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 Luterana sitio de citas libres y solteros 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.
After the war ended, Hirschman was assigned to be the interpreter in the first Allied war crimes trial, brought against the German General Anton Dostler, who had ordered the execution of prisoners in plain violation of conventions of war. Hirschman sat next to Dostler through the dramatic five-day trial. What must this have been like for him? The only record of his feelings is a single sentence in The New York Times, which reported that the nameless American “interpreter turned pale as he had to utter the death sentence” to the German general. Home in California, Sarah came across a black-and-white photo of her husband, leaning close to the Nazi general. Reading about how the interpreter went pale, she “breathed a sigh of relief that the war had not destroyed her husband’s sensitivity.”
The problem is that when some nations are wealthier than others, national sovereignty can produce economic sovereignty over entire regions
Now with two daughters, Hirschman and his wife made their way to South America and to Colombia. There he went to work for the World Bank, acquired a lifelong interest in Latin America, and shifted the focus of his work to economic development. Advising Colombia’s president, he found a large disconnect between standard economic theory and actual practice. He produced a paper called “Case Studies of Instances of Successful Economic Development in Colombia,” which emphasized surprising success stories, including that of a bank specializing in small loans to individuals, artisans, and small firms, “which has experienced remarkable expansion recently due to novel methods and political support.”
In 1956, possibilism struck home. He received an unexpected letter from the chair of Yale’s economics department, who asked him whether he might be willing to come to New Haven as a visiting research professor. He accepted immediately, and his academic career started in his forties.