The Palgrave Companion to Chicago Economics

Contents
List of Figures
List of Tables
Introduction
Part I: Themes in Chicago Economics
	1: The Department of Economics at the University of Chicago, 1947–1982
		1	 Introduction
		2	 The Department in the 1940s and 1950s: The Fourth and Fifth Floors
		3	 The Workshops System
		4	 Fortress Chicago
		5	 Partial Versus General Equilibrium
		6	 Governance of the Department
		7	 Journal of Political Economy (JPE)
		8	 People
		9	 Teaching
		10	 The “Chicago Boys”
		11	 The Advantage of the Chicago Department
		References
	2: Economic History in Departments of Economics: The Case of the University of Chicago, 1892 to the Present
		1	 Introduction
		2	 The Early Years, 1892–1906: Laughlin, Veblen, Abbott, and Mitchell
		3	 Wright and the Functional Approach to Economic History, 1907–1947
		4	 Knight and Nef: Contrasting Views on the Role of Economic History
		5	 Hamilton: Economic History in the Service of History, Not Economics
		6	 Schultz: Institutions and Development
		7	 Fogel and McCloskey: Cliometrics and the New Historical Economics
		8	 The Demise of Economic History at Chicago
		9	 Conclusion
		References
			Primary Sources
			Secondary Sources
	3: International Economics at Chicago
		1	 Introduction
		2	 International Economics at Chicago
		3	 International Trade and Commercial Policy
			3.1	 Cost of Protection
			3.2	 The Effective Rate of Protection
			3.3	 Optimal Policy Intervention
		4	 Exchange Rates and Open Economy Monetary Economics
			4.1	 Exchange Rate Theory: Purchasing Power Parity
			4.2	 Flexible Exchange Rates
			4.3	 The Monetary Approach to the Balance of Payments
		5	 Conclusion
		References
	4: Chicago Political Economy and Its Virginia Cousin
		1	 Introduction
		2	 Chicago Political Economy: Starting with Frank Knight and Perfect Competition
		3	 Imperfect Competition: Knight Versus Most of the Profession
		4	 A Philosophical Excursus into Frank Knight’s Apparent Janus-Headedness
		5	 George Stigler and the Establishment of Chicago Political Economy
		6	 James Buchanan’s Relocation of Knight to Virginia
		7	 Buchanan and Virginia Political Economy: Noting Its Italianate Heritage
		8	 A Peroration
		References
	5: The Cowles Commission at the University of Chicago, 1939–1955
		1	 The Cowles Commission Comes to Chicago
		2	 Jacob Marschak Transforms the Cowles Commission
		3	 The Cowles Commission Approach to Simultaneous Equations Macroeconometric Modelling
		4	 Resource Allocation, General Equilibrium and Marshall Versus Walras
		5	 A Tentative Start in Behavioural Economics
		6	 The Cowles Commission Leaves the University of Chicago
		References
	6: Information at Chicago
		1	 Introduction
		2	 Information Arrives at Chicago
		3	 Searching for Chicago’s Credo
		4	 Information as a Capital Good
		5	 Rational Expectations Economics
		6	 Financial Economics, “Efficient Markets”, and Market Epistemology
		7	 Conclusion
		References
			Archival Material
			Other References
Part II: Some Chicago Economists
	7: James Laurence Laughlin (1850–1933)
		1	 Introduction
		2	 Biographical Sketch
		3	 The Road to Chicago
		4	 Bimetallism
		5	 The Attack on the Quantity Theory
		6	 Banking Reform and the Federal Reserve
		7	 Political Essays…
			7.1	 “Protection and Socialism”
			7.2	 “Political Economy and the Civil War”
			7.3	 “Our Political Delusion”
			7.4	 “The Unions Versus Higher Wages”
		8	 …And Some Controversial Public Speeches
		9	 Concluding Remarks
		References
			Main Works by J. Laurence Laughlin
			Other Works Referred To
	8: Thorstein Veblen (1857–1929)
		1	 Introduction
		2	 Early Life and Career
		3	 Phrase Making, and the Influence of Other Disciplines
		4	 Absorbing Darwin
		5	 Reaching Constructive Results
		6	 Conclusion
		References
			Main Works by Thorstein Veblen
			Other Works Referred To
	9: Frank H. Knight (1885–1972)
