Milton Friedman, winner of the 1976 Nobel Prize in Economics

Milton Friedman, winner of the 1976 Nobel Prize in Economics

Milton Friedman was born in Brooklyn, New York, in 1912. This American economist and statistician are best known for his firm belief in free-market capitalism and holding a position that opposed traditional Keynesian economists. He won the Nobel Prize in Economics in 1976 for his “contribution to the analysis of consumption, history and monetary theory, as well as for his explanations of the complexity of stabilisation policy”.

The youngest of four children, he lost his father when he was a teenager. His mother, a haberdasher’s shop assistant, struggled to provide an education for him and his siblings.

Miltón Friedman was awarded a scholarship to Rutgers University, which he combined with various jobs as a waiter, salesman, etc. He majored in mathematics and showed an interest in mathematics. He majored in mathematics and showed an interest in economics. He got to know the economist Arthur Burns, who was his professor at Rutgers and who helped him obtain a scholarship to the University of Chicago in the economics department.

Although according to Friedman himself, the university course from 1932 to 1933 was particularly hard in economic terms, it was also the period when he met Rose Director, who became his wife.

He later became an assistant at Columbia University, where he met economists such as Harold Hotelling, Westley Mitchell and John Maurice Clark. He then returned to Chicago, where he was appointed research assistant to Henry Schultz. In Chicago, he struck up a close friendship with Stigler, who would become Nobel Prize winner in Economics in 1982.

In 1935 he moved to Washington where he worked at the National Resources Committee and soon after became an assistant to Kuznets, Nobel Laureate in Economics in 1971, at the National Bureau of Economic Research where they co-wrote Income from Independent Professional Practice, a book that was surrounded by much controversy and whose publication was delayed. His work in Washington allowed him to develop his theory of the consumption function and his doctoral thesis on the self-employed income, defended at Columbia University.

Between 1941 and 1943, he worked at the Treasury Department on wartime fiscal policy. He then returned to Columbia, where he worked on mathematical and statistical problems related to armaments and military tactics.

One of Friedman’s first breakthroughs in economics was his Consumption Function Theory in 1957. In this theory, he argued that “an individual’s consumption and saving decisions are more affected by permanent changes in income than by changes in income that are perceived to be ephemeral”. He introduced the permanent income hypothesis, which explained why short-term tax increases actually reduce saving and keep consumption levels static, all other things being equal.

Milton Friedman‘s economic theories have given way to what we know today as monetarism. He also popularised several economic ideas that are still important today. He died in California on 16 November 2006.

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