Juan C. Cachanosky (1953 – 2015): See you in our next morning walk

Por Nicolás Cachanosky. Publicado el 4/1/16 en: https://puntodevistaeconomico.wordpress.com/2016/01/04/juan-c-cachanosky-1957-2015-see-you-in-our-next-morning-walk/


Foto - 20

These are probably the most difficult lines I’ll have to write in a very long time, if not ever. In a premature way, JCC, my dad, died on December 31st, 2015. Frank Sinatra was probably his favorite singer. And his version of “May Way” probably his favorite song. He certainly lived his life his way. He died in peace doing what he loved most, doing economics and spreading the ideas of classical liberalism. For him to work during the afternoon of the last day of the year was the most natural thing to do. He achieved what most want but not everyone can: A loving family that will miss him dearly, more friends than one can count, and international academic recognition despite not being know for his “academic journal papers.” He did it, indeed, his way.

Surely my personal experience with him is different to those of many. I’m not only his son, I’m also an economist with an academic career and is impossible for me to separate both things. If anything, I rather focus on my personal experience (introspection maybe?) than on a summary of his personal life which others are more suitable to tell. I want to remember him by reflecting, maybe for the first time, how much he influenced me on key points of my life.

I cherish warm reminiscences with him since I have use of my memory. From playing video games together in our first Commodore 64 (mid 80s version of a PC), to our morning walkings along Pinamar’s beach, the both of us and sometimes with my sibllings where I would ask him all sort of questions (economics, history, philosophy, physics, etc.) Those morning walk were among the favorite part of my days and remain as one of my most cherished memories of our old times. How much I’d love to have one last walk with him.

My first contact with economics was, of course, through him. But not without some initial mistakes on my part. In elementary school (as I was told by my mom I think), we were asked what our dads do for work. At my turn I said that “My dad is a communist (producing a white-pale face in our teacher, and quietly moving on).” In Spanish, communist and economist sound similar enough for a younger version of me to get confused. I know now, that if dad didn’t kick me out from home, his patience was indeed almost unlimited. When I started high school I wanted to become an astronomer due to an astronomy book my mom gave my for my birthday. Years later I passed that book to my sister, who actually started astronomy and then moved to physics. By mid high school I shifted my interested from astronomy to physics after reading different physics books from my dads bookshelf (George Gamow is what I remember most.) Then I could do a specialization in astronomy (astrophysics) if I felt inclined to (I now realize my sister might be living my parallel life. I gave her a few economics books too, but apparently I don’t have my dad’s magic powers). I wanted to understand how this huge universe of which we are an insignificant dot in space is possible and works by itself (I can’t say I ever was a religious person). But in mid high school we were required to write a short essay on a controversial topic; meaning an essay that would be open to debate different opinions in class. I saw that as an opportunity to explore some economics: what dad does for life that gets him all this respect I see in people around him! I chose to write why to build new machines does not increase unemployment. I couldn’t pin down by myself why that would be the case. Two things happened.

First, he walked me through the value added process of production with more capital or higher technology step-by-step to the point that a young 14 year old kid would say “duh!” (I actually think it might been on a napkin.) The conclusion that machines do not produce unemployment didn’t surprise me, I was expecting that already. But the strength of an argument that did not require to much (any?) empiric had an effect that left a strong impression in a mind that was used to think about empiric problems of physics. How do you show something that cannot be shown and still be convincing? I don’t know, and now never will, if he realized that in retrospection a 20 minutes talk produced the most important inflection point in my life. It wasn’t the explanation, it was how it was explained. I’m not surprised of all the positive comments we received the last few days of him as professor. There was no lecture by him I would attended were I wouldn’t learn something new, even if it was on a topic I’ve heard him lecture before.

The second thing that a happened is that he gave me four books to read. If I recall the order correctly (1) a cartoon-type book by Luis Pazos which I can’t remember the title, (2) Hazzlit’s Economics in One Lesson, (3) Hayek’s Individualism and Economic Order and (4) Mises’s Planning for Freedom. After these readings there was no question on my mind. It doesn’t matter how hard physics and astronomy might be, economics deals with unintended consequences of living things that do not react to the law of nature. In my mind economics became the really hard (difficulty) science (from some time I entertained the idea of doing both careers, economics and physics, but this delusion didn’t last long.) Dad never asked me or pushed to follow one path or the other, he wanted me to do whatever I wanted to; I’m sure he was happy when I finally told him I wanted to be an economist too in one of our summer morning walks in the beach. I just couldn’t take my mind out of it, and I still can’t. To paraphrase his friend Peter Boettke, dad lived and transpire economics. During my remaining years at high school I read everything I could from his bookshelf. As you can imagine, a lot of Hazzlit, Hayek, Mises, Friedman, etc,. But mostly, I’ve read and re-read, and then re-read, everything he wrote. For me he was THE economist and I wanted to be able to think as clearly as he did. Even today I feel I’m influence by his way of thinking when I write an op/ed or work research papers.