		1	 Introduction
		2	 Who Was Frank Knight?
		3	 Why Knight Was Important to the Chicago Tradition
		4	 How Chicago and Knight Departed from Each Other
		5	 Conclusion
		References
			Main Works by Frank Knight
			Other Works Referred To
	10: Lloyd W. Mints (1888–1989)
		1	 Introduction
		2	 Life and Career
		3	 Mints’s A History of Banking Theory in Great Britain and the United States and His Case Against the Real Bills Doctrine
			3.1	 Outline of the Book
			3.2	 Mints’s Case Against the Real Bills Doctrine
			3.3	 Reception and Criticism of the Book
		4	 Mints’s Views on Monetary Policy and Banking Reforms
			4.1	 Mints’s Theoretical Framework: Monetary Stability as a Condition for High-Employment Equilibrium
			4.2	 Stabilising the Monetary and Banking System: Mints’s Banking Reform Proposals
			4.3	 The Need for a Definite Monetary Policy Criterion: Mints’s Case for ‘Rules’ Against ‘Discretion’
			4.4	 Increasing the Effectiveness of Monetary Operations: Mints’s Case for Combining Monetary and Fiscal Policies
			4.5	 Reception and Criticism
		5	 Conclusion
		References
			Main Works by Lloyd W. Mints
			Other Works Referred To
	11: Paul H. Douglas (1892–1976)
		1	 Introduction
		2	 Douglas’s Boyhood: Career Foundations
		3	 Academic Pursuits Before Chicago
		4	 Douglas and the “Chicago School’s” Early Years
		5	 Academic and Public Policy Experience from 1920 to the Second World War
		6	 Douglas and the 1930s “Chicago Plan”
		7	 Douglas and “The Accord”
		8	 Lessons in Fiscal Responsibility and Government Ethics
		9	 Conclusion
		References
			Main Works by Paul Douglas
			Other Works Referred To
	12: Jacob Viner (1892–1970)
		1	 Introduction,
			1.1	 Career
		2	 The Chicago Years
		3	 The Pure Theory of International Trade
			3.1	 Comparative Advantage
			3.2	 Income Gains from Trade
		4	 The Theory of International Economic Policy
			4.1	 Dumping
			4.2	 Customs Unions
			4.3	 Free Trade and Protection
			4.4	 Exchange Rate Policy
		5	 Balance-of-Payments Adjustment Theory
			5.1	 The Transfer Problem
		6	 Microeconomics
		7	 Macroeconomics
			7.1	 Viner and Keynes
			7.2	 Monetary Policy
		8	 Economic Philosophy and Methodology
		9	 History of Economic Thought
		10	 Concluding Remarks
		References
			Main Works by Jacob Viner
			Other Works Referred To
	13: Henry Schultz (1893–1938)
		1	 Introduction
		2	 Biography
		3	 Henry Schultz’s Teaching and Research
		4	 Conclusion
		References
			Main Works by Henry Schultz
			Other Works Referred To
	14: Margaret Gilpin Reid (1896–1991)
		1	 Introduction
		2	 Biography
		3	 Economics of Household Production
		4	 The Economic Well-Being of Families
		5	 The Chicago Years
		6	 Professor Emerita
		7	 Conclusion
		References
			Archival Sources
			Main Works by Margaret Gilpin Reid
			Other Works Referred To
	15: Henry Calvert Simons (1899–1946)
		1	 Introduction
		2	 The Early Years: Becoming a Professional Economist
		3	 A Positive Program for Laissez-Faire
		4	 Becoming the ‘Head’ of a School
		5	 Conclusion
		References
			Main Works by Henry Calvert Simons
			Other Works Referred To
	16: Aaron Director (1901–2004)
		1	 Introduction
		2	 High School and College Years
		3	 The Roots of Chicago Law and Economics
		4	 Conclusion
		References
			Main Works by Aaron Director
			Other Works Referred To
	17: Theodore W. Schultz (1902–1998)
		1	 Introduction
		2	 A Research Impresario
		3	 Project Evaluation
		4	 Human Capital, Transforming Traditional Agriculture, and the Economics of Education
		5	 Conclusion
		References
			Archival Sources
			Main Works by Theodore W. Schultz
			Other Works Referred To
	18: Mary Jean Bowman (1908–2002)
		1	 Introduction
