Armen Alchian, My Friend, My Mentor
by
Steven N.S. Cheung
February 21, 2013
Armen Albert Alchian (1914-2013) passed away last February 19. That evening, I was putting final touches to an article explaining Alchian’s contributions (and those of Harold Demsetz) to the theory of economic organization. In the last paragraph I wrote: "Alchian, at the age of 98, is still around." Just hours later, emails came in from all over telling me that he was gone. What an unhappy coincidence!
Six years ago, Armen began suffering from brain degeneration, so much so that he stopped responding to communications from me and my wife Linda. A few months before that, Yoram Barzel told me that Armen’s memory had deteriorated. Since that time, we (and other friends of Armen) knew that the day of farewell is nigh. My son Ronald, who is in medical research, said: "Dad, Alchian is a very old man, and there are many possible reasons for such a condition in the aged like him."
During the past several years, increasing numbers of friends and colleagues have forwarded to me Internet articles and pages which contain glowing appreciations of Alchian's scientific contributions. "Why hasn't Armen Alchian won the Nobel Prize in Economics?" "The greatest economist in the world!" "The most outstanding price theorist ever lived!" People closer to Alchian tend to hold him in higher regard. In the early part of the 1970s, John McGee and I hailed Alchian as the best economic scholar on earth. Yoram Barzel, another colleague at the University of Washington who was then not acquainted with Alchian, was bemused by our bold assertion. But after getting to know Armen, Yoram concurred that he deserved the accolade.
Alchian never engaged in self-promotion, and he never cared about journal rankings. Kenneth Arrow, Armen’s former colleague at RAND, told a story about the classic paper "Costs and Outputs," which was written by Alchian in 1957 and accepted for publication in the American Economic Review. Now AER was (and is) one of the profession’s leading journals. However, when invited to contribute to a Festschrift in honor of Bernard F. Haley, Alchian decided to withdraw this piece from the AER and to publish it in the volume instead. Who else would do something like this? I know I can't. But under Armen's influence, I have at least learned to ignore the ranking of journals and submit my papers to editors on friendly terms.
Refusal to fame-seeking has a cost. A quarter of a century ago Alchian was not as well-known in Europe as his contributions merited. In 1985, the editors of New Palgrave Dictionary of Economics invited me to contribute four entries to its new edition---viz., "common property rights," "economic organization and transaction costs," "Ronald Coase," and "Armen Alchian." The Dictionary only published entries of reputable economists above the age of sixty, and strict word limits were imposed – a few thousand words for "Coase," but a mere few hundred for "Alchian." How could I possibly summarize Alchian's contributions within such an exiguous word count? When I apologized to Armen for my inadequate coverage in the Dictionary, typically he just smiled and said, "That's not important."
To write about "Armen Alchian," I can flow endlessly like the Yangtze River. This I have done, in numerous Chinese articles. In choosing to express my thoughts in Chinese rather than English I was hoping that the life, times and works of a great master would enhance the interest of economics among my own countrymen. I am sure the name of A.A. Alchian will live long and famously in the annals of Chinese economics.
I started attending Alchian's UCLA lectures in 1963, and became what the Chinese would say as a student inside his chamber two years later. My doctoral dissertation, The Theory of Share Tenancy, was written under the co-supervision of Armen Alchian and Jack Hirshleifer. Having expressed my gratitude for Alchian's teaching (including private lessons on how to write better English) in previous articles, I will not repeat these things here. However, I must declare once again that Alchian taught me to be scrupulous about research, to use economic theories to explain real-world observations, and to adhere strictly to the principles of the seeker after truth.
True scholars – individuals who are genuinely interested in analysis and thinking and to know the causes of things – are rare in the economics profession. Lucky is me, to have met a number of true scholars besides Armen Alchian. But Armen is the only individual who persistently maintained the unadorned and scientifically-driven curiosity of a genius-child.
One time Armen returned from a trip to Japan, and summoned me to his office. I first thought that he was going to give me some important advice. It turned out that he wanted to show me a gift that he brought back from Japan. What was it? It was a little paper box with nothing inside. What was so special about this box? It was wrapped in a single piece of paper, similar to those wrappings that we commonly see in the street markets in Hong Kong. Obviously Armen had never seen something like that before. He said, "Asian people are so smart. Why couldn't we think of using a piece of paper to wrap things in such a simple way?"
I was born and raised in Sai Wan Ho in Hong Kong. As a young man, I was given to wandering around the area, learning about countless trivial things. Every time I talked to Armen about this street-wise "knowledge" he would be so intrigued and would start asking all kinds of interesting questions. I once described to him the process of bilateral bargaining in a fiercely competitive market. We had several exchanges about the economics behind such behavior, but could not come up with a satisfactory explanation. I finally found the answer some twelve years ago, but unfortunately did not have the opportunity to explain it to Armen. I never had the opportunity to tell him my explanations for tie-in sales and full-line forcing either. Had he known about my discoveries, he would no doubt be excited and relentlessly cross-examine my answers.
