The Chicago School(s) of Democratic Capitalism

25 Pages Posted: 28 Dec 2011 Last revised: 26 May 2012

See all articles by Ross B. Emmett

Ross B. Emmett

Arizona State University (ASU) - Center for the Study of Economic Liberty; PERC - Property and Environment Research Center

Robert van Horn

University of Rhode Island - Department of Economics

Date Written: May 25, 2012

Abstract

Our main contention is that two different re-conceptualizations of liberal democracy took place among Chicago economists in the postwar period. The first emerged out of Frank H. Knight’s ruminations in the 1930s on the failures of liberalism. By the 1940s, Knight devoted most of his attention to the question of whether rational norms for intelligent democratic action could provide a means of avoiding those failures. The second came in the early 1950s when Aaron Director gave up both the classical liberalism of his predecessor Henry Simons and Knight’s re-conceptualization. Although both Knight and Director viewed liberalism as flawed, they sought solutions to its inadequacies in different ways. While Director asserted the fundamental role of competition in the economic realm, Knight argued that an appreciation for competition must be accompanied by recognition of the equally fundamental roles of discussion and ethics.

A subsidiary contention is that Director’s re-formulation provided the underlying conception of democracy in the subsequent work of the Chicago School. While Knight may have taught the Chicago economists price theory, his emphasis on democratic discussion and ethics, coupled with their commitment to the competitive order, diminished his importance to the emerging Chicago approach. Our argument, therefore, lends support to the view that Knight played a smaller role, and Director a more important role, in the Chicago School’s development than often thought.

Keywords: Chicago School of Economics, Chicago School, Aaron Director, Frank Knight, democracy, competitive order, economics and democracy

JEL Classification: A13, B20, B31, D79

Suggested Citation

Emmett, Ross B. and van Horn, Robert, The Chicago School(s) of Democratic Capitalism (May 25, 2012). Available at SSRN: https://ssrn.com/abstract=1977287 or http://dx.doi.org/10.2139/ssrn.1977287

Ross B. Emmett (Contact Author)

Arizona State University (ASU) - Center for the Study of Economic Liberty ( email )

CPCOMM 4th Floor
United States

PERC - Property and Environment Research Center

2048 Analysis Drive
Suite A
Bozeman, MT 59718
United States

Robert Van Horn

University of Rhode Island - Department of Economics ( email )

Chaffe Hall
10 Chaffe Road #3
Kingston, RI 02881
United States

HOME PAGE: http://www.uri.edu/faculty/vanhorn/cv.htm

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