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Exam Questions Harvard

Harvard. Earliest Multiple Choice Exam for Principles of Economics, 1948

 

What makes the second semester  final examination for Principles of Economics at Harvard in 1947-48 particularly interesting is that we probably discover there the introduction (at least to Harvard’s economics department) of that  art form known as the multiple choice question. For the sake of completeness I have transcribed the first semester final examination as well. Coming up soon will be the course reading list for both semesters. I challenge readers to take the multiple choice exam and send me their answers. Perhaps someone out there will get a grant fat enough to allow administering the exams to a sample of current students! 

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1947-48
HARVARD UNIVERSITY

ECONOMICS Aa

 I.
(One hour and a half)

Answer BOTH questions

  1. Suppose that Congress approves a European Recovery Plan which would entail a $4 billion expenditure by the United States Government during the coming year. This expenditure could be financed by the sale of government bonds (a) to the public; (b) to the member banks; (c) to the Federal Reserve Banks; or by (d) taxation. Indicate the effects of each one of these alternative methods on (1) member bank reserves (2) the money supply. Illustrate b use of member bank and Federal Reserve Bank statements (balance sheets).
  2. Analyze and discuss “the process by which competition rations scarce goods, determines their values relative to each other…regulates the types and amounts of the goods and services produced, and encourages the use of the most efficient productive processes.” (Quoted from Chandler, p. 185)

II.
(One hour and a half)

Answer any THREE questions

  1. Given the following incomplete data for 1939 (rounded out to the nearest billion):

Government outlays inclusive of transfer payments………17
Corporate saving (i.e., undistributed profits)…………….……1
Total taxes…………………………………………………………………15
Gross private investment…………………………………………….10

which of the additional items listed below would be necessary in order to deduce separately,   1. Gross National Product, 2. Net National Product, 3. Personal savings.
List of additional items:

a. Total wages,
b. Total money supply at beginning of year,
c. Total money supply at end of year,
d. Net increase in inventories,
e. Consumption expenditures,
f. Depreciation,
g. Income velocity of money,
h. Transfer payments by government,
i. Net change in member bank reserves.

  1. How does the economist define profit? Why is this definition likey to differ from the concept of profit of the business man? What is the purpose of the eonomist’s definition?
  2. Analyze the effect on the price charged by a monopolist for his product of THREE of the following:
    1. A rise in the cost of labor,
    2. A percentage tax on his profits,
    3. A tax on the value of his plant and equipment,
    4. The appearance on the market of a high priced rival substitute for his product.
  3. Discuss the advantages and disadvantages of attempts to use anti-trust laws to restore competitive conditions in large scale industries.

Final. January, 1948.

 

Source: Harvard University Faculty of Arts and Sciences. Papers Printed for Final Examinations: History, History of Religions,…,Economics,…Military Science, Naval Science. January, 1948. Harvard University Archives, Harvard Final Examinations, 1853-2001. Box 15 of 284.

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HARVARD UNIVERSITY
THIS EXAMINATION PAPER MUST BE RETURNED TO THE PROCTOR

ECONOMICS Ab
May 17, 1948

 

The total time allowed for the three objective parts of the Examination is eighty-five (85) minutes. At the end of that time, these three objective parts of the examination will be collected.
Read carefully the instructions for marking the answer sheets.
Do not write on this paper. Use the scratch paper provided.

 

PART I

Indicate on the separate sheet the one best answer to each of the following questions. For each correctly marked answer, credit is given. For each incorrectly marked answer, credit is taken away. For each question no answered, credit is neither given nor taken away.
Allow approximately twenty (20) minutes for this part of the exam.

A vineyard produces only one output, burgundy wine, with only two inputs, unskilled agricultural labor and ten acres of land planted in grapes. The firm hires labor on a day-to-day basis, and can freely vary the quantity hired; the market for labor is purely competitive. The firm rents the land from its real owner, and has a two-year lease obligating it to pay a fixed monthly rental; moreover, it cannot increase or decrease the quantity of land which it can rent in less than two years. The price of burgundy wine is fixed by a trade association, and does not change during the entire period considered in this problem. The firm is in complete equilibrium, with optimum adjustment of inputs (land and labor) and output (burgundy wine) for maximum profit.
Now, the wage which must be paid for labor falls. There are no changes in the economy other than this fall in wages and its effects. In the firm’s new short-run equilibrium, compared to the original situation:

      1. The schedule of the marginal revenue productivity of labor to the firm
        1. is raised.
        2. is lowered.
        3. is not shifted.
        4. Its behavior is indeterminate with the information given.
      2. The schedule of the marginal cost of labor to the firm
        1. is raised.
        2. is lowered.
        3. is not shifted.
        4. Its behavior is indeterminate with the information given.
      3. The quantity of labor hired by the firm
        1. is increased.
        2. is decreased.
        3. is not changed.
        4. Its behavior is indeterminate with the information given.
      4. The marginal revenue productivity of labor for the quantity now hired by the firm, compared to the marginal revenue productivity for the quantity hired in the original situation
        1. is increased.
        2. is decreased.
        3. is not changed.
        4. Its behavior is indeterminate with the information given.
      5. The total payment made to labor by the firm
        1. is increased.
        2. is decreased.
        3. is not changed.
        4. Its behavior is indeterminate with the information given.
      6. The output of burgundy wine produced by the firm
        1. is increased.
        2. is decreased.
        3. is not changed.
        4. Its behavior is indeterminate with the information given.
      7. The profit of the firm
        1. is increased.
        2. is decreased.
        3. is not changed.
        4. Its behavior is indeterminate with the information given.

After many years pass, in the firm’s new long-run equilibrium, compared to the original situation:

      1. The quantity of land rented by the firm for any particular output of burgundy wine produced
        1. is increased.
        2. is decreased.
        3. is not changed.
        4. Its behavior is indeterminate with the information given.
      2. The quantity of labor hired by the firm for any particular output of burgundy wine produced
        1. is increased.
        2. is decreased.
        3. is not changed.
        4. Its behavior is indeterminate with the information given.
      3. The schedule of the marginal revenue productivity of labor to the firm
        1. is raised.
        2. is lowered.
        3. is not shifted.
        4. Its behavior is indeterminate with the information given.
      4. The output of burgundy wine produced by the firm
        1. is increased.
        2. is decreased.
        3. is not changed.
        4. Its behavior is indeterminate with the information given.
      5. The quantity of land rented by the firm
        1. is increased.
        2. is decreased.
        3. is not changed.
        4. Its behavior is indeterminate with the information given.
      6. The quantity of labor hired by the firm
        1. is increased.
        2. is decreased.
        3. is not changed.
        4. Its behavior is indeterminate with the information given.
      7. The rental per acre on the land rented by the firm
        1. is increased.
        2. is decreased.
        3. is not changed.
        4. Its behavior is indeterminate with the information given.
      8. The total rent payment to the owner of the land by the firm
        1. is increased.
        2. is decreased.
        3. is not changed.
        4. Its behavior is indeterminate with the information given.

 

 

PART II

Indicate on the separate answer sheet the one best answer to each of the following questions. For each correctly marked answer, credit is given. For each incorrectly marked answer, credit is taken away. For each question not answered, credit is neither given nor taken away.
Allow approximately forty-five (45) minutes for this part of the exam.

      1. A tax is proportional if
        1. the tax rate increases as the tax base increases.
        2. the tax rate decreases as the tax base increases.
        3. the tax rate remains the same as the tax base increases.
        4. the tax rate increases at a decreasing rate as the tax base increases.
      2. The Federal government can ease the inflationary pressure created in the U.S. through the European Recovery program by
        1. requiring that all the funds sent abroad be spent in the U.S.
        2. budgeting for a surplus.
        3. financing the program by borrowings from commercial banks.
        4. financing the program by borrowings from the federal reserve banks.
      3. The International Monetary Fund reflects the desire of the member nations to
        1. restore the pre-1914 gold standard.
        2. construct a stable yet flexible exchange rate system.
        3. eliminate, or at least reduce, tariff barriers.
        4. provide funds for the reconstruction of war-devastated Europe.
      4. A larger supply of dollars can be made available to other countries by
        1. stopping U.S. gold purchases and thus ending the drain of gold from abroad.
        2. reducing U.S. purchase of foreign securities.
        3. reducing U.S. trade barriers, particularly tariffs.
        4. continuing subsidies to American agriculture.
      5. The main source of instability and disturbance in the international dealings of the U.S. during the inter-war years was
        1. the surplus in the supply of dollars made available to other countries throughout the period.
        2. caused by deficient foreign demand for U.S. products.
        3. the extraordinary amplitude of fluctuations in the U.S. domestic economic life with concomitant variations in our purchases of foreign goods and services.
        4. stability of the movements of capital, into and out of the U.S.
      6. Which of the following would tend to increase the value of the dollar relative to the British pound under a system of free exchanges?
        1. Purchase by U.S. citizens of bonds issued by a British corporation.
        2. Payment of dividends by a British firm to U.S. stockholders.
        3. Flight of short term capital from U.S. to Great Britain.
        4. Greater increase in U.S. prices than in British prices.
      7. To find the marginal physical product of a factor we
        1. divide the total product by the number of additional units of the factor.
        2. see how much the total product has increased as a consequence of having used a small additional amount of the factor in question while holding the input of other factors fixed.
        3. examine the rate of change of average product.
        4. see how much the total product has increased as a consequence of having used a small additional amount of the factor in question along with the technologically appropriate additional amounts of the cooperating factors.
      8. A depression in the U.S. would tend to spread to foreign countries
        1. through lower incomes in the U.S., therefore lower U.S. imports, therefore lower incomes in countries exporting to the U.S.
        2. through lower incomes in the U.S., therefore greater importation of foreign goods, therefore lower real incomes abroad.
        3. through low prices in the U.S. causing greater demand in the U.S. for foreign commodities because of the Law of Demand.
        4. None of the above is an acceptable answer.
      9. Equity investments (stocks) rather than ordinary lending (bonds) is preferred as an implementation of a policy of foreign investments because
        1. the return is more certain.
        2. stocks are easier to sell in this country.
        3. the return is geared to the level of economic activity in the foreign country and, therefore, doesn’t represent such a burden in times of economic stress.
        4. the return is larger.
      10. A laborer’s reservation price is that which
        1. every other unit of labor receives.
        2. is so low that he prefers not to work.
        3. is the minimum amount he will take and still work.
        4. is so high that when he gets it he will refuse to work anymore.
      11. Once economic recovery has set in, inflationary price rises are likely to occur, even before full employment is reached, provided that
        1. the supply of some factor services is inelastic.
        2. the supply of some factor services is elastic.
        3. large scale increases in productivity take place.
        4. a sudden recession occurs in several important foreign countries.
      12. “All employees who, fifteen days after April 23, 1947, are members of the Union in good standing in accordance with its constitution and by-laws and all employees who become members after that date shall, as a condition of employment, remain Union members in good standing for the duration of this Agreement.”
        The above section of a trade agreement is commonly referred to as

        1. a union ship clause.
        2. a closed shop clause.
        3. bargaining for members only.
        4. None of these.
      13. A businessman produces a product using only one variable input, labor, and one fixed input, machinery. He pays his labor under a piece rate system and hires it in a competitive market. In the short run, if he increases his output
        1. his average variable cost will fall.
        2. his average variable cost will rise.
        3. his average variable cost will remain the same.
        4. his average variable cost will first fall and then rise.
      14. It is commonly believed that taxes upon economic profits are not shifted in the short run because
        1. redistribution of income and consequent changes in demand which occur are negligible.
        2. profit taxes are not business costs and hence do not alter the adjustment of output (therefore supply) which maximizes profits.
        3. neither the “marginal” firm nor individual ever pays taxes on profits.
        4. migration of capital occurs so speedily that the readjustment does not necessitate price changes.
      15. All but one of the following are disadvantages of a system of free or flexible exchange rates. That one is:
        1. encouragement to speculation in the exchanges.
        2. sacrifice of autonomy in a country’s internal economic policy.
        3. tendency toward retaliatory action by countries concerned.
        4. discouragement to traders and investors in the international field.
      16. The greater the divergence between a country’s opportunity cost ratio before trade and the international exchange ratio after trade,
        1. the less will be that country’s gain from international trade.
        2. the greater will be its gain.
        3. the less will be the extent of its specialization.
        4. the less vulnerable will it be to external deflationary influences.
      17. Under monopolistic condition an entrepreneur will hire more of a factor so long as
        1. its marginal physical product continues to be positive.
        2. the value of the marginal physical product is greater than the cost of the additional amount of the factor.
        3. he can sell the extra amount produced.
        4. None of the above is an acceptable answer.
      18. If an industry employs units of a factor with relatively high transfer earnings side by side with other units (of equal quality) whose transfer earnings are lower and if all units of the factor receive the same payment
        1. the former may be said to enjoy a rent-like return.
        2. the latter may be said to enjoy a rent-like return.
        3. the industry may be said to enjoy a rent-like return.
        4. the concept of rent doesn’t apply here.
      19. A necessary condition for “forced saving” is
        1. an expansion of credit resulting in the employment of men and resources previously unemployed.
        2. some people having incomes which don’t rise as rapidly as prices.
        3. banks being completely loaned up.
        4. None of the above is an acceptable answer.
      20. To determine whether the U.S. terms of trade improved between 1940 and 1947, which of the following would you need to know?
        1. The amount of gold imports during the period.
        2. The price (in the same currency) of U.S. imports and exports in 1940 and 1947.
        3. The rate of exchange between the dollar and some other important currencies (say the pound) in 1940 and 1947.
        4. The price level in the U.S. in 1940 relative to that in the rest of the world.
      21. A larger volume of government deficit expenditure will be required to bring about a given increase in employment
        1. the greater the elasticity of the supply of labor.
        2. the greater the velocity of money.
        3. the less the elasticity of supply of all factors of production.
        4. the greater the confidence of businessmen in the effectiveness of the government policy.
      22. A U.S. corporation may pay a net income tax when it has made an “economic loss” rather than “economic profits” because:
        1. the corporate income tax and excess profits tax together may exceed 100% of statutory net income.
        2. the corporate income tax rate structure is regressive.
        3. all interest payments but no dividends are deductible as costs before computing net income.
        4. the corporate income tax is a “benefit tax” on the privilege of doing business in the corporate form and hence takes no account of losses.
      23. A building and lot are valued at $20,000, and it is expected that the property will yield annual net income after taxes of $800 for an indefinite future period. Subsequently, a 2% rise in the tax rate on real property occurs which is expected to be permanent. The tax is capitalized if:
        1. the property is then sold for $10,000.
        2. the property is then sold for $12,000.
        3. the property is then sold for $30,000.
        4. the income from the property increases $400 annually because the tax is shifted.
      24. Assume that in 1937 the equilibrium rate of exchange between the U.S. and Great Britain was $5 to one pound, and that since that time the American price level has doubled and the British price level trebled. According to the theory of “purchasing power parity,” the new equilibrium rate of exchange will be:
        1. $3.33 to one pound.
        2. the same as the old rate.
        3. $7.50 to one pound.
        4. $6.25 to one pound.
      25. Great Britain imports raw materials in order to manufacture finished goods for exports. A devaluation of the pound sterling would
        1. tend to raise the price of British exports in foreign markets because the price of raw materials in Britain would rise.
        2. tend to lower the price of British exports in foreign markets because of the lower cost of pounds in terms of foreign currencies.
        3. have an indeterminate effect because both the above tendencies would exist.
        4. None of the above is an acceptable answer.
      26. Government deficit expenditures will fail to increase the money national income unless
        1. prices rise rapidly as a result of the policy.
        2. the difference between government expenditures and taxation is more than any reduction in private investment that may take place.
        3. wages of workers rise enough to prevent any profits which would be the direct result of the expenditures.
        4. None of the above is an acceptable answer.
      27. Suppose a firm uses 1,000 machines to produce 100,000 units of product per year. Suppose the machines have a useful life of five years, and that the machines are replaced in regular annual amounts. Then the normal demand for machines by this firm will be 200 per year.
        If the demand for the firm’s product rises 10% in some year, what will be the increase in its demand for machinery for this year?

