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Transcript of Milton Friedman
1945 - Income from Independent Professional Practice.
1953 - Essays in Positive Economics.
1956 - Studies in the Quantity Theory of Money
1957 - A Theory of the Consumption Function
1962 – Capitalism and freedom
1962 - Price Theory: A Provisional Text.
1963 - A Monetary History of the United States, 1867–1960
1972 - An Economist’s Protest: Columns on Political Economy
1980 – Free to Choose
Friedman rejected the use of fiscal policy as a tool of demand management; and he held that the government's role in the guidance of the economy should be severely restricted. Friedman wrote extensively on the Great Depression, which he called the Great Contraction, arguing that it had been caused by an ordinary financial shock whose duration and seriousness 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 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.
-Born in July 31, 1912 to Jewish immigrants from Hungarian community (what is now Ukraine) in Brooklyn, New York City.
-When he was 3 months old, Friedman and his family moved to New Jersey, where Friedman’s parents owned a private business of dry-goods store.
-His father died during his senior high school year.
Milton attended college at an early age even though no one in his family has attended university before, by receiving scholarship and by working to meet his living expenses.
-Friedman earned a degree in mathematics at Rutgers University during the Great Depression in 1932. Although Friedman wanted to become an actuary, he became interested in economics.
-Friedman was highly inspired to become an economist by professor Arthur F. Burns and Homer Jones,
Friedman’s view was also highly influenced by the unproductive government intervention that influenced the U.S. economy after WWII
-He therefore believed that government’s effort to promote full employment and economic growth through the reduction of taxes resulted periods of inflation and increased public debt, which in his opinion made the public dependent on the government’s assistance.
The Phillips curve represents the relationship between the rate of inflation and the unemployment rate. Although he had precursors, A. W. H. Phillips’s study of wage inflation and unemployment in the United Kingdom from 1861 to 1957 is a milestone in the development of macroeconomics. Phillips found a consistent inverse relationship: when unemployment was high, wages increased slowly; when unemployment was low, wages rose rapidly.
However, the problem that emerged with it in the 1970s was its total inability to explain unemployment and inflation going up together - stagflation . According to the Phillips Curve they weren't supposed to do that, but throughout the 1970s they did. Friedman then put his mind to whether the Phillips Curve could be adapted to show why stagflation was occurring, and the explanation he came up with was to include the role of expectations in the Phillips Curve - hence the name 'expectations-augmented' Phillips Curve.
In the diagram of the Expectations-Augmented Phillips Curve
it can be shown how there is
an negative relationship between
changes of inflation and the
unemployment rate. The NAIRU
listed on the graph is the
non-accelerating inflation rate of unemployment, that is why
this graph has a straight line
and not an exponential graph
like a traditional Phillips curve.