Much has been noted and posted across traditional and social media regarding the contributions and reception of the work of Robert Solow who died on December 21, 2023. I was one of the legion of economics apprentices (a.k.a. graduate students) whom Bob Solow introduced to the art and craft of summoning meaning from the chaos of everyday trends and fluctuations. Economics in the Rear-view Mirror has, to date, posted transcriptions of sixteen archival artifacts from his M.I.T. work-and-play-ground.
Bob Solow was like a favorite uncle to those lucky enough to have had him as a teacher. 99 years was one helluva long-run and besides having been a great economist, he was a good man.
With the growth of the Harvard economics and economics-related course offerings exploding at the start of the 20th century, it’s taking more time for Economics in the Rear-View Mirror to work through all the courses, year by year as we move forwards. Of course the collection of artifacts becomes more valuable as the sample size increases, but I am aware that other content is wanted by visitors too. Or at least a nice mixture across time and space.
Anyhow, this post completes the Harvard exam transcriptions for 1904-05. It was not technically an economics course, but enough economics graduate students took the course for this to be considered a serious elective or even field of specialization at the time. And any present day economist not interested in the socio-normative side of economic life is unlikely to follow Economics in the Rear-View Mirror.
David Camp Rogers (1878-1959). A.B. Princeton 1899. A.M. Harvard 1902 Ph.D. Harvard 1903 (Thesis: Coördinations in Space Perceptions). First Professor of Psychology at Smith College, appointed 1914. If this seems like an odd pairing of teaching assistant to professor, it would not have seemed particularly odd at that time. Both the study of ethics and human psychology were covered by the philosophy department. To get a Ph.D. in philosophy would have required examination in several fields of philosophy, so I suppose that ethics, or social ethics, was one of Rogers’ examination fields. He probably did well in the exam and was offered a teaching assistantship in social ethics on that basis.
__________________________
Course Enrollment
1904-05
[also listed as Ethics 1]
Graduate School of Arts and Sciences
[Philosophy] 5 1hf. Professor Peabody, assisted by Dr. Rogers. — Ethics of the Social Questions. The problems of Poor-Relief, the Family, Temperance, and various phases of the Labor Question, in the light of ethical theory.
[Ethics] 1 1hf. Professor Peabody, assisted by Dr. Rogers. — Introductory Course. — The Ethics of the Social Questions. — The modern social questions: Charity, the Family, Temperance, and various phases of the Labor Question, in the light of ethical theory. — Lectures, special researches, and required reading. Half-course.
Total 122: 7 Graduates, 99 College, 5 Sc., 11 Divinity.
Introductory Course. The Ethics of the Social Questions. — The modern social questions: Charity, the Family, Temperance, and various phases of the Labor Question, in the light of ethical theory. Lectures, special researches, and required reading. Tu., Th., Sat., at 10. Professor Peabody, assisted by Dr. Rogers.
This course is an application of ethical theory to the social problems of the present day. It is to be distinguished from economic courses dealing with the same subjects by the emphasis laid on the moral aspects of the social situation and on the philosophy of society involved. Its introduction discusses various theories of Ethics and the nature of the Moral Ideal [required reading from (John Stuart) Mackenzie’s Introduction to Social Philosophy]. The course then considers the ethics of the family [required reading from (Herbert) Spencer’s Principles of Sociology (3rd edition: Vol. 1; Vol. 2; Vol. 3)];the ethics of poor-relief [required reading from Devine, The Practice of Charity, and from Charles Booth’s Life and Labour of the People in London (1903 edition) [First Series, Poverty: Vol. 1; Vol. 2; Vol. 3; Vol. 4. Second Series, Industry: Vol. 1; Vol. 2; Vol. 3; Vol. 4; Vol. 5. Third Series: Religious Influences: Vol. 1; Vol. 2; Vol. 3; Vol. 4; Vol. 5; Vol. 6; Vol. 7; Concluding Volume]; the ethics of the labor question [required reading: J.A. Hobson, The Social Problem; Schäffle’s The Quintessence of Socialism] and the ethics of the drink question [required reading from Rowntree and Sherwell, The Temperance Problem and Social Reform]. In addition to lectures and required reading two special and detailed reports are made by each student, based as far as possible on personal research and observation of scientific methods in poor-relief and industrial reform. These researches are arranged in consultation with the instructor; and an important feature of the course is the suggestion and direction of such personal investigations, and the provision to each student of special literature or opportunities for observation.
