Month: April 2019

Categories
Economists Harvard Suggested Reading

Harvard. Economics Ph.D. alumnus. Edgar M. Hoover, 1932

 

The Harvard economics Ph.D. alumnus for this post is someone who had both CEA and CIA lines on his c.v. Edgar Malone Hoover also taught at the University of Michigan and Harvard before settling at the University of Pittsburgh. A course Hoover taught during the second term of 1935-36 while an instructor at Harvard was on the location of economic activity. It attracted two graduate students. Hoover served as president of the Regional Science Association in 1962 and was an important contributor to the theory of spatial price discrimination.

Vital data for Edgar M. Hoover: born February 22, 1907 in Boise, Idaho, d. July 24, 1992 in Santa Barbara, California.

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Hoover index

It is equal to the portion of the total community income that would have to be redistributed (taken from the richer half of the population and given to the poorer half) for there to be income uniformity.

See: Edgar Malone Hoover Jr. The Measurement of Industrial Localization, Review of Economics and Statistics, 18, No. 4 (November, 1936) 162–171.

Source: “Hoover index” in Wikipedia.

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From the 1974 AEA Directory

Hoover, Edgar M., b. Boise, Idaho, 1907. Educ. A.B., Harvard, 1928; A.M., Harvard, 1930; Ph.D., Harvard, 1932. Doc. Dis. The Location of the Shoe Industry in the United States, 1932. Pub. Location Theory and the Shoe and Leather Industries, 1937; The Location of Econs. Activity, 1938; An Introduction to Regional Econs., 1971. Prev. Pos.  Dir. Econ. Study, Pittsburgh Regional Planning Assoc., 1959-63, Vis. Prof. Econs., Harvard U., 1957-59. Cur. Pos.  Emeritus Prof. Econs., U. of Pittsburgh, Address 15331 Bollman Rd., Saratoga,,CA 95070.

Source: 1974 Directory of Members. American Economic Review, Vol. 64, No. 5 (October 1974), p.182.

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Resignation from the University of Michigan to work at the CEA, 1947

Dr. Edgar M. Hoover, Professor of 
Economics and a faculty member since 1936, has resigned to accept an appointment as staff member on the 
Council of Economic Advisers at Washington, D.C.

Winner of the Henry Russel Award 
in 1940, Dr. Hoover received his A.B., A.M. and Ph.D. degrees from Harvard
University, and taught there for four years before joining the faculty at Ann Arbor. He has specialized in problems of the location of industry, and in 1939 was invited to participate in a conference organized by the National Bureau of Economic Research and by the New York State Planning Commission. He spent four years on leave 
from the University as a member of 
the National Resources Planning Board and the fuel-rationing branch of the OPA, and later as a member of the Office of Strategic Services.

 

Source: The Michigan Alumnus (427) from the University of Michigan’s Faculty History Project.

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PITT NAMES HOOVER UNIVERSITY PROFESSOR
Press Release: March 28, 1966

Dr. Edgar M. Hoover has been named University Professor of Economics at the University of Pittsburgh. His appointment was announced today by Dr. Charles H. Peake, vice chancellor for the academic disciplines.

Dr. Hoover, director of the Center for Regional Economic Studies, came to Pitt in 1959 as professor of economics. At the inception of the Center in 1962, he was named director, a post he will continue to hold.

“The appointment of Dr. Hoover as University Professor is in recognition of his outstanding contributions,” Dr. Peake said. “He is an authority in the field of regional economics and under his direction the Center has conducted studies of national and international concern.” Among the Center’s activities have been studies of Appalachia, flood plain usages, industrial growth and potential, and new trends in urban economics.

Dr. Hoover currently is co-administrator for a $200,000 Ford Foundation training and research program in economics and demography. Under the project, employees of planning commissions from underdeveloped countries will study demography, in particular, the relation of population to economic change. Dr. Hoover has Just returned from India, where he laid groundwork for parts of the program.

Recently, Dr. Hoover published, in four volumes, the results of an Economic Study of the Pittsburgh Region which he directed for the Pittsburgh Regional Planning Association.

Dr. Hoover came to Pitt from Harvard University where he was visiting professor. Previously, he had worked with Princeton University’s Office of Population Research on a project estimating the future population of India. From 1952 to 1954, he was a member of the Board of National Estimates of the Central Intelligence Agency and between 1947 and 1951 he served as a senior staff member of the Council of Economic Advisors. He also has taught at the University of Michigan and was an economist in the U.S. Office of Strategic Services.

Dr. Hoover received his Ph.D., A.M. and A.B. degrees from Harvard. He is a member of the Phi Beta Kappa, the American Economic Association, the Population Association of America, and the Regional Science Association. He was president of the latter group in 1962.

Source:  University of Pittsburgh Press Release, March 28, 1966. Records of the University of Pittsburgh.

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Harvard Ph.D. awarded in 1932 to Edgar Malone Hoover, Jr.

Hoover, Edgar Malone, Jr., A.B. 1928, A.M. 1930.

Subject, Economics. Special Field, Economic Geography. Thesis, “The Location of the Shoe Industry in the United State.” Research Assistant in Economics.

Source: Harvard University. Report of the President of Harvard College, 1931-1932, p. 120.

 

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Class Enrollment

[Economics] 56 2hf. Dr. Hoover.—The Location of Economic Activity

Total 2: 2 Graduates.

Source: Harvard University. Report of the President of Harvard College, 1935-1936, p. 84.

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RESERVE SHELF LIST FOR ECONOMICS 56—Feb. 4, 1936.

E. M. Hoover

  1. Friedrich, C.J., Alfred Weber’s Theory of the Location of Industries.
  2. Sorokin, P., Contemporary Sociological Theories.
  3. Semple, E.C., American History in its Geographic Conditions.
  4. 4. Fetter, F., The Masquerade of Monopoly [The Economic Law of Market Areas] in Quarterly Journal of Economics, vol. 38 [No. 3 (May, 1924), pp. 520-529.]
  5. Keir, Malcolm, Manufacturing.
  6. Black, J.D., Production Economics.
  7. Weber Alfred, Ueber den Standort der Industrien (Vol. 2 only, consisting of 8 monographs by different people).

Source: Harvard University Archives. Syllabi, course outlines and reading lists in Economics, 1895-2003. Box 2, Folder “Economics, 1935-1936”.

Image Source: Economics instructor Edgar M. Hoover. Harvard Class Album 1932.

 

 

Categories
Chicago Exam Questions

Chicago. Money, banking and monetary policy prelim examination, 1956

 

Fourteen graduate students took the prelim exam for the field of money, banking and monetary policy during the summer quarter at the University of Chicago in 1956. These examination questions were found in Milton Friedman’s papers at the Hoover Institution Archives along with the points awarded for each question along with the final grade recommendation by Friedman and the examination committee.

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MONEY, BANKING AND MONETARY POLICY

Preliminary Examination
Summer Quarter, 1956

Write your number and not your name on your examination paper.

Answer all questions. Time: 4 hours. [120 points total]

  1. (a) What is the Keynesian “investment multiplier” in its simplest form? How can it be computed from the consumption function? [5 points]
    (b) Keynes assumed that the consumption function is expressed in wage units and that the average propensity to consume is greater than the marginal propensity. He further assumed as a first approximation that an increase in income is fully reflected in real income with prices stable up to “full employment” and in prices with real income stable, thereafter. What, if any, is the effect of the shift from below full employment to full employment on the numerical value of the “multiplier”? Explain in terms of the properties assigned to the consumption function by Keynes. [15 points]
  1. (a) Compare very briefly the essential parts of the a “fiscal operation” and a “monetary operation,” as they are usually described in the literature, and the way in which they affect prices and employment. Then discuss what the following statement might mean. Is it a meaningful comparison? If not, why not? If so, in what way? “Fiscal policy is more effective than monetary policy.” [10 points]
    (b) Suppose the Treasury engaged in a fiscal operation by running a budget deficit and paid for it by selling bonds to the public. Suppose further the Federal Reserve simultaneously engaged in a monetary operation by selling the public an amount of bonds equal to the deficit. What is likely to be the net effect of these two operations on prices in the short run? In the long run? Explain. What questions of fact did you need to consider in arriving at your answer? [10 points]
  1. “What, by the way of comparison, is likely to be the monetary mechanism of a price-wage spiral? When wages are increased, the immediate finance may be provided either by drawing on firms’ balances which would otherwise have been idle in the short period in question, or by increased borrowing from the banks.” – A. J. Brown
    Discuss, paying special attention to the relation implied between an increase in wages and the willingness of firms to hold smaller cash balances or engage in larger borrowing.
    (a) Discuss both the case of a wage increase in a particular sector and for “all” labor. [5 points]
    (b) Do the two cases differ?
    (c) Does “wages” as used in the second sentence of the quotation refer to “wage rates” or “wage payments”? Does it matter? [5 points]
    (d) If so, why? If not, why not? [5 points]
  2. (a) Sketch the development of the quantity theory of money. [7 points]
    (b) Compared the Cambridge and the Fisherine versions of this theory. [6 points]
    (c) What are the differences and similarities in the formulation of the demand for money between the Cambridge version of the quantity theory and the liquidity-preference function used by Keynes in his General Theory? What are the assumptions underlying these two formulations? What seems to you the most useful formulation of the demand for money? [7 points]
  1. “Inasmuch as the total quantity of purchasing media is expected to increase more or less in parallel with the production of gold and goods, the importance of a given amount of inflationary purchasing media will depend on its relation to the non-inflationary purchasing media in use… The commercial banks are able to [create inflationary purchasing media by acquiring investments in securities and noncommercial loans greater in dollar value than the total of their time deposits and capital], because the banks can create the purchasing media (demand deposits) with which they buy such assets. The inflationary purchasing media thus created are initially in the form of credits (bookkeeping additions) to the accounts of depositors…As these inflationary purchasing media are spent by the original recipients, the funds flow into the channels of trade and are indistinguishable from other demand deposits and currency that represent gold and goods being offered in the Nation’s markets. Thus great additions to the purchasing media used to buy goods can occur without corresponding increases in the goods available in the market; hence the upward pressure on prices and related developments of an inflationary boom.” – American Institute for Economic Research, Current Economic Trends, (June, 1955), p. 7.(a) What is meant by “inflationary purchasing media” in this quotation? [7 points]
    (b) How does their creation allegedly produce “an inflationary boom?” [6 points]
    (c) Evaluate the reasoning implied in the last sentence [7 points].
  1. “There cannot, in short, be intrinsically a more insignificant thing, in the economy of society, then money; except in the character of a contrivance for sparing time and labor. It is machine for doing quickly and commodiously, what would be done without it; and like many other kinds of machinery, it exerts a distinct and independent influence of its own when it gets out of order.” – John Stuart Mill, Principles of Political Economy, Ashley addition, p. 488.

(a) Formulate your conception of money that is in order [5 points],
(b) sketch the monetary experience of one or more countries [5 points],
(c) indicate clearly when you think money was “out of order,” [5 points] and
(d) explain the results [5 points].

 

From Friedman’s handwritten table we find the following distribution of points by question as well as the final grade awarded for the preliminary examination (failure, MA candidacy, PhD candidacy). The committee final grades awarded are designated in boldface. Friedman judged four exams to be borderline cases.

 1. 2. 3. 4. 5. 6. Total Final Grade
ID no. (a) (b) (a) (b) (a) (b) (c) (a) (b) (c) (a) (b) (c) (d)

1

 4 0 7 4 5 2 4 7 6 4 6 4 3 2 1 59 PhD
2 5 8 4 3 7 4 3 5 1 3 1 3 3 5 1 56

PhD

3

 4 12 5 6 6 2 5 5 5 3 3 5 4 3 1 69 PhD
5 5 0 7 6 13 3 4 7 0 4 3 4 3 3 1 63

PhD

6

 4 3 4 5 3 3 3 2 0 2 0 3 4 2 2 40 MA/F
7 5 8 7 4 10 3 6 6 3 1 4 3 5 5 3 71

PhD

8

 3 0 3 0 7 2 1 3 2 0 0 3 5 2 0 31 F
10 4 2 5 4 8 3 3 6 5 3 5 3 2 2 1 56

PhD

11

 5 5 5 2 0 0 3 5 0 0 0 — — — — 25 F
12 5 7 4 6 3 2 3 3 0 3 1 2 1 2 0 42

MA/F

13

 4 3 6 6 5 4 3 4 1 1 1 3 3 2 0 46 MA
14 5 4 5 4 2 3 3 4 0 3 1 1 3 1 0 39

MA/F

15

 4 5 3 2 5 2 1 3 5 2 4 3 5 4 2 50 MA/PhD
16 5 6 9 4 10 4 4 6 5 3 4 4 5 3 0 72

PhD

Source: Hoover Institution Archives. Papers of Milton Friedman. Box 76, Folder 10.

Image Source: University of Chicago Photographic Archive, apf1-06231, Special Collections Research Center, University of Chicago Library

Categories
Funny Business Pennsylvania

Pennsylvania. Share of doctoral dissertations by field that used (cited?) foreign language titles, 1954-55

The previous post included a column from a table that ranked economics graduate programs in 1957 included in the appendix to a study written at the University of Pennsylvania that also included the following table. 

I cannot help but tweak an old joke,

What do you call a graduate student who knows three languages?…Trilingual.
What do you call a graduate student who knows two languages?…Bilingual
What do you call a graduate student who knows one language?…An American economics graduate student.

(I’ll show myself out…)

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Before economists stopped writing their Ph.D. dissertations in English…

A study of the doctoral dissertations accepted [at the University of Pennsylvania] in 1954-1955 shows the extent to which foreign language titles were used in the preparation of the dissertation.

