George Stigler

Enigmatic Price Theorist of the Twentieth Century

Craig Freedman

• Publisher: Palgrave Macmillan
• Year: 2020
• Print ISBN: 9781137568144
• eBook ISBN: 9781137568151
• Topic: Economics
• Subtopic: Econometrics
• Index: Economics

George Stigler (1911-1991) was unquestionably one of the post-war giants of the economics profession. Along with such compatriots as Milton Friedman, Aaron Director, Gary Becker and others at Chicago, he would manage to radically reshape the contours of the discipline, engineering a virtual counter-revolution against the previous post-war consensus. Stigler essentially pioneered the fields of industrial organisation and regulatory economics while contributing landmark studies to the history of economic thought. George Stigler was awarded a much-deserved Nobel Prize in 1982.

At heart always a shy boy from the provinces, defending himself and his beliefs against the demands of a more wicked and devious world, he remained one of the only truly inscrutable figures in the history of modern economics. A kind, deeply caring family man, he fended off those outside his inner circle by employing a razor sharp, and often cruel, wit, keeping friends, colleagues and especially enemies at an arm's distance. "… [there was] the student who came to George complaining that he didn't deserve the 'F' he'd received in George's course. George agreed but explained that 'F' was the lowest grade the administration allowed him to give." Many who had the fortune, or misfortune, of coming within the range of his sharp tongue, even in the seeming context of an innocent encounter, would bear the scars of that contact for years to come. "With a paper like this, [delivering it] under the table, would not be inappropriate."

This volume is then one of the first to shed light on an entirely enigmatic figure by approaching both the man and his work from very divergent and original perspectives. Whether it succeeds is up to the whims of the reader. Or as George Stigler was wont to say, "Let the chips fall where they may."

Voyages on the Seas of History and Economic Thought

© The Author(s) 2020

C. Freedman (ed.)George Stiglerhttps://doi.org/10.1057/978-1-137-56815-1_9

Begin Abstract

Historical Ambiguity: Reshaping the Snows of Yesteryear

Craig Freedman¹

(1)

University of New South Wales, Sydney, NSW, Australia

Craig Freedman

History is bunk (Henry Ford)

Those readers with literary pretensions might recognise the allusion to François Villon’s well-known poem. The line of course that forms the work’s refrain: ‘Mais où sont les neiges d’antan!’ ‘Oh, where are the snows of yesteryear!’.

End Abstract

History of economic thought may have been George Stigler’s first love, but he turned out to be something of a feckless lover as the years rolled by. (It raises the question of why at crucial moments Stigler obviously didn’t seem to give a feck.) At times, his attitude to the field, which greatly benefited from his efforts, parallels the closed-minded perspective of the mechanically gifted but entirely cantankerous Henry Ford. These moments reveal an academic who considers his passion to be something of a guilty pleasure, like someone catching up on his macramé during an academic conference. The pursuit has hardly been (for many decades) a field that garners even a modicum of respect.

… the low state of repute in which the subject has fallen in the United States discourages me from pursuing that interest any further. People positively jeer at you when you state your speciality … it should be a side line, they argue. (Mark Blaug letter to George Stigler, December 20, 1963)

Despite his eminence in the field, that George Stigler in the 1970s did nothing to resist the subject’s (history of economic thought) permanent termination from graduate education at the University of Chicago should hardly come as a shock. Intermixed with his sense of guilty pleasure is a continuing ambivalence of attitude with which he surrounded the subject.¹ Whatever his innermost reflections and emotions might be at any given moment, Stigler was never one to hint at, let alone exude, any degree of sentimentality. His heart was never carelessly displayed on his sleeve. Though it is true that while at Columbia, he supervised Mark Blaug’s dissertation on Ricardo, equally clear is his continued unwillingness to actually promote the subject, whether through making a conscious decision or by simple neglect alone.² However, he clearly dismissed the importance of such knowledge as forming a vital, or even useful, substratum of an accomplished, academic economist.³

Some historians of economics – Schumpeter is an eminent representative – believe that an understanding of the evolution of a science helps to understand its present structure. This claim may be conceded and restated as the plausible hypothesis that correct knowledge never has a negative marginal product. Nevertheless, one need not read in the history of economics – that is, past economics – to master present economics. (Stigler 1982: 107)⁴

In Stigler’s actual work in the field, he seemed incapable, at moments, of preventing ideological concerns from seeping into his research. His work, scientific or otherwise can be evaluated, without too much strain, as a continuing defence of market efficiency . The core of his analytical framework rested unreservedly on a base of rational decision-making .⁵ Doing so, allowed him to equate consumer sovereignty with individual freedom and liberty . This ploy necessitated a determined rejection of any conflicting influences, whether psychological, historical or political. In this sense, history for Stigler was indeed bunk.⁶

In fact Smith’s professional work of psychology (in the Theory of Moral Sentiments) bears scarcely any relationship to his economics, and this tradition of independence of economics from psychology has persisted despite continued efforts from Jennings (1855) to Herbert Simon and George Katona to destroy it. (Stigler 1965: 28)

He revered Adam Smith as the alpha and omega of economics for recognising that narrow self-interest, when attached to competitive forces, led to unintended but desirable societal ends. Stigler was nonetheless disappointed at Smith’s reluctance to carry the campaign to its logical end.⁷ (‘Well, you know my argument is the opposite? No, he [Stigler] was sort of critical of Adam Smith in a way that I didn’t think was justified”. Conversation with Ronald Coase, October 1997.) The insistence that everything had to reduce to self-interested motivations , including in particular political markets, separated him from his version of the unarguable superiority of Adam Smith’s insights. To a clear and certain extent, Stigler remained dumbfounded at his hero’s inexplicable lapse.

We’re talking about the political world, the political market as opposed to the economic one. But in interpreting the political market, George very consistently, interprets the political market as a resolution of opposing self-interests and tended to give very little attention to the extent to which it arose out of the desire of the people involved in government to promote the public interest . (Conversation with Milton Friedman, August 1997)

Apart from his own work, George Stigler was grudging in his praise for, and even dismissive of, the field in which he himself had so extensively contributed. In his evaluation, History of Economic Thought harboured more insidious danger than the Postman Pat children’s series, but lacked its scholarly impact. If young economists were not to become fatally distracted by mulling the ambiguities thrown up by a careful examination of the subject’s history, then the only real prophylactic was complete abstinence. He was then perhaps heartened in his later years by the increasing ignorance of most economists when it came to an understanding of the history and evolution of their profession.

The young economist who reads some of the early controversies with care will surely learn one lesson, and he may learn two. The inevitable lesson is that after studying previous controversies one cannot become quite so engaged in the current controversies – one cannot become quite so convinced of either the correctness or the importance of one’s new ideas. The more subtle lesson is that it does not pay to learn the first lesson: the temperate, restrained, utterly fair-minded treatment of one’s own theories does a disservice to these theories as well as to one’s professional status and salary. The scientist is loath to buy new models which have not been well advertised. I therefore accept the proposition of Bishop Stubbs that the study of history probably makes a man wise, and surely makes him sad. (Stigler 1988: 111)

George Stigler apparently remained quite comfortable throughout his career in permanently exiling the field described by the history of thought to the dank anterooms of economic research. Despite his own distinguished efforts, starting with his Northwestern MBA⁸ and relentlessly exploring noted unresolved issues in the field, Stigler remained ambivalent of its worth. He even showed a willingness to emblazon it with a warning label sufficient to deter the unwary who might wander into these unrewarding thickets, ‘abandon hope all ye who enter here’. One does wonder, in light of his treatment of economists long buried, whether George Stigler was really Adam Smith’s best friend or even much of a supporter of History of Economic Thought.

There is a well-known story, still worth retelling, about a word game George invented for young children. He would give them, he said, a million dollars if they correctly answered three questions. The first, “Who was buried in Grant’s tomb?” and the second, “Whose head was on the Lincoln penny?” inspired great confidence in the child for a prospective life of luxury and leisure. Invariably, all hopes were dashed with the third question: “Who was Adam Smith’s best friend?” Except one time the son of a friend responded, “Why, you are, Uncle George”. (Rosen 1993: 809–810)

Notes

1. 1.
   Stigler’s exact role in banishing History of Economic Thought from the graduate curriculum is not unfortunately clear. In a published piece, Sherwin Rosen claimed that

   … history of thought, like all other fields, is well enough served by its own specialists. These were the reasons why Stigler proposed and supported the decision of the Economics Department at the University of Chicago to abandon its history of thought requirement in 1972, before many other departments did. (Rosen 1993: 811)

   However, in private conversation, Rosen preferred to qualify this unequivocal claim shifting some of the core responsibility away from the determined shoulders of George Stigler. Whether or not George Stigler agitated for such a move, what remains clear is that he certainly did not see fit to attempt to impede such a development.

   Now, I don’t know if he [George Stigler] was a leader [in abolishing the HET requirement], but he was certainly in favour of it. I don’t know how that issue first came up. I think it came up because most young economists had lost interest in it and it was just a big tax on everyone’s energy. No one was working on it. It wasn’t really much of a research field. I think it’s had a slight come back but it’s still pretty small. Even now, you see very few Ph.D.’s with that particular interest. There’s also been a general laissez faire attitude around here about graduate degree requirements. So I think that’s how it came up for discussion. In the same way, there was an Economic History requirement which, I don’t think we have anymore either. That was also dropped. So I don’t think he was in favour of putting artificial restrictions on a degree. That was probably his motivation. But I don’t know. I don’t think any of us were too happy about that move. (Conversation with Sherwin Rosen, October 1997)
2. 2.
   Though at time...

Table of contents

• Cover
• Front Matter
• The Protestant Father as Economist
• A Biographical Perspective
• Voyages on the Seas of History and Economic Thought
• The Pervasive Lightness of the Chicago Price Theory
• Back Matter