		2	 Life and Career
		3	 Early Career and the Post-war Transformation of American Economics
		4	 Income Distribution and Inequality
		5	 The Role of Education in Inequality
		6	 Human Capital Theory and the “New” Economics of Education
		7	 Education and Economic Development
		8	 The Economics of the Education System
		9	 Conclusion
		References
			Main Works by Mary Jean Bowman
			Other Works Referred To
	19: George J. Stigler (1911–1991)
		1	 Introduction
		2	 The ‘Rational, Decentralized Organization’ of Economists
		3	 Stigler’s List
		4	 Product Exhaustion
		5	 Goals
			5.1	 Knight’s Disciple
			5.2	 Stigler’s Diet Problem
			5.3	 Mandeville’s Disciple
		6	 Imperfect Competition
		7	 Fair Competition Among Theories and Theorists
		8	 Conclusion
		References
			Main Works by George J. Stigler
			Other Works Referred To
	20: Milton Friedman (1912–2006)
		1	 Introduction
		2	 The “Positive Economics” of the Early Friedman
		3	 The Consumption Function
		4	 Aspects of the Quantity Theory of Money
		5	 Monetary History
		6	 Stabilisation Policy
		7	 The Causes of Inflation
		8	 The Phillips Curve and Friedman’s Later Writing
		9	 Friedman’s Anti-Keynesianism
		10	 Popular Writing and the Advocacy of Monetarist Policy
		11	 Conclusion
		References
			Main Works by Milton Friedman
			Other Works Referred To
	21: Lloyd A. Metzler (1913–1980)
		1	 Introduction
		2	 Life and Career
		3	 Contributions
			3.1	 Theory of International Trade
			3.2	 Money, Interest and Prices
			3.3	 Business Cycles and Economic Fluctuations
			3.4	 Mathematical Economics and Statistics
		4	 Conclusion
		References
			Main Works by Lloyd A. Metzler
			Other Works Referred To
	22: Berthold F. Hoselitz (1913–1995)
		1	 Introduction
		2	 Hoselitz’s Life
		3	 Hoselitz as Economist and Social Scientist
			3.1	 Early Career
			3.2	 The Research Center in Economic Development and Cultural Change (REDCC)
			3.3	 Hoselitz’s Application of Parsons’ Pattern Variables to Issues in Economic Development
			3.4	 Urbanisation and Economic Development
			3.5	 Theories of Growth
			3.6	 The Role of the Entrepreneur
			3.7	 Hoselitz and a More General Chicago Approach to Economic Development
		4	 Conclusion
		References
			Archival Sources
			Bibliography of Bert Hoselitz’s Publications
			Main Works by Bert F. Hoselitz
			Other Works Referred To
	23: H. Gregg Lewis (1914–1992)
		1	 Introduction
		2	 Trade Unions and Their Impacts
			2.1	 Theoretical Underpinning
			2.2	 He DiD It
			2.3	 Unions and Wage Inequality
			2.4	 The Theory of Unions and a Normative Approach
		3	 Labour Demand and Supply
		4	 Other Research
		5	 Conclusion
		References
			Main Works by H. Gregg Lewis
			Other Works Referred To
	24: D. Gale Johnson (1916–2003)
		1	 Introduction
		2	 Formative Years
		3	 Early Contributions to the Economics of US Agriculture and Agricultural Policy
		4	 Farm Supply Relationships
		5	 Economics of Farm Labour and Farm Income
		6	 Farmland Markets and Tenancy
		7	 Soviet and Chinese Agriculture
		8	 World Agriculture in Disarray: Policy and Agricultural Progress
		9	 Population, Food, and Knowledge
		10	 Johnson’s Contributions to Chicago Economics and Economics at Chicago
		11	 Conclusion
		References
			Main Works by D. Gale Johnson
			Other Works Referred To
	25: Albert E. Rees (1921–1992)
		1	 Introduction
		2	 Al Rees as a Generator of Data
			2.1	 The Chicago Labor Market Study
			2.2	 The New Jersey Income Maintenance Experiment
		3	 Rees and Improved Economic Measurement
		4	 Rees as a Macroeconomist
			4.1	 Professor Rees Goes to Washington
		5	 Rees on Trade Unions
		6	 Other Research Interests
		7	 Conclusion
		References
