------------ EH.NET BOOK REVIEW --------------  
Published by EH.NET (September 2006)  
  
J. Daniel Hammond and Claire H. Hammond, editors, _Making Chicago   
Price Theory: Friedman-Stigler Correspondence, 1945-1957_. London:   
Routledge, 2006. xvii + 165 pp. $120 (hardcover), ISBN: 0-415-70078-7.  
  
Reviewed for EH.NET by Craig Freedman, Department of Economics,   
Macquarie University.  
  
Economic Billets Doux -- A Review of the Friedman-Stigler Correspondence  
  
"Indifferent! Oh no -- I never conceived you could become   
indifferent. Letters are no matters of indifference; they are   
generally a very positive curse."  
  
"You are speaking of letters of business; mine are letters of friendship."  
  
"I have often thought them the worst of the two," replied he, coolly.   
"Business you know, may bring money, but friendship hardly ever   
does." (Jane Austen, _Emma_)  
  
Reading this volume generates reflections which are more substantial   
than a mere nostalgic yearning for times past. Technology has   
condemned to the museum archives a means of personal and business   
communication which had outlasted the centuries. Letters not only   
were for most of history the only way accurately to convey thought,   
emotion and information over long distances, but a method that was   
remarkably cheap as well. In the nineties, the rise of e-mail has   
largely put paid to those fondly received missives. Today, I would be   
hard pressed to recall the last time I received an overseas letter,   
although in the late eighties and early nineties such occurrences   
were routine. What makes this more than just a yearning for familiar   
ways is that technology changes not only communication channels but   
the very content of that medium. The style, structure and thought   
behind a handwritten (and perhaps even a typed) letter is definably   
different from the modest e-mail which is more of an off the cuff   
note. Moreover, e-mail is ephemeral. Few people print out and store   
them as they might preserve letters. So the sad news when we read   
this wonderful collection is that future generations will turn to the   
equivalent of the Stigler or Friedman archive and find a bare   
cupboard instead of a treasure trove of material. Future biographers   
and historians of thought will come to mourn this loss. What is to be   
done? Nothing, except to enjoy those opportunities that we still have   
at hand.  
  
Claire and Daniel Hammond (both at Wake Forest University) have   
performed a real service in making so many of the key exchanges   
between Milton Friedman and George Stigler available to the   
interested reader. Many economists today simply take for granted the   
wonders these two men performed in the post-war period. They set out   
to overturn the then prevailing orthodoxy and (for better or worse)   
largely succeeded. When economists today refer so blithely to the   
Chicago School, they are implicitly referring to the work, effort and   
campaign of these two long-time friends and colleagues. (Even today,   
Milton Friedman still mourns the loss of his remarkable compatriot.)   
Though most economists, let alone the general public, will associate   
Friedman with the Chicago School counter-revolution to overthrow the   
teaching of Keynes and other heretics, it is perhaps Stigler who had   
in his more quiet way the greater influence (at least academically).   
In any case, their spheres of operation were largely separable with   
Stigler focusing almost exclusively on microeconomic matters. What   
the two did have in common, besides their fierce dedication to market   
principles, was the ability to sell economic ideas in a rhetorical   
way that had a significant impact.[1] What the letters themselves   
show, besides a mutual affection and respect, are the ways in which   
the ideas that formed the core of the Chicago School developed and   
the role which the two had in cross pollinating each other's work.   
(This despite the fact that the only joint work they ever formally   
endeavored was a paid for pamphlet brought out shortly after World   
War Two (_Roofs or Ceilings_) which examined ceilings on rental   
prices.)  
  
By a stroke of luck, the two were forced apart in the immediate   
post-war period, except for a brief year together in Minnesota   
(1945). Like some modern day couple forced to pursue widely separated   
careers, Milton Friedman went off to Chicago (1946) and Stigler to   
Columbia (1947) after a brief stop at Brown (1946). As a result,   
these two close colleagues and friends would spend the years between   
1946 and 1958 largely apart except for periodic visits. Their loss   
was our gain.[2] This enforced separation is the reason that we now   
have this fascinating correspondence which reflects the way in which   
the two attempted to transform economics. In particular, we can   
discern their attempts to reshape economic methodology, as well as   
their changing views on such issues as equality and income   
distribution. As we read these letters, the outline of what would   
form the bedrock of the Chicago School, a distinctive take on price   
theory, becomes progressively clearer.  
  
Friedman's counter-revolution against the prevailing dominance of   
post-war Keynesian theory is well known by most economists. Less   
appreciated is Stigler's role in defending traditional price theory   
against heretical challenges. At least in part through his efforts,   
Stigler maintained what would later be accepted as the   
micro-foundations of economics, defending Marshallian partial   
equilibrium analysis (or at least the Friedman-Stigler version)   
against the seemingly invincible tide of Walrasian general   
equilibrium theory. What both of these lynchpins of the Chicago   
school held in common was an unshakeable belief in the efficiency of   
markets. They especially viewed this form of economic structure as a   
bulwark of individual choice and liberty against the omni-pervasive   
depredations of the chronic economic planners.  
  
