Milton Friedman became part of Chicago's economics department in 1946. At the time Chicago economics was viewed as pro-market, anti-regulation, and focused heavily on supply and demand in free markets. Friedman's main goal was to counter the extremists of the Keynesian method and keep interest rates permanently low. He also proposed a fixed money growth rule to place a limit on the government's use of money issue and to also act as a stabilizer during economic imbalances.
Modigliani and Friedman agreed on the quantity theory of money as it relates to employment. However, they disagreed if monetary authorities would improve if a money growth rule was implemented.
Merton Miller was looking for something beyond the Efficient Markets Theory and the CAPM; he teamed up with Charles Upton and created a landmark textbook in macroeconomics. Fischer thought highly of Merton Miller and viewed him as one of the best scholars in finance.
A for Rooster.
ReplyDeleteThere's a lot of clarification needed here. I think Rooster has misinterpreted and overstated a lot of Mehrling's tone.
Chicago economics is still viewed as "pro-market, anti-regulation, and focused heavily on supply and demand".
Friedman was not trying to counter the extremists. Friedman was the extremist. He's no longer viewed that way, but he certainly was until 40 years ago.
What does it mean to say "monetary authorities would improve"? Are you saying this would make them do their job better?
Miller and Upton's book was not a landmark. Hardly anyone read it, and almost no one refers to it any more.