David R. Henderson  

Harold Demsetz

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In yesterday's post, I said that the thing that turned me around and made me want to get a Ph.D. in economics after finding my one economics course boring beyond belief was a visit to the University of Winnipeg by Harold Demsetz. Here's part of that story (from my book, The Joy of Freedom: An Economist's Odyssey):

Our libertarian club at the University of Winnipeg spent its whole annual budget that year on getting Demsetz to give three speeches over a two-day period. He had been recommended to us by an American organization named the Intercollegiate Studies Institute, which had offered to chip in a few hundred bucks because our modest annual budget didn't quite cover his costs.
Demsetz's speeches were eye-opening. He explained how rent controls and minimum wage laws increase the amount of discrimination against black people and other disfavored groups. So, for example, if rent control keeps rents below their free-market level, a white landlord with even slight racist tendencies, facing a line of people wanting the apartment, will be inclined to choose the white tenant. Rent control, he said, makes the cost of discriminating effectively zero. Then Demsetz reported data on the percentage of ads in the Chicago Tribune classifieds during World War II that carried the word "restricted" (i.e., no blacks allowed) or that tied in the sale of furniture with the lease (a way, he noted, around the rent controls). As the war proceeded and the controlled rents got further below free-market rents, said Demsetz, the percent of such ads rose until by 1945, over 90 percent of the ads contained either one or both mentions.
I also liked Demsetz's style. In the back and forth between him and members of the audience who disagreed, he was pushy and combative, but fair. Throughout, he seemed calmly certain. After a speech Demsetz gave on how property rights can solve the problem of pollution, for example, a professor in the audience quoted socialist author Michael Harrington's line that in every exchange there is a winner and a loser. I'd gotten used to such ain't-it-awful lines, and had never even thought to analyze them. But Demsetz shot back: "That's not true. In every exchange both sides are winners, or else they wouldn't exchange."
Demsetz did something else I had never seen: He cited evidence for almost everything he said. A member of the audience would say, for example, that without airline regulation, airlines would gouge passengers, and Demsetz would cite a study, usually from a journal I had never heard of called the Journal of Law and Economics, that showed that in the unregulated intrastate California market, airline fares for a given distance were 30 percent lower.
In the downtimes after his speeches, he was equally impressive. I had a reservoir of questions I had been wondering about--tough problems posed to me by critics of economic freedom that I had been unable to answer, neither to their satisfaction nor to my own. One I remember is whether governments should keep their hands off "electric utilities" and other so-called "natural monopolies." His answer was yes, and he referred me to one of his own articles, "Why Regulate Utilities?" in that now-legendary Journal of Law and Economics.
Suddenly, my interest in economics was revived. Here was a guy who was actually making a good living at it, with probably the best economics faculty in the world, and he was doing and saying things I found interesting, rather than what I had seen in class. It opened a whole new world for me. Then Demsetz added a bonus. When we said good-bye to him at the airport, he told me that I should consider coming to Chicago and getting a Ph.D.
Then he gave me one last tip. Get all the back issues of the Journal of Law and Economics, he said, and read them. The next morning, I called up the flying school and cancelled my lessons. I was "rehooked" on economics.
I had taped Demsetz's speeches--I still have the tapes--and every few weeks after he left, I would replay the tapes. I found myself imitating his debating style and even his Chicago accent.


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CATEGORIES: Economic Education



COMMENTS (11 to date)
Mike writes:

I drive around town listening to EconTalk and practicing my Russ Roberts impersonation.

Robbie writes:

What was your undergrad degree or major?

Michael Wiebe writes:
Our libertarian club at the University of Winnipeg

Seriously? A libertarian club in Winnipeg?

Shawn writes:

David, you may enjoy this lecture Demsetz recently gave at PERC on Coase and externality theory:

http://percolatorblog.org/2011/02/16/demsetz-lecture-on-coase-on-externalities/

David R. Henderson writes:

@Mike,
Sweet.
@Michael Wiebe,
Absolutely. And a very powerful one in the late 1960s. We spearheaded a successful secessionist movement to take U. of W. out of the Canadian Union of Students. We won by 507 to 493 votes. One of our many accomplishments.

Eric Crampton writes:

Jealous, David. The econ department at Manitoba would have attempted a lynching had Demsetz turned up there mid 90s.

fundamentalist writes:

Very interesting. But the message I get from your story is how natural socialism is to humanity. It seems so obvious. We seem to be born socialists and have to be trained to be capitalists. But isn't that true of everything valuable? Kids aren't born knowing how to behave. They have to be civilized.

Your experience with Harold Demsetz confirms an impression I have formed, that U. Chicago's Economics Dept. hosted a combative but healthy style of intellectual debate during that bygone era. I suppose Milton Friedman's style also exemplified this U. Chicago style.

I wish I could learn more about that style. Has it been codified? To my knowledge no one teaches it.

I know that many people teach debating style. But I'm not talking about any style. I want to learn the style which Demsetz demonstrated.

J.C. Kelly writes:

David,

When and where will the tapes be uploaded so we can all listen to them, or are they already available somewhere?

Finbar writes:

Great story, but it leaves us hanging on a vitally important issue.

Did you ever complete your pilot's license?

David R. Henderson writes:

@Richard Hammer,
Interesting. I learn styles by noticing, imitating, practicing, and adjusting to fit my temperament. I'm virtually positive Demsetz's style has never been formally taught anywhere.
@J.C.,
Unfortunately, the tapes are "available" in my attic in a box. I need to go to a local service that will DVD these 40-year-old tapes.
@Finbar,
No, I didn't. The money was just much better spent on taking time off from work to learn economics on my own and to go to graduate school. Now I have the money and maybe even the time, but I get nervous about fatality rates.

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