Milton Friedman

e_content">				theories. On this issue, Friedman held the opinion
INTRODUCTION:				that economists should only invoke the predictive
Milton Friedman was an American economist as				ability of the theory and not the descriptive
well as being a public intellectual. He was born in				realism of the theory. Friedman was also influential
1912 and died at the age of 94 in 2006. He was				in proposing that governments use countercyclical
an ardent advocate of economic freedom as well				budget policies.
as personal liberty. Before his death Friedman was				CASE ANALYSIS: JAPANS MACROECONOMIC
one of the most influential scholars and figures of				POLICIES:
authority in the fields of microeconomics,				Japan is the world’s second largest
statistics, and economic history as well as the field				economy from the United States. It is a market
of macroeconomics, which happens to be the field				economy just like the United States although
of study.				geographically it is very small. Japan is an industrial
THESIS STATEMENT:				state although it relies mainly on imported raw
Milton Friedman, although unfortunately bereaved,				materials for its industries. As thus, Japan is highly
was one of the most influential economics of all				dependent on the nature of international trade and
time. Many economists as well as economies big				this means that Freidman’s analysis of
and small have adapted to the teachings of				price theories, inflation and free trade has a huge
Friedman. Why has this been so? In trying to				impact within the Japanese macroeconomic
analyze this paper, I will look at some of the				policies.
major contributions of Friedman to the field of				Within Japan, the economy has followed the
macroeconomics.				teachings of Friedman in the following ways.
ANALYSIS:				Firstly, the country has realized the importance of
Macroeconomics is a sub-discipline in the field of				laissez faire economics. For this reason, given that
economics. It concerns it self with the structure,				the country relies mostly on imported raw
performance and the behaviors of national				materials for its industries have, been one of the
economies. It seeks to find out the determinants				major advocate’s free trade. This has
of the aggregate movements within the				been commissioned in many ways including being
economy.				one of the influential members of the world trade
Macroeconomics gives specific attention to				organization.
inflation, unemployment, international trade,				Secondly, the country has adopted
investments and the national income.				Friedman’s teachings in the way the
On the other hand, Microeconomics is the branch				country designs its fiscal policy; this has been
of economics that concerns itself with the				done mainly by changing the composition of public
processes that firm's, households and individuals				spending instead of expanding it.
concerns themselves in allocating limited resources.				Thirdly, the countries central bank, the bank of
In this sense microeconomics scrutinizes how				Japan has also followed Friedman’s rules in
these decisions affect the demand and supply				inflation targeting and interest rate benchmarking.
schedules and helps determine not only the prices				In addition to these, the Japanese cabinet
but also how these prices influence the supply and				especially in recent years has been very vocal in
demand of goods and services in any given				trying to push for structural reforms as well as
market segment.				the adoption of stringent business policies
Macroeconomics is generally divided in to two				especially in the financial sector that has been
major areas of study; the business cycle which				affected by banking crisis for a very long time.
concerns itself mainly with the consequences and				Concerning the activities of the bank of Japan, it
causes of the of short term fluctuations in				is important to note that for a long time now the
national income and the determinants of the long				bank has been steadily increasing the money
run economic growth (increases in the national				supply. This is intended to contain inflation as well
income).				as being a way of supporting the fiscal policy. In
As thus, the field of macroeconomics is of				addition to this, the Japanese economy has been
paramount importance in designing, developing and				under a condition of a liquidity trap.
evaluating strategies and policies not only for				According to the monetarist theory, mainly
governments but also for large corporations like				influenced by Milton Friedman, a country would
Sony and Toyota.				most likely move out of a liquidity trap by turning
Macroeconomics concerns itself with economic				to the printing press or increasing the money
aggregates of the nation’s economic				supply. In order for Japan to move out of the
activities. On this field, macroeconomics concerns				liquidity trap, the bank of Japan has resulted to
itself with issues of government actions (spending				the printing press as well as the purchase of
and taxation), issues of unemployment, inflation as				Japanese government’s treasury bonds.
