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Harvard. History of Economic Theory. Final exam questions, Taussig, 1891-94



Examination questions spanning just over a half-century can be found in Frank Taussig’s personal scrapbook of cut-and-pasted semester examinations for his entire Harvard career. Until Schumpeter took over the core economic theory course from Taussig in 1935, Taussig’s course covering economic theory and its history was a part of every properly educated Harvard economist’s basic training. In the previous posting you will find Taussig’s exam questions for the academic years 1886/87 through 1889/90 along with enrollment data for this course. Today Economics in the Rear-view Mirror provides the analogous material from 1890/91 through 1893/94.

The second half of the course was devoted to socialism in 1889/90 and 1890/91 and taught by John Graham Brooks (Wikipedia article).  Four boxes of his papers are to be found at the Arthur and Elizabeth Schlesinger Library on the History of Women in America, Radcliffe Institute for Advanced Study, Harvard University. A biographical note from the on-line guide to the Brooks’ papers: 

“John Graham Brooks was born in Acworth, New Hampshire, on July 19, 1846; he attended Oberlin College from 1869 to 1871 and graduated from Harvard Divinity School in 1875. While ordained and serving as a Unitarian minister in Roxbury, he took an interest in economic affairs, organizing classes for workingmen, later lecturing at Harvard on socialism, and for many years acting as investigator of strikes for the U.S. Department of Labor. In 1880 he married Mrs. Helen Washburn and from 1882 to 1885 traveled and studied in Europe, mainly in Germany. He was the first president of the National Consumers’ League, president of the American Social Science Association in 1904, and a lecturer for the League for Political Education for many years. He died on February 8, 1938.”

Taussig’s scrapbook does not include exam questions (if there were exams) for the second semesters for 1890 and 1891 when Brooks taught Socialism.

Incidentally, W.E.B. Dubois was enrolled in Economics 2 in 1890/91 as a graduate student and was awarded a grade of A (one of six awarded to the twenty-two who received grades,  as recorded in Taussig’s scrapbook).

Also note that “Political Economy” is replaced by “Economics” as of 1892/93. 


Course Description and Enrollment

For Graduates and Undergraduates:—

[Political Economy] 2. Professor Taussig and Mr. Brooks. — History of Economic Theory. — Examination of selections from Leading Writers. — Socialism. 3 hours.

Total 23: 4 Graduates, 10 Seniors, 8 Juniors, 1 Other.

Source:   Harvard University, Annual Reports of the President and Treasurer of Harvard College, 1890-91, p. 58.


[Mid-Year, 1891]

[Omit one question.]

  1. It has been suggested that the real source from which wages are paid is not the product of the laborer, nor the capital of the employer, but the income of the consumer. What should you say?
  2. To which of the following cases, if to any, is the reasoning of the wages fund theory applicable? (1) The farmer tilling his own land with his own capital; (2) the fisherman working for a share of the catch; (3) the independent artisan working on his own account with borrowed capital; (4) the employer who habitually sells his product before pay-day, and pays his laborers with the proceeds?
  3. Wherein does President Walker’s view of the source from which wages are paid differ from George’s?
  4. “The extra gains which any producer or dealer obtains through superior talent in business, or superior business arrangements, are very much of a similar kind [to rent.] If all his competitors had the same advantages, and used them, the benefit would be transferred to the consumers, through the diminished value of the article; he only retains it for himself because he is able to bring his commodity to market at a lower cost, while its value is determined by a higher… Wages and profits represent the universal elements in production, while rent may be taken to represent the differential and peculiar; any difference in favor of certain producers, or in favor of production in certain circumstances, being the source of a gain, which, though not called rent, unless paid periodically by one person to another, is governed by laws entirely the same with it.” — Mill, Political Economy, book iii., ch. v., §4.
    What has President Walker added to this in his discussion of business profits?
  5. “It is true that money does not beget money; but capital does manifestly beget capital. If a man borrows a thousand ducats and ties them up in a bag, he will not find any little ducats in the bag at the end of the year; but if he purchases with the ducats a flock of sheep, he will, with proper attention, have lambs enough at the end of the year to make a handsome interest on the loan, and make a handsome profit for himself. If he turns the ducats into corn, he will find it bringing forth, some thirty, some sixty, some an hundred fold…. Very seldom does a man borrow money to use it, as money, through the term of his loan. When he does so, as brokers for example sometimes do, he may to Antonio’s question, ‘Is your gold and silver rams and ewes?’ return Shylock’s answer, ‘I cannot tell; I make it breed as fast.’”
    Discuss this explanation of interest. Whom do you suppose to be the writer of the extract?
  6. “The natural history of the notion on which it [the wages-fund doctrine] rests, is not obscure. It grew out of the conditions which existed in England during and immediately subsequent to the Napoleonic wars. Two things were then noted. First, capital had become accumulated in the island to such an extent that employers found no (financial) difficulty in paying their laborers by the month, week, or day, instead of requiring them to await the fruition of their labor in the harvested or marketed product. Second, the wages were, in fact generally so low that they furnished no more than a bare subsistence, while the employment offered was so restricted that an increase in the number of laborers had the effect to throw some out of employment or to reduce the wages for all. Out of these things the wages-fund theory was put together.”
    Examine this account of the rise of the wages-fund doctrine.
  7. Discuss the method of reasoning followed by Adam Smith, and illustrate by his treatment of two of the following topics: (1) the causes which bring about high wages; (2) the effects on domestic industry of restraints on importation; (3) the origin and effects of the division of labor.
  8. Explain how Ricardo’s conception of wages bears on his conclusions as to the effects of taxes on wages, and as to the net income of society.
  9. What can be said in justification of the views of the writers of the mercantile school? 


