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1. Personal History
George Stigler, one of the great economists of all time, with a gift for writing matched among modern economists only by John Maynard Keynes, was born January 17, 1911 in Renton, Washington, a suburb of Seattle, the only child of Joseph and Elisabeth Stigler. His parents had separately migrated to the United States at the end of the nineteenth century, his father from Bavaria, his mother from what was then AustriaHungary. Stigler went to public schools in Seattle, and then to the University of Washington, receiving a BA in 1931. Although he says that he had ‘no thought of an academic career’ when he graduated from college, he applied for and was awarded a fellowship at Northwestern University for graduate study in the business school, receiving an MBA in 1932 (Stigler 1988, p.15). More important, at Northwestern he developed an interest in economics as an object of study in its own right and decided on an academic career. After one further year of graduate study at the University of Washington, he moved to the University of Chicago where he found the intense intellectual atmosphere he sought. Chicago became his intellectual home for the rest of his life, as a student from 1933 to 1936, a faculty member from 1958 to his death in 1991, and a leading member of, and contributor to, the ‘Chicago School’ throughout. He received his PhD in 1938, with a thesis, now a classic, on the history of neoclassical theories of production and distribution (Stigler 1941).
At Chicago, Stigler was particularly inﬂuenced by Frank H. Knight, under whom he wrote his dissertation, Jacob Viner, who taught economic theory and international economics, John U. Nef, economic historian, and their younger colleague, Henry Simons, who became a close personal friend and whose A Positive Program for Laissez Faire greatly inﬂuenced many of Stigler’s contemporaries.
‘At least as important to me,’ Stigler writes (1988, pp. 23–5), ‘as the faculty were the remarkable students I met at Chicago,’ and goes on to list W. Allen Wallis, Milton Friedman, Kenneth Boulding, and Robert Shone from Britain, Sune Carlson from Sweden, Paul Samuelson, and Albert G. Hart—all of whom subsequently had distinguished careers.
In 1936, Stigler was appointed an assistant professor at Iowa State College (now University), and shortly thereafter was married to Margaret Mack. The Stiglers had three sons: Stephen, a professor of statistics at the University of Chicago, David, a lawyer in private practice, and Joseph, a businessman. Mrs. Stigler died in 1970, tragically without any advance warning. George never remarried.
In 1938, Stigler accepted an appointment at the University of Minnesota, going on leave in 1942 to work ﬁrst at the National Bureau of Economic Research and then at the Statistical Research Group of Columbia University, where he joined a group directed by W. Allen Wallis that was engaged in war research on behalf of the armed services. When the war ended in 1945, George returned to the University of Minnesota, but remained only one year, leaving in 1946 to accept a professorship at Brown University, where he also remained only one year before moving to Columbia University in 1947 and then, in 1958, to the University of Chicago where he remained the rest of his life. At Chicago, he became an editor of the Journal of Political Economy, established the Indus- trial Organization Workshop, which achieved recognition as the key testing ground for contributions to the ﬁeld of industrial organization, and in 1977 founded the Center for the Study of Economy and the State, serving as its director until his death in Chicago on December 1, 1991.
Stigler served as President of the American Economic Association in 1964, and of the History of Economics Society in 1977. He was elected to the National Academy of Sciences in 1975. He received the Alfred Nobel Memorial Prize in Economic Science in 1982 and the National Medal of Science in 1987.
Stigler’s governmental activities included: serving as a member of the Attorney General’s National Committee to Study the Antitrust Laws, 1954–5; Chairman, Federal Price Statistics Review Committee, 1960–1; member, Blue Ribbon Panel of the Department of Defense, 1969–70; Vice Chairman, Securities Investor Protection Corporation, 1970–3; Co-Chairman, Blue Ribbon Telecommunications Task Force, Illinois Commerce Commission. 1990–1.
2. Scientiﬁc Contributions
Stigler made important contributions to a wide range of economic areas: (a) history of thought, (b) price theory, (c) economics of information, (d) organization of industry, and (e) theory of economic regulation. In addition, (f ) he wrote many inﬂuential essays and reviews, and was a long-time editor.
