George Stigler Quotes

Some important aspects of important aspects of economic organization take on a new meaning when they are considered from the viewpoint of the search of information.

Footnotes are not an occasional token of respect for an obsolete and purposeless tradition. It will come as a shock to many, I am sure, even to realize that references can be checked.

It was in the 1960s that I began the detailed study of public regulation. My interests were aroused, and my faith in the cliches of the subject destroyed, as so often with other subjects, by the discussions with my friend, Aaron Director. This wonderful man is that rarest of scholars: a clear-headed, imaginative, erudite man who enjoys the task of constructing luminous and original theories but does not even write them down!

Economists are neither distinctively good nor bad, no more or less virtuous or brave or generous or faithful than the sum of mankind, and certainly no more modest.

One should hardly have to tell academicians that information is a valuable resource: knowledge is power. And yet this occupies a slum dwelling in the town of economics. Mostly it is ignored.

Unlike the members of the physical and biological sciences, the economist is asked to explain his work in a manner that is interesting and convincing to a weary listener. Yet there is no reason to believe that the explanation of our economic and social world is inherently simpler than the explanation of our physical world.

Regulation may be actively sought by an industry, or it may be thrust upon it. A central thesis of this paper is that, as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit. There are regulations whose net effects upon the regulated industry are undeniably onerous; a simple example is the differentially heavy taxation of the industry's product (whiskey, playing cards). These onerous regulations, however, are exceptional and can be explained by the same theory that explains beneficial (we may call it "acquired") regulation.

A modern economic system is of extraordinary complexity. Imagine a three-dimensional jigsaw puzzle, consisting of roughly 100 million parts. Some parts touch against, let us say, 1,000 other parts. (That is, each family deals at one time or another with that many employers, banks, retail stores, domestic servants, and so on.) Other parts touch—let us be conservative—50,000 other parts (firms that sell to retailers and buy from other firms and hire laborers and so on). It would be enough of a task to fit these 100 million pieces together, but the real difficulties have yet to be mentioned. The pieces change shape quite often—a family has twins; a firm does the next best thing and invents a new product. The economist has the interesting task of predicting (in the aggregate) each of these movements. Meanwhile a busy set of people—congressmen, members of regulatory bodies, central bankers, and the like—are changing the rules on who or what the jigsaw pieces will be and how they are shaped. And of course there are other jigsaw puzzles (foreign economies) of comparable complexity, and these other puzzles are connected at literally a million points with our puzzle.

Dr. Smith and all of his sensible disciples have believed that people would not strive to do anything well unless there were a reasonable measure of agreement between the success of their efforts and the rewards they would receive.

Economic theories are infinitely diverse in their predictive power. Entirely too many have zero predictive power-they are statements of tautologies. Thus the statement that to maximize profits one should operate a firm where marginal revenue equals marginal cost is a mere mathematical statement of the condition for a maximum. The example we gave of search theory is not a tautology because we can identify the factors that influence costs and returns.· Some theories have negative power: they predict the opposite of what happens (and then become useful in the hands of a sophisticated user).

Consider the Negro as a neighbor. He is frequently repelled and avoided by the white man, but is it only color prejudice? On the contrary, it is because the Negro family is, on average, a loose, morally lax group, and brings with its presence a rapid rise in crime and vandalism. No statutes, no sermons, no demonstrations, will obtain for the Negro the liking and respect that sober virtues commend. And the leaders of Negro thought: they blame the crime and immorality upon the slums and the low income—as if individual responsibility could be bought with a thousand dollars a year.

A rational man must be guided by the incentive system within which he operates. No matter what his own personal desires, he must be discouraged from certain activities if they carry penalties and attracted toward others if they carry large rewards. The carrot and the stick guide scientists and politicians as well as donkeys.

The state --the machinery and power of the state-- is a potential resource or threat to every industry in the society. With its power to prohibit or compel, to take or give money, the state can and does selectively help or hurt a vast number of industries. That political juggernaut, the petroleum industry, is an immense consumer of political benefits, and simultaneously the underwriters of marine insurance have their more modest repast. The central tasks of the theory of economic regulation are to explain who will receive the benefits or burdens of regulation, what form regulation will take, and the effects of regulation upon the allocation of resources.

So the price system gives innumerable messages on the state of supply and demand for each commodity or service at each place where it is bought or produced. If a city is in short supply for windows (following a hailstorm) or has an excess supply of workers, the movements of prices and wages communicate the facts to other communities. Some messages are swift and others slow.

The delicate and intricate pattern of competition and cooperation in the economic behavior of the hundreds of thousands of citizens of Stockholm offers a challenge to the economist that is perhaps as complex as the challenges of the physicist and the chemist.