Price theory as prophylactic against popular fallacies

Abstract

AbstractThe articles collected inChicago Price Theoryillustrate elements of continuity and change in the development of the Chicago School of Economics. The editors stress a continuity in the Chicago tradition that runs from Frank Knight to Gary Becker. Our contribution in this essay is to emphasize the discontinuity in the evolution of the Chicago price theory tradition. We argue that a logical continuity runs not from the Knight/Viner/Simons generation to the Friedman/Stigler/Becker generation, but to a branch of the Chicago tradition best exemplified by the Alchian/Buchanan/Coase generation of Chicago price theory. The continuity we stress is understanding price theory as a study of market adjustment and adaptation under alternative institutional arrangements.