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94-636: At that time, the Fed argued that rising and variable inflation since 1965 was largely attributable to non-monetary forces such as the power of labor unions and oil price shocks, and had little to do with rapid money growth. Based on the principles of monetarism developed earlier by Milton Friedman , the SOMC blamed the Great Inflation squarely on Federal Reserve policies that featured excessive money growth. The SOMC's principal message that persistent inflation

188-534: 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

282-658: 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

376-528: 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

470-471: 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

564-550: 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

658-659: A gradual reduction in money growth as a preferred alternative. Together with William Wolman , Brunner and Meltzer chose the name "Shadow Open Market Committee," as a reference to both the Federal Open Market Committee , the Federal Reserve's monetary policy making arm, and the Shadow Cabinet as the group of ministers chosen from the opposition party within the U.K. Parliamentary system. The original SOMC featured twelve members, equal to

752-661: A member of the Council of Economic Advisors in 1981 and 1982 and as President of the Federal Reserve Bank of Cleveland from 1992 through 2003. Lee Hoskins served as President of the Federal Reserve Bank of Cleveland from 1987 through 1991; William Poole as President of the Federal Reserve Bank of St. Louis from 1998 through 2008; and Charles Plosser as President and of the Federal Reserve Bank of Philadelphia from 2006 through 2015. Anna Schwartz

846-525: 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

940-409: 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

1034-524: 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

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1128-521: 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,

1222-795: Is a measure of his genius." Nobel Memorial Prize in Economic Sciences The Nobel Memorial Prize in Economic Sciences , officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel ( Swedish : Sveriges riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne ), is an economics award funded by Sveriges Riksbank and administered by the Nobel Foundation . Although not one of

1316-459: Is always and everywhere a monetary phenomenon has been widely accepted by central bankers and economists. That framework still forms the basis for the Committee's comments on and criticisms of Federal Reserve policy actions and strategy. Over time, the SOMC has broadened its focus to include issues relating to policies on international trade, exchange rates, and taxes, as well as the regulation of

1410-629: 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

1504-511: The Financial Times , both the former Swedish minister for finance , Kjell-Olof Feldt , and the former Swedish minister for commerce, Gunnar Myrdal , wanted the prize abolished, with "Myrdal rather less graciously want[ing] the prize abolished because it had been given to such reactionaries as Hayek (and afterwards Milton Friedman )." Relatedly, it has been noted that several members of the awarding committee have been affiliated with

1598-627: 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

1692-517: 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

1786-605: The Mont Pelerin Society . Milton Friedman was awarded the 1976 prize in part for his work on monetarism . Awarding the prize to Friedman caused international protests. Friedman was accused of supporting the military dictatorship in Chile because of the relation of economists of the University of Chicago to Pinochet , and a controversial six-day trip he took to Chile during March 1975 (less than two years after

1880-643: 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

1974-517: 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

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2068-550: 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

2162-658: 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

2256-546: The Royal Swedish Academy of Sciences . It was first awarded in 1969 to Dutch economist Jan Tinbergen and Norwegian economist Ragnar Frisch "for having developed and applied dynamic models for the analysis of economic processes". An endowment "in perpetuity" from Sveriges Riksbank pays the Nobel Foundation's administrative expenses associated with the award and funds the monetary component of

2350-429: 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

2444-549: The committee 's bias towards mainstream economics , though heterodox economists like Friedrich Hayek ( Austrian School ) and Ronald Coase (associated with new institutional economics ) have won. In his speech at the 1974 Nobel Prize banquet, Friedrich Hayek stated that had he been consulted on the establishment of a Nobel Prize in economics, he would have "decidedly advised against it", primarily because "The Nobel Prize confers on an individual an authority which in economics no man ought to possess. This does not matter in

2538-699: 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

2632-575: 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

2726-414: The natural sciences . Here the influence exercised by an individual is chiefly an influence on his fellow experts; and they will soon cut him down to size if he exceeds his competence. But the influence of the economist that mainly matters is an influence over laymen: politicians, journalists, civil servants and the public generally." Nevertheless, Hayek accepted the award. According to Samuel Brittan of

2820-534: 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

2914-565: 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

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3008-633: 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

3102-488: 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

3196-504: 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

3290-596: 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

3384-561: 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

3478-440: 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

3572-527: The Nobel Prize laureates, and receive the award at the same ceremony. The Royal Swedish Academy of Sciences awards the prize "in accordance with the rules governing the award of the Nobel Prizes instituted through his [Alfred Nobel's] will", which stipulate that the prize be awarded annually to "those who ... shall have conferred the greatest benefit on mankind". According to its official website,

