Chicago and Vienna

by Jerry O’Driscoll

In the last two days, two prominent economists have asked me essentially the same question: what is the difference between Chicago and Austrian economics? It is interesting that both asked, particularly since one has a Ph.D from Chicago.

The second economist asked me specifically if Armen Alchian wasn’t really an Austrian. I’ll respond as I did to him. I learned most of my Austrian economics in the UCLA graduate economics program. (At that time, UCLA was known as Chicago West.) I was never an Alchian student, but one read lots of Alchian anyway. And his influence pervaded the department. It was obvious to me that Mises had influenced Alchian. Also Hayek, as is made clear in a video of Alchian interviewing Hayek.

Hayek’s classic essays on prices and information were on various reading lists at UCLA. Continue reading

Happy Birthday Ronald Coase

Ronald Coase is 100 years old today

by Mario Rizzo

There are few economists who are as important to the development of economics as Ronald Coase. It is important that young economists who, in their now almost-universally inadequate education, take the time to familiarize themselves with his contributions. This is best done directly through his own well-written articles rather than through the literature about him. It is perhaps unfortunate that George Stigler labeled Coase’s analysis in “The Problem of Social Cost” a theorem — the Coase Theorem. This has given rise to all manner of misunderstandings, including the incredibly ignorant remark I once heard from a graduate student, mocking the theorem-status of the analysis. That was some years ago. Today most students at the top economics have never been exposed to Coase’s work.

I look at Coase’s work on property rights as establishing an analytical framework rather than a set of policy conclusions. I believe that a new, exciting area of application of Coase’s perspective lies in the study of what some economists are calling internalities. An internality is a cost (or benefit) that a individual imposes on his future selves as as side-effect of activity today. Thus, for example, I may eat potato chips today getting pleasure but then impose some health cost on my future self. Some economists have proposed an internality tax to “correct” the situation. In a previous post I analyze this issue and present some references, including a great piece by Glen Whitman.

I wish Ronald Coase a happy birthday and thank him for making economics a better discipline.

(HT: David Boaz)