Specifically, the money supply affects price levels. Further, Friedman used monetarism to openly contradict the Keynesian principles of the Keynesian multiplier and the Phillips curve. Friedman was awarded the Nobel Prize in Economics in for his research on income and consumption and for his developments in monetary theory. Over the course of his career, he published pioneering books on the modern economy, as well as numerous influential articles, changing the way economics is taught.
John Maynard Keynes and Milton Friedman were two of the most influential economic and public policy thinkers of the 20th century. While Keynes is widely credited with creating the first systematic approach to macroeconomic government policy, Friedman rose to fame in part by criticizing Keynes' policy proposals and instead arguing for more emphasis on monetary policy.
Keynes argued that an interventionist government could help smooth out recessions by using fiscal policy to prop up aggregate demand. Strategic government spending could spur consumption and investment, argued Keynes, and help alleviate unemployment. Keynes's theories gave rise to a new dominant paradigm in economic thought, which was subsequently dubbed Keynesian economics. While still popular, some have argued that Keynesian economics has provided a pseudo-scientific justification for short-sighted elected politicians to run fiscal deficits and accumulate massive levels of government debt.
If Keynes was the most influential economic thinker of the first half of the 20th century, Friedman was the most influential economic thinker of the second half. As Friedman developed in his ideas about monetarism, he came to oppose many of the policy proposals espoused by the Keynesian economists in the post-War period.
He argued for deregulation in most areas of the economy, calling for a return to the free market of classic economists, such as Adam Smith. He challenged contemporary notions of deficit spending and suggested that, in the long run, only disco-ordination results from expansionary fiscal policy. Friedman argued for free trade, smaller government and a slow, steady increase of the money supply in a growing economy. His emphasis on monetary policy and the quantity theory of money became known as monetarism.
The popularity of Friedman attracted other free market thinkers to the University of Chicago, giving rise to a coalition referred to as the Chicago School of economics. When Friedman won the Nobel Prize in Economic Sciences in , it marked the turning of the tide in academic economic thought, away from Keynesianism and toward the burgeoning Chicago School.
Friedman brought about a renewed emphasis on prices, inflation, and human incentives, a direct counter to Keynes' focus on employment, interest and public policy. To the extent that Keynes was seen as an enemy of laissez-faire, Friedman was the new public face of free markets.
Friedman won a major intellectual victory after three decades of Keynesian policies ended in stagflation in the late s, something establishment Keynesians generally thought was impossible. In many ways, Friedman was an idealist and libertarian activist, but his economic analysis was always grounded in practical reality. He famously told Richard Heffner, host of "The Open Mind," in an interview: "One of the great mistakes is to judge policies and programs by their intentions rather than their results.
Many of Friedman's most controversial positions were based on this principle.
He opposed raising the minimum wage because he felt it unintentionally harmed young and low-skilled workers, particularly minorities. He opposed tariffs and subsidies because they unintentionally harmed domestic consumers. His famous "Open Letter" to then-drug czar Bill Bennett called for the decriminalization of all drugs, mostly because of the devastating unintended effects of the drug war. This letter lost Friedman a swath of conservative supporters, who he said failed "to recognize that the very measures you favor are a major source of the evils you deplore.
During Friedman's landmark interviews on Phil Donahue's show in and , the host said his guest was "a man who will never be accused of making economics confusing," and told Friedman "the nice thing about you is that when you speak, I almost always understand you. Friedman gave lectures on college campuses, including Stanford and NYU. He ran a series television program entitled "Free to Choose" and wrote a book with the same name, adjusting his content for his audience.
Economist Walter Block, sometimes a friendly agitator of Friedman, memorialized his contemporary's death by writing, "Milton's valiant, witty, wise, eloquent and yes, I'll say it, inspirational analysis must stand out as an example to us all. The most famous excerpt from Friedman's writings and speeches is, "Inflation is always and everywhere a monetary phenomenon.
In a paper titled "Studies in the Quantity Theory of Money," Friedman found that, in the long run, increased monetary growth increases prices but does not really affect output. Friedman's work busted the classic Keynesian dichotomy on inflation, which asserted that prices rose from either "cost-push" or "demand-pull" sources.
It also put monetary policy on the same level as fiscal policy. In a Newsweek column, Milton Friedman said: "If you put the federal government in charge of the Sahara Desert, in five years there'd be a shortage of sand. Friedman was a vocal critic of government power and was convinced free markets operated better on grounds of morality and efficiency.
In terms of the actual economics, Friedman rested on a few truisms and basic, incentive-based analyses. He offered that no bureaucrat would or could spend money as wisely or as carefully as the taxpayers from whom it was taken. He spoke often of regulatory capture , the phenomenon where powerful special interests co-opt the very agencies designed to control them. To Friedman, government policy is created and carried out through force, and that force creates unintended consequences that do not come from voluntary trade. The valuable political power of government force creates an incentive for the wealthy and devious to misuse it, helping generate what Friedman dubbed "government failure.
Friedman combined his lessons about unintended consequences and the bad incentives of government policy.