Foreign languages

 100%
Linguistics

80%

Natural Sciences

 77%
Political Science

58%

History

 50%
English

43%

Education

 33%
Behavioral Sciences

21%

Economics

17%

Source:  Hayward Keniston. Graduate Study and Research in the Arts and Sciences at the University of Pennsylvania (January 1959), p.95.

Image Source: Cover of English Sounds for Foreign Tongues: A Drill Book by Sarah Tracy Barrows (Columbus: Ohio State University, 1918).

Categories
Berkeley Carnegie Institute of Technology Chicago Cornell Duke Economics Programs Harvard Illinois Indiana Iowa Johns Hopkins M.I.T. Michigan Minnesota Northwestern NYU Ohio State Pennsylvania Princeton Stanford UCLA Vanderbilt Wisconsin Yale

Economics Departments and University Rankings by Chairmen. Hughes (1925) and Keniston (1957)

 

The rankings of universities and departments of economics for 1920 and 1957 that are found below were based on the pooling of contemporary expert opinions. Because the ultimate question for both the Hughes and Keniston studies was the relative aggregate university standing with respect to graduate education, “The list did not include technical schools, like the Massachusetts Institute of Technology and the California Institute of Technology, nor state colleges, like Iowa State, Michigan State or Penn State, since the purpose was to compare institutions which offered the doctorate in a wide variety of fields.” Hence, historians of economics will be frustrated by the conspicuous absence of M.I.T. and Carnegie Tech in the 1957 column except for the understated footnote “According to some of the chairmen there are strong departments at Carnegie Tech. and M.I.T.; also at Vanderbilt”.

The average perceived rank of a particular economics department relative to that of its university might be of use in assessing the negotiating position of department chairs with their respective university administrations. The observed movement within the perception league tables over the course of roughly a human generation might suggest other questions worth pursuing. 

Anyhow without further apology…

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About the Image: There is no face associated with rankings so I have chosen the legendary comedians Bud Abbott and Lou Costello for their “Who’s on First?” sketch.  YouTube TV version; Radio version: Who’s on First? starts at 22:15

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From Keniston’s Appendix (1959)

Standing of
American Graduate Departments
in the Arts and Sciences

The present study was undertaken as part of a survey of the Graduate School of the University of Pennsylvania in an effort to discover the present reputation of the various departments which offer programs leading to the doctorate.

A letter was addressed to the chairmen of departments in each of twenty-five leading universities of the country. The list was compiled on the basis of (1) membership in the Association of American Universities, (2) number of Ph.D.’s awarded in recent years, (3) geographical distribution. The list did not include technical schools, like the Massachusetts Institute of Technology and the California Institute of Technology, nor state colleges, like Iowa State, Michigan State or Penn State, since the purpose was to compare institutions which offered the doctorate in a wide variety of fields.

Each chairman was asked to rate, on an accompanying sheet, the strongest departments in his field, arranged roughly as the first five, the second five and, if possible, the third five, on the basis of the quality of their Ph.D. work and the quality of the faculty as scholars. About 80% of the chairmen returned a rating. Since many of them reported the composite judgment of their staff, the total number of ratings is well over 500.

On each rating sheet, the individual institutions were given a score. If they were rated in order of rank, they were assigned numbers from 15 (Rank 1) to 1 (Rank 15). If they were rated in groups of five, each group alphabetically arranged, those in the top five were given a score of 13, in the second five a score of 8, and in the third five a score of 3. When all the ratings sheets were returned, the scores of each institution were tabulated and compiled and the institutions arranged in order, in accordance with the total score for each department.

To determine areas of strength or weakness, the departmental scores were combined to determine [four] divisional scores. [Divisions (Departments): Biological Sciences (2), Humanities (11), Physical Sciences (6), Social Sciences (5)]….

… Finally, the scores of each institution given in the divisional rankings were combined to provide an over-all rating of the graduate standing of the major universities.

From a similar poll of opinion, made by R. M. Hughes, A Study of the Graduate Schools of America, and published in 1925, it was possible to compile the scores for each of eighteen departments as they were ranked at that time and also to secure divisional and over-all rankings. These are presented here for the purpose of showing what changes have taken place in the course of a generation.

The limitations of such a study are obvious; the ranks reported do not reveal the actual merit of the individual departments. They depend on highly subjective impressions; they reflect old and new loyalties; they are subject to lag, and the halo of past prestige. But they do report the judgment of the men whose opinion is most likely to have weight. For chairmen, by virtue of their office, are the men who must know what is going on at other institutions. They are called upon to recommend schools where students in their field may profitably study; they must seek new appointments from the staff and graduates of other schools; their own graduates tum to them for advice in choosing between alternative possibilities for appointment. The sum of their opinions is, therefore, a fairly close approximation to what informed people think about the standing of the departments in each of the fields.

 

OVER-ALL STANDING
(Total Scores)

1925

1957

1.

 Chicago

1543

1.

 Harvard

5403

2.

 Harvard

1535

2.

 California

4750

3.

 Columbia 1316 3. Columbia 4183
4. Wisconsin 886 4. Yale

4094

5.

 Yale 885 5. Michigan 3603
6. Princeton 805 5. Chicago

3495

7.

 Johns Hopkins 746 7. Princeton 2770
8. Michigan 720 8. Wisconsin

2453

9.

 California 712 9. Cornell 2239
10. Cornell 694 10. Illinois

1934

11.

 Illinois 561 11. Pennsylvania 1784
12. Pennsylvania 459 12. Minnesota

1442

13.

 Minnesota 430 13. Stanford 1439
14. Stanford 365 14. U.C.L.A.

1366

15.

 Ohio State 294 15. Indiana 1329
16. Iowa 215 16. Johns Hopkins

1249

17.

 Northwestern 143 17. Northwestern 934
18. North Carolina 57 18. Ohio State

874

19.

 Indiana 45 19. N.Y.U. 801
20. Washington

759

 

ECONOMICS

1925

1957
1. Harvard 92 1. Harvard

298

2.

 Columbia 75 2. Chicago 262
3. Chicago 65 3. Yale

241

4.

 Wisconsin 63 4. Columbia 210
5. Yale 42 5. California

196

6.

 Johns Hopkins 39 5. Stanford 196
7. Michigan 31 7. Princeton

184

8.

 Pennsylvania 29 8. Johns Hopkins 178
9. Illinois 27 9. Michigan

174

10.

 Cornell 25 10. Minnesota 96
11. Princeton 23 11. Northwestern

70

12.

 California 22 12. Duke 69
13. Minnesota 20 13. Wisconsin

66

14.

 Northwestern 18 14. Pennsylvania 45
15. Stanford 17 15. Cornell

32

16.

 Ohio State 15 16. U.C.L.A.

31

According to some of the chairmen there are strong departments at Carnegie Tech. and M.I.T.; also at Vanderbilt.

 

Source:  Hayward Keniston. Graduate Study and Research in the Arts and Sciences at the University of Pennsylvania (January 1959), pp. 115-119,129.

 

 

Categories
Cambridge Exam Questions

Cambridge. Examination Papers in Political Economy, 1871-1872

 

This post takes us back nearly 150 years to the University of Cambridge and to when political economy was merely one among several moral sciences worthy of study. Below you will find sets of three examination papers in Political Economy from each of the (i) Moral Sciences Tripos, (ii) Second Special Examination in Moral Science for the Ordinary B.A. Degree, and (iii) Special Examination in Moral Science for the Ordinary B.A. Degree for the 1871-1872 academic year.

One notes the relative prominence given to the work of Frédéric Bastiat. In contrast John Stuart Mill’s name does not appear in the examination questions.

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CAMBRIDGE UNIVERSITY EXAMINATION PAPERS
MICHAELMAS TERM, 1871 TO EASTER TERM, 1872.

MORAL SCIENCES TRIPOS.

TUESDAY, Nov. 28, 1871. 1 to 4.
POLITICAL ECONOMY.

  1. EXPLAIN the nature of the distinction between fixed and circulating capital.
    A timber merchant gradually disengages his capital from that business, and invests it in an omnibus company: what effect is produced thereby upon the fixed and circulating capital, respectively, of the country?
  2. What is meant by the Effective Desire of Accumulation? In discussing this desire is it assumed that old men, as a rule, save as much as young men; and, if so, is the assumption correct? Examine Bastiat’s definition of “saving.”
  3. State, without any further explanation, the Ricardian theory of Rent.
    If a farmer were to insist that rent enters into the cost of production of his corn, because, without having to pay rent, he could have afforded to sell his corn at 30s. a quarter, but, paying rent, only at 40s.; what should you reply?
  4. What is meant by “gratuitous” and “onerous utility”? What laws determine their relative proportion?
  5. How is our silver coinage guarded against any present danger of being melted down, and from what causes could such a contingency arise?
  6. Explain, in their usual sense, the following terms:— Free trade, excise duties, prohibitive duties, ad valorem duties, direct and indirect taxation.
  7. By what arguments is the “right to employment” supported? How does Bastiat endeavour to meet them?
  8. If any one had private information that war was about to break out between England and America, what sort of changes in his investments might it be prudent for him to make?

Source: Cambridge University Examination Papers. Michaelmas Term, 1871 to Easter Term, 1872 (Cambridge, 1873), p. 25.

 

MORAL SCIENCES TRIPOS.

THURSDAY, Nov. 30, 1871. 9 to 12.
POLITICAL ECONOMY.

[Not more than four of these questions are to be attempted. Full marks may be obtained by adequate treatment of any one.]

  1. SUPPOSE that a comparison were made between the capital of this country now and a century ago: describe the principal respects in which you would expect to find an increase.
  2. What are the principal causes which determine the average rate of interest in a country, and its temporary fluctuations?
    To what extent is the price of shares in British and in Foreign railways affected by the varying rate of interest at home
  3. What are the advantages and disadvantages, and to what classes of society, of the enclosure of common lands? Illustrate your views historically.
  4. Estimate the probable effect of Post Office savings banks upon the capital and wealth of the country.
  5. Has Political Economy or Ethics the most to learn from the other?
  6. Discuss the social and political effects of the custom of primogeniture as compared with those of a law of equal division.
  7. Examine the probable results, to the different classes of English society, if the anticipated decline and ultimate exhaustion of our coal-fields were to commence at once.
  8. “The Internationale however goes much farther than this. It proposes that the central authority in Switzerland shall abolish all indirect taxation whatever, even we presume upon alcohol, and substitute for all a property-tax estimated by valuation, as in America, but increasing in rate with the increase of the fortune upon which it is levied, and accompanied by a heavy succession duty…With the revenue thus accumulated the central authority is to create a State Bank, with the sole right of issuing notes, and is, with those notes, to furnish all associations of operatives with the capital they require, thus superseding the necessity for the individual capitalist. The State itself would be the sole employer of labour, the payment or receipt of wages would be prohibited by statute, and all profits would be divided equally amongst those who earned them. The capitalist would thus be summarily extinguished…every citizen being declared entitled to poor relief, first from his Commune, and afterwards, if the Commune is over pressed, from the State. No condition whatever, except poverty, is annexed to this relief.”
    Do you consider any of the above provisions wise or feasible?

Source: Cambridge University Examination Papers. Michaelmas Term, 1871 to Easter Term, 1872 (Cambridge, 1873), p. 27.

 

MORAL SCIENCES TRIPOS.

FRIDAY, Dec. 1, 1871. 1 to 4.
POLITICAL ECONOMY.

  1. WHAT exactly is meant by the Cost of Production of an article? Take, as an example, a bottle of old vintage port.
  2. Why is it that people at watering-places find it cheaper to live in lodgings than in hotels?
  3. Explain what is meant by the principle of Cooperation, as applied to manufactures and to trades. What limits to its extension, if any, do you anticipate?
  4. What does Prof. Cairnes understand by a monopoly rent, and in what respects does he contrast it with an agricultural rent?
  5. What do you consider to be the effects of Freedom of Trade, with and without reciprocity?
  6. Illustrate the principal mistakes which have been made, or which might be made, in taxing imported commodities.
  7. Indicate briefly the opinions held by Adam Smith upon the following points:

(1) “The different effects of the Progress of Improvement upon three different sorts of rude produce.”

(2) The principal forms of Circulating Capital in any country.

(3) The evidences of any change in the value of silver before the discovery of the American mines.

(4) The objects of the Navigation Act.

(5) The causes which have interfered with the “Natural course of things,” in respect of the order of priority of agriculture, manufactures, and foreign commerce.

(6) The Methuen treaty.

(7) Taxes upon the Wages of Labour.

(8) The objections to taxes upon luxuries.

Source: Cambridge University Examination Papers. Michaelmas Term, 1871 to Easter Term, 1872 (Cambridge, 1873), p. 28.

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SECOND SPECIAL EXAMINATION IN MORAL SCIENCE FOR THE ORDINARY B.A. DEGREE.

THURSDAY, Nov. 30. 9 to 12.
POLITICAL ECONOMY.

  1. EXPLAIN the terms Fixed and Circulating Capital.
    An omnibus proprietor gradually disposes of his business, and invests his capital instead in the wine trade; what sort of change is produced thereby, so far as he is concerned, upon the fixed and circulating capital respectively, of the country?
  2. Describe the causes which render manufactures on a large scale more profitable than those on a small scale.
    Why then is not the manufacture of every particular article in a country carried on in a single establishment?
  3. What exactly is meant by saying that profits depend, not upon wages but, upon the cost of labour?
  4. Explain the principal reasons why cotton goods are cheaper now than they were a century ago, whereas butcher’s meat is much dearer.
  5. Discuss, with examples of your own, the causes which procure a permanently higher rate of wages for some employments than for others.
  6. Distinguish between Value and Price.
    What sort of connection would you expect to find between the prices respectively of beef, of milk, and of hides?
  7. What is meant by saying, of certain articles, that their value depends upon demand and supply? Apply your remarks to the case of corn in spring and autumn. What sort of articles are likely to vary most in market value?
  8. If any one were to melt a quantity of our silver coins, and then sell the bullion, he would find that he lost by the process. Explain (1) why this is so, (2) the object of the mint regulations by which this result is secured.

