Arline Alchian Hoel reports that her father, Armen Alchian, “passed away peacefully in his sleep early this morning at his home in Los Angeles.” He was 98 years old.
Armen Alchian was a major figure in the economics profession for more than half a century. At UCLA, where he spent his academic career as a faculty member in the department of economics, he was a legend to generations of graduate students, who were required to take the price theory course he taught in the first year of the program. He used the Socratic method: he simply walked into the class each day and asked a student a question. From that point, the discussion went back and forth between teacher and students. Woe to any student who had arrived unprepared—and sometimes to those who had prepared. Public embarrassment was the price such students had to pay. But in the end, the students came away from the course with a healthy measure of their teacher’s mastery of applied price theory.
And master he was. Besides having a knack for making sense of countless aspects of economic and social life by viewing them as relative-price problems, Alchian helped to blaze trails toward extremely valuable improvements in microeconomic analysis by bringing into the analysis careful treatments of information, uncertainty, transaction costs, and property rights. For him, little difference existed between micro and macro; both were to be understood by using the same basic economic analysis of individual choice.
Alchian’s textbook, written with Bill Allen, differed from existing texts. It was, for one thing, not dumbed down. In addition, it included many questions at the end of each chapter, some of which were quite difficult. At the University of Washington in the late 1960s and 1970s, we used the Alchian and Allen book at every level: introductory, intermediate, and first-year graduate. The only difference came in the level of sophistication we expected in the answers to the questions. Although Alchian did not lack mathematical skills—from 1942 to 1946 he worked as a statistician for the Army Air Corps—his work did not display much mathematical formality. For the most part, he said what he meant in straightforward English prose, spiced with wit and sparkling asides.
Many of Alchian’s students and friends believed that he well deserved a Nobel prize in economics, but this recognition never came to him. Yet, aside from Ronald Coase, no one had a greater influence in creating and fostering what has come to be known as the New Institutional Economics, one of the most notable improvements in mainstream economics during the past half century. Armen was also a genial and friendly man who loved to play golf. He was always at ease among colleagues and affected none of the arrogance that lesser lights sometimes impose on others. He leaves a rich legacy of grateful students and friends, and a profession substantially advanced in no small part because of his creative efforts.
