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Milton Friedman Economic Theory

What is the Friedman Doctrine?

Last updated date: 16th Mar 2023
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Milton Friedman's theory is sometimes called the ‘Shareholder Theory’. The Friedman Doctrine has a few different names. According to this view of business ethics, "an entity's primary duty resides in the happiness of the shareholders," created by American economist Milton Friedman, the company should put shareholder interests first. Therefore, the company should continually try to raise its sales to benefit its owners.

In Friedman's view, the shareholders represent the organisation's lifeblood and need special consideration. To maximise profits, a company must seek avenues for expanding its revenue base via activities like value creation and product expansion, all while keeping expenses as low as possible. Instead of having an outsider make essential choices like funding for social activities, Friedman argued that shareholders should have such authority.


All About Milton Friedman's Doctrine


All About Milton Friedman's Doctrine


Who Was Milton Friedman?


All About Milton Friedman


All About Milton Friedman

American statistician and economist, Milton Friedman was a proponent of unrestricted capitalism and freedom and a prominent figure in developing the Chicago School's fiscal and monetary policy approach. For his work regarding analysing consumer behaviour, developing a theory of money, and illuminating the complexities of stabilisation policy, he was awarded the Nobel Prize in economics in 1976.

Friedman has written several books, the most famous of which are titled "Capitalism and Freedom." In 1988, President Reagan presented him with the Medal of Freedom. With his fellow monetarists, Friedman took on the Keynesian establishment by arguing for a return to a free market, including reduced government or deregulation in most sectors of the economy.

When Friedman passed away in 2006 at the ripe old age of 94, the Wall Street Journal obituary said that his ideas had "reshaped contemporary capitalism" and "laid the conceptual underpinnings for the anti-inflation, tax-cutting, or anti-government policies" of President Ronald Reagan or British Prime Minister Margaret Thatcher.


Is Capitalism the Same as a Free Market?


The Economy in a Free Market Tends to Boom


The Economy in a Free Market Tends to Boom

There are a few distinct varieties of economic systems, two of which are a capitalist economy and a free market economy. The two phrases are often confused, particularly in everyday conversation. However, even though they have specific characteristics, the two aren't the same thing at all.


The rule of supply and demand, which serves as the foundation for determining the price of products and services and their production, lies at the root of the capitalist and free market capitalism economic systems.


However, they are not the same thing at all. The differences between free markets and capitalist economies may be summarised as follows: the former emphasises the development of new wealth and the ownership of the capital and tools of production, while the latter emphasises the trading of existing wealth.


What Did Milton Friedman Believe?

An American economist who favoured less government regulation and a freer market was Milton Friedman. Friedman rejected the Keynesian theory in favour of monetarism, emphasising the significance of monetary policy and that changes in the money supply had immediate and permanent impacts.


Did You Know?

  1. American economist Milton Friedman supported monetarism. According to monetarism, the amount of money the government prints affects the economy. He prefers that the government print the same amount of money each year.

  2. Born to Hungarian-Jewish parents in Brooklyn, NY. Rahway, NJ, was his hometown. Friedman attended Rutgers, Columbia, and Chicago. He co-founded the Chicago school of economics with George Stigler.

  3. Milton Friedman's monetarism gained favour in the 1970s, and he became Reagan's economic counsellor.

  4. Friedman said the government should restrict economic control.

  5. He opposed conscription and believed ending it was his proudest achievement.

  6. Friedman expressed his ideas through films, books, and interviews for decades. Capitalism and Freedom and Free to Choose were his best-known publications.

  7. Friedman, 94, died in San Francisco of heart failure. His wife and children survived him. His ashes were strewn in San Francisco Bay.

Conclusion

The United States' very own Milton Friedman was honoured with the Nobel Prize in Economics. Many people believe that the present monetarist economic movement would not be possible if it were not for the ideas and research that was offered by him. This is a viewpoint that is held by many people. Friedman is considered a founding member of the Chicago School of Monetarist Economics and is known to be a prominent person in the field of economics. He has been called a leading figure in the field.

FAQs on Milton Friedman Economic Theory

1. Why is Milton Friedman considered one of the most renowned economists?

Economists and their theories' have made significant contributions to the area of economic science. One of them is Mr Friedman who was awarded the Nobel Prize for Economic Science in 1976. His description of the significant shifts in monetary base play on economic and pricing changes garnered him the most considerable prominence.. In addition, when Burns' fiscal policy, such as inflation rose and the unemployed took control, his views grew more prominent. Finally, they started dominating the discourse as the economy deteriorated.

2. Did Milton Friedman support the gold standard while still alive and active?

Friedman began placing an increasing degree of importance on how money moves in the functioning of the economy. However, as time passed, he changed his stance to prefer a complex money strategy in which the amount of money circulating would rise at the same pace as the development of the nation's economy. Initially, he pushed for a standard to regulate inflation and prevent bank runs; even so, as time passed, he switched his position to favour a complex money policy.

3. Where exactly did Friedman place his support for certain aspects of public policy?

In his book, which was released in 1962 and titled Capitalism and Freedom, Friedman called for policies that included a voluntary military, free exchange rates, elimination of licences to practice medicine, and a negative income tax or school vouchers. Friedman also pushed for an end to the practice of medical licensing. In addition, Friedman was against the government's efforts to eradicate drug use and advocated for reforms that would make drug laws more lenient.

4. How exactly does Milton Friedman advise lowering the inflation rate, and why did he do this?

To solve this problem, it was said that "only one way to tackle inflation is to restrict the pace at which total expenditure is expanding" as the solution. Friedman believed that there would be a negative impact on the economy in the near term as a result of this therapy. He said, "There is no technique of slowing down prices that would not require a temporary rise in unemployment as well as a transitory decrease in..."