March 2012
Economics ISU
Milton Friedman
Table of Contents:
1. Background
2. Life
3. Ideas
4.Criticisms
5. Conclusion
6. Bibliography
1. Background
Milton Friedman enrolled in his
first economic class in 1930 when the most important issue at that time was the
Great Depression. He believed that economists could help solve the Great
Depression. This led to the rest of his career as an economist.
2. Life
Milton Friedman was born on July 31st,
1912 in Brooklyn, New York. His parents were Jewish immigrants from Hungary and
they worked as dry good merchants.
He was a very talented student and
around his 16th birthday he graduated from Rahway High School. He
attended Rutgers University in New Jersey. He studied mathematics and economics
and earned his bachelors degree there. He became influenced by Arthur Burns and
Homer Jones, two economic professors, who convinced him that modern economics
could help end the Great Depression.
Friedman pursued his economic
studies at the University of Chicago where he earned his masters degree in the
year of 1933. He was further influenced by his economic professors, Jacob Viner,
Frank Knight, and Henry Simmons. He earned his PhD at Columbia University in
1946. Milton met his future wife, Rose Director, while studying in Chicago.
In 1935, Friedman moved to
Washington D.C where he worked with the Natural Resources Committee large
consumer budget survey. Two years later he received a job with the National
Bureau of Economics Research to work with Simon Kuznets in his studies of
distribution of professional incomes. They helped explain the higher incomes of
physicians compared with other professionals.
Milton Friedman married Rose
Director in 1938, as soon as he got a steady income. Their first daugether,
Janet, was born on Februruary 26th 1943, She beacme a lawyer. Their
first son was born on February 12th, 1945.
They named him David, who became an economist, author, and right wing
Libertarian theorist.
During World War Two, Friedman was
appointed as an assistant professor teaching economics at the University of
Wisconsin-Madison but he left due to the antisemitism that he encountered at
the economics department. He returned to government service and started working
at the Department of Treasury in the Division of Tax Research and he helped
develop the federal withholding tax system for the United States of America. He
and his colleagues created the economic term, “ sequential sampling” which
meant “the standard analysis of quality control inspection”.
Toward the end of the war, Friedman
worked as a mathematical statistician at Columbia University. He was involved
in focusing on problems of weapon design. He helped develop a new fuse for
anti-aircraft projectiles and making sure that the fuse in the bomb wouldn’t go
off unless it was near the object it intended to destroy.
In 1945 Friedman submitted his PhD thesis to
Columbia, Incomes from Independent Professional Practice, which he
co-authored with Simon Kuznets. In 1946, he accepted a position in the
Economics Department at the University of Chicago, in which he stayed for the
next 30 years. He helped build a community of intellectuals, known as the
Chicago School of Economics. Many Nobel Prize winners graduated from there.
During the same period of time, Friedman was asked by Arthur Burns, the head of
the National Bureau of Economic Research, to rejoin them and he accepted the
offer. He would be working at the Economics Department at the University of
Chicago and at the National Bureau of Economic Research, at the same time.
In 1963, Friedman collaborated with
Anna Schwartz and they published a book called, Monetary History of the
United states, 1867-1960. From 1966 to 1984, he started writing weekly
columns for Newsweek Magazine, which were very influential among political and
business people. From 1968 to 1978, he and Paul Samuelson together created a
biweekly, half hour show where they would discuss the economic issues of that
time.
In 1976, Friedman won the Nobel
Memorial Prize in Economics “for his achievements in the field of consumption
analysis, monetary history and theory, and for his demonstration of the
complexity of stabilization policy”. In 1977, at the age of 65, he retired form
the University of Chicago and he and his wife moved to San Francisco.
Friedman advised Richard M. Nixon
during his presidential campaign in 1968 and he also served on the President's
Economic Policy Advisory Board for the Ronald Reagan Administration until the
end of his presidency. During 1988, Friedman received the National Medal of
Science and Ronald Reagan awarded him the the Presidential Medal of Freedom.
