Economist Milton Friedman: biography, ideas, life path and statements. Milton Friedman - biography, main ideas Friedman economic school

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Milton Friedman ( English Milton Friedman, July 31 1912 , NY - November 16 2006 , San Francisco) - American economist, laureate Nobel Prize 1976 g. "for achievements in the field of consumption analysis, the history of monetary circulation and the development of monetary theory, as well as for a practical demonstration of the complexity of economic stabilization policies."

Economics, described in Friedman's living language and filled with his irrepressible energy, ceases to be a "dull science." It was about him that President Bush said that the American nation and the whole world were lucky that Milton Friedman became an economist...

George F. Will

Plan

Biography 3

Bibliography 5

The main ideas of the monetarist theory of M. Friedman and the monetarists. 6

Used literature 10

Biography

Milton Friedman was born in 1912 in Brooklyn, New York, into a poor family of Jewish emigrants from Galicia (modern Ukraine).

In 1932 he graduated from Rutgers University, where he received a bachelor's degree in two disciplines - economics and mathematics. His teachers in economic disciplines were two Nobel Prize laureates S. Kuznets and J. Stigler, as well as the future President of the US Federal Reserve System A. Burns. This helped shape Friedman's interests and influenced his decision to continue studying economics.

Friedman received his master's degree in economics from the University of Chicago in 1933, and completed his postgraduate practice in New York (Columbia University). There, in 1946, he defended his doctoral dissertation on problems of philosophy, taking as its basis his first scientific work, “Income from independent private practice,” co-written by Saiman Kuznets.

During the Second World War, Friedman taught economics at the University of Minnesota, on behalf of the Ministry of Finance, he participated in the development of a new tax policy and independently conducted research on military statistics.

In 1948, he worked at the University of Chicago, where he studied methodological problems of the social sciences, problems of legal relations (he defended his doctoral dissertation), money, and gathered around himself a group of followers and like-minded people, called the “Chicago School of Economics.” They were united by ideas that were considered seditious in those years - faith in the self-sufficiency of the market and the need to rid it of government intervention.

Milton Friedman always led a very active social life: he wrote a column for Newsweek magazine for many years and took part in all the political and economic battles of the 20th century. In 1950, Friedman went to France as a consultant on the implementation of the Marshall Plan, which provided for the restoration of the war-torn economies of Western Europe. A few years later, he was already lecturing in China and taking part in the restoration of the Chilean economy under Pinochet, encouraging the dictator to introduce “free” market rules in the country. Friedman advocated the legalization of drugs and prostitution, the privatization of roads, and the abolition of licensing and permits for doctors and drivers. And in recent years, he has been involved in school “vouchers”, being confident that in this area, market competition will give much better results than government regulation.

In 1967-1969 M. Friedman held the honorary position of President of the American Economic Association.

Supporters of Friedman's economic ideas at various times included British Prime Minister Margaret Thatcher and US President Ronald Reagan. The principle promoted by Friedman was adopted by the International Monetary Fund.

In 1976 he won the Alfred Nobel Memorial Prize. It was awarded to Friedman "for his achievements in the field of consumption analysis, the history of monetary circulation and the development of monetary theory, as well as for his practical demonstration of the complexity of economic stabilization policies." He proved the influence of long-term assessment of current income by economic agents on economic processes.

Bibliography

M. Friedman owns more than 250 works, including 27 books. Main works:

1. "Methodology of positive economic science" (1953);

2. "Theory of consumer function" (1957);

3. "Monetary History of the United States, 1867-1960" (1963), written together with Anna Schwartz;
4. “Capitalism and Freedom” (Capitalism and Freedom, 1962);

The book arose as a result of the author's concerns about the rise of government and the restriction of freedom in the United States. In his work, M. Friedman argues that economic freedom is a necessary condition for political freedom. If the means of production are concentrated in the hands of the government, then in reality society cannot oppose anything to it. The state, the economist continues, is obliged to establish laws, monitor compliance with property rights, take measures against monopolies, mitigate the manifestations of “market fiasco,” and also gradually (3-5% per year) increase the volume of money in circulation.

5. “The Role of Monetary Policy” (The Role of Monetary Policy. 1967);

6. "The Optimal Amount of Money and Other Methodologies" (1969);

7. "Theoretical foundations of monetary analysis" (1972);

8. "Money and economic development" (Money and economic development, 1973);

9. “Freedom of Choose” (Freedom of Choose, 1980);

In the book, M. Friedman defends the principle of economic liberalism, while simultaneously criticizing the policies of the US government in many areas, and especially in the field of taxation and government regulation of the school system. As one of the panaceas, F. proposes introducing a negative taxation system.

