Armen Alchian facts for kids
Quick facts for kids
Armen A. Alchian
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| Born | April 12, 1914 Fresno, California, U.S.
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| Died | February 19, 2013 (aged 98) Los Angeles, California, U.S.
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| Institutions |
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| Field | Microeconomics Property rights Law and economics |
| School or tradition |
New Institutional Economics Chicago School Neoclassical economics |
| Doctoral students |
William F. Sharpe, David R. Henderson, Steven N. S. Cheung, Jerry Jordan |
| Influences | Adam Smith, Ludwig von Mises, Friedrich Hayek |
| Awards |
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Armen Albert Alchian (April 12, 1914 – February 19, 2013) was an American economist. He made big contributions to how we understand small parts of the economy (called microeconomic theory). He also helped shape the idea of how businesses work.
Alchian spent almost his whole career at the University of California, Los Angeles (UCLA). He is known for helping make UCLA's economics department one of the best in the country. He also helped start a new way of thinking in economics called new institutional economics. People widely recognize his important work on property rights, which are the rules about who owns what.
Contents
Early Life and Education
Armen Albert Alchian was born on April 12, 1914, in Fresno, California. His parents were Armenian-American. His father came to the U.S. in 1901 from the Ottoman Empire. His mother was born in Fresno to Armenian immigrant parents.
Armen grew up in the Armenian community. This community faced some unfair treatment early on. In the 1920s, his family even hosted General Andranik, a famous Armenian hero. Later, an economist named Michael Intriligator called Alchian "the Armenian Adam Smith."
Alchian went to Fresno High School. He was very good at both schoolwork and sports. He started college at Fresno State College in 1932. Then, he moved to Stanford University in 1934. He earned his first degree there in 1936. He later got his PhD (a very high degree) in philosophy from Stanford in 1943. His PhD paper was about how changes in wages affect the economy. Another famous economist, Kenneth Arrow, said Alchian was the "brightest economics student Stanford ever had."
Career Highlights
Alchian started his career as a teaching assistant at Stanford. He also worked at research groups like the National Bureau of Economic Research (NBER). From 1942 to 1946, he served in the Army Air Forces as a statistician, working with numbers and data.
In 1946, Alchian joined the economics department at University of California, Los Angeles (UCLA). He started as an assistant professor and became a full professor in 1958. He retired from UCLA in 1984 but kept an office on campus until he was 93 years old!
In his classes, Alchian liked to use the Socratic method. This means he would ask students questions to help them think, instead of just giving lectures. A colleague, James M. Buchanan, said Alchian was the "best blackboard economist." This means he was great at explaining ideas clearly. Many people credit Alchian with building UCLA's economics department into what it is today.
Alchian also worked with the RAND Corporation from 1946 to 1964. RAND is a famous research organization. There, he studied the hidden costs of government rules. He was the first economist hired at RAND. He also helped teach economics to legal experts and judges for about 20 years.
Key Economic Ideas
Alchian was an applied economist. This means he used economic theories to understand real-world problems. He was part of the Chicago School of thought. He also helped create the "UCLA tradition" or "Los Angeles School" of economics. This approach focused on free markets and how institutions work.
Alchian was also influenced by the Austrian School of economics. He especially liked the ideas of Ludwig von Mises and Friedrich Hayek. He even interviewed Hayek in 1978.
Alchian is seen as one of the founders of New Institutional Economics. This field looks at how rules, customs, and organizations affect economic behavior. He also helped develop Law and Economics, which studies how laws affect the economy.
Property Rights and Economics
A big part of Alchian's work was about property rights. These are the rules that say who owns what and what they can do with it. Alchian believed that understanding these rules is key to understanding how an economy works. He famously said, "In essence, economics is the study of property rights over resources." He showed how clear property rights can make an economy perform better.
Hidden Research
While at RAND in 1954, Alchian did a secret study. He used public financial data to figure out what material was used to make hydrogen bombs. This was a big secret at the time. He correctly guessed it was lithium by looking at the stock price of a lithium company. However, his paper was taken away and destroyed because it was seen as a threat to national security.