Source: Cambridge University Examination Papers. Michaelmas Term, 1871 to Easter Term, 1872 (Cambridge, 1873), p. 52.

SECOND SPECIAL EXAMINATION IN MORAL SCIENCE FOR THE ORDINARY B.A. DEGREE.

THURSDAY, Nov. 30, 1871. 1 to 4.
POLITICAL ECONOMY

  1. To what extent, in you: opinion, does the Science of Political Economy furnish rules for human action?
  2. Compare economically the advantages and disadvantages of large and small farms.
    Supposing that serf-labour on large farms were found cheaper than free, what objection could be made, economically, to its employment?
  3. Adam Smith says, “There seem, however, to be two cases in which it will generally be advantageous to lay some burden upon foreign, for the encouragement of domestic industry.” What are those cases?
  4. Quote Adam Smith’s remarks upon the system of taking fines on the renewal of agricultural leases.
  5. “A militia, however, in whatever manner it may be either disciplined or exercised, must always be much inferior to a well-disciplined and well-exercised standing army.”
    By what arguments does Adam Smith support this assertion?
  6. Give a brief account of the Agricultural systems of Political Economy.
  7. What is Adam Smith’s opinion of Treaties of Commerce?
  8. Shew that in consequence of International Trade it may be profitable to the trader to sell articles in the foreign country at a price which does not exceed their market price in his own by the cost of carriage.
    To what limit do you consider that the difference in price of the same article in the home and foreign countries would ultimately tend?
  9. The rate of Discount has varied, within the last few years, between one per cent, and ten per cent. Indicate the causes on, which such variations depend.
    Should you expect to find any corresponding variations in the price of the Public Funds?

Source: Cambridge University Examination Papers. Michaelmas Term, 1871 to Easter Term, 1872 (Cambridge, 1873),  pp. 53-54.

SECOND SPECIAL EXAMINATION IN MORAL SCIENCE FOR THE ORDINARY B.A. DEGREE.

FRIDAY, Dec. 1, 1871. 9 to 12.
POLITICAL ECONOMY

  1. QUOTE some of Bastiat’s arguments in favour of “free-trade.”
  2. Give a sketch of the “mercantile system” as described by Adam Smith.
  3. State Bastiat’s definition of “Value;” and quote his criticisms upon the definitions of other political economists.
  4. Bastiat says:
    “Each step of progress annihilates value.”
    “In all departments of industry value increases with the density of population.”
    How does he argue in support of these propositions?
  5. Bastiat asserts that “There is not in the entire price of the corn (offered for sale in any market) a single farthing which does not go to remunerate human services.”
    Examine the validity of this assertion.
  6. “The Bankers,” says Adam Smith, “invented therefore another method of issuing their promissory Notes, by granting, what they called, Cash accounts.”
    How does he describe the effect of these “cash accounts” on trade?
  7. Adam Smith says, “There are no public institutions for the education of women, and there is accordingly nothing useless, absurd, or fantastical in the common course of their education.”
    Give a sketch of the argument in the course of which this statement is made.
  8. Discuss some of the common objections to the fairness of an Income Tax.
  9. Discuss the policy of the English Poor Law from an economical point of view.

Source:  Cambridge University Examination Papers. Michaelmas Term, 1871 to Easter Term, 1872 (Cambridge, 1873), p. 54.

________________

SPECIAL EXAMINATION IN MORAL SCIENCE FOR THE ORDINARY B.A. DEGREE.

Monday, June 3, 1872. 9 to 12.
POLITICAL ECONOMY.

  1. DEFINE Political Economy: investigate the relation between it and Political Philosophy: and discuss the statement that it is hard-hearted and selfish.
  2. Define Wealth, Capital, Productive Labour, Metayer Tenancy; and distinguish between Direct and Indirect Taxation.
  3. Compare the economical benefits of large and small farming.
  4. What is Communism? Explain and criticize the schemes of Communism proposed by St. Simon and Fourier respectively.
  5. State Ricardo’s theory of Rent, and examine any arguments which have been brought against it.
  6. What are the principal causes of the different rates of wages in different trades?
  7. Explain the statement that ‘There cannot be a general rise in values, but there can be a general rise in prices.’
  8. How do you account for the fact that both wages and profits are generally high in a new colony?
  9. State Adam Smith’s four ‘Canons’ of taxation, and give examples illustrating their infringement.
  10. Who really pays the poor-rates, (a) upon farms, (b) upon houses in an ordinary village, (c) upon shops in Regent Circus, (d) upon cotton-mills?

Source:  Cambridge University Examination Papers. Michaelmas Term, 1871 to Easter Term, 1872 (Cambridge, 1873), p. 10.

 

SPECIAL EXAMINATION IN MORAL SCIENCE FOR THE ORDINARY B.A. DEGREE.

MONDAY, June 3, 1872. 1 to 4.
POLITICAL ECONOMY.

  1. “THE real price of everything is the toil and trouble of acquiring it.” In what way is this statement ambiguous? How should you mend it?
  2. What are the principal artificial causes mentioned by Adam Smith, as producing inequalities in the wages and profit in different employments?
  3. Adam Smith makes one division of rude produce to consist of those articles which it is scarce in the power of human industry to multiply at all. What other divisions does he take account of? Give examples of each sort.
  4. Give a brief account of the principal restraints upon importation and encouragements to exportation which were formerly supported by statesmen and economists. On what ground are they now generally condemned?
  5. What was the nature and object of the laws against forestalling and engrossing?
  6. What kinds of trade does Adam Smith consider suitable for joint-stock companies? What general judgment does he pronounce upon the management of the East India Company?
  7. What are Capitation Taxes? What taxes of this description have been actually imposed in England or France?
  8. “The progress of the enormous debts which at present oppress, and will in the long run probably ruin, all the great nations of Europe has been pretty uniform.” Give some account of the progress of our national debt since these words were written. What circumstances have contributed to avert, in our case, the fate here anticipated?
  9. Discuss the policy of attempting to pay off a national debt, shewing to what extent your conclusion is affected by the circumstances, social commercial or otherwise, of the particular country in question.
  10. Mention some of the principal taxes which have been remitted in England during the last ten years, and the grounds of their remission.

Source: Cambridge University Examination Papers. Michaelmas Term, 1871 to Easter Term, 1872 (Cambridge, 1873), p. 11.

SPECIAL EXAMINATION IN MORAL SCIENCE FOR THE ORDINARY B.A. DEGREE.

TUESDAY, June 4, 1872. 9 to 12.
POLITICAL ECONOMY.

  1. “TAKE up the Collection des Economistes, and read and compare all the definitions [of value] which you will find there. If there be one of them which meets the case of the air and the diamond, two cases in appearance so opposite, throw this book into the fire.”
    Describe the difficulty here alluded to, and give some account of the way in which Bastiat considers that he has solved it.
  2. “Of all the elements of which the total value of any product is made up, the part which we should pay for most cheerfully is that element which we term the interest of the advances or capital.” Why so?
  3. To what extent is Utility, according to Bastiat, dependent upon labour? Illustrate your answer by examples of your own.
  4. Indicate, as precisely as you can, the extent to which you consider Bastiat to be in error on the subject of Rent.
  5. If twelve pence were melted or defaced the metal would not be worth a shilling. Explain clearly why this is so, and what is the nature and object of the legislation by which the inequality is secured.
  6. What is meant by saying that the foreign exchanges are against any particular country?
  7. What is meant by saying that the current rate of discount is four per cent.?
    To what extent are the fluctuations in the value of Railway and other Stocks dependent upon the rate of discount?
  8. Describe the principal mistakes to be avoided in levying taxes upon imported commodities.

Source:  Cambridge University Examination Papers. Michaelmas Term, 1871 to Easter Term, 1872 (Cambridge, 1873), p. 12.

Image Source: George Arents Collection, The New York Public Library. “Bridge of Sighs” St. John’s College, Cambridge, England.” New York Public Library Digital Collections. Accessed April 8, 2019. http://digitalcollections.nypl.org/items/510d47e2-362a-a3d9-e040-e00a18064a99

 

 

Categories
Economists Harvard

Harvard. Economics Ph.D. Alumnus. Arnold M. Soloway, 1952

 

 

An earlier post provided the syllabi for the Harvard economics department public finance course (actually consolidated into a single document for the undergraduate and graduate versions of the course) taught by J. Keith Butters and Arnold M. Soloway in 1954-55.

Since both instructors received their doctorates in economics from Harvard, I have added this post that provides some biographical information about Arnold M. Soloway. The previous post did the same for J. Keith Butters.

Before getting his economics training at Harvard, Soloway was a Phi Beta Kappa, two-way tackle at Brown University. He was such a good athlete that he was included in the Sports Illustrated 25th Anniversary All-American Team (see below).

I begin with the vital dates: Arnold M. Soloway was born December 3, 1920 in New York City and he died April 13, 2016 in Westwood, Massachusetts.

_______________________

Harvard Ph.D. (1952)

Arnold Michael Soloway, A.B. (Brown Univ.) 1942, A.M. (ibid.) 1948. Special Field, Public Finance. Thesis, “The Purchase Tax and British Economic Policy, 1940-1950.”

Source: Harvard University. Report of the President of Harvard College, 1951-52, p. 178.

_______________________

Arnold M. Soloway
Obituary

Arnold M. Soloway, former Harvard economics professor, real estate developer, state chairman of Americans for Democratic Action, prominent 1960s Democratic Party leader, and well known expert on Israel and the Middle East, died at his home in Westwood, MA on Wednesday, April 13, 2016. He was 95.

Arnie graduated Phi Beta Kappa from Brown University in 1942, where he also starred on the football team. Following WWII, he returned to Brown as an economics instructor and assistant football coach, where he coached a young quarterback from Brooklyn, NY named Joe Paterno. He left Brown in 1948 and came to Harvard where he taught for more than 10 years and received his PhD in economics. During this same period, in 1948, Arnie also founded Camp Walt Whitman, a co-ed summer camp in New Hampshire, which he ran with his brother for more than twenty years and which today remains one of the nation’s highest rated summer camps. After leaving Harvard, he was an economics and business consultant for more than a decade.

He helped lead then-Boston Mayor John Collins’s “New Boston Committee” and its seminal study on Boston’s housing challenges, and later went on to serve on the consumer advisory council established by then-Attorney General Edward J. McCormack. In the years that followed he became increasingly active in Massachusetts and national democratic politics, including managing McCormack’s Senate campaign against Edward M. Kennedy in 1961 and his later gubernatorial campaign against John Volpe in 1966; chairing the Massachusetts chapter of Americans for Democratic Action; managing the Massachusetts campaign for Hubert Humphrey in his 1968 presidential campaign, and serving as a senior advisor to the late Senator Henry M. “Scoop” Jackson in 1976.

In the early 1960s, Arnie led the renovation of the old Bellevue Hotel next to the state Capitol into an apartment complex and built the landmark “Jamaicaway Towers,” across from Jamaica Pond, at the time the tallest high rise apartment complex in New England. He later founded Design Housing, Inc., through which he built a number of residential developments including the Townhouses at Lars Andersen in Brookline, Allandale Farms in Boston, and Lochstead in Falmouth.

In addition, Arnie was the first Chairman of the Facing History and Ourselves Foundation, which was created when the now-internationally acclaimed holocaust-based curriculum began to spread beyond its roots in the Brookline schools. He also chaired and was an early backer of the Committee for Accuracy in Middle East Reporting (CAMERA) and founded the Center for Near East Policy Research, through which he published numerous monographs and papers on Middle East issues.

He received the Louis Brandeis Award from the Zionist Organization of America in 1996 and was inducted into the Brown University Athletic Hall of Fame in 1993. In 1968, Sports Illustrated named him to their 25th Anniversary All American Football team.

Arnie is survived by three children: Nathaniel (Nick) of Helena, MT; Stan of Washington, DC; and Belle of Westwood, MA; a daughter-in-law Kathy, also of Washington, DC; and seven grandchildren: Aaron of San Francisco; Mollie of Orford, NH; Anna and Sonya of Washington, DC; and Daniel Robinson of San Francisco, Eugene Robinson of East Lansing, MI, and Hannah Robinson of Westwood, MA. He was pre-deceased in 2004 by his wife of 56 years, Joan Field Soloway.

Services at the Levine Chapels, 470 Harvard St., Brookline on Friday, April 15 at 1:00pm.

Burial in Sharon Memorial Park, 40 Dedham St., Sharon.

Source: Dignity Memorial webpage obituary.

_______________________

Brown University Athletics Hall of Fame
Arnold M. Soloway ‘42, Football
Hometown: Brookline, MA
Sport: Football
Year Inducted: 1993

Arnie Soloway was a very effective two-way tackle for three years – ’39, ’40 & ’41 – three very good Brown football teams. As a junior and again as a senior he was selected to the All-New England Team; the only Brown lineman to be awarded that honor in those years. As a senior Arnie was also awarded the Class of 1910 Football Trophy at the team banquet. The NFL Brooklyn Dodgers gave Arnie a contract to play following graduation, but with the onset of World War II Arnie volunteered to enter the service. In 1946 Arnie was hired by Rip Engle to join the Brown coaching staff with Ernie Savignano; and from 1946-48 they groomed Brown athletes to go on to varsity competition. While coaching afternoons Arnie earned his Masters Degree in economics in 1948. During 1949 and 1950 he continued to scout for Brown while studying and teaching at Harvard, completing his Ph.D. in economics in 1952, where he remained on the faculty until 1960. In 1967 Arnie was once again recognized for his football accomplishments at Brown when he was selected to the Sports Illustrated 25th Anniversary All-American Team. Arnie has had a varied and effective career in the public and private sectors: Chairman, Harvard Graduate Society Council, 1982-83; Massachusetts Board of Higher Education, 1980-81; Chairman, Special Commission on Boston Public Housing, 1978-79; Director, National Committee on American Foreign Policy; National Bureau of Economic Research, 1974-79; Visiting Professor, Graduate School, Boston College. Arnie and his wife, Joan Field Soloway (Pembroke, ’49) reside in Brookline and have three children: Nathaniel A. Brown ’74; Stan Z., Dennison ’75; and Belle F., Brown ’78; and, as Arnie will tell you, seven fantastic grandchildren from 7 months to 11 years old.