        1. 20%
        2. 10%
        3. 50%
        4. 500%
      28. In general the elasticity of supply of agriculture products is less than that of manufactured products. In the early 1930’s the demand for virtually all goods declined. This would cause
        1. an improvement in the terms of trade of Great Britain who imports agriculture goods and exports manufactured goods.
        2. the opposite.
        3. the terms of trade of countries exporting agricultural products to improve.
        4. None of the above is an acceptable answer.
      29. Given the requirement that all individuals are to sacrifice equally in bearing the burden of taxation, then it follows that the maximum degree of progression which may be introduced into the income tax is limited only by
        1. the rate at which marginal utility decreases with increases in income.
        2. the size of income.
        3. the needs of government for revenue.
        4. the rate at which marginal utility increases with increases in income.
      30. Given: the same amount of labor (taken as representative of all the factors which in country A produces either 80 T or 160 L, in country B produces either 60 T or 50 L. One day’s labor in A produces one T or two L and receives a wage of $10.00. The wage of a day’s labor in B is $6.00. We assume that each country has a constant opportunity cost relationship between the two goods and, therefore, specializes completely in the production of one good. The terms of trade will be:
        1. 10 T for 8 L
        2. 3 T for 8 L
        3. 5 T for 8 L
        4. 3 T for 8 L

 

PART III

[Note: It appears that the typesetting of Part III that starts a new page in the original mistakenly numbered questions from  16 to 22]

Indicate on the separate answer sheet the one best answer to each of the following questions. For each correctly marked answer, credit is given. For each incorrectly marked answer, credit is taken away. For each question not answered, credit is neither given nor taken away.
Allow approximately twenty (20) minutes for this part of the exam.

The following items represent all the available information on the balance of payments for Ruritania in the year 194x. The Ruritanian monetary unit is the dollar.

Interest on foreign bonds owned by Ruritanians $15
Expenditures of foreign tourists in Ruritania $10
Exports (merchandise) $440
Profits on Ruritania’s direct investments abroad $55
Imports (merchandise) $225
Expenditures of Ruritanian tourists abroad $80
Net increase in short-term commercial loans made by Ruritanians $50
Profits on foreigners’ direct investment in Ruritania $10
Fees on insurance written for foreigners $10
Interest on net increase in short-term commercial loans made by Ruritanians $5
Interest on Ruritanian bonds owned by foreigners $70
Net long-term loans made by Ruritanians $85

 

      1. On the basis of these items, the total number of dollars supplied by Ruritania in 194x is
        1. $470
        2. $475
        3. $520
        4. $530
        5. $535
      2. On the basis of these items, the total number of dollars demanded on current account (trade and service items) in 194x is
        1. $515
        2. $520
        3. $530
        4. $535
        5. $585
      3. On the basis of these items, the total number of dollars supplied by Ruritania on capital account (capital items) in 194x is
        1. $0
        2. $85
        3. $115
        4. $135
        5. $155
      4. On the basis of these items, the total number of dollars demanded on capital account in 194x is
        1. $0
        2. $85
        3. $115
        4. $135
        5. $155
      5. If Ruritania were on the gold standard, her balance of payments in 194x would result in
        1. an increase in her gold reserves of $115.
        2. an increase in her gold reserves of $105.
        3. an increase in her gold reserves of $15.
        4. a decrease in her gold reserves of $5.
        5. a decrease in her gold reserves of $15.
      6. If Ruritania were on an inconvertible paper standard, her balance of payments in 194x would result in
        1. depreciation of the currency.
        2. inflation of the currency.
        3. devaluation of the currency.
        4. appreciation of the currency.
        5. deflation of the currency.
      7. From the balance of payments data, one can infer that Ruritania is a
        1. debtor country on long-term account.
        2. debtor country on short-term account.
        3. creditor country on long-term account.
        4. creditor country on short-term account.
        5. One cannot infer that Ruritania is in any of the above positions.

Final. May, 1948.

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1947-48
HARVARD UNIVERSITY

This part of the examination is to be written in the blue book AFTER you have finished the multiple choice test.

I
(Forty minutes)

      1. Outline and explain the monetary and fiscal policies appropriate to the several phases of the business cycle.

II
Answer any TWO questions
(Twenty-five minutes each)

      1. Describe and discuss the principal economic factors influencing the wage policy adopted by the trade unions in the hosiery industry in the period from 1920 to 1940.
      2. Explain the differences between rent, quasi-rent, and interest, and give specific illustrations of each.
      3. Discuss the possible defects of a progressive tax levied upon personal income. In your opinion do these defects arise from progressive personal income taxation as such, or from the particular form of the federal tax in the United States? Explain.

 

Final. May, 1948.

 

Source: Harvard University Faculty of Arts and Sciences. papers Printed for Final Examinations: History, History of Religions,…,Economics,…Military Science, Naval Science. May, 1948. Harvard University Archives, Harvard Final Examinations, 1853-2001. Box 15 of 284.

Categories
Exam Questions Northwestern Suggested Reading Syllabus

Northwestern. Monetary Policy Readings and Exam. Modigliani, 1961

 

Between his professorships at Carnegie and MIT, Franco Modigliani briefly held a professorship at Northwestern. It appears that Northwestern could not be faulted in its pursuit and courtship of Modigliani, but one sees that Modigliani’s academic heart was left in Cambridge. He answered the call to MIT, undoubtedly leaving a broken hearted colleague or two in Evanston.

Below the reading list and final exam questions for Franco Modigliani’s course at Northwestern “Monetary Policy”.

____________________________

Modigliani remembers Northwestern

Carnegie granted me a sabbatical year in 1957-58, during which I was a visiting professor at Harvard, where I stood in for Leontief (who was on leave)…At the end of 1959 I was again invited to be a visiting professor, but this time at MIT. I intended to accept, but the administration at the Carnegie Institute was against it. In that period I felt rather annoyed by the university, for I had the impressiona that the administration did not intend to invest resources in the economics sector. To my dismay, they decided not to replace an excellent economist, Alexander Henderson, who had worked alongside me and died prematurely…
Serena and I therefore decided it was time to move on and accepted MIT’s offer and an invitation to occupy a permanent chair at Northwestern University, with the proviso that I be allowed to retain my post of visiting professor at MIT. The year 1960, then, was a crucial one, for I fell in love with MIT. It was a delight to have so many colleagues who were both at the top of the profession and pleasant. The administration aimed only to oil the wheels of the teacher’s liffe, and the students were all of the first quality…
At MIT everyone knew I had the commitment to go to Northwestern and, nobless oblige, no one tried to deter me. The University of Northwestern [sic] gave us a grand welcome. We found a large funished house awaiting us near the campus, and we were taken to avarious areas in order that we might choose where to buy our home. But we made too many comparisons with MIT and could not make the decision to put down roots. Everyone was too kind, too solicitous, and maybe we had the feeling as of being animals in a zoo, with everybody asking us about Italy. Well, our hearts were still back at MIT. Judge, then, how happy we were when, at Christmas, the dean of the Sloan School at MIT phone me and asked: “Franco, now you’ve had a taste of Northwestern…what about coming back to us?” We had no hesitation, and in June 1962 Serena returned to Massachusetts alone and bought our house in Belmont, where I joined her as soon as I had finished my classes in Evanston and where we spent 36 happy years.

Source:  Franco Modigliani, Adventures of an Economist. New York: Texere, 2001, pp. 91-2.

____________________________

NORTHWESTERN UNIVERSITY
Department of Economics
Economics C-30
Mr. Modigliani

Fall Term 1961

C-30 MONETARY POLICY

Reading List I

Books suggested for general background and review

Chandler—The Economics of Money and Banking, 3rd edition
Day and Bean—Money and Income
Sayers—Modern Banking

  1. The Supply of Money, the Banking System, Financial Intermediaries and the Matrix of Claims

Meade, J. E.—“The Amount of Money and the Banking System”—Readings in Monetary Theory.
The Federal Reserve System—Purposes and Functions—Ch. I-VIII and XIII
H.C. Carr—“Why and How to read the Federal Reserve Statement” Journal of Finance, Dec. 1959
Roosa, R. V.—Federal Reserve Operations in the Money and Government Securities Markets
Chandler, L. V.—“Federal Reserve Policy and the Federal Debt”—Readings in Monetary Theory
Federal Reserve Bulletin
—August 19959 “A quarterly presentation of Funds, Saving and Investment”

 

Reading List II

  1. The Demand for Money

Fisher, I.—The Purchasing Power of Money, Chs. 1-6 and 8
Robertson, D.—Money, Chs. 4-6
Pigou, A.C.—“The Value of Money”, Readings in Monetary Theory
Hicks, J. R.—“A suggestion for simplifying the Theory of Money”, Readings in Monetary Theory
Tobin, J.—“The interest elasticity of Transaction Demand for Cash”, Review of Economics and Statistics (RE&S), August 1956
Keynes, J. M.—General Theory, Ch. 15
Friedman, M.—“The Restatement of the Quantity Theory of Money”, in Studies in the Quantity Theory of Money
Latané, H.A.—“Cash Balances and the Interest Rate”, RE&S, Nov. 1954, pp. 456-460
___________–“Income Velocity and Interest Rates”, RE&S, Nov. 1960, pp. 445-449
Stedry, A.C.—“A Note on Interest Rates and the Demand for Money”, RE&S, August 1959
Bronfenbrenner and Mayer—“Liquidity Functions in the American Money”, Econometrica, October 1960, Sects. I-IV
Friedman, M.—“The Demand for Money: Some Theoretical and Empirical Results”, JPE, August 1959

 

Reading List III

  1. The Modus Operandi of Monetary Policy—Money and Liquidity—Monetary and Fiscal Tools.

Keynes, J.M.—A Treatise on Money—Ch. 13, 31, 37.
Keynes, J.M.—The General Theory of Employment, Interest and Money—Ch. 2, 6, 10, 11, 18, 19, 21.
Hicks, J.R.—“Mr. Keynes and the Classics”—Readings in the Theory of Income Distribution.
Modigliani, F.—“Liquidity Preference and the Theory of Interest and Money”—Readings in Monetary Theory (except sections 10 and 13)
Patinkin, D.—“Price Flexibility and Full Employment”—Reading in Monetary Theory
Tobin, J.—“A Dynamic Aggregative Model”, JPE, April, 1955 (espec. pp. 103-111)
Modigliani, F.—“Long Run Implications of Alternative Fiscal Policies and the Burden of the National Debt”—(Mimeographed)
Roosa, R.V.—“Interest Rates and the Central Bank”—Money, Trade and Economic Growth; Essays in Honor of John H. Williams
Kareken, J.H.—“Lender’s Preferences, Credit Rationing and the Effectiveness of Monetary Policy”, Review of Economics and Statistics, August 1957.
Friedman, M.—“A Monetary and Fiscal Framework for Economic Stability” Readings in Monetary Theory.
American Assembly—United States Monetary Policy Ch. 1, 2, 7.
Friedman, M.—A Program for Monetary Stability, (Fordham University Press)
Axilrod, S.H.—“Liquidity and Public Policy,” Federal Reserve Bulletin, October 1961.

 

Reading List IV

  1. The Term Structure of Interest Rates, Monetary Policy and Debt Management

*Lerner, A.P.—“Essential Properties of Interest and Money”, QJE, May 1952
*Lutz, F.—“The Structure of Interest Rates”, Readings in the Theory of Income Distribution.
Hawtrey, H. G.—A Century of Bank Rates, Ch. VI
*Tobin, J.—“Liquidity Preference as Behavior Toward Risk”, Review of Economic Studies, Feb. 1958
*Meiselman, D.—“Expectations, Errors, and the Term Structure of Interest Rates” (mimeographed)
*Riefler, W.W.,–“Open Market Operations in Long Term Securities”, FRB, Nov. 1958
*Young, R.A. and Yager, C.A.—“The Economics of ‘Bills Preferably’” QJE, August, 1960.
Conrad, J.W.—An Introduction to the Theory of Interest. University of California Press, 1959 (especially part Three)

 

Final Examination
December 14, 1961
8:00-10:00

ANSWER ANY FOUR QUESTIONS

  1. Under the present system commercial member banks are required to keep a reserve proportional to their demand deposit liability in the form of cash or deposits with the Federal Reserve Banks.
    1. What is the function and role of these reserve requirements?
    2. What would be the major implications of requiring a reserve proportional to their commercial loans rather than to their demand deposits. Explain whether and why you would favor or oppose such a change?
  2. Some authors have maintained that the ability of certain financial intermediaries other than banks to create close money substitutes seriously impairs the effectiveness of monetary policy. Spell out the argument and assess its validity.
  3. Evaluate the relative merits and shortcomings of monetary and fiscal policies in dealing with “cost push” inflation.
  4. Explain the essence of the so called “availability doctrine” and its relevance for an understanding of the modus operandi of monetary policy.
  5. State the main arguments for and against the “bills only” doctrine and give your own evaluation and recommendation.
  6. The Federal Reserve Board and the Federal Deposit Insurance Corporation have recently raised the maximum rate payable on time deposits from 3 to 4%.
    1. What are the purposes and the likely effects of this move?
    2. Even though the new provision does not apply to Saving and Loan Institutions a spokesman for the United States Saving and Loan League was quoted by the Sun-Times of December 2 to the effect that the change “may very well mean some dividend rate increase by Savings and Loan institutions in different parts of the country” and “If Savings and Loans have to pay more for dividends they will have to increase rates on mortgages. This is a surprising development in view of the administration’s announced drive to hold mortgage rates down.” Assess this statement critically.