A special library of 700 carefully selected volumes is provided for the use of students in this course.
This paper should be considered as a whole. The time should not be exhausted in answering a few questions, but such limits should be given to each answer as will permit the answering of all the questions in the time assigned.
The chief historical steps in the evolution of the family.
The relation of the Family to the State:—
(a) As urged by Mr. Spencer (Spencer, Sociology, I, 707).
(b) As proposed by “Scientific Socialism.”
Certain economic movements which affect the integrity of the Family.
The causes of poverty, classified and compared.
The evolution of the “Double-Decker,” and the provisions of the New York “New Law” for tenements.
Charles Booth’s Class E in East London; its dimensions, special risk of degradation, and the way of security proposed.
Some elementary principles of organized charity (Devine, The Practice ofCharity, ch. IX).
Compare the “Case System” with the “Space System.”
Compare the Church Districting System with the Liverpool system of collection.
Germany and Belgium compared in their provision for the “out-of-works.”
Source: Harvard University Archives. Harvard University, Examination Papers 1873-1915. Box 7, Bound volume: Examination Papers, 1904-05; Papers Set for Final Examinations in History, Government, Economics,…,Music in Harvard College (June, 1905), p. 45.
From 1958 through 1962 Richard Musgrave was Professor of Economics at Johns Hopkins. One thinks of him today as a giant in the history of public finance but the examination below reminds us that he was also an economist who still taught graduate courses in monetary economics/policy at least into the early 1960s.
Richard Musgrave
Faculty of Arts and Sciences — Memorial Minute
At a Meeting of the Faculty of Arts and Sciences April 8, 2008, the following Minute was placed upon the records.
Richard Musgrave, the Harold Hitchings Burbank Professor of Political Economy, Emeritus, was the leading public finance economist of his generation. He died on January 15, 2007, at the age of 96.
Richard Abel-Musgrave was born in Königstein, Germany, and educated in Munich and Heidelberg. He was of half Jewish ancestry, his paternal grandfather and maternal grandmother both being Jews who had converted to the Christian faith.
He came to the United States in 1933 as an exchange student at Rochester University but soon transferred to Harvard where he received his PhD in 1937. He decided not to return to Germany and applied for U.S. citizenship in that same year. At that time he dropped the hyphen in his family name, becoming Richard Abel Musgrave. He was known thereafter as Richard Musgrave.
After completing his PhD, Musgrave worked at the Board of Governors of the Federal Reserve until 1948. He then taught at Johns Hopkins, the University of Michigan and Princeton before joining the faculty at Harvard in 1965. He held simultaneous appointments in the economics department and in the Harvard Law School, the first person to hold a joint appointment in both the Faculty of Arts and Sciences and the Law School. Professor Musgrave took emeritus status in 1981 and moved to California where he was an adjunct professor at the University of California at Santa Cruz.
Although the 19th-century giants of political economy, David Ricardo and John Stuart Mill, wrote extensively about the theory of taxation, by the middle of the 20th century the teaching and writing on public finance in the United States was largely descriptive and institutional. Richard Musgrave changed all of that with his major volume, The Theory of Public Finance, published in 1959.
The Theory of Public Finance was both a theoretical research monograph and a text book. It applied the analytic tools of price theory and of Keynesian macroeconomics to the issues of tax incidence (i.e., who bears the burden of taxes), of efficiency (i.e., measuring the losses caused by the distorting effects of taxes), and of achieving full employment. All of this was done in a very readable and accessible way that made the book very widely studied. The book proved to be a particularly significant resource for tax law professors in their teaching and writing about federal tax policy.
A key feature of Musgrave’s Theory of Public Finance was the division of the problem of public finance into what Musgrave called three “branches.” One “branch” was devoted to the problem of achieving full employment. Here Musgrave applied the ideas of Keynesian fiscal policy to using tax reductions and government spending to increasing aggregate demand. A second “branch” focused on economic efficiency, i.e., on the design of taxes that would raise revenue with the least distortion to incentives and therefore the least loss of real incomes. The third “branch” then dealt with issues of redistribution to achieve a politically acceptable distribution of income. These branches were of course just pedagogical devices and not a way of organizing the actual making of policy.