10. "The Tyranny of the Status Quo" (1984), co-written with wife Rose Friedman and others.

The main ideas of the monetarist theory of M. Friedman and the monetarists.

M. Friedman's path from an academic scientist to the founder of the Chicago monetarist school, a Nobel Prize winner, was associated with the development of the theory of capitalism as a self-regulating system, with the formation of the monetarist doctrine, which was recognized as the antipode to the Keynesian system of government intervention in the economy.

Monetarism (from Latin moneta - coin) is an economic theory according to which the amount of money in circulation is a determining factor in the development of the economy.

His monetarism is a set of theories that have independent significance, but they are all united by the quantity theory of money, which Friedman considered as a general principle of analysis. According to Friedman's monetarism, the main means of development of modern capitalism is economic freedom, which determines all other freedoms of society. He believed that the idea of economic freedom is realized only if the state does not interfere in the economy, reducing that part of the national product that determines the state’s income and is the material basis of state “built-in stabilizers.”

According to Friedman, it is human psychological factors, in contrast to state regulation of the economy, that act as a natural factor in the economic system’s desire for equilibrium. This is where Friedman’s subjectivity manifests itself, which is one of the characteristic features of the neoclassical direction in economic theory, because he took into account the psychological factor - the motives of human behavior in different economic situations.

State intervention in the economy, Friedman argues, blocks the action of spontaneous regulators that help achieve equilibrium; it is focused on the short term, since any unforeseen external influences can cause deviations from the intended direction. But the main thing is that, using Keynes’ model, the state can only influence aggregate demand, financing it from its own income, but it cannot ensure balance between supply and demand. Regarding foreign trade, monetarists oppose protectionist methods of regulating it by the state. The laws of the market must have room for action in this sector of economic activity.

So, the basic principle of monetarism is that there is no alternative to the market mechanism. But, nevertheless, the market mechanism cannot itself ensure some economic actions aimed at achieving socially important goals not related to production efficiency (for example, ensuring defense capability). Then there is a need for economic intervention by the state, which is justified in this situation. In addition, it is possible in the form of budgetary incentives, but on condition that real resources are involved in the production process.

Monetarists, unlike Keynesianism, did not strive for full employment of the population.

As it turned out, low unemployment and price stability are incompatible phenomena, so they resolutely deny the possibility of budget financing of programs to increase employment. Friedman considers a 4-5% unemployment rate economically justified, since social retention of such a number of unemployed is not problematic. He argues that unemployment can fall during a period of accelerating inflation only with unforeseen changes in national demand in a market where there are long-term links between work and capital. But these changes will have a short-term effect.

Based on a database of US economic history, he proves that the monetary factor has an exceptional influence on the cyclical nature of economic development. An insufficient amount of money in circulation, according to Friedman, leads to a production crisis, and an increased amount leads to inflation, therefore the central bank should not allow fluctuations in the money supply and maintain a stable rate of its growth. In this regard, Friedman focuses on the problem of the money supply, size, growth rate and its components. He explains the cyclical nature of development based on the “equation of exchange,” according to which the total price of a product created in a country should be equal to the product of the money supply and the turnover rate. Then the value of money and prices will remain unchanged, hence there will be no inflation.

The fundamental difference between the monetary and Keynesian systems is the direction of liberal and state monetary policies and the expected consequences. Monetary policy is long-term and balanced, according to which the state must systematically increase the money supply, regardless of cyclical fluctuations and, in contrast to the views of Keynes, should not interfere in monetary relations and influence exchange rates, reacting to cyclical changes in market conditions. This does not mean, however, that he downplays the importance of monetary policy. On the contrary, among all the ways of influencing the economy, he gives preference to monetary policy as the most acceptable way for a democratic society to intervene in the economy, which does not lead to excessive government dictates and a decrease in individual freedom. But at the same time, it clearly defines the nature and goals of monetary policy. He advocates the principle of gradualism, which implies that measures within the framework of this policy are carried out slowly, are designed for years and are not a quick response to changes in the situation. The author considers the stability of the movement of the mass of money as one of the most important conditions for the stability of the economy as a whole. He proposes to abandon attempts to use monetary levers to influence real variables (unemployment level, production) and defines control over nominal variables, primarily prices, as the goals of this policy. Friedman sees the achievement of this goal in following the “monetary rule,” proposing to maintain the growth rate of the money supply at a level not exceeding 3-5% per year.

The state should also control the money supply by reducing its own expenses and expenses in the social sphere, which will help reduce the state budget deficit, limit the growth of the money supply, and reduce the rate of inflation. But this will lead to a decrease in demand, therefore, unemployment will increase, but the constant attenuation of inflation rates will reduce the level of inflation expectations, revive business activity, and the unemployment rate will begin to decline.

