Aaron Director, founder of the field of Law and Economics,Hoover Institution fellow and distinguished University of Chicago economist

Tuesday, September 14, 2004

Aaron Director, a distinguished University of Chicago economist who greatly influenced the modern course of economics and legal thought through his founding of the field of Law and Economics and his mentoring of generations of scholars, died Saturday, Sept. 11, at his home in Los Altos Hills, Calif., at the age of 102.

A thoughtful and gentle scholar, Director was a passionate defender of liberty and free markets. He joined the Hoover Institution as a fellow in 1965 upon his retirement from the University of Chicago.

"Aaron Director was one of the truly pivotal figures in the intellectual history of American law and of the University of Chicago Law School," said law professor Geoffrey Stone, former Dean of the Law School and Provost at Chicago. "As an essential proponent of the economic analysis of legal questions, he opened the way to new questions that have illuminated legal and political issues for more than half a century."

Director, who at his death held the title of Professor Emeritus in the University of Chicago Law School, was trained in economics at Yale and at Chicago, taught economics at Chicago, Northwestern University and Howard University, and also held positions during World War II in the War Department and the Department of Commerce.

But it was his appointment to the faculty of the University of Chicago Law School in 1946 that marked the beginning of his greatest influence. With fellow faculty member Henry Simons, Director first began to apply the principles of economics to legal reasoning, eventually training generations of law students and even his colleagues on the faculty in this then-new way of thinking about the law. His many students and colleagues, including future Federal Judges Richard Posner, Robert Bork and Frank Easterbrook, spread his ideas further, creating what has been called "the greatest innovation in legal thinking since the adoption of the case method."

"Aaron Director was first and foremost a teacher of teachers," said Douglas Baird, Professor and former Dean of the University of Chicago Law School. "Take any course in antitrust or turn to any law review and what you encounter are the ideas and insights Aaron Director and Edward Levi debated in the classroom in the 1950s."

Director's own publications were modest in number, but his contributions to his colleagues' thinking were considerable. University of Chicago colleague and future Nobel laureate, the late George Stigler often said, "most of Aaron's articles have been published under the names of his colleagues."

"Aaron Director's strength as a scholar was a remorseless logic and absolute intellectual integrity," said Judge Bork, who was one of Director's students at Chicago. "Though he chose to publish little, his teaching, beginning with the economics of antitrust, made him the seminal figure in launching the law and economics movement, which has transformed wide areas of legal scholarship. A warm and patient mentor, he remained my friend for a full half-century. I know that many others whom he influenced could say the same."

Law and Economics as a field attempts to apply the scientific methods of economics—including statistics and price theory—to behaviors that in the past had been analyzed solely by appeal to the history and intuitions of the law. With coherent theory, precise hypotheses and a willingness to subject those hypotheses to empirical tests, it has transformed legal thinking in the United States and in many nations around the world.

"Aaron was someone who by his personality as much as anything was able to make this great difference in the way that people looked at the law, even influencing people whose views were completely different from his own," said Nobel laureate Ronald Coase, who was a colleague of Director's at Chicago's Law School for many years. "In all, he was a very civilized man. But he did not like any argument that was not solid, because his own arguments were always very solid."

Director was also intimately involved in a remarkable number of other important developments in modern economic thought. When The Road to Serfdom by future Nobel laureate Friedrich von Hayek could not find a publisher in the U.S. because of its then-unfashionable classical liberal ideas, it was Director who interceded, persuading his friends at the University of Chicago and its Press to publish the book in a first run of 2,000 copies. It went on to sell 100 times that number.

When future Nobelist Ronald Coase was invited to the University of Chicago for his famous exposition of what later became known as the "Coase Theorem," he faced his inquisitors at a dinner party at Director's home.

And when von Hayek gathered a group of like-minded scholars to discuss the threats to freedom that were arising from collectivist government policies at the famous "Mt. Pelerin" meetings in Switzerland, he relied on Director to recommend others, and he invited two young colleagues named Milton Friedman and George Stigler.

Director taught antitrust courses at the law school with Edward Levi, who eventually would serve as Dean of Chicago's Law School, President of the University of Chicago, and as U.S. Attorney General in the Ford Administration. Director continued to co-teach the course for many years, with such colleagues as Philip Neal, who would later become Dean of the Law School at Chicago; Kenneth Dam, who would later serve as U.S. Deputy Secretary of State; and Posner. And Director's 1931 book The Problem of Unemployment was co-authored with Paul Douglas, also on Chicago's faculty, and who would later become a U.S. Senator from Illinois.