Richard Musgrave was an inspiring teacher. It was clear to his students that he cared about both the analytic science in public finance and the practical implications of that analysis for improving our tax system. He taught students to think about the impact of taxes on economic efficiency while not losing sight of their distributional consequences. Or, as he might have said, to think about the distribution of the tax burden and the use of taxes and transfers to redistribute income while not losing sight of the consequences of the progressive tax and transfer structure on economic efficiency.
In the weekly graduate seminar in public finance, graduate students and visiting faculty would present their latest research. The seminar brought together not only graduate students and faculty from the department of economics, but also tax specialist members of the Harvard Law School faculty. Their presence added a greater degree of practical focus to the seminar’s discussion of tax reform. Musgrave’s questions and insights kept the seminar focused on the substantive importance of the problems rather than on the more abstract methodological issues. Many of the students taught by Richard Musgrave went on to do important work in public finance.
Although Musgrave felt strongly about tax policy and about transfer programs like Social Security and unemployment insurance, he was not an activist who tried to influence outcomes in Washington. He appeared to believe that he was most effective in developing the analysis and teaching students who would carry this material into practice.
An important exception to this was a major report on fiscal reform in Columbia that Musgrave prepared jointly with Malcolm Gillis in 1971. This report, prepared under the auspices of the Harvard International Tax Program of the Harvard Law School, was based on extensive and detailed work in Columbia.
Richard Musgrave was elected a Distinguished Fellow of the American Economic Association in 1978. Musgrave was one of the organizers of the International Seminar in Public Economics which brought together American and European faculty members who specialized in public finance. He also served as an honorary president of the International Institute of Public Finance.
Professor Musgrave collaborated with his wife, Peggy Musgrave, in writing a popular undergraduate text book, Public Finance in Theory and Practice, which was published in 1973. The Musgraves also found time to reach out to young colleagues and their wives at their homes in Belmont and in Vermont.
Respectfully submitted,
Lawrence Summers
Bernard Wolfman
Martin Feldstein, Chair
Economics 611 Final Examination Prof. R. A. Musgrave January 22, 1960
I
Write for forty-five minutes.
There is by now pretty general agreement, among monetary theorists, regarding the various relationships by which the supply of money may affect the level of output and prices. Nevertheless, there remains a division between those who prefer to study the role of money in the framework of an income-expenditure approach, and those who prefer the quantity theory of equation of exchange tradition. What, if any, substantive justification is there for retention of this dichotomy? If there is none, which approach is to be retained? If there is, what distinct purposes are served by the two approaches?
II
Write on two out of the following three questions, thirty minutes each,
Various writers, including Wicksell, Fisher and Keynes, have treated the problem of monetary disequilibrium and the nature of the equilibrating process, in terms of the differential between two rates of interest. Discuss these approaches and compare the concepts of interest used therein.
Where do you stand on the loanable funds—liquidity preference controversy? In particular, are you satisfied that the distinction between the stock and the flow approach to monetary theory is purely terminological?
“It was a great misfortune for the development of monetary theory, that Marshall and Pigou did not stick with their initial intent to relate k to wealth, but proceeded to relate it to income. Thereby was postponed the recognition — so essential for a fruitful approach to monetary theory — that the demand for money must be dealt with in the context of a general portfolio theory.” Discuss.
III
Write on the following three statements, for fifteen minutes each. Indicate whether the statement is right or wrong and why.
“The real balance effect implies that the demand schedule for money has unit elasticity, from which it follows that the price level changes proportionately with the money supply.”
“The liquidity trap is a necessary but not a sufficient condition for under-employment equilibrium.”
“Classical theory was mistaken in assuming that the rate of interest is determined by income independent of money supply. As Keynes has shown, interest is determined by money supply and then determines income.”
______________________
Dr. R. A. Musgrave Friday, May 20, 1960
ECONOMICS 611
The following changes occur: Bill holdings at the Federal Reserve rise by 100 million, while bond holdings fall by 80 million. Also, bank holdings of bills fall by 70 million, non-bank holdings of bills fall by 30 million, and non-bank holdings of bonds rise by 80 million. What is the resulting change in excess reserves, assuming a reserve ratio of 20%, and why? (Assume that the system retains such changes in excess reserves as result, without reacting with corresponding changes in loans.)
Assume that the system is always loaned up. What will be the effects on member bank reserves and demand deposits of (a) an increase in vault cash by 100; (b) a decrease in currency in circulation by 200; (c) a gold outflow of 300; (d) a decrease in treasury deposits at commercial banks by 500. The reserve ratio is again 20%.
