Profile of an Economist Milton Friedman - Research Paper Example

Task: Profile of an Economist: Milton Friedman Education and Career Background Milton Friedman was a 19th century economist who is primarily acknowledged for his advocacy on the free market. The economist was born in 1912 by parents who were Jewish immigrates. He schooled at Rutgers University where he graduated with a B.A at the age of twenty. Furthermore, he graduated with M.A in the year 1933 from the University of Chicago (Ruger 49). He further enrolled for his PH.D in the same university having graduated in 1946. Friedman presented high expertise in the field of business that made him a renowned economist. In the year of 1951, he won the “John Bates Clark Medal,” an award that recognized economists under age of forty who presented commendable performance (Ruger 90). Furthermore, he received the Nobel Prize in 1976 for his contributions in the field of consumption examination, monetary history and concepts, as well as for his effort in describing the stabilization policy. The economist chaired the Chicago school of economics where he guided research plan of the economics profession. The scholar also worked as the chairperson of the American Economic Association in 1967 (Wahid 14). Furthermore, the scholar served as a senior research fellow at the Stanford University after retiring from the University of Chicago. Some surveys of economists have identified Friedman as a well-liked economist of the 20th century after John Keynes. Friedman explored various economics-related theories and analytical procedures highlighting informative concepts. Nedomlelova (32) observes that Friedman was great scholar who had excellent knowledge of economics. The economist’s initial works include the 1945 publication titled the “Income from Independent professional Practice” that he coauthored with Simon Kuznets. This work was very relevant in the field of business and the report attracted a global attention. In this publication, the author claimed that the state licensing procedures discouraged entry of the medical professions into the healthcare business. Consequently, the scholar noted that this practice provide doctors with an option of charging higher fees due to lack of competition in the field. The economist proposed the need of adjusting such regulation in order to create constructive competition that would persuade delivery of quality services at sustainable fees. This provided strategists with effective managerial tools (Friedman et al. 32). Friedman’s effort in the development of the Theory of Consumption Function The scholar has substantially contributed in the development of the economic theories. His earliest prominent work includes the 1957 publication in which he described A Theory of the Consumption Function (Friedman & Ebenstein 19). The scholar developed the theory from the Keynesian perception that individuals and households have a tendency of adjusting their expenditures on consumption to align them with their income (Friedman & Ebenstein 26). The economist highlighted that individual’s yearly consumption reflects a function of their “permanent income.” He introduced this term as a measure of the aggregate income individuals expect over a few years. The theory was an expression of the permanent income hypothesis, the concept that proposes that household’s consumption and investment decisions are mainly defined by changes in permanent income, but not temporary changes that household members experience within their activities. These ideas were essential because they provide bases for developing future business theories that has enriched the field (Brittan 2). Friedman challenged Keynes ideas claiming that the scholar based his consumption models on psychological assumptions. He emphasized the need of considering individuals as rational thinkers who make plans on how to spend their resources over their families. Friedman was not primarily objecting the Keynesian ideas because a reputable Keynesian economist Franco Modi-gliani also made the same observation. This theory prompted the need of examining household’s patterns from a classical perspective. The model provided solutions to numerous questions that characterized the relationship between revenue and expenditure patterns. Moreover, economists currently explain households spending and saving patterns using this theory (Wahid 69). The Development of Capitalism and Freedom Concepts In the 1960s, Friedman drafted an informative book on capitalism and freedom. In this book, the scholar described a scenario for relatively free markets to an ordinary audience. He described the situations involving a volunteer army, withdrawal of licensing of doctors, unrestricted floating exchange rates, education vouchers and a negative income tax. Friedman was strongly opposed to the idea of military draft that he considered unproductive. Most scholars argue that this book was very inspiring because most youths who read the book developed interests in pursuing economics (Ruger 86). His concepts attracted a global audience with his article Free to Choose becoming the best selling factual book of 1980. This article was aimed at accompanying a TV series that was broadcasted during the time. Consequently, the article made his name “Milton Friedman” become a household name. Friedman’s works have affected the economics professional substantially. An explicit influence includes the economists’ change on the perception towards monetary policy that was initially proposed by Samuelson Keynesian (Wahid 96). Initially, Samuelson highlighted in his book the Economics that few economists consider Federal Reserve monetary plan as the ultimate solution for managing the business cycle. However, following Friedman’s arguments, Samuelson changed his perception in the 1967 recognizing that monetary policy had a considerable effect on the overall spending. Samuelson