Based on the concept of “objective unemployment,” Friedman concludes that employment and, as a consequence, production are inherently cyclical, its nature hidden in the insufficient supply of money supply. The article “Money and the Business Cycle” provides examples of how the crisis recession occurred against the backdrop of lower prices, which led to a decrease in the need for money. A decrease in the money supply was a sign of crises and stagnation and was necessarily accompanied by changes in conditions on the labor market. He evaluates market fluctuations as the reaction of the economic body to the dynamics of the money supply. A decrease in its volume causes an increase in prices, consumer spending, investment and, finally, real changes in factors of production. This reveals a natural inclination towards economic balance.

It is interesting that the thoughts of Keynesians and monetarists regarding the definition of the role of the interest rate as regulators of the flow of capital from one country to another coincide, but, according to Friedman, they perform an auxiliary function on the way to achieving equilibrium. He believed that in a market economy there is an inverse relationship between foreign exchange reserves and the size of the domestic money supply, which in total amounts to the amount necessary for the exchange of goods. It is through this feedback that equilibrium is established, while the system created on the basis of the Keynesian model blocks the action of the market's adaptive mechanisms. It is obvious that Friedman viewed the economic activity of society as an organic unity of the internal and external economies and in this he saw the essence of the openness of the economy.

Conclusion

As a conclusion, we can formulate the main ideas of Milton Friedman’s economic policy as the key provisions of monetarism:

1. the regulatory role of the state in the economy should be limited to control over money circulation;

2. market economy is a self-regulating system. Disproportions and other negative manifestations are associated with the excessive presence of the state in the economy;

3. The money supply affects the amount of spending by consumers and firms. An increase in the supply of money leads to an increase in production, and after full capacity utilization - to an increase in prices and inflation;

4. inflation must be suppressed by any means, including by cutting social programs;

5. when choosing the growth rate of money, it is necessary to be guided by the rules of “mechanical” growth of the money supply, which would reflect two factors:

a) the level of expected inflation;

b) the rate of growth of the social product.

References

Wikipedia is the free encyclopedia. http://ru.wikipedia.org

A Celebration of Intellectual Energy / George F. Will Washington Post 2003.

RUCONOMICS. Economics in Russian. http:// ruconomics. com/2006/11/17/ milton- friedmen-1912-2006

Capitalism and freedom / M. Friedman. - M.: New publishing house, 2006 - 240 pages.

History of economic theory / Ed. Zlushko S.M., - K.: Zannaya, 2005. - 720 stor.

Website, dedicated to the film and book “Freedom of Choice” http://www.freetochoose.net/

Economic Dictionary. http://abc.informbureau.com/html/iiiaoadeci.html

Milton Friedman is an American economist who received the Nobel Prize in 1976 for his research on consumption, monetary history, and the complexities of stabilization policy. Along with George Stigler, he was the intellectual leader of the second generation of the Chicago School. Among his students are such outstanding economists as Gary Bakker, Robert Fogel, Robert Lucas Jr. Friedman's main ideas concern monetary policy, taxation, privatization, and deregulation of government policies, especially in the 1980s. Monetarism also influenced the decisions of the US Federal system during the global financial crisis.

Brief biography of Milton Friedman: early years

The future scientist was born in Brooklyn, one of the poor areas of New York. His parents were emigrants from Hungary. The city from which they emigrated is now located on the territory of Ukraine (the city of Beregovo in the Transcarpathian region). Friedman's parents were engaged in the sale of textiles. Soon after the birth of the child, the family moved to Rahway, New Jersey. As a child, Friedman was in an accident, and the scar on his upper lip remained with him for the rest of his life. He graduated from high school in 1928 and attended Rutgers University. The young man specialized in mathematics and economics. He originally intended to become a secretary. However, during his studies, he met two scientists - Arthur Burns and Homer Jones, who convinced him that economics could help lead the world out of the Great Depression.

After graduation, he was offered two scholarships: in mathematics at Brown and in economics in Chicago. Friedman chose the latter and received his MFA in 1933. His views were influenced by Jacob Wiener, Frank Knight and Henry Simons. There he met his future wife Rose. He then studied statistics under Harold Hotelling and worked as an assistant to Henry Schultz. At the University of Chicago, Friedman met two of his best friends, George Stigler and Allen Wallis.

Public service

After completing his studies, Friedman was initially unable to find a teaching job. So he decided to go to Washington with his friend Allen Wallis, where Roosevelt was just beginning to implement his New Deal. Friedman later concluded that all government interventions were "ineffective cures for the wrong disease." In 1935, he worked for the National Resources Committee, where he first began to think about the interpretation of the consumption function. Friedman then took a job at the National Bureau of Economic Research. He is Simon Kuznets.