 

Source: Duke University, Rubenstein Library. Franco Modigliani Papers, Box T6, Folder “Teaching material, Economics, 1961”.

Image Source: Website Archivio Storico degli economisti.

 

 

 

Categories
Columbia Regulations

Columbia. Rules for Conduct of Graduate Oral and Final Exams, 1967

 

Every so often some well-meaning Dean tries to capture established procedures in writing. Since the Faculty of Political Science was explicitly referred to and the printed pamphlet transcribed below was found in the papers of the former head of the economics department (located within the Faculty of Political Science), Carl Shoup, it would seem reasonable that the spirit of the these rules, if not the letter, governed the administration of graduate oral and Ph.D. final examinations in economics. When one thinks of the salience of such examination memories, I find it surprising that it is difficult to find detailed written recollections of the oral exams experienced by generations of economic graduate students.

______________________

The Graduate Faculties
COLUMBIA UNIVERSITY
1967

The Conduct of Oral and Final Examinations

Note

During the academic year 1958-1959 the Chairmen of the Committees on Instruction of the Graduate Faculties wrote to the Dean of the Graduate Faculties to ask that he set down in permanent form the rules governing oral examinations. Before and after that request, numerous faculty members had also asked the Dean’s office question on particular points…

The few pages that follow attempt to answer these various inquiries by summarizing the contents of committee minutes and faculty statements. The forms and procedures here listed were developed over the years by the Faculties themselves and given coherence and fixity by the decisions of the Joint Committee on Graduate Instruction. They apply also to the professional schools in which the Ph.D. degree is offered. The customs indicated, such as rising, notifying the candidate in subjects in one’s office, but bringing back the dissertation candidate, are of course no compulsory but they will be found pleasant and convenient to observe…

I
The Conduct of Oral Examinations

THE CERTIFYING EXAMINATION OR ORALS IN SUBJECTS

In departments where oral examinations are required, a student applies for his orals in subjects to his department. When the request has been approved, the department appoints a committee of not fewer than five members, one of whom is designated as chairman, to examine the candidate on specified subjects or fields. (In the Faculty of Political Science, at least one member of the committee must belong to a department other than the candidate’s; in other faculties, members of outside departments are called on when it is appropriate to do so.) The examination is held preferably in an examination or seminar room, not in an office or classroom, and its duration may be two or two and a half hours, depending on department practice.

The examination chairman is responsible for the conduct of the examination. He calls upon the committee members to ask questions and regulates the length of time that each examiner may occupy. All persons present are deemed members of the committee, whether members of the department or not, and must be given an opportunity to ask questions. The chairman has the right to disallow any question that seems to him irrelevant or improper.

At some convenient point during the examination — e.g., between the major and the minor when that division applies — the candidate is given an opportunity to leave the room for two or three minutes. He is not required to do so and may prefer to forge ahead to the end. At the close of the examination, the candidate is asked to wait in or near his sponsor’s office, the examiners rising as he leaves the room. The chairman then asks for opinions on the examination. Every person present may vote on the issue of Pass or Fail, a majority vote being sufficient.

If passing, the committee must next assign a grade or comment which is entered on the student’s record. Excellent. Very Good, Good, Fair are the commonest terms in use. Poor is not considered passing. In some departments, failure on the examination as a whole is final, unless the committee, of its own motion, recommends to the department a reexamination at some specified time in the future; in others a second examination is normally permitted. There is precedent for giving this second examination in written form if the committee decides that the oral method would permanently prevent the candidate from displaying his knowledge. The committee may also require reexamination, either written or oral, in some part or parts, suspending judgment on the examination as a whole until the deficiency is removed.

Only in the most unusual circumstances should an examination be terminated as a failure before it has run its normal course. This and several of the other cautions enumerated here arise from the experience of many years, during which a number of embarrassments — threatened lawsuits and the like — have been created by contentious students who took advantage of laxness or informality in the conduct of their examinations. Needless to say, it is the student who fails who has recourse to this attempted vindication, but it can be troublesome to the department and expensive for the University.

 

THE FINAL EXAMINATION OR DEFENSE OF THE DISSERTATION

At the final examination, the dissertation is defended by the student with respect to its sources, interpretations, and conclusions. The candidate is expected to show familiarity with the bibliography of his subject and the knowledge relating to the thesis he puts forward.

The committee to examine on the dissertation is not a departmental but a faculty committee. For the Ph.D. degree the Dean of the Graduate Faculties appoints a committee after nominations have been sent him by the department. The committee should consist of at least five members and should not exceed nine or ten. At least two members should come from University departments other than the candidate’s. The reason for the limit on size is that a larger number than ten can scarcely examine to any purpose within a span of two hours, and it is unfair to ask a faculty member to read and annotate a book, listen to his colleagues criticize it, and deny him the right to do the same.

For this reason also, the chairman of the committee must be strict about allotting time. If the candidate is asked to begin by summarizing his preparation and his results, this must be kept within reasonable limits.

Points made by examiners will naturally divide into substantial and editorial. Unless it is necessary to show that a very badly written dissertation must be entirely rewritten, the editorial comments ought not be taken up one by one. The sheet of notes on these matters is handed by the reader to the candidate, leaving examining tie for matters of substance.

When all examiners have finished their questioning, the candidate is asked to step outside and wait for a signal to return. During the discussion period, the question at issue is, first, Pass or Fail; then, if passing is approved, is it with minor or major revisions (known as Column 1 and Column 2 respectively)? A majority vote is required for all decisions on the final examination. But if any two examiners vote not to pass the dissertation (Column 3), it may only be accepted with major revisions, i.e., in Column 2. The committee may also, by unanimous vote, designate an exceptionally meritorious dissertation as “distinguished,” an honor which is place on the candidate’s permanent record.

When passed with minor revisions, the dissertation is corrected by the candidate in the light of the comments made upon it, and his revision is supervised by his sponsor. For major revisions, the chairman of the examination committee appoints a revision committee of three, whose names must be entered upon the reporting sheet. When the student has finished the major revisions, they must be submitted to each of the three members of the revision committee and each must state in writing that the new text is satisfactory. The three letters are sent to the Dean of the Graduate Faculties to be attached to the reporting sheet and thus settle the suspending passing. In the Faculty of Philosophy, such a dissertation may not be deposited until three months after the defense, and not during the summer months.

No candidate may have a second final examination unless the Dean considers, upon evidence put before him, that the first one was maladministered. Under special circumstances, however, the examining committee may by unanimous vote recommend that the Dean, after consultation with the chairman of the department, permit the candidate to submit and defend a totally new dissertation.

Since some students misconstrue encouragement and civilities, and blind themselves to the meaning of the phrase “certified for examination,” it is important for sponsors to make clear at all stages two fundamental features of the final examination procedure:

  1. Certification of the dissertation for examination in no way guarantees that it will be passed, nor does this certification commit the vote of any member of the examining committee.
  2. Certification does not deprive examiners of the right to press questions and criticisms during the examination.

Special dispensation for irregular modes of examination is not unknown but the precedents cannot be construed as a right. Upon formal recommendation of the department, the Dean may approve, on evidence put before him, such irregular procedures as have occurred in the past: defense in absentia (the candidate was in Asia and kept from attending by more than one circumstance); posthumous defense (the candidate’s sponsor recorded and embodied the committee’s suggestions); defense per alium (the candidate, in military service abroad, was represented by a scientific collaborator.

 

Source: Columbia University Libraries, Manuscript Collections. Columbia University, Department of Economics Collection. Carl Shoup Materials, Box 10, Folder “Columbia University—General”. Printed Pamphlet: The Graduate Faculties, Columbia University, 1967. The Conduct of Oral and Final Examinations [etc.], pp. 1-5.

Categories
Chicago Economists Methodology

USDA Graduate School. Frank Knight Lecture on Economics Methodology, 1930

 

In an obscure publication of a series of special lectures at the United States Department of Agriculture held in 1930, I found the following interesting methodological reflections of Frank Knight that are reproduced below. An earlier post provided E.B. Wilson’s thoughts on the application of scientific methods in economics (see link below) which more or less staked out precisely the opposite position to Knight. 

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UNITED STATES DEPARTMENT OF AGRICULTURE
GRADUATE SCHOOL
SPECIAL LECTURES ON ECONOMICS
DELIVERED BEFORE THE GRADUATE SCHOOL
FEBRUARY – MARCH 1930

 

Contents: The following lectures were delivered before the students of the Graduate School in February and March 1930, and are issued in this form for present and former students of the school.

Scientific Method in Economic Research
by Dr. E. B. Wilson, President, Social Science Research Council.

Evaluating Institutions as a Factor in Economic Change
by Prof. John R. Commons, University of Wisconsin.

Analytical Methods in Agricultural Economics Research
by Dr. John D. Black, Harvard University.

Fact and Interpretation in Economics
by Dr. F. H. Knight, University of Chicago.

[…]

FACT AND INTERPRETATION IN ECONOMICS

By Dr. F. H. Knight, University of Chicago.

My task on this occasion is one to be approached with misgivings, and I do approach it with doubts. I do not see clearly and surely in the field of economic methodology, and the airing of doubts, or viewing with alarm is likely to be thought an ungracious performance. Nobody loves a bear! But after all doubts have their place. We do not get where we want to be by driving with enthusiasm and power and speed in the wrong direction. And I do feel strongly that some present trends in economic activity carry more than a threat of wasted energy. If the effort to solve a problem is to be fruitful it must be put forth in the light of a correct conception of the nature of the problem itself, and there can be no real gain from conceiving a problem more simply than it realty is, and thus make the solution appear easier.

My reference is of course to the current enthusiasm for making the study of economics “scientific,” meaning factual, concrete and quantitative, or specifically, statistical. I have to raise questions and suggest doubts as to whether the proper content of this study, or “science” can really be facts, whether it can really be a “science” if we use the term in the sense it carries in speaking of the natural sciences. As the subject announced is intended to suggest, I must argue that Economics deals rather, primarily, with meanings with what facts mean rather than facts themselves. Consequently, while of course we have to consider facts and be careful to get them “right” we have to approach them, and look at their rightness and wrongness in very different terms from those proper to the natural scientist; for the economist or other social scientist, in this view, facts are preliminary, not the real subject matter of the study. The main theme of these remarks will then be the contrast in character and method between the natural sciences and those which deal with man in society, with particular reference, of course, to economics.

At the outset, however, I want further to say that I understand the feelings of those who want to make economics an objective and quantitative science, and sympathize with them deeply. The “backwardness” of the studies dealing with man, in comparison with those dealing with nature, is superficially an obtrusive fact, and one which seems superficially to point its own moral. In the face of the contrast between the solid achievements of the natural sciences in the past few centuries, and the relative lack of advance in the understanding or control of social relations since the Ancient Greeks, it is natural to conclude that the way to reform the social sciences would be to imitate those which appear so much more successful in their task. And in particular, it is natural to hit upon the theory that the social sciences have “remained” in the “speculative” stage, while the natural sciences have taken to careful detailed observation, measurement and experimentation. In the face of this situation, to repeat the thought in more vernacular terms, it is most natural to develop a certain impatience, to insist on getting out of the stage of speculating and arguing what to do, and do something, and to put content into this by making it mean to get the facts, bring them into relation with each other and see how they may be used for prediction and control, as the physical sciences have been so successful in doing.

However, a little examination will show that the case is not so simple as that. To begin with, we have long had natural sciences of man and they tell us nothing about social events. The physics, chemistry, biology, physiology and pathology of the human organism are extensively studied and well developed and beyond a few broad and obvious statements, mostly negative, they do not reveal anything about the course of history, or make possible the prediction and control of social movements. We know that human beings will always eat, and that if they live in certain climatic zones they will have some protection from the elements. Perhaps we may add speech and recreation as biological traits. But such general information is of no concrete use to the economist, for example. To be useful to him it must go so much farther, into so much greater detail, as to what people will eat, wear, etc., and how much, and how, that the problems become different in kind as well as degree. As soon as we try to make general statements in this field, we find that any general import they have runs in terms of something quite other than the facts observed by the senses. The uniformity, as suggested already, is in the meanings, not in the concrete content of behavior. Even in the matter of food, it is men’s knowledge or beliefs about what is desirable or “fit” to eat rather than that actual physical qualities of materials which are decisive.

The best illustration in principle is in the field of communication. The sounds and characters are physical facts, but there is practically no discoverable relation between these and what they are used to convey. If we know anything for sure, we can say we know there is no connection between language differences and either physical differences in the peoples or the content of thought or emotion they wish to communicate. It appears that any person could equally well learn any language and, that with slight reservations, not important in this connection, any language can equally well express any content that is expressible.

The function of the natural sciences is to describe the properties and “behavior” of things as they appear to our senses, that is, physical things and materials in space, and behavior which reduces to rearrangement of matter in space. The essence of it is the descriptive point of view. It tells what happens, not why anything happens. From the “pure” science point of view itself (separated from practical significance) it enables us to understand the complex manifold of events in the outer world by reducing them to a manageable number of elemental general principles, especially and perhaps at last entirely, those of mechanics. It does this by finding “uniformities” or “repetitions” in events, by showing that under similar conditions similar consequences follow. Thus Newton showed that the movements of the heavenly bodies exemplify the same phenomenon of “falling” that is familiar for objects near the earth’s surface; and Darwin showed that the production of the infinite variety of plant and animal forms might be viewed as a working out of the same principle as the production of new varieties through selective breeding by the gardener or fancier.

