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Lancaster, the John Bates Clark Professor of Economics, died on
July 23, 1999 at his home in New York. He was 74. Lancaster was a
pioneering economic theorist whose writings affected his
profession's conceptions of free trade, consumer demand, industrial
structure, and regulation, and played a crucial role in shaping
government economic policy.
A native of
Sydney, Australia, Lancaster was an accomplished athlete, competing
vigorously in the lifeguard competitions at Sydney's Bondi Beach.
He volunteered for military service in the Royal Australian Air
Force in 1943, at age 18. At war's end, he studied geology,
mathematics and English at Sydney University, earning a bachelor's
in mathematics, a bachelor's and master's in English, and an offer
to teach English at the university. Instead, Lancaster accepted a
position as an associate at Research Services of Australia, where
he eventually became director and developed economic indices still
in use in Australia. This research led to his interest in
economics, which he began to study on his own. In 1953, he sat for
the economics exam at University of London, becoming one of the few
external candidates to receive a First. Though essentially
self-taught in the discipline, he was appointed an assistant
lecturer at the London School of Economics. He received his Ph.D.
in economics from the University of London in 1958. Lancaster moved
to the U.S. in 1961 to take a position at Johns Hopkins, and joined
the Columbia faculty in 1966.
completing his doctorate, Lancaster emerged as a leading economic
theorist. In 1956, he authored, with R. G. Lipsey, a groundbreaking
article, "The General Theory of Second Best," for The Review of
Economics Studies. The "second best" of the title referred to
the reality of economic conditions in most cases. While classical
economists pushed for free trade and perfect competition, Lancaster
insisted that optimal conditions for economic development have to
hold in their entirety for them to be valid. If market flaws (such
as artificially constrained wages or prices) made the best option,
perfect competition, impossible, then a "second best" solution
(such as tariffs), although contrary to classical economic theory,
would be the best policy. This basic insight continues to influence
economic theory and government policy.
major contribution was to revise economists' perceptions of
consumer behavior. Lancaster's pivotal insight was to view
consumers as not choosing between different goods but between
different characteristics that the goods provided. Lancaster
emphasized basic preferences, such as horsepower or fuel economy
for cars, to determine consumer demand. Most fully articulated in
his 1979 book, Variety, Equity and Efficiency, this
conceptual breakthrough helped explain trade flows between
countries, gave economists tools to understand consumer reactions
to new goods, and laid the analytical foundations for the "new"
trade theory of imperfect competition.
widely regarded as a potential recipient of the Nobel Prize for the
notable impact that had been made by his contributions to the
theory of second best and the integration of variety into economic
theory," said his colleague, Jagdish Bhagwati, Arthur Lehman
Professor of Economics.
twice served as chairman of the economics department. He was a
fellow of the American Academy of Arts and Sciences and the
Econometric Society, and a distinguished fellow of the American
Economic Association. He also was listed among 100 entries in a
1985 volume, Great Economists since Keynes. He is survived
by his wife Debra Grunfeld Lancaster, two sons, and five
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