David R. Henderson  

Vignettes from the Armen Alchian Memorial

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On Saturday, I attended the memorial service at UCLA for the late Armen Alchian. I arrived about an hour and a half early and so I was there when Jerry O'Driscoll came in, saying that he and Walter Williams were parked illegally because no one was at the parking kiosk to let them in to the special parking lot. Allen Alchian, Armen's son, told Jerry that someone was supposed to be there and he would look into it. I went out and visited Walter Williams, saying to Walter that it was as if Armen was speaking to us from the grave. Why? Here's what I had written in my chapter on property rights in the The Joy of Freedom: An Economist's Odyssey:

Later in life, when I was in graduate school at UCLA, I learned about the important economic effects of property rights from an economics professor named Armen Alchian, who had made his reputation on that issue. Alchian pointed out that a huge amount of human behavior could be understood if you got straight what the property rights were. In the first class, he gave us two examples of things that didn't work well. One was the student bookstore on campus, where you had to line up for hours to buy books; the other was student parking, which was priced low and oversubscribed. You will feel angry standing in line for books and being unable to get a parking sticker, he said, but what you should notice is that those two examples show that economics works. (Actually, Alchian said, in his impish manner, that you should really feel happy instead of angry, but I'm trying to tell you what I got out of his first lecture--it wasn't happiness.) The student bookstore isn't run well because no one owns it, he pointed out. His point was that no individual or company had a profit motive or a strong incentive to avoid losses. Someone working at the bookstore who figures out a better way of running it doesn't get paid more for doing so, whereas if the store were private property, the owner would have a strong incentive to figure out ways of improving it, because the owner could collect much of the value he or she created. Similarly, Alchian said, the campus employees who decide what price to set on parking have an incentive to set a low price. A high price would earn more revenue for the university, but that revenue would not go in the decision-makers' pockets. However, he pointed out, because the people setting the parking fee are assured of a space, they have an incentive to set a low fee because they will pay that fee. But the low price meant also that we students were not assured of a parking place.

That was one of Alchian's spiels and Walter had heard similar versions.

The next person to show up was Sam Peltzman. So I suggested that, since it was such a beautiful day out, we just stay out by the cars and start the memorial there. Next showed up Susan Woodward and then an economist who had flown in from Beijing. As people started arriving and getting out of their cars, I said to Dan Benjamin's wife, Robbie, that this was kind of like the informality of some scenes in The Big Chill.

