Liberty Fund is proud to present, in two volumes, The Collected Works of Armen A. Alchian, bringing together Alchian’s most influential essays, articles, editorials, and lectures to provide a comprehensive record of his thinking on a broad range of topics in economics.
The second volume of this collection, Property Rights and Economic Behavior, focuses on Alchian’s merging of law and economics, in particular the economics of property rights. Here Alchian, with assistance from Ronald Coase and Harold Demsetz, expands upon the economic rationale behind property rights and demonstrates that these are not distinct from human rights but rather are integral to them. These seminal works go against the grain of conventional wisdom, pointing out among other things the lack of wealth-maximization objectives in various levels of government and nonprofit organizations. Alchian’s powerful economic methodology resists the tide, for the sake of the individual and hence for all of society.
“In a world more than one person, conflicts of interests about the use of scare resources are inevitable. The use, possession, and even the loss of scare resources involve consequences for people. Some of these consequences are desired and some are not. Who will determine them and who will bear them? The inescapable problem to which some solution must be reached is how to resolve these conflicts of interests. A discouraging part of this problem is that there may be no criterion of a “best” solution. We can think of a “way” of resolving the conflicts of interests (and conflict of interest does not necessarily mean physical violence) as being an assignment to particular individuals of the “authority” to select any of the “authorized” uses with its resultant consequences. We shall call this a system of property rights.”
Armen A. Alchian
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.