Source: Brown University Athletics Hall of Fame.

_______________________

Resigns chairmanship of the Graduate School of Arts and Sciences Alumni Association

Arnold M. Soloway, chairman of the Graduate School of Arts and Sciences Alumni Association quit his post in June to protest the appointment of a Palestinian scholar to a research position at the Center for Middle Eastern Studies. Soloway charged that Whalid Khalidi’s appointment in the spring of 1982 was dictated by a Saudi businessman’s $1 million gift. Harvard officials declined comment.

Source: The Harvard Crimson, September 12, 1983.

Image Source: Dignity Memorial webpage obituary.

 

 

Categories
Business School Economists Harvard

Harvard. Economics Ph.D. alumnus. John Keith Butters, 1941

 

The previous post provided the syllabi for the Harvard economics department public finance course (actually consolidated into a single document for the undergraduate and graduate versions of the course) taught by J. Keith Butters and Arnold M. Soloway in 1954-55.

Since both instructors received their doctorates in economics from Harvard, I have included this post that provides some biographical information about J. Keith Butters. The next post will do the same for Arnold M. Soloway.

I begin with the vital dates: John Keith Butters was born August 28, 1915 in Chicago and he died December 11, 2005 in Lexington, Massachusetts.

_______________________

Harvard Economics Ph.D. (1941)

John Keith Butters, A.B. (Univ. of Chicago) 1937, A.M. (Harvard Univ.) 1939. Subject, Economics. Special Field, Public Finance. Thesis, “Federal Taxation of Corporate Profits.” Instructor in Economics and Tutor in the Department of Economics.

Source: Harvard University. Report of the President of Harvard College 1940-1941, p. 174.

_______________________

Effect of Federal Taxes on Growing Enterprises
by J. Keith Butters and John Lintner
(1945)

Principal Conclusions

In highly condensed form the principal findings of the study may be summarized as follows:

  1. In the development-of-the-idea stage of a new enterprise taxes are seldom of dominant importance.
  2. As a business develops beyond the “idea” stage to the point at which production appears feasible, tax considerations become progressively more important.
  3. At this stage, and beyond, high corporate taxes are typically much more repressive in their effects than are high personal taxes at least so long as capital gains continue to receive very favorable treatment.
  4. High corporate taxes restrict the growth of small companies:
    1. By greatly reducing the attractiveness of risky expansions to the managements of small companies;
    2. By curtailing the amount of capital available from retained earnings to finance such expansions; and
    3. By making the acquisition of outside capital on satisfactory terms much more difficult.
  5. In each of these respects the restrictive effect of high personal taxes appears to be much less severe:
    1. The effect of personal taxes on management incentives is much less direct;
    2. Except for unincorporated enterprises personal taxes do not reduce retained earnings; and
    3. On balance, high personal taxes may not even divert outside capital away from highly venturesome enterprises.
  6. Retained earnings are an especially critical source of funds for the expansion of small enterprises:
    1. The owners of small companies frequently place great importance on the maintenance of a strong control position and of their personal freedom of action. To the extent that they do so, they will be reluctant to undertake expansions which must be financed by outside capital.
    2. Many small companies even companies with promising growth prospects find it extremely difficult or impossible to raise outside capital on reasonably favorable terms.
    3. Hence, for both of these reasons, many expansions by small companies will, in fact, be undertaken only if funds are available from retained earnings to finance them.
  7. In almost every respect high taxes are less repressive on large, established corporations than on small, growing firms.
    1. High taxes reduce the profit expectancy of new expansions by large companies much less severely than they restrict similar expansions undertaken by small, independent companies.
    2. Large, established companies have substantial amounts of funds coming available from their noncash expenses in addition to whatever earnings they may be able to retain after taxes. These funds may be used to finance the introduction of new products and technical innovations.
    3. Finally, large, established companies generally can acquire new capital on much more favorable terms than can small companies. In addition to their ability to float common stock with relative ease, they can usually issue preferred stocks or bonds alternatives available to small companies only on a limited scale, on more expensive terms, and usually at great risk to the common stockholders.
  8. Thus, unless special adjustments are made to relieve the burden of a flat-rate corporate tax on small companies, such a tax would tend to promote an increased degree of industrial concentration in addition to restricting the growth of small, independent companies.
  9. It would be possible substantially to relieve the tax burden on most small, growing companies without greatly diminishing Federal revenues. This study clearly emphasizes the need for such relief. But it makes no attempt to examine the many problems which would arise in formulating the precise character of this relief.
  10. The financial problems confronting small firms are particularly acute in times of depression and market pessimism at such times it is practically impossible for most small companies to acquire new equity capital on acceptable terms. Indeed, perhaps the surest way to improve the position of small firms would be to follow an economic policy that would promote a high level of economic activity. The indirect effects of general prosperity would be far more powerful than any specific measures which could be taken to break down the barriers between small companies and the capital market.
  11. As a final point, existing imperfections in the capital market and the general unwillingness of individual savers to assume the risks of ownership emphasize the possibility that venture capital may be scarce at a time when there is general oversavings in the economy. Failure to recognize that oversavings and shortages of venture capital are not mutually incompatible has led to many statements of doubtful validity by both proponents and opponents of the oversavings thesis.

Source: Study Effect of Federal Taxes on Growing Enterprises. Study published by the Division of Research at the Graduate School of Business Administration, Harvard University in 1945, pp. 2-4.

_______________________

In Memoriam

HBS professor J. Keith Butters, an authority on finance and taxation, died in Lexington, Massachusetts, in December [2005]. He was 90.

The Thomas D. Casserly Jr. Professor of Business Administration, Emeritus, Butters retired from the HBS faculty in 1986 after 43 years of service, during which he chaired the Finance Unit (from 1969 to 1973) and taught in both the MBA and the Executive Education programs. He also played an influential role as the Business School’s representative to a number of University committees that affected faculty across all of Harvard.

Source:   Harvard Business School/Alumni/Stories, March 1, 2006.

_______________________

Boston Globe Obituary

J. Keith Butters

Of Lexington, died Dec. 12, 2005, at age 90. Husband of the late Helena Renaud Butters. He is survived by his brother William of Arlington Heights, IL; 3 children, Liz Butters of Denver, CO, Gerard R. Butters and his wife Ettie of Bethesda, MD, Nancy Butters and her husband Ron Pies of Lexington, MA; two grandchildren and two great grandchildren. A tenured Professor at The Harvard Business School, he received Harvard’s “Distinguished Service Award” in 1989 in recognition of his extraordinary service to the University’s educational mission.

Source: Legacy.com obituary from the Boston Globe.

Image Source:  Harvard Business School, The Annual Report 1954.

 

Categories
Fields Harvard Suggested Reading Syllabus

Harvard. Consolidated undergraduate and graduate public finance syllabus. Butters and Soloway, 1954-55

 

Providing a ten page transcription of a course syllabus is a daunting task. It does have the useful side-effect of forcing me to read the syllabus closely and I still labor under the hope that something of potential future significance will lodge itself somewhere in my subconscious, ready to go if ever summoned. Of course having a digitized transcript allows us to easily search the growing sample of course syllabi already transcribed at Economics in the Rear-view Mirror. 

Harvard economics Ph.D.’s on the economics department faculty in the mid-1950’s, J. Keith Butters and Arnold M. Soloway, are listed on the public finance syllabus below that was distributed as a consolidated reading list for the undergraduate and graduate versions of the course taught in 1954-1955. I am not sure what to make of the fact that only Butters’ name appears in the enrollment report included with the annual report of the President of Harvard College.

P.S. The mid-year (January) and end-year (May) final exams have been transcribed and posted in a later post.

_______________________

Course Enrollments

[Economics] 151. Public Finance. Associate Professor Butters. Full course.

(W) Total 30: 15 Seniors, 9 Juniors, 1 Sophomore, 4 Other Graduates, 1 Other
(S) Total 27: 14 Seniors, 11 Juniors, 1 Sophomore, 1 Other Graduate

[Economics] 251 Public Finance. Associate Professor Butters. Full course.

(F) Total 19: 7 Graduates, 8 Other Graduates, 1 Radcliffe, 3 Special
(S) Total 16: 6 Graduates, 7 Other Graduates, 1 Radcliffe, 2 Special

Source: Harvard University. Report of the President of Harvard College 1954-1955, pp. 90, 93.

_______________________

Economics 151 and 251
PUBLIC FINANCE
Fall Term, 1954-1955

Professors Butters and Soloway

NOTE: Readings under the heading “Required” are required for Economics 151. Students in Economics 251 are required to read the asterisked assignments and to be generally familiar with the substance of the material covered in the other required assignments for Economics 151.

The following general studies and texts are suggested for reference throughout the course. Specific assignments on various topics are made from some of these sources.

General Texts and Treatises on Public Finance:

Blough, Roy, The Federal Taxing Process

Brownlee, O. H. and Allen, E. D., Economics of Public Finance, (Second Edition)

Due, John F., Government Finance

Groves, H. M., Financing Government (Third Edition) [Fifth edition]

Groves, H. M., Viewpoints on Public Finance

Hicks, U. K., Public Finance

Pigou, A. C., A Study in Public Finance

Poole, K. E., (Editor), Fiscal Policies and the American Economy

Schultz, W. J. and Harriss, C. L., American Public Finance [Third edition, before Harriss]

Somers, H. M., Public Finance and National Income

 

Serial Publications and Periodicals:

Annual Reports of the Secretary of the Treasury

Budget Messages of the President

Economic Reports of the President and Economic Reviews of the Council of Economic Advisers

Proceedings of the National Tax Association

National Tax Journal

Taxes, The Tax Magazine (Published by Commerce Clearing House, Inc.)

The loose-leaf tax services published by Commerce Clearing House, Inc. and Prentice-Hall, available in the Law Library

 

September 28: Nature and Scope of Government Finance

Required

*Brownlee and Allen, Economics of Public Finance, Second Edition, pp. 3-22

*Colm, Gerhard, “Why Public Finance,” National Tax Journal, Sept. 1948, pp. 193-206

*Due, Government Finance, Ch. 1, pp. 1-16

Suggested

*Hicks, Public Finance, Ch. 1, pp. 1-16

Groves, Financing Government, Ch. 1, pp. 1-8

 

September 30 – October 2: Concepts of Justice

Required

*Due, Government Finance, Ch. 7, pp. 114-133

*Simons, Henry, Personal Income Taxation, Ch. 1, pp. 1-40

*Blough, The Federal Taxing Process, Ch. 15, pp. 382-408

Suggested

Pigou, A. C., “Some Aspects of Welfare Economics,” American Economic Review, June 1951, pp. 287-302

*Pigou, A Study in Public Finance, Part II, Chs. 1-7, pp. 40-93

*Robbins, L., “Interpersonal Comparisons of Utility,” Economic Journal, December 1938, pp. 635-641

*Wright, D. Mc., “Income Redistribution Reconsidered,” Income, Employment and Public Policy, edited by Metzler, L. Pp. 159-176

Blum, W. J., and Kalven, Harry, The Uneasy Case for Progressive Taxation

Shehab, F., Progressive Taxation: A Study in the Development of the Progressive Principal in the British Income Tax

 

October 5 – October 16: The Budget

Required

Groves, Financing Government (Third Edition), pp. 509-527

Schultz and Harriss, American Public Finance, pp. 131-151

*Smithies, Arthur, The Determination and Control of Federal Expenditures (mimeographed volume), Chs. I-VI (128 pages)

*Smith, Harold D., The Management of Your Government, Chs. 5-7, pp. 54-102

*March, Michael, “A Comment on Budgetary Improvement in the National Government,” National Tax Journal, June 1952, pp. 155-173. Also, “Reply to Mr. March” by Herman Loeffler, same issue, pp. 174-175

*The Budget of the United States Government for the Fiscal Year Ending June 30, 1955, pp. M5-M104 and A3-A16. (This assignment can be scanned rather than studied carefully as to matters of detail.)

