The Chicago School: How The University of Chicago Assembled the Thinkers Who Revolutionized Economics and Business, by Johan Van Overtveldt (Agate, 432 pp., $35)
The University of Chicago is both Mecca and Rome for the science of economics, writes Johan Van Overtveldt, a journalist from Belgium, in his new history on what came to be known as the Chicago School of Economics. Chicago has won more than twice as many Nobel Prizes and John Bates Clark medals—for promising economists under the age of 40—as its closest competitors, Harvard and the University of California at Berkeley. Universities from the rest of the world hardly figure in this competition, though economics is far from an exclusively American discipline. American universities attract researchers from around the globe: in the leading American economics departments, one-third of the faculty comes from Europe, and an increasing number come from India and China.
Since the late nineteenth century, Chicago’s economics department has adhered rigidly to the orthodox version of classical economics and has rarely been tempted to deviate from it. But the idea of Chicago as something special in the field of economics only came into focus in the 1960s, when Milton Friedman, Friedrich Hayek, George Stigler, and Theodore Schultz, among others, taught there, and Gary Becker was one of their students.
They transformed Chicago’s department of economics from a purely academic endeavor into an ideological force in favor of liberty and against statism, in the U.S. and around the world. In 1974, Friedman described what made Chicago special: “Chicago takes seriously the use of economic theory as a tool for analyzing a wide range of concrete problems . . . Chicago stands for belief in the efficiency of the market . . . for skepticism about government intervention . . . and for emphasis on the quantity theory of money as a key factor in producing inflation.”
Since the 1980s, the Chicago School’s philosophy, as Friedman defined it, has come to dominate academic teaching internationally, and to drive economic policy—Chicago School principles, for instance, are to thank for the low inflation and high growth that now characterize our global economy. Since the 1970s, as Van Overtveldt shows, Chicago-style economics has also penetrated the fields of sociology, law, culture, and history. These inroads began with Gary Becker’s research on the family and Ronald Coase’s work in the field of law. Becker’s disciples have now turned their attention to the more trivial area of “Freakonomics,” which tries to explain any behavior—including deviant behavior like cheating, drug-taking, or prostitution—as rational activity from an economic perspective.
Van Overtveldt’s book is basically an encyclopedia of all leading economists who have worked at the Chicago School, and he brilliantly summarizes their research. But he doesn’t deal much with the opposition that Chicago economists have aroused. For example, in 1995, the Chilean politician Juan Gabriel Valdes wrote, “The basic doctrine of the Chicago school implies a bias against politics” and “an economic reductionism” that makes it a most attractive ideology to undemocratic regimes. Milton Friedman had already answered such criticisms years earlier, noting that he could not prevent dictators (whether Pinochet or Deng Xiaoping) from borrowing Chicago’s ideas and using them to implement effective economic policies. It is worth noting that opposition to the Chicago School usually comes from politicians, and rarely from fellow economists. This seems to be the ultimate test of Chicago’s scientific victory.
“We are all Keynesians now,” said Richard Nixon in the early 1970s. Today, political leaders around the globe could more accurately say, “We are all Chicagoans now.”