science

Harold Demsetz

Harold Demsetz is a science topic covered in the lgStudy science library. This page brings together a partial reference excerpt, illustrations, worked examples, real-world applications and a short study plan, so you can understand Harold Demsetz rather than just read about it. In short: Harold Demsetz (; May 31, 1930 – January 4, 2019) was an American professor of economics at the University of California at Los Angeles (UCLA). Career Demsetz grew up on the West Side of Chicago, the grandchild of Jewish immigrants from central and eastern Europe.

Key takeaways

Harold Demsetz belongs to science; place it in that map before memorising details.
Learn the definition first, then one example that makes the definition concrete.
Connect Harold Demsetz to a quantity you can measure, compute or draw — that is where exam questions come from.
Reproduce the core statement of Harold Demsetz from memory before moving on to harder problems.

Reference excerpt

Harold Demsetz (; May 31, 1930 – January 4, 2019) was an American professor of economics at the University of California at Los Angeles (UCLA).

Career Demsetz grew up on the West Side of Chicago, the grandchild of Jewish immigrants from central and eastern Europe. He studied engineering, forestry, and philosophy at four universities before being awarded a B.A. (1953) in economics from the University of Illinois, and an MBA (1954) and a Ph.D. (1959) from Northwestern University. While a graduate student, he published an article each in Econometrica and the Journal of Political Economy. Demsetz taught at the University of Michigan (1958–60), UCLA, 1960–63, and the Graduate School of Business at the University of Chicago, 1963–71. In 1971, he returned permanently to UCLA's Economics Department, which he chaired 1978–80. He held the Arthur Andersen UCLA Alumni Chair in Business Economics, 1986–95. He has been affiliated with the Center for Naval Analyses and the Hoover Institution. Demsetz was a fellow of the American Academy of Arts and Sciences, a director of the Mont Pelerin Society, and a past (1996) president of the Western Economics Association.

Work Demsetz belonged to the Chicago school of economic theory, and was one of the pioneers of the approach now called New Institutional Economics. He is a founder of the field of managerial economics. He has expanded the theory of property rights now prevalent in law and economics. Even though Demsetz never employed game theory, he is a major figure in industrial organization through his writings on the theory of the firm, antitrust policy, and business regulation. His expository style is devoid of mathematical formalism to an extent unusual for someone who began his career after 1950. His principal influences include Frank Knight and a number of colleagues: Armen Alchian, Ronald Coase, Aaron Director, and George Stigler. Demsetz coined the term "nirvana fallacy" in 1969. The 1972 Demsetz and Armen Alchian article Production, Information Costs and Economic Organization was selected as one of the twenty most important articles published in the first century of the American Economic Review. One of his most significant works over the course of many decades was on externalities, in which he disputed the conclusions of Pigou and of Coase and showed that there is no problem of externalities which invokes a role for the government. Instead, with strategic behaviour we might get a problem of public goods with a potential role for the government. His 2011 paper, "The Problem of Social Cost: What Problem? A Critique of the Reasoning of A.C. Pigou and R.H. Coase" provides a detailed analysis of this position.

Major publications 1967, "Toward a Theory of Property Rights," American Economic Review. 1968, "Why Regulate Utilities?" Journal of Law and Economics. 1969, "Information and Efficiency: Another Viewpoint," Journal of Law and Economics. 1972, (with Armen Alchian), "Production, Information Costs and Economic Organization", American Economic Review. 1973, "Industry Structure, Market Rivalry and Public Policy," Journal of Law and Economics. 1974, "Two systems of belief about monopoly," in H. Goldschmid, et al., eds., Industrial Concentration: The New Learning, Boston: Little Brown, also chapter 7 in, Demsetz, Harold. Efficiency, Competition, and Policy. Cambridge MA: Basil Blackwell, 1989.) 1979, "Accounting for Advertising as a Barrier to Entry," Journal of Business. 1982, Economic, Legal, and Political Dimensions of Competition. 1988, The Organization of Economic Activity, 2 vols. Blackwell. Reprints most of Demsetz's better known journal articles published as of date. 1994, (with Alexis Jacquemin). Anti-trust Economics: New Challenges for Competition Policy. 1995, The Economics of the Business Firm: Seven Critical Commentaries. 1997, "The Primacy of Economics: An Explanation of the Comparative Success of Economics in the Social Sciences" (Presidential Address to the Western Economics Association), Economic Inquiry. 2008, "From Economic Man to Economic System: Essays on Human Behavior and the Institutions of Capitalism" 2011, "The Problem of Social Cost: What Problem? - A Critique of the Reasoning of A.C. Pigou and R.H. Coase" in Review of Law and Economics.

References

External links

Brief biography of Demsetz on the web site of UCLA's Economics Department.

Illustrations

Worked examples

Example 1 — a first encounter with Harold Demsetz

Start with the simplest possible case. Write down what Harold Demsetz claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In science, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to Harold Demsetz before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about Harold Demsetz ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of Harold Demsetz

In research: Harold Demsetz appears in science research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry: Engineering practice reuses Harold Demsetz in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom: Harold Demsetz is common in secondary-school and first-year university syllabi. It links to neighbouring topics 1930 births, 2019 deaths, 20th-century American Jews, so understanding it makes those chapters shorter.
In everyday life: Look for Harold Demsetz outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.

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How to study Harold Demsetz in 20 minutes

Read the reference excerpt below once, without taking notes.
Close the page and write down what Harold Demsetz means in your own words.
Compare your version with the excerpt and mark what you missed.
Work through the three examples above with pen and paper.
Explain Harold Demsetz out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is Harold Demsetz in simple terms?

Harold Demsetz (; May 31, 1930 – January 4, 2019) was an American professor of economics at the University of California at Los Angeles (UCLA). Career Demsetz grew up on the West Side of Chicago, the grandchild of Jewish immigrants from central and eastern Europe.

Why does Harold Demsetz matter?

Because it connects several science ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study Harold Demsetz?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on Harold Demsetz.