2.1 Intellectual History
Intellectual history was Stigler’s ﬁrst ﬁeld of specialization and remained a continuing interest throughout his life. His doctoral dissertation, published as Production and Distribution Theories, 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. More recently, he succeeded in bringing about a revival of interest in the ﬁeld, which is currently ﬂourishing. In the words of one of his students, ‘The versatility of his work in [the history of economic thought] has been matched by its depth and insight—and unmatched by any other historian of economic thought’ (Sowell 1987, p. 498; the rest of this paragraph draws from Sowell’s excellent summary of ‘Stigler as an Historian of Economic Thought’). In addition to analyzing the theories of particular economists, he examined particular concepts, such as perfect competition and utility, traced trends in the economics profession, considered the inﬂuence of economic theories on events and vice-versa, and the meaning of originality. Many of his important articles in this area are collected in a 1965 volume, Essays in the History of Economics.
The history of thought provided a rich seedbed for Stigler’s wide-ranging scientiﬁc work. Stigler regarded economic theory, in the words of Alfred Marshall, as ‘an engine for the discovery of concrete truth,’ not as a subject of interest in its own right, a branch of mathematics. Few economists have so consistently and successfully combined economic theory with empirical analysis, or ranged so widely.
2.2 Price Theory
Stigler’s ﬁrst important publication after his doctoral thesis was a textbook, The Theory of Competitive Price, published in 1942, followed by four revised versions under the title The Theory of Price (1946, 1952, 1966, 1987). His textbook is unique among intermediate textbooks in price theory in its systematic linking of highly abstract theory to observable phenomena. It is unique also in its concise yet rigorous exposition.
One of his earliest papers (1939) broadened the concept of a short-run cost curve to accommodate the observation that ﬁrms faced with ﬂuctuating demand could build ﬂexibility into their ﬁxed equipment at a cost of not achieving the lowest possible cost for a particular output.
Another early paper (1945) presented a formal analysis of determining the minimum cost of an adequate diet, supplemented by an empirical calculation of the minimum cost—one of the earliest applications of linear programming. ‘The procedure,’ he explained, ‘is experimental because there does not appear to be any direct method of ﬁnding the minimum of a linear function subject to linear conditions’ (p. 310). Two years later George Dantzig provided such a direct method, the simplex method, now widely used in many economic and industrial applications (1987).
Like these two examples, Stigler’s many later contributions to price theory were a by-product of seeking to understand puzzling real world phenomena, and are best discussed in that context.
2.3 Economics Of Information
‘The Economics of Information’ is the title of a seminal article, published in 1961. In his intellectual autobiography, Stigler termed it, ‘My most important contribution to economic theory’ (1988, pp. 79–80). 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 1961, p. 213).
This brief 12-page 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.
Stigler illustrates the importance of subjecting information to economic analysis with two familiar observations—that there is generally no single ‘market price’ but a variety of prices that ‘various sellers (or buyers) quote at any time’ and that ‘advertising … is an enormously powerful instrument for the elimination of ignorance … and is normally ‘‘paid’’ for by the seller.’ In each case, he presents a sophisticated analysis that explains what determines the observed phenomena, an analysis that has empirical implications capable of being contradicted by observation. He concludes that ‘The identiﬁcation of sellers and the discovery of their prices are only one sample of the vast role of the search for information in economic life’ (quotes from Stigler 1988, pp. 213, 220, 221, 224).
As occurred throughout his career in every ﬁeld Stigler touched, this research paper was less important for the particular familiar observations that it analyzed than for giving birth to an essentially new area of study for economists. There followed an outpouring of further studies by him but even more by his students and others that have radically altered the accepted body of economic theory.
This aspect of his inﬂuence was stressed in the citation for his Nobel Prize, which noted that Stigler’s ‘studies of the forces which give rise to regulatory legislation have opened up a completely new area of economic research … Stigler is also recognized as the founder of ‘‘economics of information’’ and ‘‘economics of regulation,’’ and one of the pioneers of research in the intersection of economics and law.’