Friedman and his wife, began a
television program a request of The Free To Choose Network in which he
presented his economic ideas. The completed this project and during 1980 his
10-part series called, Free to Choose, was broadcast by PBS. This project
inspired him to write a book called, Free to Choose, which was the 3rd
bestselling non-fiction book of 1980.
Milton Friedman died at the age of
94 on November 16th, 2006 . His death was announced at a conference
of the Cato Institute in Washington by James A. Dorn, the institutes Vice
President. All the attendees observed several moments of silence in honor. He
died of heart failure after being brought to a hospital near his home in San
Francisco.
3. Ideas
Monetarism
Milton Friedman was known for his
opinion that the government should run according to the quantity theory of
money, which is that money supply has a direct, proportional relationship with
price level. Monetarism is the economic belief that the most effective way for
the government to influence the economy is by regulating the money supply in
circulation. It aims to control inflation and the national output. Modern day
monetarism was formulated by Friedman who said that too much money in
circulation causes inflation and that monetary authorities should focus on
maintaining price stability.
Friedman rejected the Keynesian
Theory whch was created by John Maynard Keynes who said that the government
should spend more and lower taxes to stimulate the economy. Friedman held that
if the government taxed more, the citizens would have less to spend.If the
government borrowed to spend more, that money would not be available for
private borrowers. Also if the government tried the reverse fiscal policies
(which is spending less and cutting either taxes or borrowing), it would leave
more for citizens to spend.
Laissez-faire
Capitalism
Friedman believed that free markets
would resolve their own economic problems more effectively if they are left
alone rather than being controlled by government intervention. He argued that
governments should stop controlling their currency rates because the invisible
hand would control it.
School Vouchers
Friedman believed that governments
should give parents vouchers equal in value to a childs education. They would
use this voucher to choose the most appropriate school for their child. The
good schools would attract students and the schools that did not get enough
students would automatically be closed.
Thereby, there would only be good schools and the education market would take
care of itself.
Conscription
Friedman was against military
conscription and he stated that the military draft was "inconsistent with
a free society”, but he did agree that they could force military training as a
reserve in case of war. He played a large role in the elimination of the draft
in the United States in 1973.
General
Friedman was a Liberationists who
supported cutting taxes, lowering government spending, and the
decriminalization of drugs. He wanted to abolish the government instituted laws
that limit the economy and the minimum wage law.
4. Criticisms
Keynesian
criticism
Several Keynesian economists like
James Galbraith and Joseph Stilgtz blamed the free market philosophy of
Friedman and the Chicago School for the economic turmoil and the financial
crisis of 2008. According to the
Keynesian theory made by John Maynard Keynes, the government should
increase spending and even borrow money to create more employment. Then, those
people who had money would spend it and stimulate the economy once again.
Friedman was known to oppose this theory.
Great Britain Failure
Milton Friedman was known for his
belief in monetarism. It was tried in Great Britain during the 1980's. His
theory was a huge disaster there and did not work. The Bank of England tried
its best to make it work but the economy sank into more of a depression. Though
inflation went down, the unemployment rate soared form 5.4% to 11.8%. In 1986,
the Bank of England decided to abandon monetarism. At that time Friedman was an
adviser for Ronald Reagan. He convinced the President to try monetarism out.
This time some people said it was a success, others not. At the end of Reagan's
Presidency the United States, the
national debt had risen over 3 trillion dollars due to the government spending
and borrowing.
5. Conclusion
Milton Friedman was known as one of
the most influential economists of the 20th century. He become a very public person and even advised
governments overseas (as well as in North America) and had an enormous impact
on economic policy. He wrote many influential economic books such as, Capitalism
and Freedom, A Monetary History of United States, 1867-1960, Free
to Choose and many more. Since his death and the financial crisis of 2008,
his ideas on government regulation have been greatly debated but his teachings
still are being supported by economists throughout the world.
6.
Bibliography
wikipedia.org
reason.com
achievement.org
google.com
