GERRIT GORTER
The present study of economics did not, of course, come out of thin air. Although thinkers in classical Greece already reflected on what we now call economics, it was largely in the eighteenth century that systematic thought on the subject began.
Two conceptual tools—the economic cycle and the idea of the invisible hand—date from that century and are still in use today, both in academic research and in education.
This site contains twenty-five portraits of important economists. Each offers a biographical sketch together with an indication of his (and, in one case, her) significance for the development of economic thought. They claim no more than to provide a first introduction to the lives and works of these pioneers.
These articles originally appeared in Dutch in the Tijdschrift voor het Economisch Onderwijs and were published on the website of Gerrit Gorter. The English translations are by Folkert Gorter.
Index
François Quesnay
Adam Smith
Thomas Robert Malthus
Jean-Baptiste Say
David Ricardo
Antoine Augustin Cournot
John Stuart Mill
Karl Marx
Walras
Carl Menger
Alfred Marshall
Vilfredo Pareto Eugen von Böhm-Bawerk
Knut Wicksell
Max Weber
Irving Fisher
Sam de Wolff
John Maynard Keynes
Joseph Alois Schumpeter
Joan Robinson
Jan Tinbergen
John Hicks
John Kenneth Galbraith
Milton Friedman
Paul Samuelson
Milton Friedman
U.S.A. 1912–2006
Milton Friedman was, after John Maynard Keynes, probably the most influential economist of the twentieth century. He achieved just about everything an economist can hope to achieve: professorships at several top universities, a number of bestselling books, a widely viewed television series, the presidency of the American Economic Association, and, as the cherry on top, the Nobel Prize in Economics in 1976.
Friedman was born in 1912 in Brooklyn, New York, to poor Jewish immigrants. His name is inextricably linked with the University of Chicago, where he spent more than thirty years — a university that has produced more Nobel Prize winners than any other. He also studied there, attending lectures by gifted economists such as Frank Knight and Jacob Viner. It was also at Chicago that he met his future wife, Rose Director. In Viner’s class, students were seated in alphabetical order — which placed Milton and Rose next to each other, resulting in a marriage. It wasn’t until 1977 that Friedman left Chicago to join the Hoover Institution in California. With the money from the Nobel Prize ($180,000 tax-free at the time), he bought an apartment overlooking San Francisco.
There are two recurring themes in Friedman’s work: the idea that “money matters” and an emphasis on free markets. Among fellow economists, his best-known work is A Monetary History of the United States, 1867–1960, published in 1963 and co-authored with Anna J. Schwartz — a book that is, if you will, his masterpiece. In this book, Friedman and Schwartz dismantled the prevailing view that the Federal Reserve — the U.S. central bank — had done everything it could to combat the Great Depression of the 1930s. The authors showed instead that the money supply fell by one-third between 1929 and 1933. In doing so, a normal recession was transformed into the most severe crisis of the twentieth century.
While changes in the money supply can have significant short-term effects, in the long run they have little to no impact on economic activity. Using the quantity theory of money (MV = PY), Friedman showed that, in the long run, an increase in the money supply leads only to inflation. Friedman’s solution for monetary policy was a steady growth of the money supply at about 3 to 5 percent per year. In this way, the growing need for means of payment would be met without causing excessive inflation.
A second major theme in Friedman’s work was his crusade against the post–World War II dominance of Keynesianism. Keynes had argued that capitalism was inherently unstable — once thrown off balance, the system could not recover on its own without government intervention. Hence his advocacy of fiscal policy — the manipulation of government spending and taxation. Friedman returned to the optimism of the classical economists, such as Adam Smith and Jean-Baptiste Say, who had great faith in the free operation of the price mechanism. Fiscal policy was not the solution to a temporary shortfall in spending — it also disrupted the functioning of the market.
Friedman set out his free-market ideas in Capitalism and Freedom, published in 1962, which became a bestseller — with more than half a million copies sold. Even more successful was his 1980 television series Free to Choose and the accompanying book, co-written with his wife Rose, which sold over a million copies. In front of the camera, Friedman’s gift for explanation came fully into its own. You could count on him to pull a pencil from his pocket to demonstrate the subtlety of the market mechanism: what it was made of, where each part came from, what capital goods were required to produce it — and what a marvel it was that, without any central planning, all those components came together at the right place, at the right time, in just the right quantities, so that even a consumer in a remote village wouldn’t be left empty-handed. Friedman played a key role in the decline of Keynesianism. Even a post-Keynesian like Paul Samuelson eventually had to admit that fiscal policy doesn’t work — and that, in the short term, only monetary policy can offer relief.
In addition to serving as an advisor to several presidents (Nixon, Reagan), he and his wife founded the Milton and Rose D. Friedman Foundation, aimed at improving the quality of (public) education. (A noteworthy remark: “Schooling is one of the technically most backward of our industries.”) Friedman died of a heart attack in 2006.