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  Allen R. Sanderson

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The life and tomes


Wealth of notions
Finally, 22 economists whose ideas have at least one point in common: they all won the Nobel Prize. Here, in translation, are the theories that made Chicago famous.

PHOTO:  MedalWhen the 2001 Nobel laureate selections ( were announced in October (marking the 100th anniversary of the five prizes specified in Alfred Nobel's will) no Chicagoans were among the honorees. Our long-term record is better: of the more than 700 Nobelists, 73 have been students, researchers, or faculty at Chicago (, placing the U of C second only to Cambridge, with 77.

Many of Chicago's Nobel honors have come in the sixth and youngest category: the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel, established in 1968 by the Sveriges Riksbank, the Swedish equivalent of the Federal Reserve System. Of 49 winners in economics to date, 22 are Chicagoans. In the past 11 years, six winners were at Chicago (in the Department of Economics, the Committee on Social Thought, the Law School, or the Graduate School of Business) when they received the award.

So pervasive is the University's identification with a distinctive Nobel-winning approach-dubbed the Chicago School of Economics-that many media summaries characterized the 2001 winners as "un-Chicago."

That phrase poses no problems to individuals well versed in economics. Such people could likely understand and even explain what the Academy meant when it honored Robert E. Lucas Jr. in 1995 for "having developed and applied the hypothesis of rational expectations, and thereby having transformed macroeconomic analysis," or Milton Friedman in 1976 for "his achievements in the fields of consumption analysis, monetary history and theory, and for his demonstration of the complexity of stabilization policy." But the intelligent lay audience may respond as did a student in Introduction to Microeconomics. When I announced in October 2000 that my colleague Jim Heckman had just received a Nobel (formally "for his development of theory and methods for analyzing selective samples"), the student inquired: "So what has he done that will benefit me and make my life better?"

What follows is my attempt to answer that question, translating and summing up the accomplishments the 22 economists whom Chicago claims on T-shirts and in official publications as its own. Along the way I hope to show how close they and their research are to a core "inner circle" to which the label Chicago economist is typically applied.

For starters, Chicago economists do empirical, real-world research, combining basic theory with data to address contemporary-and historical-problems. They are willing to tackle unpopular, controversial topics and to consider any new idea about what makes people tick. They constantly redefine and expand boundaries-to include finance theory, the economics of information, rational expectations, and law and economics. Chicago economics analyzes the responses of individuals, firms, and the public sector to costs, benefits, and incentives; pairs a fundamental appreciation for the power of competitive forces with a healthy distrust of governmental intervention in markets; and places a high value on personal and economic freedoms.

Being a Chicago economist is also equated with hard work-something Milton Friedman claimed was easier in Chicago because of the climate. Or, more idealistically, as 1970 laureate Paul Samuelson allegedly declared: "Chicago is not a place but a state of mind."

In the outermost circle are three distant relations-Nobelists who were at Chicago on a short-term research or faculty appointment and who are generally associated with another institution or school of thought...

Closer to the central core are ten Nobelists who were graduates of the College and/or the Social Sciences Division (ten of the 22 economics laureates have U of C degrees, including four from the College; three earned both their undergraduate and graduate degrees from Chicago) or were on the faculty or in research positions for a substantial length of time. Their work reflects Chicago's approach, and in many instances they were honored implicitly for contributions they made while on the quadrangles...

At last we reach dead center: nine faculty members recognized immediately and completely as Chicago economists...

When a Chicago faculty member gets that early morning October call from Sweden, which happened a staggering six times from 1990 to 2000, I am often asked by friends in the administration and colleagues in other departments if there are still other contenders left here for the economics prize, or if the "Chicago School" Nobel well has finally run dry...

Allen R. Sanderson, associate chair in the Department of Economics and senior lecturer in the College, received the Quantrell Award for undergraduate teaching in 1998. An expert on sports economics, he has written on free agency, the economic impact of stadiums, and home-court advantage in the NBA, and is at work on two pieces on competitive balance for the Journal of Sports Economics.

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