*National Income, 1951 (A Supplement to the Survey of Current Business) pp. 10-18, 21-34, 42-43, 46-49

*Tax and Expenditure Policy for 1950, Committee for Economic Development, pp. 35-41

Suggested

Hicks, J. R., The Problem of Budget Reform

Hansen, A. H., Fiscal Policy and Business Cycles, Ch. 10, pp. 186-222

Key, V. O., “The Lack of a Budgetary Theory,” American Political Science Review, Volume 34 (December 1940), pp. 1137-1144

U.S. Commission on Organization of the Executive Branch of the Government, Budget and Accounting, Parts I and II, pp. 7-31, 77-84

U.S. Commission on Organization of the Executive Branch of the Government, Task Force Report on Fiscal, Budgeting, and Accounting Activities (Appendix F), pp. 37-38

Loeffler, Herman C., “Alice in Budget-Land,” National Tax Journal, March 1951, pp. 54-64

Fieldler, Clinton, “Reform of the Legislative Budget,” National Tax Journal, March 1951, pp. 65-76

Burkhead, Jesse, “The Outlook for Federal Budget-Making,” National Tax Journal, December 1949, pp. 289-299

*Smithies, A., The Determination and Control of Expenditures, Chs. VII-XII and Ch. XVIII (Mimeographed)

Dirks, F. C., “Recent Progress in the Federal Budget,” National Tax Journal, June 1954, pp. 141-154

 

October 19 – November 6: Expenditures

Required

*Due, Government Finance, Chs. 2-6, pp. 17-113

*Musgrave, R. A. and Culbertson, J. M., “The Growth of Public Expenditures in the United States, 1890-1948,” National Tax Journal, June 1953, pp. 97-115

*”State and Local Government Receipt and Expenditure Programs,” Survey of Current Business, January 1953, pp. 11-16

*Douglas, P. H., Economy in the National Government, Chs. I-VIII, pp. 3-204

*Buchanan, J. S., “The Pricing of Highway Services,” National Tax Journal, June 1952, pp. 97-106

Studenski, “Federal Grants-in-Aid,” National Tax Journal, September 1949, pp. 193-214

*Newcomer, Mabel, “State and Local Financing in Relation to Economic Fluctuations,” National Tax Journal, June 1954, pp. 97-109

*Maxwell, J. A., “The Equalizing Effects of Federal Grants,” Journal of Finance, May 1954, pp. 209-215

*Stark, John R., “Equities in the Financing of Federal Old and Survivors Insurance,” National Tax Journal, September 1953, pp. 286-292

Suggested

*Maxwell, J. A., Federal Grants and the Business Cycle, Chs. I-IV, pp. 1-99

*Clark, C., “Public Finance and Changes in the Value of Money,” Economic Journal, December 1945, pp. 371-389

*Pechman, J. A., and Mayer, Thomas, “Mr. Colin Clark on the Limits of Taxation,” Review of Economics and Statistics, August 1952, pp. 232-242; and Smith, D. T., “Note on Inflationary Consequences of High Taxation,” Ibid., Pp. 243, 247

*Goode, Richard, “And Economic Limit on Taxes: Some Recent Discussions,” National Tax Journal, September 1952, pp. 227-233

*Pigou, A. C., A Study in Public Finance, Chs. I-V, pp. 1-34

Machlup, F., “The Division of Labor between Government and Private Enterprise,” American Economic Review, 1943 Supplement, pp. 87-104

Hansen, A. H., and Perloff, H. S., State and Local Finance in the National Economy, Chs. 2 and 8

Hicks, J. R. and Hart, A. G., The Social Framework of the American Economy, Ch. XIII, pp. 174-185

Bowen, H. R., Toward Social Economy, Ch. 18

Backman, Jules and Kurnov, Ernest, “Pricing of Government Services,” National Tax Journal, June 1954, pp. 121-140

 

November 9 – November 30: Fiscal Policy

Required

*Smithies, Arthur, “Federal Budgeting and Physical Policy,” in A Survey of Contemporary Economics (edited by Howard S. Ellis), Ch. 5, pp. 174-209

Hansen, A. H., Business Cycles and National Income, Ch. 12, pp. 195-207

(Note: Read one or two of the following four sources)

(1) Gordon, R. A., Business Fluctuations, Ch. 18, pp. 525-544

(2) Brownlee, O. H. and Allen, E. D., Economics of Public Finance, 2nd edition, Chs. VI-VIII, pp. 94-140

(3) Musgrave, R. A., “Fiscal Policy, Stability, and Full Employment,” Public Finance and Full Employment (Postwar Economic Studies No. 3, Board of Governors of Federal Reserve System), pp. 1-21

(4) Due, Government Finance, Chs. 25-26, and 28, pp. 470-505, and 524-550

*Hart, A. G., Money, Debt and Economic Activity, Second Edition, Chs. XXVII, XXVIII, and XXIX, pp. 448-495

*Hicks, U. K., Public Finance, Ch. XVII, pp. 316-336

*Committee for Economic Development, Taxes and the Budget: A Program For Prosperity in a Free Economy (November 1947), especially pp. 9-34

*Blough, Roy, “Political and Administrative Requisites for Achieving Economic Stability,” American Economic Review, May 1950, pp. 165-177

*Lerner, A. P., The Economics of Control, Ch. 24, pp. 302-322

*Pechman, Joseph A., “Yield of the Individual Income Tax During a Recession,” National Tax Journal, March 1954, pp. 1-16

Suggested

*Wallich, H. C., “Income Generating Effects of a Balanced Budget,” Quarterly Journal of Economics, November 1944, pp. 78-91

*Musgrave, R. A., and Painter, M. S., “The Impact of Alternative Tax Structures on Personal Consumption and Saving,” Quarterly Journal of Economics, August 1948, pp. 475-499

*Margolis, Julius, “Public Works and Economic Stability,” Journal of Political Economy, August 1949, pp. 277-292

Beveridge, W. H., Full Employment in a Free Society

Hansen, A. H., Fiscal Policy and Business Cycles

Terborgh, George, The Bogie of Economic Maturity

Hansen, A. H., “Some Notes on Terborgh’s ‘The Bogie of Economic Maturity,’” Review of Economics and Statistics, February 1946, and Terborgh’s reply R. E. S., August 1946

*”The Problem of Economic Instability,” A committee report, American Economic Review, September 1950, pp. 505-538 (sections pertaining to fiscal policy)

Bach, G. L., “Monetary-Fiscal Policy, Debt Policy, and the Price Level,” American Economic Review, May 1947, pp. 228-242

Bronfenbrenner, M., “Postwar Political Economy: The President’s Reports,” Journal of Political Economy, October 1948, pp. 373-391

*Clark, J. M., “An Appraisal of the Workability of Compensatory Devices,” American Economic Review, Proceedings, March 1939, reprinted in Readings in Business Cycle Theory, pp. 291-310

“Problems of Timing and Administering Fiscal Policy in Prosperity and Depression,” papers by E. E. Hagen and A. G. Hart; discussion by J. K. Galbraith, B. H. Higgins, W. S. Soytinski, and O. H. Brownlee, American Economic Review, May 1948, pp. 417-451

*Musgrave, R. A. and Miller, M. H., “Built-in Flexibility,” American Economic Review, March 1948, pp. 122-128

Musgrave, R. A., “Alternative Budget Policies for Pole Full Employment,” American Economic Review, June 1945, pp. 387-400

Clark, J. M., Economics of Planning Public Works

Lubell, “Efforts of Redistribution of Income on Consumers’ Expenditures,” American Economic Review, March 1947, pp. 157-170; Correction, December 1947, p. 930; Comment by J. M. Clark, p. 931

Burkhead, Jesse, “The Balanced Budget,” Quarterly Journal of Economics, May 1954, Pp. 191-216

 

December 2 – December 18: Government Debt and Debt Management

Required

Due, Government Finance, Chs. 24 and 27, pp. 445-469 and 506-523

Schultz and Harriss, American Public Finance, Chs. XXV-XXVII, pp. 615-704

*Lerner, A. P., “The Burden of the National Debt” in Income, Employment and Public Policy (Metzler, L., et al.), Pp. 255-275

*”How to Manage the Debt,” Symposium in Review of Economics and Statistics, February 1949, pp. 15-32

*Murphy, H. C., The National Debt in War and Transition, Chs. 18-19, pp. 249-288

*Thomas, Woodlief, “Lessons of War Finance,” American Economic Review, September 1951, pp. 618-631

*Abbott, C. C., The Federal Debt (Twentieth Century Fund, 1952), Ch. 6, pp. 89-112

Suggested

Abbott, op. cit., pp. 1-196

*Roosa, R. V., “Interest Rates in the Central Bank,” in Money, Trade and Economic Growth (In Honor of John Henry Williams), pp. 270-295

*Simons, H. C., “On Debt Policy,” Journal of Political Economy, December 1944, pp. 356-361, and “Debt Policy and Banking Policy,” Review of Economics and Statistics, May 1946, pp. 85-89; both reprinted in Economic Policy for a Free Society, pp. 220-239

*Musgrave, R. A., “Credit Controls, Interest Rates and Management of Public Debt,” in Income, Employment and Public Policy (Metzler, L., At all.), Pp. 221-254

Harris, S. E., The National Debt and the New Economics

Committee on Debt Policy, Our National Debt

Seltzer, L. H., “Is a Rise in Interest Rates Desirable or Inevitable?” American Economic Review, December 1945, pp. 831-850

Roosa, R. V., “Integrating Debt Management and Open Market Operations,” American Economic Review, Supplement, May 1952, pp. 214-235

Wallich, H. C., “Debt Management as an Instrument of Economic Policy,” American Economic Review, June 1946, pp. 292-310

Bach, G. L., “Monetary-Fiscal Policy Reconsidered,” Journal of Political Economy, October 1949, pp. 383-394

Tobin, James, “Monetary Policy and the Management of the Public Debt: The Patman Inquiry,” Review of Economics and Statistics, May 1953, pp. 118-127

Burgess, W. Randolph, “Federal Reserve and Treasury Relations,” Journal of Finance, March 1954, pp. 1-11

 

*  *  *  *  *  *  *  *  *  *  *

Economics 151 and 251
PUBLIC FINANCE
Spring Term, 1954-1955

Professors Butters and Soloway

Note: Readings under the heading “Required” are required for Economics 151. Students in Economics 251 are required to read the asterisked assignments and to be generally familiar with the substance of the material covered in the other required assignments for Economics 151. References in Shultz and Harriss, American Public Finance, refer to the new 6thedition.

 

February 3-10: General Introduction to Taxation in the United States.

Required:

Shultz, W. J., and Harriss, C. L., American Public Finance, Chapters 7, 9, 10, 11.

Groves, Harold, Viewpoints on Public Finance, Chapter 1.

Lerner, A. P., Economics of Control, Chapter 24 (review).

Suggested:

*Bullock, C. J., Readings in Public Finance, Chapters VIII-IX.

Paul, Randolph E., Taxation in the United States (1954).

Ratner, Sydney, American Taxation, Its History as a Social Force in Democracy (1942).

Dewey, Davis R., Financial History of the United States.

 

February 10-17: Personal Income Taxation.

Required:

Shultz, W. J., and Harriss, C. L., American Public Finance, Chapters 12, 13.

*Simons, H. C., Personal Income Taxation, Chapter I (reread), Chapters II, III (passim), IV-VI, VIII, X.

Groves, H. M., Financing Government, 3rdedition, Chapter 9.

Your Federal Income Tax, Bureau of Internal Revenue.

Suggested:

*National Tax Journal, March 1955, articles by Professor Shoup, Brown, and Pechman.

*Vickrey, W. S., Agenda for Progressive Taxation, Chapters 1, 2, 4, 6 (passim), 12, 13, 14.

Fisher, I., and Fisher, H. W., Constructive Income Taxation, A Proposal for Reform, Chapters 1, 5, 7, 8, 9, and 21.

Holt, C. G., “Averaging of Income for Tax Purposes: Equity and Fiscal-Policy Considerations,” National Tax Journal, December 1949.

*Musgrave, R. A., and Tun, Thin, “Income Tax Progression, 1929-48”, Journal of Political Economy, December 1948, pp. 498-514.

Farioletti, Marius, “The 1948 Audit Control Program for Federal Income Tax Returns”, National Tax Journal, June 1949, pp. 142-150.

Farioletti, Marius, “Some Results from the First Year’s Audit Control Program of the Bureau of Internal Revenue”, National Tax Journal, March 1952, pp. 65-78.

Blakey, R. G., and Blakely, G. C., The Federal Income Tax.

Magill, Roswell, Taxable Income.

Prentice-Hall, Federal Tax Course – 1954, Chapters 1-3.

 

February 19-24: Capital Gains Taxation.

Required:

*Seltzer, L. H., The Nature and Tax Treatment of Capital Gains and Losses, Chapters 1, 2, 4, 9, 11.

Groves, H. M., Financing Government, 3rd edition, pp. 172-177.

*Simons, H. C., Personal Income Taxation, Chapter VII.

Suggested:

*Vickrey, W. S., Agenda for Progressive Taxation, Chapter 5.

Capital Gains Taxation (A Tax Institute Symposium) (passim).

Federal Income Tax Treatment of Capital Gains and Losses (A Treasury Tax Study), 1951.

Groves, H. M., Viewpoints on Public Finance, pp. 151-158.

Prentice-Hall, Federal Tax Course – 1954, Chapters 4-6.

 

February 26-March 5: Corporation Income Tax.

Required:

Shultz, W. J., and Harriss, C. L., American Public Finance, pp. 311-320.

*Goode, Richard, The Corporation Income Tax, Chapters 1-9, 11, 18.

*Thompson, L. E., and Butters, J. K., “Effects of Taxation on the Investment Policies and Capacities of Individuals”, Journal of Finance, May 1953, Pp. 137-151.

*Smith, D. T., “Taxation and Executives”, Proceedings of the National Tax Association, 1951, pp. 232-250.

*Brown, E. C., “Business-Income Taxation and Investment Incentives”, Income, Employment, and Public Policy (Essays in Honor of Alvin H. Hansen), pp. 300-316.

Butters, J. K., and Lintner, J., Effect of Federal Taxes on Growing Enterprises, Chapters I-VII, VII and IX passim.

Suggested:

Prentice-Hall, Federal Tax Course – 1954, Chapters 21-23.

Smith, D. T., and Butters, J. K., Taxable and Business Income, Forward, Introduction, and Chapter 1.

*Slitor, Richard E., “The Corporate Income Tax: A Re-evaluation”, National Tax Journal, December 1952, pp. 289-309.

*Domar, E. D., and Musgrave, R. A., “Proportional Income Taxation and Risk-Taking”, Quarterly Journal of Economics, May 1944, pp. 388-422.

