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Transcript of Milton Friedman
Causes and Conditions of the Economic Boom
The "Freed-men" Government
“Government has three primary functions.
It should provide for
military defense of the nation.
enforce contracts between individuals.
protect citizens from crimes against themselves or their property.
When government-- in
pursuit of good intentions
tries to r
earrange the economy,
help special interests,
the cost come in inefficiency,
lack of motivation,
loss of freedom.
Government should be a referee, not an active player.”
– Milton Friedman
New York City
- Moved to Rahway in his teen years,
where he showed talent for math
- He was
when stock market crashed
in 1928, and suffered the after effects of
the Great Depression in his adulthood.
- Gained a
degree in mathematics
- After graduation, he was inspired by
the dire state of the economy and
decided to pursue future studies in
University of Chicago.
- Post WWII (1945), he became an
American economist and statistician
known for his strong belief in
- He was influenced by
and his support for classical liberalism.
the views of
and their support for modern liberalism.
that led to the
post WWII boom:
High spending on the war effort stimulated and stabilized the economy
High demand for the production of weapons and raw materials resulted in a high demand for new workers. Increase in income resulted in increase in consumerism, which brought money back into circulation and brought American out of the Great Depression.
Expansion of industry:
the automobile industry began to produce cars, new industries in aviation and electronics began to emerge.
Housing boom was stimulated by easily affordable mortgages and led to the nation's gross national product rising from $200 000 million in 1940 to more than $ 500 000 million in 1960.
rise in the number of births
following the war resulted in the "
baby boom" and increased the number of consumers to stimulate the economy.
of the BOOM!
- In attempt to create a welfare state
, the American government during the post WWII boom time did not increase taxes and decrease spending during prosperous times to save money.
believed that the government would eventually go
bankrupt due to deficit spending.
Friedman argued that the goals/roles of the government should be:
control the money supply
This is the central idea of
to set business expectations and fight inflation.
minimal government intervention
To stay out of the foreign exchange market.
To provide certain public goods that private businesses could not provide, but the production of these goods
To replace existing welfare state with negative income tax.
Results or Effect of Approach
problem of inflation
for example, Ronald Reagan (who was heavily influenced by Friedman's theories) successfully lowered inflation rates in the
, resulting in an inflationary boom
However, unemployment rates were
This could be seen in both the US and the UK (under Margaret Thatcher)
The anti-inflationary policies applied during the 80's resulted in a
Friedman was quite a little man.
Standing at just 152cm (barely 5 feet!)
Recipient of the Nobel Prize in Economics in 1976
Ranked the second most popular economist in the 20th century, after John Maynard Keynes in a survey
“The most influential economist of the second half of the 20th century...possibly of all of it." – The Economist on Milton Friedman
Advocated for volunteer military and successfully brought an end to U.S. conscription
Cato Institute used his name for the Milton Friedman Prize for Advancing Liberty
which means an economist who holds the strong belief that the
almost entirely by changes in the money system
The belief that inflation is proportional to how much money the government puts into circulation.
Keep your eye on one thing and one thing only:
how much government is spending, because that’s the true tax ... If you’re not paying for it in the form of explicit taxes, you’re paying for it indirectly in the
form of inflation
or in the form of borrowing.
The thing you should keep your eye on is
what government spends
, and the real problem is to
hold down government spending as a fraction of our income,
and if you do that,
you can stop worrying about the debt.
- Milton Friedman
Thanks for Listening!