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169-474: The institute was incorporated in January 1991, with the mission of "promoting public policies fostering individual liberty, personal responsibility, and economic opportunity." Steve Buckstein, a former investment broker influenced by the libertarian ideas of Milton Friedman , founded Cascade Policy Institute after leading a 1989 ballot initiative to introduce school choice to Oregon, which failed. Co-founders of

338-534: A fixed cost which must be incurred regardless of any outside factors such as work experience , or other factors of human capital . During 1940, Friedman was appointed as an assistant professor teaching economics at the University of Wisconsin–Madison , but encountered anti semitism in the Economics department and returned to government service. From 1941 to 1943 Friedman worked on wartime tax policy for

507-658: A natural rate of unemployment and argued that unemployment below this rate would cause inflation to accelerate. He argued that the Phillips curve was in the long run vertical at the "natural rate" and predicted what would come to be known as stagflation . Friedman promoted a macroeconomic viewpoint known as monetarism and argued that a steady, small expansion of the money supply was the preferred policy, as compared to rapid, and unexpected changes. His ideas concerning monetary policy , taxation, privatization , and deregulation influenced government policies, especially during

676-477: A shock therapy , which rapidly transformed Chile from an economy with a protected market and strong government intervention into a liberalized, world-integrated economy, where market forces were left free to guide most of the economy's decisions. Inflation was tempered, falling from over 600% in 1974, to below 50% by 1979, to below 10% right before the economic crisis of 1982 ; GDP growth spiked (see chart) to 10%. however, inequality widened as wages and benefits to

845-415: A "slowly unfolding economic disaster" and bequeathed to the world increased inequalities, societal divisions, economic misery and a lack of meaningful politics. The Great Depression in the 1930s, which severely decreased economic output throughout the world and produced high unemployment and widespread poverty , was widely regarded as a failure of economic liberalism . To renew the damaged ideology,

1014-528: A 2007 article in Commentary magazine, his "parents were moderately observant Jews, but Friedman, after an intense burst of childhood piety , rejected religion altogether". He described himself as an agnostic. Friedman wrote extensively of his life and experiences, especially in 1998 in his memoirs with his wife, Rose , titled Two Lucky People . In this book, Rose Friedman describes how she and Milton Friedman raised their two children, Janet and David, with

1183-471: A Christmas tree in the home. "Orthodox Jews of course, do not celebrate Christmas. However, just as, when I was a child, my mother had permitted me to have a Christmas tree one year when my friend had one, she not only tolerated our having a Christmas tree, she even strung popcorn to hang on it." Friedman died of heart failure at the age of 94 years in San Francisco on November 16, 2006. He was still

1352-636: A centrist political movement from modern American liberalism in the 1970s. According to political commentator David Brooks , prominent neoliberal politicians included Al Gore and Bill Clinton of the Democratic Party of the United States. The neoliberals coalesced around two magazines, The New Republic and the Washington Monthly , and often supported Third Way policies. The "godfather" of this version of neoliberalism

1521-441: A certain set of economic beliefs. The colloquium defined the concept of neoliberalism as involving "the priority of the price mechanism, free enterprise, the system of competition, and a strong and impartial state". According to attendees Louis Rougier and Friedrich Hayek , the competition of neoliberalism would establish an elite structure of successful individuals that would assume power in society, with these elites replacing

1690-514: A civilian-military regime. Shortly after the inauguration of Fujimori, his government received a $ 715 million grant from United States Agency for International Development (USAID) on 29 September 1990 for the Policy Analysis, Planning and Implementation Project (PAPI) that was developed "to support economic policy reform in the country". De Soto proved to be influential to Fujimori, who began to repeat de Soto's advocacy for deregulating

1859-487: A decline in the quantity of money by one-third from 1929 to 1933 ... Far from the depression being a failure of the free-enterprise system, it was a tragic failure of government. This theory was put forth in A Monetary History of the United States , and the chapter on the Great Depression was then published as a stand-alone book entitled The Great Contraction, 1929–1933 . Both books are still in print from

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2028-415: A drop in the real salary of the working class. They also liberalized trade policy so that foreign goods could freely enter the country. Argentina's industry, which had been on the rise for 20 years after the economic policies of former president Arturo Frondizi , rapidly declined as it was not able to compete with foreign goods. Following the measures, there was an increase in poverty from 9% in 1975 to 40% at

2197-498: A free-market alternative to third-party payer systems. In 2010, it published a report, The Oregon Health Plan: A “Bold Experiment” that Failed , critiquing the state's inability to meet its objectives. Analysis by Cascade based on U.S. census data showed that the percentage of uninsured Oregonians increased from 12.4 percent in 1990 to 15.3 percent in 1996 after the Oregon Health Plan was first implemented, contradicting

2366-426: A global 'free market'. Naomi Klein states that the three policy pillars of neoliberalism are " privatization of the public sphere, deregulation of the corporate sector, and the lowering of income and corporate taxes , paid for with cuts to public spending ". According to some scholars, neoliberalism is commonly used as a pejorative by critics, outpacing similar terms such as monetarism , neoconservatism ,

2535-438: A government-appointed commission that ensured Pinochet would remain as president for a further eight years—with increased powers—after which he would face a re-election referendum. The Chicago Boys were given significant political influence within the military dictatorship , and they implemented sweeping economic reform . In contrast to the extensive nationalization and centrally planned economic programs supported by Allende,

2704-599: A group of 25 liberal intellectuals, including a number of prominent academics and journalists like Walter Lippmann , Friedrich Hayek , Ludwig von Mises , Wilhelm Röpke , Alexander Rüstow , and Louis Rougier , organized the Walter Lippmann Colloquium , named in honor of Lippmann to celebrate the publication of the French translation of Lippmann's pro- market book An Inquiry into the Principles of

2873-525: A mess, highlighting the strained relationship between monetarism and new classical schools. Friedman was also known for his work on the consumption function, the permanent income hypothesis (1957), which Friedman himself referred to as his best scientific work. This work contended that utility-maximizing consumers would spend a proportional amount of what they perceived to be their permanent income. Permanent Income refers to such factors like human capital . Windfall gains would mostly be saved because of

3042-445: A multitude of phenomena. However, it is primarily employed to delineate the societal transformation resulting from market-based reforms. Neoliberalism is an economic philosophy that originated among European liberal scholars during the 1930s. It emerged as a response to the perceived decline in popularity of classical liberalism , which was seen as giving way to a social liberal desire to control markets. This shift in thinking

3211-698: A new constitution to replace the Pinochet-era constitution, which entrenched certain neoliberal principles into the country's basic law, won with 78% of the vote. However, in September 2022 , the referendum to approve a rewritten the constitution was rejected with 61% of the vote. Peruvian economist Hernando de Soto , the founder of one of the first neoliberal organizations in Latin America, Institute for Liberty and Democracy (ILD), began to receive assistance from Ronald Reagan 's administration, with

3380-633: A philosophy that was more moderate than entirely Laissez-faire free-market capitalism and favored using state policy to temper social inequality and counter a tendency towards monopoly. In 1976, the military dictatorship 's economic plan led by José Alfredo Martínez de Hoz was the first attempt at establishing a neoliberal program in Argentina. They implemented a fiscal austerity plan that reduced money printing in an attempt to counter inflation. In order to achieve this, salaries were frozen; however, they were unable to reduce inflation, which led to

3549-431: A proposed megaproject to build a new bridge and light rail system connecting Oregon and Washington. Instead, they argued, Oregon should focus on seismically retrofitting the existing bridge; funding the construction of a new bridge through tolls; and increasing legislative oversight and management. Milton Friedman Milton Friedman ( / ˈ f r iː d m ən / ; July 31, 1912 – November 16, 2006)

