University Of California Los Angeles Faculty

"Alchian: Two things you [Hayek] wrote that had a personal influence on me, after your Prices and Production, were 'Individualism and Economic Order' [sic — Alchian certainly has in mind Hayek's 'Economics and Knowledge'] and 'The Use of Knowledge in Society.' These I would regard as your two best articles, best in terms of their influence on me. Hayek: 'Economics and Knowledge' — the '37 one — which is reprinted in the volume, is the one which marks the new look at things in my way. Alchian: It was new to you, too, then? Was it a change in your own thinking? Hayek: Yes, it was really the beginning of my looking at things in a new light. … I was aware that I was putting down things which were fairly well known in a new form, and perhaps it was the most exciting moment in my career when I saw it [i.e. 'Economics and Knowledge'] in print. Alchian: Well, I'm delighted to hear you say that, because I had that copy typed up to mimeograph for my students in the first course I gave here [i.e. UCLA]. And Allan Wallace … came through town one day, and I said, 'Allan, I've got a great article!" He looked at it, started to laugh, and said, "I've seen it too; it's just phenomenal!' I'm just delighted to hear you say that it was exciting, because it was to me, too … that was a very influential article, I must say."

"Neither perfect knowledge of the past nor complete awareness of the current state of the arts gives sufficient foresight to indicate profitable action. Even for this more restricted objective, the pervasive effects of uncertainty prevent the ascertainment of actions which are supposed to be optimal in achieving profits. Now the consequence of this is that modes of behavior replace optimum equilibrium conditions as guiding rules of action. Therefore, in the following sections two forms of conscious adaptive behavior are emphasized."

"The mark of a capitalistic society is that resources are owned and allocated by such nongovernmental organizations as firms, households, and markets. Resource owners increase productivity through cooperative specialization and this leads to the demand for economic organizations which facilitate cooperation. When a lumber mill employs a cabinetmaker, cooperation between specialists is achieved within a firm, and when a cabinetmaker purchases wood from a lumberman, the cooperation takes place across markets (or between firms). Two important problems face a theory of economic organization—to explain the conditions that determine whether the gains from specialization and cooperative production can better be obtained within an organization like the firm, or across markets, and to explain the structure of the organization."

"Alchian: Perhaps it might have been more appropriate for the Nobel Prize to have gone to you and Hicks together, and [Kenneth] Arrow and [[Gunnar Myrdal|[Gunnar] Myrdal]] together. Hayek: Oh, surely. [laughter]"

"Before condemning violence (physical force) as a means of social control, note that its threatened or actual use is widely practiced and respected—at least when applied successfully on a national scale. Julius Caesar conquered Gaul and was honored by the Romans; had he simply roughed up the local residents, he would have been damned as a gangster. Alexander the Great, who conquered the Near East, was not regarded by the Greeks as a ruffian, nor was Charlemagne after he conquered Europe. Europeans acquired and divided—and redivided—America by force. Lenin is not regarded in Russia as a subversive. Nor is Spain’s Franco, Cuba’s Castro, Nigeria’s Gowon, Uganda’s Amin, China’s Mao, our George Washington."

"The greater the uncertainties of the world, the greater is the possibility that profits would go to venturesome and lucky rather than to logical, careful, fact-gathering individuals."

"Like the biologist, the economist predicts the effects of environmental changes on the surviving class of living organisms; the economist need not assume that each participant is aware of, or acts according to, his cost and demand situation."

"The rights of individuals to the use of resources (i.e., property rights) in any society are to be construed as supported by the force of etiquette, social custom, ostracism, and formal legally enacted laws supported by the states' power of violence of punishment. Many of the constraints on the use of what we call private property involve the force of etiquette and social ostracism. The level of noise, the kind of clothes we wear, our intrusion on other people's privacy are restricted not merely by laws backed by police force, but by social acceptance, reciprocity, and voluntary social ostracism for violators of accepted codes of conduct."

