Posts Tagged 'Alchian'

Remembering Armen Alchian

On March 23, a memorial service celebrating the life of Armen Alchian was held at UCLA. David Henderson was there and shared some vignettes from the service.

Here is a webpage with pictures from the memorial.

Here is a tribute to Alchian by one of his finest students, Stephen N. S. Cheung. I found this passage especially moving, but follow the link and read the entire eulogy by Cheung.

Back in the old days at UCLA, it was not easy for graduate students to discuss research ideas with Alchian in person.  Most students harbored the impression that he was aloof and not very approachable.  I shared the same view initially, but discovered the contrary later.  The following is a true story.

In early 1967, after finishing the first lengthy chapter of my thesis, I received news from Hong Kong that my elder brother (who was a year older) had passed away.  Understanding that my mother must be shattered by the death of her favorite son, I thought about giving up at UCLA and returning to Hong Kong to be near her.  At that time I was already an assistant professor at the California State University at Long Beach.  I drove back to LA to tell Jack Hirshleifer the sad news and my intention to quit.  Hirshleifer thought that it would be a pity to abandon my dissertation, on which I had already made very good progress.  He then said he would discuss with other members of my thesis committee the possibility of granting me a PhD on the strength of the first long chapter alone.

That afternoon I went to see Alchian, planning to tell him what I told Hirshleifer.  Alchian obviously knew what I had in mind.  But before I had a chance to say anything, he said, “Don’t tell me anything about your personal matters.”  So I left without a word.  One day later in Long Beach, I received a letter from Alchian with a $500 check enclosed and simply two lines: “You can buy candies with this $500 or you can hire a typist to help you finish your dissertation as quickly as possible.”  This $500 was equivalent to my one month’s gross salary, so it was not a small amount.  What other alternatives did I have?  In less than two months I wrapped up my dissertation.  Alchian said it was a miracle.  In retrospect, I regret cashing that check and spending that $500.  If I had kept the check, I could now show it to my children, grandchildren, and students while telling them this proud story.  I know Armen would say, “Steve, put that check up for auction and see how much it would fare now.”

Here is another eulogy from the same website, and another eulogy from that website — in Chinese!

Here are remembrances from some of Alchian’s UCLA colleagues, including David Levine, John Riley and Harold Demsetz.

Here is the obituary about Alchian from the Los Angeles Times.

And finally (for now), here is a video clip of Alchian speaking about property rights.

My Paper (co-authored with Paul Zimmerman) on Hayek and Sraffa

I have just uploaded to the SSRN website a new draft of the paper (co-authored with Paul Zimmerman) on Hayek and Sraffa and the natural rate of interest, presented last June at the History of Economics Society conference at Brock University. The paper evolved from an early post on this blog in September 2011. I also wrote about the Hayek-Sraffa controversy in a post in June 2012 just after the HES conference.

One interesting wrinkle that occurred to me just as I was making revisions in the paper this week is that Keynes’s treatment of own rates in chapter 17 of the General Theory, which was in an important sense inspired by Sraffa, but, in my view, came to a very different conclusion from Sraffa’s, was actually nothing more than a generalization of Irving Fisher’s analysis of the real and nominal rates of interest, first presented in Fisher’s 1896 book Appreciation and Interest. In his Tract on Monetary Reform, Keynes extended Fisher’s analysis into his theory of covered interest rate arbitrage. What is really surprising is that, despite his reliance on Fisher’s analysis in the Tract and also in the Treatise on Money, Keynes sharply criticized Fisher’s analysis of the nominal and real rates of interest in chapter 13 of the General Theory. (I discussed that difficult passage in the General Theory in this post).  That is certainly surprising. But what is astonishing to me is that, after trashing Fisher in chapter 13 of the GT, Keynes goes back to Fisher in chapter 17, giving a generalized restatement of Fisher’s analysis in his discussion of own rates. Am I the first person to have noticed Keynes’s schizophrenic treatment of Fisher in the General Theory?

PS: My revered teacher, the great Armen Alchian passed away yesterday at the age of 98. There have been many tributes to him, such as this one by David Henderson, also a student of Alchian’s, in the Wall Street Journal. I have written about Alchian in the past (here, here, here, here, and here), and I hope to write about Alchian again in the near future. There was none like him; he will be missed terribly.