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3718-702: A reduction in the rate of inflation , though Peru's poverty rate remained largely unchanged with over half of the population living in poverty in 1998. According to the Foundation for Economic Education , USAID, the United Nations Population Fund (UNFPA) and the Nippon Foundation also supported the sterilization efforts of the Fujimori government. E. Liagin reported that from 1993 to 1998, USAID "basically took charge of

3887-462: A significant factor in the proliferation of conservative and right-libertarian organizations, political parties , and think tanks , and predominantly advocated by them. Neoliberalism is often associated with a set of economic liberalization policies, including privatization , deregulation , consumer choice , globalization , free trade , monetarism , austerity , and reductions in government spending . These policies are designed to increase

4056-409: A theory which would later become part of mainstream economics and he was among the first to propagate the theory of consumption smoothing . During the 1960s, he became the main advocate opposing Keynesian government policies, and described his approach (along with mainstream economics) as using "Keynesian language and apparatus" yet rejecting its initial conclusions. He theorized that there existed

4225-566: A widely cited statistic from the Office of Oregon Health Plan Policy and Research that the percentage had dropped significantly during that period. Cascade also argued that by failing to compensate health care providers adequately, the Oregon Health Plan had caused health maintenance organizations (HMOs) to reduce their services to rural areas. Cascade has been called one of the leading neoliberal critics of Portland Metro 's Transit-Oriented Development (TOD) program , and has testified in front of

4394-524: A working economist performing original economic research; his last column was published in The Wall Street Journal the day after his death. He was survived by his wife, Rose Friedman (who would die on August 18, 2009), and their two children, David D. Friedman , known for The Machinery of Freedom , as well as his unique anarcho-capitalism from a Chicago School perspective, and attorney and bridge player Jan Martel . Friedman

4563-521: Is sequential sampling . Friedman did statistical work at the Division of War Research at Columbia, where he and his colleagues came up with the technique. It became, in the words of The New Palgrave Dictionary of Economics , "the standard analysis of quality control inspection". The dictionary adds, "Like many of Friedman's contributions, in retrospect it seems remarkably simple and obvious to apply basic economic ideas to quality control; that, however,

4732-400: Is a measure of his genius." Neoliberalism Neoliberalism is both a political philosophy and a term used to signify the late-20th-century political reappearance of 19th-century ideas associated with free-market capitalism . The term has multiple, competing definitions, and is often used pejoratively. In scholarly use, the term is often left undefined or used to describe

4901-629: Is always and everywhere a monetary phenomenon. Friedman rejected the use of fiscal policy as a tool of demand management; he also held the belief that the government's role in the guidance of the economy should be restricted severely. Friedman wrote extensively on the Great Depression , and he termed the 1929–1933 period the Great Contraction . He argued that the Depression had been caused by an ordinary financial shock and

5070-444: Is broadly defined as the extension of competitive markets into all areas of life, including the economy , politics and society . The Handbook of Neoliberalism Neoliberalism is contemporarily used to refer to market-oriented reform policies such as "eliminating price controls , deregulating capital markets , lowering trade barriers " and reducing, especially through privatization and austerity , state influence in

5239-461: Is distinct from liberalism insofar as it does not advocate laissez-faire economic policy, but instead is highly constructivist and advocates a strong state to bring about market-like reforms in every aspect of society. Anthropologist Jason Hickel also rejects the notion that neoliberalism necessitates the retreat of the state in favor of totally free markets, arguing that the spread of neoliberalism required substantial state intervention to establish

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5408-739: Is near the Latin American average, Chile still has one of the highest Gini coefficients in the OECD , an organization of mostly developed countries that includes Chile but not most other Latin American countries. Furthermore, the Gini coefficient measures only income inequality ; Chile has more mixed inequality ratings in the OECD's Better Life Index , which includes indexes for more factors than only income, like housing and education . Additionally,

5577-675: The Asia-Pacific , the Middle East , and China implementing significant neoliberal reform. Additionally, the International Monetary Fund and World Bank encouraged neoliberal reforms in many developing countries by placing reform requirements on loans, in a process known as structural adjustment . Neoliberal ideas were first implemented in West Germany . The economists around Ludwig Erhard drew on

5746-627: The Friedman Foundation for Educational Choice , later renamed EdChoice . Friedman's works cover a broad range of economic topics and public policy issues. His books and essays have had global influence, including in former communist states . A 2011 survey of economists commissioned by the EJW ranked Friedman as the second-most popular economist of the 20th century, following only John Maynard Keynes . Upon his death, The Economist described him as "the most influential economist of

5915-518: The Great Recession . In sum, the neoliberal policies of the 1980s and 1990s—initiated by a repressive authoritarian government —transformed the Chilean economy from a protected market with high barriers to trade and hefty government intervention into one of the world's most open free-market economies. Chile experienced the worst economic bust of any Latin American country during

6084-517: The Hoover Institution at Stanford University . During 1977, Friedman was approached by Bob Chitester and the Free to Choose Network . They asked him to create a television program presenting his economic and social philosophy. Friedman and his wife Rose worked on this project for the next three years, and during 1980, the ten-part series, titled Free to Choose , was broadcast by

6253-597: The Latin American debt crisis (several years into neoliberal reform), but also had one of the most robust recoveries, rising from the poorest Latin American country in terms of GDP per capita in 1980 (along with Peru) to the richest in 2019. Average annual economic growth from the mid-1980s to the Asian crisis in 1997 was 7.2%, 3.5% between 1998 and 2005, and growth in per capita real income from 1985 to 1996 averaged 5%—all outpacing Latin American averages. Inflation

6422-467: The National Endowment for Democracy 's Center for International Private Enterprise (CIPE) providing his ILD with funding. The economic policy of President Alan García distanced Peru from international markets, resulting in lower foreign investment in the country. Under García, Peru experienced hyperinflation and increased confrontations with the guerrilla group Shining Path , leading

6591-643: The National Recovery Administration and the Agricultural Adjustment Administration ". Foreshadowing his later ideas, he believed price controls interfered with an essential signaling mechanism to help resources be used where they were most valued. Indeed, Friedman later concluded that all government intervention associated with the New Deal was "the wrong cure for the wrong disease" , arguing

6760-517: The Philips curve evolved from a strict model emphasizing the connection between inflation and unemployment as being absolute, to a model which emphasized short term unemployment reductions and long term employment stagnations. Friedman's revised and updated Phillips Curve also changed as a result of Robert Lucas's idea of Rational expectations , replacing the adaptive expectations Friedman used. One of his most famous contributions to statistics

6929-615: The Princeton University Press , and some editions include as an appendix a speech at a University of Chicago event honoring Friedman in which Ben Bernanke made this statement: Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression, you're right. We did it. We're very sorry. But thanks to you, we won't do it again. Friedman also argued for

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7098-658: The Public Broadcasting Service (PBS). The companion book to the series (co-authored by Milton and his wife, Rose Friedman ), also titled Free To Choose , was the bestselling nonfiction book of 1980. Friedman served as an unofficial adviser to Ronald Reagan during his 1980 presidential campaign , and then served on the President's Economic Policy Advisory Board for the rest of the Reagan Administration . Ebenstein says Friedman

7267-541: The United States , the Chilean armed forces and national police overthrew the Allende government in a coup d'état . They established a repressive military junta , known for its violent suppression of opposition , and appointed army chief Augusto Pinochet Supreme Head of the nation. His rule was later given legal legitimacy through a controversial 1980 plebiscite , which approved a new constitution drafted by

7436-488: The University of Minnesota (where his friend George Stigler was employed). On February 12, 1945, his only son, David D. Friedman , who would later follow in his father's footsteps as an economist, was born. In 1946, Friedman accepted an offer to teach economic theory at the University of Chicago (a position opened by the departure of his former professor Jacob Viner to Princeton University ). Friedman would work for

