Topics: Economic Systems - 9. Chicago School

9. Chicago School

The Chicago School of Economics

The Chicago school of economics describes a neoclassical school of thought within the academic community of economists, with a strong focus around the faculty of University of Chicago, some of whom have constructed and popularized its principles. It is at times referred to as freshwater school of economics, in contrast to the saltwater school based in coastal universities (notably Harvard, MIT, and Berkeley). The Chicago school is associated with neoclassical price theory and libertarianism in its support of radically lower taxation and private sector regulation, but differs from pure free-market economics in its support of government-regulated monetary policy.

The "Chicago School" is perhaps one of the better known American "schools" of economics. In its strictest sense, the "Chicago School" refers to the approach of the members of the Department of Economics at the University of Chicago over the past century. In a looser sense, the term "Chicago School" is associated with a particular brand of economics which adheres strictly to Neoclassical price theory in its economic analysis, "free market" libertarianism in much of its policy work and a methodology which is relatively averse to too much mathematical formalism and willing to forego careful general equilibrium reasoning in favor of more results-oriented partial equilibrium analysis. In recent years, the "Chicago School" has been associated with "economic imperialism", i.e. the application of economic reasoning to areas traditionally considered the prerogative of other fields such as political science, legal theory, history and sociology.

The school rejected Keynesianism in favor of monetarism until the 1980s, when it turned to rational expectations. It has affected the field of finance by the development of the efficient market hypothesis. In terms of methodology the stress is on "positive economics" – that is, empirically based studies using statistics to prove theory.

Approximately 70% of the professors in the economics department have been considered part of the school of thought. The University of Chicago department, widely considered one of the world’s foremost economics departments, has fielded more Nobel Prize winners and John Bates Clark medalists in economics than any other university.

Among the foremost recognized scholars of the Chicago school are:

David Friedman

Milton Friedman

Rose Friedman

Frank Knight

Ronald Coase

Robert Fogel

Gary Becker

Robert E. Lucas

George Stigler

Friedrich von Hayek (assossiated)">Source:

9. Chicago School
Milton Friedman, Nobel Prize in economics and libertarian activist