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Week 5: Chicago school( 1946) (Main ideas of chicago school (1. …
Week 5: Chicago school( 1946)
University of Chicago
1946: Milton Friedman (NP 1976)
1948: George Stigler (NP 1982)
1964: Ronald Coase (NP 1991)
1968: Gary Becker (NP 1992)
1974: Robert Lucas (NP 1995)
Historical background
Since Marshall many new ideas/theories that encouraged government intervention:
Monopsony (Robinson)
Government policy to stabilize economy (Keynes)
Externalities (Pigou)
Chicago school opposed to more government intervention
Main ideas of chicago school
3. Mathematical focus
4. Rejection Keynesianism
Markets self-adjust and self-regulate
Monetary policy distorts
2.Observed prices/wages equal longterm competitive ones
: Prices reflect opportunity costs to society
5.Limited government
: inefficiency
1.
Optimizing behavior
– Preferences stable and independent of prices
– Incentives work
– Utility maximizing individuals
Implications
Focus on classical and neoclassical economics
Preserve Fisher’s monetary views Focus on inflation in 1970s-1980s
Stengthening marginalist tradition
--> Microeconomic analysis to expand insights on formerly
marco-topics