David R. Henderson  

Henderson on Alchian

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The Wall Street Journal published my piece this morning on the late Armen Alchian and some of his important contributions to economics. Some excerpts follow. The intro:

In 1975, I attended a week-long conference in Connecticut at which the star attraction was Friedrich Hayek. Hayek, who had shared the 1974 Nobel Prize in economics with Swedish economist Gunnar Myrdal, was doing a kind of victory tour of the United States. I told him that I thought Armen Alchian, one of my mentors when I earned a Ph.D. at UCLA, also deserved the Nobel Prize. I asked Hayek what he thought.

Hayek gave his characteristic wince, paused, and said, "There are two economists who deserve the Nobel prize because their work is important but won't get it because they didn't do a lot of work: Ronald Coase and Armen Alchian."

Sixteen years later, in 1991, Ronald Coase did win the Nobel Prize. When I got the news, I called Armen and told him the story. He got a kick out of it and seemed to have a new hope that he would win. He didn't, and now he can't. Armen Alchian died on Tuesday at the fine age of 98.

His contributions:
What was so important about Alchian's work? There were three aspects. First, he was one of the last economists of his generation to communicate mainly in words and not equations. Second, although economists often use the word "unrigorous" to refer to communication in words rather than math, Alchian was profoundly rigorous, writing clearly and carefully and using basic logic to reach sometimes-startling conclusions. As a result, many of Alchian's papers, even those from the 1950s, are still widely cited.

Third, Alchian is known for his textbook, "University Economics," first published in 1964 and later called "Exchange and Production," coauthored with UCLA colleague William R. Allen. That text is unique in economics. It is much more literary and humorous than any other modern economics textbook that deals with complex issues for an undergraduate audience. Example: "Since the fiasco in the Garden of Eden, most of what we get is by sweat, strain, and anxiety."

I also quote from my personal favorite of his articles, "The Economic and Social Impact of Free Tuition." It's here on Econlib. Go to the link and scroll down. I first read it when I was 18 and in college and it so persuaded me that I wrote a submission that I delivered to a committee at my undergrad school, the University of Winnipeg, in which I took his argument and argued that the University should raise tuition.

BTW, a hat tip to Armen's daughter, Arline, and his son, Allen. The Wall Street Journal wanted a high-res photo and the ones I found for them on the web weren't good. So I e-mailed Arline. Her brother sent me a photo within 15 minutes. Isn't the web wonderful? I know Armen would have appreciated it. He had a childlike delight in new technology.

As a bonus, the Journal published, in "Notable and Quotable," a segment from his article, "Property Rights," in The Concise Encyclopedia of Economics.

Comments and Sharing

CATEGORIES: Economic Education

COMMENTS (8 to date)
Don Boudreaux writes:

Superbly done, David.

Travis M writes:

With the passing of Armen Alchian does anyone know what will happen to the updated version of his textbook that was in preparation?

John Goodman writes:

Very good tribute.

I agree that University Economics was a great principles textbook. And, this from Alchian's piece on property rights;

Accompanying and conflicting with the desire to secure private property rights for oneself is the desire to acquire more wealth by “taking” from others. This is done by military conquest and by forcible reallocation of rights to resources (also known as stealing). But such coercion is antithetical to—rather than characteristic of—a system of private property rights. Forcible reallocation means that the existing rights have not been adequately protected.

Could be illustrated with something that's been playing out in the Seattle area, and now is fini.
While some Clyde Hill residents supported the Oleruds, many others said the Bakers shouldn't be forced to cut down 50-year-old trees that were there long before the Oleruds bought their Clyde Hill property in 2006 and subsequently built a new house.
An appraisal commissioned by the Oleruds said removing the trees would increase the value of their $4 million property by $255,000. The trees block 40 percent of what would otherwise be a 30-degree view of Lake Washington, Seattle and the Olympic Mountains, John Olerud told the Board of Adjustment.

Playing out, being appropriate as the Olerud in question is the former AL Batting Champion, John. And, no, Olerud didn't have to pay a quarter million to his neighbors for the view, he just used the available political resources to force them to do his bidding.

David R. Henderson writes:

Thanks, Don and John.
I don't know. I did hear that Ron Batchelder was involved but that was a few years ago.
@Patrick R. Sullivan,
Great--and upsetting--story.

Shayne Cook writes:

In tribute to Armen Alchian ...

I did not have the privilege of studying under this man directly. But I did benefit greatly from his contributions to economics, indirectly. My first, and most influential, economics course was taught by Scott Harris - a UCLA economics Phd. and former student of Alchian. And our textbook was "Exchange and Production." I still have and rely upon that text.

It is my considered opinion that the economics Nobel Prize Committee merely diminished its own status, by failing to recognize Armen Alchian's contributions.

If you want to read more of Alchian's works, note that Liberty Fund now carries, inexpensively, The Collected Works of Armen A. Alchian. Also available through Liberty Fund is the DVD Interview with Armen A. Alchian, in the Intellectual Portrait series.

Wayne Ruhter writes:

David, that was a very well done tribute, and the WSJ's accompanying photo a special touch.

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