This past week, Harold Demsetz, one of the great economists of the Chicago School, died in California at the age of 88. In one sense, Demsetz’s passing marks the end of an era now that the Chicago School of Economics, to which I generally subscribe, is subject to multiple sustained attacks. Behavioral economists, such as Daniel Kahneman, believe the secret to understanding human behavior lies in identifying, through experimental observation, anomalies in individual choices tending to undermine the axioms of rational choice theory. Meanwhile, other modern populists such as legal scholars Tim Wu and Lina Khan attack Chicago-style antitrust law for wrongly exalting economic efficiency over all other values, such as the protection of small businesses from competition or the ability of moral communities to flourish when operating in the large shadow of powerful economic firms.

Demsetz would have none of this. As if to rebut these novel approaches in advance, Demsetz constantly stressed the dangers of falling prey to the “nirvana fallacy,” or the view of public policy that “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.” As economist Peter Boettke has pointed out, Demsetz never quarreled with success in the marketplace. If firms like Amazon and Netflix can obtain and sustain a dominant position, it is because they have figured out a formula for success that they constantly adjust to ensure that some new upstart competitor in these “contestable” markets does not take their place. Demsetz was right to scorn the populist critique of popular firms that succeed because they offer low prices and excellent service.