SummaryMonetarism became popular amongst, famously, US and UK politicians in the 1980s, coinciding with a period of severe stagflation, and is, to this day, a controversial school of Economics, paradoxically known because of its affinity to various legislatures despite being a firm advocate of the separation between politics and economics.
- Milton Friedman
- Chicago School
From the University of Chicago, and opposing Keynesianism, a number of contributions and doctrinal attitudes of authors can be identified, which turn back to neoclassical economics, are in favour of laissez faire and monetarism. Created around the 1940s, its main precursor is Milton Friedman, along with Frank H. Knight and Friedrich A. von Hayek, the latter acting as a liaison with the Austrian School.
The common view of the Chicago School focuses on the idea that governmental interventions should be at its minimum required, being deregulation the most desirable path. Another characteristic theory of the Chicago School is that the reduction or eradication of all types of regulation on business activities is beneficial for the economy as a whole. They support monetary policies when required by the economic environment, as they assume these to be more reliable and effective than fiscal policies.
The Chicago School based their assumptions on the concept of rational expectations. Milton Friedman defended that the price levels in a certain economy are always determined by the amount of money moving in circulation. According to the Chicago School, by acting and allocating resources in a rational way, people drive economic growth, while at the same time controlling price levels.