Friedman vs Keynes

Topics: Great Depression, Milton Friedman, Keynesian economics Pages: 5 (955 words) Published: November 27, 2012
Friedman vs. Keynes



II. Milton Friedman

A. Historical Background

B. View of Economy

a. Early Views

b. Later Views

C. Influence on Policy Makers

a. Richard Nixon

b. Ronald Reagan

III. John Maynard Keynes

A. Historical Background

B. View of Economy

a. Trade

b. Unemployment

C. Influence on Policy Makers

a. Prime Minister David Lloyd George

b. Frank D. Roosevelt

IV. Conclusion

Friedman vs. Keynes

The discipline of macroeconomics deals with the performance, structure, and behavior of a national economy as a whole. Macroeconomists seek to understand the determinants of aggregate trends in an economy with particular focus on national income, unemployment, inflation, investment, and international trade. Milton Friedman and John Maynard Keynes, who was both great economists, embraced the different challenges of the world by imposing their own philosophies. Although both Friedman and Keynes have some similarities, strong disagreements about the monetary arena set them apart. These two gentlemen traveled different paths of economics their whole life to establish ground rules for the government to follow.

The first son of a working class Jewish family, Milton Friedman was born in New York City in the early 1900’s. Milton graduated high school before his 16th birthday and received a scholarship to Rutgers University where he began a specialization in mathematics. Milton’s interest in economics was influenced by two economics professors during his undergraduate studies during the time of the Great Depression (Friedman, 2005). He was convinced that the study of economics could help solve ongoing economic difficulties. Milton graduated with a double major of economics and mathematics. Milton has been credited as being the most influential economist of the second half on the twentieth century. Though originally a follower of the theories of John Maynard Keynes, Friedman later revoked the ideas of central control after witnessing the effects and moved towards advocating free markets.

Friedman’s views of monetary policy, taxation, privatization, deregulation influenced the presidential term of Ronald Reagan in the United States during the 1980’s and Margaret Thatcher in Britain. Friedman served on the committee of economic advisors for President Richard Nixon and was at times unsuccessful at convincing Nixon to accept his advice (Stein, 2006). In addition to the influence on world leaders, Friedman’s impact on economy is also evident in his contribution to the payroll withholding tax system. This system was put in place to counteract tax evasion and tax avoidance either by domestic or international taxpayers. Milton Friedman also advocated for a voluntary military and against a draft. Friedman’s approach to economy and government developed into a laissez-faire view. He defended capitalism and criticized the ideas of the New Deal.

John Maynard Keynes was born in Cambridge, England in 1883. John’s father was a registrar at the University of Cambridge and an economist while John’s mother was one of the first female graduates of the University of Cambridge, and later the mayor of Cambridge. John Maynard Keynes began his studies in mathematics and the classics at King’s College of Cambridge (Reich, 1999). Keynes was strongly influenced by Alfred Marshall to change his academic interests to politics and economics. Upon completion of his undergraduate studies Keynes became a civil servant in India for a spell and later returned to Cambridge to teach economics. As World War I ensued Keynes returned to government employment and studied relations with war allies. Keynes acted as an economic advisor to Prime Minister David Lloyd George (Reich, 1999).

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