When Alchian was thinking about retirement in 1976, his friends organized a Conference in his honor. Given the large number of Alchian admirers, this happened to be just the first of at least four similar events. In the first Conference I presented the paper, "Why are Better Seats Underpriced?"--- it was an attempt to overturn the explanation Alchian gave in 1964 on why premium seats in Rose Bowl games were underpriced. After reading my piece, Armen did not say anything. Thirty years later I sent him a collected volume of my English articles, in which I included the underpricing analysis. In his reply he praised that article --- and that article only!
The scientifically-driven curiosity of Alchian has permanently influenced my attitude towards research. In my doctoral thesis, I observed that the early stage of the land reform in Taiwan saw a rapid surge in the production of a plant named citronella, and provided a clear explanation for this fact based on my theory of share tenancy. Alchian became seriously interested in the plant itself, and insisted that I study details of its cultivation methods as well.
To do research, to know the causes of things, we cannot ignore details. Ever since my first day as an economist, I have never put much weight on statistical data (from whatever source) and on regression analysis. But I have always emphasized facts in detail. Without the nitty-gritty, economics would tend to become colorless and boring: and research on uninteresting problems is not terribly meaningful. It was from Alchian, the eternally curious genius-child who was so fond of asking fundamental questions, that I learned to pay close and serious attention to facts in detail.
When it comes to personalities, Alchian and I are dramatically different. He was a modest gentleman. As Ronald Coase wrote, "Alchian is classical in manners as well as in thought." No one would ever describe me that way. I may not be a good imitator of Alchian’s grace and polish, but I have managed to follow his integrity as a scholar. As academics, our job is to explain the world, and perhaps (sometimes) to make policy recommendations. Anything else is beyond our ambit. This is the line drawn by Alchian, and one who crosses it can no longer be deemed to be a genuine scholar. As a Chinese who is deeply concerned about China’s future, I have written extensively on economic reforms in China. Although I may lash out now and then at the state of the world, I have never transgressed the boundary Alchian drew on the ground. In discussing my views about transaction costs and the delineation of rights to the Chinese people, I have often alluded to the influence of Ronald Coase. But in terms of the scientific methodology, the close scrutiny of facts and details and scholarly integrity, I learned it all from Armen Alchian.
Back in the old days at UCLA, it was not easy for graduate students to discuss research ideas with Alchian in person. Most students harbored the impression that he was aloof and not very approachable. I shared the same view initially, but discovered the contrary later. The following is a true story.
In early 1967, after finishing the first lengthy chapter of my thesis, I received news from Hong Kong that my elder brother (who was a year older) had passed away. Understanding that my mother must be shattered by the death of her favorite son, I thought about giving up at UCLA and returning to Hong Kong to be near her. At that time I was already an assistant professor at the California State University at Long Beach. I drove back to LA to tell Jack Hirshleifer the sad news and my intention to quit. Hirshleifer thought that it would be a pity to abandon my dissertation, on which I had already made very good progress. He then said he would discuss with other members of my thesis committee the possibility of granting me a PhD on the strength of the first long chapter alone.
That afternoon I went to see Alchian, planning to tell him what I told Hirshleifer. Alchian obviously knew what I had in mind. But before I had a chance to say anything, he said, "Don't tell me anything about your personal matters." So I left without a word. One day later in Long Beach, I received a letter from Alchian with a $500 check enclosed and simply two lines: "You can buy candies with this $500 or you can hire a typist to help you finish your dissertation as quickly as possible." This $500 was equivalent to my one month’s gross salary, so it was not a small amount. What other alternatives did I have? In less than two months I wrapped up my dissertation. Alchian said it was a miracle. In retrospect, I regret cashing that check and spending that $500. If I had kept the check, I could now show it to my children, grandchildren, and students while telling them this proud story. I know Armen would say, “Steve, put that check up for auction and see how much it would fare now.”
I spoke to Armen's wife and daughter on the phone this morning. They said, "He has gone to a better place."
(This eulogy was written in Chinese on February 21, 2013, published in the Hong Kong Economic Journal and several blogs in China on Feb. 26, 2013, and translated into English by the collaboration of Fred K. Luk, Kam-Ming Wan, Chi-Wa Yuen, and Michael T. Cheung.)
The chinese version of this article can be found:
http://blog.sina.com.cn/s/blog_47841af70102e1yi.html