In 1940, Friedman received a professorship at the University of Wisconsin, but returned to government service due to anti-Semitism. He worked on the Federal Government's war tax policy as an advisor. On duty, he advocated Keynesian government intervention in the economy.

Career and achievements

Milton Friedman was an adviser to Republican US President Ronald Reagan and British Conservative Prime Minister. His political philosophy extolled the virtues of free markets with minimal government intervention. Friedman once noted that he considered his main achievement to be the elimination of conscription in the US. During his life, he wrote many monographs, books, articles in scientific journals and newspapers, was a guest on television programs, and gave lectures at various universities. His works were popular not only in the USA and Great Britain, but also in the countries of the socialist camp. The Economist magazine named him the most influential economist of the second half of the 20th century, and perhaps the entire century. Although some polls give the palm to John Maynard Keynes.

Economic views

Milton Friedman is best known for drawing attention to the supply of money. Monetarism is a set of views associated with quantity theory. Traces of it can be found as early as the 16th century. Together with Anna Schwartz, Friedman wrote a book entitled "The Monetary History of the United States of America, 1867-1960 (1963)." Several confirmed the primacy of money supply over investment and government spending. Natural unemployment is inevitable, so there is no point in fighting it. There is no need for the government to guide the economy through fiscal policy.

Developments in the field of statistics

Sequential analysis was developed by Milton Friedman. The main ideas came to him while serving in the military research department at Columbia. Sequential statistical analysis then became a standard method of evaluation. Like many of Friedman's discoveries, today it seems unusually simple. But this is an indicator of a genius who managed to penetrate into the very essence of phenomena. Today, consistent statistical analysis is a key tool for modern economists.

Milton Friedman: capitalism and freedom

The concept of monetarism began with a refutation of Keynesian theory. Milton Friedman would later call many of its provisions naive. In the 1950s he made his interpretation of the consumption function. Capitalism and freedom are two concepts that Milton Friedman reintroduced into scientific circulation. Monetarism uses “Keynesian language and methodological apparatus,” but denies the original assumptions of the theory of state regulation of the economy. Friedman does not believe that production capacity can be fully utilized. In his understanding, there is always a natural level of unemployment, which is pointless to fight. The economist argued that in the long run the Phillips curve looks like a vertical straight line, and predicted the possibility of such a phenomenon as stagflation. Therefore, the only effective government policy is to gradually increase the money supply.

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4. Research in the field of consumer function, permanent income hypothesis

1. Biography of M. Friedman and his economic activities

American economist Milton Friedman was born on July 31, 1912 in Brooklyn (New York). When he was still a child, his parents Sarah Ethel Friedman and Geno Saul Friedman, immigrants from Eastern Europe, moved to Rahway. His mother worked in a haberdashery store, and his father, as F. later recalled, “tried unsuccessfully to achieve results in hopeless trading operations.” The family had small and unstable incomes and could not get out of poverty.

At the age of 16, F. was admitted to Rutgers University through a competitive selection process with the right to receive a partial scholarship. In 1932, he was awarded a bachelor's degree in two disciplines - economics and mathematics. While studying at the university, F. came under the influence of two assistants: Arthur F. Burns, who later became director of the US Federal Reserve System, and Homer Jones, a future authority on the theory of interest rates. It was to Jones that F. was obliged to write his thesis in economics and receive a recommendation to continue his specialization in this area at the University of Chicago.

Having received a master's degree from the University of Chicago in 1933, F. moved on to a postgraduate internship at Columbia University (New York). F.'s collaboration with the US National Bureau of Economic Research (NBER) began in 1937, when he began working as an assistant to Simon Kuznets. economist consumer income

In 1940, they completed the writing of a joint scientific work, “Income from Independent Private Practice.” This work subsequently formed the basis of a dissertation, for which F. was awarded a doctorate in economics at Columbia University in 1946.

Although many of his views on economic theory and public policy remain controversial, he, as the English economist John Barton put it, "provided us with a foundation for future research in macroeconomics."

Starting to work with S. Kuznets, working closely with economists Dorothy Brady, Margaret Reid and Rose Director, F. formulated and found practical confirmation of his hypothesis of “permanent consumption income”. In his book "The Theory of the Consumption Function", published in 1957, F. proved that John Keynes's concept of linking current consumption with current income will inevitably lead to a wrong course. Instead, F. put forward a theory according to which the consumer does not base his consumption calculations, with the exception of temporary ones, on current income, relying on expected or permanent income.

