The Major Contributions: Major Theories, Models, Principles, and Concepts Introduced by Milton Friedman
- 1. Free-Market Economic Theory The concept of free-market economics did not originate from Friedman. ...
- 2. Economic Role of the Money Supply It is important to note that Friedman is a monetarist. ...
- 3. The Quantity Theory of Money ...
- 4. Permanent Income Hypothesis ...
- 5. Friedman-Savage Utility Function ...
- 6. The Economic Model of Social Responsibility ...
- 7. Sequential Hypothesis Testing ...
What are Milton Friedman’s theories?
Thus, one of the most famous Friedman’s theories is monetary theory that has had a positive impact on a number of world economies and proved to be effective for the USA in 2007-2010 financial crisis. Another no less important theory advanced by Milton Friedman is permanent income hypothesis, or a theory of consumption.
What did Milton Friedman do for Economics?
In 1976, he received the Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory, and for his demonstration of the complexity of stabilization policy. 1. Free-Market Economic Theory The concept of free-market economics did not originate from Friedman.
What did Milton Friedman say about the Great Depression?
Friedman's economic theories became what is known as monetarism, which refuted important parts of Keynesian economics. In his book A Monetary History of the United States, 1867-1960, Friedman illustrated the role of monetary policy in creating and, arguably, worsening the Great Depression.
What did Milton Friedman say about freedom and equality?
Milton Friedman Quotes. Quotes about: A society that puts equality before freedom will get neither. A society that puts freedom before equality will get a high degree of both. When a man spends his own money to buy something for himself, he is very careful about how much he spends and how he spends it.
See more
Who Was Milton Friedman?
Milton Friedman was an American economist and statistician best known for his strong belief in free-market capitalism .
What did Milton Friedman write about the Great Depression?
In his book A Monetary History of the United States, 1867-1960, Friedman illustrated the role of monetary policy in creating and, arguably, worsening the Great Depression.
What is Milton Friedman's theory?
Friedman's economic theories became what is known as monetarism, which refuted important parts of Keynesian economics. In his book A Monetary History of the United States, 1867-1960, ...
What did Friedman do in his career?
In 1946, after graduating with a Ph.D., Friedman took an economics position at the University of Chicago, where he conducted his most impactful work. During his time as a professor at the University of Chicago, Friedman developed numerous free-market theories that opposed the views of traditional Keynesian economists. In his book A Monetary History of the United States, 1867-1960, Friedman illustrated the role of monetary policy in creating and, arguably, worsening the Great Depression. 2
Why did Friedman win the Nobel Prize?
Friedman was awarded the Nobel Prize in Economics in 1976 for his research on income and consumption and for his developments in monetary theory. 1 Over the course of his career, he published pioneering books on the modern economy, as well as numerous influential articles, changing the way economics is taught.
Why did Friedman oppose raising the minimum wage?
He opposed raising the minimum wage because he felt it unintentionally harmed young and low-skilled workers, particularly minorities. He also opposed tariffs and subsidies because they unintentionally harmed domestic consumers.
Where did Friedman work?
In 1946, after graduating with a Ph.D., Friedman took an economics position at the University of Chicago, where he conducted his most impactful work. During his time as a professor at the University of Chicago, Friedman developed numerous free-market theories that opposed the views of traditional Keynesian economists.
What Are the Responsibilities of Business?
Published on September 13, 1970, the Nobel Prize-winning economist argued against the so-called “social responsibilities of businesses.”
What does Friedman mean by "executive who respond to social concerns beyond making profits aren't performing their?
For Friedman, executives who respond to social concerns beyond making profits aren’t performing their jobs as employees. While an individual can do whatever they like with their money, an employee must always hew to the desires of their superiors.
What is Milton Friedman's epochal essay about business?
Milton Friedman’s epochal essay, “ The Social Responsibility of Business Is To Increase Its Profits ,” was published in the New York Times Magazine 50 years ago this month. The piece remains as polarizing today as it was five decades ago.
What is the highest good in Friedman's analysis?
The highest good, in Friedman’s analysis, is for an executive to return as much money as possible to shareholders. Anyone who wishes to pursue the greater good can do it on their own time with their own money. Executives who take profits and spend them on social aims have, for Friedman, effectively turned themselves into legislators.
Why is Friedman's doctrine of social responsibility important?
“This is the basic reason why the doctrine of ‘social responsibility’ involves the acceptance of the socialist view that political mechanisms, not market mechanisms, are the appropriate way to determine the allocation ...
What is SRI in the post office?
Another example is growing interest in socially responsible investing, or SRI, which attempts to incorporate the social impact of an investment, rather than solely its ability to deliver long-term returns to your portfolio.
Did Milton Friedman denounce shareholder activism?
Friedman was dubious of this type of shareholder activism but admitted he couldn’t denounce it. Instead he admired owners of businesses “who disdain such tactics as approaching fraud.”
What is Friedman's most important contribution?