Important Writings
Alchian didn't write a huge number of books or articles. But the ones he did publish are very important and often quoted. His writing style was clear and didn't use a lot of complicated math.
In 1964, Alchian and William R. Allen wrote an important textbook called University Economics. It was used by many students.
Some of his most famous articles include:
- "Uncertainty, Evolution, and Economic Theory" (1950): This paper was one of his first big successes. It suggested that the economy works a bit like nature. Businesses that use efficient methods survive, even if they don't plan to be efficient.
- "Production, Information Costs, and Economic Organization" (1972): This is Alchian's most quoted paper. It changed how people thought about how businesses are organized. It looked at problems like "shirking," where some team members don't do their fair share of work. This paper is still very influential today.
His Beliefs
Alchian was known as a classical liberal and libertarian. This means he believed in free markets and individual freedom. He thought that people should rely on themselves and be responsible for their actions. He believed these ideas were important for capitalism.
He was skeptical of government trying to fix everything. He also thought that Keynesianism (an economic theory about government spending) didn't pay enough attention to what motivates people. He was friends with Milton Friedman, another famous economist. Friedman often quoted Alchian saying, "The one thing you can be most sure of in this life is that everyone will spend someone else’s money more liberally than they will spend their own."
Alchian was critical of minimum wage laws. During the energy crisis in the 1970s, he argued that the government should not control gas prices. He famously said that "95% of the material in economics journals was wrong or irrelevant."
Personal Life and Death
Alchian lived in Los Angeles. In 1940, he married Pauline, an elementary school teacher. They had two children.
Alchian loved using computers and was one of the first people to use email.
Personality
People who knew Alchian described him as kind, humble, and gentle. He didn't try to promote himself or build a big personal empire. William F. Sharpe, one of his students, called him a "brilliant mind" who solved difficult economic problems in creative ways. Another economist, Deirdre McCloskey, said talking to Alchian about economics was like talking to a famous painter about art.
Love for Golf
Alchian was a lifelong golfer. He often played with fellow economist George Stigler. He loved the sport so much that he wrote an article about it for The Wall Street Journal. He said golf was like capitalism because it required self-reliance, responsibility, and trust. He even chose to play golf instead of attending a conference called by President Gerald Ford to fight inflation, saying golf would be "more productive."
Later Years
In his last six years, Alchian suffered from a brain disease. He passed away peacefully in his sleep at his home in Los Angeles on February 19, 2013, at the age of 98.
Recognition and Legacy
In a 2011 survey, Alchian was ranked among the top living economists over 60. Many economists, including Friedrich Hayek, believed he deserved a Nobel Prize. However, he never received one. Some think it was because he didn't write a huge number of papers and wasn't good at promoting himself.
Influence on Others
Many economists, including several Nobel Prize winners, were influenced by Alchian.
- Kenneth Arrow was closely linked to Alchian. Alchian's ideas helped Arrow develop the concept of "learning curve" in economics.
- William F. Sharpe, who won a Nobel Prize, said Alchian was one of his most important mentors.
- Elinor Ostrom, another Nobel winner, appreciated Alchian's approach to understanding institutions.
- Walter E. Williams and William R. Allen called him one of their key mentors.
Alchian's 1972 paper on "Production, Information Costs, and Economic Organization" also influenced important work by other economists like Bengt Holmström and Oliver Hart.
Honors and Awards
Alchian received many honors throughout his career:
- Member of the Mont Pelerin Society (1957)
- President of the Western Economic Association International (1975)
- Fellow of the American Academy of Arts and Sciences (1978)
- Distinguished Fellow of the American Economic Association (1996)
- Adam Smith Award by the Association of Private Enterprise Education (2000)
- Honorary Fellow of the Institute of Economic Affairs
He also received honorary doctorates from the University of Rochester (1983) and Universidad Francisco Marroquín (2010).
Tributes
- The Armen A. Alchian Chair in Economic Theory was created at UCLA in 1997.
- The Armenian Economic Association has given out the Armen Alchian Award since 2014.
See Also
- Daron Acemoglu, another prominent American economist of Armenian origin
