September 23, 2004
Vol. 24 No. 1

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    Aaron Director founded field of Law and Economics

    Aaron Director, a distinguished University 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, Ca., at the age of 102.

    “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 Geoffrey Stone, the Harry Kalven Jr. Distinguished Service Professor in the Law School and the College, and 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 Professor Emeritus in the Law School, was trained in economics at Yale University and at Chicago, taught economics at Chicago and at Northwestern and Howard universities, 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 in the 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, the Harry A. Bigelow Distinguished Service Professor and former Dean of the 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. A University 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, the Clifton R. Musser Professor Emeritus in Economics, who was a colleague of Director’s 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 also was 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 United States because of its then-unfashionable classical liberal ideas, it was Director who interceded, persuading his friends at 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 Coase was invited to the University 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.

    In 1958, Director 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.

    Director taught antitrust courses with Edward Levi, who eventually would serve as Dean of Chicago’s Law School, President of the University and as U.S. Attorney General in the Ford Administra-tion. 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 Judge Posner. And Director’s 1931 book The Problem of Unemployment was co-authored with Paul Douglas, also a Chicago faculty member, who served in the U.S. Senate.

    Director showed early on that antitrust laws governing patents and resale prices have little effect 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.

    Director, who was born in Russia in 1901, retired from the University and moved to California. His sister, Rose Director Friedman, of San Francisco, Calif., survives him. University memorial services are pending, and contributions may be made to the Law and Economics Program at the Law School.