The following macroeconomics course outline with readings and examination questions come from the last academic year that Evsey Domar taught at Johns Hopkins University (1957-58) before he moved to M.I.T.
Note: the last three reading items in section VII (Solow (1956), Solow (1957), and Abramovitz (1956) have clearly been added after the original syllabus was typed (a lighter typewriter ribbon and a larger font were used).
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THE JOHNS HOPKINS UNIVERSITY
ECONOMIC FLUCTUATIONS AND GROWTH
E. D. Domar
Political Economy 605
Fall, 1957-58
READING LIST
Students not familiar with accounting are advised to read Mason and Davidson, Fundamentals of Accounting, Chapters 3-5, 9, 13, 17, 21, 25-26, or an equivalent.
The purpose of this list is to suggest to the student the sources in which the more important topics of the course are discussed from several points of view. His objective should be the understanding of these topics and not the memorization of opinions expressed.
Items marked with an * are strongly recommended. (I don’t like to use the expression “required” in a graduate reading list.)
- NATIONAL INCOME AND RELATED ITEMS
*Kuznets, S., National Income and Its Composition (New York, 1941), particularly vol. I, Chapter 1.
*Ruggles, R. & N., National Income Accounts and Income Analysis (New York, 1956).
*National Income, 1954 Edition, Supplement to the Survey of Current Business.
*Leontief, “Output, Employment, Consumption and Investment,” Quarterly Journal of Economics, Feb., 1944.
Leontief, The Structure of American Economy (New York, 1951)
- KEYNESIAN ECONOMICS — GENERAL
Students without prior training in this field are advised to study D. Dillard, The Economics of John Maynard Keynes (New York, 1948), A. H. Hansen, A Guide to Keynes (New York, 1953), or K. Kurihara, Introduction to Keynesian Dynamics (New York, 1956).
*J. M. Keynes, The General Theory of Employment, Interest, and Money (New York, 1936), Philadelphia, 1944).
*American Economic Association, Readings in Business Cycle Theory, essays 5, 6, 7, 8.
S. E. Harris, The New Economics (New York, 1947) essays 1-19, 30-33, 38-46.
*A. P. Lerner, Economics of Control (New York, 1944), chapters 21-23, 25.
*K. K. Kurihara, Post Keynesian Economics (New Brunswick, N. J., 1954), essays 1, 11*.
*American Economic Association, Readings in the Theory of Income Distribution (Philadelphia, 1946), essay 24.
L. R. Klein, The Keynesian Revolution, chapters 3-5.
H. S. Ellis, A Survey of Contemporary Economics (Philadelphia, 1948) Vol. 1, chapter 2.
*Income, Employment, and Public Policy, Essays in Honor of Alvin H. Hansen (New York, 1948, essay I.)
*A. F. Burns, “Economic Research and the Keynesian Thinking of our Times,” in his The Frontiers of Economic Knowledge, (Princeton, 1954), or in the Twenty-Sixth Annual Report of the National Bureau of Economic Research, Inc. (New York, 1946). See also the discussion by Hansen and Burns in the Review of Economic Statistics, November, 1947.
Patinkin, D., Money, Interest, and Prices (Evanston, Ill., 1956)
- THE THEORY OF INTEREST
Readings in the Theory of Income Distribution, essays 22, 23, 26
Readings in Monetary Theory, essays 6, 11, 15
*Haberler, Prosperity and Depression, (Lake Success, N.Y., 1946), chapter 8.
*J. E. Meade and P. W. S. Andrews, “Summary of Replies to Questions on Effects of Interest Rates,” and “Further Inquiry into the Effects of Rates of Interest,” Oxford Economic Papers, No. 1, 1938 and No. 3, 1940.
*J. G. Gurley and E. S. Shaw, “Financial Aspects of Economic Development,” American Economic Review, September, 1955
A. G. Hart, Money, Debt, and Economic Activity, Second Ed. (New York, 1953).
*J. F. Ebersole, “The Influence of Interest Rates,” Harvard Business Review, Vol. XVII, 1938, pp. 35-39.
*H. D. Henderson, “The Significance of the Rate of Interest,” Oxford Economic Papers, October, 1938, pp. 1-13.
R. S. Sayers, “Business Men and the Terms of Borrowing,” Oxford Economic Papers, Feb. 1940, pp. 23-31.
P. W. S. Andrews, “A Further Inquiry into the Effects of Rates of Interest,” Oxford Economic Papers, Feb. 1940, pp. 32-73.
*W. H. White, “Interest Inelasticity of Investment Demand – the Case from Business Attitude Surveys Re-examined,” American Economic Review, Sept. 1956, pp. 565-87.
F.A. Lutz, “The Interest Rate and Investment in a Dynamic Economy,” American Economic Review, Dec., 1945.
- THE CONSUMPTION FUNCTION
Post-Keynesian Economics, essay 15.
Income, Employment and Public Policy, Essays in Honor of Alvin H. Hansen, (New York, 1948) essay III.
*J. S. Duesenberry, Income, Saving, and the Theory of Consumer Behavior (Cambridge, Mass., 1949).
*B. F. Haley, A Survey of Contemporary Economics (Homewood, Illinois, 1952), Vol. II, essay 2.
*T. E. Davis, “The Consumption Function as a Tool of Prediction,” The Review of Economics and Statistics, August, 1952.
