An Unusual History: A Conversation Between Two Economists About the Economics Department at the University of Chicago

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tags: neoliberalism, economics, University of Chicago, intellectual history, neoclassical economics

Editor’s note [ProMarket]: The current debate in economics seems to lack a historical perspective. To try to address this deficiency, we decided to launch a Sunday column on ProMarket focusing on the historical dimension of economic ideas. You can read all of the pieces in the series here.


housands of pages have been written about the Department of Economics at Chicago. Some works have been celebratory and others have been critical; some have been deep, and others have been superficial. This piece, based on a longer paper, is about the Department of Economics at the University of Chicago, as seen by one of its long-term faculty members —Arnold C. Harberger—and one of its former students, Sebastian Edwards. The period covered is from 1947 through 1982. That is, 35 years that span form the time Harberger arrived as a student to the time Edwards graduated with a PhD. The approach that we have decided to follow is somewhat unusual: the paper has the form of a conversation between two people from different generations, two colleagues and friends, two professional economists who have traveled together around the world providing advice to governments on almost every continent.

Of course, we played very different roles in the Department. Harberger was a faculty member for over 30 years, and chairman for 12 years. He was a colleague of some of the most famous economists of the second half of the twentieth century and early decades of the twentieth-first, and hired many of them. After four years as a student, Edwards went to UCLA, where he has spent most of his career. He looked at Chicago from afar, but always with great interest.

Sebastian Edwards: You enrolled in the Department of Economics in the fall of 1947, after having spent a year studying international relations at the University of Chicago. At the time, the Department had a large number of very prominent members, including some credited as having founded the “First Chicago School.” People like Frank Knight, Lloyd Mints, Henry Simons, and others. Also, Milton Friedman had just arrived as a faculty member, in 1946. How was the Department when you joined? From today’s perspective, what do you think were the most salient characteristics of the place? And, at the time, how was it different from other leading departments such as Harvard and Yale?

Arnold C. Harberger: In 1947, there were lots of students, but it really did not feel crowded. It was very exciting and to us it was clear that it was a special place. The fact that the Cowles Commission was there added to the sense that this was a unique place. I was hired as a research assistant at Cowles in March 1949 and I shared an office with Stanley Reiter, who ended up having a very distinguished career at Northwestern.

SE: Some people have said that the Chicago School started with Frank Knight and from him different branches spurred out: Henry Simons, Milton Friedman, George Stigler. Some people say that what made it operational was Milton’s monetary analyses, plus Viner’s and Friedman’s price theory, and George Stigler’s and Ronald Coase’s views on externalities, regulatory capture, and transaction costs.

ACH: If one talks about the existence of a “Chicago School,” one also needs to talk about T.W. Schultz. He was incredibly influential, very talented, and a great economist. He and D. Gale Johnson ran an extremely prestigious agricultural economics program at Chicago. When I think of the Chicago School, I think of three principles: theory is of utmost importance, and should guide economic thinking; theoretical constructs should be confronted with the real world, they should be tested, there should be a lot of data analysis; and when in doubt, always come back to fundamental price theory, to the functioning of markets.

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