The Midnight Economist Reminisces About His Colleague and Co-author Armen Alchian and the Brief but Wonderful Golden Age of the UCLA Econ Department

Bill Allen was a stalwart member of the UCLA economics department in the years of its glory from the late 1950s to the early 1970s. A distinguished economist in his own right, specializing in the international economics and the history of economic thought, Allen is probably best known for having been selected by Armen Alchian to be his co-author in writing the greatest economics textbook ever written and for later becoming the Midnight Economist, delivering daily economic commentaries over the radio from the late 1970s to the early 1980s. The broadcasts are now available on the web or as podcasts, and were also collected in book form.

I have written several earlier posts (e.g., this and this) in which I wrote about what a great place UCLA was to learn economics and what a loss it has been for the economics profession that the special brand of economics taught and practiced at UCLA has been overshadowed by the more formalistic and axiomatic approaches that now dominate the profession, and, alas, even the UCLA economics department itself.

Just yesterday I stumbled upon Bill Allen’s memoir about his own life in Econ Journal Watch and especially about his years at UCLA, and his relationships with his colleagues, and especially, of course, with Alchian. Herewith are a few excerpts:

What defined and distinguished the Core [the central group within the department who were the intellectual leaders of the department and gave the department its unique character, most notably during my day Alchian, Jack Hirshleifer, Allen, George Hilton, Harold Demsetz, Axel Leijonhufvud, and Earl Thompson; Karl Brunner left before I arrived--DG] is a question of considerable subtlety and nuance. The leader of the impressive band clearly was Alchian. His position of prominence evolved and developed, not by his intention or machinationn or the extroverted personality of a self-conscious and self-serving field marshall. (Much later, when as chairman I was recruiting the eminent Jim Buchanan, I apologized to Alchian for being obliged to offer Jim a salary greater than Alchian’s. Armen firmly put me at ease—after all, he had some understanding of how markets work.) Almost always soft-spoken, unaggressive, and seemingly bemused, he was genuinely curious about certain workings of the world, and he was imaginatively and innovatively bold in seeking explanations—and he was remarkably generous in helping other curious analysts. He was confident that much of previously unaccountable behavior and phenomena could be explicated by fundamental and often quite simple (when adroitly utilized) analytic propositions and techniques. The tools of Econ l and 2 can be powerful in masterly hands. Larry Miller observed, with some appreciation, that Alchian “found economics behind every rock.”

The department in its brief Golden Age was aware of being out of step with most of the profession both in the purpose and nature of the work of the Core and in how the work was conducted. For members of the Core, Economics was to be dedicated to genuine, bone fide, real-worldly, enlightening and useful empirical problem-solving. Who is to gain what from the efforts of economists? What is the relevance and worth of their meditations and exercises? How great and widespread would be the net calamity if all the economists suddenly departed for their esoteric Nirvana?

In a 1985 memorandum to me, Leijonhufvud wrote: [Alchian's] unique brand of price theory is what gave UCLA Economics its own intellectual profile and achieved for us international recognition as an independent school of some importance—as a group of scholars who did not always take their leads from MIT, Chicago or wherever. When I came here (in 1964) the Department had Armen’s intellectual stamp on it (and he remained the obvious leader until just a couple of years ago ….). Even people outside Armen’s fields, like myself, learned to do Armen’s brand of economic analysis and a strong esprit de corps among both faculty and graduate students sprang from the consciousness that this ‘New Institutional Economics’ was one of the waves of the future and that we, at UCLA, were surfing it way ahead of the rest. But Armen’s true importance to the UCLA school did not stem just from the new ideas he taught or the outwardly recognized ‘brandname’ that he created for us. For many of his young colleagues he embodied qualities of mind and character that seemed the more important to seek to emulate the more closely you got to know him.

The entire essay is eminently worth reading, though, like all golden-age stories, it is also, sadly, one of decline and fall. Sic transit gloria mundi.

About Me

David Glasner
Washington, DC

I am an economist at the Federal Trade Commission. Nothing that you read on this blog necessarily reflects the views of the FTC or the individual commissioners. Although I work at the FTC as an antitrust economist, most of my research and writing has been on monetary economics and policy and the history of monetary theory. In my book Free Banking and Monetary Reform, I argued for a non-Monetarist non-Keynesian approach to monetary policy, based on a theory of a competitive supply of money. Over the years, I have become increasingly impressed by the similarities between my approach and that of R. G. Hawtrey and hope to bring Hawtrey's unduly neglected contributions to the attention of a wider audience.

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