Examining an extensive range of practical consumption data, F. found that the results did not diverge from his theory of permanent income. The conclusion about permanent income played an important role in causing a justified change in the formulation of the quantity theory of money. In subsequent works, F. will show that changes in money demand throughout American history have always been determined by changes in the sphere of permanent income.

On November 16, 2006, Milton Friedman died in San Francisco, California of a heart attack at the age of 94.

2. Professional position of an economist, criticism of his views

Friedman recommends completely abandoning a consistent monetary policy, which still leads to cyclical fluctuations, and adhering to the tactics of constantly increasing the money supply. In A Monetary History of the United States (1963), Friedman and Anna Schwartz analyzed the role of money in economic cycles, particularly during the Great Depression. Subsequently, Friedman and Schwartz co-authored the monumental studies Monetary Statistics of the United States (1970) and Monetary Trends in the United States and the United Kingdom (1982).

Friedman's views (as well as the Chicago School of Economics in general) are sharply criticized by Marxists (including Western ones), leftists, anti-globalists, especially Naomi Klein, who considers him to be responsible for the negative phenomena in the economy of Chile during the Pinochet dictatorship and in Russia during the Yeltsin presidency . In their opinion, a completely free market leads to the impoverishment of the vast majority of people, the unprecedented enrichment of large corporations; the removal of the education system from state control leads to the transformation of the school into a business, in which a full-fledged education becomes inaccessible to many citizens; a similar situation is observed in medicine.

3. Friedman's discussion of total utility

Friedman believed that total utility increases as money income increases. One interesting, although not the main, conclusion is that an increase in income that improves the position of a given economic unit, but does not take it out of its class, reflects diminishing marginal utility, while an increase in income that results in a given unit moving into a new class, reflects increasing marginal utility. Thus, the desire to get a new job, the income from which can provide a higher position in society, reflects higher utility. But Friedman then reverses the argument, arguing that people with low incomes will avoid additional risk because, with diminishing marginal utility, a premium must be paid to induce action. On the other hand, middle-income groups, according to Friedman, are very prone to risky actions. All this shows how the shape of the utility curve can reflect changes in economic conditions. But this is tantamount to saying that the fittest survive.

The meaning of Friedman's concept of utility emerged more clearly when he tried to connect it with the problem of income distribution. He attempted to build a bridge between the functional and personal distribution of income. The first, of course, should be derived from the action of the market mechanism and the assessment of cost factors, while personal distribution depends on luck, chance, natural abilities, inheritance, that is, in fact, on everything except the uneven distribution of wealth. Friedman tries not to notice the last circumstance. The main factor in his model is risk and the reaction to it in different people. A society (or part of it) that disapproves of the psychology of risk will prefer insurance to the lottery and progressive taxation to regressive taxes. It will tend to resort more to the mechanism of redistribution, so that income will be distributed more evenly.

4. Research in the field of consumer function, theory of permanent income

Friedman's research on consumer function deserves more attention. The consumption function - the central idea of modern economic theory, used by Keynes, means such a relationship between income and consumption when the latter, although it grows as income grows, but at a slower pace. Friedman entered this rather interesting discussion with his new concept - the permanent income hypothesis, the origins of which can be traced back to Fisher and especially Knight. Friedman argues that the ability to predict the course of consumption using an income-based consumption function is limited because, in his view, real investment does not have a multiplier effect on real consumption. The latter is determined by its own long-term trend. There is a tendency, says Friedman, for an economic unit to strive towards a certain level of consumption over a period of time, to which end it adjusts its current income by making or obtaining loans. In a sense, the income of any economic unit is related to the amount of capital.

Both consumption and income have two parts, one constant and the other variable. The steady income which an individual hopes to receive for a long time depends largely on his foresight; its value is influenced by the environment, type of activity and size of capital property. The variable elements of income consist of unexpected additions and deductions. Friedman admits that it is quite difficult to establish the size of the constant component by direct observation, but he nevertheless believes that some conclusions can be formulated if certain assumptions are made regarding the relationship between the constant and variable parts. This ratio must depend on the rate of interest, the ratio of income to wealth, and consumer tastes. But since no connection exists between the variable parts of consumption and income, total consumption depends solely on permanent income. This means that the consumer remains committed to his spending plans over time, regardless of whether income deviates from planned spending.

The importance of F.'s theory of permanent income is difficult to overestimate.

Much of the subsequent research on aggregate consumption confirms this theory, and the developed methodology for determining and estimating projected future income has aroused keen interest among macroeconomists everywhere. Moreover, the most important developments in econometrics during the 60s and 70s. were achieved thanks to F.'s statistical methods, which he used specifically to estimate permanent income.

