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Aaron Director died yesterday at the age of 102. Here’s his obituary in the New York Times [2]. He was the brother of Rose Friedman, brother-in-law of Milton Friedman, and uncle of David Friedman. Few people, I’m sure, have contributed as much to Americans’ prosperity as did Professor Director.
More than anyone else, he is responsible for launching the Chicago School analysis of antitrust regulation. For the past quarter century, this approach to antitrust law has prevented untold billions of dollars of prosperity from being destroyed by misguided antitrust enforcement.
Director refused to take textbook models of competition and monopoly too seriously, too literally. He saw, when almost everyone else was blind, that actual business practices that are inconsistent with textbook models of competition often mean that the problem is with the textbook models and not with the actual business practices.
For example, he recognized early on that price-cutting is an enormously costly way of attempting to secure monopoly power – a way typically more costly for the predator than merging with the rivals that the predator seeks to eliminate. This insight played an important role in John McGee’s justly famous article showing that Standard Oil did not win monopoly power through predatory pricing.
McGee’s article appeared in the first issue of the Journal of Law & Economics (October 1958). It’s in this Journal, more than in any other single place, that Chicago’s justly celebrated antitrust scholarship and empirical research was published. Director was founding editor of the Journal, which he shepherded until 1964, when Ronald Coase [3] took its reins.
Here’s what Robert Bork, in the Preface to Bork’s The Antitrust Paradox [4] (1978), says about Director:
Much of what is said here derives from the work of Aaron Director, who has long seemed to me, as to many others, the seminal thinker in antitrust economics and industrial organization. His reputation is immense among those who know him; that it is not more widespread is entirely due to his choice to publish little and rest content with the establishment of a strong oral tradition at the law school at the University of Chicago, where he taught economic theory. I had the good fortune to be his student in 1953 and 1954, the latter year as a graduate research associate, and our discussions permanently and substantially altered my ways of thinking about much more than antitrust. It is impossible to capture the impressiveness of the man for the reader who does not know him: he depended for his results not at all upon pedagogical fireworks but rather upon a quiet manner and a remorseless logic. He gave the impression of absolute intellectual integrity, a very rare quality and so immensely impressive when encountered. Perhaps his genius lay in that, and in his capacity for examining what appeared the most ordinary propositions of law and perceiving at length that the shibboleths were empty.