Chicago

Information about Chicago

Published on October 15, 2007

Author: Jolene

Source: authorstream.com

Content

The Chicago School:  The Chicago School ECON 205W Summer 2006 Prof. Cunningham Historical Background:  Historical Background Theodore Schultz arrives 1943, chair 1946-61. Nobel Prize, 1979. Milton Friedman arrives 1946. Nobel Prize in 1976. Von Hayek (1950-62). Nobel Prize, 1974. George Stigler arrives 1958. Nobel Prize, 1982. Ronald Coast arrives 1964. Nobel, 1991. Gary Becker earned PhD at Chicago, returns to faculty in 1970. Nobel Prize, 1992. Robert Lucas earned his degrees at Chicago, returned in 1974 as professor. Nobel Prize, 1995. Background (2):  Background (2) Old School vs. New School Tenets: Optimizing behavior Monopoly and monopsony effects are not significant. Observed prices and wages are good approximations of long-run competitive prices and wage equilibria. Old school—policy, empiricism, Marshallian. New School—theory, math, Walrasian, REH. Rejection of Keynesian Economics and fiscalism. Limited role for government. Contributions that have lasted? Milton Friedman (1912- ):  Milton Friedman (1912- ) ·       Milton Friedman Þ              mid-1950s, University of Chicago neoclassical price theorist Þ              Establish career on PIH and the underpinnings of Marshall’s basic supply and demand model ·       Influenced by Frank Knight while a student at Chicago. Joined faculty there in 1948. ·       Money and Banking Workshop at Chicago. ·       Friedman is a self-proclaimed quantity theorist and classical liberal. According to Friedman, “Inflation is everywhere and at all times a monetary phenomenon.” (To the Keynesians, inflation is the result of excess demand for goods and services, and hence arises out of conditions in the real sector.) Karl Brunner coins the phrase “Monetarism”; Brunner and Alan Meltzer construct the microfoundations of Monetarism, creating a second “camp.” Friedman’s Restatement of the Quantity Theory:  Friedman’s Restatement of the Quantity Theory Friedman, M. “The Quantity Theory of Money--A Restatement.” In Studies in the Quantity Theory of Money, Milton Friedman, editor. Univ. of Chicago Press (1956).   According to Friedman, total income (Y) is explained by nominal wealth (W) and the returns (r) that it generates. Explicitly: Y = Wr.   If wealth and returns are estimated via expectations of lifelong streams, then Y is really permanent income. According to the quantity theory, money demand is proportional to the value of nominal transactions, which should be a function of permanent income. Friedman, restatement (2):  Friedman, restatement (2) Friedman expands the detail of wealth and returns to indentify the variety of assets and returns in the potential portfolio:   where P is the price level, rb is the return on bonds, re is the return on equities, ra is the return on real assets, w is the ratio of human to nonhuman wealth (to capture the return on “human wealth”), /r is total wealth, and u is the “portmanteau variable.”   We can simplify this to:   Note: at equilibrium, the inflation rate should be equal to the nominal return on the entire (aggregate) stock of real (physical) assets. If individuals do no suffer money illusion, they are not fooled by changes to scale, and f is linearly homogeneous in prices and nominals. Friedman, restatement (3):  Friedman, restatement (3) So,   .  This must hold for any value of , even =1/Y. This implies that:   More simply, But since Y=Py, which closely resembles the Cambridge form of the equation of exchange:   Friedman, restatement (4):  Friedman, restatement (4) This implies that the cash balances “constant” k, or equivalently, the circular velocity of money V in MV=Py, is really a (stable) function of a few well-defined variables.   Interpretation: Over any reasonable period of time, the rates of return in this function will all move together (in “lock-step”). That is, the yield curve maintains a constant shape, even though it may shift up or down. Thus, substitutions among assets are not likely to take place except on the very short run. Therefore, f and k are quite stable, so that the results of the traditional quantity theory still obtain. Friedman and the Expectations-Augmented Phillips Curve:  Friedman and the Expectations-Augmented Phillips Curve U  e=0 e=1 U* U1 LRPC Short run Phillips curves Friedman’s Constant Growth Rate Rule:  Friedman’s Constant Growth Rate Rule Argument based on permanent income hypothesis. Argument based on long and variable lags. Argument based on money as an institution. Argument based on stable money demand. Robert Lucas:  Robert Lucas Born in Yakima, Washington, 1937. Influenced by one of his teachers—Milton Friedman—and Samuelson’s Foundations. BA, History. PhD, Economics, Chicago. Professor at Carnegie-Mellon, 1970. Professor at University of Chicago, 1974. Editor of Journal of Political Economy since 1978. Lucas (2):  Lucas (2) Brings rational expectations to macroeconomics and begins information-based modeling. Islands model. The Critique. Gary S. Becker:  Gary S. Becker Born 1930. PhD, Chicago. Writes for BusinessWeek. Best known for five books: The Economics of Discrimination, 1957. Human Capital, 1964. Economic Theory A Treatise on the Family The Economic Approach to Economic Behavior. Believes that neoclassical theory can be used to explain all human behavior. His approach to human behavior is based on (1) rational choice, (2) market equilibrium, (3) stable preferences. Becker (2):  Becker (2) Discrimination Discriminators have a preference for discrimination. This preference will still be subject to market forces—the market will impose costs upon discriminators, reducing discrimination. Time Allocation Time used is a cost, and will be optimized. Goods-intensive commodities vs. time-intensive. Higher incomes will lead people to move to goods-intensive commodities. Time-saving conveniences can increase time. Two-worker (with high incomes) families will have a higher opp. cost to have children, so will have fewer. Becker (3):  Becker (3) Marriage Reproducing and raising children are central commodities that marriage facilitates—people form families out of self-interest. The partner with the highest market wage is most likely to engage in market work. Becker (4):  Becker (4) Fertility Children are durable capital, which add to a family’s income or welfare. Marriage partners optimize on the number of children they have based on cost-benefit analysis—they weigh the costs against the various benefits. Rural families have traditionally had more children because it is cheaper to raise children in rural areas. Welfare programs reduce the costs of having children, so increase fertility.

