From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.
“George Stigler, Economist Extraordinaire” by Milton Friedman The Chicago Maroon, 10 January 1992 © The Chicago Maroon
George J. Stigler was one of the great economists of the twentieth—or any other—century. There is hardly a field in economics that has not been enriched by his insights and his dedication to a fuller understanding of how our society works. His first field of specialization was intellectual history, which remained a continuing interest throughout his life. His doctoral dissertation, published as Production and Distribution Theory, was followed by a steady flow of perceptive, thoughtful, and beautifully written articles and books interpreting the contributions of his predecessors. Almost single-handedly, he kept the field alive, despite widespread lack of interest within the profession. In more recent years, interest in the field, much to his regret, has declined sharply. He attributed that to the development of the science, which, he argued, in every field has produced a decline of interest in the history of its past.
The history of thought provided a rich seed-bed for his extraordinarily prolific scientific work. A deep understanding of the ideas of the great economists of the past gave him a strong foundation on which to build an analysis of contemporary issues. Few economists have so consistently and successfully combined economic theory with empirical analysis. He regarded economic theory not as a branch of abstract mathematics, to be admired for its elegance, but as a working tool for explaining the real world. Accordingly, his many contributions to economic theory were made primarily in the course of seeking to understand puzzling phenomena: from “The Cost of Subsistence,” one of the earliest applications of linear programming, to the effect of minimum wages and rent control, Domestic Servants in the United States, Employment and Compensation in Education, and on and on.
His impact was greatest and most lasting in three fields in particular: those he labelled “The Economics of Information,” The Organization of Industry, and “The Theory of Economic Regulation.”
“The Economics of Information” is the title of a seminal article, published in 1961, that gave birth to an essentially new area of economists, and which, in his intellectual autobiography, he termed, “My most important contribution to academic theory.” The article begins, “One should hardly have to tell academicians that information is a valuable resource: knowledge is power. And yet it occupies a slum dwelling in the town of economics. Mostly it is ignored.” Stigler then proceeds to illustrate the importance of subjecting information to economic analysis with two examples: the dispersion of prices and advertising.
This article is a splendid illustration of several of Stigler’s unique virtues: creativity, which he defined as consisting of “looking at familiar things or ideas in a new way,” the capacity to extract new insights about those seemingly familiar things, and the ability to state his main points in a provocative and eminently readable way.
The Organization of Industry is the title of a book published in 1968. Its “main content,” Stigler says in the preface, “is a reprinting of 17 articles I have written over the past two decades …
1 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.
although the main topics in industrial organization are touched upon, the touch is often light. The ratio of hypotheses to reasonably persuasive confirmation is distressingly high in all of economic literature, and it must be my chief and meager defense is that I am not the worst sinner in the congregation.”
Far from being the worst sinner, Stigler’s main contribution to the field, both in this book and later writing, was the use of empirical evidence of test hypotheses designed to explain features of industrial organization. Article after article combines subtle theoretical analysis with substantial nuggets of empirical evidence, presented so casually as to conceal the care with which the data were compiled and great effort hat was expended what data were both relevant and accessible.
“The Theory of Economic Regulation” is the title of an article published in 1971 that accurately describes its contents, but conceals its implications for a far wider range of issues. It is one of a series of contributions to our science.
Like most great economists, Stigler was also a great teacher. As one of his students, James Lothian, wrote in a letter to me: “He was a professor who made a profound impression on me and whom I have always recalled with great fondness. I didn’t come away from [his classes] with reams of notes, the little cookbooks that graduate students love, but his lectures taught me how to think about economics. As a student, I found him to be amaxingly patient. His public persona was one of not suffering fools gladly, but that certainly did not come across in the classroom or in his individual meetings with us… he seemed quite willing to put up with foolishness from us as long as it seemed like we might ultimately get somewhere with what we were doing, which when all was said and done, I think we did.”
George Stigler was an ardent believer in human freedom and a founding member of the Mount Pelerin Society. He was persuaded, partly by his own scientific work, that government intervention generally did more harm than good. Yet he was never active in the public policy area, partly because of his conviction that the “public interest” approach of economic policy was false, so that, as I have already quoted him, "Until the basic logic of political life is developed, reformers will be ill-equipped to use the state for their reforms, and victims of the progressive use of the state’s support of special groups will be helpless to protect themselves." Though I fully agreed with this proposition, I have been much more involved in public policy than he was. “Milton,” he was fond of saying, “wants to change the world; I only want to understand it.”
I cannot end without a personal comment. George Stigler was one of my wife’s and my closest friends for nearly six decades. Our lives and our work were closely intertwined for most of those decades. He had a major influence on my own scientific work, my understanding of economic phenomena, and, no less on our enjoyment of life. I have never known him to do anything mean or unworthy. A delightful companion and colleague, he combined wit and substance as few others have been able to do. He brought a sense of joy and excitement to any company he joined. He was always open-minded, ready to take criticism and to give as good as he received. He was always considerate of others could be counted on to be helpful when help was needed, made a point of not imposing on others—a favorite remark was “fish and guests smell after three days,” which was never true of him as a guest. The world is a far dimmer place for us because of his death. It truly marks the end of an era.
2 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.
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