Armen Albert Alchian (1914) is an American economist and an emeritus professor of economics at the University of California, Los Angeles (UCLA).
In 1946, he joined the Economics Department at UCLA, where he spent the rest of his career. For many years, he was affiliated with the Rand Corporation. In 1996, he became a Distinguished Fellow of the American Economic Association.
Alchian is the founder of the "UCLA tradition" in economics, a member of the Chicago School of Economics, and one of the more prominent price theorists of the second half of the 20th century. He is the author of pathbreaking articles on information and uncertainty, and the theory of the firm. Through his writings on property rights and transition costs, he is a founder of the new institutional economics. A surprising fraction of Alchian's writings have touched on topics conventionally viewed as macroeconomic: money, inflation, unemployment, and the theory of business investment. His writings are characterized by lucid witty exposition and a minimum of mathematical formalism.
Alchian is the coauthor (with William Allen) of the curious and influential introductory economics text Exchange and Production. This was the first American introductory text to discuss information, transaction costs, property rights, and a market economy as a discovery process. This text also contains the classic statement of what has come to be known as the Alchian-Allan Theorem. This proposition, colloquially known as "ship the good apples out," states that when output varies in quality, the lower quality output is consumed nearby while the higher quality output is shipped long distances. The reason is simple: transportation costs vary with the weight and bulk, but not the quality, of that which is transported. The added per-unit amount decreases the relative price of the higher-grade product.