Milton Friedman was an economist who won the 1976 Nobel memorial prize in economic science. He was famous for his quantity theory of money. Which is when there is a economic problem, government should not control the market, or invest more money, or it will cause serious inflation, which is similar as free market theory, and I support his opinion. The definition for a free market economy is: in a free market economy, the law of supply and demand, rather than a central government, regulates production and labor. Companies sell goods and services at the highest price consumers are willing to pay, while workers demand the highest wages companies are willing to pay for their service. One of the examples which connects with his theory id the great depression. Friedman said the great depression comes from an ordinary economic problem, and the policy of managing of Federal Reserve Bank made it more serious. The wrong tightening of money supply further exacerbated the storm, which eventually turned into a panic that could not be tidied up. He argued that the economic panic was not caused by "laissez faire", but was caused by excessive intervention and regulation by the government. Pan 2 …show more content…
government's heavy control of the economy before the panic, and the bank's controls made it impossible for banks to respond to demand from the market. What's more, the federal government restricted the exchange rate of gold into gold, which at first caused a great deal of gold surplus, but then it dropped too low and led to a great deal of gold flowing out of the United states. Freedman believes that this cannot respond to monetary demand restrictions caused by bank lost processing ability in restrictions on gold and currency exchange rate but no correction of the deflation pressure, causing the economy to