Inventing Paradigms, Monopoly, Methodology, and Mythology at 'Chicago': Nutter and Stigler

26 Pages Posted: 22 Jun 2010

Date Written: June 21, 2010

Abstract

This paper focuses on Warren Nutter’s The Extent of Enterprise Monopoly in the United States, 1899-1939. This started out as a (1949) doctoral dissertation at The University of Chicago, part of Aaron Director’s Free Market Study. Besides Director, O.H. Brownlee and Milton Friedman were closely involved with supervising it. It was published by The University of Chicago Press in 1951. In the 1950s the book was explicitly understood as belonging to the “Chicago School” (Dow and Abernathy 1963).

By articulating the content, context, and reception of Nutter’s monograph, this paper discusses four larger themes. First, by drawing on the unpublishes Kuhn-Stigler exchange, I introduce the importance of Kuhnian conceptions of science to the methodological and institutional understanding of economics in the development of a ‘Chicago’ school of economics. While Thomas Kuhn was widely read and adopted in the social sciences and humanities in the 1960s and 70s (and thereafter), I argue that at ‘Chicago,’ proto-Kuhnian language can be found going back to the 1940s; in those early days it is partly used to disparage the achievements of economic theorizing as promoted by others. A more self-congratulatory Kuhnian self-understanding of economics as a mature paradigm starts to get adopted around 1955 by George Stigler. One important new claim is that the later Kuhnian language gets adopted in part to divest ‘Chicago’ from its shared roots with Institutionalist economics. So, this paper contributes to a better understanding of the formation of a shared narrative at ‘Chicago.’

Second, I introduce contextual themes from Milton Friedman’s writings in the late 40s and 50s to help us understand the nature of realism at Chicago. Nutter’s dissertation helps in reading and illuminating Milton Friedman’s famous 1953 methodology paper in historical and intellectual context.

Third, while this paper notes some of the political ramifications of Chicago economics, my main aim is to help explain the manner in which Chicago attempted to chart a distinctive methodological course. This methodology has often been described as Marshallian with debts to the large-scale NBER studies. Rather than going over familiar territory, I call attention to the importance of proxies in Nutter’s empirical methodology. It is an unappreciated feature of the inductive, quantitative method that focused on the component structures of the economy that characterizes Chicago’s methodological outlook in this period. I show this by comparing Nutter’s dissertation to work done by George Stigler, then at Columbia. We know from Stigler’s correspondence with Friedman that in this period they discussed methodological matters. What is less well known is that Friedman is explicitly credited for Stigler’s methodological insights in Stigler 1949 Five Lectures at LSE. The fifth lecture, “Competition in the United States,” covers similar territory as Nutter’s project. Comparing the work by Stigler and Nutter sheds light on the nature of Chicago methodology as it was being developed away from foundations laid by Frank Knight and Henry Simons in the late 1940s and 1950s. I present my analysis through the published critical reception of both works among economists. I will argue that Harberger's response to Stigler and Nutter introduced new welfare economics (and, thus, the possibility of social engineering) into 'Chicago.'

A fourth reason to focus on Nutter’s dissertation is that it was featured in a Fortune magazine article in January 1952. So, it provides a useful entry into how politically important ‘Chicago’ research was marketed to a wider audience. Nutter’s dissertation can help us see how ‘sponsored’ research looks at ‘Chicago at the time.

Keywords: Warren Nutter, George Stigler, Thomas Kuhn, Milton Friedman, Harberger, proxies, methodology

JEL Classification: B20, B23, B25, B31, B41

Suggested Citation

Schliesser, Eric S., Inventing Paradigms, Monopoly, Methodology, and Mythology at 'Chicago': Nutter and Stigler (June 21, 2010). Available at SSRN: https://ssrn.com/abstract=1628102 or http://dx.doi.org/10.2139/ssrn.1628102

Eric S. Schliesser (Contact Author)

Ghent University ( email )

Philosophy and Moral Sciences
Blandijnberg 2
Ghent, 9000
Belgium

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