"By this I refer to the fact that at the same time several people may each possess some portion of the rights to use the land. A may possess the right to grow wheat on it. B may possess the right to walk across it. C may possess the right to dump ashes and smoke on it. D may possess the right to fly an airplane over it. E may have the right to subject it to vibrations consequent to the use of some neighboring equipment. And each of these rights may be transferable. In sum, private property rights to various partitioned uses of land are "owned" by different persons."

"It is a general prevalence of double coincidence of information rather than wants by both parties that would avoid the use of money."

"Where foresight is uncertain, “profit maximization” is meaningless as a guide to specifiable action."

"Economists have uncovered the conditions necessary if Adam Smith’s results are to be achieved and where, in the real world, such conditions do not appear to be found, they have proposed changes which are designed to bring them about. It is what one finds in the textbooks. Harold Demsetz has said rightly that what this theory analyses is a system of extreme decentralisation. It has been a great intellectual achievement and it throws light on many aspects of the economic system. But it has not been by any means all gain."

"The legal substructure is private; the use of payments to influence the behavior of others is neither prohibited nor frowned upon. But the ' frictions" that perfect decentralization assumes away, must be lived with in laissez-faire."

"Demsetz (1980) refers to the hypothetical economic system of neoclassical economics as the decentralized model. According to the usual implicit and explicit assumptions of the decentralized model, the cost of information is zero; private property rights are fully defined and enforced at zero cost; and the state stays in the background, upholding the institutions of market exchange. Economic outcomes derived from this model are found in the standard textbook: For any underlying distribution of resources, wealth is maximized; output is valued by consumers who take indirectly into account the value of leisure and other extra-market activities; income distribution depends on wages and the prices of nonhuman inputs which equal the value of marginal products; and economic resources always find their highest-valued uses."

"Modern analysis has yet to describe inefficiency in a world where indivisibilities are present and knowledge is costly to produce."

"The mark of a capitalistic society is that resources are owned and allocated by such nongovernmental organizations as firms, households, and markets. Resource owners increase productivity through cooperative specialization and this leads to the demand for economic organizations which facilitate cooperation. When a lumber mill employs a cabinetmaker, cooperation between specialists is achieved within a firm, and when a cabinetmaker purchases wood from a lumberman, the cooperation takes place across markets (or between firms). Two important problems face a theory of economic organization—to explain the conditions that determine whether the gains from specialization and cooperative production can better be obtained within an organization like the firm, or across markets, and to explain the structure of the organization."

"Property rights develop to internalize externalities when the gains of internalization become larger than the cost of internalization. Increased internalization, in the main, results from changes in economic values, changes which stem from the development of new technology and the opening of new markets, changes to which old property rights are poorly attuned [G]iven a community's tastes... [for private versus state ownership], the emergence of new private or state-owned property rights will be in response to changes in technology and relative prices."

"A relevant notion of efficiency must refer to scarcity and people as they are, not as they could be."

"The view that now pervades much public policy economics implicitly presents the relevant choice as between an ideal norm and an existing "imperfect" institutional arrangement. This nirvana approach differs considerably from a comparative institution approach in which the relevant choice is between alternative real institutional arrangements."

"Business firms, in which controlled cooperation takes place, are the first important implication of costly transactions. The laissez-faire filtering process, using the profit test, selects some of these business organizations for survival and rejects others."

"Harold D. Koontz (1908–1984) and Cyril O’Donnell (1900–1976) of the University of California at Los Angeles defined management as "the function of getting things done through others." They furthered Fayol’s ideas and sought to provide a conceptual framework for the orderly presentation of the principles of management. According to Koontz and O’Donnell, managers were known by the work they performed, which was planning, organizing, staffing, directing, and controlling. These authors pointed out that, although some authorities maintained that these functions were exercised in the sequence given, in practice managers actually used all five simultaneously. They stressed that each of these functions contributed to organizational coordination. Coordination, however, was not a separate function itself but was the result of effective utilization of the five basic managerial functions. Koontz and O’Donnell offered a number of principles: in organizing, for example, "the principle of parity of authority and responsibility" and "the principle of unity of command"; in planning, "the principle of strategic factors"; and so on. The Koontz and O’Donnell text became an enduring, integral part of the search for a systematic body of management knowledge."