Related presentations


Other presentations created by Jolene

Smart Dust and Micro Robots
07. 01. 2008
0 views

Smart Dust and Micro Robots

2509 9h20 kessler usoinseguro
02. 05. 2008
0 views

2509 9h20 kessler usoinseguro

whats driving emerging markets
27. 09. 2007
0 views

whats driving emerging markets

Barrie Peter Pan Text Only
12. 10. 2007
0 views

Barrie Peter Pan Text Only

rutherford winterjohnson
13. 10. 2007
0 views

rutherford winterjohnson

chap3 2
16. 10. 2007
0 views

chap3 2

IntroDNACloningDNARep
16. 10. 2007
0 views

IntroDNACloningDNARep

MOAC204
17. 10. 2007
0 views

MOAC204

nile hydrology
23. 10. 2007
0 views

nile hydrology

12 HACCPJuiceSeafood French
24. 10. 2007
0 views

12 HACCPJuiceSeafood French

politiques Sant Boi Pere Dorca
24. 10. 2007
0 views

politiques Sant Boi Pere Dorca

thomson
15. 10. 2007
0 views

thomson

climate change and poverty
29. 11. 2007
0 views

climate change and poverty

botnet underground economics
04. 12. 2007
0 views

botnet underground economics

Macroevolution
12. 10. 2007
0 views

Macroevolution

Roman Religion powerpoint
29. 10. 2007
0 views

Roman Religion powerpoint

2268Atakan
31. 10. 2007
0 views

2268Atakan

Banned Books
31. 10. 2007
0 views

Banned Books

Bob
01. 11. 2007
0 views

Bob

Week 3 DW Design Kimball
07. 11. 2007
0 views

Week 3 DW Design Kimball

STILLEHAVSKRIGEN3
13. 11. 2007
0 views

STILLEHAVSKRIGEN3

enhancing osh standards
14. 11. 2007
0 views

enhancing osh standards

ELISA 2004
12. 10. 2007
0 views

ELISA 2004

Climate McBean f
21. 10. 2007
0 views

Climate McBean f

PP 08 Conditioning
16. 11. 2007
0 views

PP 08 Conditioning

Ontologies in Bioinformatics
20. 11. 2007
0 views

Ontologies in Bioinformatics

laminas centroamÃrica
22. 10. 2007
0 views

laminas centroamÃrica

1World War II
23. 12. 2007
0 views

1World War II

NOAA Fisheries NMFS
28. 12. 2007
0 views

NOAA Fisheries NMFS

ClassDay4
31. 12. 2007
0 views

ClassDay4

ENGR310 1 07
03. 01. 2008
0 views

ENGR310 1 07

PAN Villarreal
22. 10. 2007
0 views

PAN Villarreal

gpr
05. 01. 2008
0 views

gpr

hansen
29. 10. 2007
0 views

hansen

3 El Hattab Ahamed
25. 10. 2007
0 views

3 El Hattab Ahamed

marrocos2
24. 10. 2007
0 views

marrocos2

NWS Partnering
05. 10. 2007
0 views

NWS Partnering

Lyster
16. 10. 2007
0 views

Lyster

webcast1
29. 10. 2007
0 views

webcast1

Faridah Noor Indian Dance New
23. 11. 2007
0 views

Faridah Noor Indian Dance New

xmm UG 051606
28. 11. 2007
0 views

xmm UG 051606

ISOM7
15. 10. 2007
0 views

ISOM7

Thermocouple
16. 02. 2008
0 views

Thermocouple

Gubler
21. 10. 2007
0 views

Gubler

test5
30. 10. 2007
0 views

test5

pit 2
26. 02. 2008
0 views

pit 2

m6 Eyler
28. 02. 2008
0 views

m6 Eyler

PSCM
07. 03. 2008
0 views

PSCM

pfl powerpoint may06
10. 03. 2008
0 views