Back of this function of science of enabling us to understand things, of explaining and so satisfying our intellectual cravings, is, as we all know, the practical function or functions, of making possible prediction and control. The fundamental point here, which seems to be overlooked in proposing to make the social sciences “scientific” is that the natural sciences themselves are based on the assumption of a sharp antithesis between man and nature. Man is the controller, nature the to-be-controlled. In fact, quite aside from this practical relationship between user and used, workman and tool, the same insuperable opposition really holds in the mere logical relationship between knower and known, or understander and thing, or matter understood. But it is clearest in the practical view. All our notions of prediction and control, by man over nature, through science are bound up in a conception of nature as passive, over against ourselves as possessed of mind, will and initiative. It is never trying to control man. More specifically, we view nature as an aggregate of things and materials in space, purposeless and inert in themselves, completely amenable to “control” from without in the particular sense of being movable from one place to another, which movement may liberate potential energy stored up in them, or modify the process of storing up or releasing such energy in some way.

When we examine the notion of prediction we find that it reduces either to the fact of “inertia,” the property of things by which they stay where they are or keep on moving as they are moving at any time, unless “acted upon” in the sense of having motion (or some new motion) imparted to them from without, or to the release of potential energy. The notion of control is always relative to movement because the only way in which human beings can act upon the external world or produce any change in it is through our voluntary muscles, which can directly produce only the, change of moving some bit of matter from one point in space to another. All changes which man produces and which constitute his “control” over nature are the results in nature of such movements of matter if they go beyond the immediate fact of motion itself. Most of our knowledge of nature, the content of the sciences, which gives variety and significance to our control activities, consists of facts regarding the processes (always the same under the same conditions) according to which energy is stored up in or released from natural materials in connection with their spatial relationships. The amount of energy communicated to natural objects by our muscles directly is generally negligible, though such a movement as striking a match may start energy changes which will explode a magazine or burn up a city.

The point here is merely that science itself depends on the assumption that just as things do not move or change their state of motion of themselves, they do not change their behavior in storing up or releasing energy of themselves, but do change as to these processes in uniform ways in response to outside acts of the form of moving them about in space in relation to each other. These uniformities are physical. A natural process, for instance, may be set off by a sound. It is said that avalanches have been started by sound waves. But in nature, the same sound will always produce the same effect. Sounds, and other causes, act as what they physically are, and not as symbols or bearers of meaning. Let us consider the contrast between this situation and that presented by the problem of applying scientific method in the field of the study of man.

In the first place, we must again note, human beings are undoubtedly natural objects, things in space, and as such they seem to be subject to all the laws and principles which science finds to hold for other objects under the same conditions. The same principles of physics and chemistry and physiology apply in the human body as elsewhere, as far as the most careful measurement reveals. But in addition some other principles seem to apply which do not hold good elsewhere. Men are more than mechanical objects which release energy in uniform ways in response to external movements of matter. They initiate changes, out of all discoverable uniformity of relation to external changes of any kind; and when they do respond to external changes, the nature of the response has relatively little uniform relation to the physical nature of the stimulus but is chiefly a matter of what we call the meaning of the stimulus-event which puts the whole occurrence, as the philosophers say, in a different universe of discourse. These meanings and the responses to them depend on the history, which is a thing made up of meanings, of social groups and the particular life-history of the individual in the group; and they are very largely free from “dependence” on anything which research has yet disclosed. As far as can be judged in the present state of knowledge (in the speaker’s opinion) the problem of understanding and explaining these phenomena must be approached in a quite different way from that of understanding and explaining physical nature. (In the scientific sense I mean; ultimately, philosophically, the problem of explaining nature is itself likely very different from that of science, for as already noted science does not pretend to give any answer to any question of why things are as they are.)

The root of the difficulty in regard to explaining and controlling human beings is the fact that the explainers and controllers are likewise human beings. It is impossible to regard human beings as of one kind when understanding and exercising control and of another and totally different kind when being understood and controlled and yet the two roles call for different characteristics. I shall return to this point presently. For the moment I wish to go a little more into detail about the “more,” in the statement that man is more than an object in space behaving in relation to other objects in accordance with universal mechanical principles.

It is possible to look at a human being in several strongly contrasting ways, and describe him in different sets of terms. We may look at him, for example, in psychological terms, and “explain” his acts by relating them to mental states. Many changes can be wrung on this theme. The philosopher Hegel gave a logical or dialectical interpretation of history, and the British psychologists of the early nineteenth century explained human nature in terms of association of ideas.

Another possible approach is in terms of “institutions,” a term which is being much used in economics these days, and very loosely used, and largely misused. An institution in the proper sense is a phenomenon of the nature of the language. It is neither a mechanical response to a physical stimulus nor a deliberately contrived procedure for achieving an end. Language is of course a tool, it is seen to be one after it has developed, but no one ever contrived it (in so far as it is a pure type of institution). It is believed by students of the subject that language actually developed primarily as a vehicle of emotional expression and acquired its more utilitarian functions secondarily. In any case, the methodological point is that the student of language treats it as an entity on its own account, indeed without very express reference to human beings or their interests and acts. It seems to have its own laws of relationship and of change, much like an organic species. It is a figure of speech, but a descriptive one, to call the human group the soil in which a language, or other institution, grows. Just as the plant one gets depends on the seed sown and not to any great extent on the soil, so it seems that institutions grow and change without much reference to the human beings who carry them on — though sensitive to contact with other related institutions with which they may hybridize, again much like plants.

There is much justification for an “institutional” approach to what we call economic phenomena. If we look at the facts of wealth and the processes of its production, distribution and consumption, and ask “why” these things are as they are, it is a very defensible answer to hold that they are customs which have grown up, much in the way in which a language grows, and to be “explained” only by giving the details of the history of that growth. Such an interpretation should, it seems clear to me, be kept very distinct from the “statistical” approach to the same problem. Economic statistics stand as a method at the opposite pole from institutional history. There is little or no distinctly human content of any kind in them. They relate almost entirely to commodities as such, and to external means of economic life rather than that life itself.

It is to be noted that the traditional or orthodox economic thought, in the British utilitarian line, is very different from both of these; in fact institutionalism and business statistics represent reactions in opposite directions from the utility-and-cost, supply-and-demand economics. The conception of human nature involved in the latter is interesting and needs to be clearly understood. Man is not looked on as a physical behavior mechanism, or a psychological being, or as the bearer of institutions, but as a being who has wants and limited means for satisfying them, and who is confronted with the problem of making the means go as far as possible. The means and ends of action are data, the procedure itself problematical. This standpoint will be clearer if it is contrasted, on the one hand, with a mechanical view of human nature, in which the response is completely determined by the conditions and hence is not in any sense problematic, and, on the other hand, with a view (or with a type of situation) in which action is conceived in terms of means and end but the end is also conceived of as problematical. As I myself see the matter the view of “unsophisticated common-sense” is in the main that of the classical economics. We assume that people in general know what they want, and are confronted with the problem of getting it, in the maximum degree, with the limited means at hand, which problem they “solve” more or less completely, through intelligence or luck. The problem itself, the ends to be realized and the means and conditions are given in the person and his situation, but his activity in “solving” it is peculiar in that it involves effort and in general a greater or smaller margin of error, these being absent from mechanical reactions.

When we look critically at human behavior, it seems to me that we are forced to recognize that the ends of action are problematic in about as great a degree as the means. Life seems to be an exploration as much as it is a quest in which we know what we are trying to find. This conception might be designated by speaking of the ethical man, in contrast with the economic man and the mechanical or behavioristic man, a variation of which would be the institutional man.

The difficulty is that all these views, and still others which I cannot here even list, have some degree of validity, and yet it is most difficult to make them seem consistent with each other. The philosopher Kant gave effective statement to a part of the problem, the conflict between the mechanical and ethical view of human nature, in his famous statement that man is at once subject to universal causality and a self-legislating member of a kingdom of ends. As I see the “facts” – which are facts in the sense that everyone treats them as such when he is not expressly trying to prove some theory – the situation is much more complicated, and hence much “worse” from the standpoint of our intellectual cravings and practical needs for simplicity. We seem to have to reconcile ourselves to the fact that man is at once not merely two but a great many different kinds of being, kinds which seem logically contradictory. He is different kinds under different circumstances, or capriciously or accidentally, and he is even several kinds in the same situation. He is a cause-and-effect mechanism and a bearer of culture or “soil” in which institutions grow according to their own laws of growth, a being of irrational judgments and a being who deliberates and decides intelligently (more or less!) and this both regarding procedures for reaching ends which he accepts unconsciously and also about ends to be chosen and pursued. For anything like completeness we should have to add still other items to the list, such as that he is commonly and in all sorts of degrees a dreamer and mystic and even an intrinsically “contrary” being and often takes a perverse delight in being thwarted and punished and in having grievances against the world and all and sundry in it.

It is indeed a formidable if not forbidding task to theorize about such a creature or formulate generalizations in terms of which his actions can be predicted and controlled. But it is hardly in conformity with the scientific attitude to insist on false simplification or refuse to face the facts because they present difficulties. The contrast between the problem of prediction and control in the case of a mechanism and in the case of human beings may be seen in a number of kinds of simple illustrative cases. In the first place, the entire theory of science depends, as noted above, on the repetitiveness of events and uniformity of relationships; the same effects follow the same causes. But in the mere external facts of the case this is not true of human beings. Physically, chemically and physiologically they are alike, enough to infer from one case to another, within limits, though it must be remarked that even in this field the science of medicine is seriously embarrassed by unaccountable differences in the reaction of different cases to the same treatment. Moreover, the doctor, if candid and shrewd, relies perhaps as much on psychological treatment wisely varied to fit the case as he does on drugs and physical therapeutic agents. On the plane of social behavior, however, even this minimum of uniformity seems conspicuously absent. Experiment with one human being simply does not tell how another will respond to the same experiment, as nearly identical as it is possible to make the repetition.

And worse, it is in the very nature of the creatures that the same one will not ordinarily respond in at all the same way if an experiment is repeated. Let anyone try the simplest experiment, such as telling another a story or sticking him with a pin or offering him a present of a five dollar bill, and then repeat the “stimulus.” It is, as just stated, the very nature of a human being not to be at all the same person with reference to a repeated situation as to its first occurrence. A gun or a trap which has been discharged or sprung is, when reloaded or reset, the same as before, but you cannot restore a person to the original condition, even to the degree within which it is possible to find another like him. People are different from mechanical objects in that they have a history. In part this difficulty may be avoided by taking them in groups, but groups also are always unlike and each group has a history. None of us is like his forefathers, even in the tenuous sense in which he is like his contemporaries. Our “situations” are very different, and our responses are different even where the situations appear similar.

This does not mean that the case is hopeless, that there is no place for intelligence in human relationships, or even that it is impossible to effect improvement through diligent observation and study. Our everyday experience proves the contrary. With all our bewilderment, we do have a fair knowledge of what to expect of our fellow-beings in ordinary situations and of how to treat them to secure cooperation and orderly living. It is a question of method. We do not acquire our common-sense knowledge of how to get along with our fellows in the same way as our common-sense knowledge of how to respond to and use natural objects, and it is reasonable to suppose that in the one case as in the other improvement will be secured by refinement along the general line of common-sense procedure. The essential fact in understanding our fellow human beings is primarily that we communicate with them. Thus in a sense we get inside of them instead of merely observing them from without. Of course our communication is based upon external observation, but the essential difference remains.

It is impossible to elaborate upon this difference here, and it should not be necessary. The heart of it is the contrast between a more direct instinctive but unformulated knowledge, based on familiarity on the one hand, and, on the other, reduction to rule in terms of physical units. A good illustration is the learning of a language. We can and do, without great difficulty, learn the meanings of sounds and characters and recognize them with fair accuracy and with little effort. But to base such knowledge on physically measured specifications as to the precise wave-forms or shapes would be quite out of the question practically, though a certain amount of such study may be interesting afterwards. The principle holds throughout the field of human phenomena and relationships. We describe people and works of art and literature and other products with a fair degree of intelligibility, and recognize them by their traits, though we could not make a beginning at putting this knowledge in accurate, scientific, physical terms. (Of course the artist who wishes to simulate effects in a physical medium does have to know in a sense how the lines and colors go, but his knowledge is also an immediate feel of how to do the thing and nearly as far remote from the ideal of mechanical “directions” as is the interpretative recognition of the layman.

My concrete suggestion is that if economics and the social sciences want to make more rapid progress they must give up the visionary ideal of building a society from blueprints and dimensions as we build a house and quit trying to imitate engineering and the sciences upon which it is based and turn rather to the study of their own data and. the processes by which we do come to have some intelligence in relation to these data on the level where progress, has already been achieved. That is, we should learn from “art” in the broad sense, and from the way in which the arts are learned and taught rather than from physical science and engineering technique.

It is to be admitted that in an important sense this is less satisfying. Our minds to crave the definite rule, the fool-proof formula. But it is a question of facing facts, and the actual character of the problem. It will never be as simple and definite a matter to improve the grammar or the morals of a social group as it is to build a bridge or compound a chemical. But we shall not make the task easier by insisting on applying methods which would admittedly be more satisfactory if they could be applied but which simply will not work because it is not that kind of a problem.

In conclusion I wish briefly to call especial attention to two sets of facts. The first is that in controlling human beings the “techniques” employed include such things as teaching, persuading, exhorting, or finally deception and coercion (which may presumably be practiced for “good” as well as “bad” ends). The point is that such concepts hove no meaning in connection with the procedure for controlling physical objects. When these procedures are sometimes applied to the higher animals it is evident that we are treating them like human beings rather than like mechanisms.

The second fact, or set of facts, is closely related to the first, but of even wider significance. It is that as words like persuade and still more deceit and coercion imply, the moral implications of the control of human beings are decidedly dubious. There is not time to develop either of these points as they deserve. But in a society as expressly and vociferously grounded on the ideal of freedom as ours is, it should not be necessary to elaborate this second one at great length. I am astounded at the facility with which discussions on “controlling” society and individuals pass over the essential questions of who is to do the controlling and how society is to control its controllers. In the economic field specifically I wish personally to register hearty agreement with whoever it was who made the suggestion that we ought to be subsidizing schools of resisting salesmanship instead of schools of salesmanship. And similarly in the political field. It is questionable much of the time whether our so-called criminals are either less ethical or less defiant of the actual law and constitution than are the officials supposed to safeguard the one by enforcing the other. It does not seem to me very intelligent to get all excited over developing techniques for “control” without having some advance information as to who is to use them and “on” whom they are to be used. Particularly since in view of the type of people who do get into power in democracies it seems fairly certain that the scientist himself will generally be in the group the techniques are used “on” and not the group they will be used “by”.

