American Ecomomy

This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research

Volume Title: The American Economy in Transition Volume Author/Editor: Martin Feldstein, ed. Volume Publisher: University of Chicago Press Volume ISBN: 0-226-24082-7 Volume URL: http://www.nber.org/books/feld80-1 Publication Date: 1980

Chapter Title: Postwar Changes in the American Financial Markets Chapter Author: Benjamin M. Friedman, Milton Friedman, A. W. Clausen Chapter URL: http://www.nber.org/chapters/c11295 Chapter pages in book: (p. 9 - 100)

1

Postwar Changes in the American Financial Markets

/. Benjamin M. Friedman 2. Milton Friedman 3.A.W. Clausen

1. Benjamin M. Friedman

Financial markets are an integral part of the modern economy. The many and varied activities of financial markets both mirror and induce events in the economic system at large. Only rarely, however, do they serve as ends in themselves. Instead, they facilitate earning and spending, saving and investing, accumulating and retiring, transferring and bequeathing—all activities at the core of economic life. In principle people could do all of these things without financial markets. In practice well-functioning financial markets enable people to do them more efficiently, and few economic events take place without financial counterparts. Financial markets in fact constitute an essential vehicle through which the millions of different participants in the nonfinancial economy continually interact with one another. The needs and resources, as well as the objectives and concerns, that people bring to financial transactions are always changing. Greater preferences for homeownership, reduced concerns for providing for one's own or one's children's future, or the desire to take advantage of a new production technology, will influence what people seek from the financial markets and hence what takes place there. New public-policy initiatives, and the persistent advance in the technology...