Phillips-Fein begins by noting that when first published in 1962, Milton Friedman's C
apitalism and Freedom received little notice. But then, "by 1982, the nation had elected a president who believed that cutting tax rates and shrinking the government were the keys to economic growth. No longer did policymakers agree that the market was the problem and the state the solution." She continues:How did this intellectual shift happen? "The Chicago School: How the University of Chicago Assembled the Thinkers Who Revolutionized Economics and Business," by Johan van Overtveldt, director of a Belgium-based think tank and a contributor to The Wall Street Journal Europe, tells the story through the lens of the University of Chicago, Friedman's scholarly home.
During the 1950s, '60s and '70s, the Gothic buildings on the Midway housed the country's most-prominent challengers to Keynesianism. The name of the school became virtually synonymous with the idea that free markets are the most fair and efficient way to distribute wealth, while any government intervention distorts the economic order. And even before the rise of the Chicago School, in the early years of the 20th Century, the University of Chicago was home to many important and influential economic thinkers. Hyde Park has nurtured record numbers of winners of the Nobel Memorial Prize in Economic Sciences -- more than twice the number at either Harvard University or the University of California at Berkeley, the runners-up....
Overtveldt makes special note of the school's "apparently inspiring isolation." Cut off from the traditional centers of culture and power -- New York City and Washington, D.C. -- and divided from the Loop by a 20-minute drive (Hyde Park lacking even decent elevated train service), the leafy Quads have protected scholars from alluring distractions while providing a haven for intellectual iconoclasts. As Deirdre McCloskey, a former U. of C. professor, notes, " 'Don't you know that the greatness of the University of Chicago has always rested on the fact that the city of Chicago is so boring that the professors have nothing else to do but to work?' "...
The modern Chicago School only developed after World War II, when thinkers like Friedman and George Stigler began to advance their critique of Keynesian economics. Through scholarship on a variety of different theoretical issues -- consumption, inflation, economic thought -- they reasserted the centrality of price theory and the primacy of the rational individual as the unit of analysis.
Overtveldt is at his best in his depiction of the ruthless yet stimulating internal culture of the department during these years. Workshops that might be polite but sleepy seminars at other campuses became "bloodbaths" at Chicago. Graduate classes were exercises in " 'terror.' " Rather than quench debate, Overtveldt argues that for those who could withstand the pressure, the intellectual hazing helped hone their economic analyses....
To critics, the willingness of the Chicagoans to analyze discrimination economically or children as an investment often seemed shocking. As economist Robert Solow of the Massachusetts Institute of Technology says, " 'There are some things that should not be analyzed as if they were subject to being bought and sold.' " But the frisson of the Chicago School was precisely its stance of being ever-willing to discard social norms and vague notions of the common wisdom for the crystalline logic of economic laws.
Yet despite the light it sheds on a fascinating corner of academic life, "The Chicago School" falls short of providing a full picture of the influence of Chicago economics on the discipline, or on American politics more broadly. Overtveldt's writing about economic ideas is at times too dense for the general reader, while for the specialist it fails to provide an effective synthesis of the common strains linking the different Chicago economists, as well as a sense of how their ideas differed from, and helped shape, the mainstream....Finally, Overtveldt chooses to focus tightly on the academic work of the Chicago economists, to the exclusion of historical context. This makes it hard to get a full sense of the political significance of their ideas.
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