Irresistibly we are thrown back on the general philosophical problem already suggested but too large and too technical to go into here, the relation between controller and controlled, and between student and subject-matter. In the natural sciences it is taken for granted that these are wholly separate and directly opposed. It is “man” who studies and uses “nature!” It is a pernicious fallacy to carry over this type of thinking into the field where the student and subject-matter are of the same kind, and still more where they are identified. If the one-sided relationship is not preserved, we find ourselves committed to such absurdities as that when the scientist is experimenting with a piece of apparatus it is also in the same sense experimenting with him. The whole problem of control in society must be thought through in different terms. In any society which has aims and ideals, in any society which is not owned outright by an absolutely ruthless despot, “control” is a matter of mutual relationships, not of the one-sided character referred to by terms like control. Its members are controllers of nature and to be made in the highest degree controllers of themselves, not tools or pawns for some ruler.

The real problem of social control is the problem of securing agreement as to policy and as to the functions of individuals in promoting it where policy has to be social, and of securing the minimum of interference (“control”) for each individual in the field of what are properly his private affairs. At no important point is this problem at all similar to that confronting an engineer or any real controller. Such “control” as is legitimate in society must be “with the consent of the controlled” which makes it a categorically different phenomenon. The only exceptions admissible are the cases of individuals proven incompetent to participate in “free” society, and even those are still to be treated as far as possible as ends in themselves or ultimately perhaps as “enemies,” but in any case, never (in the modern civilized world), as means and instruments to the purposes of others, which is the position taken for granted with regard to natural objects when we talk in the scientific sense of knowledge, prediction and control.

 

Source: United States Department of Agriculture Graduate School. Special Lectures on Economics. Washington, D.C.: 1930. Pages 37- 45.

University of Chicago Photographic Archive, apf1-03516Image Source: , Special Collections Research Center, University of Chicago Library.

Categories
Chicago Exam Questions

Chicago. Graduate Price Theory Preliminary Examination, 1964

 

Something inside of me continues to hope for this growing collection of historical economics examinations to attract comments that provide answers to the questions. But at least for now, I am at least adding to the digital historical record of economics education exam by exam and syllabus by syllabus.

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CORE EXAMINATION
Price Theory
Winter, 1964

Preliminary Examination for the Ph.D. and A. M. Degrees

WRITE THE FOLLOWING INFORMATION ON YOUR EXAMINATION PAPER:

Your Code Number and NOT your name
Name of Examination
Date of Examination

Results of the examination will be sent to you by letter.

Answer all questions. Time: 3 hours

 

  1. [45 points] Indicate whether each of the following statements is true or false and explain briefly why.
T F 1. An “inferior” good is one for which the marginal utility is negative.
T F 2. The short-run marginal cost curves cross the long-run marginal cost curve from below (proceeding from left to right) at the quantities corresponding to the points of tangency of their respective average curves.
T F 3. For a homogeneous production function of degree one, and, for given relative factor prices but varying output, both of the following are true:
a. The ratios of the quantities of the various inputs are constant at all levels of outputs.
b. The average productivities for each factor are constant at all levels of output.
T F 4. Suppose you have the following budget data for two periods for a consistent consumer (i.e., a consumer who, in those situations where the same two commodity bundles are within his budget and he chooses one of them, will never choose the other one): prices of all goods in only the first period pi1 for i = 1, 2, …, n) and quantities purchased of all goods (qi1 and qi2 for i=1, 2, …, n).
Then it is true that implies that the consumer is “better off” in the first period than in the second.
T F 5. Consider an individual’s demand functions for two goods, xk and xj. Then the cross elasticity of demand for xk with respect to pik is equal to the cross elasticity of demand for xj with respect to pk when only the substitution terms are considered.
T F 6. “The more the merrier” is a denial of the law of diminishing marginal utility.
T F 7. “The increment of product resulting from adding one more worker to a firm should not be attributed exclusively to labor because it results partly from the more intensive working of the other productive factors.”
T F 8. A tax of 20 per cent on all wages and salaries will decrease the supply of labor by more than a tax of 20 per cent on overtime pay alone.
T F 9. Carpenters would not receive a wage equal to the value of their marginal product if they were a “specific factor of production” in the industry using their services.
T F 10. The demand function for labor on the part of a competitive industry can in some cases be more elastic in the neighborhood of a given point if the quantities of other factors are taken as given than if the prices of other factors are taken as given.

[Note: Question II neatly ripped off from this copy, presumably deleted from the examination]

  1. [15 points] A substitute for a product is invented. What, if anything, can you say about the effect of this invention on (a) the position; (b) the elasticity of the demand curve for the initial product? (To fix ideas, one example is the effect of the invention of electric shavers on the demand for safety razors; another, and perhaps more widely quoted example, is the effect of the introduction of financial intermediaries on the demand for money.)
  2. [15 points] We frequently hear it said that labor is cheap and capital dear in a country like the U.S. Such statements seem reasonable, yet it is not clear how one can compare the price of labor (rupees or dollars per hour) with the price of capital (percent per year). Can you suggest a way to interpret the statements so that they make sense?
  3. [30 points] In the 1880’s there were a class of independent railroad ticket brokers called “scalpers,” who purchased tickets in quantity at reduced prices from the railroads and resold them to the public, typically at prices below the prices posted by the railroads and charged to people who bought tickets at the railroad windows.
    In discussing the practice in its 1890 report, the Interstate Commerce Commission argues that (a) it raised the cost of transportation because it made it necessary, “to support the auxiliary force of scalpers,” and (b) also reflected “the avidity of nearly every railroad to do a greater amount of passenger business than any competitor.”
    Is (a) correct? Is it consistent with (b)?
  4. [30 points] President Johnson has recently sent to Congress a bill that would require certain industries to pay double the standard wage-rate for overtime. Assuming competitive conditions, what can you say about the effect on (a) prices of products (b) output (c) number of man hours, (d) number of persons employed in (1) the industries affected and (2) other industries?
  5. [30 points] Currently, the number of taxicabs permitted to operate in the city of Chicago is limited by licensure, no new licenses are being issued, and existing licenses which can be transferred sell for substantial sums. In addition, the price which taxicabs charge is fixed by the city. (A) Suppose restrictions on licensure were lifted but prices continued to be fixed at present levels. What would be the effect on (a) number of cabs, (b) incomes of non-driving owners of cabs, (c) wages of non-owning (i.e., hired) cab drivers?
    (B) Suppose the price restrictions were lifted, so cabs could charge whatever they wanted. What would you expect to happen to prices for taxicab rides, both with respect to level and structure?

 

Source: University of Chicago Archives. George Stigler Papers. Addenda, Box 33, folder “Exams and Prelim Questions”.

Image Source:University of Chicago Photographic Archive, apf4-01703 1923 photo of the University of Chicago band’s bass drum (over 8 feet in diameter). , Special Collections Research Center, University of Chicago Library.

Categories
Economists M.I.T.

MIT. Three Kindleberger quips à la Solow, 1990

 

In an earlier post we encountered a second-order quote from the Columbia economic historian Vladimir G. Simkhovitch–Frank Fisher quoting Charles Kindleberger quoting Simkhovitch. Today we have some first-order hearsay of Charles Kindleberger from witness Robert M. Solow, his MIT colleague. Kindleberger wit with a Solow twist!  In the court of history hearsay evidence is of course admissible after being critically received. On behalf of former, present, and future graduate students of the world, I call the reader’s attention to the second of the three Kindlebergian remarks. 

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TRAVELS WITH CHARLIE

That was actually the name of a book that John Steinbeck wrote, all about driving around the country with his dog. The P in CPK does not stand for Poodle. But I like the title, and so will Charlie. I just want to rummage around in my memory.

There should be some permanent record of the time that Charlie and I were part of a panel discussion before an audience. Some question about exchange rates came up, and I spoke my piece. I must have said something wrong, because Charlie broke in to say: “The audience should keep in mind that MIT does not pay Professor Solow to think about international economics.” Bad dog!

Here is another unforgettable shaft. I can not remember the occasion; I think that some of our graduate students were expressing discontent with their lot and suggesting improvements. Charlie summed up the situation by pointing out that fundamentally a graduate student was someone with a boy’s income and a man’s appetite. Of course they felt better immediately. (By the way, the gender-specificness of that remark was just the empirical truth of the time.)

Finally I want to preserve a conversation that took place about 10 years ago when the Kindlebergers, the Samuelsons, the Solows, and Ingo and Barbara Vogelsang were dinner guests of the McFaddens. German economists were mentioned and Ingo Vogelsang asked if anyone remembered George Halm. Ingo thought that must now be very old. Oh no, said Charlie, mature maybe but certainly not what you would describe as old. You’re right, said Paul. What’s old about 80? It seemed funnier to me then than it does now. Now it’s just a home truth: what’s so old about 80? Not a thing, not if you have been, as Charlie has been, devoted to his colleagues and his students, and full of ideas, always full of ideas.

Robert M. Solow

 

Source: Letter from Robert M. Solow included in Reminiscences of Charles P. Kindleberger on his Eightieth Birthday, October 12, 1990 in the Charles P. Kindleberger Papers, Box 24, MIT Libraries, Institute Archives and Special Collections.

Image Source: Charles Kindleberger in MIT Technique, 1950.

 

Categories
Economists Harvard Kansas

Harvard. Economics Ph.D. Alumnus, John Christopher Ise, 1914

 

The Ph.D. alumni of a department typically provide their alma mater with talent-spotting services for future graduate students. The University of Kansas professor (and Harvard economics Ph.D., 1914) John C. Ise spotted Edward S. Mason, Lloyd A. Metzler (cf. the ERVM post of the Metzler memorial service) and  John Lintner and sent them to Harvard for graduate school in economics. Quite the rate of return!

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John Christopher Ise
1996 Inductee of the Osborne County Hall of Fame

One of the foremost Kansas educators of the twentieth century was born June 5, 1885, in western Ross Township of Osborne County. Named after his maternal grandfather, John Christopher Ise was the seventh of twelve children born to Henry and Rosena (Haag) Ise on the homestead Henry had claimed in June 1871. As an infant John was stricken with polio, which caused his right leg to become withered and nearly useless. His parents decided early that his best chance at success in life was for him to become a scholar.

John attended the nearby one-room Ise School and learned to play the guitar and the violin. With the latter he occasionally gave recitals in the area. In 1902 he taught a term at the Prairie Bell School in Bethany Township, receiving thirty dollars a month in pay. Later he also taught at the Rose Valley School in Ross Township. In 1903 his damaged leg was amputated and he was fitted with an artificial one, after which he could walk almost normally.

Ise entered the University of Kansas (KU) and graduated with a degree in music in 1908. He followed this with Bachelor of Arts and Bachelor of Law degrees. In 1911 he was admitted to the Kansas bar. The next year he received his master’s degree from Harvard University, where in 1914 John also became a Doctor of Philosophy. He was an assistant professor of economics at Harvard and Iowa State College before joining the faculty at the University of Kansas in 1916. He became a full professor there in 1920.

Dr. Ise’s interest in natural resources economics made him internationally known and internationally debated. “As crusty as the Kansas sod, Ise had the self-imposed mission of shocking both students and the public from their intellectual lethargy,” wrote Clifford Griffin in his The University of Kansas: A History (1983). Then-radical ideas such as conserving national oil reserves against future shortages and restricting drilling and mining in national parks and other federal lands caused Ise to be branded a Communist by some. But as time went on his ideas and writings earned him lasting respect both as a resource conservationist and a prophet of the energy crisis of the 1970s.

On August 4, 1921, John married Lillie Bernhard in Lawrence, Kansas. They had two sons, John Jr. and Charles. John was an independent in politics and a charter member of the League for Independent Political Action. He also served as president of the American Economics Association, the Mid-West Economic Association and on the editorial board of the American Economic Review. He was given life membership in the Kansas Illustriana Society in 1933 and later was named to Who’s Who in America.

John was a member of several local organizations in the Lawrence area. He and his wife gave $25,000 in 1955 to the Lawrence Humane Society for an animal shelter in memory of their son Charles, who had died in a plane crash, and spent much more time with this cause. Dr. Ise’s efforts in this area were recognized in 1968 by the American Humane Association.

John’s eight books ranged in subject matter from a comprehensive test on economics to a collection of humorous comments on current condition, interspersed with the classic story of his pioneer family in Osborne County. The United States Forest Policy (1920), The United States Oil Policy (1926), and Our National Park Policy: A Critical History (1961) all reflected his economic views on the nation’s natural resources. The Organization of Petroleum Exporting Countries, better known as OPEC, was formed in 1961 based on Ise’s conclusions in his Oil Policy book. Economics (1940) was a classroom textbook by Ise that was used at KU and several other colleges and universities from 1940 to 1965. Sod and Stubble (1936), a look at his parents’ life on the Kansas prairie in nineteenth century Osborne County, is still in print over 75 years after its initial publication. Ise also edited Howard Ruede’s critically-acclaimed Sod-House Days: Letters from a Kansas Homesteader (1937). These latter two books are considered to be the finest literature ever written about homesteading life on the Great Plains of North America, and have made Osborne County a focal point for scholarly study of the region. Ise’s final book, The American Way, was actually a present to him by his colleagues at KU upon his retirement in 1955 and is a collection of his finest speeches and letters.

Ise kept in touch with his boyhood home in Downs, whether giving the commencement address at the high school graduation or just visiting old friends. It was also customary for him to hold in Lawrence a yearly dinner for all Osborne County students attending KU.

John retired in 1955 with more earned degrees than any other KU faculty member. Up to fifteen thousand students had passed through his classes in thirty-nine years of teaching. He retired a world-renowned economist and is considered one of the three greatest professors in University of Kansas history. Currently the John Ise Award is given annually to recognize the student with the most outstanding achievement by the University of Kansas Department of Economics. John continued in the post of professor emeritus and also taught as a visiting professor of economics at Amherst College in Massachusetts, Groucher University in Baltimore, Maryland, Trinity University in San Antonio, Texas, and at Harvard University.