3666-488: The Nobel family has ever had the intention of establishing a prize in economics. He explained that "Nobel despised people who cared more about profits than society's well-being", saying that "There is nothing to indicate that he would have wanted such a prize", and that the association with the Nobel prizes is "a PR coup by economists to improve their reputation". Critics cite the apparent snub of Joan Robinson as evidence of

3760-568: The Nobel laureates in physics , chemistry , physiology or medicine , and literature , each laureate in Economics receives a diploma, gold medal, and monetary grant award document from the King of Sweden at the annual Nobel Prize Award Ceremony in Stockholm , on the anniversary of Nobel's death (December 10). The first prize in economics was awarded in 1969 to Ragnar Frisch and Jan Tinbergen "for having developed and applied dynamic models for

3854-578: The Prize in Economics for the coming year. Members of the Academy and former laureates are also authorised to nominate candidates." All proposals and their supporting evidence must be received before February 1. The proposals are reviewed by the Prize Committee and specially appointed experts. Before the end of September, the committee chooses potential laureates. If there is a tie, the chairman of

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3948-934: The Royal Swedish Academy of Sciences "administers a researcher exchange with academies in other countries and publishes six scientific journals. Every year the Academy awards the Nobel Prizes in Physics and in Chemistry, the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, the Crafoord Prize and a number of other large prizes". Each September the Academy's Economics Prize Committee, which consists of five elected members, "sends invitations to thousands of scientists, members of academies and university professors in numerous countries, asking them to nominate candidates for

4042-567: The Shadow Open Market Committee, and has also chronicled the SOMC’s early history. When, in 1971, President Richard Nixon adopted wage and price controls in an attempt to reverse the acceleration of inflation, which by then had risen above 4 percent, Brunner and Meltzer wished to form a group of "like-minded economists" to argue against the effectiveness of wage and price controls as a tool for ending inflation and in favor of

4136-539: The U.K. Shadow Cabinet, with its members rotating periodically into official policymaking positions. Original SOMC member Robert Rasche served as Executive Vice President and Policy Advisor at the Federal Reserve Bank of St. Louis from January 1999 until his retirement in June 2011. Beryl Sprinkel , another original SOMC member, became Chairman of the Council of Economic Advisers in 1985. SOMC member Jerry Jordan served as

4230-437: The U.S. banking and financial systems. The SOMC continues to meet twice per year and maintains an active website that includes an archive of the SOMC's position papers and "Core Beliefs" statement as well as papers of its members. Since 2009, the SOMC has operated in partnership with E21: Economic Policies for the 21st Century . Allan Meltzer has described the circumstances that led him, together with Karl Brunner, to organize

4324-432: 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

4418-462: 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

4512-523: 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,

4606-426: 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

4700-404: 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

4794-406: The analysis of economic processes". Three women have received the prize: Elinor Ostrom , who won in 2009, Esther Duflo , who won in 2019, and Claudia Goldin , who won in 2023. Goldin was the first woman to win the award solo. In February 1995, following acrimony within the selection committee pertaining to the awarding of the 1994 Prize in Economics to John Forbes Nash , the Prize in Economics

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4888-506: The award. In 2022, the monetary portion of the Prize in Economic Sciences was 10 million Swedish kronor , the same amount as the original Nobel Prizes. Since 2006, Sveriges Riksbank has given the Nobel Foundation an annual grant of 6.5 million Swedish kronor (in January 2008, approx. US$ 1 million; € 0.7 million) for its administrative expenses associated with the award as well as 1 million Swedish kronor (until

4982-416: 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

5076-496: The committee casts the deciding vote. Members of the Royal Swedish Academy of Sciences vote in mid-October to determine the next laureate or laureates of the Prize in Economics. As with the Nobel Prizes, no more than three people can share the prize for a given year; they must still be living at the time of the Prize announcement in October; and information about Prize nominations cannot be disclosed publicly for 50 years. Like

5170-405: 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 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

5264-414: 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

5358-503: The conduct of monetary policy and to the Federal Reserve's role as lender of last resort. They are as follows: As of April 2019, the following people are listed at the organization. Milton Friedman Milton Friedman ( / ˈ f r iː d m ən / ; July 31, 1912 – November 16, 2006) 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