			Main Works by Albert E. Rees
			Other Works Referred To
	26: Merton H. Miller (1923–2000)
		1	 Introduction
		2	 Management Science
		3	 The M&M Classics
		4	 The Impact of the M&M Classics
		5	 Asset Pricing
		6	 Financial Innovation and Regulation
		7	 The Contribution to Macroeconomics
		8	 Conclusion
		References
			Main Works by Merton H. Miller
			Other Works Referred To
	27: Harry G. Johnson (1923–1977)
		1	 Introduction
			1.1	 Harry’s Life
			1.2	 Harry’s Academic Career
			1.3	 Harry at Harvard
		2	 Harry as a Mentor and Researcher
		3	 Harry’s Important Work and Its Relationship to Chicago
			3.1	 Harry’s Contributions to Economics
		4	 Harry as a Mentor of Young Economists
		5	 Harry’s Professional Code of Conduct
		6	 A Word on Harry’s Great Humanity
		7	 Conclusion
		References
			Cited Works by Harry G. Johnson
			Other Works Referred To
	28: Arnold C. Harberger (1924–)
		1	 Introduction
		2	 Key Research Contributions
			2.1	 The Welfare Cost of Monopoly
			2.2	 The General Equilibrium Modelling of Tax Incidence
			2.3	 Applied Welfare Economics
			2.4	 Cost-Benefit Analysis
			2.5	 Macroeconomics
		3	 Influence
		4	 Some Guidelines for Reformers
		5	 Conclusion
		References
			Main Works by Arnold C. Harberger
			Other Works Referred To
	29: George S. Tolley (1925–2021)
		1	 Introduction
		2	 Tolley Family History
		3	 Graduate Student and Assistant Professor at Chicago
		4	 North Carolina State University, the USDA, and the Emergence of New Interests
		5	 Contributions to Urban Economics
		6	 Contributions to Environmental Economics
		7	 Valuing Health for Benefit-Cost Analysis
		8	 Other Research and Public Policy Activities
		9	 George Tolley as Teacher and Mentor
		10	 Conclusion
		References
			Main Works by George S. Tolley
			Other Works Referred To
	30: Robert W. Fogel (1926–2013)
		1	 Introduction
		2	 Railroads
		3	 Slavery
		4	 Religion
		5	 Health and Mortality
		6	 Seminars, Students, and Personalities
		7	 Conclusion
		References
			Main Works by Robert W. Fogel
			Other Works Referred To
	31: Arnold Zellner (1927–2010)
		1	 Introduction
		2	 Biography
		3	 Major Scientific Contributions of Arnold Zellner
			3.1	 Overview
			3.2	 Seemingly Unrelated Regressions
			3.3	 Bayesian Statistics and Econometrics
			3.4	 Stationary and Non-stationary Time Series Models
			3.5	 Panel Data Issues
			3.6	 Simultaneous Equations Models and Time Series Analysis (SEMTSA)
			3.7	 Alternative Representations for Multivariate ARMA Processes
			3.8	 The Use of Several Alternative Model Representations in Empirical Modelling and Forecasting
			3.9	 Alternative Model Representations
			3.10	 Modelling Approach
			3.11	 Marginalisation and Temporal Aggregation of Linear ARMA Processes
			3.12	 Challenges for SEMTSA
		4	 Conclusion
		References
			Main Works by Arnold Zellner
			Other Works Referred To
	32: Gary S. Becker (1930–2014)
		1	 Introduction
		2	 Life
		3	 Early Years
		4	 Building a Network Between Columbia, the NBER, and Chicago
		5	 Human Capital and the Columbia Labor Workshop
		6	 The Columbia Labor Workshop and the Beginnings of the Economic Approach to Human Behaviour
		7	 The Return to Chicago and the Development of the Economics of the Family
		8	 Later Work: Exploring the Interaction Between Social Relations and Individual Behaviour
		9	 A Reluctant Public Intellectual
		10	 Conclusion
		References
			Main Works by Gary S. Becker
			Other Works Referred To
	33: Robert E. Lucas, Jr. (1937–)
		1	 Introduction
		2	 Initiator of the DGE Programme
		3	 Contributions to Monetary Theory
		4	 On Growth Theory
		5	 A Chicago Economist?
		References
			Main works by Robert E. Lucas, Jr.