Source: Johns Hopkins University. The Eisenhower Library. Ferdinand Hamburger, Jr. Archives. Department of Political Economy [Records], Series 6/7, Box 3, Folder “Department of Political Economy, Graduate Exams 1933-1965”.
Abba Lerner changed his academic locations (including leaves of absence to accept visiting positions) with a frequency rivaled by few. The academic year 1957-58 found him visiting the department of political economy at Johns Hopkins University. The artifact for this post is the final examination for Lerner’s course on welfare economics.
THE JOHNS HOPKINS UNIVERSITY
Welfare Economics
18-640
Final Examination May 20th 2-5 p.m., 1958. Abba P. Lerner
Answer four questions, in separate blue books, in ink.
Discuss the meaning, the validity and the significance of the proposition that it is impossible to derive a social welfare function from individual preference functions.
How far can one carry the analogy between a political voting procedure and the economic price mechanism, and between the rationale of voting between alternative policies and that of allocating dollars between alternative purchases?
Discuss the rational elements in relation to other elements in the social objectives of optimum distribution of income, optimum population, and optimum rate of saving.
What is sound, what is unsound, and what is useful in the doctrine of consumers’ surplus?
Why is it socially desirable to have the prices of products equal to the value of the marginal factors used in their production? How is this objective affected by equity elements such as the need for subsidies?
Under what conditions would a partial freeing of trade be harmful to society in the largest sense? In your answer explain the treatment of this problem in terms of “second best” and the use of the concept of “divergence”.
Compare the arguments for the imposition of trade restrictions for the sake of affecting the international terms of trade with those undertaken for the sake of affecting the domestic distribution of income. Give special attention to the interdependence of efficiency and equity considerations.
Source: Johns Hopkins University. The Eisenhower Library. Ferdinand Hamburger, Jr. Archives. Department of Political Economy [Records], Series 6/7, Box 3, Folder “Department of Political Economy, Graduate Exams 1933-1965”.
Image Source: Photograph of Abba Lerner printed in an announcement for his speech “Israel—The Next Ten Years” (February 25) at the 1958 Forum presented by Beth Emet the Free Synagogue (Evanston, Illinois). Library of Congress, Manuscript Division. The Papers of Abba P. Lerner, Box 6, Folder 8 “ ‘B’ miscellany”. A copy of the announcement was posted by Ellen Blum Barish in Tablet (January 14, 2014).
The following “Application for Candidacy for the Degree of Ph.D.” for William Edward Burghardt Du Bois, who was awarded his Ph.D. in 1895 and whose 1896 publication of his dissertation book is noted, appears to be a record filed ex post. His 1895 Ph.D. was only the 3rd awarded by Harvard’s Division of History and Political Science in political science and it appears to me that the creation of an explicit, real-time record of a candidate’s satisfaction of degree requirements only came later. Similar omissions and ex post inclusions can be found in the similar applications filed for/by Frank W. Taussig and J. Laurence Laughlin.
For the previous postI have transcribed Du Bois’ updates in the reports up through 1920 by the secretary of the Harvard Class of 1890.
Research Tip:W.E.B. Du Bois Papers in the Special Collections and University Archives at the University of Massachusetts Amherst. Cf. the portrait included in above linked page which is dated 1907 with the 1900 portrait by Paul Nadar of Paris made in 1900. They are not identical, but close enough for me to suspect that they are both from the same Paris studio in 1900.
[Note: Boldface used to indicate printed text of the application; italics used to indicate handwritten entries]
______________________
William Edward Burghardt DuBois 1895
HARVARD UNIVERSITY DIVISION OF HISTORY
AND POLITICAL SCIENCE.
Application for Candidacy for the Degree of Ph.D.
I. Name (in full, and date of birth).
[Name left blank] Feb 23—1868
II. Academic career. (Mention, with dates inclusive, colleges or other higher institutions of learning attended; and teaching positions held.)
Fisk University 1888 Harvard College 1888-90 Harvard Graduate School 1890-92 Berlin University 1892-94? Prof. Latin & Greek Wilberforce Univ (Ohio); Prof. Econ. & Hist. Atlanta Univ (Georgia)
III. Degrees already attained (Mention institutions and dates.)
V. Department of Study. (Do you propose to offer yourself for the Ph.D., in “History” or in “Political Science”?
Political Science
VI. Choice of subjects for the General Examination. (Write out each subject, and at the end put in square brackets the number of that subject in the Division lists. Indicate any digressions from the normal choices, and any combinations of partial subjects. State briefly what your means of preparation have been on each subject, as by Harvard courses, courses taken elsewhere, private reading, teaching the subject, etc., etc.)
