Identifying a “Chicago School” of economics: On the origins, diffusion, and evolving meanings of a famous brand name

By Steven G. Medema

This post is part of the HISRECO 2018 series. Participants of the 2018 HISRECO conference were asked to write short blogposts to highlight their contribution to the conference for a general audience.  The idea of this blogged conference comes from the « Learning by the book » conference in Princeton, published as a series on the History of Knowledge Blog. This post is number 4 of 7.

The Chicago school of economics conjures up a host of images. Milton Friedman. Free markets. The financial crisis. The Keynesian antidote. The dramatic expansion of the boundaries of economics. At once profoundly influential and controversial, the Chicago school stands at the center of much that has been important in the history of modern economics.

Though much has been written about the Chicago school—its history, its personalities, the ideas of its members, and its role in shaping key aspects of recent economic analysis and public policy—by proponents, detractors and historians attempting to be dispassionate, no attention has been paid to the origins of the idea or perception of a “Chicago school” of economics. How, where, and when did economists come to believe that there was something distinctive about Chicago economics, and sufficiently distinctive to attach to it the “school” label?

In 1962, UCLA economist Lawrence Miller published an article titled, “On the Chicago School of Economics” in the Journal of Political Economy—a journal published by the economics faculty at the University of Chicago. This article represented the first attempt to draw a circle around the contours of the Chicago school and was met with immediate protest by George Stigler, a member of the Chicago faculty and a Chicago Ph.D., and Minnesota’s Martin Bronfenbrenner, who had earned his Ph.D. from Chicago in 1938. Each rejected the notion that the “Chicago school” moniker had any utility as an explanatory construct, owing to the heterogeneity of views among Chicago faculty and what they perceived as the commonality of much of economics as practiced at Chicago with that practiced elsewhere in the profession.

The reactions of Stigler and Bronfenbrenner make all the more interesting the results of an examination of the history of the idea of a “Chicago school” or of other terminology—e.g., “Chicago approach,” “Chicago view,” …—that signifies something distinctive about economics at Chicago. An in-depth search of the literature informs us that the first published invocations of the “Chicago school” label came in 1949, in book reviews published by … wait for it … George Stigler and Martin Bronfenbrenner.  Stigler, for his part, chastised the editors of A Survey of Contemporary Economics for ignoring the contributions of the “Chicago school,” while Bronfenbrenner noted that the variety of perspectives that informed Alvin Hansen’s macroeconomic framework did not include the “Chicago school,” which instead served as a target for Hansen’s analysis.

Medema_picture1_Simons
Henry Simons. Source: University of Chicago Photographic Archive, apfl-07613, Special Collections Research Center, University of Chicago Library.

One of the interesting features of the Stigler and Bronfenbrenner discussions is that they tossed out the term “Chicago school” without feeling any need to explain it—as if their audiences were already familiar with the term. This suggests that this label may well have been “in the air” well before 1949, and there is some evidence to support this. In a 1947 presentation at the American Economic Association annual meetings, Richard Musgrave referred in passing to the intellectual “distance between Chicago and Cambridge,” while Aaron Director’s 1947 preface to a collection of Henry Simons’ essays places Simons at the “head of a ‘school’” through his scholarship and teaching at Chicago.

The earliest data point that we have for the identification of a “Chicago school” of economics traces to the early 1940s and to the U.S. government’s Office of Price Administration (OPA). The OPA staff included a number of economists, among whom were Leon Henderson (head), John Kenneth Galbraith (deputy-head), Herbert Stein, Walter Salant, and George Stigler. On January 11, 1988, Stein, who had been a graduate student at Chicago in the 1930s and was later chair of President Nixon’s Council of Economic Advisors, penned a letter to George Stigler, who had solicited Stein’s comments on a draft chapter of his memoirs dealing with “The Chicago School” (Stigler 1988). Stein had little to offer Stigler in the way of comments, apart from one anecdote:

I do remember this incident about the Chicago School. During the War (WW II), I believe in 1941 although it may have been early in 1942, I met Jacob Viner in Bassin’s Delicatessen, Pennsylvania Avenue, NW near 14th Street, in Washington. He asked me what I was doing. I replied, callowly:

“I’m working at the OPA. They don’t have much use for the Chicago School there.”

To which he responded:

“Chicago School, Chicago School! What’s that? I’m not a member of it.”

That struck me at the time as evidence of his desire to distance himself from Knight, Simons and some others. Did I then invent the term “Chicago School?” If I did, wouldn’t he have said; “I never heard of it.” rather than “I’m not a member of it?”

 

If Stein’s memory was accurate, this story suggests that by the early 1940s there was an entity known as the “Chicago school” and that it had a reputation for opposing price controls—the implementation of which was the bread-and-butter of the OPA.

