Earlier this evening, at the closing dinner of a Liberty Fund conference that focused on the writings of Armen Alchian and Henry Manne, Jerry Jordan (a student at U.C.L.A. of Alchian and past president of the Cleveland Fed) relayed an instance that I’d never before heard. It is ….
…. many years ago (mid-1960s, is my guess) a hot-shot, freshly minted PhD student from M.I.T. – who wrote under Paul Samuelson – was starting his career as an assistant professor of economics at U.C.L.A. This young professor (who is today quite well known among economists) was assigned to teach the first semester PhD microeconomics-theory course at U.C.L.A. – a course normally and famously taught by the incomparable Alchian (who was, that semester, on a leave of absence). The young hot-shot economist, however, ran into Alchian in an elevator at U.C.L.A. just before the semester started and, very wisely, sought Alchian’s counsel on what material to cover in that first-semester PhD microeconomics class.
“Demand,” replied Alchian to the young professor’s query – as in ‘the theory of consumer, and of derived, demand.’
“Oh yes!” exclaimed the young prof., “I already have some lectures planned on demand. But what else, in addition, should I cover in the course?”
Alchian replied: “Demand. That’s all there is.”
Alchian, in this as in everything else that he addressed, was correct. At the end of the day, nearly all that is correct and worthwhile in economics is found in a deep understanding of the law of demand.