Milton Friedman

Definition

Milton Friedman was an influential American economist and a key figure in the Chicago School of Economics, known for his strong belief in free-market capitalism and minimal government intervention. His ideas have significantly shaped modern economic thought and policies, emphasizing individual freedom and responsibility in economic decision-making. Friedman is also famous for his work on the consumption function, monetary policy, and his advocacy for school vouchers.

5 Must Know Facts For Your Next Test

1. Milton Friedman was awarded the Nobel Prize in Economic Sciences in 1976 for his research on consumption analysis, monetary history, and stabilization policy.
2. He argued that inflation is always a monetary phenomenon, emphasizing the importance of controlling money supply to manage economic stability.
3. Friedman was a strong advocate for school choice, proposing that government funding should follow students rather than schools, allowing parents to choose where their children would be educated.
4. His book 'Capitalism and Freedom' published in 1962 outlines the connection between economic freedom and political freedom, influencing policymakers around the world.
5. Friedman famously argued against government intervention in the economy, believing it often leads to inefficiencies and unintended consequences.

Review Questions

• How did Milton Friedman's views on free markets influence modern economic policies?
  • Milton Friedman championed free-market principles, arguing that minimal government intervention allows for more efficient resource allocation and individual prosperity. His ideas have led to significant shifts in economic policies worldwide, including deregulation and privatization. Policymakers often reference Friedman’s work when considering reforms aimed at enhancing market efficiency and promoting competition.
• Evaluate Friedman's argument regarding the relationship between economic freedom and political freedom as presented in 'Capitalism and Freedom'.
  • In 'Capitalism and Freedom', Friedman presents a compelling argument that economic freedom is essential for political freedom. He suggests that without economic autonomy, individuals cannot make choices that contribute to a democratic society. By advocating for policies like free markets and limited government, Friedman links economic independence directly to the preservation of personal liberties.
• Analyze how Friedman's theories on monetarism can be applied to contemporary economic challenges such as inflation and unemployment.
  • Friedman's monetarist theories suggest that controlling the money supply is crucial for managing inflation and ensuring stable economic growth. In contemporary contexts where inflation rates fluctuate significantly, policymakers often consider Friedman's approach to avoid excessive monetary expansion. His ideas advocate for targeting monetary aggregates rather than interest rates, providing a framework for addressing unemployment through careful management of the money supply.

Related terms

Free Market: An economic system where prices are determined by unrestricted competition between privately owned businesses.

Monetarism: An economic theory that focuses on the role of governments in controlling the amount of money in circulation.

Chicago School: A group of economists based at the University of Chicago who promote free-market principles and are known for their contributions to microeconomics and public choice theory.