As I said, I was always curious why an economic argument that deals with living things instead of empirical regularity can be so strong. That “apriori thing” my dad would talk about led me in my last year in high school to work on “rewriting” my own way (to the best I could do as a young high school student) Popper’s Conjectures and Refutations. This put me in contact with Mario Silar and opened a still healthy appetite for epistemological problems of economics. This epistemological appetite led to me work with one my dad’s closest friends, who I now also consider a good close friend, Gabriel Zanotti. Gabriel was my masters advisor at ESEADE, where dad spent so many years teaching economics and principles of classical liberalism. Recently Gabriel and I wrote a paper together on the implications of Machlup’s reading of Mises’ epistemology (as wonkish as it gets!) I consider this, now in Journal of the History of Economic Thought, as one of the my best papers so far.

As I was about to finish high school, in one of his so many international trips he had a connection in New York, he went all the way to FEE to buy a copy of Human Action which gave me as an end of high-school gift. I read it of the first time that summer before starting college. While I had an intuition and general understanding of the apriori in economics, this was the first time I’ve read about praxeology by Mises and I don’t know I could have gone through those pages without working before hand on Popper, which wouldn’t have occurred with the impact the machine-unemployment napkin-long argument left in my head. I say the first time because I was so well impressed by Human Action that I read it every summer even after finishing my college degree. I’ve read this book only six times. I say only because after I asked dad, he told me that he thought he had read it around 9 times (but who’s counting, right?). It seems I still have some catch-up to do… Needless to say, this is my most cherished piece in my bookshelf. There’s a joke I’ve heard but can’t remember from who: “An Austrian doesn’t lend even to his best friend neither his guitar, his girlfriend, nor his Human Action.” I don’t have a guitar, I play the piano. I’m single (who knows, hopefully not for long). But sure as hell I’m not lending my copy of Human Action.

This personal detour is no accidental. All these reading and interaction with my dad led me to start my economics career, also at the Pontificia Universidad Católica Argentina, as an Austrian economist first (Menger, Bohm-Bawerk, Mises, Hayek, Kirzner), and only then as a trained mainstrem economist. For better and for worse, this has always affected how I think about economic problems, what questions to ask, and how to answer them.

There are four papers from dad that merit, I think, special mention. All of them published in Libertas. This journal was discontinued a few years ago and he was still trying to bring it back to life the same day he left this world. The last email I received by him was addressed to a “club of academic libertarians” discussing the feasibility of using Libertas as the title of a new journal:

1-. Mathematical Economics vs Economic Science I & II

The title is no accidental. This paper is the outcome of his doctoral dissertation under the direction of Hans Sennholz (himself a doctoral student of Mises). I still know of no answers to some of the arguments he puts forward in this work. I also don’t know of an English written text that rise similar arguments to his. Hopefully I’ll find the time to continue this line of work at some point in my career. The doctoral committee, I should add, was composed of mathematicians as well. When dad defended his dissertation I was only one, or maybe two, years old and stayed at home with mom. The defense took place in Grove City. Pete Boettke can share colorful recollection of the defense as he was himself there and was the first doctoral dissertation he observed. I’ve heard his colorful recollection before, it’s worth listening to.

2-. Theories of Value and Price I & II

The best reference I know about history of thought in what respects to theories of value and price. It is because of these papers that every time I hear anyone say “labor theory of value” I feel the urge to scream. Classic economists, from Smith to J. S. Mill did not have a labor theory of value, they had a cost-theory of price. The cost part is not even just labor and, of course, price is not value. For the classics, value was subjective, they just didn’t have a theory about it and that’s why they were immerse in their circular reasoning (which they knew about). If you don’t believe me, be a scholar and read the classics first hand yourself. Or read his papers on this subject. I also learned about marginal theory of value from these papers, and is because of these papers that every time I teach with a textbook that uses the famous food or water example to explain marginal theory I can’t resist the need to explain why such examples are actually wrong (yes, most economic textbook get marginal theory of value inaccurately, no surprise about dad’s skepticism on mathematical economics). I can’t deal with the idea of a student of mine that does nor properly understand what marginal theory is about (the value of similar good satisfying different needs, not different goods satisfying the same need: number of glasses of water to satisfy a unique need, being thirsty).

