The Weekly Sage hopes to regularly bring brief profiles of key contributors to thought and faith before a Christian audience for historical education and awareness of valuable resources.

Sometimes history brings together a special combination of resources and people that form a center of intellectual influence. The Weekly Sage will occasionally consider such “Schools” together. As such this is the third of a five-week series on Chicago-School Economists. This will be understood simply to mean uniquely impactful members of the faculty of economics at the University of Chicago in the 20^th century.

George Stigler

• “The distribution of income by size is influenced by most of the basic economic magnitudes of the economy (the rates of wages and of interest, the rate of growth of income, and so forth) and by many of the demographic characteristics of the population (age structure, family size, birth and death rates, and the like). A change in the degree of inequality of income can arise for reasons unrelated to the dispersion of earnings of individuals, or changes in their amounts or shares of property income. A fuller analysis would show, I believe, that educational and medical advances have probably had a larger influence upon the distribution of income than many public policies directed to changing the distribution.”[1]
• “The economist, on the contrary, believes that the existence of individual cases of scandalous behaviour neither proves the importance of illicit self-serving behaviour by corporate officers, nor does it justify, say, a new set of political controls over corporations. Twenty-five or even a hundred cases of misbehaviour a year are trivial in their impact on events in an economy of several million corporations. If in each of these few abused corporations the officers overpay themselves fivefold, that will not amount to one tenth of 1 percent of corporate-officer payrolls. That is only half the story. There should of course be rules to punish unscrupulous corporate officers and keep their number down, and indeed, the conventional rules on fiducial responsibility and fraud serve precisely these purposes. But no conceivable alteration of corporate law or the Securities and Exchange Commission’s regulation will ever eliminate all such transgressions. Even if one could devise such draconian measures, they should not be adopted. They would so hamper ordinary corporate decisions as to cost stockholders far more than they saved. In the event, however, it was the lawyers’ kind of evidence that carried the day.”[2]

George Stigler (1911-1991), of all the economists I have so far profiled in The Weekly Sage, is the most skilled writer. His concision, use of humor, and realism all stand out from the written works of the profession as a whole. The reader of Stigler’s works, even those of a more technical nature, are never drowned in graphs, befuddled by abstraction, or bored by superfluous repetition. On the contrary, Stigler is often able to transmit significant questions and conclusions in matters of economic theory, scientific methodology, or historical analysis in only a few pages, which makes his work exceptionally rewarding among modern economists.

This readability is paralleled in Stigler’s key intellectual focuses – economic history, regulatory theory, information economics, and the impact of science on society. All these topics relate closely to the impact of economics on the life of the citizen. Certainly Stigler was as competent as any practitioner in the upper theory of the economic field; regarding elements such as value theory or general equilibrium analysis his historical critiques reveal clear mastery. Nevertheless, for example, when the field asserted the traditional hypothesis that there was only one price in the market, Stigler formulated the view that more and better prices can be found if a customer searches more extensively, making price rather a function of information, and bringing price theory closer to the ordinary American. Stigler was concerned about the actual condition of the ordinary person, both in the market and on the receiving end of one of his books or lectures, and his work bears this attitude out clearly.

George Stigler’s career was as significant as his writing is approachable. Born in a small town near Seattle to a family of immigrants, Stigler pursued undergraduate studies in business at the University of Washington, but graduated in 1931 during the throes of the Great Depression.[3] As a result, he pursued further study, gaining a master’s degree at Northwestern before ultimately pursuing PhD studies in Economics at the University of Chicago.

Completing his dissertation in intellectual and economic history under Frank Knight, Stigler was shaped, but not defined by the leading thinkers of the Chicago School in this time. Knight and Viner, while good friends, held different impressions of the free market system, and Henry C. Simons added a third perspective and influence on Stigler. However, Stigler argued that the students in graduate programs influence one another deeply, and Stigler’s compatriots, such as Milton Friedman and W. Allen Wallis, significantly shaped Stigler toward free-market thinking.

After graduating from Chicago, George Stigler taught at Iowa State, Brown, and Columbia, as well as serving at the National Bureau of Economic Research.[4] Additionally, he was a part of the National Resources Planning Board during the Great Depression.[5] These experiences allowed him to hone his quantitative skills and sharpen his theoretical positions, preparing Stigler for a return to Chicago as a teacher. There he pioneered studies of regulatory capture and the role of information in the market, earning him a founding membership in the Mont Pelerin Society, the presidency of that group from 1976 to 1978, the Nobel Prize in Economics in 1982, and the National Medal of Science in 1987. As a result of his prolific writing and teaching, Stigler should certainly be considered one of the most influential economists of the 20^th century.

Stigler’s beliefs are evident and impactful in his work – a deep respect for Adam Smith and a strong understanding of the influence of self interest in human decision-making flow throughout his writing. Readers with contrary commitments may find this a bit abrasive. However, rather than tying his views to anti-opposition rhetoric and straw men, Stigler always produces logical and calm argumentation accompanying his proposals. While these sometimes lead to seemingly radical conclusions – such as that the production and advocacy of certain ideas in academia and professional scholarship are based in the self-interest of professors – it is never easy to see where Stigler went wrong in his thinking.

As a member of the Chicago School, George Stigler consistently represented the professional excellence, public influence, and lasting legacy that so characterized that faculty over several decades. While other scholars may have founded the group or been more closely representative of it in the public mind, Stigler was crucial to the environment of engagement – in academia and society – that deeply characterized this unique group of thinkers. As such, acquaintance with his work will be valuable for understanding the Chicago School, economic history, economic theory, and the relation between science and society. Even better, a bit of reading in Stigler will probably be good for an honest chuckle and a pleasant learning experience.

• “We economists have traditionally made innumerable criticisms of the inefficiency of various policies, criticisms which have often been to their own (and my own) utter satisfaction. The meagre success of these criticisms in changing these policies, I am convinced, stems from the fact that more than narrow efficiency has been involved in every case – that inexplicit or incomprehensible goals were served by these policies and served tolerably efficiently. Tariffs were redistributing income to groups with substantial political power, not simply expressing the deficient public understanding of the theory of comparative costs. We live in a world that is full of mistaken policies, but they are not mistaken for their supporters.”[6]
• “The quantitative, or better, empirical study of economic life is the only way in which one can get a real feeling for the tasks and functioning of an economic system. The completely formal theorist does not know the range or subtlety of the economic problems that arise each day, for a man is not as resourceful or imaginative as a society of men. The formal theorist therefore has a much simplified picture of the world and of the complexity of the scientific theorems required to explain its operation. He fails to realize the extent to which the successful explanation of the workings of the economy demands an enlarged scientific technique, judgment, and information, whereas the experienced empirical worker has had the complexities of the economy burned into his soul. It is not a coincidence that the theorists who have turned socialist or communist have usually been completely abstract theorists, and the more radical wing of the New Dealers was not distinguished for its empirical knowledge of the American economy.”[7]

[1] George Stigler, The Theory of Price, (Chicago: University of Chicago Press, 1966), p. 311.

[2] George Stigler, Memoirs of an Unregulated Economist, (Chicago: University of Chicago Press, 1985), p. 54-55.

[3] Ibid, 9, 15.

[4] Ibid, 52.

[5] Ibid, 58.

[6] George Stigler, The Economist as Preacher and Other Essays, (Chicago: University of Chicago Press, 1982).

[7] George Stigler, Essays in the History of Economics, (Chicago: University of Chicago Press, 1965).