Course Description and Enrollment

For Graduates and Undergraduates:—

[Political Economy] 2. Professor Taussig. — Economic Theory. — Examination of selections from leading writers. 3 hours.

Total 38: 9 Graduates, 17 Seniors, 8 Juniors, 1 Sophomore, 1 Freshman, 2 Others.


Source:   Harvard University, Annual Reports of the President and Treasurer of Harvard College, 1891-92, p. 54.


[Mid-Year Examination. 1892.]

[Arrange your answers strictly in the order of the questions]

  1. Are laborers paid out of the product of their own labor in cases where the employer sells the product before pay-day and pays the laborers out of the proceeds?
  2. “Whether wages are advanced out of capital in whole, or in part, or not at all, it still remains true that it is the product to which the employer looks to ascertain the amount which he can afford to pay: the value of the product furnishes the measure of wages. . . .
    It is the prospect of a profit in production which determines the employer to hire laborers; it is the anticipated value of the product which determines how much he can pay them.”
    Is this consistent with the wages-fund theory?
  3. Consider the following: —

“Given machinery, raw materials, and a year’s subsistence, does it make no difference with the annual product whether the laborers are Englishmen or East-Indians? Certainly if one quarter part of what has been adduced under the head of the efficiency of labor be valid, the difference in the product of industry arising out of differences in the industrial quality of distinct communities of laborers are so great as to prohibit us from making use of capital to determine the amount that can be expended in any year or series of years in the purchase of labor.”

  1. How does President Walker prove the existence of a no-profits class of business men?
  2. Wherein does President Walker’s theory of distribution differ from Professor Sidgwick’s?
  3. What grounds are there for saying that Political Economy is distinctly a modern science?
  4. “Let us suppose, for example, that in the greater part of employments the productive powers of labour had been improved to ten-fold, or that a day’s labour could produce ten times the quantity of work which it had done originally; but that in a particular employment they had been improved only to double, or that a day’s labour could produce only twice the quantity of work it had done before. In exchanging the produce of a day’s labour in the greater part of employments for that of a day’s labour in this particular one, ten times the original quantity of work in them would purchase only twice the original quantity in it. Any particular quantity in it, therefore, a pound weight, for example, would appear to be five times dearer than before. In reality, however, it would be twice as cheap.” — Wealth of Nations, Book I. ch. viii.
    Explain what Adam Smith meant; and what Ricardo would have said as to this passage.
  5. Explain Adam Smith’s conclusions as to the effect on wages, profits, and rent, of the progress of society; noting briefly the reasoning which lead to the conclusion in each case.
  6. Examine the following criticisms on Malthus: —
    1. that there is no such difference of law between the increase of man and of the organic beings which form his food, as is implied in the proposition that man increases in a geometrical, food in arithmetical ratio;
    2. that the adaptation of numbers to the means available for their support is effected by the felt or anticipated pressure of circumstances and the fear of social degradation, within a tolerable degree of approximation to what is desirable.
  7. Explain carefully Ricardo’s doctrine as to the effect of profits on value.


[Final. 1892.]