"After joining the faculty at UCLA in 1948, Professor O'Donnell quickly became a leader in the newly developing field of management theory and policy. He taught the basic courses in this area. In 1955 the first edition of the textbook Principles of Management, coauthored with Professor Harold Koontz, was published by McGraw-Hill. This book synthesized an operational approach to the management of enterprises. By filling a long-felt need in colleges and universities, it soon became the outstanding college textbook on its subject."

"[ Management can be defined as] the function of getting things done through others."

"The term "human relations" is being used to denote a field of inquiry - one which cuts across the jurisdictional boundaries of traditional social sciences in an effort to avoid fragmented, compartmentalized, or partial approaches to human problems."

"Human relations today has its iconoclasts and believers, critics and supporters, detractors and zealots. This is not surprising; for during the past twenty years, numerous research groups have burgeoned, and many individual investigators have become most active in the field. There has been a fantastic outpouring of professional and popular books and articles, untold new or revised college and university offerings, a plethora of in-plant training courses, a growing number of training laboratories and seminars, and a seemingly ever-increasing schedule of meetings and speeches—all concerned, in whole or in part, with "human relations.""

"[The human relations movement ] will bring to bear existing and newly developed theories, methods, and techniques of the relevant social sciences upon the study of inter- and intrapersonal phenomena, ranging fully from the personality dynamics of individuals at one extreme to the relations of cultures at the other."

"If they can see them as forces that consciously or unconsciously influence their behavior, they can better understand what makes them prefer to act in a given way. And understanding this, they can often make themselves more effective."

"Each type of action is related to the degree of authority used by the boss and to the amount of freedom available to subordinates in reaching decisions. The actions seen on the extreme left characterize managers who maintain a high degree of control while those seen on the extreme right characterize managers who release a high degree of control."

"In recent years the areas of leadership, training, and organization have increasingly challenged theorists, researchers, and practitioners. Evidence of this has been a growing literature from many disciplines and approaches. Without self-consciously determining the long-range directions of our work, we have found ourselves challenged by these issues and contributing to this literature."

"Leadership is interpersonal influence, exercised in a situation, and directed, through the communication process, toward the attainment of a specified goal or goals."

"Bob Tannenbaum’s intellectual work described organizational systems not as machines with interchangeable human parts, but as living communities that can be designed to enable people to grow and learn while achieving business goals. His writings, as well as his teaching and consulting, reflected the value he placed on people, and his belief that, to a great extent, leadership effectiveness derives from awareness of one’s own basic assumptions about human nature and the testing out and revision of those assumptions."

"Institutional theories of organization provide a rich, complex view of organizations. In these theories, organizations are influenced by normative pressures, sometimes arising from external sources such as the state, other times arising from within the organization itself. Under some conditions, these pressures lead the organization to be guided by legitimated elements, from standard operating procedures to professional certification and state requirement, which often have the effect of directing attention away from task performance... Institutional theories of organization have spread rapidly, a testimony to the power of the imaginative ideas developed in theoretical and empirical work."

"Top managers are always slow to point the finger of responsibility at headquarters or at themselves. When global faults have local symptoms, they will be slower still. When taking corrective action means a full, zero-based review of all systems, skills and structures, their speed will decrease even further. And when their commitment to acting globally is itself far from complete, any motion is unlikely."

"In practice, the managerial decision to tackle organizational and systems changes is made even more difficult by the way in which problems become visible. Usually a global systems problem first comes into view in the form of local symptoms. Rarely do such problems show up where the real underlying causes are."

