A colleague lent me George Stigler’s Memoirs of an Unregulated Economist, and the book has me thinking about economists who could have gotten Nobel Prizes, should have gotten Nobel Prizes, but didn’t. This rules out anyone who passed away before 1969, when the first economics Nobel was awarded to Ragnar Frisch and Jan Tinbergen “for having developed and applied dynamic models for the analysis of economic processes.” That rules out a lot of obvious names who could have won it had the economics Nobel been established with the others in 1901 like Joseph Schumpeter (1883-1950), Carl Menger (1840-1921), and Eugen von Boehm-Bawerk (1851-1914), and it rules out economists who deserve it but are still alive (Arnold Harberger, Thomas Sowell, Israel Kirzner, Deirdre McCloskey, Joel Mokyr, and Claudia Goldin, for example). Here’s the list along with links to some things I’ve written about them where applicable.
Ludwig von Mises (1881-1973). Mises wrote four truly great books: The Theory of Money and Credit (1912), Socialism: An Economic and Sociological Analysis (1922), Human Action (1949), and Theory and History (1957). His most important contribution, in my opinion, was his explanation of why socialism is “impossible” as an economic system. Even his shorter books, now distributed in $0 online editions by Liberty Fund and the Institute that bears his name, are excellent reads. His English prose is astounding for its clarity and precision given that he was writing in what wasn’t his first (German) or even his second language (French). Friedrich Hayek won the Nobel Prize in 1974, the year after Mises died (which, I’ve heard, has led some to speculate that this was a deliberate move on the part of the Nobel Committee), so at least some of the ideas he developed and the research programs to which he contributed gained the recognition they deserved. He’s on this list from the economist Timothy Taylor, and no less an authority than Paul Samuelson (the first American to win the Nobel and in many ways the father of post-World War II economics) put him on a “What if?” list of economics laureates if the prize had been awarded between 1901 and 1930 (see the footnote on p. 358).
Frank H. Knight (1885-1972). I’ve heard that it was said around the University of Chicago “There is no God, and Frank Knight is his prophet.” Knight was the father of what Deirdre McCloskey calls the “Good Old Chicago School” and the mentor to many of the members of what she calls the “Sort-of-Good Old Chicago School” who did win Nobels. His picture was one of two that hung in the office of 1986 Nobel Laureate James M. Buchanan; the other was Knut Wicksell. Knight is most famous for his 1921 book Risk, Uncertainty, and Profit, which made the important distinction between risk and uncertainty and which laid the groundwork for our understanding of entrepreneurship and profit in a commercial society. He also wrote extensively in ethics, and he was the first visitor to Buchanan’s Thomas Jefferson Center at the University of Virginia. There, he delivered lectures that were later published as Intelligence and Democratic Action, which I discussed here. You can find an annotated bibliography of Knight’s work assembled by Ross Emmett, probably the world’s foremost Knight scholar, here.
Gordon Tullock (1922-2014). It is perhaps understandable that the Nobel committee did not get around to awarding prizes to Mises and Knight, who passed away while the prize in economics was still young. It is a lot less understandable that Gordon Tullock made it to the grave without a Nobel. Tullock probably should have shared the 1986 prize with Buchanan for their early work developing public choice as a distinct field, but even beyond this, he was worthy of a Nobel for his analysis of rent-seeking (which, perhaps, he would have shared with Anne Krueger and Jagdish Bhagwati). He was the founding editor of Public Choice, and his path-breaking accomplishments were certainly Nobel-worthy.
Armen Alchian (1914-2013) and Harold Demsetz (1930-2019). Alchian and Demsetz go together as two of the leading lights in the “UCLA School of Economics,” summarized and described in The Essential UCLA School of Economics by David R. Henderson and Steven Globerman and the accompanying videos. UCLA’s economics department was described as the “Chicago of the West Coast,” and it shared a lot in common with the University of Chicago. Alchian and Demsetz’s 1972 co-authored American Economic Review paper “Production, Information Costs, and Economic Organization” has over 21,000 citations. Among Alchian’s many contributions, he showed that while firms may not consciously seek to maximize profits, profit maximization is a crucial survival characteristic in a competitive economy. Demsetz is responsible for identifying what we now call the “nirvana fallacy” in his 1969 Journal of Law and Economics paper “Information and Efficiency: Another Viewpoint” and for developing the economic theory of property rights in his 1967 American Economic Review article “Toward a Theory of Property Rights.” The great economist Walter Williams, who passed away in 2020, was trained at UCLA, and it was also Thomas Sowell’s intellectual home for a brief time.
