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His death was announced by the
University of Chicago, where he taught for two decades and imbued a generation
of some of the nation's most influential economic and legal scholars with
startling new ways to view public issues, particularly antitrust policy,
through an economic lens. Milton Friedman, Dr. Director's brother-in-law and
his longtime colleague, said in an interview yesterday that his achievement was
"to apply economic analysis to the kind of issues that had been treated on
the basis of supposed common sense before."
In particular, Dr. Friedman cited
a study published by John S. McGee in 1958 that was specifically intended to
prove Dr. Director's thesis that would-be monopolists always prefer merger to
predatory pricing. The paper is widely believed to prove that the government's
1911 breakup of the Standard Oil trust as a monopolistic combination hurt
rather than benefited consumers because prices of oil products were actually
lower under the efficiencies the trust created.
Antitrust laws restrict business
practices considered unfair or monopolistic, like conspiring to fix prices, and
courts have considerable latitude in determining both violations of the laws
and appropriate remedies. Dr. Director's contribution was to apply statistics
and price theory to judicial thinking.
Robert H. Bork, who was a student
of Dr. Director and later a judge and antitrust expert, said Dr. Director was
"the first one anywhere to question the economics of antitrust as the
courts developed it."
On a personal level, Dr. Bork said
in an interview, "Aaron gradually destroyed my dreams of socialism with
price theory."
Dr. Director's conservatism was
such that he called Dr. Friedman, long a revered guru to conservative
intellectuals, "my radical brother-in-law."
In an interview, Kenneth E. Scott,
a professor emeritus at Stanford Law School, said that Dr. Director's
contribution was to refocus antitrust law to make it serve the interests of
consumers, not the interests of competing companies. Dr. Bork said that,
practically, this meant that big is not necessarily bad.
In 1958, Dr. Director magnified
his influence by founding The Journal of Law and Economics, which spread his
ideas to courthouses and law schools; both institutions now routinely employ
economists.
A central idea of law and
economics is to promote efficiency, not equitable distribution, making results,
not actions, the criteria for legal judgments. From the field of antitrust,
what its adherents call a "movement" has expanded to most legal
arenas and beyond.
"Feminists, in recent years,
have picked up the law-and-economics ball and run with it," said Richard
A. Posner, the judge and legal scholar who developed some of his novel ideas in
talks with Dr. Director. For example, in Reason magazine in 2001, he explained
that giving a monetary value to domestic work can support feminist arguments
for greater equity.
Dr. Director was born in what is
now Ukraine in 1901, according to the New Palgrave Dictionary of Economics and
the Law. When he was 12 or 13, his family moved to Oregon, where his father was
a peddler and later opened a store.
A representative from Yale came to
Portland to recruit students, and he and a friend, the painter Mark Rothko,
applied. At Yale, the two published a cheeky leftist newspaper called Yale
Saturday Evening Pest.
After graduating, Mr. Director
took jobs he thought appropriate for a young socialist, from working in a coal
mine to picking fruit. He took a cattle boat to England and taught labor
history at a union school in Oregon. In 1927, he went to the University of
Chicago to study labor economics with Paul Douglas, later a Democratic senator
from Illinois.
In 1930, he began a four-year stint
as an instructor at the university. The department was then ruled by Frank H.
Knight and Jacob Viner, who together elevated the University of Chicago to
economics' highest tier, along with Harvard and the London School of Economics.
Henry C. Simons, sometimes called
the true progenitor of the Chicago School, that beehive of brilliant and
conservative economists that included Dr. Friedman and George Stigler, was a
close friend. Dr. Simons did pioneering work in applying economics to tax law.
Dr. Director invited his sister
Rose, who had studied economics for two years at Reed College in Portland, to
move to Chicago. In 1932, she took Dr. Viner's course. So did Mr. Friedman. Dr.
Viner seated students in alphabetical order, and they sat next to each other. Things
proceeded, and they eventually married.
Dr. Director worked in Washington
for the American Youth Commission during World War II. After the war, he
persuaded the University of Chicago Press to publish "The Road to
Serfdom," by Friedrich von Hayek, a seminal work on the dangers of state
control.
In 1946, Dr. Director was
appointed a professor at the University of Chicago's Law School. Edward H.
Levi, a professor who would later be attorney general of the United States,
asked him to help him teach his antitrust course. Dr. Levi lectured four days,
with Dr. Director handling the fifth.
"Aaron Director would tell us
that everything Levi told us the preceding four days was nonsense," E.
Kitch wrote in The Journal of Law and Economics in 1983. "He used economic
analysis to show us the legal analysis simply would not stand up."
Around 1960, Dr. Director was host
at a dinner at his home for Ronald H. Coase to discuss a new theory on the
inefficiency of governmental intervention. The discussion began with 20 of 21
people opposing what quickly came to be called the Coase Theorem, the basis for
Dr. Coase's Nobel Prize. At the dinner's end, all 21 endorsed the paper.
Dr. Director moved to California
in 1965 and joined the Hoover Institution at Stanford. Dr. Director's only
immediate survivor is his sister, Rose Director Friedman, who lives in San
Francisco.
Dr. Director wrote two books, both
published in 1931: "The Problem of Unemployment," written with Mr.
Douglas, and "Unemployment." Dr. Friedman suggested a reason his
brother-in-law did not write more: "He had a sense of perfection."