I will not be attempting to discuss every aspect of their work, but, will be looking at their major contributions to the world of Economics John Maynard Keynes makes a good starting point because he was both an influential economist and a man of many talents. Unlike many economists, Keynes, was very much at home in the business world.
Friedman grew up on the East Coast and attended Rutgers University, studying mathematics and economics. He graduated from college in and went on to earn a Ph. During this time, Friedman took a position at the National Bureau of Economic Research to study income distribution in the United States.
After his work on income inequalityhe focused on tax research and statistical analysis.
Inafter graduating with a Ph. This theory produced the permanent income hypothesiswhich explained why short-term tax increases actually decrease savings and keep consumption levels static, all else being equal. During his time as a professor, macroeconomics was dominated by Keynesian Economic Theory.
This school of economic thought, pioneered by British economist John Maynard Keynes, holds that fiscal policy is more important than monetary policy, that government spending should be used to neutralize the volatility of the business cycle and that prices are inherently sticky.
Friedman opposed these macroeconomic Keynesian views with his own economic theory of free-market monetarism. Through this theory, Friedman expressed the importance of monetary policy and pointed out that changes in the money supply have real short-term and long-term effects.
Specifically, the money supply affects price levels. Further, Friedman used monetarism to openly contradict the Keynesian principles of the Keynesian multiplier and the Phillips curve. Friedman was awarded the Nobel Prize in Economics in Over the course of his career, he published pioneering books on the modern economy, as well as numerous influential articles, changing the way economics is taught.
Milton Friedman and Monetarism vs. Keynesian Economics John Maynard Keynes and Milton Friedman were two of the most influential economic and public policy thinkers of the 20th century.
For most of his life, Keynes was more noted for his political journalism and legendary debating skills than for his economic thinking. Inhe published "The Economic Consequences of the Peace," an objection to the onerous reparation payments and sanctions exacted upon Germany after World War I.
Keynes argued that these unfair punishments would make the region politically unstable. Keynes became a prominent thinker in Great Britain during the s when the country was struggling with unemployment. His fame took off following the release of his economic magnum opus, "The General Theory of Employment, Interest and Money," in In this work, Keynes argued that an interventionist government could help smooth out recessions by propping up aggregate demand.
Strategic government spending could spur consumption and investment, argued Keynes, and help alleviate unemployment.
At the time of the release of "The General Theory," the world was in the middle of the Great Depression, and classical notions about the political economy were in disrepute.
While still popular, some have argued that Keynesian economics has provided a pseudo-scientific justification for short-sighted elected politicians to run fiscal deficits and accumulate massive levels of government debt. If Keynes was the most influential economic thinker of the first half of the 20th century, Friedman was the most influential economic thinker of the second half.
Friedman strongly opposed many of the policy proposals espoused by the Keynesian economists of his day. He argued for deregulation in most areas of the economy, calling for a return to the free market wisdom of classic economists, such as Adam Smith.
He challenged contemporary notions of deficit spending and suggested that, in the long run, only discoordination and inflation could result from expansionary fiscal and monetary policy.
Friedman argued for free trade, smaller government and a slow, steady increase of the money supply in a growing economy. His emphasis on monetary policy and the quantity theory of money became known as monetarism.
The popularity of Friedman attracted other free market thinkers to the University of Chicago, giving rise to an anti-Keynesian coalition referred to as the Chicago School of economics.John Maynard Keynes () is perhaps the foremost economic thinker of the twentieth century.
On economic theory, he ranks with Adam Smith and Karl Marx; and his impact on how economics was practiced, from the Great Depression to the s, was pfmlures.coms: 1. Articles; What the EA community can learn from the rise of the neoliberals; What the EA community can learn from the rise of the neoliberals.
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Founded in , Princeton University Press is an independent publisher with close connections, both formal and informal, to Princeton University. Keynes and Great Depression It was during the s, that Keynes' really made his mark as an economist, helping to develop a whole new branch of Economics.
When the Great Depression hit, with unprecedented ferocity, economists were at a loss to explain its causes and how to overcome it. This volume explains how, after the collapse of financial markets in led to the Great Depression, John Maynard Keynes, the greatest economic thinker of the 20th century, developed an alternative analytical framework to this orthodox pfmlures.coms: 3.