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Friedman loved pointing out government failures. He exposed how President Richard Nixon's wage and price controls led to gasoline shortages and higher unemployment. Famously, he contended that the combination of public schooling, minimum wage laws, drug prohibition, and welfare programs had unintentionally forced many inner-city families into cycles of crime and poverty.
This concept wraps up many of Friedman's most powerful ideas: policies have unintended consequences; economists should focus on results, not intentions; and voluntary interactions between consumers and businesses often produce superior results to crafted government decrees. The authors develop a process model of organizational failure combining deductive and inductive steps to analyse 43 published case studies and move beyond the simple internal versus external causes of organizational failure found in prior research. They describe four process archetypes through which organizational failure occurs i.
Each of these prototypes is driven by distinct sequences of rigidity and conflict mechanisms. The study provides new theorizing that can be the basis of future quantitative or qualitative investigations. Given that QMA is uncommon in management research, the study serves as an important example of how to utilize qualitative research as input for aggregating evidence and building new theory. It also allows researchers to perform dominance analyses wherein the relative importance of competing predictors is compared Budescu and Azen, MASEM involves two steps.
One advantage of this approach is that data usually correlations can be included from any primary study that investigates a relationship between any of the variables of interest, even if the study does not investigate any of the other relationships needed for the MASEM. Statistical tests of structural models and their paths in primary research depend on sample size. MASEM has a number of strengths, such as allowing researchers to control for alternative explanations i. However, there are also challenges. Finally, it is difficult to test moderator variables Bergh et al.
Fortunately, there is a rich literature emerging with suggestions how to handle these problems Tang and Cheung, ; Yu et al. Carnes et al. Building on insights from competitive dynamics research e. They combine evidence from almost 24, organizations and find that outcome e.
By calculating the mediating paths of each control type through the others, they showed that these controls are complementary in that they have even stronger effects when used in conjunction with one another. Many researchers and practitioners have long thought these controls act as substitutes i.
Further, their approach to assessing complementarity versus substitution effects can serve as a blueprint for others. Dominance analysis uses the change in R 2 from a series of regressions to identify which predictors are most important, or dominant, with respect to outcomes see Budescu and Azen, for a summary. Karam et al. Overall, their main thesis is that these two sets of influences — leadership behaviours and organizational justice — need to be considered jointly.
These were later adopted by criminal justice researchers Mark Lipsey and David Wilson in , and the approach has become increasingly popular. Unlike personnel selection researchers e. Accordingly, these researchers advanced MARA as a way to simultaneously investigate a large number of factors, such as sample demographics, measurement technique, or study design features that potentially moderate and thus explain why different studies find different effects for key relationships. These can be study features such as year published, measurement or treatment approach used, study design features e.
Significant regression coefficients in MARA are interpreted as indication that a study feature or attribute changes the focal relationship — i. Subgroup analysis offers much more statistical power than MARA because confidence intervals are heavily influenced by T , the total number of observations across all studies , but it 1 often forces researchers to dichotomize continuous moderator variables e. Sequentially isolated moderator tests involving correlated moderators can lead important interpretation errors unless there are enough studies i.
MARA addresses these problems by simultaneously testing multiple continuous moderators, but it introduces new challenges in doing so Schmidt, Whereas subgroup analysis takes advantage of the statistical power gained by aggregating effects across many studies collectively grounded in thousands of observations typically , the significance of moderator coefficients i.
Accordingly, the risks of Type I error due to sampling error is very high in MARA, and these risks grow when researchers use MARA to test many potential moderators simultaneously and without strong theoretical justification Schmidt, Three of these e. In doing so, they capitalize on a central strength of MARA. Wang et al. They draw on governance substitution theory to investigate antecedents to CEO duality i. This theory argues that alternative means for controlling CEO behaviour substitute for one another such that when the board is independent, the board has ample human capital, and the board members are motivated by ownership, boards will allow CEO duality because it fosters unity of command and frees the CEO to take decisive action.
They also drew on theory about managerial discretion to theorize that substitution among alternative governance mechanisms matters most in countries where managers have greater discretion. Rosenbusch et al. From a methodological standpoint, Rosenbusch et al. Rather than contributing by using MARA to investigate how relationships change across countries, Schommer et al.
It is unusual because they used the mean as the dependent variable in their MARA rather than a correlation between two variables. Such an approach is used in medicine — e.
Counterintuitively, however, they theorize and find that the negative effect of unrelated diversification on firm performance has been shrinking over time. Their theory is that less talented top management teams are abandoning the strategy, thereby increasing the proportion of skilled unrelated diversifiers in the population. The advanced approaches summarized here facilitate new theorizing i. Reaping benefits from these approaches is increasingly important for advancing knowledge in top management journals see Shaw and Ertug, Habersang et al.
Three studies i. Finally, Schommer et al. First, Geyskens et al. This no longer appears true. A second controversial issue that we encountered is that even though methodological treatments widely recognize that standardized or unstandardized regression coefficients i. Until recently, after we had put the special issue together, we were unaware of how big a problem this is. Roth et al.
Although there are thoughtful approaches for estimating bivariate correlations from regression coefficients e.