George J. Stigler (1911-1991)

George Stigler would have turned 96 today. He passed away shortly before his friend Ronald Coase's Nobel Ceremony. He himself won the same prize in 1982.

A long time faculty member of the economics department of University of Chicago and a close friend of Milton Friedman, who passed away last month, Stigler is easily associated with Friedman's liberal views and seen as part of the "Chicago Mafia".

One important but often neglected feature of the Chicago school economists is their emphasis on explanation of observed phenomena in the real world and empirical testing of theories. Friedman himself is one good example of such, especially before his shift of focus to developing a theory of currency in the 1960s. In this regard, both Stigler and Friedman were heavily influenced by an older colleague Aaron Director, Friedman's sister-in-law, who helped recruit Ronald Coase and whose real world knowledge and oral tradition (tie-in sales, price discrimination, etc.) was highly respected.

Today, many overzealous model builders out there would do themselves a favor to pay attention to these words of Stigler's:

"The criterion of congruence with reality should have been sharpened--sharpened into the insistence that theories be examined for their implications for observable behavior. Not only were such implications not sought and tested, but there was a tendency, when there appeared to be a threat of an empirical test, to reformulate the theory to make the test ineffective. Economists did not anxiously seek the challenge of the facts."