Armen Alchian founded the UCLA tradition in economics, a tradition that sadly no longer permeates the corridors of that once great Department of Economics. The tradition emphasizes, through the medium of verbal analysis, supplemented by ‘unsophisticated’ empirical testing, that individual behavior is self-seeking and rational and that such behavior has many unanticipated consequences. It recognizes that rationality is the outcome of evolution and learning, and focuses attention on frictions such as uncertainty that serve as brakes on the ability of individuals to make decisions and to coordinate, the one with the other.
Armen Alchian was a brilliant builder of teams, successfully bringing together a group of market economists, any one of whom would have secured a Nobel Prize in Economic Sciences had that prize been awarded by a non-socialist economics academy. The scholars who graced Armen’s academy during the Glory Years of Alchian’s reign included, Robert Clower, Harold Demsetz, Jack Hirshleifer, Alex Leijonhufvud and Earl Thompson. Only Chicago during its own glory years could out-match that superb free-market combination.