Memories, of course, are notoriously fallible. But there are multiple circumstances that lend credence to Stein’s recollections, even if Viner himself suggests that he did not encounter the term until the early 1950s. While the exact origins of the idea of a “Chicago school” may never be known with certainty, what we can conclude is that, at a minimum, the term itself and the idea of a distinctive “Chicago” point of view were in the air within the economics profession during the 1940s.

A total of 71 works referencing a “Chicago school” appeared between 1949 and 1962, with another 45 making reference to a distinctive Chicago “group,” “tradition,” approach, point of view, etc. As the graph below illustrates, the term “Chicago school” and its synonyms appeared regularly in the economics literature during the 1950s and early 1960s, picking up significant steam in the second half of the 1950s owing to the influence of Friedman’s restatement of the quantity theory of money and Edward Chamberlin’s diatribe against Chicago opposition to his theory of monopolistic competition.

Particularly noteworthy here is the fact that virtually all of the references during this period were from people not associated with Chicago and critical of the perspective identified with Chicago. That is, while Stigler and Bronfenbrenner were the first to use the “Chicago school” term in print, it seems to have quickly been appropriated by the Chicago critics and jettisoned by Chicago insiders–which perhaps explains Stigler and Bronfenbrenner’s dim view of the term in their 1962 comments on Miller’s article.

It is also interesting to examine precisely what those using the “Chicago school” label meant by it–that is, what it was that economists during this period had in mind when referring to a Chicago school or point of view. What stands out in the literature spanning the late 1940s to the early 1960s is the absence of any discussion of a sort of all-encompassing Chicago approach in the years leading up to Miller’s 1962 article.

What we see instead are references to a Chicago view of specific slices of economic thinking, the particular slice being a function of the subject under consideration in the book or article in question. Perhaps surprisingly, the identification of Chicago with a laissez-faire approach was rather slow in coming, gathering steam only at the tail end of the 1950s. It was monetary analysis, with more than one third of the total Chicago references, that loomed largest, with no other category garnering even 20 percent of the citations.

Outlet “Chicago School” Chicago Distinct Total
Monetary 25 21 46
Markets-Government-Laissez Faire 11 15 26
Labor Economics/Unions 11 1 12
Monopolistic Competition 11 0 11
Agricultural Economics 4 7 11
Methodology 6 1 7

References to “Chicago” by Topic, 1949–1962. The data in this table do not include individuals referenced in Miller (1962), Stigler (1962), or Bronfenbrenner (1962).

When one examines the names of economists identified with the Chicago school in this early literature, the results are at once expected and surprising. Milton Friedman is far and away the most referenced Chicagoan, as one might expect. More surprising, for those not well-versed in the history of Chicago economics, is the prominence of Henry Simons, references to whom vastly exceed any Chicago economist save for Friedman and dwarf those to Jacob Viner who, with Frank Knight, is typically viewed as the key figure in the first generation of the Chicago school in modern discussions of the subject.

Name References
Frank Knight 14
Jacob Viner 3
Henry Simons 23
Lloyd Mints 8
Milton Friedman 41
George Stigler 12
T.W. Schultz 3
Albert Rees 3

Chicago Economists in Discussions of a “Chicago School,” 1949–1962. The data in this table do not include individuals referenced in Stigler (1962) or Bronfenbrenner (1962).

Meema_picture2_Friedman
Milton Friedman. Source:
University of Chicago Photographic Archive, apfl-06231, Special Collections Research Center, University of Chicago Library.

But as Stigler noted, Simons was, before his untimely death, “the Crown Prince of that hypothetical kingdom, the Chicago school of economics” (1974, p. 1). Nor was this simply an insider’s view. In his 1954 review of Friedman’s Essays in Positive Economics (1953), Oxford’s Peter Newman described Friedman as “perhaps the most able living representative of that school of Chicago economists associated with the name of Henry Simons” (1954, p. 259). Though he did not publish widely and is not nearly so well known among economists today compared to other Chicagoans of this period, Simons’ research, like that of Friedman, was often at odds with the mainstream and focused on policy-related subjects that came to have distinctive Chicago school positions associated with them.

In his 1988 Memoirs, Stigler, who by this time had once again embraced the “Chicago school” moniker, contended that “There was no Chicago School of Economics when the Mt. Pelerin Society first met at the end of World War II” (1988, p. 148). That meeting took place in April 1947, or exactly two years before Stigler’s first “Chicago school”-referencing article was published. Stein’s recollection suggests that Stigler was off the mark, at least in terms of professional perceptions, and the widespread use of the label during the 1950s—in language suggesting that the readers were very familiar with it—only adds to the sense that economists understood that there was a “school” of thought—distinctive but variously defined—associated with the University of Chicago already by the mid-1940s.

Steven G. Medema is Distinguished Professor of Economics at the University of Colorado Denver.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s