[Arrange your answers strictly in the order of the questions]

  1. Does the example of a laborer hired by a farmer, and paid by him at the close of the season, after the crop has been harvested and disposed of, present a case of labor paid, not out of capital, but out of the product of current industry?
  2. What do you conceive the relation of political economy to laissez faire to have been with Adam Smith? with Ricardo and his contemporaries? How would you state the relation yourself?
  3. “Ricardo never fairly appreciated that his notion of the laborer’s ‘necessaries’ stood for something subject to wide variation in different stages of civilization. It is true that in one passage he says with emphasis that the necessaries, which determine the natural rate of wages, depend on habits which vary with time and place; but elsewhere he sets up a distinction between gross and net income, which is tenable only if we put the laborer’s necessaries side by side with other elements of cost of production. The distinction loses its practical harshness, when he admits that the laborer may at times receive, over and above natural wages, some part of the community’s net income; but its theoretic shortcomings then become the more obvious.” (Cohn, National-oekonomie.)
    Explain Ricardo’s conception of natural wages and net income, here referred to; and examine the justice of this criticism.
  4. “The average rate of profits is the real barometer, the true and infallible criterion of national prosperity. A high rate of profit is the effect of industry having become more productive, and it shows that the power of society to amass capital, and to add to its wealth and population, has been increased.” (M’Culloch’s Political Economy.) What led to the adoption of this test by M’Culloch? Should you accept it?
  5. What were Ricardo’s views as to the effect of foreign trade on profits?
  6. “In the actual period of production, on a wages system, the existing supplies for laborers are distributed to laborers in wages, while they, with the help of fixed capital, till the ground and work up the raw materials, transforming the old capital into a new product. . . . The product is divided at the end of the period of production into the replacement of capital (support of laborers, raw material, and wear of fixed capital), profits, and rent. . . . Hence it is clear that wages and profits are not parts of the same whole. Wages were in capital at the beginning of the period of production; profits are in product at its close.” (W. G. Sumner.)“We may suppose that share of the National Dividend which goes as rent to be set on one side; and then there remains what would be produced by labour and capital if they were all applied under conditions no more favourable than those under which they were applied at the margin of profitable employment; and a proposal was made by the present writer, in the Economics of Industry, that this should be called the Wages-and-Profits Fund, or the Earnings-and-Interest Fund. These terms were suggested in order to emphasize the opinion that the so-called Wages-Fund theory, however it might be purified from the vulgar errors which had grown around it, still erred in suggesting that earnings and interest, or wages and profits, do not stand in the same relation to the National Dividend.” (Marshall.)Which of these seems to you the sounder view?
  7. Explain what is meant by Consumer’s Rent; and examine the effect on Consumer’s Rent and on the aggregate satisfaction of the community, of a tax on a community subject to the law of Diminishing Returns.
  8. Explain the grounds which lead Professor Marshall to believe that the forces by which the wages of different grades of laborers are determined, work by a process similar to that by which the expenses of production determine the value of commodities.
  9. Examine carefully Professor Marshall’s view of the part played by rent of natural ability in determining manager’s earnings.
  10. Wherein is there similarity, wherein difference, in the positions of Carey and Bastiat in the history of economic theory?


Course Description and Enrollment

For Graduates and Undergraduates:—

[Economics] 2. Professor Taussig. — Economic Theory. — Examination of selections from leading writers. 3 hours.

Total 38: 11 Graduates, 10 Seniors, 11 Juniors, 3 Sophomore, 3 Others.


Source:   Harvard University, Annual Reports of the President and Treasurer of Harvard College, 1892-93, p. 67.


[Mid-Year. 1893.]

  1. State George’s doctrine as to the cause of interest, and give an opinion of its soundness.
  2. “It may be said, we grant that wages are really paid out of the product of current industry, and that capital only affects wages as it first affects production, so that wages stand related to product in the first degree, and to capital in the second degree only; still, does not production bear a certain and necessary ratio of capital? and hence may not the measure of wages be derived from capital virtually, — though not, it is true, directly, — through its determination of product?” Consider whether so much would be granted by one holding to the wages-fund doctrine; and answer the questions.
  3. “The employer [in the West and South] advances to the laborer such provisions and cash as are absolutely required from time to time; but the ‘settlement’ does not take place until the close of the season or the year, and the final payment is often deferred until the crop is not only harvested but sold.” Under such conditions is it true that wages are paid out of capital, or limited in amount by the quantity of previously accumulated capital?
  4. What do you conceive President Walker’s opinion to be as to the effect on business profits of the possession of large means by the business man at the outset of his career?
  5. Are there grounds for saying that in a socialist community the conception of capital would be different from that in communities as now organized?
  6. Compare Adam Smith’s doctrine as to the relation of capital and wages with Ricardo’s.
  7. Compare Adam smith’s conclusions with Ricardo’s as to the propriety of import duties levied to countervail internal taxes on necessaries consumed by laborers.
  8. “No extension of foreign trade will immediately increase the amount of value in a country, though it will very powerfully contribute to increase the mass of commodities, and therefore the sum of enjoyments.” What does Ricardo mean?
  9. “There is only one cause, and that will be temporary, in which the accumulation of capital with a low price of food may be attended with a fall in profits.” What is the case, and why did Ricardo think it would be temporary?