W. W. Heller, F. M. Boddy & C. L. Nelson, Savings in the Modern Economy, A Symposium (Minneapolis, 1953).
*R. Ferber, A Study of Aggregate Consumption Functions, National Bureau of Economic Research, Technical Paper 8 (New York, 1953).
M. Friedman, A Theory of the Consumption Function (Princeton, N. J., 1957).
- THE MULTIPLIER AND THE ACCELERATOR
*Readings in Business Cycle Theory, essays 9-12.
*Haberler, Prosperity and Depression, chapter 13.
*S. Kuznets, “Relation between Capital Goods and Finished Products in the Business Cycle,” in Economic Essays in Honor of Wesley Clair Mitchell, (New York, 1935).
*R. F. Kahn, “The Relation of Home Investment to Unemployment,” Economic Journal, 1931. Republished in Hansen and Clemence, Readings in Business Cycles and National Income (New York, 1953), essay 15.
*Haavelmo, T., “Multiplier Effects of a Balanced Budget,” Econometrica, 1945; reprinted in Readings in Fiscal Policy, pp. 335-343.
*William A. Salant, “Taxes, Income Determination, and the Balanced Budget Theorem,” The Review of Economics and Statistics, May, 1957.
- PRICE FLEXIBILITY AND EMPLOYMENT
*A. C. Pigou, “The Classical Stationary State,” The Economic Journal, December, 1943.
*O. Lange, Price Flexibility and Employment, (Bloomington, Indiana, 1944).
*M. Friedman, “Lange on Price Flexibility and Employment,” American Economic Review, Sept. 1946.
*Readings in Monetary Theory, essay 13.
*T. C. Schelling, “The Dynamics of Price Flexibility,” American Economic Review, Sept. 1949.
D. Patinkin, Money, Interest, and Prices (Evanston, Ill., 1956).
- THEORY OF GROWTH
*E. D. Domar, Essays in the Theory of Economic Growth (New York, 1957), Foreword, Essays I, III-V.
W. Fellner, Trends and Cycles in Economic Activity, (New York, 1956)
A. H. Hansen, Fiscal Policy and Business Cycles (New York, 1941)
*R. F. Harrod, Towards a Dynamic Economics (London, 1951), Part III.
W. W. Leontiev [sic], Studies in the Structure of the American Economy, (New York, 1953).
J. Robinson, The Accumulation of Capital, (London, 1956).
*Simon Kuznets, “Towards a Theory of Economic Growth,” R. Keckachman, ed., National Policy for Economic Welfare at Home and Abroad (New York, 1955)
*Robert M. Solow, “A Contribution to the Theory of Economic Growth,” The Quarterly Journal of Economics, Feb. 1956.
*Robert M. Solow, “Technical Change and the Aggregate Production Function,” The Review of Economics and Statistics, August, 1957.
*Moses Abramovitz, “Resource and Output Trends in the United States since 1870,” American Economic Review Papers and Proceedings, May, 1956, pp. 5-23.
Source: Duke University. David M. Rubenstein Rare Book and Manuscript Library. Economists’ Papers Archive. Papers of Evsey D. Domar, Box 15, Folder “Macroeconomics, Old Reading Lists”.
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THE JOHNS HOPKINS UNIVERSITY
ECONOMIC FLUCTUATIONS AND GROWTH
(Political Economy 605, Fall Term 1957-58)
Final Examination—Three hours
January 23, 1958
E. D. Domar
Please answer all questions in any order you like. Your reasoning is more important than your answers.
I. (25%)
(a) Explain the basic economic philosophy which forms the foundation of modern National income (and gross product) estimates in Western countries.
(b) Show how this philosophy is transformed into specific criteria used by the U.S. Department of Commerce in their estimates of GROSS NATIONAL PRODUCT, NATIONAL INCOME, AND CONSUMER DISPOSABLE INCOME. Illustrate your discussion with examples.
(c) “Existing methods of computing national income or product exaggerate the difference between the incomes (or products) of advanced and of undeveloped countries.”
Comment fully.
II. (15%)
The following comment was made by Mr. Ayzenshtadt, a Soviet economist, in 1947:
“Even the greatest admirers of Keynes and of his theory that loan capital is the main propeller of the industrial cycle, do not see anything new in it…Keynes himself thinks that the ‘novelty’ of his system lies in the equilibrium formula of the economic process in which the independent and dependent variables are arranged as follows:
Independent Variables:
(1) Propensity to consume
(2) Marginal efficiency of capital
(3) Rate of interest
(4) Liquidity preference
Dependent Variables:
(1) Savings
(2) Investment
(3) Level of Employment”
Comment. Be specific.
III. (15%)
“The best cure against inflation is increased production.” Do you agree? Why or why not? Comment fully.
IV. (25%)
Write an analytical essay on the subject: “The effect of a proportional personal and corporate income tax on the rate or rates of interest.”
V. (20%)
Examine the effect on GROSS NATIONAL PRODUCT of a $100 increase in GROSS PRIVATE CAPITAL FORMATION.
(a) Discuss the conceptual and analytical questions involved.
(b) Try to make a numerical estimate
Source: Duke University. David M. Rubenstein Rare Book and Manuscript Library. Economists’ Papers Archive. Papers of Evsey D. Domar, Box 16, Folder “Final Exams. Johns Hopkins, Stanford, U of Michigan”.
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