7605-595: The Washington Consensus and "market reform" in much scholarly writing. The Handbook of Neoliberalism , for instance, posits that the term has "become a means of identifying a seemingly ubiquitous set of market-oriented policies as being largely responsible for a wide range of social, political, ecological and economic problems". Its use in this manner has been criticized by those who advocate for policies characterized as neoliberal. The Handbook , for example, further argues that "such lack of specificity [for

7774-699: The federal government , as an advisor to senior officials of the United States Department of the Treasury . As a Treasury spokesman during 1942, he advocated a Keynesian policy of taxation. He helped to invent the payroll withholding tax system, since the federal government needed money to fund the war. He later said, "I have no apologies for it, but I really wish we hadn't found it necessary and I wish there were some way of abolishing withholding now." In Milton and Rose Friedman's jointly written memoir, he wrote, "Rose has repeatedly chided me over

7943-575: The law of diminishing marginal utility . Friedman's essay " The Methodology of Positive Economics " (1953) provided the epistemological pattern for his own subsequent research and to a degree that of the Chicago School. There he argued that economics as science should be free of value judgments for it to be objective. Moreover, a useful economic theory should be judged not by its descriptive realism but by its simplicity and fruitfulness as an engine of prediction. That is, students should measure

8112-534: The permanent income hypothesis . Friedman began employment with the National Bureau of Economic Research during the autumn of 1937 to assist Simon Kuznets in his work on professional income. This work resulted in their jointly authored publication Incomes from Independent Professional Practice , which introduced the concepts of permanent and transitory income, a major component of the permanent income hypothesis that Friedman worked out in greater detail in

8281-675: The "clearest repudiation of the country's establishment". In the 1960s, Latin American intellectuals began to notice the ideas of ordoliberalism ; they often used the Spanish term "neoliberalismo" to refer to this school of thought. They were particularly impressed by the social market economy and the Wirtschaftswunder ("economic miracle") in Germany and speculated about the possibility of accomplishing similar policies in their own countries. Neoliberalism in 1960s Argentina meant

8450-565: The 1950s. The book hypothesizes that professional licensing artificially restricts the supply of services and raises prices. Incomes from Independent Professional Practice remained quite controversial within the economics community because of Friedman's hypothesis that barriers to entry , which were exercised and enforced by the American Medical Association , led to higher than average wages for physicians, compared to other professional groups. Barriers to entry are

8619-633: The 1954–1955 academic year as a Fulbright Visiting Fellow at Gonville and Caius College, Cambridge . At the time, the Cambridge economics faculty was divided into a Keynesian majority (including Joan Robinson and Richard Kahn ) and an anti-Keynesian minority (headed by Dennis Robertson ). Friedman speculated he was invited to the fellowship because his views were unacceptable to both of the Cambridge factions. Later his weekly columns for Newsweek magazine (1966–84) were well read and increasingly influential among political and business people, and helped earn

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8788-494: The 1980s, "have contributed to steady economic growth in Chile and have more than halved poverty rates," and some scholars have even called the period the " Miracle of Chile ". Other scholars have called it a failure that led to extreme inequalities in the distribution of income and resulted in severe socioeconomic damage. It is also contested how much these changes were the result of neoliberal economic policies and how much they were

8957-488: The 1980s. His monetary theory influenced the Federal Reserve 's monetary policy in response to the 2007–2008 financial crisis . After retiring from the University of Chicago in 1977, and becoming Emeritus professor in economics in 1983, Friedman served as an advisor to Republican U.S. president Ronald Reagan and Conservative British prime minister Margaret Thatcher . His political philosophy extolled

9126-507: The 1990s, Chile maintained high growth, averaging 7.3% from 1990 to 1998. Eduardo Aninat, writing for the IMF journal Finance & Development , called the period from 1986 to 2000 "the longest, strongest, and most stable period of growth in [Chile's] history." In 1999, there was a brief recession brought about by the Asian financial crisis , with growth resuming in 2000 and remaining near 5% until

9295-504: The Bureau's staff. He accepted the invitation, and assumed responsibility for the Bureau's inquiry into the role of money in the business cycle . As a result, he initiated the "Workshop in Money and Banking" (the "Chicago Workshop"), which promoted a revival of monetary studies. During the latter half of the 1940s, Friedman began a collaboration with Anna Schwartz , an economic historian at

9464-596: The Bureau, that would ultimately result in the 1963 publication of a book co-authored by Friedman and Schwartz, A Monetary History of the United States, 1867–1960 . In 1951, Friedman was awarded the John Bates Clark Medal , which at the time was awarded every other year to the best economist under the age of 40, by the American Economic Association . Remarkably, his most influential work was still ahead of him. Friedman spent

9633-567: The Chicago Boys implemented rapid and extensive privatization of state enterprises, deregulation, and significant reductions in trade barriers during the latter half of the 1970s. In 1978, policies that would further reduce the role of the state and infuse competition and individualism into areas such as labor relations, pensions, health and education were introduced. > Additionally, the central bank raised interest rates from 49.9% to 178% to counter high inflation. These policies amounted to

9802-629: The Consumption Function helped Friedman gain respect in the field of economics. His work on the permanent income hypothesis is among the many contributions which were listed as reasons for his Sveriges-Riksbank Prize in Economic Sciences . His work was later expanded on by Christopher D. Carroll, especially in regards to the absence of liquidity constraints . The permanent income hypothesis faces some criticism, mainly from Keynesian economists. The primary criticism of

9971-489: The English-language study of political economy. According to one study of 148 scholarly articles, neoliberalism is almost never defined but used in several senses to describe ideology, economic theory, development theory, or economic reform policy. It has become used largely as a term of abuse and/or to imply a laissez-faire market fundamentalism virtually identical to that of classical liberalism – rather than

10140-440: The Federal Reserve was to blame, and that they should have expanded the money supply in reaction to what he later described in A Monetary History of the United States as " The Great Contraction ". Later, Friedman and his colleague Anna Schwartz wrote A Monetary History of the United States, 1867–1960 , which argued that the Great Depression was caused by a severe monetary contraction due to banking crises and poor policy on

10309-571: The German neoliberals, his name was only occasionally mentioned in conjunction with neoliberalism during this period due to his more pro-free market stance. During the military rule under Augusto Pinochet (1973–1990) in Chile, opposition scholars took up the expression to describe the economic reforms implemented there and its proponents (the Chicago Boys ). Once this new meaning was established among Spanish-speaking scholars, it diffused into

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10478-757: The Good Society . Meeting in Paris in August 1938, they called for a new liberal project, with "neoliberalism" one name floated for the fledgling movement. They further agreed to develop the Colloquium into a permanent think tank based in Paris called the Centre International d'Études pour la Rénovation du Libéralisme. While most agreed that the status quo liberalism promoting laissez-faire economics had failed, deep disagreements arose around

10647-411: The Great Depression while Mises denounced the other faction, complaining that the ordoliberalism they advocated really meant "ordo-interventionism". Divided in opinion and short on funding, the Colloquium was mostly ineffectual; related attempts to further neoliberal ideas, such as the effort by Colloque-attendee Wilhelm Röpke to establish a journal of neoliberal ideas, mostly floundered. Fatefully,

10816-537: The Italian economist Maffeo Pantaleoni , with the term néo-libéralisme previously existing in French; the term was later used by others, including the classical liberal economist Milton Friedman in his 1951 essay "Neo-Liberalism and its Prospects". In 1938 at the Colloque Walter Lippmann , the term neoliberalism was proposed, among other terms, and ultimately chosen to be used to describe

