Wednesday, February 20, 2013

An Economist Who Made the Science Less Dismal

by David R. Henderson

Wall Street Journal

February 19, 2013

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.

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.


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