Aaron Director

Director’s Early Life and Education

Aaron Director (19012004) was born in the village of Staryi Chortoryisk in what was then the Russian Empire. The region now lies in the northwestern corner of Ukraine.

Director’s family, which was Jewish, emigrated to the US in 1913, settling in Portland, Oregon.

Director received his secondary education in the Portland public school system. Although he was editor of his class’s senior yearbook, he later remembered bearing the brunt of numerous anti-Semitic insults and other incidents while growing up.

In high school, Director became close friends with another Russian-Jewish émigré two years younger than himself, the future celebrated abstract painter, Mark Rothko.

Director and Rothko both attended Yale University, where for a time they collaborated on a satirical magazine they called The Saturday Evening Pest. Its motto was:

The beginning of Doubt is the beginning of Wisdom.

During his undergraduate years, Director fell under the intellectual influence of Thorstein Veblen and H.L. Mencken, both of whom were skeptical of free markets and liberal democracy.

Director received his bachelor’s degree from Yale in 1924.

For the next two years, Director traveled widely and supported himself through manual labor. He worked, among other things, as a coal miner, a migrant farm laborer, and a textile factory employee.

In 1926, Director obtained a job as a teacher and administrator at Portland Labor College, which was sponsored by the American Federation of Labor (AFL).

Director got into hot water by inviting American Communists and International Workers of the World (IWW) members, known as “Wobblies,” to lecture on campus.

The AFL—which, then as now, was a decidedly anti-Communist organization—did not look kindly upon Director’s radical activities. After only a few months, Director was out of a job.

Director decided to go back to school, entering the graduate program in economics at the University of Chicago in 1927.

After some years of course work and student teaching, Director began doing research for a doctoral dissertation on the history of the Bank of England, under the supervision of Jacob Viner.

In 1937, Director traveled to England to continue his investigations, where he met and became friendly with Lionel Robbins and, especially, Friedrich A. Hayek.

Unfortunately, the Bank of England decided to withdraw access to its archives from Director and he had to suspend work on his dissertation. As a result, he never completed his degree.

Director’s Career

When he returned to the US, at first Director continued to work as a Research Associate at the University of Chicago Law School.

Around 1940, Director left Chicago for Washington, DC. There, he worked mainly as a statistician for a number of different government agencies, including the War Department and the Department of Commerce.

In 1946, thanks to help from Hayek, the University of Chicago economist Henry C. Simons, and others, Director was able to return to the University of Chicago. This time he was given a regular, tenure-track teaching position, in the Law School.

After a few years, Director was invited by a colleague, the noted jurist and future US Attorney General, Edward H. Levi, to help him teach a course on antitrust cases. The way in which Director brought key economic insights to Levi’s more-traditional legal approach laid the groundwork for what would become known as the “Law and Economics” movement.

Apart from a handful of visiting professorships elsewhere—notably, at Northwestern University and Howard University—Director taught at Chicago for the rest of his career, until his retirement in 1966.

In 1947, Director was instrumental in the organization of the conference that led to the founding of the Mount Pèlerin Society (MPS). He not only helped to organize the first meeting in Switzerland, he led discussions from the podium, along with Hayek and the German economist Walter Eucken.

Director then signed on as one of the MPS’s three incorporating officers in order to have it legally registered in the state of Illinois in the US, He went to serve for many years as the society’s secretary.

In 1958, Director founded the Journal of Law and Economics, which he also edited for many years, eventually with the help of Ronald H. Coase.

At the time of his death in 2004—at the age of 102—Director still retained the official title of Professor Emeritus in the University of Chicago Law School.

Director’s Ideas

Director has been called a “truly pivotal figure” in the intellectual history of the University of Chicago and in the US legal profession.

There is no doubt that Director’s virtually single-handed creation of the field of Law and Economics had an incalculable impact on the day-to-day practice of American jurists. It has even been said that his application of statistics, price theory, and other elements of economic reasoning to the law represented “the greatest innovation in legal thinking since the adoption of the case method.”

There are numerous testimonials to the power of Director’s intellect and the influence of his personality on his students. During the post-war period, especially, Director was a major influence on a generation of legal scholars, including Richard A. Posner and Robert H. Bork, who passed his teachings on to their own students.

Although Director published littleonly one co-authored monograph, an edited volume, a handful of articles, and numerous book reviews (of which we list a representative baker’s dozen below)—he is by consensus one of the most influential economists of the Chicago School.

Director’s influence has been summed up by his sobriquet: “The Socrates of Hyde Park.” (Hyde Park is the Chicago neighborhood where the university is located, while Socrates was, of course, one of the most influential philosophers of all time despite having written nothing.)

Director seems to have had a gift for friendship, establishing close relationships with such renowned scholars as the future Nobel laureates Friedrich A. Hayek (already mentioned), George J. Stigler, and Milton Friedman. Friedman even became Director’s brother-in-law, when he married latter’s sister, Rose Director.

While Director abandoned his youthful enthusiasm for socialism early in his career—and later became a strong advocate of free markets, as befits a friend of Hayek and a founder of the MPS—he always kept an open mind. The doctrinaire spirit was foreign to him and he was prepared to change his opinion on any economic doctrine if the facts seemed to warrant it.

The best example of Director’s frankness and openness of mind is perhaps his changing attitude towards anti-trust policy. Early in his career, he was a strong advocate of legislation restricting monopolies in all areas of the economy.

However, as a result of a multi-year project in the history of monopoly-formation in England and the US that was carried out by several of Director’s students under his close supervision, he changed his mind.

The facts simply did not bear out the fear that monopolies pose a serious threat to the free market. As a result, Director switched sides in the antitrust policy debate and began to oppose government regulation of monopolies as unnecessary.