There are notoriously few minor omissions or curious lacunae in this   
volume that I can point out, and only if strongly pressed. In the   
very useful introduction to this series of letters the Hammonds   
wonder why there is no mention made of Friedman's pioneering work on   
monetary theory. Friedman's quantity theory of money was, after all,   
at the heart of his counter-revolution. However, this is much like   
being puzzled by the lack of any direct references to the Napoleonic   
wars in Jane Austen's novels. The solution is simple. This bit of   
geo-politics failed to fall within the attention of Ms Austen's   
interests in writing her novels. She was not about to drag it into   
the picture by virtue of its sheer topicality. In a similar manner,   
George Stigler displayed only minimal interest in macroeconomic   
matters and claimed to possess no particular insights in this area.   
Instead he tended to defer to Milton Friedman's expertise (though   
Stigler does provide useful comments on Friedman's seminal work   
dealing with the Consumption Theory).  
  
There is also a strange lapse in what otherwise amounts to a   
comprehensive set of endnotes attached to these letters. Two items   
transmitted by Stigler to Friedman would later appear in an   
idiosyncratic collection entitled _The Intellectual and the Market   
Place and Other Essays by George Stigler_ ('Stigler's Law' and 'On   
Scientific Writing'). True, the publication date (1963) puts it   
outside the boundaries set by the editors. But it is still a useful   
bit of information to provide to interested readers.  
  
Lastly, the Hammonds claim that the close bond between George Stigler   
and Milton Friedman only commenced with their mutual employment by   
the Statistical Research Group during the war (1943-1945). It can be   
easily argued that they were already close from their days as   
graduate students in Chicago. Though, it does seem clear that Stigler   
was initially closer to Allen Wallis.[3] (It was, in fact, Wallis as   
director of the Statistical Research Group that reunited the two.)   
This issue is, however, more a question of nuance and interpretation   
than any clear disagreement.  
  
The very low level of my nitpicking is perhaps the best indication of   
my admiration for what the two editors have achieved in selecting   
these letters for publication. It is a work that can be enjoyed on   
several levels. It displays economists in their most human mode. Here   
we see two relatively young academics advancing their careers,   
discussing economics, worrying about their families, gossiping and   
making withering remarks about colleagues and competitors. "It may   
merely be prejudice, but I'm inclined to write him [Samuelson] off as   
an economist." (Stigler to Friedman, p.97) "Of the many speakers only   
one was terrible -- shallow and pretentious, Joe Schumpeter."   
(Stigler to Friedman, p.96)  
  
Let me add a minor final note which may only display a creeping onset   
of curmudgeonly attitude rather than anything resembling good   
judgment on my part. The publisher, Routledge, seems determined to   
prove that you can't tell a book by its cover. In fact, you can't   
determine anything about a Routledge book by its cover. The firm   
seems unshakeable in its belief that the more the cover is dull and   
indistinguishable, the more scholarly is the work. Potential readers   
of excellent volumes, like the one under review, are actively   
discouraged from opening the work rather than enticed. It would be   
kind to think that Routledge is taking some principled, if obscure,   
stand by its choices in artwork. But, the more likely explanation is   
that it is simply succumbing to the rather lazy option of not trying.   
By doing so, Routledge fails to do justice to the volumes it   
publishes.  
  
References:  
  
Stigler, George Joseph (1963) _The Intellectual and the Market Place   
and Other Essays by George Stigler_. Glencoe, IL: Free Press.  
  
Stigler, George Joseph (1988) _Memoirs of an Unregulated Economist_.   
New York: Basic Books.  
  
Notes:  
  
1. "I've come to the conclusion that no economic theory is important   
unless one's contemporaries are persuaded to adopt it. If it meets   
this test it is important; if it does not, it is unimportant - no   
matter how correct or profound it may be." (George Stigler to Milton   
Friedman, March 1950, p. 112)  
  
2. "... there is no one anywhere I would rather have as a colleague   
than you." (George Stigler to Milton Friedman, October 19, 1954,   
p.133)  
  
3. I base my alternative view on the recollections of Rose and Milton   
Friedman as well as Paul Samuelson who knew them while enrolled as an   
undergraduate at Chicago. Additional insights on this matter may be   
gained in Stigler's own autobiography (1988).  
  
  
Craig Freedman is Associate Professor of Economics, Macquarie   
University, Sydney, Australia and also the Director of the Centre for   
Japanese Economic Studies. His articles on George Stigler and the   
Chicago School have appeared in the _Cambridge Journal of Economics_,   
_Journal of Economic Issues_, _Journal of Post-Keynesian Economics_,   
_Journal of the History of Economic Thought_ and _History of   
Economics Review_. In addition he has edited a number of volumes on   
the Japanese Economy.  
  
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