			Other Works Referred To
	34: Sherwin Rosen (1938–2001)
		1	 Introduction
		2	 Equalising Differences
			2.1	 Hedonic Prices and Implicit Markets
			2.2	 From Smith Through Friedman and Kuznets to Mincer and Lewis
			2.3	 Applications: Value of Human Life and Racial Discrimination Among Teachers
			2.4	 Spatial Amenities: Wages, Rents, and the Quality of Life
			2.5	 Monopoly and Product Quality
		3	 Earnings Inequality
			3.1	 Schooling
			3.2	 Superstars
			3.3	 Hierarchies and Sorting
			3.4	 Tournaments
		4	 Surveys and Other Papers
			4.1	 Occupations: Lawyers, Teachers, and Engineers
			4.2	 Dynamics: Housing, Cattle, and Potatoes
		5	 Conclusion
		References
			Main Works by Sherwin Rosen
			Other Works Referred To
	35: Richard A. Posner (1939–)
		1	 Introduction
		2	 Biographical Summary
		3	 From Chicago Law and Economics to Chicago Economic Analysis of Law
		4	 Posner’s Economic Analysis of Law as a Contribution to Chicago Economics
			4.1	 Judges, the Law, and the Market
			4.2	 Efficiency, Wealth Maximisation (Kaldor-Hicks), and Illegal Activities
			4.3	 Wealth Maximisation, Ethics, and Justice
			4.4	 Posner’s Jurisprudence, Notes, Opinions: Attempts to Put Chicago Econ into Law
		5	 Transition: Is Posner a Chicago Economist?
			5.1	 Pragmatism
			5.2	 Switch to Keynesian Economics and Criticisms of Modern Chicago Economics
		6	 Conclusion
		References
			Main Works by Richard A. Posner
			Other Works Referred To
	36: Eugene F. Fama (1939–)
		1	 Introduction
		2	 Biography
		3	 Efficient Markets
		4	 Asset Pricing
		5	 Corporate Finance and Organisational Economics
		6	 Conclusion
		References
			Main Works by Eugene F. Fama
			Other Works Referred To
	37: James J. Heckman (1944–)
		1	 Introduction to the First Six Sections,
		2	 Labour Supply
		3	 The Selection Model and Discrete Choice
		4	 Labour Market Dynamics
		5	 Evaluation of Labour Market Programmes and Human Capital Incentives
		6	 Summary
		7	 Contributions Since 2001
		8	 Structural Econometrics
		9	 Human Capital: Beyond Educational Attainment and Cognitive Skills
		10	 Life-Cycle Skill Formation
		11	 Conclusion
		References
			Main Works by James J. Heckman
			Other Works Referred To
	38: Richard H. Thaler (1945–)
		1	 Introduction
		2	 The Emergence of Behavioural Economics
		3	 Showing Why Psychology Matters for Economics
			3.1	 The Psychology of Time Preferences and Self-Control
			3.2	 Behavioural Biases and Market Behaviour
			3.3	 Behavioural Biases in Finance and Consumer Choice
		4	 Putting Behavioural Economics to Work
			4.1	 Behavioural Economics as a Toolkit
			4.2	 Libertarian Paternalism and Nudge
		5	 Conclusion
		References
			Main Works by Richard H. Thaler
			Other Works Referred To
	39: Lars Peter Hansen (1952–)
		1	 Introduction
		2	 Generalized Method of Moments (GMM)
		3	 Testing Asset Pricing Models
		4	 Term Structure of Risk
		5	 Rational Expectations Econometrics
		6	 Econometric Analysis of Misspecified Models
		7	 Model Misspecification Concerns Faced by Economic Agents
		8	 Policy-Oriented Work
		9	 Conclusion
		References
			Main Works by Lars Peter Hansen
			Other Works Referred To
Notes on Contributors
Index