John Ise passed away March 26, 1969, at Lawrence and was buried there in the Oak Hill Cemetery. His legacy of teaching and his writings will continue to shape and inspire the world we live in for many years to come.

JOHN ISE
MEMORIES OF MY FATHER

“I was asked to write a brief summary of my father’s life as it pertained to Osborne County. Of his early life I know little beyond his own story of his parents’ life as set forth in his book Sod and Stubble. This book, which I understand is being reissued in 1996, delineates the hardships, sorrows, and joys experienced by Rosa and Henry Ise (nee Eisenmanger) as early settlers near Downs. It ends with the selling of the Ise farm and the move of the family to Lawrence following Henry’s death.

It became abundantly clear to me how much my father’s early farm life had affected him, since for as far back as I can remember (I was born in 1923, in Lawrence, Kansas) he always owned a couple of farms. These were both quarter-sections, one near Richland and the other near Doniphan. He let neighbors farm these in exchange for half the wheat crop, which I remember as yielding (at least during the 1930s) a modest negative return. And just after my brother was born, in March 1926, he moved our family from the rented house on Louisiana Street to a farmhouse a few miles west of Lawrence on Highway 40. His nostalgia for the farm had apparently overweighed my mother’s misgivings, but after about a year she prevailed and they moved back to 1208 Mississippi Street, where he spent the rest of his life.

He had extremely broad interests in life. Thus at KU he earned bachelor’s degrees from three schools – the School of Fine Arts in 1908 (in music), the College of Liberal Arts and Sciences in 1910, and the School of Law in 1911. He subsequently earned Master’s and Ph.D. degrees from Harvard in economics, which became his consuming interest from then on, particularly the study of conservation and farm economics. He wrote several books on these subjects, U.S. Oil Policy, U.S. Forest Policy, and U.S. National Park Policy, in addition to Sod and Stubble.

His early life on a Kansas farm had imbued him with several traits that I always found very admirable. He was scrupulously honest – I can remember once when he found that a sales clerk at the old Woolworth’s store on Massachusetts had given him a nickel too much change, whereupon he walked a block and a half in a light snowfall to return the nickel. This was not an easy task for a man who had to drag along a heavy artificial leg (prosthetics have come a long way since he had his withered leg cut off in 1903).

He loved animals with an unqualified love. He had worked his way through college by serving as a mounted officer for the Lawrence SPCA. His stories of how he had rescued dogs and horses from what seemed to my brother and me as incredible brutality and cruelty made a deep impression on both of us. After losing the use of his leg at the age of two to polio he had to get to school (half a mile) in a little wagon pulled by his faithful dog, Coalie. When my brother was killed in a light plane crash in 1955 my father donated money for the Charles Ise Animal Shelter in Lawrence.

And he seemed to have an uncanny way with animals. During the months that we spent on the farm west of Lawrence a neighboring farmer gave him a large and savage Airedale that had so badly bitten several of the farmer’s hired hands that he had to get rid of the dog. I can still remember Dad taking me and the dog by the scruff of the neck and saying, ‘Pal, this is Johnboy – you two are going to be friends.’ Not a growl from the fierce-looking dog, who did indeed become my fast friend, twice saving my life (as I still believe), once from a huge sow who had broken down her pen – this pig had actually eaten two of her own piglets – and once when I got stuck in quicksand in a wash near the farmhouse. These incidents may have hastened our move back to Lawrence!

My father was also a firm believer in the Biblical injunction ‘By the sweat of thy brow shalt thou earn thy daily bread’ and he worked harder than anyone I knew. He would teach all morning ‘up on the Hill,’ come home for lunch and then immure himself in his office, or ‘Library,’ as we called it. This was the downstairs room in our three story house, which contained many hundreds of books, mostly in his own field. All the rooms of the house, except for the kitchen, had bookcases, all full and almost all read. Dad worked, grading papers, preparing lectures, or writing some book or other, all afternoon and for three or four hours after dinner. This was a daily routine, except on Saturday afternoon when the Metropolitan Opera was playing, or when my parents either went out to dinner at friend’s homes or entertained friends themselves. My mother was an excellent cook; once being written up in Clementine Paddleford’s Sunday column for her Black Walnut Cake, but no wine or liquor was ever served in her house. Her father had been a Methodist minister and she and her nine brothers and sisters had been raised quite strictly. Dad’s parents had actually drunk beer and wine on rare occasions, to the considerable embarrassment of all their eleven children, most of whom remained strict teetotalers.

There were many things Dad could not teach me and my brother, because of his artificial leg. Thus there was no ball throwing or family bicycling trips. But he showed us things that to me were more important. As a child in Kansas he had had to be very inventive in the matter of playtime activities. He had learned to whittle with his jackknife–I still have a little box in which he carried his flute, carefully crafted from about a dozen types of wood native to Kansas. He showed Charlie and me how to crack a long bullwhip, and how to make shingle darts, launched with a stick with a knotted piece of string which fit into a notch in the body of the dart. He was incredibly precise with those things, and could hit targets at fifty yards as well as my brother and I could with our BB guns. Because of his missing leg he had had to compensate by using his arms more and had such strength in his arms and hands that he could chin himself with one hand, holding onto the exposed ceiling joists, a feat that his athletic older brothers could not duplicate. But the most important things he could and did teach us were attitudes and beliefs. We learned to love the outdoors, what is now called ‘the environment.’ Summer vacations were always spent camping in the western national parks. We picked up a love of great art, good music and great literature. His favorite author was always Mark Twain. He was fiercely loyal to Kansas and to the United States, which belies his frequently controversial views about many things. He was widely considered to be a Communist sympathizer for many years and the chancellor and even the governor received occasional letters from Kansas businessmen complaining about “that radical John Ise, infecting the young minds in our University.” This amused Dad greatly, but infuriated me and my brother. And thanks to a tolerant administration he remained at KU for thirty-nine years and I believe he taught at least a few thousand students how to think for themselves.

During my postdoctoral Fulbright fellowship to France in 1950 I was working with Jean Daudin, then a leading physicist in the field of cosmic rays. He also happened to be one of the leaders of the Communist Party in southern France and we worked together at the Pic du Midi, on the Spanish border, where he frequently entertained Spanish Loyalists hostile to Franco. Dad was teaching that summer at a seminar in Salzburg, sponsored by Harvard University, and I can remember the bitter argument he had with Daudin about communism, when the two of them met in Paris, for by 1950 the grim reality of Stalin’s dictatorship was obvious to all. I had to translate for the two of them for Dad spoke no French and Daudin no English and it was difficult for me to translate Dad’s cusswords into the kind of French I had learned from Mademoiselle Crumrine at KU!

He was a very good economist, serving as president of the American Economic Association, and an excellent teacher. His textbook on economics was for a time used by the majority of state universities, and I am glad that I was able to take his course in Economics 90, although I was too shy to ever open my mouth in class. When he retired from the KU faculty in 1955 his colleagues expressed their admiration by publishing a collection of his essays in a book, The American Way. In 1963 he was very proud to receive KU’s highest honor, the Citation for Distinguished Service, awarded at Commencement exercises. He remained a true son of Kansas all his life, which was inexorably shaped by his early upbringing in Downs. In one short essay reproduced in The American Way, entitled ‘No Time To Live’, he recalled one episode of his college days, when the family was still living in Downs, in the following manner:

‘When we went to Lawrence to college we did not expect to make the trip in four hours but rode the unhurried Central Branch, changed trains a time or two, making connections if we were lucky – if not, lounging around the depot for some hours or perhaps all night. I remember well the evening my sister and I missed connections at Beloit and sat out behind the depot most of the night, reciting poetry and talking of our plans and ambitions and theories of the good life. It was full moon, and there was a mist on the field of ripening wheat across the fence, and the frogs were croaking from the creek nearby. Sister has been gone these many years, but I can still close my eyes and see that lovely, peaceful scene as if I had been there only yesterday. An interruption of our long journey which I, no doubt, cursed with vigor, had enriched my life with an unforgettable experience. It was enforced leisure, but how rich and enduring.’

One final remark he made about the early settlers among whom he was raised is still relevant: ‘They had what it took, and it took a lot.’ That about sums it up.” – John Ise, Jr., November 1995.

 

Source: The Osborne County Hall of Fame, Presenting The Notable Past and Present Citizens of Osborne County, Kansas. 1996 Inductees.

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Excerpt from Edward S. Mason’s Autobiography

            John Ise, then an Associate Professor of Economics, was a remarkable man and he came from a remarkable family. His father, Henry Eisenmenger, had come to this country from Wurttemberg, Germany in 1857. As his son later recounted, the father “joined the Union arising at the outbreak of the Civil War, helped guard the Mississippi, fought around Chattanooga, marched with Sherman to the sea, and at the close of the war, returned to Illinois, with a new name, ‘Ise’ – because the captain could not remember his full name.”* He moved west after the war, took up a “free” claim of 160 acres in western Kansas, made it into a thriving farm and, with the help of an indomitable wife, raised 12 children, of whom 11 lived. All of them attended college and a few became significant figures in the life of their communities. John was one of the younger ones. He was stricken with infantile paralysis in his youth but, although crippled, he was a powerful man and full of energy. He was also a most engaging teacher.

John Ise had taken his, doctor’s degree at Harvard in 1914 with a dissertation on the History of the Forestry Policy of the United States which foreshadowed later interest in natural resources and land policy**. Ise was much impressed by the Harvard Economics Department – a little too much impressed I later thought when studying under some of the same teachers and – it led him to send his good students there for graduate training. Among others, Lloyd Metzler, now Professor at the University of Chicago, and John Lintner, now Professor at Harvard, passed through his hands. Although Ise could not be called an eminent economist he was an eminent teacher and I received a thorough grounding in Alfred Marshall’s Principles that later stood me in good stead. But he was much more than a teacher and economist. He was a liberal influence in the University and throughout the state. Indeed his very effective speeches in public affairs acquired for him the reputation of having somewhat of a “socialist tinge” which was unusual, to say the least, in Republican Kansas. Whether socialist or not he was the only teacher I ever had who significantly influenced the course of my development.

*John Ise, Sod and Stubble: The Story of a Kansas Homestead. New York, Barnes and Noble, Inc. 1940, p. 10

**His dissertation was later published in part by the Ames iowa Forester. Among subsequent publications were: The United States Oil Policy, Yale University Press, New Haven, 1926. Our National Park Policy, Johns Hopkins Press, Baltimore, 1961. He also published a textbook, Economics, Harper, N.Y., 1946.

Source: Edward S. Mason, A Life in Development: An Autobiography (privately published by his son Edward H. L. Mason, 2004) p. 14. [Available in the Harvard University Archives Box 1 of Papers of Edward Sagendorph Mason

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Ise’s account (1922) of the undergraduate principles of economics course

…Most departments of economics, nevertheless, follow the plan of giving an all-inclusive course in Elements or Principles to freshmen or sophomores, and make this course prerequisite to most other work in economics. This arrangement can probably be explained, if not excused, by the power of academic tradition. Not many decades ago, only one or two courses in economics were given in most universities — Principles of Political Economy, and perhaps one or two other courses. New courses were gradually added to the curriculum, but the course in Principles was retained as a fundamental introductory course. As long as there were only a few other courses, there was justification for a broad course in the Principles, even if there was little reason for making it the first course; but when enough advanced courses were added to cover the entire field of economics, the course in Principles represented little but duplication. It was not changed much, in character or in scope, as the other courses were added. This is revealed by examination of some of the textbooks used in the United States during the past half century or more. Wayland, Bowen, Amasa Walker, Perry, Meservey, Newcomb, Macvane, Osborne — all cover somewhat the same general ground. Wayland’s Elements of Political Economy, published in 1837, strikingly resembles many recent texts.

John Stuart Mill’s Principles is not very different from many texts now in use, except that it is somewhat superior to most of them.…

There has been a widespread appreciation of the fact that underclassmen do not have the basis of information necessary to a thorough grasp of the course in Principles ; and at least twenty institutions have provided one or two, or even as many as three courses, to precede the Principles and lay a foundation for it. The courses most commonly prescribed are largely historical or descriptive — Economic History of England, Economic History of the United States, Commercial Geography, Commercial Industries, Economic Resources, American Economy, The Economic Order, Modern Economic Life, Industrial Society, Industries and Commerce, Descriptive Economics, etc…

Source: John Ise. The Course in Elementary Economics. American Economic Review, Vol. 12, No. 4 (Dec. 1922), pp. 614-623.

_________________________________

Kansapedia article
[Yes, there is a Kansapedia]

John C. Ise

Born: June 5, 1885, Ross Township, Osborne County, Kansas. Married Lillie Bernhard, 1921.
Died: March 26, 1969, Lawrence, Douglas County, Kansas.

John Ise was born June 5, 1885, in June 5, 1885, in Ross Township, Osborne County, Kansas, to Henry and Rosena (Haag) Ise, where the family had homesteaded in 1871. He was the eighth of 12 children.

Ise attended the University of Kansas and earned bachelor’s degrees in 1908, 1910, and 1911. He earned a master’s degree in 1912 and doctoral degree in 1914 from Harvard University. In 1916 Ise joined the faculty of the University of Kansas in the economics department and reached full professor status in 1920. He married Lillie Bernhard in 1921. They had one child.

Ise retired from the University of Kansas in 1955. He authored eight books that include humorous anecdotes, economics textsbooks, and pioneer family stories. Ise was a philanthropist who supported the animal shelter in Lawrence. He served on numerous boards related to economics and became known around the world for his work as an economist. He was still considered among the three greatest professors in the history of the University of Kansas for many years.

Sod and Stubble is Ise’s most well-known work. The story tells of pioneer life on the Kansas plains in the late 19th century. His mother inspired the character of the pioneer woman who at the age of 17 married a young German farmer and settled in north central Kansas and raised a large family.

 

Source: “Ise, John, C.” in Kansas Historical Society, Kansapedia. Webpage created June 2014 and modified December 2015.

_________________________________

From: John Ise Papers at the University of Kansas

…Over the course of his career he authored eight books, served as president of the American Economics Association and the Mid-West Economic Association, and served on the editorial board of the American Economic Review. Sod and Stubble is Ise’s best known work, recording his childhood as a child of homesteaders in Osborne County in the late 19th century. Other volumes written by Ise include Economics, Our National Park Policy: A Critical History, The American Way, The United States Forest Policy, and The United States Oil Policy.