Of course Friedman is greatly respected for his theoretical work as an economist, especially on his analysis of the role of money, the importance of inflation expectations in wages and employment, and perhaps his most lasting contribution (it could be argued), the permanent income hypothesis, which suggests that households take a longer view of anticipating their past and future income than previously thought. His award of a Nobel prize in economics was richly deserved - even if he was churlish in accepting it (he said after winning: "I would not want a professional judgment of my scientific work to be those seven people who selected me for the award").
What did Friedman do?
Even the economic reforms in Pinochet's Chile he is said to have inspired have run into trouble. Friedman's first big role as a policy advisor came in 1964 to Barry Goldwater - ...
What was Friedman's greatest irony?
The great irony for Friedman's fans is that the one piece of public policy he was responsible for that was widely and internationally adopted was one that greatly increased the ability of central governments to collect taxes - a policy he later repudiated in disgust.
Is Friedman a monetarist?
For all his high public profile - thanks to his regular column in Newsweek and series on US television, Free To Choose, which made him into something of a star - today no mainstream academic economist is a monetarist and Friedman left no lasting school of academic heirs. Even the "Chicago school" at the University of Chicago has waned in influence, eclipsed by the mighty MIT army of economists that followed Samuelson.
Who was the most controversial economist of the post-war era?
M ilton Friedman, who has died aged 94, was not the most important economist of the post-war era - that title belongs to the brilliant Paul Samuelson - but he was certainly the most controversial. Yet despite his views being championed by so many politicians on the right, it may come as a surprise that Friedman's career as a policymaker largely ...
Did Friedman's ideas of targeting the money supply fail?
But Friedman's ideas of directly targeting the money supply were tried and rejected as a failure, in both the UK and the US, and Friedman himself backed away from his dogmatic earlier positions. Today, no major central bank directly targets money supply data in setting monetary policy - instead they are far more pragmatic.
Who was Friedman's admirer?
Even Friedman's great admirer Alan Greenspan never tied himself to the monetarist mast, preferring to keep his options open. Friedman also railed long and hard for school vouchers to be adopted, to little avail, and his libertarian leanings provoked him to call for recreational drugs and prostitution to be legalised.
What was the cause of the 1929 stock market crash?
Starting in 1930, a handful of shareholder lawsuits put the issue of executive pay on the front pages, culminating in Congress’s “Pecora hearings” on the securities industry. The hearings revealed that Charles E. Mitchell of National City Bank (now Citibank), who was blamed for fueling the speculation that led to the Crash of 1929, took home more than $1 million a year leading up to the crash, a revelation that inflamed shareholders and the American public and prompted the federal government to begin to institute reforms, starting in the early 1930s with the Securities Act and the Securities Exchange Act.
Why is pay for performance based on stock price?
And when “pay for performance” is based on the company’s stock price, it is really “pay for luck,” because more of the share price performance that CEOs are paid for is driven by broader macroeconomic factors, particularly economic upswings, than anything the executives did .
How is CEO pay determined?
In theory—and this is what corporations would like us to believe—compensation packages for CEOs are determined by independent boards of directors, by compensation committees made up of members of the board, and sometimes by compensation consultants, who make pay recommendations based on their analysis of the market.
What was the New Deal response to the Pecora revelations?
The New Deal response to the Pecora revelations centered on disclosure, which was already a major component of the nascent structure of corporate reform and Wall Street regulation. As previously noted, the 10-K form on which we find chief executive salaries to this day was created in the Securities Exchange Act of 1934. Soon after, in 1938, the SEC required shareholder proxies to report compensation of the corporation’s top three executives. Since the New Deal, the SEC has, among other regulations, instituted a variety of disclosure rules, including a 2009 rule requiring some companies to disclose what they pay for compensation consulting. And it has recently proposed a strong disclosure rule—mandated by the Wall Street Reform and Consumer Protection Act of 2010, better known as the Dodd-Frank bill—on the CEO-worker pay gap.
Why is CEO pay controversial?
CEO pay has been controversial in the United States for more than a century—for as long as corporate management has been a profession separate from ownership.
What did Friedman believe?
Friedman espoused neoliberalism, the "new" "freedom" of unfettered capitalism. There's a reason all of this deregulation has been destroying countries and the environment over the past 4 decades. This is what actually trickles down into society - lawless behavior.
When did companies start paying executives bonuses?
Steel were among the first companies, in the 1910s , to institute “performance pay” in the form of bonuses for senior executives, who received a percentage of annual profits in addition to their base salary. By 1928, a survey of 100 industrial companies showed that 64 percent of executives received a bonus, typically in the form of cash linked to the firm’s annual profits. The same survey found that for those executives, bonuses constituted 42 percent of average total compensation. Incidentally, while it’s impossible to do any real comparison with the available data, there does seem to be a noticeable jump in pay after bonuses were introduced. The 1928 survey of industrial firms reports that the median annual compensation for executives was $69,728, or $892,000 in 2010 dollars—four times the pre-World War I numbers.
What happens when a man spends his own money?
When a man spends his own money to buy something for someone else, he is still very careful about how much he spends, but somewhat less what he spends it on. When a man spends someone else's money to buy something for himself, he is very careful about what he buys, but doesn't care at all how much he spends.
How many times is the word "free" used in the Declaration of Independence?
