Believers in limited government and privatization lost one of their unsung heroes with the death of distinguished economist Ed Clarke on October 10. Clarke conceived of an idea he called revealed demand, a notion that helped make the case for having the market allocate goods and services formerly thought to be the sole province of governments. Across the globe, governments have come to use its precepts, creating markets to finance such things as roads, bridges, and runway landing and takeoff slots, with the people using the assets, rather than taxpayers, to pay for such investments.
While taxpayers around the world ultimately saved money thanks to Clarke’s innovation, it didn’t do much for his career. His adviser at the University of Chicago, George Stigler, initially rejected his dissertation, in which he spelled out this idea, forcing Clarke to abandon any hope of an academic career. Instead, he landed a job in the White House just in time to watch Watergate destroy the Nixon administration.
Chicago eventually saw the error of its ways and gave Clarke his Ph.D., but he remained in government for his entire career. He ended up at the Office of Management and Budget, where he worked on the deregulatory efforts of the 1970s and 1980s and later did yeoman’s work fighting the regulatory overreach of executive branch agencies.
Clarke never won the Nobel, although the prize committee did acknowledge his work when giving the 1996 award to William Vickrey for his work on auction markets, and 1986 winner James Buchanan would tell anyone who asked that Clarke should have won it with him.
But unlike most other economists, Clarke had the satisfaction of seeing his ideas make a real impact on the world, nudging the government out of an area of the economy that had been previously thought to be its sole province.