The Friedman Proposal for Auctioning Treasury Bills

IN RECENT years the United States Treasury has employed two different techniques for selling its marketable obligations -the sealed-bid auction system for Treasury bills and the "fixed-price" method for certificates, notes, and bonds. Milton Friedman has proposed that the Treasury abandon these techniques in favor of a new sort of auction technique which would be used to sell both bills and longer-term securities.2 The present note considers the pros and cons of his proposal, but only for Treasury bills. The question of whether the new technique should be used for notes and bonds is not examined.3