well as general economic policies.				These are all monetarist activities and they go on
CONCERNING FRIEDMAN:				to show us how the Japanese economy has gone
Friedman for a long time worked in isolation. Until				in line with the teachings of Milton Friedman.
the late 70s, many scholars especially in the field				CRITICISMS:
of economics met Friedman’s work with a				Although Friedman was very influential on the field
lot of hostility.				of macroeconomics, very many different schools
Milton Friedman was an ardent opponent to the				of thought have criticized, or have held different
Keynesian economics; Milton led the "Monetarist				views from those of Friedman. These include the
school" commonly referred to the Chicago School				Marxists, the Keynesians and neo-Keynesians.
against the Keynesian school of economics.				The Keynesians and neo-Keynesians advocate for
Friedman's contributions include the "Permanent				a mixed economy. In this view, they consider an
Income Hypothesis" on consumption (1957), in				equally important role to be played by both the
addition to this there was the formulation of				private sector and the government. . Thus
risk-aversion and risk-proclivity (1948); he was				Keynes believed that the government was
also influential through his evolutionary theory on				responsible for not only helping the economy rise
the theory of the firm, including his own				out of a depression by increasing aggregate
propositions for a "positivist" methodology in				spending but also it could increase general levels of
economics (1953).				investments by pumping more money into the
Friedman was key influential in macroeconomics				economy, then the citizens are encouraged to
especially in attacking the Keynesians on their				spend more because more money is in circulation.
view of the IS-LM analysis. In this attack,				Once this is done then People will start to invest
Friedman wanted the Keynesians not to ignore				more, and the economy will react by increasing
money matters in their analysis.				productive ventures.
He was critical in pinpointing the importance of a				Thus, Keynes argued that government
laissez-faire economy, but he still held the				investment in public goods that will not be
proposition that concrete policies need to be				provided for by the market would encourage the
operational within the economy for there to be				private sector's growth. This would include
harmony in the economy.				government spending on such things as basic
In essence, the works and teachings of Friedman				research, public health, education, and
came to be an influential part of modern				infrastructure.
economics especially after the Keynesian analysis				On the other side, the Marxists beliefs in a social
failed to offer a solution to the 1970s crisis				state where neither the government nor the
because of the prevalent cost-push inflation and				market takes control. Karl Marx believed that the
the inability of Keynesians to offer a solution to				state was a manifestation of the ruling class, in
the increasing wages and prices.				many instances he claimed, that the ruling class
Friedman scathingly attacked the Keynesians for				was the bourgeoisie (owners of the means of
failing to debate or offer directions on the need				production). Whose aim was self-enrichment under
for competitive markets, this Friedman said was				such a state developments of either the
the reason why there had emerged larger				infrastructure or education would be done if it
monopolies within the 50s and the 60s which led				were to their benefit and not to the benefit of
to the ensuing stagflation.				the workers (Proletariat).
In addition to this, Friedman together with other				CONCLUSION:
scholars from the Chicago school provided				The works of Milton Friedman will continue to hold
evidence to prove that within competitive				the field of economics for a long time to come,
markets the price system could effectively and				especially in these days of globalization and
efficiently to allocate scarce resources. In his own				increasing interdependence of states.
words, Friedman claimed that the price system				REFERENCES:
plays the following roles: firstly, the price system				Hadjimichalakis M. (1982) Modern Economics,
provides incentives for the adoption of the least				Prentice Hall Publishers, New Jersey
costly methods of production. The price system				H. Stratton (1999) Economics: A New Introduction,
also helps in using available resources for the best				Pluto Press, USA
use available, in addition the price system is used				Martin U. (1976) Agricultural Production Economics
to transmit information on production, available				and Resources Used, Oxford University Press,
resources and tastes, on top of this the prices				Oxford
can be used to determine the distribution system				Paul Anthony Samuelson (1964) Economics,
who gets what when and how.				McGraw-Hill publishers, USA
Friedman was also influential in designing test				Thomas A.

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Milton Friedman