[Final. 1893.]

[One question in each of the three groups may be omitted.]


  1. What is the meaning and importance of the proposition that demand for commodities is not demand for labor?
  2. How far is Ricardo’s doctrine as to the connection between labor and value similar to Marx’s doctrine that value consists of the labor incorporated in commodities?
  3. What is meant when it is said that the connection between value and expenses of production depends on the mobility of capital, while the connection between value and cost of production depends on the mobility of labor and capital?
  4. “The ideal of justice in distribution, applicable both to individual producers and to the different factors in production (land, labor, capital), may be stated thus: each should have a share in net income proportionate to the contribution which, by labor or by the use of material means of production, he has made to the product.”
    What should you say as to the feasibility of carrying out such a principle?


  1. Explain briefly what is meant by total utility, marginal utility, and consumer’s rent.“Subject to these corrections, then, we may regard the aggregate of the money measures of the total utility of wealth as a fair measure of the part of the happiness which is dependent on wealth.” Mention one or two corrections.
  2. Give your opinion on the objection raised by Carey to the theory of rent, that the total rent paid for the use of land does not exceed interest at current rates on the total capital sunk in land.
  3. How far is it an answer to the proposition that rent and business profits are analogous, when it is said that the losses of some business managers must be set off against the larger gains of others?
  4. Explain Professor Marshall’s opinion as to the bearing on the relative wages of different laborers of
    1. the “rent” of labor;
    2. the standard of living among laborers;
    3. the expenses of production of labor;

and point out the connection between his views on these subjects.


  1. Explain the distinctions (1) between private capital and social capital, (2) between historico-legal capital and national capital; and point out how far the two distinctions run on the same lines.
  2. “In the present condition of industry, most sales are made by men who are producers and merchants by profession. . . . For them, the subjective use-values of their own wares is, for the most part, very nearly nil. . . . In sales by them, the limiting effect which, according to our theoretical formula, would be exerted by the valuation of the last seller, practically does not come into play.”
    Explain what is meant, and consider the consequences as to the importance of the law that price is determined by the valuations of the marginal pairs.
  3. “Our whole interest is centred in the question as to the position which the law (of cost of production), so well accredited by experience, takes in the systematic theory of price. Does it run counter to our law of marginal pairs or not? Our answer is that it does not. It is as little of a contradiction as we before found to exist between the proposition that the marginal utility determines the height of subjective value, and the other proposition that the costs determine it. “
    In what way is the apparent contradiction removed in the two cases referred to by Böhm-Bawerk?
  4. Explain the three grounds on which Böhm-Bawerk bases the superiority of present over future goods, and and give your opinion as to their relative importance and significance.


Course Description and Enrollment

For Graduates and Undergraduates:—

[Economics] 2. Professor Taussig. — Economic Theory from Adam Smith to the present time. — Examination of selections from leading writers. 3 hours.

Total 43: 12 Graduates, 16 Seniors, 10 Juniors, 1 Sophomore, 4 Others.


Source:   Harvard University, Annual Reports of the President and Treasurer of Harvard College, 1893-94, p. 61.


[Mid-Year. 1894.]

[Arrange your answers strictly in the order of the questions. Write with deliberation, but answer all the questions.]