Ise was also a generous philanthropist, notably supporting and for a time serving as president of the Lawrence Humane Society in Lawrence, Kansas…

Research Tip: Box 19 “Clippings, letters, published materials, class notes” would almost certainly have course materials from Harvard, but perhaps also from his own student days:

Source: Excerpt from short biography in University of Kansas Libraries, Kenneth Spencer Research Library. Guide to the John Ise Collection.

 

Image Source: The Osborne County Hall of Fame, Presenting The Notable Past and Present Citizens of Osborne County, Kansas. 1996 Inductees.

 

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Chicago Exam Questions Suggested Reading

Chicago. Jacob Viner’s Price and Distribution Theory Course, 1941

 

 

Jacob Viner’s graduate course on price and distribution theory has become a legend in the history of economics. Milton Friedman (1932) [links to many of the course readings assigned by Viner found in the posting for 1932] attended Viner’s lectures as did Paul Samuelson (1935). During the Fall quarter of 1941, Norman M. Kaplan attended Viner’s price and distribution theory course. From Kaplan’s approximately 100 pages of handwritten class notes plus 150 pages of handwritten notes on the course readings, I am able to post today a transcription of his notes from the first week of the course along with a list of titles of readings that I have found referred to in his class notes and/or in his reading notes. In the folder with these notes one also find course examination questions together with Kaplan’s answers. I only include Viner’s examination questions today.

________________________

Course Description

  1. Price and Distribution Theory.—A study of the general body of economic thought which centers about the theory of value and distribution and is regarded as “orthodox theory.” This course includes the critical examination of some modern systems of this character. Prerequisite: Economics 209 or equivalent and the Bachelor’s degree. Summer, 8:00, Knight; Autumn, 9:00, Viner.

Source: Announcements of the University of Chicago. Vol. XLI, No. 10. (April 25, 1941). The College and the Divisions for the Sessions of 1941-1942. p. 306.

________________________

First Week: Introduction
Kaplan’s notes to Viner’s lectures

Oct. 7

I.   Changes in econ. theory in last 10 years.

  1. Increasing tendency now to general as vs. partial equilibrium analysis. (More than one variable permitted to vary as vs. Marshall,: ceteris paribus relaxed). You surrender usually the breadth of the generalization in the interest of reality, of closer approximation to facts. Since Walras-Pareto school, technical skill of economists has increased so that little is lost in way of generalization. Few now use Walras-Pareto method; Schultz last used Lausanne method preceded by Henry Moore.
  2. A more definite and thorough incorporation of monetary theory in general theory. In Marshall’s Principles, e.g., equilibrium is described with monetary theory & banking structure excluded. This stemmed from Classical Economists’ criticism of Mercantilists as exaggerating role of money; money was a “veil covering other things”. Since 1929, emphasis has been placed on monetary theory due to depression (depressions always yield concentration on monetary matters) and to special influence of Keynes.
  3. Increasing attention to cyclical phenomena (now on wane, thinks Viner)—depression is normal & prosperity an aberration.
  4. Greater attention paid to monopolisitic practices and to deviations from perfect competition.
  5. Substitution of production theory for distribution theory. Distribution theory in Marshallian sense is disappearing from theory.

Viner will give little of these changes; this is a course in Marshallian econ., primarily.

II. Most of econ. propositions are quantitative in nature, mathematical

(Includes “greater than”, and “less than” concepts; though qualitative may also be math.).

Criteria: (1) Have you been logically consistent; (2) If you have been logically consistent, where have you gotten in deduction from premises. Another important issue is selection of premises; here is where economists frequently fall down.

Premises must be examined: (1) what variables are you recognizing; (2) how many & nature of variables; (3) nature of preconceptions—what do you assume with regard to econ. rationality, e.g. Part of reason for controversial nature of econ. is wide range of possible choices as to premises due to wide range of variables in any situation as vs. physical sciences where there are few variables & laboratory control can reduce the no. of these. On the other hand, variables in econ. are too few to apply probability theory as in actuarial science or celestial mechanics where you don’t have to worry about nature of variables, since great no. of variables none of which has any intelligible significance.

III. Two types of analysis:

(1) Reduction of variables in any situation & particular scrutiny of variables; (2) Probability theory. Criteria of probability theory: (1) Population is large; (2) Population is homogeneous; (3) All members are roughly coordinate in effect. Economist uses probability in his statistical analyses; he selects dominant variables & leaves the rest to probability theory on grounds that none of these variables exert a very important influence on result. Leaving the rest to probability is an euphemism for neglecting them.

IV. Marshallian approach is a static equilibrium approach.

Changes & disturbances through time have been dealt with not through process analysis [illegible parenthetical insert here: perhaps “(time implicit)”)] but through comparative statics—no analysis of how you get from one place to another through time but a comparison of two static equilibriums with slight changes. Marshallian economics is a balanced aquarium system, with individual inhabitants undergoing cycles of life & death but with the equilibrium undisturbed by individual dynamics.

 

Oct. 8

I. We ordinarily assume a stationary economy in some sense (something not changing through time) in orthodox theory.

  1. Often you start out with “exchange economy”—no change in production; no consumption. All participants have commodities, swap; who has what & how much?
  2. Another type of assumption.—fixed quantity of resources or factors of production
  3. Another type of assumption.—fixed quantity of services
  4. Another type of assumption.—fixed supply functions of resources (not inconsistent with stationary state)
  5. Another type of assumption.—fixed supply functions of services (not inconsistent with stationary state)

II. [Meaning of stable equilibrium]

In assuming stable equilibrium, you may assume that all atoms are in equil. or that atoms may be in disequilibrium but over all equil. is possible because disequil. in one direction are offset by disequil. in other direction.[Note by Kaplan:

III. Theorists are tending to work from individuals to aggregate rather than vice versa.

IV. Neo-classical theory is criticized as being abstract.

  1. But abstraction is necessary to generalizations & generalization is the only thought we know.
  2. Such critics usually meant that it’s too abstract, if they mean anything.
    1. Complete absence of concrete detail is practically inconceivable. There always must be some factual or allegedly factual material or you wouldn’t know it was econ.
    2. Complete particularism (no generalization) can’t be found.
      1. Even an infant beginning to talk uses generalizations—“cat” as label
      2. Use of symbols is so tied with generalization it’s impossible to use words without generalization.

Walton H. Hamilton is a particularist; generalizations are dangerous because they lead to abstraction. His book on prices shows each industry has peculiarities of its own. Of course, but particularism is dangerous because it shows absence of thought; no inquiry into uniformities.

The degree of abstraction depends on the purpose of economic inquiry—eternal economic truths or problem solving.

V. 4 kinds of purposes in economic analysis.

  1. Intellectual exercise
  2. Cultural value—throwing light on history & nature of mankind
  3. Tool sharpening—to teach skill in use & invention of tools of analysis
  4. (Social) problem solving—most important for profession as a whole.

Degree of abstraction depends on purpose.

VI. Econ. is criticized for assuming the rationality of man

(Cf. Mitchell’s [word illegible: appears to be “Phillisipl”, probably a misspelling of “Felicific. See Wesley Clair Mitchell, “Bentham’s Felicific Calculus”Political Science Quarterly (June, 1918), pp. 161-183.] Calculation of Bentham) Mitchell says we have now learned man is not dominated by rational behavior—thinking of Freud & Behaviorism.

But what is rational behavior? What proportion of time must a man spend so behaving (after rational is defined) to be dominated by such behavior? Sentence is meaningless. Habit may be rational in origin, habitual behavior does not mean irrational behavior.

  1. does assume rationality in some sense.
  2. To econ. rationality means:
    1. Correct use of means to attain desired ends, given the state of kg. [knowledge] of the actor.
    2. Substantial degree of reliable accurate kg. [knowledge]
    3. Immediate ends of behavior econ. is looking at are primarily economic—i.e., directed towards wealth, leisure, productive activity.

Testing rationality would be very difficult probably impossible.

  1. Classical economist believed that except for depraved & degraded persons the behavior of man was substantially close to the three criteria to constitute rationality. They were biased in favor of rationality because they were essentially democrats (politically) & equalitarians [sic]. They had a technological (professional) bias in favor of rationality because they were proficient in such an assumption, they had been taught that. (A professional bias, not a class bias, says Viner). That technological bias was for a priori deductive analysis because earlier classicals were deductive and it was easier & body of kg. [knowledge] was deductive. Deductive analysis is tied up with rationality because otherwise you would have to make observations to know how men would behave. Econ. even deductive econ., is not absolutely tied to rationality but only to some predictable pattern of human behavior (which may be irrational, but must be predictable if science is to be a priori.[)]

Oct. 9

I. Assumption of rationality.

  1. No reason why econ. couldn’t take account of irrationality if it could find such patterns, but that would take systematic observation. Rationality is easier.
  2. Economic man:
    1. Is he selfish? Unit is the family; it’s an economic family not an economic man; Ricardo, e.g., took it for granted that wife would be taken care of & children raised. Ends which economist treats are not final ends, though they may be final as far as economist analyzes. Assumption is only that in market place, man is economic. Whatever altruistic motives man may have are not directed towards other party to contract. Altruism or hostility to other bargainer disturbs economic theory; participant is neutral towards other. This is extent of selfishness. Such an assumption—indifference of party A in contrast to welfare of party B—may be unrealistic in some markets: hostility in Irish landlord-tenant and Negroe [sic] sharecropper relation and benevolence in English landlord-tenant relation. English landlord may be acting rationally, though not an economic man.
    2. Not synonymous with rationality.

II. [When the “means” themselves are “ends”]

You don’t get very far with definition of econ. as application of scarce resources to desired ends because one of the most difficult problems is to distinguish between means and ends. Adam Smith dealt with division of labor as allocation of scarce resources to desired ends but Ferguson criticized Smith for not seeing the values in the activities. What Smith thought were means may have been ends. Agriculture may be a means, but it may also be an end—agr. as a “way of life”.

III. What is rational attitude towards risk taking?

Value all risks which could be valued at actuarial values? But is abhorrence of risks & therefore undervaluing them or love of chance & therefore overvaluing any the less rational.[?]

IV. Even Classical did not always assume rationality:

  1. Dealt with ignorance factor—patterns of behavior due to misinformation or lack of it
  2. In connection with savings they said masses failed to make adequate provision for future, did not foresee needs of the future or hadn’t the will to so provide (former is ignorance; latter is irrationality)
  3. Population theory based on irrationality—family decisions not made on grounds of economic welfare.

We will assume rationality in this course, but in economics generally we must be flexible and willing to drop the assumption if necessary.

End of introduction

[Oct. 9 notes continue with a preliminary discussion of the Marshallian demand curve]

________________________

 Suggested/Required Course Readings
Compiled from Kaplan’s notes
Notes on these readings ( made by Kaplan

Demand & Supply: Cost of Production

*Marshall, Book V, Ch. 1, 2, 3, 4, 5, 12, Appendix H
*Viner, Cost Curves & Supply Curves
*Chamberlin, Theory of Monopolistic Competition, Ch. II & Appendix B, pp. 190-93.
Harrod, Theories of Imperfect Competition (get article)

On Cobweb Adjustment

*M. Ezekiel “The Cobweb Theorem” QJE, Feb. 1938
*N. W. Buchanan “On the Cobweb Theorem” JPE, Feb 1939

Empirical Analysis

(Optional) Joel Dean, “Statistical Investigation of Costs with Especial Reference to Marginal Costs”, Supplement to 1936, U. of C. Journal of Business.
*Stigler, “The Limitations of Statistical Demand Curves,” J. of Am. Stat. Assn. Sept 1939, pp. 469-81

Austrian Theory of Value

*Smart, Intro. to Theory of Value, pp. 64-83
*Wicksteed, Commonsense of P.E. Robbins edition Intro. Vol. I p. XX, Vol. II, pp. 784-88

Joint Demand & Joint Supply.

*Marshall, Bk. V, Ch. 6 & Math Appendix H

Monopoly Value.

*Marshall Bk. V., Ch. 14

Distribution Theory

*Distribution theory. Marshall, Bk. VI, Ch’s 1 & 2
J.B. Clark, Dist. of Wealth. Preface & chapters 1, 7, 8.

Some items mentioned as suggested readings

Cf. A. L. Meyers. Elements of Modern Economics (1941 ed.), Ch. V on Indifference Curves.
or *Boulding Economic Analysis, [Ch. 30 Advanced Theory of Consumption]

Cf. Hans Staehle. Elasticity of Demand & Social Welfare. QJE, Feb. 1940.

Betterman, Elasticity of Supply Am. Ec. Rev. 1934, pp. 417 ff. Better: R. F. Fowler “The diagrammatical representation of elasticity of supply” Economica, May 1938.

Cf. p. 24 of Viner article on conflict between English & Austrian schools.

Cf. Ch. 23 Boulding

Halevy, Westminister Review

 

Not recorded as assignments in lecture notes,
but reading notes were taken by Kaplan

*F. H. Knight. “Demand” in Encyclopedia of Soc. Science.

Marshall

*Book III, Ch. I, II, III, IV, V, VI, Note III in math appendix. Ch. III A, Ch. IV B., Note IV
*Book V, Ch 1 Note A, B
*Book V, Ch. 2. Note A, B
*Book V, Ch. 3. Note A, B, C
*Book V, Ch. IV
*Book V, Ch. 5, Note A, B, C, D, E, F
*Book V, Ch. 6, Note. A, B, C, D, E, F, G, H, I, J, K
*Book V, Ch. VI, mathematical note XIV appended to note D.

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Course Exams

ECONOMICS 301
[Perhaps midterm: Kaplan answers only for 1-3]

Comment briefly on each of the following passages (explanation, justification, disproof, qualification, as may be appropriate).