3-. The Great Depression

Also my first reference for the Great Depression. If there were an English version of this paper it would certainly be an assigned reading in my macro courses. I’ve learned many things from this paper. One lesson I always remember is that there is no such thing as fixing the price of gold or an international system of fixed exchange rates under gold standard. This explanation is flavored with his unique and self-reliant irony. If it weren’t for this paper I would had a very hard time understanding some of the monetary literature like Larry White’s and George Selgin’s free banking, which was my first research topic when I first started to write academic papers. It was my good friend Adrian Ravier who first pushed me into this topics, but was dad who got me ready to deal with them.

4-. Value Based Management

This is one of his latest papers (1999), also one that seems to have gone somewhat unnoticed. In this paper he applies finance to economic analysis; think of micro vs finance and macro vs finance, not of financial economics. Being his son I couldn’t resist everything he wrote and I read this peace just as I did with all others. This paper left a seed in my head for many years: apply finance to economics (not economics to finance). If economics wants to deal with real world problems, the assumptions have to simplify the real world without changing the problem to be solved in the process (Hayek’s points in The Use of Knowledge in Society). Conventional micro simplifies but also modifies the problem to be solved. Finance, however, is how entrepreneurs actually make decisions. During a discussion about the rational expectations critique to ABCT with Pete Leeson as he was visiting Suffolk University, where I was a doctoral student working with Ben Powell, this paper came to my head and I used its line of reasoning to answer Leeson’s criticism of ABCT. Soon after (a few days actually) I wrote a rebuttal to the RE critique using a EVA(R) as the financial framework [now in The Review of Austrian Economics]. It was this paper that also put me in contact for the first time with Anthony Evans in the U.K., with whom I interact with from time to time. In this paper I cite dad as the only work I know doing a similar application to mine (well, it was his application actually). Now this finance application to capital theory is my largest research project, one I’m still working along with Peter Lewin in a set of so far 7 papers. At the moment of reading his paper, in 1999, I couldn’t phantom that this would become, so far from home, a research project more than 10 years later. I’m only sorry that he didn’t live long enough to see how far this project is going [Spoiler for Peter Lewin: The seed has transformed into a book structure in my head I still need to discuss with him]. In some sense, I can’t help feeling I’m carrying out what was his original idea. I wish he would have had more time to read my papers with Pete to give us his comments.

I wasn’t, of course, a typical student of him. I wasn’t also his typical colleague. I only worked briefly at his firm, CMT Group, after quitting Reuters and before moving to the U.S. to become one of Ben Powell students. But his passion for economics and teaching was as alive as ever up to the very end.

The eternal optimist, always with a smile ready for everyone. Professor in numerous universities in Argentina, and many countries in Latin America. He leaves students and friendly colleagues all around the world. Humble to the limit.

He died too young and with plenty of energy that will go unused, but I know we’ll share again our morning walks in the after life and I’ll tell him what I did since that first napkin when I was only 14 years old.

Foto - 10


Nicolás Cachanosky es Doctor en Economía, (Suffolk University), Lic. en Economía, (UCA), Master en Economía y Ciencias Políticas, (ESEADE). Fué profesor de Finanzas Públicas en UCA y es Assistant Professor of Economics en Metropolitan State University of Denver.

El descalce de plazos no es la causa del ciclo económico, parte 2

Publicado por Adrián Ravier el 21/9/13 en: http://puntodevistaeconomico.wordpress.com/2013/09/21/el-descalce-de-plazos-no-es-la-causa-del-ciclo-economico-parte-2/

Hace unos días subí un post en el que ofrecía algunos argumentos a favor de la hipótesis de que el descalce de plazos no es la causa del ciclo económico. Inmediatamente, Rallo ofreció una réplica sistemática, lo que abrió un diálogo en diversos grupos de redes sociales y blogs que manifiestan el interés que hay en el tema. A continuación intentaré una réplica.