pfl powerpoint may06

Prasa2001
13. 03. 2008
0 views

Prasa2001

PresentationANALYSTE SSNI2006
24. 10. 2007
0 views

PresentationANALYSTE SSNI2006

Perine I2 22april04
16. 03. 2008
0 views

Perine I2 22april04

Panel B Igor Hansen
20. 03. 2008
0 views

Panel B Igor Hansen

kapil kaul
25. 03. 2008
0 views

kapil kaul

part1 intro
07. 10. 2007
0 views

part1 intro

ans1 ffa program
03. 04. 2008
0 views

ans1 ffa program

Jonah
07. 04. 2008
0 views

Jonah

051208 Osawa
09. 10. 2007
0 views

051208 Osawa

3arq
18. 10. 2007
0 views

3arq

Bourgeat Siam
06. 12. 2007
0 views

Bourgeat Siam

allen
08. 04. 2008
0 views

allen

Fry 2005
10. 04. 2008
0 views

Fry 2005

ValueofNonpartisan
14. 04. 2008
0 views

ValueofNonpartisan

lovelock12
16. 04. 2008
0 views

lovelock12

Pumpkin SmallSat 2006
17. 04. 2008
0 views

Pumpkin SmallSat 2006

CSAM DOJ Briefing Day2
22. 04. 2008
0 views

CSAM DOJ Briefing Day2

SOUTHEAST pp
03. 01. 2008
0 views

SOUTHEAST pp

Arbetslagsplan 04 05
02. 11. 2007
0 views

Arbetslagsplan 04 05

dentist
06. 05. 2008
0 views

dentist

critical care slides
07. 05. 2008
0 views

critical care slides

origins
08. 05. 2008
0 views

origins

mas info
08. 05. 2008
0 views

mas info

18 4
22. 10. 2007
0 views

18 4

Vulvodynia
01. 05. 2008
0 views

Vulvodynia

014 Robot Control Architectures
02. 05. 2008
0 views

014 Robot Control Architectures

3678s1 03 schechter
02. 05. 2008
0 views

3678s1 03 schechter

Dana Guerrieri
02. 05. 2008
0 views

Dana Guerrieri

Anestezja
02. 05. 2008
0 views

Anestezja

lezersp1
15. 10. 2007
0 views

lezersp1

20050928 Yasuyuki Fuchita
09. 10. 2007
0 views

20050928 Yasuyuki Fuchita

S Pathi
16. 10. 2007
0 views

S Pathi

Thompson Adjusted
30. 04. 2008
0 views

Thompson Adjusted

Poretti dscut Gdor CW8
15. 11. 2007
0 views

Poretti dscut Gdor CW8

2002 04 maintenance
19. 11. 2007
0 views

2002 04 maintenance

N1 Richard News from ELAN Paris
29. 09. 2007
0 views

N1 Richard News from ELAN Paris

cal20050303
09. 10. 2007
0 views

cal20050303

2007 FL GHC ICC Tezak Kilcollins
05. 10. 2007
0 views

2007 FL GHC ICC Tezak Kilcollins

TUD About the institution
18. 03. 2008
0 views

TUD About the institution

iPOP2007 OIF Berthold
09. 10. 2007
0 views

iPOP2007 OIF Berthold

patricia arsene
15. 10. 2007
0 views

patricia arsene

IHS 2003
27. 03. 2008
0 views

IHS 2003

MOTIVATE 1 slides
29. 10. 2007
0 views

MOTIVATE 1 slides

Alia2003
05. 10. 2007
0 views

Alia2003

RE SUNUM ppt2
23. 11. 2007
0 views

RE SUNUM ppt2

grid2000 welcome
17. 10. 2007
0 views

grid2000 welcome

Larry
07. 01. 2008
0 views

Larry

Abel
25. 10. 2007
0 views

Abel

Weitz Tracy 1 24 07
03. 01. 2008
0 views

Weitz Tracy 1 24 07

del rel
07. 11. 2007
0 views

del rel

ilc analyse
23. 10. 2007
0 views

ilc analyse

CAS 07 MDHS
02. 05. 2008
0 views

CAS 07 MDHS