Here’s my just-published remembrance, in Public Choice, of my late teacher, dissertation advisor, co-author, and friend, Bob Ekelund. Three slices:
The only textbook assigned for the course was Milton Friedman’s Price Theory. From some younger members of Auburn’s economics faculty, I heard a few cocktail-lubricated complaints that core theory courses in a modern economics Ph.D. program shouldn’t feature such low-brow fare as Friedman. Not enough math. I disagreed, sensing that my classmates and I were destined to learn from the combo of Ekelund and Friedman far more useful microeconomic theory than we’d have learned had the assigned text been any that were then used in the elite programs (or, indeed, had the professor been any randomly chosen one from the likes of Yale or M.I.T.).
Looking back, I was only half right. My classmates and I did indeed learn from a master price theorist how to deploy microeconomic theory creatively, rigorously, and usefully. But during the course, Friedman hardly appeared. We were given reading assignments from the text, but almost no class time was devoted to reviewing or applying anything that Friedman wrote in that textbook – a textbook that, despite its light reliance on mathematics, is surprisingly abstract. Ekelund instead taught Armen Alchian. A few of Alchian’s papers were assigned, but Alchian’s appearance came mostly through Bob’s teaching style. The world offers endless fascinating questions that can be productively explored with price theory. Bob put countless of these questions to his students in ways expertly crafted to elicit enlightening discussion.
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About a month or so into the course a major national news story broke: Several people had died after swallowing some tablets of Tylenol. It quickly became clear that someone had intentionally laced the pills with poison. Bob instructed his students each to write a paper describing how economics might advise government to respond to this tragedy. I wish that I remembered the details of what I wrote as well as I remember, first, my elation upon learning that my paper earned an A+ from Bob, and second, the thrill of the classroom discussion of our papers. Every proposal for government action – or, in my case and that of a few other students, government inaction – was met by Bob with, “Well, what about …?” which invariably was a preface to him masterfully noting downsides to the proposal. In the classroom discussion, even my A+ paper was subjected to tough scrutiny. It was during that discussion when I fully realized the meaning and importance of Thomas Sowell’s observa-tion that “there are no solutions, only tradeoffs.” And it was in that class that I cemented my conviction that price theory done in the style of Armen Alchian – which was the style of Bob Ekelund – is an exquisite tool far more powerful and useful than what the great majority of economists, then as now, consider to be microeconomic theory.
I’m genuinely ashamed to report that my experience in the next course that I took from Bob wasn’t as rewarding as was my experience in the micro-theory course. The fault was mine. This next course was a seminar on regulation, and my classmates and I were graded exclusively on a research paper that each of us submitted at the quarter’s end. I was cocky, confident that my instincts about theory – which showed well in the earlier course – were sufficient to carry me through to an A+ in this course. I don’t now recall the details of the regulatory topic on which I wrote my paper; I recall only that it had something to do with antitrust. I do, though, remember the humiliation I felt upon learning that my grade on that paper – and, hence, my grade for the course – was B-minus. The humiliation was made real because I knew that Bob graded me unfairly; he should have assigned me a course grade of C-minus (or even lower). Bob wanted a research paper showing evidence of its author having grappled with the messy details and institutional context of some real-world regulatory issue. Instead, I breezily bypassed the details and waxed philosophically about regulation. Scrawled across the paper in Bob’s handwriting was “This isn’t even the beginning of publishable research” – or words to that effect. He was right. I learned a difficult but necessary lesson.
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[T]he bulk of my and Bob’s criticisms of [some work of William] Comanor came from a distinctly “market process” understanding of the economy. Entrepreneurs are active and creative, always on the lookout for the profit opportunities lurking in markets that have yet to achieve perfect efficiency (which is to say, in all real-world markets). If it’s really the case that the use of some vertical restraint reduces the welfare of infra-marginal consumers by enough to matter – or, what is perhaps the same thing, by enough to be detected by antitrust authorities and courts – there exists a profit opportunity for entrepreneurs. The firms contracting with each other to create the vertical restraint themselves have incentives to devise ways to better serve infra-marginal consumers without abandoning their efforts to satisfy the demands of marginal consumers. And if these firms lack the entrepreneurial alertness or creativity to better serve both groups of consumers, then other entrepreneurs will find profit opportunities in this failure to better serve infra-marginal consumers. Either way, market competition is far more likely than are government officials to strike the ‘optimal’ trade-off between service to marginal and service to infra-marginal consumers.