The word 'free' is used three times in the Declaration of Independence and once in the First Amendment to the Constitution, along with 'freedom.'. The word 'fair' is not used in either of our founding documents. Milton Friedman. Independence, Three, Firsts. 11 Copy quote.
What is the excuse for the destruction of liberty?
The excuse for the destruction of liberty is always the plea of necessary ' that there is no alternative
What is the virtue of a free market system?
The great virtue of a free market system is that it does not care what color people are; it does not care what their religion is; it only cares whether they can produce something you want to buy. It is the most effective system we have discovered to enable people who hate one another to deal with one another and help one another.
What happens when you start paying people to be poor?
When you start paying people to be poor, you wind up with an awful lot of poor people.
What is the essential notion of a capitalist society?
The essential notion of a capitalist society ... is voluntary cooperation, voluntary exchange. The essential notion of a socialist society is force.
When was Richard Heffner interviewed?
Interview with Richard Heffner on "The Open Mind", December 7, 1975.
Where did Milton Friedman grow up?
James A. Nuechterlein noted in 2007, “Milton Friedman grew up in Rahway, New Jersey, the son of Hungarian Jewish immigrants. (His parents were moderately observant, but Friedman, after an intense burst of childhood piety, rejected religion altogether .)
What to do if playback doesn't begin?
If playback doesn't begin shortly, try restarting your device.
What was Solomon's experiment?
Solomon’s experiment was a search for meaning to life “under the sun.”. Then in last few words in the Book of Ecclesiastes he looks above the sun and brings God back into the picture: “The conclusion, when all has been heard, is: Fear God and keep His commandments, because this applies to every person.
What are the properties of the universe?
The universe we observe has precisely the properties we should expect if there is, at bottom, no design, no purpose, no evil and no good, nothing but blind, pitiless indifference. 22. Without God in the picture life is meaningless ultimately.
When was Milton Friedman's 100th birthday?
Testing Milton Friedman – Preview Uploaded by FreeToChooseNetwork on Feb 21, 2012 2012 is the 100th anniversary of Milton Friedman’s birth. His work and ideas continue to make the world a better place. As part of Milton Friedman’s Century, a revival of the ideas featured in the landmark television series Free To Choose are being ]
Did Milton Friedman have a moral basis?
Milton Friedman had no valid basis for his morality. He was borrowing from a Judeo-Christian basis.
Who is the economist who advocated an unfettered free market?
Charlie Rose interview of Milton Friedman My favorite economist: Milton Friedman : A Great Champion of Liberty by V. Sundaram Milton Friedman, the Nobel Prize-winning economist who advocated an unfettered free market and had the ear of three US Presidents – Nixon, Ford and Reagan – died last Thursday (16 November, 2006 ) in San Francisco ]
Education and Early Career
The University of Chicago and Hoover lnstitution
- In 1946, Friedman accepted an offer to teach economic theory at the University of Chicago and spent the next 30 years conducting groundbreaking analysis and developing free-market theories that challenged Keynesian economics—the school of thought that had dominated macroeconomics since the New Deal.2 Workshop on Money and Banking: A key institutional acc…
Friedman The Theoretical Economist
- Certain of Friedman’s accomplishments as a theoretical economist have been so significant that even vocal neo-Keynesian critics admire the brilliance of his logic, including his assertion that economic models should be judged by the accuracy of their predictions about behavior—not by their psychological realism. For example, in Friedman’s rational behavior model on consumptio…
Monetarism and The Great Depression
- When Friedman won the Nobel Prize in 1976, the Committee cited a book on monetarism that he and his colleague Anna Schwartz had published in 1963: A Monetary History of the United States, 1867–1960.3In this book, Friedman used highly detailed theoretical and empirical analysis of the role of money in the U.S. economy since the Civil War to make the anti-Keynesian case that cont…
Real-World Application of Monetarism
- Friedman first introduced monetarism in his 1959 book, A Program for Monetary Stability, and for the next three decades monetarism was a major topic of economic debate. In subsequent publications and public appearances over the next 25 years, he made the case for controlling the money supply so effectively that his reputation as an economist was defined to a large extent b…
The Public Face of Free Markets
- In 1976, when Friedman was awarded the Nobel Prize in Economic Sciences for his work on consumption analysis, monetary history and theory, and the complexity of stabilization policy, it marked the turning of the tide away from three decades of Keynesian Economics and toward the Chicago School of Economics he had co-founded. With this international validation of his theori…
Friedman The Public Intellectual
- One of Friedman’s most significant accomplishments was the extent to which his theories influenced government policy and public opinion as well as economic research. As the Nobel Committee noted in 1976, “It is very rare for an economist to wield such influence, directly and indirectly, not only on the direction of scientific research but also on actual policies.”3 At his dea…
Communicating Economics to The Masses
- One measure of the extent to which Friedman has shifted the center of debate about the proper role of government in the economy is the fact that certain of his core ideas have become popular wisdom.
The Bottom Line
- Friedman is widely considered the most influential economic and public policy thinker of the second half of the 20th century, just as Keynes is considered the most influential of the first half. One of Friedman’s most significant accomplishments was the extent to which his theories influenced government policy and public opinion as well as economic research. Friedman's publi…