Things I left out about Chicago economics

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In a cryptic little response to my post last week on Chicago economics, the estimable Reiham Salam writes:

Justin Fox doesn’t mention Frank Knight or Jacob Viner in this post. He also suggests that John Cochrane has nothing interesting to say.

This hit a nerve. I did consider discussing the pre-1950s Chicago economics tradition personified by Knight and Viner, but finally decided that I’d gone on long enough already. If I had written more I would have said that the Chicago economics department was distinguished by a free-market bent and a distrust of theories that were fashionable elsewhere long before Milton Friedman returned to campus in 1946 (he’d been a graduate student at Chicago in the early 1930s, although he completed his doctorate at Columbia). But it wasn’t a school (or, really, a movement) in the way it became at some point in the 1950s. It had been home to Knight and Viner, but also to critic-of-capitalism Thorstein Veblen and liberal U.S. Senator Paul Douglas. It produced Friedman and George Stigler and Aaron Director, but it also produced Paul Samuelson and Wesley Mitchell. It was, as I described today’s Chicago econ department in my previous post, “just another (excellent) economics department,” not a major political force.

As for Cochrane, I’m sure he has lots of interesting things to say. I met him at a conference last year and found him to be quite entertaining. I just haven’t heard anything from him that has enlightened me as to the causes of the financial crisis of 2008. Saying that it was all because George Bush gave a speech that scared markets just doesn’t cut it for me.

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