Milton Friedman was an American economist who won the Nobel Memorial Prize in Economic Sciences in 1976 for his research on consumption analysis, monetary history and theory, and for his demonstration of the complexity of stabilization policy. Aside from this achievement, his significant contributions brought forth economic theories and models that challenged existing models and provided new ways for understanding different economic phenomena.
The Body of Works: Notable Books, Articles, and Other Publications Authored by Milton Friedman
1. A Theory of Consumption Function (1957)
Friedman explored and described the exact nature of the consumption function. In arguing against the earlier theories, such as the Keynesian theory that individuals and households adjust their expenditures to reflect their current income, he presented the Permanent Income Hypothesis. The theory asserts that changes in permanent income and not changes in temporary or current income are what drive changes in consumption patterns.
2. Studies in the Quantity Theory of Money (1956)
He also wrote the 1956 book “Studies in the Quantity Theory of Money” that restated and introduced the Quantity Theory of Money first put forward by Nicolas Copernicus. The theory states that an increase in the money supply has a long-term effect of increasing prices while having little to no impact on output. Also, an increase in the money supply has a short-term effect of increasing employment and output levels. Decreasing the money supply negatively affects employment rate and output.
3. A Program for Monetary Stability (1960)
The only way to address inflation is to cut it off at its root. The economist explained why the government should intervene in banking functions and monetary policy while also criticizing the way the U.S. Federal Reserves controls margin requirements on security loans, consumer installment credits, and interest rates on demand and time deposits. He also proposed the coordination between the U.S. Treasury and the Federal Reserves, and the abandoning the system of fixed exchange rates along with the fixed official price of gold.
4. Capitalism and Freedom (1962)
Another one of the major works of Milton Friedman was the book “Capitalism and Freedom” first published in 1962 by the University of Chicago Press. It generally discussed the role of economic capitalism in a liberal society. Furthermore, it specifically tackled the relationship between economic freedom and political freedom, the role of the government in a free society and education, social welfare measures, and alleviation of poverty.
5. A Monetary History of the United States, 1867–1960 (1963)
Considered as one of the most important books of that time, the renowned economist and another American economist, Anna J. Schwartz used historical time series and economic analysis to assert that changes in the money supply significantly influenced the American economy. They further argued that changes in the money supply had unintentional adverse effects, and that sound monetary policy is essential for economic stability.
6. Utility Analysis of Choices Involving Risk (1948)
Published in the Journal of Political Economy, Milton Friedman and mathematician Leonard J. Savage wrote an article that introduced the theory called Friedman-Savage Utility Function. It argues that a part of the utility function is concave, while another part is convex. To be more specific, the theory explains why individuals tend to pursue risky consumption behavior or investment decisions when they have more wealth and why they tend to disfavor risk when they are poorer. Note that individuals with income levels between the low and high points are risk takers.
FURTHER READINGS AND REFERENCES
- Friedman, M. 1992. Capitalism and Freedom. 40th Anniversary Ed. Chicago: University of Chicago Press. ISBN: 0-226-26421-1
- Friedman, M. 1960. A Program for Monetary Stability. New York: Fordham University Press. ISBN 0-8232-0371-9
- Friedman, M. 1957. A Theory of the Consumption Function. New Jersey: Princeton University Press. ISBN: 978-0-691-04182-7.
- Friedman, M. 1956. Studies in the Quantity Theory of Money. Chicago: University of Chicago Press. ISBN: 978-0226264066
- Friedman, M. and Savage, L. J. 1948. “Utility Analysis of Choices Involving Risk.” Journal of Political Economy. 56(4): 279-304. DOI: 10.1086/256692.
- Friedman, M. and Schwartz, A. 1963. A Monetary History of the United States, 1867-1960. New Jersey: Princeton University Press