Now some items from the actual service:
. Armen's two children, Arline and Allen, did an excellent job of telling the story of Armen's personal life. One fun fact: He and Pauline married in the late 1930s and were set to go to England for his studies. But with the war having broken out, they went instead to Columbia University but, I assume to get an ocean voyage out of it, they went via the Panama Canal. For some reason, it was cheaper to go as two singles rather than as a married couple and so they did so. Along the way, various other passengers kept urging them to get the ship's captain to marry them.
. One sobering fact: Armen was discharged from active duty in 1946 and he joined the reserves. Then along came the Korean war and he was called up. He managed to get exempted because he was working at Rand Corporation on sensitive military data. Thank goodness.
. Walter Williams gave one of the most fun and moving talks. He told a story from the legendary Friday afternoon coffee and doughnut event for faculty and Ph.D. students. Walter had said that his wife's viewpoint was that most people start off liking you and so you should like them back until you get evidence otherwise, and that Walter's viewpoint was that most people dislike you and so you should dislike them back until you get evidence otherwise. Alchian had said: "Williams, have you thought of a third alternative?" "No," said Walter, "what's that?" Alchian: "Most people don't give a damn about you." That, said Walter, had become his viewpoint. (Afterwards, I told Walter that I had figured that out much earlier.)
. One other moving talk was by the son of one of Armen's early star students, Steven N.S. Cheung. His son, Ronald, is a pediatric oncologist in Washington state. Ronald read from his father's tribute. When his father's brother had died in the 1960s, Steven felt compelled to go home but he would have left without his dissertation completed. Armen gave Steven a check for $500, which allowed him to hire a typist and get it done quickly. Ron also said that, growing up, he had seen his father's excitement and joy about economics and couldn't understand it. Then, when he was in his late teens, he met Armen and, within 15 minutes, understood.
. One other person--I don't remember who--reminisced about sitting in class one day when Armen was at the board drawing isoqants and isocosts. By the way, the person didn't note this, but that in itself was unusual. With his extreme Socratic method, Armen virtually never drew a graph. Anyway, a young woman came into class, apparently thinking she was late for class. When Armen turned from the board to the class, the young woman, standing there and probably doubting that she was in the right room, said, "Professor, is this Folk Art and Mythology?" Without skipping a beat, Armen grinned that grin and said, "Yes."
. My own talk covered much of the ground that I had covered in my previous posts and my Wall Street Journal article. I wanted his relatives and neighbors, and the spouses of the various economists present, to go beyond his style as a teacher and get a feel for what he actually thought and believed.
I also quoted my favorite question Alchian and Allen gave at the end of one of the chapters. They had quoted the late Arthur Goldberg, former Justice of the Supreme Court, Secretary of Labor under President Kennedy, and counsel for the United Steelworkers Union. He had said: "Technically speaking, any labor union is a monopoly in the limited sense that it eliminates competition between workingmen for the available jobs in a particular plant or industry." Wrote Alchian and Allen: Why did he write "technically speaking" and "in the limited sense"? Is there some other mode of speaking, and is there an unlimited sense of monopoly? [Italics in original.]
Finally, I ended with my own view of why Alchian hadn't received the Nobel prize: "Although I didn't know him as well as some of you, I knew him well enough to know that the man was comfortable in his own skin. He didn't feel the need to brag about his accomplishments. But had he been willing to toot his own horn just a little more, we would probably now be celebrating the life of a Nobel laureate."

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CATEGORIES: Economic Methods

COMMENTS (6 to date)
david writes:

The context for Goldberg's remark is here (PDF).

Mark V Anderson writes:

I have no idea who Mr Alchian is and I don't really care. But I'm willing to read David's stories any day. I was chuckling at several of the stories, even though I knew no one. David, you are gifted at story telling. I hope you do this in class. Tell more.

Jim Rose writes:

Alchian seemed to be happy to be a teacher, yet his collected works run to 1700 pages - all worth reading - and he co-wrote three outstanding textbooks.

His 2005 universal economics had a small hardcover print run. see http://alchian-allen.com/index.html for table of contents and the 1st chapter.

a paperback of universal economics was in preparation in 2010. no furthur information on that.

David R. Henderson writes:

Thanks so much. I had always wondered about the context.
@Mark V Anderson,
Thanks so much. I do love telling true stories. If you want more, take a look at my book, The Joy of Freedom.
@Jim Rose,

Jim Rose writes:

david, one of the interesting things when reading Alchian's writings from the 1950s and 1960s is none of that work, which is extensive, is now dated. his work is so well grounded in price theory that it is not overtaken by new developments.

that is one reason why his university economics (1972) can still be read with great profit today.

Ken Maurer writes:

I was unable to attend, but just had an interesting incident. A friend from another discipline said that he got all his economics knowledge from reading Thomas Sowell and Walter Williams. He asked if I thought their stuff was actually good economics and wondered what else he should read. The first thing that jumped into my mind was my old edition of University Economics, which I still have on my shelf and recommended to him. Never having used it as an undergraduate, I recalled reading it cover to cover numerous times in grad school. It was accepted practice to study for our theory written exams by writing answers to the chapter questions appropriate for PhD candidates rather than freshmen even though, if I recall correctly, Armen wasn't reading the theory exams that term. I think I had at least a dozen pages single-spaced on the effects of an increase in the transportation costs of oranges. Worthwhile then; worthwhile today.

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