Summer Edition

Kelvin Lancaster, a Top Economist of His Generation, Dies at 74

Kelvin John Lancaster, the John Bates Clark Professor of Economics, died of cancer on July 23 at his home in New York. He was 74.

During a prolific career, Lancaster, an economic theorist who continued to teach at Columbia until his death, made contributions to economics in such diverse areas as the theories of consumer behavior and the structure of markets. A major conceptual innovation that he introduced was not to view the consumer as choosing between different goods but between different characteristics which the goods themselves provided. This apparently simple idea was shown to have deep implications and to better explain such phenomena as the replacement of old by new goods. The fullest statement of these ideas was in his 1979 book Variety, Equity and Efficiency. His innovation also laid the analytical foundation for the "new" trade theory of imperfect competition that created waves in the profession in the 1980's.

Kelvin Lancaster was born and grew up in Sydney, Australia and remained attached to Australia even after moving to the United States, which he loved. As a young man he was a brilliant student as well as an athlete and an enthusiastic competitor in the lifeguard competitions at Sydney's Bondi Beach. In 1943, at the age of 18, he volunteered for the Royal Australian Air Force. He received much of his training in Canada, and his trip across Canada by train made a lasting impression on him as a lover of travel and of trains. He was among the first group of Australian bombardiers being trained on the new Norden bombsight when the war ended.

After the war, Lancaster continued his studies, which were wide-ranging in keeping with his insatiable intellectual curiosity. At Sydney University, he studied geology and mathematics as well as English literature. He felt that "analysis" would serve to untangle the intricacies of literature just as well as the structures of mathematics. Besides a degree in mathematics, he received bachelor's and master's degrees in English Literature, so impressing the faculty that he was offered a position teaching English Literature at the University of Sydney.

Lancaster decided instead to join a research organization, Research Services of Australia, where he worked as an associate (later director) in statistics and economics. There was a need to develop economic indices for a government project, and he developed an index that is still in use in Australia. The nuts-and-bolts work that he did as a researcher led him to become intensely interested in economic theory, which he proceeded to study on his own.

In 1953 Lancaster sat for the economics exam at London University and attained a First, which was unusual for an external candidate. He was subsequently appointed Assistant Lecturer at the London School of Economics. To counter his youth and youthful appearance he took up pipe smoking. His concern about making an impression was unwarranted, however, since he immediately gained a reputation for brilliance. When Lord Robbins, in his legendary seminar, called for an analysis of a particularly difficult paper, Lancaster volunteered to tackle it; he found a flaw in the argument, developed the solution and presented the results. At the time he was entirely self-taught in economics. He received his Ph.D. in economics from the University of London in 1958.

Almost immediately, Lancaster proceeded to establish a worldwide reputation as one of the leading young theorists of his generation, writing brilliant papers in rapid succession. His best-known paper of that period is his remarkable work (with Richard Lipsey) on "The Theory of Second Best," an important theoretical breakthrough which had, in the best tradition of economic theory, enormous policy impact. Stated briefly, this paper established that the necessary conditions for the optimal allocation of economic resources have to hold in their entirety; if one of them is violated then adhering to the remaining conditions is no longer optimal. The implications of this principle reach into all fields of economics.

After serving as Lecturer and then Reader at the London School of Economics, Lancaster moved to the United States in 1961, first to Johns Hopkins and in 1966 to Columbia where he remained for the rest of his career. He was twice the chairman of the economics department. Among his many graduate and undergraduate courses was the popular seminar "Economics and Philosophy," which Lancaster taught with the philosopher Sidney Morgenbesser.

An economist who relied on the power of his ideas and not on self-promotion to diffuse them, he was nonetheless extremely well known and regarded in the profession. Several honors came his way, among them election to Fellowship in the Econometric Society and in the American Academy of Arts and Sciences, and election as a Distinguished Fellow of the American Economic Association. He was also listed among 100 entries in a 1985 volume on Great Economists since Keynes.

According to the economist and Lancaster's Columbia colleague Jagdish Bhagwati, "He was 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. He joins the list of extraordinary economists such as Joan Robinson, Roy Harrod and Mancur Olson whom death deprived of this singular honor."

Lancaster's first marriage was to Lorraine Cross. In 1963 he married Deborah Grunfeld, a lawyer and the widow of the economist Yehuda Grunfeld. Their marriage was a happy one, filled with the exchange of ideas as well as devotion to children and grandchildren. His children, Clifton Lancaster, a statistician, and Gilead Lancaster, a cardiologist, both live in Connecticut. He was a doting grandparent, and loved to be with his grandchildren Ian, Neal, Peter, Meredith and Chloe. His wife, his children and his grandchildren survive him.