| New institutional economics | |
|---|---|
| Born | 12 April 1914 Fresno, California |
| Alma mater | California State University, Fresno Stanford University |
| Influenced | Steven N. S. Cheung, William F. Sharpe |
Armen Albert Alchian (born April 12, 1914) is an American economist and an emeritus professor of economics at the University of California, Los Angeles.
Alchian was born in Fresno, California into an Armenian family. He attended California State University, Fresno for two years before transferring to Stanford University in 1934, which awarded him the B.A. (1936) and Ph.D. (1944). He was a statistician with the USA Army Air Corps, from 1942 to 1946. In 1946, he joined the Economics Department at UCLA, where he spent the rest of his career. For many years, he was affiliated with the Rand Corporation. Alchian was elected a Fellow of the American Academy of Arts and Sciences in 1978.[1] In 1996, he became a Distinguished Fellow of the American Economic Association and in 2010 he received an honorary doctorate degree from Universidad Francisco Marroquín.[2]
Alchian is the founder of the "UCLA tradition" in economics, a member of the Chicago school of economics, and one of the more prominent price theorists of the second half of the 20th century. He is the author of pathbreaking articles on information and uncertainty, and the theory of the firm. Through his writings on property rights and transaction costs, he is a founder of the new institutional economics. A surprising fraction of Alchian's writings have touched on topics conventionally viewed as macroeconomic: money, inflation, unemployment, and the theory of business investment. His writings are characterized by lucid witty exposition and a minimum of mathematical formalism.
Alchian is the coauthor (with William Allen) of the curious and influential introductory economics text Exchange and Production. While the technical level of this text is unusually low, the demands it makes of the student's economic intuition are unusually high. Its content and organization differ radically from those of other American university economics texts written during the second half of the 20th century. This was the first American introductory text to discuss information, transaction costs, property rights, and a market economy as a discovery process. This text 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.
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