  1. “It is no doubt true that a portion of capital is always remuneratory and not auxiliary in its nature; that is, does not consist of instruments that make labour more efficient, but of finished products, destined for the consumption of labourers and others. This part of capital continually becomes real wages (as well as real profits, interest, and rent), being purchased by the labourer with the money wages he receives from time to time. But it does not seem to me therefore correct to regard the real wages as capital ‘advanced’ by the employer to the labourer. The transaction between the two is essentially a purchase, not a loan. The employer purchases the results of a week’s labour, which thereby becomes part of his capital, and may be conceived — if we omit for simplicity’s sake the medium of exchange — to give the labourer in return some of the finished products of his industry.”
    Consider whether and how remuneratory capital continually becomes real interest and rent, as well as real wages; and give your opinion as to the closing analysis of the relation between employers and laborers.
  2. Suppose (1) that profit-sharing were universally adopted; (2) that laborers habitually saved a very large part of their income, — and consider whether any modification must be made in the reasoning of those who would maintain a Wages-Fund doctrine.
  3. It has been said that while the capital of the employing class is the immediate source from which wages are paid, the ultimate and important source is the income of the consumers who buy the goods made by the laborers for the capitalists. Consider this doctrine.
  4. Compare critically the treatment by Walker, Sidgwick, and Ricardo, of the relation between the profits of the individual capitalist and the amount of capital owned by him.
  5. State carefully Ricardo’s criticism of Adam Smith’s doctrine on labor as the measure of value.
  6. Compare Adam Smith’s reasoning with Ricardo’s as to the manner in which the progress of society in wealth affects profits.
  7. “We have seen that in the early stages of society both the landlord’s and the labourer’s share of the value of the produce of the earth would be but small; and that it would increase in proportion to the progress of wealth and the difficulty of procuring food. We have known, too, that although the value of the labourer’s portion will be increased by the high value of food, his real share will be diminished; while that of the landlord will not only be raised in value, but will also be increased in quantity.”
    Explain the reasoning by which Ricardo reached the several conclusions here summarized, and give your opinion as to the soundness of the conclusions.


[Final. 1894.]

  1. “Perhaps the most striking conflict of the Wages-Fund-theory with facts, is found in the periodical influctions and depressions of trade. After a commercial crisis, when the shock is over and the necessary liquidation has taken place, we generally find that there is a period during which there is a glut of capital, and yet wages are low. The abundance of capital is shown by the low rate of interest and the difficulty of obtaining remunerative investments.” — Nicholson, Political Economy
    How far is the theory in conflict with the facts here adduced?
  2. How is the significance of the doctrine of consumer’s rent affected by the fact that the money incomes of different purchasers vary widely?
  3. Explain Marshall’s doctrine as to the influence on wages of the standard of living among laborers; and consider how far it differs from Richard’s teaching as to the connection between wages and the price of food.
  4. Explain Marshall’s doctrine of the quasi-rent of labor; compare it with his conclusions as to the rent of business ability; and point out how far he finds in either case something analogous to economic rent as defined by the classic writers.
  5. “It is not true that the spinning of yarn in a factory, after allowance has been made for the wear-and-tear of the machinery, is the product of the labour of the operatives. It is the product of their labour (together with that of the employer and subordinate managers) and of the capital; and that capital itself is the product of labour and waiting; and therefore the spinning is the product of labour (of many kinds) and of waiting. If we admit that it is the product of labour alone, and not of labour and waiting, we can no doubt be compelled by inexorable logic to admit that there is no justification for interest, the reward of waiting.”
    How far would you accept this reasoning?
  6. “Barter, though earlier historically than buying and selling, is really a mere complex transaction, and the theory of it is rather curious than important.” — Marshall.
    “The attribute of normal or usual value implies systematic and continuous production.” — Cairnes.
    “Where commodities are made for sale, the sellers’ subjective valuations fall out altogether, and price is determined by the valuation of the last buyer.” — Böhm-Bawerk.
    Explain these statements, separately or in connection with each other.
  7. What does Böhm-Bawerk mean by the general subsistence market, or the total of advances for subsistence; and how far do the “advances” differ from the wages-fund of the classic economists?
  8. Explain Böhm-Bawerk’s views as to the connection between the prolongation of the period of production, and the increase in the productiveness of labor; and consider how far his conclusions as to interest would need to be modified, if those views were changed.
  9. Explain briefly, by definition or example, the sense in which Böhm-Bawerk uses the terms, —

social capital;
private capital;
subjective value;
marginal pairs;
technical superiority of present goods.


Source: Harvard University Archives. Prof. F. W. Taussig, Examination Papers in Economics 1882-1935 (Scrapbook).

Image Source: Frank W. Taussig. Harvard Album, 1900.



Irwin Collier

Posted by: Irwin Collier

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