Like the ‘invisible hand‘ that Adam Smith describes, Milton Friedman theorized there exists a “natural rate of unemployment.”
The unemployment rate should be allowed to automatically adjust with market needs. He disagreed with the Phillips curve theory that lower inflation rates increased joblessness. He also rejected the Keynesian idea that governments could control unemployment and inflation through spending. Instead a Keynesian administrative policy could in-fact bring about ‘stagflation’ or high inflation with little or no growth in the economy.
Nobel Prize winner Milton with Ronald Reagan felt that the central government was the problem, not the solution. Government can not micromanage the economy.
It is important to understand what Milton Friedman is telling us. There are far numerous advantages of the free marketplace and far too many disadvantages of government intervention and regulation.
This blog is dedicated to Milton Friedman’s Economic Study as it relates to the economy of today and tomorrow.
Recommended reading: Capitalism and Freedom by Milton Friedman.