5. “Money Rule” by M. Friedman

According to Milton Friedman, the main problem of monetary policy is to ensure a match between the demand for money and its supply. Sustainable demand for money is the main prerequisite for price stability, the stability of aggregate payment demand, and therefore ensuring the stability of the system as a whole. This leads to his proposed recommendation: the increase in money in circulation should correspond to the increase in the gross national product (GNP). This is the so-called Friedman money rule.

Friedman believed that it was necessary to increase the money supply at a constant rate: “a constant expected rate of growth of the money supply is a more significant point than knowing the exact value of this rate.”

In practice, in the field of monetary policy, Western countries do not literally follow the above “rule”, but usually annually set a “fork” around which the money supply should fluctuate.

Milton Friedman was an American economist and theorist. His name is associated mainly with the monetarist doctrine, which brought him great popularity and influenced the revision of the monetary policy pursued by central banks, mainly in the United States, in the 70s and 80s.

Friedman's main achievements in the field of money theory are, one way or another, related to the analysis of the theory of J. M. Keynes and his followers, who proceeded from the position that money has an insignificant influence on general expenses, consumption and prices. Friedman outlined his criticism of these provisions in the article “The Relative Stability of the Velocity of Money Circulation and the Investment Multiplier in the United States” (1897 - 1958). It shows that nominal consumer spending is determined more by the money supply than by individual items of the state budget. Based on the determining role of money relative to prices and incomes, Friedman argued that changes in the intensity of growth of nominal incomes are primarily due to changes in the growth of the money supply. The article by Friedman and D. Meiselman marked the beginning of the controversy with the Keynesians on monetary and fiscal policy, which unfolded in the 60-70s. and the result of which was a certain revision of monetary policy in the United States.

List of sources used

1. Bunkina M.K. Monetarism. - M.: JSC "DIS", 1994;

2. Dolan E.D. Money, banking and monetary policy. - SPb.: SPb. -Orchestra, 1994. - Part IV, ch. 14-17.

3. Kostyuk V.N. History of economic doctrines: Textbook. - M.: Center, 1997. - Topic 15.

4. McConnell K.R., Brew S.L. Economics: Principles, problems and policies. - M.: Republic, 1992. - T. 1, ch. 18.

5. Solodkov V.M. The economic theory of Milton Friedman // USA: economics, politics, ideology. 1992. No. 6.

6. Friedman M. Quantitative theory of money. - M.: Elf Press, 1996.

7. Friedman M. Quantitative theory of money. - M.: Mysl, 1989. - Ch. 4.

8. Bartenev S.A. Economic theories and schools (history and modernity): Course of lectures. - M.: BEK, 1996. - Ch. 10.

9. Usoskin V.M. "Money World" by Milton Friendman. - M.: Mysl, 1989. - Ch. 2, 3.

10. Livshits A.Ya. Introduction to market economics. - M.: MP TPO "Kvadrat", 1991. -Lectures 7, 8.

11. Seligman B. Main currents of modern economic thought. - M.: Progress, 1968. - Ch. VII.

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Friedman's main ideas and projects

During his long life (the economist died in 2006), Friedman published a number of books and put forward many innovative economic theories. Thus, working as a consultant during the implementation of the Marshall Plan, he suggested that a fixed exchange rate would lead to the collapse of the national currency. This is what happened in the European economy in the 70s, which is why most countries now use a floating exchange rate.

The scientist received the Nobel Prize for economic research in 1976. But he attributed to his merits not only the receipt of an honorary award, but also the abolition of military service with the subsequent transition of the US Army to contracts.

Friedman advocated an end to government intervention in the American economy, but the scientist considered his main achievement to be his own theory of consumer behavior.

Since 2002, there has been a prize named after the scientist. It is awarded annually by the Cato Institute and is called “For the Advancement of Freedom.”

A scientist’s incredible work ethic is the key to his success. Born into poverty, he managed to become the world's leading economist thanks to an irresistible desire to acquire knowledge.

Nobel Memorial Prize in Economics, 1976

American economist Milton Friedman was born in Brooklyn (New York). When he was still a child, his parents Sarah Ethel (nee Laundau) Friedman and Geno Saul Friedman, immigrants from Eastern Europe, moved to Rahway (New Jersey). His mother worked in a haberdashery store, and his father, as F. later recalled, “tried unsuccessfully to achieve results in hopeless trading operations.” The family had small and unstable incomes and could not get out of poverty. Nevertheless, she did not have to go hungry, and the atmosphere in the family was warm and friendly.

Having received a master's degree from the University of Chicago in 1933, F. moved on to a postgraduate internship at Columbia University (New York). At the end of 1934, he returned to the University of Chicago, becoming a research assistant. The following summer, he participated in a large-scale consumer budget research project for the US National Natural Resources Committee, Washington, DC. F.'s collaboration with the US National Bureau of Economic Research (NBER) began in 1937, when he began working as an assistant to Simon Kuznets.