Butters, J. K., Effects of Taxation on Inventory Accounting and Policies, Chapters I, IV, V.

Butters, J. K., Thompson, L. E., and Bollinger, L. L., Effects of Taxation on Investments by Individuals, Chapters I-VI.

Smith, D. T., Effects of Taxation on Corporate Financial Policy, Chapters I, VI-IX.

*Smith, D. T., “Corporate Taxation and Common Stock Financing”, National Tax Journal, September 1953, pp. 209-225.

Brown, E. See., Effects of Taxation on Depreciation Adjustments for Price Changes, Chapters I-IV.

*Eldridge, D. H., “Tax Incentives for Mineral Enterprise”, Journal of Political Economy, June 1950, pp. 222-240.

Economic Effects of Section 102 (Tax Institute Symposium, 1951).

 

March 8-10: Integration of Personal and Corporate Income Taxation.

Required:

*Goode, Richard, The Corporation Income Tax, Chapter X.

*Simons, H. C., Personal Income Taxation, Chapter IX.

Suggested:

*The Postwar Corporation Tax Structure, U.S. Treasury Study.

How Should Corporations be Taxed?, A Tax Institute Symposium.

“Final Report of the Committee on the Federal Corporation Income Tax”, Proceedings of the National Tax Association, 1950, pp. 54-76.

Lent, G. E., The Impact of the Undistributed Profits Tax, 1936-1937.

 

March 12-15: Excess Profits Taxation.

Required:

*Hart, A. G., and Brown, E. C., Financing Defense, Chapter 7.

*Blough, Roy, “Measurement Problems of the Excess Profits Tax”, National Tax Journal, December 1948, pp. 353-365.

*”Symposium on the Excess Profits Tax”, National Tax Journal, September 1951, pp. 219-36.

Tax Institute, Excess Profits Tax, Parts 1 and 3, and pp. 119-141.

Suggested:

Oakes, E. E., “Excess Profits Tax Amendments”, National Tax Journal, March 1952, pp. 53-64.

Hicks, J. R., Hicks, U. K., and Rostas, L., The Taxation of War Wealth, Chapters 1, 4-7.

 

March 14-19: Estate and Gift Taxation.

Required:

Schultz, W. J., and Harriss, C. L., American Public Finance, Chapter 20.

*Groves, H. M., Viewpoints on Public Finance, Nos. 44, 46, 47, and 48 (all in Chapter 5).

*Butters, J. K., Lintner, J., and Cary, W. L., Effects of Taxation on Corporate Mergers, Chapters I-III and V.

Bloch, Henry S., “Economic Objectives of Gratuitous Transfer Taxation”, National Tax Journal, June 1951, pp. 139-147.

Suggested:

*Surrey, Stanley S., et al., “A Critique of Federal Estate and Gift Taxation”, California Law Review, March 1950. (Introduction by Stanley Surrey, Pp. 1-27, required for graduate students; remainder optional.)

*Federal Estate and Gift Taxes– A Proposal for Integration and for Correlation with the Income Tax. (A joint study by an advisory committee to the Treasury Department and the Office of the Tax Legislative Council, 1947) (Sections I and II and remainder, passim. Required for graduate students).

Keith, E. Gordon, “How Should Wealth Transfers Be Taxed?”, American Economic Review, May 1950, pp. 379-390.

Wedgewood, Josiah, The Economics of Inheritance, especially Chapters 9-11.

 

March 22-31: Taxes on Consumption.

Required:

Schultz, W. J., and Harriss, C. L., American Public Finance, Chapters 8, 16.

*Groves, H. M., Viewpoints on Public Finance, Nos. 58, 59, 60, 64.

Soloway, A. M., “The Purchase Tax and Fiscal Policy”, National Tax Journal, December 1951.

Suggested:

Due, John F., “American and Canadian Experience with the Sales Tax”, The Journal of Finance, September 1952.

*Due, John F., “Toward A General Theory of Sales Tax Incidents”, The Quarterly Journal of Economics, May 1953.

Pao Lun Cheng, “A Note on the Progressive Consumption Tax”, The Journal of Finance, September 1953.

Soloway, Arnold M., “Economic Aspects of the British Purchase Tax”, Journal of Finance, May 1954.

*Hicks, U. K., Public Finance, Chapters IX and X.

Hart and Brown, Financing Defense, Chapter 4.

 

April 12-23: Intergovernmental Tax Problems.

Required:

Shultz, W. J., and Harriss, C. L., American Public Finance, Chapters 23, 24, 18, 19.

*Groves, H. M., Postwar Taxation and Economic Progress, Chapter 12.

*State-Local Relations, The Council of State Governments, Report of the Committee on State-Local Relations, 1946, Parts 3 and 4; Parts 1, 2, 5, and 6 passim.

*Federal State Local Tax Correlation; Symposium of the Tax Institute, 1953. Chapters I, II, III, VII, VIII, XVIII.

Suggested:

Groves, H. M., Postwar Taxation and Economic Progress, Chapter 12.

Groves, H. M., Viewpoints on Public Finance, Chapter 2.

*George, Henry, Progress and Poverty.

Hansen and Perloff, State and Local Finance in the National Economy.

*National Tax Journal, December 1951, pp. 341-371.

 

April 26-May 5: Burden of Taxation.

Required:

*Musgrave, R. A., et al., “Distribution of Tax Payments by Income Groups”, National Tax Journal, March 1951, pp. 1-53.

*Tucker, Rufus S., “Distribution of Tax Burdens in 1948”, National Tax Journal, September 1951, pp. 269-283.

*Allen, E. D., and Brownlee, O. H., Economics of Public Finance, Chapter X.

*Tucker, R. S., “Distribution of Government Burdens and Benefits”, American Economic Review, May 1953, pp. 519-534.

Suggested:

*”Further Consideration of the Distribution of the Tax Burden”, National Tax Journal, March 1952, pp. 1-39.

Poole, K. E., Fiscal Policies and the American Economy (Chapter VIII, “The Fiscal System, The Distribution of Income, and Public Welfare” by John H. Adler), pp. 359-409.

 

Source: Harvard University Archives. Syllabi, course outlines and reading lists in Economics, 1895-2003. Box 6, Folder “Economics, 1954-1955”.

Image Source: J. Keith Butters from Webpage of the Harvard Business School Baker Library Historical Collection “Edwin H. Land & the Polaroid Corporation: The Formative Years”.

Categories
Berkeley Exam Questions Suggested Reading Syllabus

Berkeley. Syllabus and exams. Regulation and Antitrust. Woroch, 1996

 

Every so often I plunge into the Wayback Machine to search for “ancient” economics course materials from as far back as the 1990’s. Today I return with a syllabus, suggested readings for presentations and for paper topics, and some final examination questions for what has/had been the traditional second course in the field of industrial organization that covers regulation and competition policy. 

The course instructor at UC Berkeley was Glenn Woroch who had received his Ph.D. in economics from the University of California, Berkeley in 1983. According to his August 2013 homepage he taught that graduate course “Regulation and Antitrust” three times (Spring 1994, 1996, 1997).

__________________

Glenn Woroch: Short Bio

Dr. Glenn Woroch is Adjunct Professor of Economics, University of California, Berkeley, and Executive Director of the Center for Research on Telecommunications Policy. Dr. Woroch is an internationally recognized expert in the economics of the telecommunications industry, and has served as a consultant to governments and the private sector on a wide range of telecommunications issues.
Dr. Woroch has published numerous articles on industrial organization, regulation, antitrust, corporate strategy and intellectual property. He served on the editorial boards of Information Economics & Policy, the Journal of Regulatory Economics, and Telecommunications Policy and was a founding member of the International Telecommunications Society.
Dr. Woroch is regularly retained as an economic expert witness on litigation matters involving monopolization claims, mergers, intellectual property infringement, and economic damages. Besides his expertise in telecommunications, Dr. Woroch has extensive experience in the broadcast and cable television, computer software, personal computer, computer networking, ecommerce, electric power and food and beverage industries. Dr. Woroch has been an economic advisor to government agencies including the U.S. Departments of Energy and Justice and the Office of Technology Assessment. In addition to his U.S. engagements, he has consulted to private and public sector clients in Latin America, the Pacific Rim and Western Europe.
Previously, Dr. Woroch taught economics at the University of Rochester and Stanford University, and was Senior Member of Technical Staff at GTE Laboratories. He holds a Ph.D. in Economics and M.A. in Statistics from Berkeley.

Source: Short bio of Glenn Woroch linked to his August 2013 webpage. Archived copy at the Wayback Machine internet archive.

__________________

Department of Economics
University of California
Economics 220B, Spring 1996
REGULATION & ANTITRUST
Glenn Woroch

Description. This is the second of two graduate courses in industrial organization. It will cover regulation and antitrust policy, concentrating on control of natural and artificial monopoly in theory
and in practice. Emphasis will be on theoretical developments although an occasional empirical study or case study will illustrate key points.

Instructor. Glenn Woroch, 669 Evans, 642-4308, glenn@econ.berkeley.edu.

Office hours: Wednesday, 2:30-4:00 PM.

Textbooks. No textbook is assigned for this course, but several books cover large portions of the material and have been put on reserve:

Sandy Berg and John Tschirhart, Natural Monopoly Regulation, Cambridge University Press.
Alfred Kahn, The Economics of Regulation, volumes I and II, (2nd edition) John Wiley, 199?.
Jean-Jacques Laffont and Jean Tirole, A Theory of Incentives in Procurement and Regulation, 1993.
William Sharkey, The Theory of Natural Monopoly, Cambridge University Press, 1982.
Daniel Spulber, Regulation and Markets, MIT Press, 1991.
Kenneth Train, Optimal Regulation, MIT Press, 1991.

Assignments. Students will select a paper, either one of the optional readings or a paper that we agree upon, and present it to the class. Each student will also write a paper of moderate length on a topic
related in some manner to the economics of regulation. I will distribute a list of suggested topics shortly. Lastly, there will be a final exam.

READING LIST

* – required, in reader. + – recommended for presentation.

I. NATURAL MONOPOLY AND ITS REGULATION

1. Natural Monopoly

* Panzar, J., “Technological determinants of firm and industry
structure,” Chapter 1 in Handbook of Industrial Organization, (Vol.
1) North-Holland, 1989.
* Faulhaber, G., “Cross-subsidization: pricing in public enterprises,”
American Economic Review, 1975.
Baumol, W., “On the proper cost tests for natural monopoly in a
multiproduct industry,” American Economic Review, December 1977.
Faulhaber, G., and S. Levinson, “Subsidy free prices and anonymous
equity,” American Economic Review, 1981.
+ Evans, D. and J. Heckman, “Multiproduct cost function estimates and
natural monopoly tests for the Bell System,” in Breaking Up Bell,
edited by David Evans, 1983.

2. Efficient Pricing

* Baumol, W. and D. Bradford (1970), “Optimal departures from marginal
cost pricing,” American Economic Review, June.
* Willig, R., “Pareto-superior nonlinear outlay schedules,” Bell
Journal of Economics, 1979.
Baumol, W., E. Bailey and R. Willig, “Weak invisible hand theorems on
the sustainability of prices in a multiproduct monopoly, American
Economic Review, 1977.
Braeutigam, R., “Optimal policies for natural monopoly,” in Handbook
of Industrial Organization, (Vol. 2) 1989.
+ Brock, W., and W.D. Dechert, “Dynamic Ramsey pricing,” William Brock
and W. D. Dechert, International Economic Review, October 1985.
+ Braeutigam, R., “Optimal pricing with intermodal competition,”
American Economic Review, 38-49, 1979.
+ Panzar, J., “The Pareto domination of usage-sensitive pricing,” in
Proceedings of the 6th Telecommunications Policy Research
Conference, H. Dordick (ed.) 1979.

3. Reality Check: Alternative Explanations of Regulatory Policy

* Stigler, G., “The Theory of Economic Regulation,” The Bell Journal of
Economics, 1971.
* Peltzman, S., “The economic theory of regulation after a decade of
deregulation,” Brookings Papers: Microeconomics, 1989.
* Joskow, P., “Pricing decision of regulated firms: a behavioral
approach, Bell Journal of Economics, 1973.
Peltzman, S., “Towards a more general theory of regulation,” Journal
of Law & Economics.
Noll, R., “Economic perspectives on the politics of regulation,” in
Handbook of Industrial Organization (Vol. 2) 1989.
Posner, R., “Taxation by regulation,” Bell Journal of Economics,
1971.
+ Winston, C., “Economic deregulation: days of reckoning for
microeconomists,” Journal of Economic Literature, September 1993.

II. REGULATION IN PRACTICE

1. Rate of Return Regulation

* Baumol, W. and A. Klevorick, “Input choices and rate of return
regulation: an over of the discussion,” Bell Journal of Economics,
1970.
* Averch, H. and L. Johnson, “Behavior of the firm under regulatory
constraint,” American Economic Review, December, 1962.
* Spence, A.M., “Monopoly, quality and regulation,” Bell Journal of
Economics, Autumn 1975.
+ Petersen, C., “An empirical test of regulatory effects,” Bell Journal
of Economics, Spring 1975.
+ Bailey, E., “Regulation and innovation,” Journal of Public Economics,
December 1974.

2. Contracting vs. Administration

* Demsetz, H., “Why regulate utilities?” Journal of Law & Economics,
1968
* Goldberg, V., “Regulation and administered contracts,” Bell Journal
of Economics, 1976.
* Williamson, O., “Franchise bidding for natural monopoly: in general
and with respect to CATV, Bell Journal of Economics, 1976.”
+ Zupan, M. “The efficacy of franchise bidding schemes in the case of
cable TV: Some systematic evidence,” Journal of Law and Economics,
October 1989.