Selected Works by Director

1.  Works Authored or Co-authored by Director (except book reviews)

The Problem of Unemployment, with Paul H. Douglas (1931).

Unemployment (pamphlet) (out of print) (1932).

Does Inflation Change the Economic Effects of War?,” American Economic Review, 30(1), Part2, Supplement: Papers and Proceedings of the Fifty-second Annual Meeting of the American Economic Association: 351–361 (1940).

Simons on Taxation,” University of Chicago Law Review, 14: 15–19 (1946).

“Prefatory Note,” in Henry C. Simons, Economic Policy for a Free Society. Chicago: University of Chicago Press (1948).

The Parity of the Economic Market Place,” Journal of Law and Economics, 7: 110 (1964).

2. Selected Book Reviews Authored by Director

The Prosperity of Australia: An Economic Analysis. (2nd ed.) By Frederick C. Benham,” Journal of Political Economy, 39: 676–678 (1931).

John Mitchell, Miner: Labor’s Bargain with the Gilded Age. By Elsie Glück,” Journal of Political Economy, 40: 424427 (1932).

International Unemployment, A Study of Fluctuations in Employment and Unemployment in Several Countries, 1910–1930. By M. L. Fleddérus,” Journal of Business of the University of Chicago, 5: 403406 (1932).

Unemployment Insurance in Switzerland: The Ghent System Nationalized with Compulsory Features. By T.G. Spates and G.S. Rabinovitch,” Journal of Political Economy, 41: 412–413 (1933).

A New Deal. By Chase Stuart,” Annals of the American Academy of Political and Social Science, 165: 229–230 (1933).

The Social Cost of Industrial Insurance. By Maurice Taylor,” American Journal of Sociology, 40: 274275 (1934).

Debt and Production: The Operating Characteristics of our Industrial Economy. By Bassett Jones,” Journal of Political Economy, 43: 405406 (1935).

The Theory of Wages. By J.R. Hicks,” Journal of Political Economy, 43: 109–111 (1935).

Bank of England Operations, 1890–1914. By R.S. Sayers,” Journal of Political Economy, 45: 841–842 (1937).

A Century of Bank Rate. By R.G. Hawtrey,” Journal of Political Economy, 48: 442–444 (1940).

The Road to Serfdom. By Friedrich A. Hayek,” American Economic Review, 35: 173175 (1945).

Unions and Capitalism. By Charles E. Lindblom,” University of Chicago Law Review, 18: 164–167 (1950).

 “United States v. United Shoe Machinery Corporation: An Economic Analysis of an Anti-trust Case. By Carl Kaysen,” University of Chicago Law Review, 24: 606–611 (1957).

3. Book Edited by Director

Defense, Controls and Inflation: A Conference Sponsored by the University of Chicago Law School (1952).

Selected Works About Director

Coase, Ronald H. and Peter Newman, “Aaron Director,” in Peter Newman, ed., The New Palgrave Dictionary of Economics and the Law (three volumes). New York: Macmillan Reference (1998).

Ebeling, Richard M., “Aaron Director on the Market for Goods and Ideas,” The Freeman: Ideas on Liberty, 54(11): 2–3 (2004).

Kitch, Edmund W., “The Fire of Truth: A Remembrance of Law and Economics at Chicago, 1932–1970,” Journal of Law and Economics, 26: 163234 (1983).

Kolasky, William, “Aaron Director and the Origins of the Chicago School of Antitrust; Part I—Aaron Director: A Portrait of the Economist as a Young Man,” Antitrust, 34(3): 85–91 (2020).

Kolasky, William, “Aaron Director and the Origins of the Chicago School of Antitrust; Part II—Aaron Director: The Socrates of Hyde Park,” Antitrust, 35(1): 101106 (2020).

Levi, Edward H., “Aaron Director and the Study of Law and Economics,” Journal of Law and Economics, 9: 3–4 (1966).

Meltzer, Bernard D., “Aaron Director: A Personal Appreciation,” Journal of Law and Economics, 9: 5–6 (1966).

Peltzman, Sam, “Aaron Director’s Influence on Antitrust Policy,” Journal of Law and Economics, 48: 313330 (2005).

Stigler, Stephen M., “Aaron Director Remembered,” Journal of Law and Economics, 48: 307–312 (2005).

Stoller, Matt, Goliath: The 100-Year War Between Monopoly Power and Democracy. New York: Simon & Schuster (2019).

Tavlas, George S., “‘The Initiated’: Aaron Director and the Chicago Monetary Tradition,” Journal of the History of Economic Thought, 44: 1–23 (2022).

Van Horn, Robert, “Aaron Director,” in Ross B. Emmett, ed., The Elgar Companion to the Chicago School of Economics. Cheltenham, UK: Edward Elgar Publishing (2010).

Van Horn, Robert, “Harry Aaron Director: The Coming of Age of a Reformer Skeptic (1914–1924),” History of Political Economy, 42: 601630 (2010).

Van Horn, Robert, “Hayek’s Unacknowledged Disciple: An Exploration of the Political and Intellectual Relationship of F.A. Hayek and Aaron Director (1945–1950),” Journal of the History of Economic Thought, 35: 271–290 (2013).

Van Horn, Robert, “Aaron Director,” in Alain Marciano and Giovanni Battista Ramello, eds., Encyclopedia of Law and Economics. New York: Springer (2019).

Van Horn, Robert and Ross B. Emmett, “Two Trajectories of Democratic Capitalism in the Post-War Chicago School: Frank Knight versus Aaron Director,” Cambridge Journal of Economics, 39: 1443–1455 (2015).