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The Essential UCLA School of Economics
The UCLA tradition carries on in the work of dozens of economists who earned their PhDs at UCLA during its golden years. Because their work spread beyond UCLA, the tradition lives on in the work of scores of economists who had no formal connection with the School. The most important economists at UCLA during the 1970s were Armen Alchian, Harold Demsetz, Sam Peltzman, Benjamin Klein, Robert Clower, Alex Leijonhufvud, Jack Hirshleifer, William Allen, and George Hilton.
A distinguishing feature of most of the UCLA economists’ contributions is that they were non-mathematical. This was especially notable in an era in which mathematics had almost taken over economics. The major UCLA School contributors used mainly words and occasionally graphs. Another distinguishing feature is their use of basic economic analysis to understand behaviour that had previously not been understood or had even been misunderstood.
The best-known member of the School, Armen Alchian, taught at UCLA from 1946 until his retirement in 1984. His insights and writings underlie a distinctive theme of the School’s approach to in most productive activity, the profit motive, combined with private property rights, successfully aligns the interests of producers and consumers, often in subtle ways. Alchian had no use for formal models that did not teach us to look somewhere new in the known world. Nor had he any patience for findings that relied on fancy statistical procedures. Alchian saw basic economics as a powerful tool for explaining much of human behaviour in both market and non-market settings.
The second most prominent member of the UCLA School was Harold Demsetz, who made major contributions to the study of property rights and to regulation and antitrust policy. He argued that market concentration could reflect the superior efficiency of firms with large market shares primarily resulting from innovation or from economies of scale. Government efforts to break up large firms or restrain their growth was, therefore, likely to reduce innovation and economic efficiency, with consequent harm to consumers.
Other academic research at the UCLA School included Klein’s work in monetary theory, and Clower and Leijonhufvud’s work in macroeconomics. Another famous UCLA School economist was Thomas Sowell, who wrote his 1975 book Race and Economics, a precursor to his much more extensive work on the economics of various ethnic groups, while at UCLA.
A distinguishing feature of most of the UCLA economists’ contributions is that they were non-mathematical. This was especially notable in an era in which mathematics had almost taken over economics. The major UCLA School contributors used mainly words and occasionally graphs. Another distinguishing feature is their use of basic economic analysis to understand behaviour that had previously not been understood or had even been misunderstood.
The best-known member of the School, Armen Alchian, taught at UCLA from 1946 until his retirement in 1984. His insights and writings underlie a distinctive theme of the School’s approach to in most productive activity, the profit motive, combined with private property rights, successfully aligns the interests of producers and consumers, often in subtle ways. Alchian had no use for formal models that did not teach us to look somewhere new in the known world. Nor had he any patience for findings that relied on fancy statistical procedures. Alchian saw basic economics as a powerful tool for explaining much of human behaviour in both market and non-market settings.
The second most prominent member of the UCLA School was Harold Demsetz, who made major contributions to the study of property rights and to regulation and antitrust policy. He argued that market concentration could reflect the superior efficiency of firms with large market shares primarily resulting from innovation or from economies of scale. Government efforts to break up large firms or restrain their growth was, therefore, likely to reduce innovation and economic efficiency, with consequent harm to consumers.
Other academic research at the UCLA School included Klein’s work in monetary theory, and Clower and Leijonhufvud’s work in macroeconomics. Another famous UCLA School economist was Thomas Sowell, who wrote his 1975 book Race and Economics, a precursor to his much more extensive work on the economics of various ethnic groups, while at UCLA.
- GenresEconomics
125 pages, Kindle Edition
Published July 5, 2021
55 people are currently reading
67 people want to read
About the author
David R. Henderson
18 books10 followersProfessor of economics at the Naval Postgraduate School in Monterey, California, research fellow at the Hoover Institution, Fraser Institute and Independent Institute, editor of The Fortune Encyclopedia of Economics. Henderson also blogs for the economics blog EconLog along with Bryan Caplan.
From 1982 to 1984, he was the senior economist for health policy and, from 1983 to 1984, the senior economist for energy policy, with President Reagan's Council of Economic Advisers.
Born and raised in Canada, Henderson moved to the United States in 1972 to pursue his Ph.D. in economics at UCLA. He became a U.S. citizen in 1986.
From 1982 to 1984, he was the senior economist for health policy and, from 1983 to 1984, the senior economist for energy policy, with President Reagan's Council of Economic Advisers.
Born and raised in Canada, Henderson moved to the United States in 1972 to pursue his Ph.D. in economics at UCLA. He became a U.S. citizen in 1986.
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December 1, 2024The UCLA School of Economics (hereinafter “UCLA Econ”) collectively refers to a group of professors and scholars who made their mark in the latter half of the 20th century. Given their reverence for
free markets and reduced government intervention, some see the UCLA Econ group as a corollary or derivative of the Chicago School of Economics - so much so that UCLA Econ is sometimes humorously referred to as “the University of Chicago at Los Angeles”.
