Milton Friedman, 1912 2006

1
Milton Friedman, 1912 2006

• Theres no such thing as a free lunch.

• Born in Brooklyn, 1912
• Immigrant parents
• BA, Rutgers, 1932
• Arthur Burns, Homer Jones
• MA, Chicago, 1933
• Viner, Knight, Simons
• Columbia Statistics
• Washington, NBER
• Consumer Budgets
• Professional Income
• War Research
• Sequential Sampling
• PhD, Columbia, 1946
• U. of Chicago, 19461977
• Clark Medal, 1951
• Nobel Memorial Prize, 1976
• Hoover Institution, 1977-2006

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• Milton Friedman (1912 - 2006) Major Works
• "Professor Pigou's Method for Measuring
  Elasticities of Demand From Budgetary Data"
  Quarterly Journal of Economics Vol. 50, No. 1
  (Nov., 1935), pp. 151-163
• "Utility Analysis of Choices Involving Risk" with
  Leonard Savage, 1948, Journal of Political
  Economy Vol. 56, No. 4 (Aug., 1948), pp. 279-304
• "The Expected-Utility Hypothesis and the
  Measurability of Utility", with Leonard Savage,
  1952, Journal of Political Economy Vol. 60, No. 6
  (Dec., 1952), pp. 463-474 JSTOR
• The Methodology of Positive Economics (1953)
• Essays in Positive Economics (1953)
• "The Quantity Theory of Money A restatement",
  1956, in Friedman, editor, Studies in the
  Quantity Theory of Money.
• A Theory of the Consumption Function (1957)
• A Program for Monetary Stability (Fordham
  University Press, 1960) 110 pp online version
• Price Theory ISBN 0-202-06074-8 (1962),
• A Monetary History of the United States,
  1867-1960, with Anna J. Schwartz, 1963 part 3
  reprinted as The Great Contraction
• The Relative Stability of Monetary Velocity and
  the Investment Multiplier in the United States,
  1897-1958 with David Meiselman
• "The Role of Monetary Policy." American Economic
  Review, Vol. 58, No. 1 (Mar., 1968), pp. 1-17
• The Optimum Quantity of Money And Other Essays
  (1976)
• Milton Friedman's Monetary Framework A Debate
  with His Critics (1975)
• "Inflation and Unemployment Nobel lecture",
  1977, Journal of Political Economy. Vol. 85, pp.
  451-72.
• Monetary Trends in the United States and the
  United Kingdom Their relations to income, prices
  and interest rates, 1876-1975. with Anna J.
  Schwartz, 1982
• "Quantity Theory of Money", in J. Eatwell, M.
  Milgate, P. Newman, eds., The New Palgrave (1998)
  
• "Franklin D. Roosevelt, Silver, and China,"
  Journal of Political Economy Vol. 100, No. 1
  (Feb., 1992), pp. 62-83

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Ideas of Milton Friedman

• Positive economics is in principle independent of
  any particular ethical position or normative
  judgments it deals with what is, not with
  what ought to be.
• The ultimate goal of a positive science is a
  theory or hypothesis that yields valid and
  meaningful predictions about phenomena not yet
  observed Theory is to be judged for its
  predictive power ... The choice among alternative
  hypotheses equally consistent with the available
  evidence is suggested by the criteria of
  simplicity and fruitfulness within a given
  field of phenomena.
• Truly important and significant hypotheses will
  have assumptions that are wildly inaccurate
  descriptive representations of reality A
  hypothesis is important if it explains much by
  little The relevant question is not whether
  assumptions are descriptively realistic but
  whether they are sufficiently good approximations
  for the purpose in hand.
• Economics is a dismal science because it
  assumes man to be selfish and money-grubbing it
  assumes markets to be perfect, competition to be
  pure, and commodities, labor, and capital to be
  homogeneous Criticism of this type is largely
  beside the point unless supplemented by evidence
  that a different hypothesis yields better
  predictions.

4
More Ideas of Milton Friedman

• A Monetary and Fiscal Framework for Economic
  Stability, AER 1948
• Eliminate private creation of money and
  discretionary control of Ms by central bank ?100
  reserve banking
• Base G on communitys desire, need, and
  willingness to pay for public services
• A predetermined program of transfer payments
• A progressive personal income tax system
• ? Rely on automatic stabilizers
• countercyclical action can do too much as
  well as too little. (1951)
• The Case for Flexible Exchange Rates (1950)
• Instability of exchange rates is a symptom of
  instability in the underlying economic structure.
  Elimination of this symptom by administrative
  freezing cures none of the underlying
  difficulties and only makes adjustment to them
  more painful.
• Studies in the Quantity Theory of Money (1956)
• The Quantity Theory of Money A Restatement
• There is perhaps no other empirical relation in
  economics that has been observed to recur so
  uniformly under so wide a variety of
  circumstances as the relation between substantial
  changes over short periods in the stock of money
  and in prices
• Phillip Cagan, Monetary Dynamics of
  Hyperinflation
• Adaptive expectations and stable money demand
• John Klein, German Money and Prices, l932-44
• Eugene Lerner, Inflation in the Confederacy,
  1861-65
• Richard Seldon, Velocity in the United States

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Yet More Ideas of Milton Friedman

• A Theory of the Consumption Function (1957)
• Errors are in income, not in consumption
• ?Permanent income hypothesis
• A Monetary History of the United States (1963)
• inflation is always and everywhere a monetary
  phenomenon.
• small events at times have large consequences.
  A liquidity crisis in a fractional reserve
  banking system is precisely the kind of event
  that can trigger and often has triggered a
  chain reaction. And economic collapse often has
  the character of a cumulative process. Let it go
  beyond a certain point, and it will tend for a
  time to gain strength from its own development as
  its effects spread and return to intensify the
  process of collapse. Because no great strength
  would be required to hold back the rock that
  starts a landslide, it does not follow that the
  landslide will not be of major proportions.
• The Role of Monetary Policy (1968)
• Adaptive Expectations
• ?Vertical Long-run Phillips Curve
• ? Accelerationist Hypothesis
• Capitalism and Freedom (1962)
• Money growth rule (3 5 per year)
• Floating exchange rates
• Negative income tax
• School vouchers
• End occupational licensure
• Why Not a Volunteer Army? (1967) / Gates
  Commission (1968)