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Price theory as prophylactic against popular fallacies


The articles collected in Chicago Price Theory illustrate elements of continuity and change in the development of the Chicago School of Economics. The editors stress a continuity in the Chicago tradition that runs from Frank Knight to Gary Becker. Our contribution in this essay is to emphasize the discontinuity in the evolution of the Chicago price theory tradition. We argue that a logical continuity runs not from the Knight/Viner/Simons generation to the Friedman/Stigler/Becker generation, but to a branch of the Chicago tradition best exemplified by the Alchian/Buchanan/Coase generation of Chicago price theory. The continuity we stress is understanding price theory as a study of market adjustment and adaptation under alternative institutional arrangements.

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We thank the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at George Mason University for reading an earlier draft of this paper and offering very helpful comments, particularly Donald Boudreaux, Christopher Coyne, Peter Leeson, Patrick Newman, Solomon Stein, Virgil Storr, and Richard Wagner. We also thank Mario Rizzo, Israel Kirzner and the participants at the Colloquium on Market Institutions & Economic Processes at New York University as well as Shaun Hargreaves Heap, John Meadowcroft, Mark Pennington, and David and Emily Skarbek of the Department of Political Economy at King's College London for offering comments, criticisms, and helpful suggestions. We also gratefully acknowledge Brian Albrecht, Per Bylund, Bruce Caldwell, Randall Holcombe, Roger Koppl, Alain Marciano, Deirdre McCloskey, Steve Medema, Svetozar Pejovich, Benjamin Powell, Edward Stringham, and Glen Weyl for offering comments and criticisms. Any remaining errors are our own.

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This list contains references from the content that can be linked to their source. For a full set of references and notes please see the PDF or HTML where available.

G. A. Akerlof and R. J. Shiller (2015), Phishing for Phools: The Economics of Manipulation and Deception, Princeton: Princeton University Press.

A. A. Alchian (1950), ‘Uncertainty, Evolution, and Economic Theory’, Journal of Political Economy, 58 (3): 211221.

G. S. Becker (1962), ‘Irrational Behavior and Economic Theory’, Journal of Political Economy, 70 (1): 113.

P. J. Boettke (1997), ‘Where Did Economics Go Wrong? Modern Economics as a Flight from Reality’, Critical Review, 11 (1): 1164.

P. J. Boettke and R. A. Candela (2014), ‘Alchian, Buchanan, and Coase: A Neglected Branch of Chicago Price Theory’, Man and the Economy, 1 (2): 189208.

P. J. Boettke and R. Candela (2016), ‘Milton Friedman, James Buchanan, and Constitutional Political Economy’, in R. A. Cord and D. J. Hammond (eds.), Milton Friedman: Contributions to Economics and Public Policy, New York: Oxford University Press, pp. 727740.

J. M. Buchanan (1959), ‘Positive Economics, Welfare Economics, and Political Economy’, The Journal of Law and Economics, 2: 124138.

J. M. Buchanan (1964), ‘What Should Economists Do?’, Southern Economic Journal, 30 (3): 213222.

J. M. Buchanan (2015), ‘Notes on Hayek – Miami, 15 February, 1979’, Review of Austrian Economics, 28 (3): 257260.

R. H. Coase (1959), ‘The Federal Communications Commission’, The Journal of Law and Economics, 2: 140.

H. Demsetz (1968), ‘Why Regulate Utilities?’, Journal of Law and Economics, 11 (1): 5565.

M. Friedman (1947), ‘Lerner on the Economics of Control’, Journal of Political Economy, 55 (5): 450–416.

N. M. Kay (1995), ‘Alchian and the ‘Alchian Thesis’’, Journal of Economic Methodology, 2 (2): 281286.

E. W. Kitch (1983), ‘The Fire of Truth: A Remembrance of Law and Economics at Chicago, 1932–1970’, Journal of Law and Economics, 26 (1): 163234.

P. A. Samuelson (1948), Economics, New York: McGraw-Hill.

M. N. Shirley (2013), ‘Battles Lost and Wars Won: Reflections on “The Problem of Social Cost”’, Journal of Natural Resources Policy Research, 5 (4): 243247.

G. J. Stigler (1992), ‘Law or Economics?’, Journal of Law and Economics, 35 (2): 455468.

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Journal of Institutional Economics
  • ISSN: 1744-1374
  • EISSN: 1744-1382
  • URL: /core/journals/journal-of-institutional-economics
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