I took Money at Chicago

It was exactly 60 years ago, in the depths of winter like it is now, and I wasn’t the only one who took it. Everyone of my batch in graduate economics at the University of Chicago was taking Money for a second quarter under the already famous professor Milton Friedman (Nobel prize 1976). In the previous (fall) quarter, that started the academic year, we met Friedman for the first time, and took Money 1 under him; now, in the winter quarter, we were taking Money 2. Our batch of some 50 students was crammed into a biology lecture hall, since the economics department classrooms could hold only about 25, for special subjects.

Economics at Chicago has no courses labelled macroeconomics; what is taught is called Money instead. Neither is there any microeconomics; in Chicago, it is called Price Theory, and also takes up the fall and winter quarters. In the spring quarter, one takes optional subjects. The summer is not for vacation, but for taking two long Core exams, in Money and Price Theory, which are graded as Ph.D. pass, M.A. pass (which is considered a consolation prize), or fail.

The Core slashed our original 50 by half for the next year. Then the exams for two fields of one’s choice cut the remainder to 10 by the third year. Chicago, a practitioner of free competition, always accepts a much larger entering class than the Ivy League schools do; but then it designs tough exams to separate the grain from the chaff. For economics grad students, survival is victory already.

Friedman’s first lesson for us was that the world’s oldest profession is not related to some bodily service, because that kind of work became professional only when done in exchange for money. Money had to be invented first, as a medium of economic exchange. Therefore, the world’s oldest profession was that of money changer.

Money is quite a special commodity, with no intrinsic value in itself—”they’re just pieces of paper!”—but acquires value when very many people find the pieces acceptable. One doesn’t even need paper, Friedman pointed out; moneys might as well be pure accounting entries, if everyone can see the entries and accept them as genuine. So, he had already foreseen Bitcoin.

The most popular special fields in Chicago were money/finance and international trade. In my case, my scholarship required specializing in agricultural economics, which had no faculty at the University of the Philippines (UP) School of Economics in Diliman, my home base. (Prior to Chicago, I did a year as research assistant in agricultural economics at the International Rice Research Institute, in Los Baños.) For my second field, I chose econometrics, having enjoyed several grad courses at the UP Statistical Center. My slow-cooked three years of master’s work at UP turned out to be good preparation for Chicago.

I’m not the only Filipino economist who was in Chicago. My colleagues who went there include: Niceto S. Poblador (see “Poblador’s new capitalism,” 5/28/22); Emmanuel Velasco, former UP business administration dean; and the late economics professor Ruperto P. Alonzo (+2017), human capital specialist. The Foundation for Economic Freedom (fef.org.ph) has many founders aside from me, but I’m the one who argued the strongest for “freedom” in its name.

The Chicago school is less about money in particular than it is about economic freedom in general. With respect to Friedman, I like best his book, “Freedom to choose.” My dissertation chair was Theodore W. Schultz, author of “Transforming Traditional Agriculture”; his 1979 Nobel speech was “The economics of being poor.” My industrial organization teacher, George J. Stigler, Nobel 1982, was the author of “The theory of price,” our textbook in UP Diliman.

The government can influence, but cannot dictate, the pace of economic growth. The role that it cannot shirk is that of minimizing inflation. Essentially, this means very careful control and regulation of the supply of money. I’m not suggesting any specific ways to do that; whatever keeps our inflation at pace with that of, say Singapore (1+ percent per year), is fine, and 2+ percent is OK too.

I remember playing, as a child, with leftover “mickey-mouse” money of the Japanese occupation. But what caused the cruel hyperinflations of 50 percent in 1984 and 25 percent in 1985 (i.e., after the September 1983 assassination of Ninoy Aquino), that surely were factors to the intensity of People Power in February 1986? The original Central Bank of the Philippines (CB), established in 1949, went bankrupt; the CB’s foreign exchange reserve reports were faked; a mysterious “Binondo central bank” sprouted. The present Bangko Sentral ng Pilipinas, established in 1993, is a distinct organization, not merely the old name translated into Filipino. Let’s make very sure it never goes the way of its predecessor.