Aclaración previa: Si bien en las redes sociales han surgido defensores de la posición Rothbard-Huerta de Soto, por el momento prefiero concentrarme exclusivamente en la posición Fekete-Rallo (la que incluye por supuesto a otros economistas, especialmente a Gabriel Calzada y José Ignacio del Castillo, con quienes he conversado sobre estos temas en varias oportunidades). Es por ello que dejaremos fuera del análisis a los depósitos a la vista, porque pueden generar confusión. Cuando de aquí en más diga “depósitos”, me referiré especialmente a los depósitos a plazo fijo, en el que el “depositante” pierde la disponibilidad del dinero por el plazo del contrato. Quedará para otro post, extender el análisis incluyendo los depósitos a la vista.

  1. Lo primero en lo que quiero insistir es en el argumento de que el descalce de plazos no es la causa del ciclo económico y para ello puede servir un contraejemplo. Imaginemos que un banco capta un depósito de 10.000 dólares a un año. Imaginemos ahora que el banco presta estos 10.000 dólares a diez años. Se podrá decir que cumplidos los primeros 365 días, el banquero no podrá cumplir su compromiso de devolver el dinero al depositante. Sin embargo, imaginemos que el banquero logra captar el último día del primer año otro depósito por el mismo monto, y nuevamente por un plazo de un año. El primer depositante habrá recibido su dinero, pero ahora hay un segundo depositante que corre el riesgo de perder su capital. Al cierre del segundo año, digamos entonces que el banquero logra captar nuevamente un depósito que le vuelve a permitir cumplir su compromiso. Digamos que esto ocurre una y otra vez hasta que llega el décimo año, y el banco recupera su préstamo inicial de 10.000 dólares, pudiendo cancelar –con ese dinero- el último compromiso.
  2. Nótese que el caso podría extenderse a muchos bancos y muchos depositantes, sin alterar la conclusión. Da igual que tengamos un “depositante” por 10.000 dólares, que 10.000 depositantes de un dólar. Da igual que el valor sea de 10.000 dólares que 10 billones de dólares. Da igual que en lugar de un banco hablemos de diversos bancos.
  3. En el punto 3 de la réplica, coincidimos con Rallo en que “[e]l ciclo es un fenómeno macroeconómico, no microeconómico, y en parte debemos explicar por qué la lógica individual puede conducir a descoordinaciones agregadas. Si todos los ahorradores han invertido a plazos y riesgos superiores a los que están dispuestos a asumir, ¿pueden todos ellos deshacer su posición? No, no pueden…” Nótese, sin embargo, que el contraejemplo muestra que el descalce de plazos no generó ningún problema, ni en el banco individual, ni en cada uno de los depositantes, ni tampoco en el sistema bancario.
  4. Nótese también que no se da aquí un efecto Ponzi, porque no se requieren nuevas “víctimas” recurrentemente para evitar el colapso del sistema. Es cierto que el primer año, el banco cancela su deuda con dinero de otro cliente, pero al cumplirse el décimo año, el banco recupera el depósito inicial, y con ello, cancela todas sus deudas.
  5. Nótese que si el banco tuviera problemas para captar un depósito a tiempo para cumplir su contrato, podrá subir el tipo de interés que paga al “depositante”, y con ello –en la medida que no tenga serios problemas de solvencia- lograría asegurarse la obtención de fondos.
  6. Nótese que el caso imaginario, no es otra cosa que la forma en que la banca ha operado históricamente desde sus inicios.
  7. Nótese que el caso incluye cierta incertidumbre, porque el banquero podría llegar al final del primer año sin captar el o los depósitos suficientes para cumplir su compromiso. Esto sin embargo, no debiera preocuparnos. El banquero ejerce en este sentido la función empresarial, al igual que millones de empresarios que día a día arriesgan capital en cada uno de sus contratos (explícitos o implícitos).
  8. Nótese que nada diferencia al banquero de un dueño de un restaurante que al cierre del período no logró vender los cubiertos suficientes para pagarle a sus empleados. La pregunta que surge entonces es por qué le vamos a exigir a la industria bancaria mayor certidumbre que al resto de las industrias.
  9. Creo que todos coincidimos que el descalce de plazos tendrá distintas consecuencias en distintos marcos institucionales. Quizás ayude en este debate mostrar qué ocurre bajo un sistema de banca libre con reserva fraccionaria, en comparación con un sistema de banca central. El mensaje de Rallo es parcialmente correcto bajo la órbita del banco central (como lo es también el ataque de la posición Rothbard-Huerta de Soto a las reservas fraccionarias), pero no bajo banca libre. Bajo un sistema de banca central, seguramente el “descalce” será mayor, porque los banqueros saben que hay un prestamista de última instancia que ofrecerá la liquidez necesaria para rescatarlos de problemas de iliquidez. Bajo un sistema de banca libre descentralizado y competitivo (White 1984, Selgin 1988, Dowd 1992) tal posibilidad de recurrir a un prestamista de última instancia desaparece, lo que obliga a los banqueros a comportarse más responsablemente. Recordemos que en competencia el éxito de un banco está en construir reputación. Pienso que el descalce de plazos bajo un sistema de banca libre con reserva fraccionaria será más limitado y no causará ciclos económicos, pues se comportaría como de hecho mostramos en el contraejemplo. En tal caso, los bancos no solo “no son los motores de este proceso distorsionador” (Rallo, punto 6), sino que al contrario, intermediando entre ahorristas e inversores, permiten la estabilidad del sistema.
  10. Aplicado al caso de Escocia, los bancos emisores competían unos con otros. El sistema de compensación bancaria justamente obligaba a cada banco a manejarse responsablemente. Si un banco sobre-expandía su oferta de billetes  bancarios rápidamente veía disminuir sus existencias de oro, lo cual lo obligaba a cambiar, o bien, lo conducía a la quiebra (Mises 1949).  Pero de nuevo, la quiebra de un banco, no implica la quiebra del sistema. En el caso escocés, especialmente en la primera etapa, hubo un proceso de prueba y error que dejó algunos  bancos en el camino, pero con el tiempo la reputación de algunos bancos fue construyendo un sistema sólido donde el descalce de plazos no representó un problema.
  11. Nótese que para Rallo (punto 7) “[e]l análisis institucional –que elementos refuerzan o frenan el descalce de plazos– viene después una vez poseemos un sólido análisis económico.” Sin embargo, si coincidimos que el ciclo económico es causado por una “descoordinación generalizada”, y entendemos también –a través del contraejemplo- que el descalce de plazos en sí mismo no genera ese problema, entonces lo que importa es el marco institucional que hace que la descoordinación sea generalizada. Concluyo entonces que es Rallo quien coloca el carro delante del caballo (punto 8).
  12. Resumiendo, coincidimos con Rallo que el problema del ciclo económico está en una descoordinación generalizada. Creo haber mostrado que el descalce de plazos no es la causa de esta descoordinación. Si un banco, en una situación excepcional no consigue financiamiento para cubrir sus baches, ni siquiera aumentando los tipos de interés, entonces debemos estudiar concretamente el caso. Ya dijimos que si el problema es individual, entonces es otro problema. s el caso se generaliza, entonces estamos ante “el problema”. Pero “ese” factor exógeno, será la causa del ciclo económico.
  13. Para cerrar, nótese que la posición de Rallo tiene un condimento keynesiano importante. El ciclo económico se produce ahora por un factor endógeno del capitalismo. Rallo no concluye de ello que el Estado deba intervenir para calzar los plazos, pero en lo que concierne a las causas del ciclo, la posición de la teoría de la liquidez parece fortalecer la visión keynesiana (y quizás marxista) sobre la inestabilidad inherente del capitalismo.

