Business, Legal & Accounting Glossary
The Chicago School is a neoclassical economic school of thought that has its beginnings at the University of Chicago during 1940s. Principal dogmas of Chicago school lay stress on freedom from government control and believes that free markets are the best allocator of economic resources. Chicago school has made an impact on finance by developing ‘efficient market hypothesis’. This economic school of thought emphasizes ‘positive economics’- empirical studies utilizing statistical methods to prove economic theories.
Chicago school started with the founding of the University of Chicago by John D.Rockefeller in 1892. The first head of the economics department was J.Laurence Laughlin, an American apologist. This department began to get noticed in academic circles from the late 1920s. At that time it was under Frank H. Knight and Jacob Viner. Chicago school at that time (1920-1950) was vastly different from Chicago school of later years. This school denounced economic imperialism and were unconvinced of the validity of laissez-faire economics. Active government policies were welcomed at that time. However, Keynesian economics was not welcomed by Chicago school.
Chicago school gained prominence under Milton Friedman and George J. Stigler in 1960s. This school exhibited a remarkable fidelity to Neoclassical economics and avowed opposition to Keynesian economics. Studies of Chicago school was publicized through journals like ‘Journal of Law and Economics’ and ‘Journal of Political Economy’.
In the 1960s, Chicago school of economics extended neoclassical price theory- as a reason for its ‘imperialist’ tag. Chicago school economists like Harry Markowitz and Eugene F. Fama brought finance and business into economics subject fold. Subjects like institutional theory and political science were bought into economics by James Buchanan and G.J Stigler. Economics was used in Chicago Law School to reexamine a substantial number of legal theories. Even sociological issues like family, marriage and addiction were given an economic interpretation.
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This glossary post was last updated: 29th March, 2020 | 0 Views.