  1. “It is not the case that an increased demand for mutton must in the long run necessarily operate to lower the price of wool. An increased demand for mutton will stimulate sheep farming, but it will also stimulate the substitution of crossbred [mutton type] for merino [wool type] breeds; and the resultant of these two opposite tendencies is logically indeterminate.”
  2. “When Consols are at 93½ , and business in in a tranquil state, it matters not how many buyers of these securities there are at 93, or sellers at 94. They are really off the market. Those only are operative who may be made to buy or sell by a rise or a fall of an eighth. The question is, whether the price shall remain at 93½, or rise to 93 5/8, or fall to 93 3/8. This is determined by a very few persons and by the sale or purchase of very small amounts.”
  3. “The degree of monopoly control by a seller equals the degree by which price exceeds marginal revenue.”
  4. “The degree of monopoly control by an employer as employer equals the degree by which the value of the marginal product of labor exceeds the marginal supply price of labor.”
  5. “Where it is the case that people would not give as large a total sum for a larger quantity of an article than for a smaller, this would be expressed geometrically by saying that the demand curve would cut negatively a rectangular hyperbola.” [negatively means cut from above]
  6. “The fact that supplying labor with better or more instruments results in an increase in output has sometimes led to the conclusion that capital is productive, a phrase which must be used with care. The strictly accurate statement is that labor applied in some ways is more productive than labor applied in other ways. Tools and machinery, buildings and materials, are themselves made by labor, and represent an intermediate stage in the application of labor. Capital as such is not an independent factor in production, and there is no separate productiveness of capital.”

 

 

ECONOMICS 301
Thursday [December 18, 1941]

Time: 1 hour.

  1. a. If elasticity of demand is unity, and original rate of sales is 1,000 per month, what will happen to the rate of sales if price falls 50 per cent?
    b. If elasticity of demand is two, and original rate of sales is 1,000 per month, what will happen to the rate of sales if price falls 25 per cent?
    c. “Since elasticity of demand measures variations in quantity demanded divided by variations in price, the elasticity of the demand for anything will be seven times as large for seven similar demanders taken together as it is for one.” Comment.
  2. Discuss the probable shapes for a particular plant of its short-run and its long-run average cost curves, and given these curves, explain the derivation of the corresponding marginal cost curves.
  3. On what grounds can it be held that in any important industry, increase in output is in the static long-run likely to be subject to conditions of increasing cost? Give and discuss the arguments which have been presented in support of different views.

 

ECONOMICS 301
Friday [December 19, 1941]

Time: 1 hour.

  1. Suppose that a single monopolist takes charge of an industry which has hitherto been in the hands of a large number of independent producers and which makes extensive use of a specialized type of labor. Give an account of the factors which will determine the effect of the change on (a) the industry’s output, and (b) the volume of employment of labor by the industry.
  2. A power monopoly, operating within the range where there are net internal economies of large-scale production sells current for both industrial and domestic use. The distribution costs on the latter are 20 cents per unit higher than for the former. Given: (a) the industrial demand schedule for current; (b) the domestic demand schedule for current; (c) the average cost schedule for generating current plus distributing it to industrial users.
    What rates should be charged to each type of customer to maximize the net income of the company?
  3. a. What conditions are necessary if the demand curves for particular firms in an industry are to have negative inclinations, but without any net monopoly profits?
    b. Are these conditions compatible with long-run equilibrium?

 

Source: The University of Chicago Archives. Norman M. Kaplan Papers, Box 4, Folder 1.

Image Source: Image Source: University of Chicago Photographic Archive, apf1-08490, Special Collections Research Center, University of Chicago Library.

 

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Chicago Economists Harvard Yale

Harvard. Mason, Domar and Samuelson at Metzler Memorial Service, 1980

 

These memorial remarks for Lloyd Metzler come from Evsey Domar’s papers. Edward S. Mason and Evsey D. Domar’s remarks have been transcribed in full. I have only provided excerpts of those by Paul Samuelson that were published later in Vol. V of his Collected Scientific Papers. The common denominator of all three remembrances is that Metzler was an outlier among economists both with respect to his analytical abilities and contributions to economics as well with respect to his uncommon utter decency. It appears even back then, nice guys in economics attracted as much attention as an albino moose today. Samuelson’s speculative remark regarding Metzler’s assignment to the “Burbank ghetto” is priceless as is his recounting of Keynes’ less than sage advice to Sidney Alexander.

___________________

LLOYD A. METZLER
1913-1980
by Edward S. Mason

We are here to celebrate the life of Lloyd Metzler who gave comfort and pleasure not only to his family but to a host of friends. In the six short years he was at Harvard, he made a name for himself as a scholar of promise and a man to whom others turned for help and companionship.

Lloyd took his first degree at the University of Kansas and studied under a man who was my own teacher and who taught John Lintner and a number of others who later came to Harvard. I’d like to say a word about this man, John Ise, who left his imprint on Lloyd, on me, and on all those who passed through his hands. Ise was one of five children who grew up on the Kansas prairies just after the Sod House days that he later wrote about. All of these children went through the University and all made their mark in life. He was a strong man who fought for his unpopular opinions and encouraged his students to strike out for themselves. I know he impressed Lloyd as much as he did me.

After teaching two years at Kansas, Lloyd came to the Graduate School at Harvard in 1936. It was an interesting period in Cambridge and in the Department of Economics. The old guard was leaving the Department and a new crew coming in. Taussig, Carver, and Bullock retired; Ripley died; and Gay left for the Huntington library. These were the stalwarts who had dominated the Department since 1900. Early in the 1930s, Schumpeter, Leontief, and Haberler joined the Department and, later, Hansen, Schlichter, and Black. They were a vigorous crew. Lloyd early discovered his major interest in international trade and worked, in particular, with Hansen and Haberler. Harvard economics was also fortunate in attracting during that period a number of exceptional graduate students, a number of whom are here with us today. I am sure that Lloyd learned as much from them as from his teachers and, in the process, gave as much as he took.

The 1930s were also a period of upheaval in the country and in the University. In some respects it resembled the late 1960s though the protagonists and antagonists were not as strident or violent. It was a period when new ideas percolated the environment and questions of public policy were much to the fore. The influence of Keynes dominated the last few years of the decade, and Lloyd soon found himself in the middle of Keynesian controversies.

After leaving Harvard in 1942, he spent a year as a Guggenheim Fellow and then joined the Office of Strategic Services for a year. Although OSS had a good stable of economists, I am sure that he felt more at home at the Federal Reserve Board where he served from 1944 to 1946. After that a brief period at Yale, and then the University of Chicago where he was a distinguished member of the Economics Department for the rest of his life.

I leave it to others to comment on his considerable scholarly accomplishments, but want to say something about how Lloyd impressed me as a young man. He was obviously much more than an economist, with deep interests in music and literature. He was a cultivated man who in some respects reminded me of Allyn Young who also had a great interest in music and who, for a brief moment in the 1920s, shed his light on Harvard. Young looked more like a poet than an economist though I admit it is difficult for me to describe just what an economist is supposed to look like. Lloyd was a sensitive gentleman with a gift for friendship. Everyone who knew him like him and all of us join Edith in deeply mourning his departure.

 

ON LLOYD METZLER
by Evsey D. Domar

Last Sunday, The New York Times reviewed another book on President Truman. He is a gold mine for historians. A man of modest ability, yet a good president. Well, perhaps not quite so good… On the other hand, by comparison with our presidents in the recent past and, may I add, expected in the near future, a giant indeed… Many contradictions in his character and performance and so on. Could you find a better man to write about?

Lloyd Metzler does not offer such wonderful opportunities. As I look back over nearly forty years since I first met him, I don’t find contradictions either in his character nor in his actions; what stands out is a man of rare intellectual ability, remarkable modesty and much kindness.

Over my lifetime I have known a number of very bright people, including some economists; and a number of very modest and kind people, also including some economists. But I have never met one who could excel Lloyd in the combination of ability, modesty and kindness.

This was true at Harvard where he was finishing his thesis when I first met him in 194’ [sic]. If a visitor asked then, “Who is your brightest graduate student?” the answer, without any hesitation was “Lloyd Metzler, of course.” If the question was, “Who is your nicest graduate student?” the answer was once again, “Lloyd, of course.” Ant the same was true at the Federal Reserve where he spent a couple of years during the War. It was true in his office, in the cafeteria, in the afternoon math class which he gave for the staff, and outside of that marble building which has lately appeared several times on TV. (Hard to believe now that in those days the interest rate of government securities was something like 2½ per cent.)

As Solzhenitsyn said, he “was the one righteous person without whom, as the saying goes, no city can stand. Neither can the whole world.”

 

LLOYD METZLER
(April 3, 1913—October 26, 1980)
by Paul A. Samuelson

[Excerpts]

That we should hold this memorial service in the Harvard Yard is fitting. Widener Library was Lloyd’s first stamping grounds after he came to Harvard in 1937 from Kansas. Later, when the Littauer building was new, he switched his battleground to the other side of where we now meet. In my mind’s eye, I can still see Lloyd Metzler walking across the Harvard Yard, with his little dachshund in tow, engaged in animated badinage with Bob Bishop or Dan Vandermeulen. A young resident of Winthrop House, destined to be president of the United States [John F. Kennedy], used to be disturbed in his studies by our revels in Lloyd’s Winthrop House tutorial suite.

…To be near K.U., the family finally moved to Lawrence, Kansas. There the spellbinder populist, John Ise, rescued Lloyd from the swamp of the business school. Just as Ise had done with Ed Mason, and as he was to do with John Lintner, Challis Hall, and a host of other sons of the middle border, Ise sent Metzler on to his old graduate student at Harvard.

Harold Hitchings Burbank, noting the Germanic “z” in Lloyd’s name and recognizing his egregious talent, probably mistook him for a Jew…Like other able people Burbank didn’t favor, Lloyd was put in the galleys of Frickey and Crum, to serve as assistant in the undergraduate courses in statistics and accounting. Since I never had that honor, I can with good grace report that the cream of the graduate school, those who have won the Wells Prizes and top honors of our profession, all came from this Burbank ghetto.

…What is in order is to speak of Wassily Leontief and E.B. Wilson We few mathematical economists at Harvard were blessed by these great teachers…Wilson spotted Metzler’s genius. One of President Conant’s few stupid decisions was to retire Wilson at the earliest possible age, and this in a period of teacher shortages, thereby depriving the post-Metzler generations of the consumers’ surplus that Metzler, I, Bergson, Tsuru, Alexander, and some other happy few enjoyed.

That, however , was par for the critics of mathematical economics. In the year that Metzler came to Harvard, Sidney Alexander was Keynes’s last tutee at Cambridge University. Keynes seriously advised Alexander not to waste his time with mathematical economics…

…All in all, Lloyd Metzler added enormously to economic science. And that sense of humor and sweet nature lives on in our happy memories.

Note: Samuelson’s complete remarks at the memorial service were published in The Collected Scientific Papers of Paul A. Samuelson, Vol. V (Kate Crowley, ed.) pp. 827-830. Cambridge, Massachusetts: MIT Press, 1986.

 

Source: Duke University. Rubenstein Library. Papers of Evsey Domar, Box 6, Folder “Correspondence: Lloyd Metzler etc.”

Image Source: “Lloyd A. Metzler/Fellow: Awarded 1942/Field of Study: Economics”John Simon Guggenheim Memorial Foundation. Webpage .

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Columbia Economic History Economists Harvard Illinois Johns Hopkins Minnesota Yale

Columbia. Seligman Recommends Three Harvard Colleagues for English Visiting Professorship, 1925

 

The Sir George Watson Chair of American History, Literature, and Institutions was administered by the Anglo-American Society for a distinguished visiting professor to lecture in several English universities. The inaugural lecture was given in 1921 by Viscount Bryce. That lecture, “The Study of American History” was published along with an account of the establishment of the Sir George Watson Chair. The first full course of lectures, “Economic Problems of Democracy” was given the following year by the economist and President-Emeritus of Yale University, Arthur T. Hadley. 

From the following exchange of letters between the president of Columbia University and economist, E.R.A. Seligman, we harvest Seligman’s ranking of four economics professors (three from Harvard and one from Johns Hopkins) regarded by Seligman to dominate the leading specialists in American economic history for this prestigious visiting position in “American History, Literature, and Institutions”. I have been unable at this time to determine who was actually appointed in 1925 or 1926

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Columbia President Butler Requests E.R.A. Seligman to Propose Names of Distinguished Economists for a British Chair in American History

Columbia University
in the City of New York
President’s Room

January 6, 1925

Professor E. R. A. Seligman
Department of Economics

My dear Professor Seligman

The electors to the Watson Chair of American History in British Universities contemplate acting upon a suggestion of mine and naming in the not distant future a competent American scholar to present the subject of our economic history and development. The topics that I have in mind include the migration West and the settlement of the large land areas there, the development of government aid in internal improvements, the building up of the railway and other transportation systems, the struggles over the tariff, the development, both industrially and geographically, of our manufacturing system, and the growth and character of foreign trade. There would, of course, also have to be treatment, although in general fashion, of the high points of our financial history.

Can you out of your wide acquaintance with American economists suggest a few names that I might send to the electors for consideration when they come to make their choice? The man ought to have enough standing at home to make his appointment abroad significant. He ought to be a good lecturer before a general academic audience and he ought to have a sufficiently philosophic cast of mind to avoid plunging into a morass of facts and statistics when what is needed is philosophic exposition of principles, happenings and trends of events.

With cordial regards an all the compliments of the season, I am

Faithfully yours
[signed]
Nicholas Murray Butler

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Copy of Seligman’s Response to Butler’s Request

January 7, 1925.

President Nicholas Murray Butler,
Columbia University.

My dear President Butler:

In reply to your letter of January 6th I would say that the professed economic historians are not of the very first rank. The best of them are Clive Day, of Yale, who is, I am afraid, a bit ineffective as a speaker; E. L. Bogart, of Illinois, who is a much more impressive personality and who is a fine fellow, although not a scholar of the first rank; and, finally, Professor Gras, of Minnesota, who is a younger man. It would be far better, it seems to me, to choose some prominent economist, many of whom either give courses in economic history as an incidental matter or who may be assumed to have a competent knowledge of American history. In this rank I should put first Professor E. L.(sic) Gay, of Harvard, with whom no doubt you are acquainted, and who was formerly editor of the Evening Post; then either Ripley or A. A. Young, of Harvard, would do very well, as they are both men of distinction and personality. Other men, like Hollander of Johns Hopkins, occasionally gives courses similar to the one that I give every few years, on economic and fiscal history. Taking it all in all, the order of my choice would be Gay, Young, Ripley, Hollander.

If you desire more detailed information about any of these and their characteristics or standing, I should be glad to talk it over with you.

Faithfully yours,
[E.R.A. Seligman]

 

Source: Columbia University Archives. Edwin Robert Anderson Seligman Collection, Box 37, Folder “Box 100, Seligman, Columbia 1924-1930”.

Image Source: E.R.A. Seligman portrait in  American Economic Review, 1943.