Armen A. Alchian: The Independent Institute

The Power of Independent Thinking

Armen A. Alchian
Armen A. Alchian

Armen A. Alchian (1914–2013) was Professor Emeritus of Economics at UCLA and an economist at RAND Corporation. He received his Ph.D. in economics from Stanford University, and he held positions at the National Bureau of Economic Research, Harvard University and the University of Oregon. Professor Alchian was elected a Fellow of the American Academy of Arts and Sciences in 1978, and he was named a Distinguished Fellow of the American Economic Association in 1996.

A long-time friend of the Independent Institute, Professor Alchian was co-founder of the "UCLA tradition" in economics that emphasizes that individual behavior is self-directed and "rational" and that this has many unanticipated consequences. His textbook with William R. Allen, University Economics (now called Exchange and Production), was enormously influential in teaching the principles of economics on both the undergraduate and graduate levels. This was the first American textbook to discuss information, transaction costs, property rights, and a market economy as a discovery process. And unlike most texts, which are excessively bland, Exchange and Production is bitingly ironic, poking fun at political correctness, long before it had a name. It is unique as well in that it incorporated Alchian and Allen's latest thinking about issues such as property rights and unemployment when most other textbooks are content to regurgitate the state of economic theory of some 20 years ago. The book also contains the classic statement of what has come to be known as the Alchian–Allen theorem. This proposition, colloquially known as "ship the good apples out," states that when output varies in quality, the lower quality output is consumed nearby while the higher quality output is shipped long distances. The reason is simple: transportation costs vary with the weight and bulk, but not the quality, of that which is transported. The added per-unit amount decreases the relative price of the higher-grade product.

Professor Alchian's scholarly work has had a profound impact on economic thinking, including such topics as price theory, evolution and learning, law and economics, transactions costs and the theory of organizations, information costs and resource unemployment, money, and exchange and production. In this regard, his articles have appeared in such journals as the Journal of Political Economy; Econometrica; Il Politico; American Economic Review; Journal of Law and Economics; Economic Inquiry; and Journal of Money, Credit and Banking.

Edited by Daniel Benjamin, The Collected Works of Armen Alchian is published in two volumes by Liberty Fund, and the Armen Alchian Chair in Economic Theory at UCLA is named in his honor.

Professor Alchian's seminal work is examined in the Independent Institute book Living Economics, Yesterday, Today, and Tomorrow, by Peter J. Boettke.