[An updated version of this biography can be found at Fritz Machlup in the 2nd edition.]
One of Machlup's most famous articles in industrial organization was a 1946 defense of the economist's standard assumption that firms maximize profits. Economist Richard Lester had argued that businessmen do not know enough about their demand and cost conditions to maximize profits. Machlup agreed but argued that the purpose of assuming profit maximization is not to predict everything a firm does, but instead to predict how it will react to changes in demand or in costs. For this purpose, argued Machlup, the assumption was appropriate. Machlup expanded on this argument in two later books, The Economics of Sellers' Competition and The Political Economy of Monopoly.
Another of Machlup's contributions to understanding the organization of industry was his 1949 book, The Basing-Point System, which is said to have influenced President Truman's decision to veto a bill that would have forced cement producers to charge the same price irrespective of their buyers' locations. Machlup also wrote at length about the economics of the patent system.
Machlup studied economics at the University of Vienna in the twenties under Ludwig von Mises and Friedrich Hayek. He wrote his doctoral dissertation under Mises on the gold-exchange standard. But from 1922 to 1932, he worked in his family's cardboard-manufacturing business. His interest in and insights into the economics of industry are often attributed to his experience in the family business. Machlup taught at the University of Buffalo from 1935 to 1947, moved to Johns Hopkins in 1947, and moved to Princeton in 1960. After retiring in 1971 he joined the faculty of New York University, where he was active until his death. Machlup was president of the American Economic Association in 1966.
The Basing-Point System. 1949.
The Economics of Sellers' Competition. 1952.
The Political Economy of Monopoly. 1952.
An Economic Review of the Patent System. Study of the Subcommittee on Patents, Trademarks, and Copyrights of the Committee on the Judiciary, U.S. Senate, study no. 15. 1958.
The Production and Distribution of Knowledge in the United States. 1962.
Conference proceedings, 1974. "Opening Remarks: Mises, Keynes, and the Question of Influence" and "Closing Remarks". Printed in 1976 in The Economics of Ludwig von Mises, Laurence S. Moss, ed.
International Payments, Debts, and Gold, 2d ed. 1976.