I got a nice note from Sam Peltzman this morning about my WSJ piece on my teacher and his colleague Harold Demsetz.

I responded to Sam that I had a great Demsetz story to tell him that involved him. I’ll tell that and then I’ll tell one that Harold told at the June 1 and 2, 2012 Harold Demsetz Conference that UCLA held.

First story involving Peltzman. (By the way, I told this story in my podcast with Robert Murphy at about the 30:40 point.)

At the UCLA orientation they had for incoming Ph.D. students, Sam Peltzman got up and made a pitch for two things–being a summer intern at the Council of Economic Advisers where he had been a senior economist from 1970 to 1971 and taking his two-quarter course in Industrial Organization (IO). Another professor named George Murphy got up and made his pitch for, if I recall correctly, Economic History. (In the interview I said History of Economic Thought, but I now think that’s wrong.) Both courses sounded attractive. I was determined to do an overload so I could get through the program in 3 years and come out with little debt. So I went up to Demsetz at the reception afterwards, told him I was planning to do an overload, and told him that both Peltzman and Murphy had made good pitches and I was torn about which one to take.

I was used to professors, and people more senior than me in general, answering such questions with short cost/benefit analyses–on the one hand this, on the other hand that–and then leaving me to make the decision for myself.

Harold answered “Peltzman.” I was so shocked by the one-word answer that I just reflexively said “What?”

“Peltzman,” answered Harold. That was his blunt style.

And so I took Peltzman’s class, which was fortunate because he left for the University of Chicago the next year and I learned a ton, not just about IO but also about how to teach. Peltzman was the most fair-minded teacher I ever saw. When he got a dumb question, you would never know it was a dumb question. He would either find the kernel of “non-dumb” and answer that or turn it into a good question and answer that. He showed incredible respect for his students.

Second story about Demsetz.

First, some background. When I visited Harold at the University of Chicago in May 1970, a lot of the student protests were going on. He took me to the faculty club to have lunch with his colleagues and on the way, a fairly polite student asked him if he wanted a flyer. It was about how bad a man the guy who founded the University of Chicago, John D. Rockefeller, was. I’ll never forget Harold’s answer. In an exasperated tone, he said, “I’ve had enough.”

At the Harold Demsetz Conference, held at UCLA, Tom Hazlett and I gave luncheon talks about Harold. I told, of course, about the big influence he had on my career, namely helping give me a career. After, Harold got up and reminisced. One reminiscence was that when a lot of the student protests were going on at UCLA in the early 1970s, just after he got there, a leftist student came into his class during the lecture and announced that because this was an economics class, the students were being misled because capitalism hurts consumers.

Now, given what you read above, what would you expect him to do or say, not to someone offering a leaflet, but to someone actually disrupting a class? Think about that before you read the next paragraph and I’ll give some space so you don’t immediately read the next one.












Harold answered calmly, “Oh, no, economics is pro-consumer.” The student paused, and then said, “Right on!” Then he left. Harold continued his class.