In 1940, they completed the joint scientific work “Income From Independent Professional Practices”. This work subsequently formed the basis of a dissertation, for which F. was awarded a doctorate in economics at Columbia University in 1946. However, one of the conclusions of the mentioned study, namely that “medicine provides only limited opportunities for increasing the income of doctors of all specialties compared to the income of dentists,” aroused such widespread objections in the NBER that the publication of the book was delayed until after the Second World War .

F.'s development as an economist can be traced from his first independent steps in this science. His subsequent contribution to the theory and practice of economic science is accompanied by unexpected results, he becomes a fruitful researcher and popular economic writer, participates in important research conducted by government and academic institutions, and leads the so-called. Chicago School of Economists. Although many of his views on economic theory and public policy remain controversial, he, as the English economist John Barton put it, “provided us with a foundation for future research in macroeconomics.”

During the Second World War, F. participated in the development of tax policy on behalf of the Federal Ministry of Finance and, taking advantage of his stay in Washington, conducted research at Columbia University on military statistics. In 1945...1946 he teaches economics at the University of Minnesota. Then F. returns to the University of Chicago and becomes an assistant professor of economics. With the assistance of the NBER, F. began work that lasted many years on the creation of a monetary theory.

In 1950, F., as a consultant on the implementation of the “Marshall Plan”, developed by George C. Marshall and providing for the restoration of the war-ravaged economies of Western Europe, arrived in Paris, where he became an active defender of the idea of floating exchange rates. He predicts that the fixed exchange rates introduced by Bretton Woods will ultimately fail, as they did in the early 1970s. His knowledge of theoretical and practical problems of European economics increased during his collaboration with Professor Fulbright (1953) from the University of Cambridge (England).

Starting to work with S. Kuznets, working closely with economists Dorothy Brady, Margaret Reid and Rose Director, F. formulated and found practical confirmation of his hypothesis of “permanent consumption income”. In his book “A Theory of the Consumption Function,” published in 1957, F. proved that John Maynard Keynes's concept of linking current consumption to current income would inevitably lead to a wrong course. Instead, F. put forward a theory according to which the consumer does not base his consumption calculations, with the exception of temporary ones, on current income, relying on expected or permanent income. Although permanent income is not always obvious, it could be calculated by taking a weighted averaging of recent cash receipts. He called this averaging “distributed lag.”

Examining an extensive range of practical consumption data, F. found that the results did not diverge from his theory of permanent income (in the 50s, Franco Modigliani presented an alternative, but similar to F.’s approach, consumption theory, tied to life cycles and explaining the same economic phenomenon). The conclusion about permanent income played an important role in causing a justified change in the formulation of the quantity theory of money. In subsequent works, F. will show that changes in money demand throughout American history have always been determined by changes in the sphere of permanent income.

The importance of F.'s theory of permanent income is difficult to overestimate. Much of the subsequent research on aggregate consumption confirms this theory, and the developed methodology for determining and estimating projected future income has aroused keen interest among macroeconomists everywhere. Moreover, the most important developments in econometrics during the 60s and 70s. were achieved thanks to F.'s statistical methods, which he used specifically to estimate permanent income.

The publication in 1963 of the fundamental work “The Formation of the Monetary System in the United States” (“A Monetary History of the United States”), written by F. in collaboration with a specialist in the field of economic history Anna J. Schwartz, made it possible to highlight the importance of F.’s theory not only in an applied sense, but also in the field of the history of monetary circulation. The authors collected extensive statistical materials on issues of monetary circulation since the period of the American Revolution and documented the comprehensive influence of the money supply participating in state circulation on inflationary processes.

The chapter of their joint work, dedicated to the era of the Great Depression, contained an accusation that the Federal Reserve was unable to maintain an adequate level of liquidity in the US banking system. They formulated the following thought in this chapter: “A radical reduction in the money supply is, although tragic, a true evidence of the power of monetary policy, in contrast to the view of Keynes and his supporters regarding the reduction in the amount of money in circulation as a weakness of the banking system.” Continuing to defend his arguments, F., co-authored with economist David Meiselman, published an article in 1963 criticizing the basic idea of Keynes and his followers. It showed that nominal consumer spending is determined by the money supply rather than by individual items of state budget expenditure. These considerations formed the basis of the so-called. theories of monetary circulation of the 80s.

According to F., “it’s all about money,” because changes in the intensity of growth of nominal incomes are mainly due to changes in the growth of the money supply. The response criticism of the views of F. and Meiselman from the neo-Keynesians reflected the main directions of the debates of the 60s and 70s on issues of monetary and fiscal policy, during which, however, F.’s main proposals had to be recognized as quite acceptable and legitimate.

