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Alchianian Wisdom

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The two greatest living economists yet to receive the Nobel Prize are Armen Alchian [2] and Gordon Tullock [3].  This post is about Alchian.

For those of you who haven't read Alchian's work, you're missing a cornucopia of insights.  Liberty Fund has gathered many of his best articles into a two-volume collection [4], edited by my former colleague at Clemson, Dan Benjamin.  It is not at all a stretch to say that, no matter how good an economist someone might be who hasn't studied Alchian's work carefully, that person will become a much better economist by spending several attentive hours with Alchian's writings — writings that span the range from those addressed only to other academic economists to those addressed to broad audiences.

Here, for example, is the opening of an article that Alchian wrote in 1976 ("Problems of Rising Prices"):

I believe inflation is inevitable as a long-run trend, with transient, decade-long interruptions of stable or falling prices.  That forecast reflects my view of government.  Inflation is a tax on money.  Like any tax, it will be used.  The more subtle, the less detected, and the less avoidable the tax, the better it is for those with predominant political power and the more surely it will be used.  I join Keynes in at least part of the following: "progressive deterioration in the value of money through history is not an accident, and has had behind it two great driving forces — the impecuniousity of governments and the superior political influence of the debtor class."

[The Keynes quotation is from page 12 of Keynes's 1923 book, Tract on Monetary Reform.]