5452-418: 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

5546-600: The coup that ended with the suicide of its democratically elected President Salvador Allende ). Friedman himself answered that he never was an adviser to the dictatorship, but only gave some lectures and seminars on inflation and met with officials, including Augusto Pinochet , in Chile. Four Nobel Prize laureates – George Wald , Linus Pauling , David Baltimore and Salvador Luria  – wrote letters in October 1976 to The New York Times protesting Friedman's award. The 2005 prize to Robert Aumann

5640-508: 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

5734-536: 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

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5828-421: 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

5922-416: The end of 2008) to include information about the award on the Nobel Foundation's web site. The Prize in Economic Sciences is not one of the Nobel Prizes endowed by Alfred Nobel in his will. However, the nomination process, selection criteria, and awards presentation of the Prize in Economic Sciences are performed in a manner similar to that of the original Nobel Prizes. Laureates are announced with

6016-408: 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

6110-578: The five Nobel Prizes established by Alfred Nobel's will in 1895, it is commonly referred to as the Nobel Prize in Economics , and is administered and referred to along with the Nobel Prizes by the Nobel Foundation. Winners of the Prize in Economic Sciences are chosen in a similar manner as and announced alongside the Nobel Prize recipients, and receive the Prize in Economic Sciences at the Nobel Prize Award Ceremony. That

6204-429: 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

6298-441: 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,

6392-500: 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

6486-464: 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

6580-641: The number of voting members of the Federal Open Market Committee, chosen from academic institutions, financial institutions, and nonfinancial businesses. Beginning on September 14, 1973, the group met semi-annually in New York City. John Allan of the New York Times described the first SOMC meeting and policy statement. The Committee urged the Fed to abandon its efforts to fine tune the economy, and focus instead on reducing

6674-521: 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

6768-501: 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

6862-510: The prize for work in the field of behavioral economics . Some critics argue that the prestige of the Prize in Economic Sciences derives in part from its association with the Nobel Prizes, an association that has often been a source of controversy. Among them is the Swedish human rights lawyer Peter Nobel , a great-grandnephew of Alfred Nobel . Nobel accuses the awarding institution of misusing his family's name, and states that no member of

6956-411: The prize is not an original Nobel Prize has been a subject of controversy, with four of Nobel's relatives having formally distanced themselves from the Prize in Economic Sciences. The award was established in 1968 by an endowment "in perpetuity" from Sweden's central bank, Sveriges Riksbank , to commemorate the bank's 300th anniversary. Laureates in the Prize in Economic Sciences are selected by

7050-422: The rate of money growth from 6 ½ to 5 ½ percent per year, as an initial step towards working inflation down to more acceptable levels. In 1988, the SOMC moved its meeting location from New York to Washington. Changes in membership gradually occurred, with some former SOMC members leaving to accept high-ranking positions at the Federal Reserve. In this sense, Meltzer points out, the SOMC has functioned somewhat like

7144-449: 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

7238-430: 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

7332-605: 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

7426-443: The secretary and four of the five members are professors of economics. In 1978, Herbert A. Simon , whose PhD was in political science , became the first non-economist to win the prize, for his work in the fields of economics and organizational decision making. Elinor Ostrom , also a political scientist, won the prize in 2009. Similarly, Daniel Kahneman , a professor of psychology and public affairs at Princeton University , won

7520-502: 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

7614-698: 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

7708-453: 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

7802-569: 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

7896-632: 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

7990-710: 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

8084-566: 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

8178-459: 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

8272-462: Was criticized by the European press for his alleged use of game theory to justify his stance against the dismantling of illegal Israeli settlements in occupied Palestine . Paul Krugman 's left-wing commentary has attracted both widespread praise and criticism. The 1994 prize to mathematician John Forbes Nash caused controversy within the selection committee. This resulted in a change to

8366-413: 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

8460-478: Was redefined as a prize in social sciences. This made it available to researchers in such topics as political science, psychology, and sociology. Moreover, the composition of the Economics Prize Committee changed to include two non-economists. This has not been confirmed by the Economics Prize Committee. The members of the 2007 Economics Prize Committee are still dominated by economists, as

8554-435: 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

8648-433: 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

8742-498: Was the longest-serving member of the Shadow Open Market Committee. One of the 12 original members in 1973, Schwartz continued to attend and participate actively in SOMC meetings through 2010. In 2009, the SOMC moved the site of its bi-annual meetings back to New York City. At its November 2014 meeting, the Committee presented a statement of "Core Beliefs," intended to "help promote its vision and relevance in an era of increasingly complex central banking." The SOMC Core Beliefs relate to

8836-529: 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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