10985-938: The Oregon legislature, the TOD Steering Committee, and the Metro task force attempting to raise funds through bonds. Sociologist Erik Solevad Nielsen explains that rather than a wholesale rejection of rail systems or sustainable development, Cascade Policy Institute's stance is that "Metro and TriMet should abandon urban planning, designing and development – and especially avoid high-risk projects." The institute has objected to subsidization of Portland's MAX light rail system and associated development projects, arguing that they have squandered millions of taxpayer dollars, often on projects that have in turn created more housing and transportation problems, and would have been better addressed through privatization. In John Charles's view,

11154-476: The Oregon legislature. Cascade Policy Institute has advocated school choice laws since the organization's inception over 30 years ago. Cascade organized conferences supporting charter schools in 1993 and 1994, inviting speakers such as Jeanne Allen, founder of the Center for Education Research, one of the first nationwide groups promoting charter schools, and Ted Kolderie, the policy analyst who helped to develop

11323-594: The Peruvian economy. Under Fujimori, de Soto served as "the President's personal representative", with The New York Times describing de Soto as an "overseas salesman", while others dubbed de Soto as the "informal president" for Fujimori. In a recommendation to Fujimori, de Soto called for a "shock" to Peru's economy. The policies included a 300% tax increase, unregulated prices and privatizing two-hundred and fifty state-owned entities. The policies of de Soto led to

11492-432: The United States, 1867–1960 (1963), which was an examination of the role of the money supply and economic activity in the U.S. history. Friedman was the main proponent of the monetarist school of economics. He maintained that there is a close and stable association between inflation and the money supply, mainly that inflation could be avoided with proper regulation of the monetary base 's growth rate. He famously used

11661-462: The University of Chicago for the next 30 years. There, he contributed to the establishment of an intellectual community that produced a number of Nobel Memorial Prize winners, known collectively as the Chicago school of economics . At the time, Arthur F. Burns , who was then the head of the National Bureau of Economic Research , and later chairman of the Federal Reserve , asked Friedman to rejoin

11830-523: The University of Chicago." The relationship between Friedman and Lucas, or new classical macroeconomics as a whole, was highly complex. The Friedmanian Phillips curve was an interesting starting point for Lucas, but he soon realized that the solution provided by Friedman was not quite satisfactory. Lucas elaborated a new approach in which rational expectations were presumed instead of the Friedmanian adaptive expectations . Due to this reformulation,

11999-426: The accuracy of its predictions, rather than the 'soundness of its assumptions'. His argument was part of an ongoing debate among such statisticians as Jerzy Neyman , Leonard Savage , and Ronald Fisher . While being an advocate of the free market, Friedman believed that the government had two crucial roles. In an interview with Phil Donahue, Friedman argued that "the two basic functions of a government are to protect

12168-404: The analogy of " dropping money out of a helicopter ", to avoid dealing with money injection mechanisms and other factors that would overcomplicate his models. Friedman's arguments were designed to counter the popular concept of cost-push inflation , that the increased general price level at the time was the result of increases in the price of oil, or increases in wages; as he wrote: Inflation

12337-651: The benefits are concentrated in Lima." In 2020, the COVID-19 pandemic in Peru compounded these disparities, with political scientist Professor Farid Kahhat of the Pontifical Catholic University of Peru stating that, "market reforms in Peru have yielded positive results in terms of reducing poverty ... But what the pandemic has laid bare, particularly in Peru, is that poverty was reduced while leaving

12506-416: The chapters specifying an issue in each respective chapter from the role of government and money supply to social welfare programs to a special chapter on occupational licensure. Friedman concludes Capitalism and Freedom with his "classical liberal" stance that government should stay out of matters that do not need it and should only involve itself when absolutely necessary for the survival of its people and

12675-474: The classical liberal notion that competition drives economic prosperity. However, they argued that a laissez-faire state policy stifles competition, as the strong devour the weak since monopolies and cartels could pose a threat to freedom of competition. They supported the creation of a well-developed legal system and capable regulatory apparatus. While still opposed to full-scale Keynesian employment policies or an extensive welfare state , German neoliberal theory

12844-483: The country towards high levels of instability. The Peruvian armed forces grew frustrated with the inability of the García administration to handle the nation's crises and began to draft an operation – Plan Verde – to overthrow his government. The military's Plan Verde involved the " total extermination " of impoverished and indigenous Peruvians perceived as a drain on the economy, the control or censorship of media in

13013-489: The country. He recounts how the best of a country's abilities come from its free markets while its failures come from government intervention. In 1977, at the age of 65, Friedman retired from the University of Chicago after teaching there for 30 years. He and his wife moved to San Francisco, where he became a visiting scholar at the Federal Reserve Bank of San Francisco . From 1977 on, he was affiliated with

13182-508: The depth of economic thinking. Friedman was unable to find academic employment, so in 1935 he followed his friend W. Allen Wallis to Washington, D.C., where Franklin D. Roosevelt 's New Deal was "a lifesaver" for many young economists. At this stage, Friedman said he and his wife "regarded the job-creation programs such as the WPA , CCC , and PWA appropriate responses to the critical situation", but not "the price- and wage-fixing measures of

13351-536: The desire to compete with Milton professionally (perhaps because I was smart enough to recognize I couldn't). On the other hand, he has always made me feel that his achievement is my achievement." During the 1960s, Friedman built (and subsequently maintained) a cottage in Fairlee , Vermont. Friedman also had an apartment in Russian Hill , San Francisco, where he lived from 1977 until his death. According to

13520-451: The developed world was under threat from collectivist trends, which they outlined in their statement of aims: The central values of civilization are in danger. Over large stretches of the Earth's surface the essential conditions of human dignity and freedom have already disappeared. In others, they are under constant menace from the development of current tendencies of policy. The position of

13689-421: The duration and seriousness of which were greatly increased by the subsequent contraction of the money supply caused by the misguided policies of the directors of the Federal Reserve. The Fed was largely responsible for converting what might have been a garden-variety recession, although perhaps a fairly severe one, into a major catastrophe. Instead of using its powers to offset the depression, it presided over

13858-444: The earliest nations to implement neoliberal reform. Marxist economic geographer David Harvey has described the substantial neoliberal reforms in Chile beginning in the 1970s as "the first experiment with neoliberal state formation", which would provide "helpful evidence to support the subsequent turn to neoliberalism in both Britain... and the United States." Similarly, Vincent Bevins says that Chile under Augusto Pinochet "became

14027-550: The early 1970s. After several years of socialist economic policies under president Salvador Allende , a 1973 coup d'état , which established a military junta under dictator Augusto Pinochet , led to the implementation of a number of sweeping neoliberal economic reforms that had been proposed by the Chicago Boys , a group of Chilean economists educated under Milton Friedman . This "neoliberal project" served as "the first experiment with neoliberal state formation" and provided an example for neoliberal reforms elsewhere. Beginning in

14196-575: The early 1980s, the Reagan administration and Thatcher government implemented a series of neoliberal economic reforms to counter the chronic stagflation the United States and United Kingdom had each experienced throughout the 1970s. Neoliberal policies continued to dominate American and British politics until the Great Recession . Following British and American reform, neoliberal policies were exported abroad, with countries in Latin America ,

14365-520: The economy. It is also commonly associated with the economic policies introduced by Margaret Thatcher in the United Kingdom and Ronald Reagan in the United States. Some scholars note it has a number of distinct usages in different spheres: There is debate over the meaning of the term. Sociologists Fred L. Block and Margaret Somers claim there is a dispute over what to call the influence of free-market ideas which have been used to justify