In 1958 he founded the Journal of Law and Economics, where Coase eventually joined him as co-editor, and which has been of fundamental importance in developing the field.

In 1962, Director helped to found the Committee on a Free Society at the University of Chicago, which was established to "clarify and reinforce the tradition of individual liberty in its economic, political, historical and philosophical dimensions."

While Simons had concentrated on the tax aspects of law and economics, Director then focused on antitrust law. Director showed early on that antitrust laws governing patents and resale prices have little affect and should focus instead on issues of price fixing and on the largest mergers of competing firms. Today, law and economics ideas are fundamental to teaching and rulings in areas as diverse as corporate law, torts, criminal law and even constitutional law. As early as 1993, articles using economic analysis were cited in major U.S. law journals more often than those using any other methodology.

Kenneth Scott, a Hoover Institution senior research fellow and an emeritus professor of law at Stanford University, recalls Director as a man of gentleness but also a rapier intellect.

"His comments in workshops were few but invariably penetrating," Scott said. "They reminded me of a Thurber cartoon in which one fencer slices through the neck of the other (who seems not to realize what has just happened), saying merely 'Touche.'"

Maurice Rosenfield, a retired Chicago lawyer who earned his J.D. degree at the University of Chicago, recalls Director as "an incredibly influential member of the faculty, among both students and among his colleagues. He was also the most interesting man you could imagine. He was always available to anyone with a question, and so wise and eloquent, and with such unique insights. Yet he carried no pretension—he was always gracious."

"I was especially grateful to him, not only as a beneficiary of his education, but also because of his friendship and his accessibility to me and my colleagues at the University," said Bernard Meltzer, the Edward H. Levi Distinguished Service Professor Emeritus at the University. "My family also benefited from his capacity for friendship, particularly his special touch with children. Each Christmas he was the bearer of intriguing new jigsaw puzzles which he had crafted in his own shop. He demonstrated that he worked with his hands as effectively as he worked with his head. The puzzles reflected a unity of his personal and professional life, in which he strove to understand the roots of puzzles in the law and how best to solve them. We all will cherish the memory of his friendship."

Many of Director's ideas, though out-of-fashion at the time, have become increasingly accepted in recent years. At a panel discussion at the University in 1950, he stated that "there is room neither for subsidies to individual economic activities or for price fixing of particular products," and he argued as well for the removal of all tariff protection, elimination of the tax bias toward large corporations and a drastic revision of patent laws to increase innovation. He also said, "Monopolistic determination of wages is in no sense different from monopolistic fixing of enterprises. If they are not to be trusted with governing industry, neither are unions." And "I know that there is widespread belief that the proper solution is responsible or statesmanlike behavior on the part of those who hold too much power. I regret to say that I am skeptical and find more wisdom in Adam Smith's observation: 'I have never known much good done by those who affected to trade for the public good.'"

In 1965, Director retired from the University of Chicago and moved to California, where he built a home in Los Altos Hills. He accepted a position at the Hoover Institution, and for several years he returned to Chicago to co-teach the antitrust course with Posner.

Aaron Director was born in 1901 in Charterisk, which was then in Russia and now in the Ukraine. He immigrated with his family to Portland, Ore., in 1913. At Lincoln High School, he was editor of the yearbook, which predicted that he "will eventually become a newspaper editor." After graduating from Yale University in 1924 after only three years, he took his then "progressive" politics on a journey traveling around the world or "at least those aspects of the world of interest to a young radical," as Ronald Coase wrote in a biography of Director in the Palgrave Dictionary of Economics and the Law. Director worked at times in a coal mine, as a migrant farm worker, and in a textile factory. He returned to Portland and taught labor history for two years at Portland Labor College, before coming to Chicago as a graduate student in 1927. At Chicago, he took courses with some of the most distinguished scholars of the day, including Frank Knight and Paul Douglas. But according to Coase, the course that transformed his thinking was taught by Jacob Viner. "It is easy to understand why a solid course by this great teacher and great economist would have swept away like chaff in a windstorm the nebulous idealism and Socialist views of Director's Yale days," Coase wrote in Palgrave.

He stayed at Chicago for several years as an instructor, also bringing his younger sister Rose to the University. There, she finished her undergraduate work and entered graduate school in economics, where she would meet her future husband, Milton Friedman, a Hoover Institution senior research fellow.

Director is survived by his sister, Rose Director Friedman, of San Francisco, Calif. Services are pending at the University of Chicago. Contributions may be made to the Law and Economics Program at the University of Chicago Law School.

-- courtesy University of Chicago News Service