Chicago School (economics)

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The Chicago school of economics is a school of thought favoring free-market economics practiced at and disseminated from the University of Chicago in the middle of the 20th century. The leaders were Nobel laureates George Stigler and Milton Friedman. Its attitudes towards economics are the intellectual heirs of the Austrian school of economics.

It is associated with neoclassical price theory and free market libertarianism, the refutation and rejection of Keynesianism in favor of monetarism (until the 1980s, when it turned to rational expectations), and the rejection of regulation of business in favor of laissez-faire. In terms of methodology the stress is on "positive economics" -- that is, empirically based studies using statistics, with less stress on theory.

The school is noted for its very wide range of topics, from regulation to marriage, slavery and demography.

The term was coined in the 1950s to refer to economists teaching in the Economics Department at the University of Chicago, and closely related academic areas at the University such as the Graduate School of Business and the Law School. They met together in frequent intense discussions that helped set a group outlook on economic issues, based on price theory. The 1950s saw the height of popularity of the Keynesian school of economics, so the members of the University of Chicago were considered outcast. Famed economist Friedrich Hayek was teaching there because that is the only place he could find employment at the time [1].

Not all economists within the the Department of Economics at the University of Chicago shared the beliefs in the "Chicago school". The U of C department, widely considered one of the world’s foremost economics departments, has fielded more Nobel Prize winners and John Bates Clark medalists in economics than any other university. Fewer than half of the professors in the economics department were considered part of the school of thought.

Chicago School theories lay behind many of the policies of the World Bank and other Washington-based financial institutions, such as the International Monetary Fund and U.S. Treasury Department ^[1], which embraced market fundamentalism as an universal recipe for economically wrecked countries, as was expressed in the Washington consensus. Under its influence, from the mid-1980s to the mid-1990s, large portions of the state-owned companies in many Third World countries were privatized. (Mason 1997:428)

References

1. ^ Williamson, John: What Washington Means by Policy Reform, in: Williamson, John (ed.): Latin American Readjustment: How Much has Happened, Washington: Institute for International Economics 1989.

Alan O Ebenstein, Friedrich Hayek: A Biography (2001)
Milton Friedman and Rose Friedman, Two Lucky People: Memoirs ISBN 0-226-26414-9 (1998)
J. Daniel Hammond and Claire H. Hammond, ed., Making Chicago Price Theory: Friedman-Stigler Correspondence, 1945-1957. Routledge (2006). 165 pp. ISBN 0-415-70078-7.
Kasper, Sherryl. The Revival of Laissez-Faire in American Macroeconomic Theory: A Case Study of Its Pioneers (2002). Covers Knight, Simon, Hayek, Friedman and Lucas.
H. Laurence Miller, Jr. "On the 'Chicago School of Economics'", The Journal of Political Economy, Vol. 70, No. 1 (Feb., 1962), pp. 64-69 online in JSTOR
Nelson, Robert H. Economics As Religion: From Samuelson to Chicago and Beyond (2001)
Reder, Melvin W. "Chicago Economics: Permanence and Change" Journal of Economic Literature (1982) 20(1): 1-38. ISSN 0022-0515 Fulltext in Jstor.
Stigler, George J. ed. Chicago Studies in Political Economy (1988)
Stigler, George J. Memoirs of an Unregulated Economist (1988)
Wahid, Abu N. M. ed; Frontiers of Economics: Nobel Laureates of the Twentieth Century. Greenwood Press. (2002)
Mason, Mike, Development and Disorder: A History of the Third World since 1945. University Press of New England, Hanover (1997) ISBN 0-87451-829-6

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• • [ e] Chicago school economists
Milton Friedman • George Stigler • Robert Lucas, Jr.

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Early Modern	Scholasticism Mercantilism Physiocrats
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20th-century	Stockholm school Keynesian economics Austrian school Chicago school
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