"It is hard to let old beliefs go. They are familiar. We are comfortable with them and have spent years building systems and developing habits that depend on them. Like a man who has worn eyeglasses so long that he forgets he has them on, we forget that the world looks to us the way it does because we have become used to seeing it that way through a particular set of lenses. Today, however, we need new lenses. And we need to throw the old ones away."

"The strategist's method is very simply to challenge the prevailing assumptions with a single question: Why? And to put the same question relentlessly to those responsibles for the current way of doing things until they are sick of it."

"Without competitors there would be no need for strategy, for the sole purpose of strategic planning is to enable the company to gain, as efficiently as possible, a sustainable edge over its competitors. Corporate strategy, thus, implies an attempt to alter a company's strength relative to that of its competitors in the most efficient way."

"In strategic thinking, one first seeks a clear understanding of the particular character of each element of a situation and then makes the fullest possible use of human brainpower to restructure the elements in the most advantageous way. Phenomena and events in the real word do not always fit a linear model. Hence the most reliable means of dissecting a situation into its constituent parts and reassembling then in the desired pattern is not a step-by-step methodology such as systems analysis. Rather, it is that ultimate nonlinear thinking tool, the human brain. True strategic thinking thus contrasts sharply with the conventional mechanical systems approach based on linear thinking. But it also contrasts with the approach that stakes everything on intuition, reaching conclusions without any real breakdown or analysis... No matter how difficult or unprecedented the problem, a breakthrough to the best possible solution can come only from a combination of rational analysis, based on the real nature of things, and imaginative reintegration of all the different items into a new pattern, using nonlinear brainpower. This is always the most effective approach to devising strategies for dealing successfully with challenges and opportunities, in the market arena as on the battlefield."

"In Japan, organizations and people in the organization are synonymous."

"Rowing harder doesn't help if the boat is headed in the wrong direction."

"Analysis is the critical starting point of strategic thinking. Faced with problems, trends, events, or situations that appear to constitute a harmonious whole or come packaged as a whole by common sense of the day, the strategic thinker dissects them into their constituent parts. Then, having discovered the significance of these constituents, he reassembles them in a way calculated to maximize his advantage."

"In business as on the battlefield, the object of strategy is to bring about the conditions most favorable to one's own side, judging precisely the right moment to attack or withdraw and always assessing the limits of compromise correctly. Besides the habit of analysis, what marks the mind of the strategist is an intellectual elasticity or flexibility that enables him to come up with realistic responses to changing situations, not simply to discriminate with great precision among different shades of gray."

"He did extensive linguistic fieldwork on a scale it had not been done before, and when he brought it back from the field he found ways to use sophisticated laboratory equipment to analyze his recordings."

"[It's] not our decision to make. It's up to the people themselves."

"I wanted to find out why Shelley could write better-sounding poetry than I."

"My immediate answer was, 'I don't have a singing butler and three maids who sing, but I will tell you what I can as an assistant professor.'"

"The International Phonetic Association is like the Episcopal church. One can hold almost any theoretical position as long as one gets the symbols right."

"It was really [David] Whitteridge who taught me to be a scientist."

"I think of the classical world as a cancer patient or an AIDS patient. You know you have a limited life span. The question you now might want to ask is what would be the most important things to do now with your remaining years. I would like to think that that type of prioritizing could happen with museums, symphony orchestras, opera companies. Things really are urgent right now, and what we're doing somehow has to matter, has to make a contribution."

"Nobody can predict the future, but there is nobody in my generation who wants to be on the board of a symphony orchestra or an opera company and raise the kind of money that's needed. I think that the energy that in the 19th century went into opera is, in the 20th century, going into films. Films have that same over-the-top, overwhelming, high impact--all of the senses knocked out--and vast popular following, with stars who are larger than life. Well, that's what opera did in the 19th century."