VIII. Thesis Subject. (State the subject and mention the instructor who knows most about your work upon it.)
The Suppression of the African Slave Trade in the United States of America.— ?illegible word? and published Harvard Historical Studies, I (1896).
IX. Examinations. (Indicate any preferences as to the time of either of the general or special examinations.)
[left blank]
* * * [Last page of application] * * *
[Not to be filled out by the applicant.]
Name:William Edward Burghardt DuBois Date of reception: [left blank] Approved: [left blank] Date of general examination: [left blank] Thesis received: [left blank] Approved: [left blank] Read by: [left blank] Date of special examination: [left blank] Recommended for the Doctorate: [left blank] Voted by the Faculty: [left blank] Degree conferred:1895 (Pol Sci.)
Source: Harvard University Archives. Division of History, Government, and Economics, Box 1, Folder “Ph.D. degrees conferred, 1873-1901 (folder 1 of 2)”.
W. E. B. Du Bois joined the Harvard Class of 1890 in its junior year. He entered the Ph.D. division of History and Political Science to major in political science. At the end of the 19th century, political science was a synonym for “social science” and encompassed government, economics, and sociology. Economists have a rightful (partial) claim to Du Bois, much as they have to Thorstein Veblen.
This post provides transcriptions from five Harvard class of 1890 reports on the life and activities of W.E.B. Du Bois through 1820.
William Edward Burghardt Du Bois is at present teaching at Wilborforce University, Green County, Ohio, an institution for education of colored youth. Has lately published a monograph on the suppression of the slave trade from the press of Longmans, Green & Co. 1896-97, Fellow, University of Pennsylvania.
William Edward Burghardt Du Bois. “In the fall of 1897 I accepted a position at Atlanta University as professor of history and economics. Here I am still at work. During that time I have published the following works:—
“We have had one little boy, born October 3, 1897, died May 24, 1899; a daughter, Nina Yolande, was born October 4, 1900. Married, May 12, 1896, Nina Gomer.”
BORNat Great Barrington, Mass., Feb. 23, 1868. Son of Alfred Alexander and Mary Sylvina (Burghardt) Du Bois. Prepared at Great Barrington High School, Great Barrington, Mass.
IN COLLEGE, 1888–90. Entered Fall of ’88, graduated ’90. DEGREES: A.B. 1890; A.M. 1891; Ph.D. 1895; A.B. (Fisk Univ.) 1888.
MARRIEDto Nina Gomer at Cedar Rapids, Iowa, May 12, 1896. CHILDREN:Burghardt Gomer, born Oct. 3, 1897, died May 24, 1899; Nina Yolande, born Oct. 14, 1900.
OCCUPATION: Editor.
DURING the years 1897–1910 I was Professor of Economics and History at Atlanta University. I have been Editor of The Crisis Magazine from 1910 to date. I am also Director of Publicity and Research of the National Association for the Advancement of Colored People. In 1911 I was Secretary for the United States Universal Races Congress.
ADDRESS: (home) 248 West 64th St., Apt. 45, New York, N. Y.; (business) 70 Fifth Ave., Room 521, New York, N. Y.
CLUBS AND SOCIETIES: Authors’ League of America, Liberal Club, New York; Fellow of the American Association for the Advancement of Science, Royal Societies Club, London.
BORNat Great Barrington, Mass., Feb. 23, 1868. Son of Alfred Alexander and Mary Sylvina (Burghardt) Du Bois. Prepared at Great Barrington High School, Great Barrington, Mass.
MARRIEDto Nina Gomer at Cedar Rapids, Iowa, May 12, 1896. CHILDREN: Burghardt Gomer, born Oct. 3, 1897, died May 24, 1899; Nina Yolande, born Oct. 14, 1900.
OCCUPATION: Editor, New York.