Its members included Armen Alchian, Harold Demsetz, William Allen, Sam Peltzman, Benjamin Klein, Robert Clower, Axel Leijonhufvud, George Hilton, Jack Hirshleifer, and to an extent Thomas Sowell (who is considered part of the Chicago School).
A central theme of UCLA Econ is that property rights are at the core of human behavior. Relatedly, the absence or restriction of property rights result in moral hazards and otherwise undesirable behavior. One example is the tragedy of the commons with respect to land: people will overuse, pollute, and/or neglect land they do not own; alternatively, one who owns land is incentivized to put it to its best use. (To be clear, UCLA Econ was not against public ownership of land so long as the benefits to the public clearly outweighed the costs.) Put another way - property rights better internalize externalities. Another example is how discrimination is far less pervasive in a free market (i.e., no price ceilings or floors such as rent control and minimum wage).
Peltzman and Hilton called into question the idealized view that government regulation of private sector business was for the protection of the consumer, instead arguing that regulators pursue their own self-interests. Even if one were to assume that regulators only had good intentions, that they lack actual skin in the game often results in insufficient thought or analysis - resulting in unintended consequences caused by bad policy. More often than not, regulations made in the name of public safety or the environment are often imposed at the behest of lobbyists to establish barriers to entry thereby protecting corporations who enjoy the status quo. Not only do the regulations often fail to prevent the actual harm they profess to protect against, such also result in less free market competition (sidenote: most monopolies exist because of government regulation). On the subject of monopolies, Alchian, in his seminal work University Economics (3/5 stars) presented an interesting way to view labor unions as a form of monopoly which eliminated wage competition among workers, all to the detriment of not only consumers but also many of the workers themselves.
Free markets are certainly imperfect, because all transactions take place in a world of uncertainty, imperfect information, and with costs and tradeoffs. But this doesn’t mean we should throw the baby out with the bathwater. Demsetz accordingly coined the term the Nirvana Fallacy, which is a false choice between an existing imperfect situation and an ideal norm. In other words, private markets are not perfectly efficient, but it is inappropriate to measure that against some unattainable standard of perfection. Public policy should be guided by realistic alternatives.
free markets and reduced government intervention, some see the UCLA Econ group as a corollary or derivative of the Chicago School of Economics - so much so that UCLA Econ is sometimes humorously referred to as “the University of Chicago at Los Angeles”.
Its members included Armen Alchian, Harold Demsetz, William Allen, Sam Peltzman, Benjamin Klein, Robert Clower, Axel Leijonhufvud, George Hilton, Jack Hirshleifer, and to an extent Thomas Sowell (who is considered part of the Chicago School).
A central theme of UCLA Econ is that property rights are at the core of human behavior. Relatedly, the absence or restriction of property rights result in moral hazards and otherwise undesirable behavior. One example is the tragedy of the commons with respect to land: people will overuse, pollute, and/or neglect land they do not own; alternatively, one who owns land is incentivized to put it to its best use. (To be clear, UCLA Econ was not against public ownership of land so long as the benefits to the public clearly outweighed the costs.) Put another way - property rights better internalize externalities. Another example is how discrimination is far less pervasive in a free market (i.e., no price ceilings or floors such as rent control and minimum wage).
Peltzman and Hilton called into question the idealized view that government regulation of private sector business was for the protection of the consumer, instead arguing that regulators pursue their own self-interests. Even if one were to assume that regulators only had good intentions, that they lack actual skin in the game often results in insufficient thought or analysis - resulting in unintended consequences caused by bad policy. More often than not, regulations made in the name of public safety or the environment are often imposed at the behest of lobbyists to establish barriers to entry thereby protecting corporations who enjoy the status quo. Not only do the regulations often fail to prevent the actual harm they profess to protect against, such also result in less free market competition (sidenote: most monopolies exist because of government regulation). On the subject of monopolies, Alchian, in his seminal work University Economics (3/5 stars) presented an interesting way to view labor unions as a form of monopoly which eliminated wage competition among workers, all to the detriment of not only consumers but also many of the workers themselves.
Free markets are certainly imperfect, because all transactions take place in a world of uncertainty, imperfect information, and with costs and tradeoffs. But this doesn’t mean we should throw the baby out with the bathwater. Demsetz accordingly coined the term the Nirvana Fallacy, which is a false choice between an existing imperfect situation and an ideal norm. In other words, private markets are not perfectly efficient, but it is inappropriate to measure that against some unattainable standard of perfection. Public policy should be guided by realistic alternatives.
March 14, 2025
A must read for aspiring economists
The book embarrassed me ...as a long time economist and public administration scholar I never paid much attention to what was coming out of UCLA...that clearly was a mistake.
The book embarrassed me ...as a long time economist and public administration scholar I never paid much attention to what was coming out of UCLA...that clearly was a mistake.
Displaying 1 - 2 of 2 reviews