3. Price Cap and Benchmark Regulation

* Brennan, T., “Regulation by capping prices,” Journal of Regulatory
Economics, 1989.
* Brauetigam, R., and J. Panzer, “Effects of the change from rate of
return to price cap regulation,” American Economic Review, 1993.
* Shleiffer, A. “A theory of yardstick competition,” Rand Journal of
Economics, 1985.
Vogelsang, I., “Price cap regulation of telecommunications services:
a long-run,” Rand Report, 1988.
+ Cabral, L. And M. Riordan, “Incentives for cost reduction under price
cap regulation,” Journal of Regulatory Economics, 1989.
+ Sappington, D., and D. Sibley, “Strategic nonlinear pricing under
price-cap regulation,” Rand Journal of Economics, Spring 1992.
+ Armstrong, M., S, Cowan and J. Vickers, “Nonlinear pricing and price
cap regulation,” Journal of Public Economics, September 1995.

III. DESIGN OF OPTIMAL REGULATORY MECHANISMS

1. Iterative and Dynamic Mechanisms

* Vogelsang, I. and J. Finsinger, “A regulatory adjustment process for
optimal pricing by multiproduct monopoly firms, Bell Journal of
Economics, 1979.
* Sappington, D., “Strategic firm behavior under a dynamic regulatory
adjustment process,” Bell Journal of Economics, Spring, 1980.
Salant, D., and G. Woroch, “Trigger price regulation,” Rand Journal
of Economics, Spring 1992.
+ Gilbert, R., and D. Newbery, “The dynamic efficiency of regulatory
constitutions,”Rand Journal of Economics, Winter 1994.
+ Blackmon, G., and R. Zeckhauser, “Fragile commitments and the
regulatory process,” Yale Journal on Regulation, 9:1, Winter, 1992.
+ Logan, J., R. Masson and R. Reynolds, “Efficient regulation with
little information: reality in the limit?” International Economic
Review, 30:4 November 1989.

2. Agency Approach

* Loeb, M., and W. Magat, “A decentralized method for utility
regulation,” Journal of Law & Economics, 1979.
* Baron, D., and R. Myerson, “Regulating a monopolist with unknown
costs,” Econometrica, July 1982.
* Laffont, J.-J., “The new economics of regulation ten years after,”
Econometrica, 1994.
Laffont, J.-J., and J. Tirole, “Using cost observation to regulate
firms,” Journal of Political Economy, 1986.
Baron, D., “Design of regulatory mechanisms and institutions,” in
Handbook of Industrial Organization, (Vol. 2), 1989.
+ Lewis, T., and D. Sappington, “Regulating a monopolist with unknown
demand,” American Economic Review, December 1988.
+ Wolak, F., “An econometric analysis of the asymmetric information
regulator-utility interaction,” draft.

IV. DEREGULATION

1. Regulation with Horizontal Competition

+ Auriole, E., and J.-J. Laffont, “Regulation by duopoly,” Journal of
Economic Management and Strategy, 1993.
+ Riordan, M., “Regulation and preemptive technology adoption,” Rand
Journal, Autumn 1992.
Biglaiser, G., and A. Ma, “Regulating a dominant firm: unknown demand
and industry structure.” Rand Journal of Economics, Spring 1995.

2. Regulation with Vertical Competition

* Laffont, J.-J. and J. Tirole, “Optimal bypass and creamskimming,”
American Economic Review, 1990.
* Panzar, J., “Sustainability, efficiency and vertical integration,” in
Regulated Industries and Public Enterpirse, edited by Paul
Kelindorfer and Bridger Mitchell, 1979.
Vickers, J., “Competition and regulation in vertically-related
markets,” Review of Economic Studies, January 1995.
Baumol, W. “Some Subtle Pricing Issues in Railroad Regulation,”
International Journal of Transport Economics, August 1983.
+ Gilbert, R., and M. Riordan, “Regulating complementary products: a
problem of institutional choice,” Rand Journal of Economics, 1995.
+ Laffont, J.-J. and J. Tirole, “Access pricing and interconnection,”
European Economic Review, 1994.

VI. ANTITRUST POLICY

1. Predation

* McGee, John, (1958), “Predatory Price Cutting: The Standard Oil
(N.J.) Case,” Journal of Law and Economics, pp. 137-169.
* Ordover, J., and G. Saloner, “Predation, monopolization and
antitrust,” chapter 9 in Handbook of Industrial Organization,
(Vol. 2) 1989.
Milgrom, P., and J. Roberts, “Limit pricing and entry under
incomplete inforamtion: an equilibrium analysis,” Econometrica,
1982.
Ordover, J., and R. Willig, “An economic definition of predation:
pricing and product innovation,” Yale Law Journal, 1981.

2. Merger to Monopoly

* Department of Justice, “The Merger Guidelines.”
* Farrell, J., and C. Shapiro, “Horizontal mergers,” American Economic
Review.
+ Baker, J., and T. Bresnahan, (1985), “The Gains from Merger or
Collusion in Product Differentiated Industries,” Journal of
Industrial Economics, 33:4, pp. 427.

3. Exclusion and Foreclosure

* Krattenmaker, T., and S. Salop, “Anticompetitive exclusion: raising
rivals’ costs to achieve power over price,” Yale Law Journal, 1986.
* Ordover, J., G. Saloner, and S. Salop, “Equilibrium Vertical
Foreclosure,” American Economic Review, 1990.
Ordover, J., A. O. Sykes and R. Willig, “Nonprice Anticompetitive
Behavior by Dominant Firms toward the Producers of Complementary
Products,” in Antitrust Regulation: Essays in Memory of John J.
McGowan, Franklin Fisher (ed.), 1985
Whinston, M., “Tying, Foreclosure, and Exclusion,” American Economic
Review, 1990.
+ Salinger, M., “Vertical mergers and market foreclosure,” Quarterly
Journal of Economics, 1988.
+ Economides, N., and G. Woroch, “Interconnection and foreclosure of
network competition,” draft, 1995.

 

Source: Spring Semester 1996 syllabus archived at the Wayback Machine.

________________________

Department of Economics
University of California
Economics 220B, Spring 1996
ADDITIONAL READINGS FOR PRESENTATIONS
Glenn Woroch

Lawrence Pulley and Yale Braunstein, “A Composite cost function for multiproduct firms with an application to economies of scope in banking,” Review of Economics & Statistics, 1992.

Besanko, David and Donnefeld, Shabtai, and Lawrence J. White, “The Multiproduct Firm, Quality Choice, and Regulation,” Journal of Industrial Economics, 1990, vol. 36, pp. 411-429.

Ma, Ching-to Albert and James Burgess, “Regulation, Quality Competition, and Price in the Hospital Industry,” mimeo, 1991.

Fudenberg, Drew and Jean Tirole, “‘A Signal-Jamming’ Theory of Predation,” Bell Journal of Economics, 1986, vol. 17, no. 3, pp. 366-376.

Ordover, Janusz and Robert Willig, “Antitrust for High Technology Industries: Assessing Research Joint Ventures and Mergers,” Journal of Law and Economics, 1985, vol. 28, pp. 311-333.

Guerin-Calvert, Margaret, “Vertical Integration as a Threat to Competition: Airline Computer Reservations Systems,” in L. White and J. Kwoka Jr. (eds.), The Antitrust Revolution, (pp. 338-370). 1989.

Sappington, David, and David Sibley, “Regulating without cost information: the incremental surplus subsidy scheme,” International Economic Review, 29:2, May 1988.

Frank Matthewson and Ralph Winter, “An economic theory of vertical restraints,” Rand Journal of Economics.

Ralph Bradburd, “Privatization of natural monopoly public enterprises: the regulation issue,” Review of Industrial Organization, 1995, 247-67.

Michael Whinston, “Tying foreclosure and exclusion,” American Economic Review, Sept 1990.

Paul Joskow and Richard Schmalensee, “Incentive regulation for electric utilities,” Yale Journal on Regulation, 4:1, Fall 1986.

Baron, David, “Price regulation, quality and asymmetric information,”American Economic Review, March 1981.

Harris, R., and E. Weins, “Government enterprise: an instrument for the internal regulation of industry,” Canadian Journal of Economics, February 1980.

 

Source: Additional Readings for Presentations from the Spring Semester 1996 archived at the Wayback Machine.

________________________

Department of Economics
University of California
Economics 220B, Spring 1996
SUGGESTIONS FOR TERM PAPER TOPICS
Glenn Woroch

The miscellaneous topics listed below are intended to get you thinking about a term paper. Most are applications to specific industries or specific regulatory policies. There are many more possibilities for research in theoretical aspects of regulation.

Problems of erecting incentives for efficient investment and operation of natural monopoly facilities placed under common ownership in a specific case such as an electric power grid or an internet backbone.

Efficient design of auctions to assign rights to common property resources such as radio spectrum or mineral/grazing rights.

Compare the trend toward re-emergence of end-to-end monopoly in telephone with the vertical divestiture in electric power in terms of the tradeoff between vertical economies and anticompetitive behavior.

Efficient design of duopoly policy in markets that are potentially natural monopoly (e.g., cellular telephone)

The increased concentration of hospitals and HMOs through mergers and joint ventures and the implications for the price and availability of health services.

Potential of labor and management sharing in the rents that accrue in trucking, railroad or other regulated industries.

Motivation and long-run sustainability of bypass in the natural gas distribution industry under different regulatory regimes.

Winners and losers from price ceilings, rationing and strategic reserves in the market for oil and gas.

Effectiveness of different ratemaking practices (e.g., ROR vs. price caps) to encourage adoption of new technologies in a specific industry (e.g., electric power, telephone, health care).

Apply principles of economic models of regulation to understand the passage of a particular piece of legislation that regulates, deregulates or re-regulates an industry (e.g., Airline Deregulation Act of 1978, Cable Act of 1992, Telecom Act of 1996).

Cross country comparison (e.g., U.S. vs. Japan) of policy formation on a specific regulatory issue (e.g., regulation of nuclear power or deregulation of telephones), and the relation between the outcome and the possibilities for rent seeking under the different political systems.

Policy alternatives toward a dominant firm that achieves a de facto standard in an industry exhibiting strong complementaries among component products (e.g., Microsoft and Intel).

The use of structural separations or Chinese walls to guard against leveraging market power into complementary product markets.

Compare performance of public enterprises relative to regulated private firms within or across industries (e.g., water, electric power, cable TV, airlines) and relate to management incentives and/or regulatory policies.

Success of regulatory policy that uses a government-owned firm to compete against a dominant private firm.

The relative effectiveness of alternative regulatory mechanisms to elicit relevant information, e.g., yardstick vs. iterative mechanisms.

Success of privatization initiatives based on the nature of the post-privatization regulatory scheme especially with regards to rate regulation and the ease of competitive entry.

Creating efficient incentives for disposal of nuclear and other kinds of hazardous waste.

Tradeoff between efficiency and anti-competitiveness of mergers/alliances/joint ventures among local/long distance/cable/wireless companies aimed at exploiting multimedia opportunities.

Comparison of solutions to pricing interconnection sold to competitors across different industries (e.g., phone v. electric power) or for a single industry across different countries.

Source: Suggested Paper Topics from the Spring Semester 1996 archived at the Wayback Machine.

________________________

Department of Economics
University of California
Economics 220B
Glenn Woroch

TAKEHOME FINAL EXAM
Spring 1996

INSTRUCTIONS: Answer each of the first four questions and then choose just one of the last two questions In each case keep you answers concise. Due the end of business on Friday, May 17th.

  1. Suppose that all firms have available the technology characterized by the cost function:

C(y1, y2) = a y1 + b y2 + c max {y1, y2}

where y1 and y2 are quantities of the two goods, 1 and 2. Further suppose that the market demand for y1 exceeds that for y2 at all relevant output prices.

(a) For y1 > y2 > 0, determine whether this cost function exhibits economies of scope, economies of scale over the entire product set, economies of scale specific to good 1 or economies of scale specific to good 2.

(b) Find the first-best output price for the industry to charge for the two goods. Determine the configuration of firms in the industry that products the corresponding industry wide outputs at least cost for the industry.

(c) Prove that the industry configuration and prices given in you answer to part (b) satisfies the requirements of sustainability

(d) Describe in words what kinds of circumstances might lead to cost functions like this one.

  1. A regulated firm produces two products: A and B. The firm is required by regulators to earn no more than is necessary to cover its operating costs plus a competitive return on invested capital.
    Assume that product B exhibits constant marginal cost of production equal to cB.

(a) Describe the solution to the Ramsey pricing problem. In the process be certain to make explicit whatever demand and cost assumptions you need to support your answer.

(b) Now suppose that an unlimited number of unregulated firms can enter into the market for product B at a constant marginal cost of cE where cE > cB. How does this affect the regulated firm’s pricing, and what is the effect on consumer welfare?

(c) Now suppose that cE < cB. Demonstrate that the regulated firm might gain by selling product B at a price (slightly) below cE.

(d) Since, in general, the regulator does not know the relative sizes of cB and cE , what are the pros and cons of allowing the regulated firm to produce B?

  1. Many schemes for regulating natural monopolies have been tried, and many more have been proposed. Listed below are some the schemes studied in this class.

(i) Rate-of-return regulation
(ii) Vogelsang-Finsinger iterative mechanism
(iii) Yardstick regulation
(iv) Price cap regulation
(v) Demsetz-type franchise auction

Choose two off of this list, and compare their relative merits in terms of each of the following criteria:

(a) short-run allocative efficiency,
(b) speed and likelihood of achieving first/second best outcomes over the long run,
(c) cross subsidization across products
(d) the rents that accrue to producers,
(e) vulnerability to political influence by producers and/or consumers,
(f) incentives to invest in cost-reducing innovations,
(g) informational requirements for implementing the mechanism.

