milton friedman was a u s economist and nobel laureate known as the most influential advocate of free market capitalism and monetarism in the 20th century 
at the beginning of his career in the 1950s and 1960s friedman s strong advocacy of monetary policy over fiscal policy and free markets over government intervention was considered radical by the established macroeconomics community at the time the field was dominated by the keynesian position that fiscal policy government spending and tax policies to influence the economy was more important than monetary policy control of the overall supply of money available to banks consumers and businesses and that an interventionist government could moderate recessions by using fiscal policy to prop up aggregate demand spur consumption and reduce unemployment in a direct challenge to the keynesian establishment friedman and his fellow monetarists held that governments could foster economic stability by controlling the supply of money that flows into the economy and allowing the rest of the market to fix itself he argued for a return to the free market including smaller government and deregulation in most areas of the economy by the time friedman died in 2006 at the age of 94 his theories had been so influential that the wall street journal said that he had reshaped modern capitalism and provided the intellectual foundations for the anti inflation tax cutting and antigovernment policies of president ronald reagan and british prime minister margaret thatcher education and early careermilton friedman 1912 to 2006 was born to immigrant parents in brooklyn n y and grew up in a small town in in new jersey 20 miles from new york city in his nobel biography friedman described his family as warm and supportive but the family income as small and highly uncertain his father died during his senior year in high school and he took various jobs to supplement a scholarship to rutgers university where he earned an undergraduate degree in mathematics and economics in 1932 on the recommendation of a rutgers professor friedman was awarded a scholarship to an economics graduate program at the university of chicago in 1932 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 for example friedman s consumer budget study at the national resources committee contributed to his famous theory of the consumption function his professional income study incomes from independent professional practice at the national bureau of economic research nber introduced the groundbreaking concepts of permanent and transitory income into economic science prior to earning a ph d in economics from columbia university in 1946 friedman spent world war ii on a select team of statistical analysts working on wartime tax policy for the u s treasury department 1941 to 1943 and serving as mathematical statisticians on weapon design military tactics and metallurgical experiments at columbia university 1943 to 1945 of note during these early years at the u s treasury the famous anti taxation crusader recommended increasing taxes to suppress wartime inflation and devised the first system of income tax withholding the university of chicago and hoover lnstitution 1946 to 2006 in 1946 friedman accepted an offer to teach economic theory at the university of chicago and spent the next 30 years conducting groundbreaking analysis and developing free market theories that challenged keynesian economics the school of thought that had dominated macroeconomics since the new deal workshop on money and banking a key institutional accomplishment during this period at the university of chicago was friedman s establishment of a money and banking workshop that allowed his monetary studies to evolve from individual scholarship into a cumulative body of work that drove the revival of both empirical and theoretical research in the fields of monetary history and statistics the chicago school of economics friedman also became the most famous alumnus of the chicago school of economics a neoclassical school founded in the 1930s by his professor frank knight to promote free markets and the concept of rational expectations a macroeconomic theory that holds that individuals base decisions on three factors human rationality available information and past experiences which means both that current expectations directly influence the future economy and that economists can accurately model future inflation and interest rates with no need for government intervention nobel prize in economic sciences 1976 in 1976 shortly before he retired from the university of chicago friedman was awarded the nobel prize in economic sciences for his achievements in the fields of consumption analysis monetary history and theory and for his demonstration of the complexity of stabilization policy hoover lnstitution of stanford university from 1977 when he retired from active teaching at the university of chicago until his death in 2006 friedman served as a senior research fellow at the hoover lnstitution of stanford university a public policy think tank promoting the principles of individual economic and political freedom friedman the theoretical economistcertain of friedman s accomplishments as a theoretical economist have been so significant that even vocal neo keynesian critics admire the brilliance of his logic including his assertion that economic models should be judged by the accuracy of their predictions about behavior rather than their psychological realism for example in friedman s rational behavior model on consumption behavior consumer preferences can be expressed mathematically in terms of utility and consumer choices are driven by rational calculations to maximize utility until then keynesian economists had explained consumer decisions more loosely in psychological terms such as the tendency to spend some but not all of any increase in income notable praise from ideological opponents includes paul krugman s statement that friedman s two greatest triumphs as an economic theorist came from applying the hypothesis of rational behavior to questions other economists had thought beyond its reach friedman s first universally applauded application of the hypothesis of rational behavior to economic patterns was a theory of the consumption function his 1957 book that made the case for his permanent income hypothesis this was a consumer spending theory positing that saving and spending decisions are based on perceptions of permanent rather than temporary changes to income people spend at a level consistent with their expected long term income and save only if current income is higher than expected permanent income by effectively resolving previous inaccuracies in the analysis of the relationship between income and spending friedman laid the foundation for all subsequent economic analysis of spending and saving patterns another indisputable friedman victory praised by critics as well as admirers was that his rational behavior explanation of inflation accurately predicted a phenomenon that establishment keynesians thought was impossible stagflation a period of stagnant economic growth with simultaneous high inflation and high unemployment in 1967 when friedman presented his prediction of stagflation in a presidential address to the american economic association he was challenging prevailing economic theories based on the phillips curve an economic model that demonstrated an historical correlation between unemployment and inflation that keynesian economists had always assumed was stable at the time keynesian economists had been using the phillips curve to argue that the stable tradeoff between unemployment and inflation justified expansionary fiscal policies and deficit spending that drove higher inflation because it would keep unemployment low friedman s counterargument to the keynesians in 1967 was that even though the data did show a correlation between inflation and unemployment it was only a temporary trade off not a stable correlation and both inflation and unemployment would eventually be high at the same time friedman s rational behavior argument was that consumers dealing with long term inflation eventually build expectations of future inflation into saving and spending decisions which eventually cancels the power of high inflation to keep employment high 