William Baumol (1922-2017). Baumol was one of the first economists I got to “know;” his textbook (with Alan Blinder) was assigned when I took principles of macroeconomics in Spring 1998. Several years ago, I argued that Baumol and his NYU colleague Israel Kirzner should share the prize for their contributions to the theory of entrepreneurship. With Baumol having passed away in 2017, Kirzner’s already-slim chances are even slimmer. Baumol was regularly in the Nobel conversation, and his 2002 book The Free Market Innovation Machine is a fantastic exploration of how entrepreneurs in a commercial society sustain what Schumpeter called “perennial gales of creative destruction.” He is perhaps most famous for identifying what came to be known as “Baumol’s Cost Disease,” which explains why labor costs grow in sectors where productivity rises more slowly than in other sectors. Rising productivity in the dynamic sectors increases a worker’s opportunity cost of taking a job in the stagnant sectors–hence, labor costs rise in the stagnant sectors. Higher education is a good example. If productivity is rising very slowly in higher education, where variations on the “chalk-and-talk” lecture are still dominant modes of delivery, while it is rising very rapidly in other sectors like technology or financial services, labor costs in higher education will rise because the professors providing that education have more attractive outside options.
Julian Simon (1932-1998). As I explain in the linked article, our younger son’s middle name is Simon because of Julian Simon’s work. Simon deserved the Prize for his explanation of how the human mind is the Ultimate Resource and his careful analysis of his ideas’ empirical implications. Simon’s most notable contributions came in his responses to “gloomster” predictions about The Limits to Growth (published in 1972 by the Club of Rome) and The Population Bomb (published in 1968 by Paul Ehrlich). Simon thought their predictions were fatally flawed because things are not “resources” independent of people’s ideas about how to use them. The population pressure that worried the Club and Ehrlich might increase prices in the short run; however, as necessity is the mother of invention, people search for substitutes and come up with new ways to use things. Consider high gas prices. If people expect them to be high enough long enough, people search for substitutes like walking, carpooling, or telecommuting. Simon is most famous for winning his bet with the supremely confident Paul Ehrlich (who was awarded a MacArthur Foundation “Genius” grant in spite of being spectacularly wrong). The economists Gale Pooley and Marian Tupy examine data from 1900-2019 and find that, contrary to the thesis that Simon “got lucky,” he would have won the bet 69.9% of the time (excluding war years). They write: “(d)uring this 119-year period, the time price of the five-metal basket fell by 87.2 per cent despite both US and world populations having grown substantially.” For showing that a higher population actually creates resources via the seeming magic of ingenuity rather than consuming them and for thereby demonstrating that a higher population is a blessing rather than a curse, Simon deserved the Nobel Prize. In the Marvel Cinematic Universe, wider diffusion of his ideas, ideally, could have perhaps persuaded Thanos that his plan to save the universe by wiping out half of its life was, in fact, mad.
W.H. Hutt (1899-1988). If you’ve heard the term “consumers’ sovereignty,” then you know at least one of Hutt’s contributions. He made many, many more, and probably deserves the prize for his introduction of consumers’ sovereignty, his incisive criticism of Keynesian macroeconomics across his books The Theory of Idle Resources, A Rehabilitation of Say’s Law, and The Keynesian Episode (along with its forerunner Keynesianism: Retrospect and Prospect), and his analysis of labor unions and restrictions on the labor market (in The Theory of Collective Bargaining, The Strike-Threat System, and The Economics of the Colour Bar). With Phillip W. Magness and Ilia Murtazashvili, I’m trying to change the fact that Hutt doesn’t have a place in the pantheon of great economists. We discuss his constitutional political economy in this paper in the most recent issue of the Independent Review and his critique of the color bar in a paper in progress but that has an early version here.
Aaron Director (1901-2004). Director did not publish much, I am not nearly as familiar with his work as I am with the work of other scholars on this list, and I will admit that I only came to this conclusion after looking at Donald Boudreaux’s similar list from 2016. His light publication record notwithstanding, he was nonetheless a profound influence on his University of Chicago colleagues. He was the brother of Rose Director and therefore the brother-in-law of Milton Friedman (he was also George Stigler’s best friend), but he also “greatly influenced the modern course of economics and legal thought through his founding of the field of Law and Economics and his mentoring of generations of scholars,” as the University of Chicago Chronicle reported in its obituary. Founding Law and Economics–he founded the Journal of Law and Economics in 1958–is a Nobel-worthy contribution, and he hosted the famous dinner at which Ronald Coase convinced the University of Chicago’s faculty that he was right and they were wrong–which was no mean feat: at the beginning of the dinner, the economists were unanimous against Coase. After the dinner, they were unanimous for him. In addition to having an important influence on an important field, Director contributed indirectly through his effect on others’ scholarship.
The economists on this list were widely recognized (and honored) for their achievements. Mises, Tullock, Alchian, Demsetz, and Baumol were all named Distinguished Fellows of the American Economic Association, for example, and the Competitive Enterprise Institute established the Julian L. Simon Award in 2001. They remain widely read and frequently cited. None of them won the profession’s ultimate honor, however, even though all were deserving. As more and more deserving economists move into their 70s, 80s, and 90s, I can only hope this list doesn’t get longer.