Por lo demás, han quedado dos puntos de la réplica de Rallo, no tratados arriba.

  1. El punto 1 me parece algo contradictorio. Por un lado se afirma no enfrentarse a la teoría austriaca tradicional, pero a paso siguiente se la critica. Al margen, como ha señalado Nicolás, es correcto señalar que el mercado funciona con una curva de rendimientos, y no con una única tasa de interés (reconocido en sus escritos por Mises, Hayek, etc.) Pero no es menos cierto que el sistema financiero opera arbitrando esa curva. Pasar de una tasa de interés única (como si toda la curva se moviese en paralelo) a una curva de rendimientos puede dar más insight y detalles, pero no veo porque debe cambiar la teoría.
  2. Dice Rallo: “Es una ilusión (de la que la Escuela Austriaca es en parte culpable) el pensar que existe un solo mercado intertemporal…” En Mises, sin embargo, queda claro que hay tantas tasas de interés originarias como individuos participan en la sociedad, vinculando esta tasa de interés a la preferencia temporal de cada sujeto. Dicho esto, bajo micro-fundamentos adecuados, no veo inconvenientes en afirmar que existe un mercado de fondos prestables –al estilo Garrison- que determina un tipo de interés a partir de la oferta y demanda agregada de ahorros que hay en el mercado.