14534-501: The economy. It would not be until a succession of economic downturns and crises in the 1970s that neoliberal policy proposals would be widely implemented. By this time, neoliberal thought had evolved. The early neoliberal ideas of the Mont Pelerin Society had sought to chart a middle way between the trend of increasing government intervention implemented after the Great Depression and the laissez-faire economics many in

14703-431: The efforts of the Colloquium would be overwhelmed by the outbreak of World War II and were largely forgotten. Nonetheless, the Colloquium served as the first meeting of the nascent neoliberal movement and would serve as the precursor to the Mont Pelerin Society , a far more successful effort created after the war by many of those who had been present at the Colloquium. Neoliberalism began accelerating in importance with

14872-595: The environment. The Children's Scholarship Fund–Oregon (CSF-Oregon) is a program run by the Cascade Policy Institute, and is affiliated with the national Children's Scholarship Fund (CSF) network. Kathryn Hickock, executive vice president at Cascade Policy Institute, also serves as director of CSF-Oregon. According to Hickock, as of January 2022, Children's Scholarship Fund–Oregon has provided $ 3.5 million in partial tuition scholarships for low-income elementary school children to attend private schools. In

15041-445: The epicenter of the community as Europeans dominated the leadership roles. Established during a time when central planning was in the ascendancy worldwide and there were few avenues for neoliberals to influence policymakers, the society became a "rallying point" for neoliberals, as Milton Friedman phrased it, bringing together isolated advocates of liberalism and capitalism . They were united in their belief that individual freedom in

15210-477: The establishment of the Mont Pelerin Society in 1947, whose founding members included Friedrich Hayek , Milton Friedman , Karl Popper , George Stigler and Ludwig von Mises . Meeting annually, it became a "kind of international 'who's who' of the classical liberal and neo-liberal intellectuals." While the first conference in 1947 was almost half American, the Europeans dominated by 1951. Europe would remain

15379-577: The existing representative democracy acting on the behalf of the majority. To be neoliberal meant advocating a modern economic policy with state intervention . Neoliberal state interventionism brought a clash with the opposing laissez-faire camp of classical liberals, like Ludwig von Mises . Most scholars in the 1950s and 1960s understood neoliberalism as referring to the social market economy and its principal economic theorists such as Walter Eucken , Wilhelm Röpke , Alexander Rüstow and Alfred Müller-Armack . Although Hayek had intellectual ties to

15548-444: The fact that every TOD project undertaken requires subsidies means that the program by definition lacks an economically sustainable business model. In 2011, the Cascade Policy Institute allied with 1000 Friends of Oregon , a non-profit organization focused on sustainable land use. Acknowledging that they were "strange bedfellows", the two organizations issued a statement that they were nevertheless aligned in opposing certain aspects of

15717-598: The faculty at the University of Chicago that rejected Keynesianism in favor of monetarism until the mid-1970s, when it turned to new classical macroeconomics heavily based on the concept of rational expectations . Several students, young professors and academics who were recruited or mentored by Friedman at Chicago went on to become leading economists, including Gary Becker , Robert Fogel , and Robert Lucas Jr. Friedman's challenges to what he called "naive Keynesian theory" began with his interpretation of consumption , which tracks how consumers spend. He introduced

15886-527: The first charter school law in Minnesota which passed in 1991. Although charter school bills failed to pass in 1995 and 1997, Oregon finally passed its charter school law in 1999, which included compromises allowing for strong local district control rather than a "pure" free-market approach. A long-time advocate of medical savings accounts , Cascade Policy Institute sponsored numerous conferences on MSAs starting in 1995, and published papers promoting MSAs as

16055-408: The first eighteen years and more than half a million since 1962. Capitalism and Freedom was translated into eighteen languages. Friedman talks about the need to move to a classically liberal society, that free markets would help nations and individuals in the long-run and fix the efficiency problems currently faced by the United States and other major countries of the 1950s and 1960s. He goes through

16224-607: The former seeks to disrupt and overcome any institutions which stand in the way. Radhika Desai, director of the Geopolitical Economy Research Group at the University of Manitoba , argues that global capitalism reached its peak in 1914, just prior to the two great wars, anti-capitalist revolutions and Keynesian reforms, and the purpose of neoliberalism was to restore capitalism to the preeminence it once enjoyed. She argues that this process has failed as contemporary neoliberal capitalism has fostered

16393-429: The fringes of Chilean economic and political thought for a number of years, as the presidency of Salvador Allende (1970–1973) brought about a socialist reorientation of the economy. During the Allende presidency, Chile experienced a severe economic crisis, in which inflation peaked near 150%. Following an extended period of social unrest and political tension, as well as diplomatic, economic, and covert pressure from

16562-485: The gloves off", goes on to assert that the term was largely unknown by the general public in 1998, particularly in the United States . Lester Spence uses the term to critique trends in Black politics, defining neoliberalism as "the general idea that society works best when the people and the institutions within it work or are shaped to work according to market principles". According to Philip Mirowski , neoliberalism views

16731-437: The government, which was received with disapproval by Fujimori. USAID would go on to assist the Fujimori government with rewriting the 1993 Peruvian constitution, with the agency concluding in 1997 that it helped with the "preparation of legislative texts" and "contributed to the emergence of a private sector advisory role". The policies promoted by de Soto and implemented by Fujimori eventually caused macroeconomic stability and

16900-438: The growth of a view of history which denies all absolute moral standards and by the growth of theories which question the desirability of the rule of law. It holds further that they have been fostered by a decline of belief in private property and the competitive market...[This group's] object is solely, by facilitating the exchange of views among minds inspired by certain ideals and broad conceptions held in common, to contribute to

17069-453: The high interest rates of the period which—while stabilizing inflation—hampered investment and contributed to widespread bankruptcy in the banking industry. Other scholars fault governmental departures from the neoliberal agenda ; for instance, the government pegged the Chilean peso to the US dollar, against the wishes of the Chicago Boys, which economists believe led to an overvalued peso. After

17238-429: The hypothesis is based on a lack of liquidity constraints . His book Capitalism and Freedom , inspired by a series of lectures he gave at Wabash College , brought him national and international attention outside academia. It was published in 1962 by the University of Chicago Press and consists of essays that used non-mathematical economic models to explore issues of public policy. It sold over 400,000 copies in

17407-421: The idea that the word is nothing more than a political slur, or a term without any analytic power". Gary Gerstle argues that neoliberalism is a legitimate term, and describes it as "a creed that calls explicitly for unleashing capitalism's power." He distinguishes neoliberalism from traditional conservatism, as the latter values respect for traditions and bolstering the institutions which reinforce them, whereas

17576-401: The ideas of those who attended the 1938 colloquium. As a result, there is controversy as to the precise meaning of the term and its usefulness as a descriptor in the social sciences , especially as the number of different kinds of market economies have proliferated in recent years. Unrelated to the economic philosophy described in this article, the term "neoliberalism" is also used to describe

17745-485: The immediate suffering of poor Peruvians who saw unregulated prices increase rapidly. Those living in poverty saw prices increase so much that they could no longer afford food. The New York Times wrote that de Soto advocated for the collapse of Peru's society, with the economist saying that a civil crisis was necessary to support the policies of Fujimori. Fujimori and de Soto would ultimately break their ties after de Soto recommended increased involvement of citizens within

17914-466: The increased economic freedom he believed the neoliberal reforms had brought had put pressure on the dictatorship over time, resulting in a gradual increase in political freedom and, ultimately, the restoration of democracy. The Chilean scholars Javier Martínez and Alvaro Díaz reject this argument, pointing to the long tradition of democracy in Chile. They assert that the defeat of the Pinochet regime and

18083-477: The individual and the voluntary group are progressively undermined by extensions of arbitrary power. Even that most precious possession of Western Man, freedom of thought and expression, is threatened by the spread of creeds which, claiming the privilege of tolerance when in the position of a minority, seek only to establish a position of power in which they can suppress and obliterate all views but their own...The group holds that these developments have been fostered by

