Armen is certainly the best economist I have known. Let me tell you a story. It was 1979, and I was in a cab in Washington DC with Mike Jensen and Fischer Black. (I was a lawyer at the time, and Mike and Fischer had been hired as consultants by a client.) We were stuck in traffic, so I had plenty of time to ask questions. I asked them two questions: Who is the most underrated economist in the world? Who is the most overrated economist in the world? Each thought for a while, and to my surprise they both had the same person for each category. I won’t comment on their most overrated economist (an incredibly well known economist), but both agreed the Armen was the most underrated economist in the world. They then started talking about all of Armen’s seminal contributions, many of which Brian mentions in his post. After some time, Fischer, a man of few words but deep thoughts, said “Armen Alchian is the foremost living micro-economist in the world today.” Mike then said, “I agree with you Fischer.”
At that time, I only knew of Armen in passing. Over the next several years, however, I got to know Armen well, first at conferences and then when he would visit his best friend, Bill Meckling, who was my dean. For some reason, Armen took me under his wing and would send me comments on my working papers. They were amazing comments--the best I ever received in my career.
I could spend hours talking about Armen’s strengths as an economist. Again, Brian has done a nice job in this dimension so I won’t repeat what he has written. Let me add what I see as one of Armen’s greatest strengths: his simplicity. He would always break a problem down to its most basic components: an individual making a choice in a world of scarcity. There is a total absence of jargon in all of Armen’s papers. He was trying to better understand the world. And at that task, I know of no one who was better.
Agree that Alchian belongs in this conversation. But it's very strange to me that there is no mention of Marx. On empirics, his hundred page chapter on the working day is masterful, with very creative use of data on height requirements in the British military to show health effects of the factory system on the working class. On theory, the model of expanded reproduction was a clear precursor to von Neumann's multisector growth model, and later work by Uzawa and others. His theory of endogenous technological change (labor saving as wages rise which expands the reserve army and lowers wages) has been influential in some of the business cycle literature, especially on long waves. Originality and influence are not in doubt, nor is macro and micro. Maybe Tyler thinks he was wrong on substance (based on predictions of a falling rate of profit, or immizerization and revolution) but even Schumpeter saw him as among the most significant of those who preceded him. Just my two cents.
Nov 30, 2023·edited Nov 30, 2023Liked by Brian Albrecht
As a reactionary, I feel compelled to suggest a tiny spelling reform to restore GOAT to its rightful place as a reasonable acronym for "Greatest Oeconomist of All Time".
Alchian and Demsetz (1972) made a great contribution on the problem of the firm: they made clear that it's fundamentally about the contractual arrangements between different parties. This was something that Coase (1939) does not recognize. I don't think Alchian and Demsetz's subsequent explanation of why the firm exists is correct, but the formulation of the problem of the firm in terms of contracts was a brilliant insight.
As for GOAT economist, I'd say Adam Smith by a wide margin. The idea that people acting in their own interest can trade their way to an efficient outcome is still the central idea of modern economics—a powerful and unintuitive result that most non-economists (and some economists) don't understand.
As for GOAT economist of the 20th century, the competition is stiffer. I would go with Coase. His work on the theory of the firm and the problem of social costs are both very deep insights that are often cited but not fully appreciated.
Armen is certainly the best economist I have known. Let me tell you a story. It was 1979, and I was in a cab in Washington DC with Mike Jensen and Fischer Black. (I was a lawyer at the time, and Mike and Fischer had been hired as consultants by a client.) We were stuck in traffic, so I had plenty of time to ask questions. I asked them two questions: Who is the most underrated economist in the world? Who is the most overrated economist in the world? Each thought for a while, and to my surprise they both had the same person for each category. I won’t comment on their most overrated economist (an incredibly well known economist), but both agreed the Armen was the most underrated economist in the world. They then started talking about all of Armen’s seminal contributions, many of which Brian mentions in his post. After some time, Fischer, a man of few words but deep thoughts, said “Armen Alchian is the foremost living micro-economist in the world today.” Mike then said, “I agree with you Fischer.”
At that time, I only knew of Armen in passing. Over the next several years, however, I got to know Armen well, first at conferences and then when he would visit his best friend, Bill Meckling, who was my dean. For some reason, Armen took me under his wing and would send me comments on my working papers. They were amazing comments--the best I ever received in my career.
I could spend hours talking about Armen’s strengths as an economist. Again, Brian has done a nice job in this dimension so I won’t repeat what he has written. Let me add what I see as one of Armen’s greatest strengths: his simplicity. He would always break a problem down to its most basic components: an individual making a choice in a world of scarcity. There is a total absence of jargon in all of Armen’s papers. He was trying to better understand the world. And at that task, I know of no one who was better.
Agree that Alchian belongs in this conversation. But it's very strange to me that there is no mention of Marx. On empirics, his hundred page chapter on the working day is masterful, with very creative use of data on height requirements in the British military to show health effects of the factory system on the working class. On theory, the model of expanded reproduction was a clear precursor to von Neumann's multisector growth model, and later work by Uzawa and others. His theory of endogenous technological change (labor saving as wages rise which expands the reserve army and lowers wages) has been influential in some of the business cycle literature, especially on long waves. Originality and influence are not in doubt, nor is macro and micro. Maybe Tyler thinks he was wrong on substance (based on predictions of a falling rate of profit, or immizerization and revolution) but even Schumpeter saw him as among the most significant of those who preceded him. Just my two cents.
I love Paul Samuelson and Kenneth Arrow; both write so clearly that I have no problem understanding. I guess I'll have to pick up some Alchian now!
As a reactionary, I feel compelled to suggest a tiny spelling reform to restore GOAT to its rightful place as a reasonable acronym for "Greatest Oeconomist of All Time".
Alchian and Demsetz (1972) made a great contribution on the problem of the firm: they made clear that it's fundamentally about the contractual arrangements between different parties. This was something that Coase (1939) does not recognize. I don't think Alchian and Demsetz's subsequent explanation of why the firm exists is correct, but the formulation of the problem of the firm in terms of contracts was a brilliant insight.
As for GOAT economist, I'd say Adam Smith by a wide margin. The idea that people acting in their own interest can trade their way to an efficient outcome is still the central idea of modern economics—a powerful and unintuitive result that most non-economists (and some economists) don't understand.
As for GOAT economist of the 20th century, the competition is stiffer. I would go with Coase. His work on the theory of the firm and the problem of social costs are both very deep insights that are often cited but not fully appreciated.
Great piece!
I tech intro to economics in Madrid.
Would you suggest Alchian & Allen textbooks for today’ students? Which textbook would you suggest?