Adrián Ravier es Doctor en Economía Aplicada por la Universidad Rey Juan Carlos de Madrid, Master en Economía y Administración de Empresas por ESEADE y profesor de Macroeconomía en la Universidad Francisco Marroquín.

RIP Ronald Coase (1910 – 2013)

Por Nicolás Cachanosky. Publicado el 3/9/13 en: http://puntodevistaeconomico.wordpress.com/2013/09/03/rip-ronald-coase-1910-2013/#more-5531

Ayer falleció Ronald Coase, a los 102 años de edad. Indiscutiblemente uno de los economistas más influyentes del siglo XX. Sus contribuciones le merecen un lugar entre los economistas que dieron forma a la economía en este siglo y a ser reconocido con el Nobel de Economía en el año 1991. La disciplina simplemente no hubiese sido la mismo sin Coase. La economía ha perdido a un grande que se ha mantenido activo hasta en sus últimos días. A la edad de 102 años Coase seguía escribiendo sobre economía. A la edad de 101 años publicó un libro en co-autoría con uno de sus alumnos; How China Became Capitalist(Coase and Wang.)

Coase fue una figura central en volver a poner las instituciones (y su relación con los costos de transacción) entre los temas centrales del análisis económico. Su trabajo (junto al de G. Calabresi) dio origen a nada menos que una disciplina dentro de al economía, el Law and Economics (análisis económico del derecho.) Los trabajos de Coase se encuentran entre los más citados en al disciplina.

A Coase también se le debe un panorama más amplio al problema de la firma (empresas en el mercado.) ¿Si las empresas son eficientes, por que no puede haber una empresa para todo el mercado? Fue la claridad de su análisis lo que hace que preguntas como estas hoy nos parezcan triviales, no siempre fue el caso.

Dejo una serie de links cuyos autores pueden expresarse con más autoridad que la mía sobre las contribuciones y personalidad de Coase. Luego dejo un pasaje de Larry White tomado de Clash of Economic Ideas que captura fielmente que Coase se encontraba a la altura de sus pares más influyentes (recuerdo haber escuchado esta anécdota por primera vez de boca de Adrian Guissarri en la UCA.)

In 1959, Ronald Coase entered the Chicago home of Aaron Director for what was to be an unusual dinner party. The host and other guests were a who’s who of University of Chicago economists, including Milton Friedman, George Stigler, Arnold Harberger, John McGee, and fifteen others. The British-born and soft-spoken Coase, an economics professor at the University of Virginia, was in town to present a new paper at the University. In an earlier paper on the regulation of radio by the Federal Communications Commission, just published in The Journal of Law and Economics, Coase had made an argument that the Chicago crowd considered interesting but erroneous. The dinner was arranged to give Coase the chance he had requested to convince the skeptics that the argument was not in error.

In his published paper Coase argued that participants in a competitive market economy can reach an efficient allocation of resources even when neighboring activities clash, or in current jargon they can “internalize” what would otherwise be “negative externalities,” by making mutually agreeable side-payments. In the case of a doctor’s examination room bothered by a noisy candy factory next door, the doctor and confectioner can bargain to an efficient mix of respective operating hours. And not only can the market reach an efficient allocation but it will reach the same efficient allocation no matter which way (e.g. to the doctor or to the confectioner) the law initially assigns the rights in dispute, or conversely assigns the liability for damages caused by the clash, assuming negligible transaction costs and profit-maximizing behavior. Stigler labeled this proposition “the Coase Theorem.” In the case of potential interference among radio broadcasters, the main topic of Coase’s 1959 paper, a system of tradable private property rights in distinct broadcast frequencies will allow a system of competing broadcasters to avoid wavelength interference and to reach the efficient mix of station formats (news, talk, various types of music). No top-down assignment of licenses was necessary.

As editor of the Journal of Law and Economics, Director had suggested that Coase remove the “Coase Theorem” claim from his article, but Coase had stuck to his guns, and Director had let it appear in print. The stage was set for the after-dinner debate. George Stigler recalled the event: “We strongly objected to this heresy. Milton Friedman did most of the talking, as usual. He also did much of the thinking, as usual. In the course of two hours of argument the vote went from twenty against and one for Coase to twenty-one for Coase. What an exhilarating event! I lamented afterward that we had not had the clairvoyance to tape it.”

Nicolás Cachanosky es Doctor en Economía, (Suffolk University), Lic. en Economía, (UCA), Master en Economía y Ciencias Políticas, (ESEADE) y Assistant Professor of Economics en Metropolitan State University of Denver.