2.4 The Organization Of Industry
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 [including the ‘‘Economics of Information’’] in the area of industrial organization. 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 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 to 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 the eﬀort that was expended to determine what data were both relevant and accessible. These articles record the shift in Stigler’s views on antitrust—from initial support of an activist antitrust policy to skepticism about even a minimalist policy.
One of the most inﬂuential of the articles in the book was on ‘The Economies of Scale’ in which he introduced ‘the survivor principle’ as a way to use market data to determine the eﬃcient size of an enterprise in a particular industry. The approach has since become widely accepted.
In 1962, he published an article, in collaboration with Claire Friedland, his long-time associate, entitled ‘What Can Regulators Regulate? The Case of Electricity,’ which concluded that regulation of electric utilities had produced no signiﬁcant eﬀect on rates charged. Schmalensee (1987, p. 499) notes that ‘This essay stimulated a great deal of important empirical work on public regulation in the USA. It also posed a basic problem: if regulation does not generally achieve its stated objectives, why have so many agencies been established and kept in existence?’
2.5 Economic Regulation
‘The Theory of Economic Regulation’ (1971b) attempts to answer that question. It is one of a series of contributions by Stigler to what has since come to be called ‘public choice’ economics: the shift from viewing the political market as not susceptible to economic analysis, as one in which disinterested politicians and bureaucrats pursue the ‘public interest,’ to viewing it as one in which the participants are seeking, as in the economic market, to pursue their own interests, and hence subject to analysis with the usual tools of economics. The seminal work that deserves much of the credit for launching ‘public choice,’ The Calculus of Consent, by James Buchanan and Gordon Tullock (1962), appeared in the same year as the Stigler– Friedland article.
The ‘central thesis of the article,’ Stigler wrote, ‘is that, as a rule, regulation is acquired by the industry and is designed and operated primarily for its beneﬁt.’ He notes that two ‘alternative views of the regulation of industry are widely held. The ﬁrst is that regulation is instituted primarily for the protection and beneﬁt of the public at large or some large subdivision of the public. The second view is essentially that the political process deﬁes rational explanation.’ He then gives example after example to support his own thesis, which is, by now, the orthodox view in the profession, concluding: ‘The idealistic view of public regulation is deeply imbedded in professional economic thought. The fundamental vice of such a [view] is that it misdirects attention’—to preaching to the regulators rather than changing their incentives (quotes from Stigler 1971b, p. 3).
‘Smith’s Travels on the Ship of State’ (1971a), published in the same year as ‘The Theory of Economic Regulation,’ raises the same question on a broader scale. Smith gives self-interest pride of place in analyzing the economic market, but does not give it the same role in analyzing the political market. Smith’s failure to do so constitutes Stigler’s main—indeed, nearly only—criticism of the Wealth of Nations, that ‘stupendous palace erected upon the granite of self interest’ (Rosenberg 1993, p. 835). The same theme pervades many of Stigler’s later publications.
2.6 Essays, Editorship, And Reviews
In addition to his proliﬁc academic publications, Stigler published a great many essays for a broader audience, many given as talks to a wide variety of audiences. The most important are collected in three volumes, The Intellectuals and the Marketplace (1963), The Citizen and the State (1975), and The Economist as Preacher (1982). ‘There he (the intelligent layman) will ﬁnd a potpourri of wit and seriousness blended with a high writing style’ (Demsetz 1982, p. 656). ‘For 19 years Stigler was a very successful editor of the Journal of Political Economy. Under his leadership this journal solidiﬁed its high reputation among economists’ (Becker 1993, p. 765).
Stigler was also a proliﬁc reviewer of books. His complete Bibliography: lists 73 reviews in 24 publications ranging from strictly professional, such as the Journal of Political Economy (22) and the American Economic Review (10) to the popular, such as the Wall Street Journal (5), and the New York Times (3), and dating from 1939 to 1989.
Stigler’s last book, his intellectual autobiography, published in 1988, Memoirs of an Unregulated Economist, is a delight to read. As I described it at the time: ‘Stigler’s memoirs are a gem: in style, in wit, and above all, in substance, they reﬂect accurately his own engaging personality and his extraordinarily diverse contributions to our science.’
