The Chicago School: How the University of Chicago ... (ISBN 1932841148)

The Chicago School of Ptolemaic Economists:
Van Overtveldt(VO)demonstrates how the "later" Chicago School of Friedman,Stigler,Lucas,and Becker overthrew and destroyed the earlier Chicago School of Frank Knight and Henry Simons by eliminating any analysis of uncertainty(either of Knight or Keynes) or ambiguity(Ellsberg)from consideration in economic theory and substituting the normal distribution's standard deviation as a measure of risk.Friedman ,a true believer in the Subjectivist Bayesian theory of probability created by Ramsey,De Finetti,and Savage,which argued that all probabilities must be unique,precise,additive single number answers derived from linear preferences,substituted this approach for the approach of Knight and Simons.Friedman, et. al, then started analyzing all markets under the assumption that all markets(commodity,labor,money ,bond,output,stocks,currencies,etc.)were either normally distributed or could be analyzed " as if" they were normally distributed.It is interesting that not a single Chicago School economist in the 20TH century(or so far in the 21st century) ever presented any type or kind(there are about 10 different such tests available currently) of goodness of fit test demonstrating that the time series data that they claimed they were analyzing fit the normal distribution. Friedman's Chicago School approach is based on a foundation that is very similar to the geocentric astronomy school founded by Ptolemy in 130 A.D.Ptolemy's " normal distribution like " assumption was that all of the planets and stars rotated on epicycles, which rotated on deferents or eccentrics(a slighly off center deferent).This gave rise to cycloid paths that generated the retrograde motion of the planets that could theoretically be observed from an equant point(this was Ptolemy's invention).All this was constructed in order to satisfy the a priori belief that the Universe had to reflect perfect uniform motion(which was exemplified by the circle).This approach fell apart after Galileo improved on the construction of the telescope and started observing what was actually going on in the solar system.The empirical evidence demonstrated that Ptolemy's theoretical constructions were completely artificial models that had NO empirical support. Benoit Mandelbrot,like Galileo,has demonstrated that the normal distributions that lie at the heart of the Chicago School do not exist.They are,like the epicycles,purely artificially constructed ,empirically empty models that explain/predict nothing.Mandelbrot has,starting in the late 1950's, provided overwhelming empirical and statistical evidence that the distributions are either Cauchy or Power law.The normal distribution turns out to be a very special case of the Cauchy. Unfortunately,Friedman's approach was spread by E.Fama to financial economics.This leads to the same conclusion-artificially constructed stochastic models based on the assumption of normality that have no more empirical support than the existence of a equant point does.The later Chicago School founded by Friedman is basically anti scientific.It replaced the scientific school founded by Knight and Simon by claiming that they were not using mathematical and statistical analysis.Like Ptolemy,Friedman hid the fact that none of the data fitted his normal distribution model by using a lot of stochastic modeling theory that " looked " scientific.It should come as no surprise that Friedman's record of making accurate and reliable predictions/forecasts was abysmal-worse even than the Ptolemaic model that got some predictions right. Lucas and Friedman desperately need to impose a distribution that does not fit the data because of their a priori claim that all false trading at disequilibrium prices cancels out ,in the long run(Friedman)or the short run(Lucas),around the mean price(equilibrium)of a set of prices which is assumed to be normally distributed around the equilibrium or market clearing price.Friedman and Lucas apply the same model macroscopically using the additivity property of normal distributions.The business cycle is just the plus and minus deviations that occur around the macroscopic mean. The Chicago School can only deal analytically with the business cycle when no uncertainty is present and risk is represented by the standard deviation of a normal distribution.It can not deal with uncertainty or the wild risk of the Cauchy.It can only deal with the mild risk of the normal(bivariate,multivariate,or log normal).

Well researched coverage of a daunting subject:
At it's best, the history of economics is a daunting subject. Economics in action is more interesting, but even then it's usually only for the inspired. So what do we make of this history of the Chicago School? Certainly it's well researched. Most every economist of note at the University of Chicago is covered, as are their influences and how they fit in the broader tradition of the University. This history goes beyond the economics department to cover the subject (or "school's") include in business, law, sociology and public policy. The key to appreciating this kind of book is you have to know what you're getting into. It's not enough to be an armchair economics afficianado - you have to care about the institution itself. This book is for people who saw "The Commanding Heights" and wanted to know more about the history of this free market school of thought. Although their are balanced arguements of this school, the subtitle should let you know where the author stands. This is economics history - a broad brush of ideas, their birth and their proponents. Not light reading, but great for armchair libertarian economists interested in ther personalities behind the economics.

Very Interesting Story constrained only by its mediocre organization:
As a casual (but avid) economist, Johan Van Overtveldt's book was extremely interesting and intellectually satisfying. To the author's credit, the book attempts to organize its story around several core beliefs and attitudes of the Chicago school (suggested by Van Overtvelt) and generally topical chapters. Despite this effort, the book instead reads as a number of short stories, tracking particular economic ideas through their various participants and generations. Summarizing my reaction to the book: As a human interest piece, the stories of various lives and the inspirations that brought each to the Chicago School and their various economic specializations is extremely compelling. With much material extracted from personal interviews, it brings life to the "bibliography" of Chicago. As a review of economic concepts, the book also scores very well. In a little under 400 pages, the author blends in hundreds of subjects and numerous associated citations. To anything but another economic historian, this is a satisfying review of some of the most interesting subjects in economics and offers a crious individual (who might not otherwise have been introduced to this diversity) plenty of opportunities to expand their studies. As a unification of themes into any sort of organized whole, the book fails miserably. Chapters jump from subject (and economists) to subject (and economist) with little regard for flow or meta-organization. Each chapter may be dedicated and true to a topic, but this seems to offer merely a de facto excuse to lump threads together. When I was done, I was neither convinced that the authors major themes were proven nor satisfied that I had a better holistic understanding of the Chicago School and its history. With that in mind, I STRONGLY SUGGEST this book to anyone who's broadly interested in economics and particularly the Chicago school. The human interest side turned a potentially dry history into an absorbing read and copious references tease the curious mind with hundreds of other opportunties to learn. But read the book for these wonderful features and not for some distillation or summarization of a unified Chicago school or the economics of its members... as you'd be disappointed.

Excellent history of U of C Econ:
This book puts in perspective U of C's greatness; a greatness that goes beyond economic thought.

Chicago School by Overtlveldt:
Best authority on the Chicago school of economics. Also includes key but little know figures (e.g., W. Allen Wallis) and influences which acted as spores to spread the principles for development in other locations (Virginia school pioneers James Buchanan and Gordon Tullock).