18252-441: The insight that a government that brings about greater inflation cannot permanently reduce unemployment by doing so. Unemployment may be temporarily lower, if the inflation is a surprise, but in the long run unemployment will be determined by the frictions and imperfections of the labor market. If the conditions are not met and inflation is expected, the "long run" effects will replace the "short term" effects. Through his critique,

18421-537: The institute included David Gore and Bill Udy, who served as the organization's first board members, along with Buckstein. Tracie Sharp, president of the State Policy Network, was also a co-founder of Cascade Policy Institute. Buckstein led the organization as president until 2004, when he was succeeded by John A. Charles Jr. as president and CEO. Charles was previously the environmental policy director at Cascade Policy Institute. Before joining Cascade, he

18590-532: The interventionist excesses of the Erhard ministry and the ordoliberals, Mises wrote: "I have no illusions about the true character of the politics and politicians of the social market economy". According to Mises, Erhard's teacher Franz Oppenheimer "taught more or less the New Frontier line of" President Kennedy's "Harvard consultants ( Schlesinger , Galbraith , etc.)". In Germany, neoliberalism at first

18759-432: The label "neoliberalism", criticized that development tendency and pressed for a more limited welfare program. Hayek did not like the expression "social market economy", but stated in 1976 that some of his friends in Germany had succeeded in implementing the sort of social order for which he was pleading while using that phrase. In Hayek's view, the social market economy's aiming for both a market economy and social justice

18928-482: The liberal focus on individualism and economic freedom must not be abandoned to collectivism. For decades after the formation of the Mont Pelerin Society , the ideas of the society would remain largely on the fringes of political policy, confined to a number of think-tanks and universities and achieving only measured success with the ordoliberals in Germany , who maintained the need for strong state influence in

19097-500: The magazine a Gerald Loeb Special Award in 1968. From 1968 to 1978, he and Paul Samuelson participated in the Economics Cassette Series, a biweekly subscription series where the economist would discuss the days' issues for about a half-hour at a time. One of Milton Friedman's most popular works, A Theory of the Consumption Function , challenged traditional Keynesian viewpoints about the household. This work

19266-442: The market as the greatest information processor, superior to any human being. It is hence considered as the arbiter of truth. Adam Kotsko describes neoliberalism as political theology , as it goes beyond simply being a formula for an economic policy agenda and instead infuses it with a moral ethos that "aspires to be a complete way of life and a holistic worldview, in a way that previous models of capitalism did not." Neoliberalism

19435-404: The mid-1980s, after French philosopher Michel Foucault brought attention to it. At a base level we can say that when we make reference to 'neoliberalism', we are generally referring to the new political, economic and social arrangements within society that emphasize market relations, re-tasking the role of the state, and individual responsibility . Most scholars tend to agree that neoliberalism

19604-427: The miserable state of public services unaltered – most clearly in the case of health services." The candidacy of Pedro Castillo in the 2021 Peruvian general election brought attention to the disparities between urban and rural Peruvians, with much of his support being earned in the exterior portions of the country. Castillo ultimately won the election, with The New York Times reporting his victory as

19773-420: The most important old age income source for a majority of the German population, therefore despite liberal rhetoric the 1950s witnessed what has been called a "reluctant expansion of the welfare state". To end widespread poverty among the elderly the pension reform of 1957 brought a significant extension of the German welfare state which already had been established under Otto von Bismarck . Rüstow, who had coined

19942-464: The nation against foreign enemy, and to protect citizens against its fellows". He also admitted that although privatization of national defense could reduce the overall cost, he has not yet thought of a way to make this privatization possible. Other important contributions include his critique of the Phillips curve and the concept of the natural rate of unemployment (1968). This critique associated his name, together with that of Edmund Phelps , with

20111-469: The nation and the establishment of a neoliberal economy in Peru. During his campaigning for the 1990 Peruvian general election , Alberto Fujimori initially expressed concern against the proposed neoliberal policies of his opponent Mario Vargas Llosa . Peruvian magazine Oiga reported that, following the election, the armed forces were unsure of Fujimori's willingness to fulfill the plan's objectives, though they planned to convince Fujimori to agree to

20280-577: The national health system of Peru" during the period of forced sterilizations. At least 300,000 Peruvians were victims of forced sterilization by the Fujimori government in the 1990s, with the majority being affected by the PNSRPF . The policy of sterilizations resulted in a generational shift that included a smaller younger generation that could not provide economic stimulation to rural areas, making such regions more impoverished. Though economic statistics show improved economic data in Peru in recent decades,

20449-623: The neoliberal policies of the Chicago boys. Some scholars attribute the successes to the re-regulation of the banking industry and a number of targeted social programs designed to alleviate poverty. Others say that while the economy had stabilized and was growing by the late 1980s, inequality widened: nearly 45% of the population had fallen into poverty while the wealthiest 10% had seen their incomes rise by 83%. According to Chilean economist Alejandro Foxley , when Pinochet finished his 17-year term by 1990, around 44% of Chilean families were living below

20618-457: The new meaning of neoliberalism became established as common usage among Spanish-speaking scholars, it diffused into the English-language study of political economy . By 1994 the term entered global circulation and scholarship about it has grown over the last few decades. An early use of the term in English was in 1898 by the French economist Charles Gide to describe the economic beliefs of

20787-470: The operation prior to his inauguration. After taking office, Fujimori abandoned his campaign's economic platform, adopting more aggressive neoliberal policies than those espoused by his election competitor Vargas Llosa. With Fujimori's compliance, plans for a coup as designed in Plan Verde were prepared for two years and finally executed during the 1992 Peruvian coup d'état , which ultimately established

20956-521: The other in economics at the University of Chicago . Friedman chose the latter, earning a Master of Arts degree in 1933. He was strongly influenced by Jacob Viner , Frank Knight , and Henry Simons . Friedman met his future wife, economist Rose Director , while at the University of Chicago. Friedman was also the student of Friedrich Hayek . During the 1933–1934 academic year, he had a fellowship at Columbia University , where he studied statistics with statistician and economist Harold Hotelling . He

21125-501: The part of the Federal Reserve . Robert J. Shiller describes the book as the "most influential account" of the Great Depression. During 1935, he began working for the National Resources Planning Board, which was then working on a large consumer budget survey. Ideas from this project later became a part of his Theory of the Consumption Function, a book which first described consumption smoothing and

21294-673: The past, the Cascade Policy Institute sponsored a better government competition, soliciting proposals from the general public about how to improve state or local services. The judges included community and political leaders from a wide range of backgrounds, but winning submissions reflected the institute's free-market philosophy. Winners of Cascade's better government competition included proposals to privatize prisons, liquor operations, and Driver and Motor Vehicle Services; reform Oregon's agricultural land use laws; and streamline adoption of children into foster families. In 1994, 8 out of 10 submissions selected for further development were introduced before

21463-433: The percentage of the Chilean population living in poverty rose from 17% in 1969 to 45% in 1985 at the same time government budgets for education, health and housing dropped by over 20% on average. The era was also marked by economic instability. Overall, scholars have mixed opinions on the effects of the neoliberal reforms. The CIA World Factbook states that Chile's "sound economic policies", maintained consistently since

21632-588: The poverty line. Despite years of suppression by the Pinochet junta, a presidential election was held in 1988, as dictated by the 1980 constitution (though not without Pinochet first holding another plebiscite in an attempt to amend the constitution). In 1990, Patricio Aylwin was democratically elected, bringing an end to the military dictatorship. The reasons cited for Pinochet's acceptance of democratic transition are numerous. Hayek, echoing arguments he had made years earlier in The Road to Serfdom , argued that

