Wed Sep 27 11:43:15 EDT 2006
Published by EH.NET (September 2006)
J. Daniel Hammond and Claire H. Hammond, editors, _Making Chicago
Price Theory: Friedman-Stigler Correspondence, 1945-1957_. London:
Routledge, 2006. xvii + 165 pp. $120 (hardcover), ISBN: 0-415-70078-7.
Reviewed for EH.NET by Craig Freedman, Department of Economics,
Macquarie University.
Economic Billets Doux -- A Review of the Friedman-Stigler Correspondence
"Indifferent! Oh no -- I never conceived you could become
indifferent. Letters are no matters of indifference; they are
generally a very positive curse."
"You are speaking of letters of business; mine are letters of friendship."
"I have often thought them the worst of the two," replied he, coolly.
"Business you know, may bring money, but friendship hardly ever
does." (Jane Austen, _Emma_)
Reading this volume generates reflections which are more substantial
than a mere nostalgic yearning for times past. Technology has
condemned to the museum archives a means of personal and business
communication which had outlasted the centuries. Letters not only
were for most of history the only way accurately to convey thought,
emotion and information over long distances, but a method that was
remarkably cheap as well. In the nineties, the rise of e-mail has
largely put paid to those fondly received missives. Today, I would be
hard pressed to recall the last time I received an overseas letter,
although in the late eighties and early nineties such occurrences
were routine. What makes this more than just a yearning for familiar
ways is that technology changes not only communication channels but
the very content of that medium. The style, structure and thought
behind a handwritten (and perhaps even a typed) letter is definably
different from the modest e-mail which is more of an off the cuff
note. Moreover, e-mail is ephemeral. Few people print out and store
them as they might preserve letters. So the sad news when we read
this wonderful collection is that future generations will turn to the
equivalent of the Stigler or Friedman archive and find a bare
cupboard instead of a treasure trove of material. Future biographers
and historians of thought will come to mourn this loss. What is to be
done? Nothing, except to enjoy those opportunities that we still have
at hand.
Claire and Daniel Hammond (both at Wake Forest University) have
performed a real service in making so many of the key exchanges
between Milton Friedman and George Stigler available to the
interested reader. Many economists today simply take for granted the
wonders these two men performed in the post-war period. They set out
to overturn the then prevailing orthodoxy and (for better or worse)
largely succeeded. When economists today refer so blithely to the
Chicago School, they are implicitly referring to the work, effort and
campaign of these two long-time friends and colleagues. (Even today,
Milton Friedman still mourns the loss of his remarkable compatriot.)
Though most economists, let alone the general public, will associate
Friedman with the Chicago School counter-revolution to overthrow the
teaching of Keynes and other heretics, it is perhaps Stigler who had
in his more quiet way the greater influence (at least academically).
In any case, their spheres of operation were largely separable with
Stigler focusing almost exclusively on microeconomic matters. What
the two did have in common, besides their fierce dedication to market
principles, was the ability to sell economic ideas in a rhetorical
way that had a significant impact.[1] What the letters themselves
show, besides a mutual affection and respect, are the ways in which
the ideas that formed the core of the Chicago School developed and
the role which the two had in cross pollinating each other's work.
(This despite the fact that the only joint work they ever formally
endeavored was a paid for pamphlet brought out shortly after World
War Two (_Roofs or Ceilings_) which examined ceilings on rental
prices.)
By a stroke of luck, the two were forced apart in the immediate
post-war period, except for a brief year together in Minnesota
(1945). Like some modern day couple forced to pursue widely separated
careers, Milton Friedman went off to Chicago (1946) and Stigler to
Columbia (1947) after a brief stop at Brown (1946). As a result,
these two close colleagues and friends would spend the years between
1946 and 1958 largely apart except for periodic visits. Their loss
was our gain.[2] This enforced separation is the reason that we now
have this fascinating correspondence which reflects the way in which
the two attempted to transform economics. In particular, we can
discern their attempts to reshape economic methodology, as well as
their changing views on such issues as equality and income
distribution. As we read these letters, the outline of what would
form the bedrock of the Chicago School, a distinctive take on price
theory, becomes progressively clearer.
Friedman's counter-revolution against the prevailing dominance of
post-war Keynesian theory is well known by most economists. Less
appreciated is Stigler's role in defending traditional price theory
against heretical challenges. At least in part through his efforts,
Stigler maintained what would later be accepted as the
micro-foundations of economics, defending Marshallian partial
equilibrium analysis (or at least the Friedman-Stigler version)
against the seemingly invincible tide of Walrasian general
equilibrium theory. What both of these lynchpins of the Chicago
school held in common was an unshakeable belief in the efficiency of
markets. They especially viewed this form of economic structure as a
bulwark of individual choice and liberty against the omni-pervasive
depredations of the chronic economic planners.
