Thursday, February 21, 2013

Armen Alchian, RIP

By Gary North

Armen Alchian died on February 19 at the age of 98.
I learned this on February 20. At the end of the day on February 19, I was working on a book I am writing on the structure of economic thought. I try to write two pages a day. I wrote this:
There is a long tradition for economics textbooks to begin with scarcity. The most rigorous of the textbooks in the Chicago School tradition, Allen and Alchian’s University Economics (3rd ed., 1972), may be the only textbook ever written that begins with Chapter 0: “How Much Mathematics and Graphs?” Chapter 1 is titled “Scarcity, Competitive Behavior, and Economics.” It begins: “Ever since the fiasco in the Garden of Eden, most of what we get is by sweat, strain, and anxiety. Two villains – nature and other people – prevent us from getting what we want. Nature is niggardly: it provides fewer resources than we could use, and much of what is available is made useful only by hard work. As for other people, the problem stems not from malevolence: their wants and ours simply exceed what is available.”
When I wrote it, I thought: “I wonder if Alchian is still alive.” I thought I would check Wikipedia, but I got sidetracked. Now I know.
I first met him at a conference at what was then called Claremont Men’s College in the summer of 1969. It was a conference of free market economists sponsored by the Institute for Humane Studies. The organizer was F. A. “Baldy” Harper, who had founded the IHS after he was dismissed in 1962 as the director of the William Volker Fund. Also in attendance were Sam Peltzman, Douglas Adie, Tibor Machan, Anne Wortham, and Alchian’s daughter, who was working on her Ph.D. Henry Manne was one of the instructors. So was Murray Rothbard. The meeting was dominated by Chicago School economists and grad students.
He devoted much of his career to studying property rights. This was surely a positive endeavor. At that conference, I decided on a new topic for my Ph.D. dissertation. I was had planned to write on the New England Puritans’ views on eschatology: the biblical doctrine of the final judgment. I changed my mind. I began work on what finally became The Concept of Property in Puritan New England, 1630-1720. There is a Freeman version here: Puritan Economic Experiments. I do not recall if Alchian’s presentation was the only reason I switched. His was surely the main one.Alchian liked to use the Socratic method. He asked questions. I recall one of his arguments, namely, that the state is like a voluntary club, analytically speaking. I should have piped up, “No professor, the state brandishes a club.” I forget what his point was. The presupposition was so preposterous that I could not shake it off . . . not after four decades.
Yet the reason I cited his textbook on the day he died was to point out that he and most other economists still begin their textbooks with the concept of scarcity, not ownership. Why not begin with private property? Alchian more than any other economist should have understood this. Academic traditions die hard.Tom Bethell was correct in Chapter 7 of his wonderfully written and horribly titled book, The Noblest Triumph (1999), when he argued that Adam Smith made a strategic error by beginning The Wealth of Nations with a discussion of the division of labor rather than property rights. For the next 180 years, free market economists were on the defensive against socialists, who went to the heart of the matter: ownership. As Bethell pointed out in Chapter 20, Alchian was the first free market economist – anyway, the first Chicago School economist – to rectify that error. (Harold Demsetz was the other major contributor.) Alchian began his work on property rights with an article on academic tenure and how it reduces productivity. Volume 2 of his Collected Works (Liberty Fund) contains his many articles on property.
I tell students that textbooks are obviously written for captive audiences, because no one goes back to re-read a college textbook. But I always offer one exception: University Economics. I read it, and no one ever assigned it to me in college. I won’t say that I have ever re-read it, but I surely go back and re-read sections. It is worth quoting. It is a shame that it has been out of print in its hardback edition for almost four decades. Its price on Amazon reflects this.
I once spotted an error of logic in the book. I recall writing to him to ask about it. I said that I realized that Chicago economists have odd ways of viewing things, but he seemed to have gotten things backward. He wrote to thank me, and said that he always appreciated free proofreading. He said to be alert to more errors. That reply persuaded me to adopt a policy of posting my books free of charge on a pre-publication basis, challenging readers to spot mistakes. That has saved me countless typos over the years. Thanks, Armen!
He wrote a textbook and dozens of journal articles. He did not write monographs.
Jews are good at business. Armenians are good at business. A lot of famous economists are Jews. Only one famous economist was an Armenian. Now he is gone. It would be nice to see a replacement with ian or yan at the end of his name. 

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