Memoirs of an Unregulated Economist

From the 1930’s to the present, the Department of Economics at the University of Chicago has won recognition as one of the world’s leading centers for economic theory. Stigler, a graduate student at Chicago and now a professor there, gives an excellent popular introduction to the school. The book, as befits a work intended for a wide audience, is long on anecdote and short on theory.

Frank H. Knight, probably the most unusual of all Chicago economists, dominated the department through the 1930’s and 1940’s. Instead of stressing detail and technique, Knight’s lectures looked at the fundamentals of the subject in an original and penetrating way. Rather than draw countless equations on the blackboard, Knight analyzed questions such as “What does ’cost’ mean?” and “How does capital reproduce itself?” Students found it difficult to absorb Knight’s wisdom, since his lectures were models of disorganization.

Among Knight’s rivals in the department were Jacob Viner, a scholar of unequaled learning, and Paul Douglas, later a United States senator. Stigler quotes the unintentionally amusing letters Knight and Douglas exchanged during their prolonged feud.

To be sure, there is more to Chicago economics than odd personalities. The school, though certainly not a monolith, tends to stress the virtues of the free market. The approach of John Maynard Keynes finds little echo at Chicago. In addition to being overly interventionist, Keynesianism commits what Chicagoans think another mortal sin; this rival approach, as Stigler and his colleagues view it, loses itself in abstraction. Economics must never stray far from the empirical world. Its aim, as Milton Friedman, the school’s leading member during the 1950’s through the 1970’s, has put it, is prediction. This is the credo not only of Friedman but also of other contemporary Chicagoans, including Gary Becker and Stigler himself.

This emphasis on prediction does not imply that the group concentrates on matters of policy. Although Friedman and others have at times dispensed Chicago-style prescriptions, usually of a conservative stripe, policy is at best a sideline for them. Stigler frequently notes that at Chicago, the aim is to study the world, not to change it.