Whither Chicago Economics?

25 June 2008 at 12:12 am 6 comments

| Peter Klein |

Steve Levitt, writing on the controversy surrounding the University of Chicago’s proposed Milton Friedman Institute, says this:

The Chicago economics department views the world differently than anyone else, even other economics departments. Having learned my economics at Harvard and M.I.T., I took my first teaching job at Chicago with the very explicit idea that I would spend two or three years in Chicago to get to “know the enemy.” After I figured out how they thought, I would escape back to more comfortable surroundings.

Well two things happened that I didn’t expect. First, it turned out that it wasn’t so easy to learn to think like a Chicago economist. I’ve been trying to learn for more than a decade and I still have learned only the rudiments. Every day my colleagues teach me something I should know, but don’t. Second, I decided that the Chicago approach to economics was the right one for me, even though I am not that good at it.

I wish Levitt would elaborate on the differences between contemporary Chicago economics and the economics of Harvard, MIT, Princeton, and Stanford, because I don’t see any. The Chicago economics of 1970 or even 1980 was distinct from that of its East and West coast rivals. The Journal of Political Economy, and even more so the Journal of Law and Economics, had a unique style and approach. Chicago-influenced economics departments at UCLA, Washington, Texas A&M, Clemson, and elsewhere were disseminating (and deepening) the brand. But that’s all gone. It’s hard to see any unique vision today. Indeed, the diversity among US economics departments seems a thing of the past, as I noted before. They are all mini-MITs. How, exactly, is Chicago economics any different?

Entry filed under: - Klein -, Education, Institutions, Methods/Methodology/Theory of Science.

The Power of Walt Gore Vidal on Academic Biographers

6 Comments Add your own

  • 1. Brian Pitt  |  25 June 2008 at 9:12 am

    Mises is correct again! I do not have the source in front of me, but Mises averred that (formal) education is invariably a conservative institution.

  • 2. Joe Mahoney  |  26 June 2008 at 3:38 am


    Arthur Okun many years ago wrote a book called:

    Rawl’s pushes hard for equality
    Chicago School economics pushes hard for efficiency

    Most of us, pragmatically speaking, are in the mid-range.

  • 3. Peter Klein  |  26 June 2008 at 8:39 am

    Joe, yes, yes, that was true 30 or 40 years ago. (Melvin Reder’s 1982 JEL article provides much more detail.) But it isn’t true today, as far as I can tell. Chicago economics does emphasize efficiency, but no more or less than any other branch of (mainstream) economics.

  • 4. Michael F. Martin  |  27 June 2008 at 4:10 pm


    As a Chicago alumni (but not of the economics department), I have a bit of perspective that may throw some light on what Levitt likes about Chicago.

    When one Nobel laureate is surrounded by a bunch of non-Nobel-winning colleagues, he or she is going to be naturally disinclined to engage in debate. First, everybody is going to be trying to score points on the Nobel laureate. Second, if not, everybody is going to be trying to suck up to the Nobel laureate.

    When one Nobel laureate is surrounded by a bunch of other Nobel laureates, nobody really cares anymore what anybody else thinks, and they pretty much just say what they think.

    That, in a nutshell, is why I think he likes Chicago.

    As an aside, there are ways to foster a similar culture without requiring the Nobel as a membership credential. The law school at Chicago is much the same. Avoiding strong expressions of ideology seems to be a key issue. Once the discussion is about “us” vs. “them,” there isn’t much intellectual content to it anymore.

  • 5. David Hoopes  |  27 June 2008 at 7:56 pm

    Is one reason Chicago is no longer different the success with which they place their doctoral students?

    I thought Scherer (at Harvard) at the time took a swipe at Demsetz (Northwestern Grad but more than honorary member Stiglitz and Coase being two of his fans).

    If the efficiency perspective is more widely accepted why is the Friedman Institute controversial? I guess non-economists are still not believers in economic efficiency.

  • 6. Danny L. McDaniel  |  2 July 2009 at 1:55 pm

    That is the beauty of Chicago School Economics: Make what is complicated, simple; and what is simple, complicated. It is more political than economic.

    Danny L. McDaniel
    Lafayette, Indiana

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


Nicolai J. Foss | home | posts
Peter G. Klein | home | posts
Richard Langlois | home | posts
Lasse B. Lien | home | posts


Former Guests | posts


Recent Posts



Our Recent Books

Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
Peter G. Klein and Micheal E. Sykuta, eds., The Elgar Companion to Transaction Cost Economics (Edward Elgar, 2010).
Peter G. Klein, The Capitalist and the Entrepreneur: Essays on Organizations and Markets (Mises Institute, 2010).
Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy (Routledge, 2007).
Nicolai J. Foss, Strategy, Economic Organization, and the Knowledge Economy: The Coordination of Firms and Resources (Oxford University Press, 2005).
Raghu Garud, Arun Kumaraswamy, and Richard N. Langlois, eds., Managing in the Modular Age: Architectures, Networks and Organizations (Blackwell, 2003).
Nicolai J. Foss and Peter G. Klein, eds., Entrepreneurship and the Firm: Austrian Perspectives on Economic Organization (Elgar, 2002).
Nicolai J. Foss and Volker Mahnke, eds., Competence, Governance, and Entrepreneurship: Advances in Economic Strategy Research (Oxford, 2000).
Nicolai J. Foss and Paul L. Robertson, eds., Resources, Technology, and Strategy: Explorations in the Resource-based Perspective (Routledge, 2000).

%d bloggers like this: