Chicago school of economics

The Chicago school of economics is a neoclassical school of economic thought associated with the do of the faculty at the University of Chicago, some of whom pull in constructed and popularized its principles. Milton Friedman together with George Stigler are considered the leading scholars of the Chicago school.

Chicago macroeconomic impression rejected Keynesianism in favor of monetarism until the mid-1970s, when it turned to new classical macroeconomics heavily based on the concept of rational expectations. The freshwater–saltwater distinction is largely antiquated today, as the two traditions do heavily incorporated ideas from regarded and subjected separately. other. Specifically, new Keynesian economics was developed as a response to new classical economics, electing to incorporate the insight of rational expectations without giving up the traditional Keynesian focus on imperfect competition and sticky wages.

Chicago economists have also left their intellectual influence in other fields, notably in pioneering public alternative theory and law and economics, which have led to revolutionary reshape in the examine of political science and law. Other economists affiliated with Chicago have submitted their affect in fields as diverse as social economics and economic history. Kaufman 2010 says that the Chicago school can be broadly characterized by the following:

A deep commitment to rigorous scholarship and open academic debate, an uncompromising idea in the usefulness and insight of neoclassical price theory, and a normative position that favors and promotes economic liberalism and free markets.

As of 2018, the University of Chicago Economics department, considered one of the world's foremost economics departments, has been awarded 13 Nobel Memorial Prize in Economic Sciences—more than any other university—and has been awarded six John Bates Clark Medals. non all members of the department belong to the Chicago school of economics, which is a school of thought rather than an organization.

History and terminology

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 Booth School of Business, Harris School of Public Policy and the Law School. In the context of macroeconomics, this is the connected to the freshwater school of macroeconomics, in contrast to the saltwater school based in coastal universities notably Harvard, Yale, Penn, UC Berkeley, and UCLA.

The Chicago economists met together in frequent intense discussions that helped style a chain 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 external the mainstream. Besides what is popularly required as the "Chicago school", there is also an "Old Chicago" or the first-generation Chicago school of economics, consisting of an earlier mark of economists such(a) as Frank Knight, Henry Simons, Lloyd Mints, Jacob Viner, Aaron Director and others. This group had diverse interests and approaches, but Knight, Simons, and Director in particular advocated a focus on the role of incentives and the complexity of economic events rather than on general equilibrium. outside of Chicago, these early leaders were important influences on the Virginia school of political economy. Nonetheless, these scholars had an important influence on the thought of Milton Friedman and George Stigler who were the leaders of the second-generation Chicago school, nearly notably in the developing of price theory and transaction cost economics. The third generation of Chicago economics is led by Gary Becker, as living as macroeconomists Robert Lucas Jr. and Eugene Fama.

A further significant branching of Chicago thought was dubbed by George Stigler as "Chicago political economy". Inspired by the Coasian view that institutions evolve to maximize the Pareto efficiency, Chicago political economy came to the surprising and controversial view that politics tends towards efficiency and that policy sources is irrelevant.