coauthored the 1985 edition of his book with William Nordhaus recognizing that money is the most significant tool that determines the activities of macroeconomic policy makers. Consequently, the scholars acknowledged that Fed is the vital factor in policymaking (Ruger 50). Development of the Quantity Theory of Money and the Money-Supply Rule Friedman’s work mainly concentrated on the price theory. This concept describes how individual markets set their prices. Particularly, the business world recognizes Friedman for his highlights on monetarism. This is because the scholar gathered essential resources that enabled him to give a clear highlight of the monetary predicaments in the contemporary world (Whitehouse, Mark, and Greg 89). The scholar challenged the Keynes and other academic concepts of the time by describing evidence of the application of the quantity theory of money (Friedman & Ebenstein 36). This theory indicated that the price level is dependent of the money supply. In the theory that was published in 1956, the economist argued that increased monetary growth has the potential of increasing prices and insignificant or no effect on output. However, he noted that in the short run, growth in money supply makes employment and output to increase while decreases in capital supply growth have a reverse effect. Burns (6) notes that most of the current monetary procedures are developed on Friedman’s concepts. Furthermore, the economist proposed concepts for addressing inflation and short-lived changes in employment and real GNP in a model regarded as the money-supply rule (Ruger 18). The scholar argued that inflation would disappear in a situation where the Federal Reserve Board (FRB) would increase the cash flow at the similar rate as the real GNP increased. The scholar’s monetarism concepts became popular in 1963 when he coauthored a book with Ann Schwartz describing the US monetary procedures. This book highlighted that the Great Depression was prompted by misguided monetary policies adopted by the Federal Reserve during the time. In the book, the scholar utilized relevant statistics in describing the cause of the recession (Butler 20). The FRB evaluated the scholar’s argument critically and responded to some of his proposals silently. For example, the Fed governors abolished their procedure of disclosing board meetings’ minutes to the public. The scholars also commissioned a counter-history with the intention of detracting from the Monetary History (Wahid 16). Friedman’s Highlights towards the Phillips Curve’s Concept Around the 1960s, Keynesians and other popular economists believed in the concept of Phillips Curve. This is the concept that highlighted that the government realizes a prolonged trade-off between inflation and unemployment; however, Friedman was opposed to this idea (Ebenstein 39). In the context of the Philips curve, a government increases the demand of products and reduces unemployment by tolerating a higher inflation rate. However, Friedman criticized this concept in the late 1960s. The scholar noted that the unemployment rate is likely to creep back to high levels when individuals adapt higher inflation rate (Friedman & Ebenstein 20). Consequently, the economist argued that a short-lived increase in inflation lacks the capability of checking unemployment because a model with the potential of creating a situation of permanent low unemployment rates should ensure permanent acceleration of the inflation rate (Wahid 32). The 1970s crisis was characterized with the increasing inflation and high rates of unemployment provided a succinct highlight of the Friedman-Phelps perception. This situation made most economists value the concepts proposed by the Friedman. For example, Keynesian noted in his 1980 edition that there is minimal trade-off after persistent monetary activities than in the short run. Furthermore, the scholar accepted later that economies do not experience trade-off in long run (Ruger 39). Friedman is a reputable economist in the field of economy. His works have considerably influenced theoretical frameworks within the discipline. His arguments are informed and remain relevant to many economists, policy makers and economic strategists. The scholar had broad knowledge of economic concepts and engaged critical mind in evaluating situations. It is apparent that Friedman’s works will continue informing economists and affecting their perceptions towards economic concepts. Works Cited Brittan, Samuel. "Iconoclastic Economist Who Put Freedom First Obituary Milton Friedman." Financial Times: 13. ABI/INFORM Complete. Nov 17 2006. Web. 3 Dec. 2012 . Burns, Greg. "Milton Friedman: 1912 -- 2006: U. of C. Economist's Influence Still at Work." McClatchy - Tribune Business News: 1. ABI/INFORM Complete. Nov 17 2006. Web. 3 Dec. 2012 . Butler, Eamonn. Milton Friedman: A Concise Guide to the Ideas and Influence of the Free-Market Economist. Hampshire, Great Britain: Harriman House, 2011. Print. Ebenstein, Alan O. Milton Friedman: A Biography. Basingstoke: Palgrave Macmillan, 2009. Print. Friedman, Milton, and Alan O. Ebenstein. The Indispensable Milton Friedman: Essays on Politics and Economics. Washington, DC: Regnery Pub, 2012. Print. Friedman, Milton, Leonard J. Savage, and Gary S. Becker. Milton Friedman on Economics: Selected Papers. Chicago: University of Chicago Press, 2007. Print. Nedomlelova, Iva. "Milton Friedman: Remembrance of Personality and Economist." E+M Ekonomie a Management.1 (2008): 6-13. ABI/INFORM Complete. Web. 3 Dec. 2012. Ruger, William. Milton Friedman. New York: Continuum, 2011. Print. Wahid, Abu N. M. Frontiers of Economics: Nobel Laureates of the Twentieth Century. Westport, Conn. [u.a.: Greenwood Press, 2002. Print. Whitehouse, Mark and Greg, Ip . "How Milton Friedman Changed Economics, Policy and Markets." Wall Street Journal: A.1. ABI/INFORM Complete. Nov 17 2006. Web. 3 Dec. 2012 . Read More