21801-624: The preservation and improvement of the free society. The society set out to develop a neoliberal alternative to, on the one hand, the laissez-faire economic consensus that had collapsed with the Great Depression and, on the other, New Deal liberalism and British social democracy , collectivist trends which they believed posed a threat to individual freedom. They believed that classical liberalism had failed because of crippling conceptual flaws which could only be diagnosed and rectified by withdrawing into an intensive discussion group of similarly minded intellectuals; however, they were determined that

21970-413: The proper role of the state . A group of "true (third way) neoliberals" centered around Rüstow and Lippmann advocated for strong state supervision of the economy while a group of old school liberals centered around Mises and Hayek continued to insist that the only legitimate role for the state was to abolish barriers to market entry. Rüstow wrote that Hayek and Mises were relics of the liberalism that caused

22139-404: The recession, Chilean economic growth rose quickly, eventually hovering between 5% and 10% and significantly outpacing the Latin American average (see chart). Additionally, unemployment decreased and the percent of the population below the poverty line declined from 50% in 1984 to 34% by 1989. This led Milton Friedman to call the period the " Miracle of Chile ", and he attributed the successes to

22308-449: The removal of government intervention in currency markets , thereby spawning an enormous literature on the subject, as well as promoting the practice of freely floating exchange rates . His close friend George Stigler explained, "As is customary in science, he did not win a full victory, in part because research was directed along different lines by the theory of rational expectations , a newer approach developed by Robert Lucas , also at

22477-430: The rest of World War II working as a mathematical statistician, focusing on problems of weapons design, military tactics, and metallurgical experiments. In 1945, Friedman submitted Incomes from Independent Professional Practice (co-authored with Kuznets and completed during 1940) to Columbia as his doctoral dissertation. The university awarded him a PhD in 1946. Friedman spent the 1945–1946 academic year teaching at

22646-606: The result of other factors; in particular, some scholars argue that after the Crisis of 1982 the "pure" neoliberalism of the late 1970s was replaced by a focus on fostering a social market economy that mixed neoliberal and social welfare policies. As a response to the 2019–20 Chilean protests , a national plebiscite was held in October 2020 to decide whether the Chilean constitution would be rewritten. The "approve" option for

22815-497: The retrenchment of New Deal programs and policies since the 1980s: neoliberalism, laissez-faire or "free market ideology". Other academics such as Susan Braedley, Med Luxton, and Robert W. McChesney, assert that neoliberalism is a political philosophy which seeks to "liberate" the processes of capital accumulation . In contrast, Frances Fox Piven sees neoliberalism as essentially hyper- capitalism . Robert W. McChesney , while defining neoliberalism similarly as "capitalism with

22984-525: The return of democracy came primarily from large-scale mass rebellion that eventually forced party elites to use existing institutional mechanisms to restore democracy. In the 1990s, neoliberal economic policies broadened and deepened, including unilateral tariff reductions and the adoption of free trade agreements with a number of Latin American countries and Canada. At the same time, the decade brought increases in government expenditure on social programs to tackle poverty and poor quality housing. Throughout

23153-549: The role of the private sector in the economy and society . Additionally, the neoliberal project is oriented towards the establishment of institutions and is inherently political in nature, extending beyond mere economic considerations. The term is rarely used by proponents of free-market policies. When the term entered into common academic use during the 1980s in association with Augusto Pinochet 's economic reforms in Chile , it quickly acquired negative connotations and

23322-605: The second half of the 20th century ... possibly of all of it". Friedman was born in Brooklyn , New York City, on July 31, 1912. His parents, Sára Ethel (née Landau) and Jenő Saul Friedman, were Jewish working-class immigrants from Beregszász in Carpathian Ruthenia , Kingdom of Hungary (now Berehove in Ukraine). They emigrated to America in their early teens. They both worked as dry goods merchants. Friedman

23491-445: The society believed had produced the Great Depression. Milton Friedman , wrote in his early essay "Neo-liberalism and Its Prospects" that "Neo-liberalism would accept the nineteenth-century liberal emphasis on the fundamental importance of the individual, but it would substitute for the nineteenth century goal of laissez-faire as a means to this end, the goal of the competitive order", which requires limited state intervention to "police

23660-502: The story in which the theory of the new classical Phillips curve was embedded radically changed. This modification, however, had a significant effect on Friedman's own approach, so, as a result, the theory of the Friedmanian Phillips curve also changed. Moreover, new classical adherent Neil Wallace , who was a graduate student at the University of Chicago between 1960 and 1963, regarded Friedman's theoretical courses as

23829-480: The system, establish conditions favorable to competition and prevent monopoly , provide a stable monetary framework , and relieve acute misery and distress." By the 1970s, neoliberal thought—including Friedman's—focused almost exclusively on market liberalization and was adamant in its opposition to nearly all forms of state interference in the economy. One of the earliest and most influential turns to neoliberal reform occurred in Chile after an economic crisis in

23998-546: The term neoliberalism is often used to describe a paradigm shift that followed the failure of the post-war consensus and neo-Keynesian economics to address the stagflation of the 1970s. The collapse of the USSR and the end of the Cold War also facilitated the rise of neoliberalism in the United States and around the world. The term neoliberalism has become increasingly prevalent in recent decades. It has been

24167-523: The term "neoliberal" as an insult or slur used by leftists against liberals and varieties of liberalism that leftists disagree with. British journalist Will Hutton called neoliberal "an unthinking leftist insult" that "stifle[s] debate." On the other hand, many scholars believe it retains a meaningful definition. Writing in The Guardian , Stephen Metcalf posits that the publication of the 2016 IMF paper "Neoliberalism: Oversold?" helps "put to rest

24336-430: The term] reduces its capacity as an analytic frame. If neoliberalism is to serve as a way of understanding the transformation of society over the last few decades, then the concept is in need of unpacking". Historian Daniel Stedman Jones has similarly said that the term "is too often used as a catch-all shorthand for the horrors associated with globalization and recurring financial crises". Several writers have criticized

24505-560: The theories they had developed in the 1930s and 1940s and contributed to West Germany's reconstruction after the Second World War. Erhard was a member of the Mont Pelerin Society and in constant contact with other neoliberals. He pointed out that he is commonly classified as neoliberal and that he accepted this classification. The ordoliberal Freiburg School was more pragmatic. The German neoliberals accepted

24674-698: The transitory component. Milton Friedman's research changed how economists interpreted the consumption function, and his work pushed the idea that current income was not the only factor affecting people's adjustment household consumption expenditures. Instead, expected income levels also affected how households would change their consumption expenditures. Friedman's contributions strongly influenced research on consumer behavior, and he further defined how to predict consumption smoothing , which contradicts Keynes' marginal propensity to consume . Although this work presented many controversial points of view which differed from existing viewpoints established by Keynes, A Theory of

24843-453: The virtues of a free market economic system with minimal government intervention in social matters. In his 1962 book Capitalism and Freedom , Friedman advocated policies such as a volunteer military , freely floating exchange rates , abolition of medical licenses , a negative income tax , school vouchers , and opposition to the war on drugs and support for drug liberalization policies . His support for school choice led him to found

25012-485: The wealth earned between 1990 and 2020 was not distributed throughout the country; living standards showed disparities between the more-developed capital city of Lima and similar coastal regions while rural provinces remained impoverished. Sociologist Maritza Paredes of the Pontifical Catholic University of Peru stated, "People see that all the natural resources are in the countryside but all