F.'s monetary economic theory gives a clear idea of the economic methods he uses. Economic models, he believes, should be judged by their ability to predict real economic outcomes, rather than by their speculative constructs. Moreover, simple, single-equation models of monetary phenomena are much preferable to those proposed by Keynesians, which rely on multiple systems of equations. F.'s monetary doctrine became a viable basis for existing doctrines, despite the excessive emphasis on one causal factor - the money supply, which could not but cause a certain skepticism among a number of researchers.

F.'s achievements are in one way or another connected with his analysis of the shortcomings of Keynes's theoretical calculations and effective criticism of the Phillips curve, which approximately interprets the so-called. natural increase in unemployment. A critical analysis of the phenomena under study allowed F. to exert a constant influence on the development of theoretical aspects of economic policy and the assessment of economic factors of unemployment for periods of rising inflation and periods of declining employment of the working population. Moreover, his exhaustive analysis of the role of economic stabilization policies - and this was especially evident in his famous analysis of the use of lags in the development of economic stabilization strategies - clearly demonstrates how and why economic stabilization measures can unexpectedly have the opposite effect.

F. was awarded the Nobel Memorial Prize in Economics in 1976 “for his achievements in the field of consumption analysis, the history of monetary circulation and the development of monetary theory, as well as for his practical demonstration of the complexity of economic stabilization policies.” In his Nobel lecture, he returned to a topic raised back in 1967 when addressing the American Economic Association - to the denial of Keynes's remark regarding the stable relationship between the rate of inflation and unemployment. He came to the conclusion that over a long period the Phillips curve still shifts upward, subject to a natural increase in unemployment.

In his opinion, the reason for this phenomenon was the acceptance of the growth of unemployment as an increasing parameter instead of interpreting it as a constant numerical constant. For the short term, in his opinion, inflationary monetary and fiscal policy could only temporarily reduce the unemployment rate, since workers and corporations, out of habit, strive to increase income levels, which ultimately cannot but contribute to an increase in the price level (and, accordingly, an increase in unemployment).

He showed that, under certain conditions, an increase in the slope of the Phillips curve could indeed be a plausible explanation for the cause of economic stagflation in the early 1970s. However, the social cost of inflation fluctuations turns out to be so high that F. becomes a consistent defender of “stability” as opposed to the “discretionary” nature of monetary policy. A sustained increase in the interest rate on monetary transactions could lead not only to stagnation of fluctuations in the money supply, but also to increased unpredictability of forecasts for business activity in the private sector.

F. earned recognition as an adviser to President Richard M. Nixon, despite his differences with him on the issue of establishing strict price and wage controls in 1971. F.'s views on the importance of non-intervention by the state in social policy became widely known through constant publications in the Newsweek magazine column assigned to him since 1966, as well as through the earlier publication of the book “Capitalism and Freedom” (1962). His popular book "Free to Choose" (1980) even provided the title for a television series of talks he gave on social and economic issues.

Many of F.'s proposals, such as reducing the amount of state intervention in the economy, introducing mercenary military service, using the so-called. “negative income tax” (payments from the budget to persons with insufficient incomes) have received practical implementation. Other proposals - education based on a guarantee of subsequent payment, refusal of social security and the minimum wage - still face serious objections from politicians.

Despite the label of “conservative” often attached to him by political opponents, F. turns out to be much closer to the classical liberalism of Adam Smith and John Stuart Mill than to the traditionally conservative wing of economic teaching. He believes that the goals he pursues do not really diverge from the goals of the modern liberal movement. He says: “Different approaches to economic policy, especially to the uninitiated, arise largely from differences in forecasts of subsequent economic action rather than from differences in fundamental principles and concepts.” Although the awarding of the Nobel Prize to F. caused a number of objections from professional economists and persons keenly interested in economic issues, the laureate's contribution to theoretical and applied research was widely recognized. Thus, Paul Samuelson called him an “economic economist.”

Returning from the University of Chicago in 1977, F. became a senior researcher at the Hoover Institution at Stanford University. For three decades he has been an active member of the American Economic Association, of which he was president in 1967.

F. married in 1938; his wife is Rose Director, an economist; their acquaintance began with joint scientific work at the University of Chicago. They have a son and daughter.

In addition to the Nobel Prize, F. was awarded the John Bates Clark Medal of the American Economic Association (1951) and honorary degrees from many American and foreign universities and colleges.

Nobel Prize laureates: Encyclopedia: Trans. from English – M.: Progress, 1992.
© The H.W. Wilson Company, 1987.
© Translation into Russian with additions, Progress Publishing House, 1992.