EDUCATION AND EARLY CAREER
Milton Friedman (1912 – 2006) was an American economist in the 20th century, He was a jewish immigrant that moved to New York City. He attended Rutgers University where he earned his B.A. at the age of twenty. Over the next 14 years, in addition to academic roles at the University of Chicago and Columbia University, Friedman held a series of government roles that deepened his expertise in mathematical statistics and economic theory and contributed to publications on consumption and income analysis that launched his career.
FRIEDMAN’S MONETARY THEORY
Within the early 1950s to 1960s, Friedman promoted his brooding about monetary policy over fiscal policy and free markets over government intervention. His brooding was inversely proportional to keynes’ thought about the monetary and fiscal policy. Friedman as a monetarist believes that inflation occurs because there is an abundance of money in circulation, so naturally prices will rise. So in his opinion, the recommended way to combat that is to reduce the money supply. Friedman stated that within the long run, increased monetary growth increases prices but has little or no effect on output. within the short run, he argued that an increase in funds growth cause a rise in employment and output, and reduces in money supply growth have the opposite effect. This statement is written within the “Quantity Theory of Money” (1956).
FRIEDMAN’S THEORY OF INCOME AND CONSUMPTION
In addition, he also wrote the book entitled “Theory of the Consumption Function” (1957), the idea that household consumption and saving decisions suffer more from changes in permanent income than changes in income which household members consider temporary or transitory. Friedman’s hypothesis classifies people’s income into permanent income and temporary income. Permanent income is income that people expect to survive in the future. Temporary income (transitory income) is the unanticipated income of revenue persists. The value of this income is sometimes positive and negative. For this reason, Friedman thought that consumption should depend on permanent income because consumers use savings and loans to carry out consumption in response to changes in income temporarily.
Capitalism and Freedom
He also wrote the book “Capitalism and Freedom”, the best-selling non-fiction book of 1980 which became the foremost important book in the 1960s about making a case for relatively free markets to a general audience. Many of generation who read it were encouraged to study economics themselves. His ideas spread worldwide which bring the reader to explore the relationship between freedom and explain the connection between individual choices with the economy performances.
Milton Friedman also introduced the Adaptive Expectation concept. Adaptive Expectation is a proposition that gives the significance of particular events in forecasting future outcomes. Adaptive expectations had a prominent part in macroeconomics within the 1960s and 1970s. For illustration, inflation prospects were frequently modeled adaptively within the analysis of the expectations stoked Phillips curve. Adaptive expectations state that if inflation increased in the once time, people will anticipate a advanced rate of inflation in the coming time.
Friedman received the Nobel Prize in economics (1976) for his achievements in consumption analysis, monetary history and theory, and demonstration of complex stabilization policies. When Friedman died in 2006 at the age of 94, his theories—monetarism and free-market capitalism— had been so influential even the Wall Street Journal once said that he had “reshaped modern capitalism” and “provided the intellectual foundations for the anti-inflation, tax-cutting, and antigovernment policies”.