  1. [WARNING: THIS PROBLEM HAD SPECIAL CHARACTERS THAT DID NOT SURVIVE THE ASCII FORMAT SAVE. WHERE YOU SEE A “z”, I HAVE ONLY GUESSED.] Consider the application of the Baron-Myerson Bayesian incentive mechanism to the following special situation. Suppose that production requires an unknown constant marginal cost and a
    known fixed cost: C(y, z) = z y + F, where z is distributed uniformly over the unit interval [0,1]. Let demand for the single product be linear: D(p) = a – bp. Assume that a/b > 1. Finally, assume that the weight attached to consumer surplus, V(p(z),t(z)), is one and the weight attached to firm z’s profit is � where 0 < � < 1.

(a) Find the optimal two-part pricing rule: p(z), t(z). What values do they take on at the extreme of least cost z = 0 and at highest cost z = 1?

(b) At the optimal solution compute the consumer surplus and the firm’s profit as a function of . Again find the values they take on at the extreme of least cost = 0 and at highest cost = 1.

(c) Describe the unit price, fixed fee, consumer surplus and firm profit as z approaches 1.

(d) Compute the profit-maximizing uniform price p(z). Find values for z and for which this unregulated monopoly price is less than the regulated price.

  1. Choose one of the following industries and periods:

(i) Electric power generation and distribution in the 1960s
(ii) Long distance telephone service in the 1970s
(iii) Passenger air transportation in the 1980s
(iv) For-profit hospitals in the 1990s

In that case describe what economic research has to say about the presence of economies of scale and scope, vertical economies and the prevalence of transactions costs. Describer the predominant form of regulation in that industry during that period in the U.S. Evaluate the match between the cost conditions and the form of regulation based on efficiency criteria.

  1. Intense debate has broken out over the years over whether certain industry practices represent an efficient response to market conditions, or an expression of anti-competitive behavior. Identify one of the following practices:

(i) predatory pricing
(ii) exclusive dealing
(iii) product bundling or tying
(iv) resale price maintenance

For the practice that you chose, describe the current antitrust treatment based on court decisions and policies of antitrust authorities. (These may not be unambiguous.) Report the positions of the different sides of the debate, especially the arguments that view the practice as efficiency enhancing and as competitively harmful. Make a persuasive argument for one of these two positions, or for a third position.

Source:  Takehome Final Exam from the Spring Semester 1996 archived at the Wayback Machine.

________________________

Department of Economics
University of California
Economics 220B
Glenn Woroch

FINAL EXAM
Spring 1994

INSTRUCTIONS: The exam has FOUR parts. Please answer each one. To
guide your time allocation, a total of 100 points is distributed as
follows:

Part I: 24 points (= 6 x 4 points)
Part II: 30 points
Part III: 28 points
Part IV: 18 points

  1. Answer TRUE or FALSE and EXPLAIN with 2 or 3 sentences.
    1. If an industry configuration is sustainable, then
      production is cost efficient.
    2. A Ramsey price vector is necessarily subsidy free.
    3. In Peltzman’s private interest model applied to monopoly
      regulation, price obeys an inverse elasticity rule typical
      of efficiency but income distribution may be skewed.
    4. In Joskow’s behavioral model of rate-of-return regulation,
      rate reviews do not occur when unit costs are rising.
    5. Producer and consumer surplus increase with the HH Index in
      a Cournot oligopoly.
    6. The so-called “double markup” that results from monopoly
      power at both the manufacturing and the retail levels can
      be eliminated with a two-part tariff.
  1. Two schemes that are designed to regulate natural monopoly
    are:

(i) Rate-of-return regulation
(ii) Vogelsang-Finsinger iterative mechanism

Evaluate each of the schemes relative to the unregulated
outcome in terms of their effects on:

(a) short-run allocative efficiency,
(b) the rents that accrue to producers,
(c) the welfare of consumers.

  1. Auctioning off monopoly franchises has often been proposed
    as a way to inject some competition into natural monopoly
    markets.
    1. In terms of economic efficiency, compare the following two
      rules for awarding the franchise: give it to the bidder
      with the most attractive price-service-quality package, or
      give it to the bidder that offers the largest cash payment
      for the franchise.
    2. What are the informational requirements needed to implement
      the schemes proposed by Demsetz and by Loeb and Magat?
    3. What difficulties arise over the course of the franchise
      contract that hamper the performance of this scheme?
    4. Under what conditions will the outcome be improved as the
      length of the firm-regulator relationship becomes infinite?
  1. Consider the Baron-Myerson approach to regulating a firm
    with private cost information. For concreteness, let the
    cost function of the firm be C(y,b) which is increasing
    in output of the good y and a cost parameter b.

1. What is meant by an “information rent”? How is it paid to
the firm in the Baron-Myerson scheme?

2. In what sense does a cross subsidization occur across
different cost realizations?

3. What additional features do Laffont and Tirole build into
their model of regulation that generalizes Baron-Myerson?
How does their pricing optimum differ?

Source:  Wayback Machine Archived copy June 1, 2002.

Image Source:  Glenn A. Woroch’s Berkeley webpage (modified 13 Jan 1999). Archived copy at the Wayback Machine internet archive.

Categories
Chicago Economics Programs Economist Market

Chicago. Draft memo of a program to rebuild the department of economics by T.W. Schultz, 1956

 

The following draft memo by T. W. Schultz outlines the serious faculty replacement needs of the University of Chicago department of economics in the mid-1950s. Particularly noteworthy, aside from the impressive list of lost faculty, is the appended table listing the sponsored research/3rd party funders of the economics department at that time. One also sees that the department had been authorized to make offers to Kenneth Arrow, Robert Solow and Arthur F. Burns. So much for the best-laid plans of mice and men. A better historian of economics than I might spin a counterfactual tale of a post-Cowles Chicago with Arrow and Solow on the faculty.

Regarding the ICA Chile Enterprise: Economic Research Center, Schultz wrote “The Chilean enterprise will give us a fine ‘laboratory’ in which to test ourselves in the area of economic development– a major new field in economics.” This reminds me of the old Cold-War Eastern European joke about whether Marx and Engels were scientists (“No, real scientists would have tried their experiments on rats first”). What a “fine ‘laboratory'” for testing oneself!

_________________________

A Program of Rebuilding the Department of Economics
(first draft, private and confidential – T. W. Schultz, May 22, 1956)

Your Department of Economics has been passing through a crisis. Whether it would survive as a first rate department has been seriously in doubt, with one adversity following another as was the case up until last year. It is now clear, however, that we have achieved a turning point in that we can rebuild and attain the objective which is worth striving for – an outstanding faculty in economics.

The crisis came upon us as a consequence of a combination of things: (1) the department, along with others in the University, had been denied access to undergraduate students of the University who might want to become economists; (2) Viner left for Princeton, Lange for Poland, Yntema for Ford and Douglas for the Senate; (3) the Industrial Relations Center drained off some of our talent and when it jammed, Harbison left for Princeton; (4) Mr. Cowles’ arbitrary decision to shift “his” Commission to Yale was a major blow; (5) Nef been transferring his talents to the Committee on Social Thought, and (6) add to all these the retirement of Knight.

Meanwhile, there were several external developments which did not reduce our difficulties: (1) a number of strong (new) economic centers were being established – at Stanford, Johns Hopkins, Yale, Vanderbilt, M.I.T. and with public funds at Michigan and Minnesota; (2) our salaries were falling behind seriously relative to some of the other places, and (3) recruiting of established, highly competent economists became all but impossible given the crisis that was upon us and the (then) low repute of the University neighborhood.

The ever present danger of the past few years has been that we would be in the judgment of competent colleagues elsewhere, in the beliefs of oncoming graduate students and in the eyes of the major foundations – not recover our high standing but instead sing to a second or even a third-rate department and in the process lose the (internal) capacity to recruit and rebuild.

We now have achieved a turning point distinctly in our favor.

The major efforts which have contributed most have been as follows:

  1. We have taken full advantage of our unique organization in combining real research with graduate instruction. Our research and instruction workshops are the result. The Rockefeller Foundation gave us three grants along the way – agricultural economics, money and public finance – to test this approach and advanced graduate work. The Ford Foundation has now financed our workshops with $200,000 (eight 5-year grant) (our proposal of January 1956 to The Ford Foundation states the theory and argues the case for this approach on the basis of the experiences we have already accumulated).
  2. We set out aggressively to recruit outstanding younger economists. The workshops were a big aid to us in doing this; so was the financial support of the University. We had the ability to “spot them”. We now have the best group of talented young economists, age 30 and less, to be found anywhere. This achievement is rapidly becoming known to others in keen “competition” is already upon us as a consequence.
  3. We need urgently to run up a lightning rod, a (rotating) professorship with a salary second to none, to attract talent and make it clear we were in business and would pay for the best. The Ford Foundation took favorably to the idea. (Thought so well of it that they will do the same for 3 other privately supported Universities – Columbia, Harvard and Yale!)
    The $500,000 endowment grant from them for a rotating research professorship is our reward.
  4. The foundations have given us a strong vote of confidence: grants and funds received by the Department of Economics during 1955-56 now total $1,220,000. (A statement listing these is attached).
  5. The marked turn for the better in the number and the quality of students applying for scholarships and fellowships is, also, an affirmative indication.
  6. The Economics Research Center is filling a large gap in providing computing, publishing and related research facilities which was formally a function of the Cowles Commission.
  7. The Chilean enterprise will give us a fine “laboratory” in which to test ourselves in the area of economic development – a major new field in economics.

There remains, however, much to be done. We must, above all, not lose the upward momentum which is now working in our favor.

Faculty and University Financial Support

To have and to hold a first rate faculty in economics now requires between $225,000 and $250,000 of University funds a year.

To have a major faculty means offering instruction and doing research in 8 to 10 fields. Up until two years ago we came close to satisfying the standard in our graduate instruction. We then had 11 (and just prior to that, 12) professors on indefinite tenure.

Then, Koopmans and Marschak were off to Yale, Harbison to Princeton and Knight did reach 70. And, then there were 7. On top of these “woes” came the serious illness of Metzler which greatly curtailed his role; and, Nef having virtually left economics. Thus, only 5 were really active in economics with Wallis carrying many other professional burdens. Meanwhile we added only one – Harberger was given tenured this year.

Accordingly at the indefinite tenure level we are down to about one-half of what is required to have a major faculty. Fortunately, several younger men have entered and have been doing work of very high quality.

It should be said that the Deans and the Chancellor have stood by, prepared to help us rebuild.

Major appointments were authorized – Arrow, Stigler, Solow and others. We still are hoping that Arthur F. Burns will come.

The resignations and the retirement, however, did necessarily reduce sharply the amount of financial support from the University.

In rebuilding, at least five additional tenure positions will be required:

  1. Labor economics (from within)
  2. Trade cycle (we hope it will be Arthur F. Burns, already authorized).
  3. Money
  4. Econometrics and mathematical economics.
  5. Business organization
  6. Consumption economics (when Miss Reid retires; next 3 years we shall have the extra strength of Dr. D. Brady with finances from The Rockefeller Foundation)
  7. International trade (pending Metzler’s recovery)
  8. Economic development.

The faculty and the University financial support recommended is as follows:

Tenured positions (for individuals fully committed to economics).

    1. Now in the harness

6: Friedman, Johnson, Harberger, Hamilton (Metzler), Wallis (Nef), Schultz

    1. To be added

5: Burns pending, (labor), (money), and two other fields, most likely econometrics and business organization

 

Budget:

11 [tenured positions]

  

$165,000
Metzler and Nef $15,000
$180,000
III. Supplementary non-tenure faculty $45,000
Altogether $225,000

 

Outside Financial Support for the Department of Economics

Grants

 Amount of grant Available 1956-57

A. Received during 1955-56.
1.     Sears Roebuck Fellowships

$4,000

$4,000
2.     National Science Foundation (2 years)

$13,000

$6,500
3.     Conservation Foundation (2 years)

$33,000

$16,500
4.     Rockefeller Foundation: consumption economics (3 years)

$45,000

$15,000
5.     American Enterprise (2 years)

$17,250

$8,625
6.     Ford Foundation: research and instructional workshops (5 years)

$200,000

$30,000
7.     Earhart Fellowships.

$6,000

$6,000
8.     S.S.R.C. Student Grants

$5,000

$5,000
9.     Ford Foundation: 3 pre-doctoral grants

$10,200

$10,200
10.  Ford Foundation: faculty research grant (Hamilton)

$12,500

$8,000
11.  ICA Chile Enterprise: Economic Research Center Fellowships, research support (3 yrs)

$375,000

$125,000
12.  Ford Foundation: endowment for rotating research professor

$500,000

$25,000
13.  Rockefeller Foundation: Latin America (Ballesteros)

$5,000

$5,000

Sub-totals

$1,225,950

$264,825

B. Received prior to 1955-56 where funds are available for 1956-57.
1.     Rockefeller Foundation: workshop in money (3 years with one year to go)

$50,000

$20,000
2.     Rockefeller Foundation: workshop in public finance (3 years with one year to go)

$50,000

$20,000
3.     Resources for the Future (3 years with one year to go)

$67,000

$27,000
4.     Russian Agriculture (2 years with one to go)

$47,000

$22,000

B sub-totals

 $214,000 $89,000

A and B totals

$1,439,950

$353,825

 

Source:  University of Chicago Archives. Department of Economics Records. Box 42, Folder 8.

Image Source: 1944 photo of T.W. Schultz from University of Chicago Photographic Archive, apf1-07479, Special Collections Research Center, University of Chicago Library. Cf. Wikimedia Commons, same portrait (dated 1944) from Library of Congress.