3. Concluding Comments
An evaluation of Stigler’s scientiﬁc contribution would be incomplete without recognizing his role as a teacher and colleague. As teacher, he inspired his students by his own high standards, and instilled a respect for economics as a serious subject concerned with real problems. As one of his students, Thomas Sowell, wrote (1993, p. 788): ‘What Stigler really taught, whether the course was industrial organization or the history of economic thought, was intellectual integrity, analytical rigor, respect for evidence—and skepticism toward the fashions and enthusiasms that come and go.’
Stigler supervised many doctoral dissertations at both Columbia and the University of Chicago. According to Claire Friedland, Stigler’s associate for many years, he served on more than 40 thesis committees at Chicago, and perhaps 40 more at Columbia, and chaired a considerable fraction of those committees. His students come close to dominating the ﬁeld of industrial organization.
Stigler was an extremely valuable colleague. He provided much of the energy and drive to the interaction among members of the Chicago economics department, business school, and law school that came to be known as ‘The Chicago School.’ His Workshop in Industrial Organization was an outgrowth of a law school seminar started by Aaron Director that Stigler cooperated in running when he came to Chicago. His relations were especially close with Aaron Director, Gary Becker, Richard Posner, Harold Demsetz, and myself, enhancing signiﬁcantly the scientiﬁc productivity of all of us.
- Becker G S 1993 George Joseph Stigler, January 17, 1911– December 1, 1991. Journal of Political Economy 101: 761–7
- Buchanan J M, Tullock G 1962 The Calculus of Consent. University of Michigan Press, Ann Arbor, MI
- Dantzig G B 1987 Linear programming. In: Eatwell J, Milgate M, Newman P (eds.) The New Palgrave: A Dictionary of Economics. Stockton Press, New York, Vol. 3, pp. 203–5
- Demsetz H 1982 The 1982 Nobel Prize in economics. Science 218: 655–7
- Rosenberg N 1993 George Stigler: Adam Smith’s best friend. Journal of Political Economy 101: 833–48
- Schmalensee R 1987 Stigler’s contributions to microeconomics and industrial organization. In: Eatwell J, Milgate M, Newman P (eds.) The New Palgrave: A Dictionary of Economics. Stockton Press, New York, Vol. 4, pp. 499–500
- Sowell T 1987 Stigler as an historian of economic thought. In: Eatwell J, Milgate M, Newman P (eds.) The New Palgrave: A Dictionary of Economics. Stockton Press, New York, Vol. 4, pp. 498–9
- Sowell T 1993 A student’s eye view of George Stigler. Journal of Political Economy 101: 784–92
- Stigler G J 1939 Production and distribution in the short run. Journal of Political Economy 47: 305–27
- Stigler G J 1941 Production and Distribution Theories, 1870 to 1895. Macmillan, New York
- Stigler G J 1942 The Theory of Competitive Price. Macmillan, New York
- Stigler G J 1945 The cost of subsistence. Journal of Farming Economy 27: 303–14
- Stigler G J 1946 The Theory of Price, rev. edns. 1952, 1966, 1987. Macmillan, New York
- Stigler G J 1961 The economics of information. Journal of Political Economy 69: 213–25
- Stigler G J 1963 The Intellectual and the Market Place, and Other Essays. Free Press of Glencoe, New York
- Stigler G J 1965 Essays in the History of Economics. University of Chicago Press, Chicago, IL
- Stigler G J 1968 The Organization of Industry. Irwin, Homewood, IL
- Stigler G J 1971a Smith’s travels on the ship of state. History of Political Economy 3: 265–77
- Stigler G J 1971b The theory of economic regulation. Bell Journal of Economics and Management Strategy. Sci. 2: 3–21
- Stigler G J 1975 The Citizen and the State: Essays on Regulation. University of Chicago Press, Chicago, IL
- Stigler G J 1982 The Economist as Preacher, and Other Essays. University of Chicago Press, Chicago, IL
- Stigler G J 1988 Memoirs of an Unregulated Economist. Basic Books, New York
- Stigler G J, Friedland C 1962 What can regulators regulate? The case of electricity. Journal of Law and Economics 5: 1–16