There are notoriously few minor omissions or curious lacunae in this
volume that I can point out, and only if strongly pressed. In the
very useful introduction to this series of letters the Hammonds
wonder why there is no mention made of Friedman's pioneering work on
monetary theory. Friedman's quantity theory of money was, after all,
at the heart of his counter-revolution. However, this is much like
being puzzled by the lack of any direct references to the Napoleonic
wars in Jane Austen's novels. The solution is simple. This bit of
geo-politics failed to fall within the attention of Ms Austen's
interests in writing her novels. She was not about to drag it into
the picture by virtue of its sheer topicality. In a similar manner,
George Stigler displayed only minimal interest in macroeconomic
matters and claimed to possess no particular insights in this area.
Instead he tended to defer to Milton Friedman's expertise (though
Stigler does provide useful comments on Friedman's seminal work
dealing with the Consumption Theory).
There is also a strange lapse in what otherwise amounts to a
comprehensive set of endnotes attached to these letters. Two items
transmitted by Stigler to Friedman would later appear in an
idiosyncratic collection entitled _The Intellectual and the Market
Place and Other Essays by George Stigler_ ('Stigler's Law' and 'On
Scientific Writing'). True, the publication date (1963) puts it
outside the boundaries set by the editors. But it is still a useful
bit of information to provide to interested readers.
Lastly, the Hammonds claim that the close bond between George Stigler
and Milton Friedman only commenced with their mutual employment by
the Statistical Research Group during the war (1943-1945). It can be
easily argued that they were already close from their days as
graduate students in Chicago. Though, it does seem clear that Stigler
was initially closer to Allen Wallis.[3] (It was, in fact, Wallis as
director of the Statistical Research Group that reunited the two.)
This issue is, however, more a question of nuance and interpretation
than any clear disagreement.
The very low level of my nitpicking is perhaps the best indication of
my admiration for what the two editors have achieved in selecting
these letters for publication. It is a work that can be enjoyed on
several levels. It displays economists in their most human mode. Here
we see two relatively young academics advancing their careers,
discussing economics, worrying about their families, gossiping and
making withering remarks about colleagues and competitors. "It may
merely be prejudice, but I'm inclined to write him [Samuelson] off as
an economist." (Stigler to Friedman, p.97) "Of the many speakers only
one was terrible -- shallow and pretentious, Joe Schumpeter."
(Stigler to Friedman, p.96)
Let me add a minor final note which may only display a creeping onset
of curmudgeonly attitude rather than anything resembling good
judgment on my part. The publisher, Routledge, seems determined to
prove that you can't tell a book by its cover. In fact, you can't
determine anything about a Routledge book by its cover. The firm
seems unshakeable in its belief that the more the cover is dull and
indistinguishable, the more scholarly is the work. Potential readers
of excellent volumes, like the one under review, are actively
discouraged from opening the work rather than enticed. It would be
kind to think that Routledge is taking some principled, if obscure,
stand by its choices in artwork. But, the more likely explanation is
that it is simply succumbing to the rather lazy option of not trying.
By doing so, Routledge fails to do justice to the volumes it
publishes.
References:
Stigler, George Joseph (1963) _The Intellectual and the Market Place
and Other Essays by George Stigler_. Glencoe, IL: Free Press.
Stigler, George Joseph (1988) _Memoirs of an Unregulated Economist_.
New York: Basic Books.
Notes:
1. "I've come to the conclusion that no economic theory is important
unless one's contemporaries are persuaded to adopt it. If it meets
this test it is important; if it does not, it is unimportant - no
matter how correct or profound it may be." (George Stigler to Milton
Friedman, March 1950, p. 112)
2. "... there is no one anywhere I would rather have as a colleague
than you." (George Stigler to Milton Friedman, October 19, 1954,
p.133)
3. I base my alternative view on the recollections of Rose and Milton
Friedman as well as Paul Samuelson who knew them while enrolled as an
undergraduate at Chicago. Additional insights on this matter may be
gained in Stigler's own autobiography (1988).
Craig Freedman is Associate Professor of Economics, Macquarie
University, Sydney, Australia and also the Director of the Centre for
Japanese Economic Studies. His articles on George Stigler and the
Chicago School have appeared in the _Cambridge Journal of Economics_,
_Journal of Economic Issues_, _Journal of Post-Keynesian Economics_,
_Journal of the History of Economic Thought_ and _History of
Economics Review_. In addition he has edited a number of volumes on
the Japanese Economy.
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