Armen Alchian

Armen Albert Alchian (April 12, 1914 – February 19, 2013) was an American economist and an Emeritus Professor of Economics at the University of California, Los Angeles. He was the founder of the "UCLA tradition" in economics, a member of the Chicago school of economics, and one of the more prominent price theorists of the second half of the 20th century.

Quotes

• Before condemning violence (physical force) as a means of social control, note that its threatened or actual use is widely practiced and respected—at least when applied successfully on a national scale. Julius Caesar conquered Gaul and was honored by the Romans; had he simply roughed up the local residents, he would have been damned as a gangster. Alexander the Great, who conquered the Near East, was not regarded by the Greeks as a ruffian, nor was Charlemagne after he conquered Europe. Europeans acquired and divided—and redivided—America by force. Lenin is not regarded in Russia as a subversive. Nor is Spain’s Franco, Cuba’s Castro, Nigeria’s Gowon, Uganda’s Amin, China’s Mao, our George Washington.
  • Armen Alchian and William R. Allen (1972). University Economics, Wadsworth Publishing Company. Reprinted as Exchange and Production; Cited in: "Armen A. Alchian". Concise Encyclopedia of Economics. Liberty Fund, Inc. December 2007.

• It is a general prevalence of double coincidence of information rather than wants by both parties that would avoid the use of money.
  • Armen A. Alchian, "Why money?." Journal of Money, Credit and Banking 9.1 (1977): 133-140.

"Uncertainty, Evolution, and Economic Theory", 1950

Armen A. Alchian, "Uncertainty, evolution, and economic theory." The journal of political economy (1950): 211-221.; Reprinted 1957.

• Where foresight is uncertain, “profit maximization” is meaningless as a guide to specifiable action.
  • p. 221

• The greater the uncertainties of the world, the greater is the possibility that profits would go to venturesome and lucky rather than to logical, careful, fact-gathering individuals.

• Neither perfect knowledge of the past nor complete awareness of the current state of the arts gives sufficient foresight to indicate profitable action. Even for this more restricted objective, the pervasive effects of uncertainty prevent the ascertainment of actions which are supposed to be optimal in achieving profits. Now the consequence of this is that modes of behavior replace optimum equilibrium conditions as guiding rules of action. Therefore, in the following sections two forms of conscious adaptive behavior are emphasized.

• Like the biologist, the economist predicts the effects of environmental changes on the surviving class of living organisms; the economist need not assume that each participant is aware of, or acts according to, his cost and demand situation.

Production, information costs, and economic organization. 1972

Armen A. Alchian and Harold Demsetz. "Production, information costs, and economic organization." The American economic review 62.5 (1972): 777-795.

• The mark of a capitalistic society is that resources are owned and allocated by such nongovernmental organizations as firms, households, and markets. Resource owners increase productivity through cooperative specialization and this leads to the demand for economic organizations which facilitate cooperation. When a lumber mill employs a cabinetmaker, cooperation between specialists is achieved within a firm, and when a cabinetmaker purchases wood from a lumberman, the cooperation takes place across markets (or between firms). Two important problems face a theory of economic organization—to explain the conditions that determine whether the gains from specialization and cooperative production can better be obtained within an organization like the firm, or across markets, and to explain the structure of the organization.
  • p. 777, Lead paragraph

Economic Forces at Work, 1977

Armen Alchian (1977) Economic Forces at Work.

• The rights of individuals to the use of resources (i.e., property rights) in any society are to be construed as supported by the force of etiquette, social custom, ostracism, and formal legally enacted laws supported by the states' power of violence of punishment. Many of the constraints on the use of what we call private property involve the force of etiquette and social ostracism. The level of noise, the kind of clothes we wear, our intrusion on other people's privacy are restricted not merely by laws backed by police force, but by social acceptance, reciprocity, and voluntary social ostracism for violators of accepted codes of conduct.
  • p. 129-130 ; as cited in Eggertsson (1990; 34)

• By this I refer to the fact that at the same time several people may each possess some portion of the rights to use the land. A may possess the right to grow wheat on it. B may possess the right to walk across it. C may possess the right to dump ashes and smoke on it. D may possess the right to fly an airplane over it. E may have the right to subject it to vibrations consequent to the use of some neighboring equipment. And each of these rights may be transferable. In sum, private property rights to various partitioned uses of land are "owned" by different persons.
  • p. 132-133

Interviewing Friedrich Hayek, 1978

Armen Alchian, interviewing Friedrich Hayek in 1978, published in Hayek's Journey : The Mind of Friedrich Hayek (2003) by Alan O. Ebenstein, p. 107

• Alchian: Two things you [Hayek] wrote that had a personal influence on me, after your Prices and Production, were 'Individualism and Economic Order' [sic — Alchian certainly has in mind Hayek's 'Economics and Knowledge'] and 'The Use of Knowledge in Society.' These I would regard as your two best articles, best in terms of their influence on me.
  Hayek: 'Economics and Knowledge' — the '37 one — which is reprinted in the volume, is the one which marks the new look at things in my way.
  Alchian: It was new to you, too, then? Was it a change in your own thinking?
  Hayek: Yes, it was really the beginning of my looking at things in a new light. … I was aware that I was putting down things which were fairly well known in a new form, and perhaps it was the most exciting moment in my career when I saw it [i.e. 'Economics and Knowledge'] in print.
  Alchian: Well, I'm delighted to hear you say that, because I had that copy typed up to mimeograph for my students in the first course I gave here [i.e. UCLA]. And Allan Wallace … came through town one day, and I said, 'Allan, I've got a great article!" He looked at it, started to laugh, and said, "I've seen it too; it's just phenomenal!' I'm just delighted to hear you say that it was exciting, because it was to me, too … that was a very influential article, I must say.

• Alchian: Perhaps it might have been more appropriate for the Nobel Prize to have gone to you and Hicks together, and [Kenneth] Arrow and [Gunnar] Myrdal together.
  Hayek: Oh, surely. [laughter]

Quotes about Armen Alchian

• I was a colleague of Armen's, at the Rand Corporation "think tank," during the 1950s, and hold no economist in higher regard. When I sat down at my keyboard just now it was to find out what happened to Armen's works. One Google response was someone saying that Armen should get a Nobel Prize. I concur. My own Nobel Prize in Economics was awarded in 1990 along with the prize for Wm. Sharpe. I see in Wikipedia that Armen "influenced" Bill, and that Armen is still alive and is 96 years old.
  • Harry Markowitz. "Amazon review of Armen A. Alchian's and William R. Allen's University Economics," at amazon.com. Republished at econlog, 2006

• I personally believe that economics is fun and valuable. People who say they found it a nightmare in college just didn't have a good teacher-professor. I became a good teacher-professor as a result of tenacious mentors during my graduate study at UCLA. Professor Armen Alchian, a very distinguished economist, used to give me a hard time in class. But one day, we were having a friendly chat during our department's weekly faculty/graduate student coffee hour, and he said, "Williams, the true test of whether someone understands his subject is whether he can explain it to someone who doesn't know a darn thing about it." That's a challenge I love: making economics fun and understandable.
  • Walter E. Williams, Economics for the Citizen