Educator, Economist (1912-2006)
Milton Friedman developed the monetarist school of thought and contributed to the advancement of Chicago price theory. He acted as an economic advisor to the America’s President Ronald Reagan and won a Nobel Memorial Prize in Economic Sciences in 1976.
Friedman theorized that there existed a natural rate of unemployment, and that any employment above this rate would cause inflation to accelerate. Subsequently, in the long-run the Phillips curve was vertical at this natural rate.
Moreover, Friedman predicted the 1970’s event that would undermine everyone’s belief in Keynesianism, namely, stagflation; a period of rising inflation and falling economic growth occurring at the same time.
Monetarism further contends that governments must control the amount of money in circulation. Friedman’s theory asserts that variations in the money supply affects national output on the short-run and the price level in the long-run. Monetarists, therefore, point that monetary policy should be used to target the growth rate of the money supply and not used in a discretionary manner to boost economic growth. Friedman’s monetarist policies have been so influential that they were even used as recently by the Federal Reserve to combat the effects of the 2007 global financial crisis.
Milton Friedman had such a profound influence on anyone he met, and his ideas, no doubt, will last in the macro policy sphere for a long time to come. If you have any doubts over the influence that Friedman had on his peers, take this quote from none other than Arnold Schwarzenegger:
“Milton was one of the great thinkers and economists of the 20th century, and when I was first exposed to his powerful writings about money, free markets and individual freedom, it was like getting hit by a thunderbolt.”
“If you put the federal government in charge of the Sahara Desert, in 5 years there’d be a shortage of sand.”
– Milton Friedman