The Folklore of the Market: An Inquiry into the Economic Doctrines of the Chicago School

Abstract

According to a recent statement by Milton Friedman (1974, p. 11), "in discussions of economic policy, 'Chicago' stands for belief in the efficacy of the free market as a means of organizing resources, for scepticism about government intervention into economic affairs, and for emphasis on the quantity of money as a key factor in producing inflation." "In discussions of economic science," the statement continues, " 'Chicago' stands for an approach that takes seriously the use of economic theory as a tool for analyzing a startlingly wide range of concrete problems, rather than as an abstract mathematical structure of great beauty but little power; for an approach that insists on the empirical testing of theoretical generalizations and that rejects alike facts without theory and theory without facts." In this preliminary investigation into the validity and relevance of the economic presuppositions and the belief-system of the Chicago School, I shall concentrate chiefly on the arguments that bear on its belief in the efficacy of free markets in organizing resources, in extending individual choice, and in preserving political freedom.