25181-561: The working class were reduced. In 1982, Chile again experienced a severe economic recession . The cause of this is contested but most scholars believe the Latin American debt crisis —which swept nearly all of Latin America into financial crisis—was a primary cause. Some scholars argue the neoliberal policies of the Chicago boys heightened the crisis (for instance, percent GDP decrease was higher than in any other Latin American country) or even caused it; for instance, some scholars criticize

25350-648: The world's first test case for 'neoliberal' economics." The turn to neoliberal policies in Chile originated with the Chicago Boys , a select group of Chilean students who, beginning in 1955, were invited to the University of Chicago to pursue postgraduate studies in economics. They studied directly under Milton Friedman and his disciple, Arnold Harberger , and were exposed to Friedrich Hayek . Upon their return to Chile, their neoliberal policy proposals—which centered on widespread deregulation , privatization , reductions to government spending to counter high inflation, and other free-market policies —would remain largely on

25519-569: The years about the role that I played in making possible the current overgrown government we both criticize so strongly." In 1940, Friedman accepted a position at the University of Wisconsin–Madison, but left because of differences with faculty regarding United States involvement in World War II. Friedman believed the United States should enter the war. In 1943, Friedman joined the Division of War Research at Columbia University (headed by W. Allen Wallis and Harold Hotelling ), where he spent

25688-580: Was "the 'guru' of the Reagan administration ". In 1988, he received the National Medal of Science and Reagan honored him with the Presidential Medal of Freedom . Friedman is known now as one of the most influential economists of the 20th century. Throughout the 1980s and 1990s, Friedman continued to write editorials and appear on television. He made several visits to Eastern Europe and to China, where he also advised governments. He

25857-436: Was a muddle of inconsistent aims. Despite his controversies with the German neoliberals at the Mont Pelerin Society, Ludwig von Mises stated that Erhard and Müller-Armack accomplished a great act of liberalism to restore the German economy and called this "a lesson for the US". According to different research Mises believed that the ordoliberals were hardly better than socialists. As an answer to Hans Hellwig's complaints about

26026-710: Was also for many years a Trustee of the Philadelphia Society . Friedman had two children, David and Jan . He met his wife, Rose Friedman (née Director), at the University of Chicago in 1932, and wed six years later, in 1938. Friedman was noticeably shorter than some of his colleagues; he measured 5 feet 0 inches (1.52 m), and has been described as an "Elfin Libertarian" by Binyamin Appelbaum . Rose Friedman , when asked about Friedman's successes, said that "I have never had

26195-408: Was an American economist and statistician who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory and the complexity of stabilization policy . With George Stigler , Friedman was among the intellectual leaders of the Chicago school of economics , a neoclassical school of economic thought associated with the work of

26364-511: Was back in Chicago for the 1934–1935 academic year, working as a research assistant for Henry Schultz , who was then working on Theory and Measurement of Demand . During the 1934–1935 academic year, Friedman formed what would later prove to be lifetime friendships with George Stigler and W. Allen Wallis , both of whom later taught with Friedman at the University of Chicago. Friedman was also influenced by two lifelong friends, Arthur Burns and Homer Johnson. They helped Friedman better understand

26533-459: Was best known for reviving interest in the money supply as a determinant of the nominal value of output, that is, the quantity theory of money . Monetarism is the set of views associated with modern quantity theory. Its origins can be traced back to the 16th-century School of Salamanca or even further; however, Friedman's contribution is largely responsible for its modern popularization. He co-authored, with Anna Schwartz, A Monetary History of

26702-519: Was brought under control. Between 1970 and 1985 the infant mortality rate in Chile fell from 76.1 per 1000 to 22.6 per 1000, the lowest in Latin America. Unemployment from 1980 to 1990 decreased, but remained higher than the South American average (which was stagnant). And despite public perception among Chileans that economic inequality has increased, Chile's Gini coefficient has in fact dropped from 56.2 in 1987 to 46.6 in 2017. While this

26871-399: Was employed principally by critics of market reform and laissez-faire capitalism . Scholars tended to associate it with the theories of economists working with the Mont Pelerin Society , including Friedrich Hayek , Milton Friedman , Ludwig von Mises , and James M. Buchanan , along with politicians and policy-makers such as Margaret Thatcher , Ronald Reagan , and Alan Greenspan . Once

27040-413: Was inherently social and did not need to be made so. He hoped that growing prosperity would enable the population to manage much of their social security by self-reliance and end the necessity for a widespread welfare state. By the name of Volkskapitalismus , there were some efforts to foster private savings. Although average contributions to the public old age insurance were quite small, it remained by far

27209-407: Was marked by the willingness to place humanistic and social values on par with economic efficiency. Alfred Müller-Armack coined the phrase "social market economy" to emphasize the egalitarian and humanistic bent of the idea. According to Boas and Gans-Morse, Walter Eucken stated that "social security and social justice are the greatest concerns of our time". Erhard emphasized that the market

27378-413: Was originally published in 1957 by Princeton University Press , and it reanalyzed the relationship displayed "between aggregate consumption or aggregate savings and aggregate income". Friedman's counterpart Keynes believed people would modify their household consumption expenditures to relate to their existing income levels. Friedman's research introduced the term "permanent income" to the world, which

27547-423: Was shaped by the Great Depression and manifested in policies designed to counter the volatility of free markets . One motivation for the development of policies designed to mitigate the volatility of capitalist free markets was a desire to avoid repeating the economic failures of the early 1930s, which have been attributed, in part, to the economic policy of classical liberalism. In the context of policymaking,

27716-463: Was synonymous with both ordoliberalism and social market economy. But over time the original term neoliberalism gradually disappeared since social market economy was a much more positive term and fit better into the Wirtschaftswunder (economic miracle) mentality of the 1950s and 1960s. In the 1980s, numerous governments in Latin America adopted neoliberal policies. Chile was among

27885-435: Was the average of a household's expected income over several years, and he also developed the permanent income hypothesis . Friedman thought income consisted of several components, namely transitory and permanent. He established the formula y = y p + y t {\displaystyle y=y_{p}+y_{t}} to calculate income, with p representing the permanent component, and t representing

28054-870: Was the executive director at the Oregon Environmental Council , where he worked as a lobbyist for 17 years. In 1997, Cascade said it had more than 800 private donors, including individuals and corporations. Between 2007 and 2011, Cascade Policy Institute received $ 1.25 million, or more than a quarter of the $ 4.38 million it received in grants and donations, from Donors Capital Fund , based in Virginia. Cascade publishes background reports and policy studies, which it encourages Oregon lawmakers to read and cite, and hosts conferences and forums. Issues they discuss include transportation, right-to-work laws , health care, education, land use, economic opportunity for small businesses, tax and budget policies, and

28223-433: Was the first in his family to attend a university. Friedman was awarded a competitive scholarship to Rutgers University and graduated in 1932. Friedman initially intended to become an actuary or mathematician, however, the state of the economy, which was at this point in a depression , convinced him to become an economist. He was offered two scholarships to do graduate work, one in mathematics at Brown University and

28392-498: Was the journalist Charles Peters , who, in 1983, published "A Neoliberal's Manifesto". Historian Elizabeth Shermer argued that the term gained popularity largely among left-leaning academics in the 1970s to "describe and decry a late twentieth-century effort by policymakers, think-tank experts, and industrialists to condemn social-democratic reforms and unapologetically implement free-market policies"; economic historian Phillip W. Magness notes its reemergence in academic literature in

28561-529: Was their fourth child and only son, as well as the youngest of the children. Shortly after his birth, the family relocated to Rahway, New Jersey . Friedman's father, Jenő Saul Friedman, died during Friedman's senior year of high school, leaving Friedman and two older sisters to care for their mother. In his early teens, Friedman was injured in a car accident, which scarred his upper lip. A talented student and an avid reader, Friedman graduated from Rahway High School in 1928, just before his 16th birthday. He

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