Originally assigned to a combat unit, Hirschman was shifted to the Office of Strategic Services, where he worked as an interpreter

As part of his research, he developed statistical indices designed to measure market concentration (the degree to which a market is dominated by a limited number of firms) and market power. In a letter to his sister, Hirschman described his results as “pretty interesting”-a lovely understatement in view of the fact that those results continue to have basic importance for many areas of economics (including antitrust), under the name of the Herfindahl-Hirschman Index, which measures the level of concentration in industries, and thus helps show how competitive they are. (Orris Herfindahl is often given credit for the index, but Hirschman got there first.)

Exploring the consequences of national power for the structure of foreign trade, Hirschman published his first book in 1945. Among other things, it addressed an interesting puzzle: Nazi Germany shifted from commerce with other wealthy nations to dealing with its smaller and less prosperous neighbors (Bulgaria, Hungary, Romania). Hirschman explained that it did so in order to achieve economic and thus political dominance over them. Hirschman’s first book, largely ignored in its own time and also ours, helps to explain a number of current predicaments. Consider China’s growing economic power and the political dominance that is resulting from that power.

As the book was being completed, Japan bombed Pearl Harbor, and the young German economist, so recently a soldier in Spain and France, promptly enlisted in the US Army. He read voraciously, including Albert Camus and Friedrich Hayek, whose great work, The Road to Serfdom, he found “very useful for someone like me who grew up in a ‘collectivist’ climate-it makes you rethink many things….” Notwithstanding his extensive reading, he abandoned the idea of an academic career, believing that he had no future in it. Read more