Chicago school of economics

  

Definition

Major ideological defender of conservative economics and capitalism it has been one of the most influential bodies of economic thought in recent times. This monetarist (see monetarism) school is associated with the economics department at the University of Chicago, specially during 1970s and particularly with professor (1948-79) Milton Friedman (1912-2006) who won 1976 Nobel Prize in economics for his theory of natural rate of unemployment. His colleagues went on to win seven more Nobels, including George Stigler (1911-91) in 1982 for deregulation theory, Merton Miller (1923-) in 1990 for financial economics, Ronald Coase (1910-) in 1991 for Coase's theorem, Gary Becker (1930-) in 1992 for application of microeconomics to non-market behavior, and Robert Lucas (1937-) in 1995 for the theory of rational expectations. Its basic tenets are that (1) markets allocate resources more efficiently than any government, (2) monopolies are created by government's attempt to regulate an economy (3) governments should avoid trying to manage aggregate demand and, instead, (4) should focus on maintaining a steady and low rate of growth of money supply. It relies to an extraordinary extent on mathematical models through which, its critics charge, it can prove anything it wants to. Also, some of its assertions end us as absurdities such as criminal activity is a career choice, and that smoking is an example of making an informed choice (between cancer risk and immediate gratification).

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