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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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Journal of Institutional Economics
  • ISSN: 1744-1374
  • EISSN: 1744-1382
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