Since 1915 I have continued my work as editor of “The Crisis” magazine, which has a circulation of one hundred thousand. I have also begun the publication of a magazine for colored children, known as “The Brownies’ Book.” I have published “The Negro” in The Home University Library , in 1915 , and “Darkwater,” a book of essays, in 1920. After the armistice, I was sent to France to represent the National Association of the Advancement of Colored People. While there, I assembled a Pan-African Conference with fifty delegates, representing sixteen different Negro groups. This conference made report to the Peace Conference, concerning the future of Africa and the treatment of colored peoples.
The following typed notes were based on a conversation that took place on February 21, 1936 regarding possible future hires for the Harvard economics department. President James B. Conant (or someone on his behalf) met with Columbia university professors Wesley C. Mitchell and his NBER sidekick, Frederick C. Mills. This artifact comes from President Conant’s administrative records in the Harvard Archives.
In the memo we find a few frank impressions of members of the Harvard economics departments together with head-hunting tips for established and up-and-coming economists of the day.
An observation that jumps from the paper is the identification pinned to the name Arthur F. Burns, namely, “(Jew)”. Interestingly enough this was not added to Arthur William Marget (see the earlier post Harvard Alumnus. A.W. Marget. Too Jewish for Chicago? 1927.) nor to Seymour Harris.
General impression is that the Department of Economics at Harvard is in a better state today than these gentlemen would have thought possible a few years ago. The group from 35-50 which now faces the future is about as good as any in the country. [Edward Hastings] Chamberlin, [John Henry] Williams,[Gottfried] Haberlerand Schlichter [sic, [Sumner Slichter] are certainly quite outstanding. Very little known about [Edward Sagendorph] Mason; he seems to have made a favorable impression but no writings. [Seymour Edwin] Harris slightly known, favorable but not exciting.
[John Ulric] Neff admitted to be the best man in economic history if we could get him. Names of other people in this country mentioned included:
[Robert Alexander] Brady — University of California, now working on Carnegie grant on bureaucracy; under 40.
Arthur [F.] Burns at Rutgers (Jew) now working with the Bureau of Economic Research and not available for 3 or 4 years. Said by them to be excellent.
[Arthur William] Marget of Minnesota, Harvard Ph.D., I believe; well known, perhaps better than Chamberlin. Flashy and perhaps unsound. (Mitchell and Mills disagree to some extent on their estimate of his permanent value but agree on his present high visibility).
Winfield Riffler [sic,Winfield William Riefler], recently called to the Institute of Advanced Study at Princeton, probably one of the most if not the most outstanding of the younger men.
Giddons [sic, Harry David Gideonse?] of Chicago, very highly thought of by Chicago people but has not written a great deal; supposed to be an excellent organizer.
C. E. [Clarence Edwin] Ayres, University of Texas, about 40; in N.R.A. at Washington. Mitchell thinks very highly of him.
England
[Theodore Emmanuel Gugenheim] Gregory, at London School of Economics, about 50, same field as Williams but not so good. Mills more favorable than Mitchell.
The economics department at Harvard at the start of the 20th century offered a course taught by the Law School assistant professor, Bruce Wyman (b. 15 June 1875; d. 21 June 1926), to provide future businessmen an overview of commercial and industrial relations law. Students expecting to go to study law were explicitly not encouraged to take the course.
Bruce Wyman pops up in an even earlier post. Harvard President Lowell complained to Professor Frank Taussig about Wyman’s course in the economics department having too soft a grade distribution (making it a “snap” course). Also we learn there the somewhat scandalous circumstances that led to Wyman’s forced resignation from his Harvard Law professorship in December 1913.
[Economics] 21. Principles of Law governing Industrial Relations. — Commercial Law. — Competition and Combination. Mon., Wed., and (at the pleasure of the instructor) Fri., at 11. Asst. Professor Wyman.
Course 21 is open to those students who will complete their undergraduate work in 1904-05.
This course considers certain rules of the law modern trade and the governing the course of organization of modern industry. The commercial law is thus taken up at large in its application to the conduct of modern business. The aim of the course is to give to students who mean to enter business life some contact with the law and some understanding of the legal point of view; at the same time the problems brought forward are actual and the rules of law discussed are specific, so that the instruction may prove of service in a business career. The course forms a natural introduction to the study of law, as it involves most of the elementary principles in one way or another. As the course deals with adjudication and legislation on questions of first importance in the economic development of modern times, it may also be of advantage to all those who wish to equip themselves for the intelligent discussion of issues having both legal and economic aspects.
In 1904-05 five principal topics will be discussed: Competition — Combination — Association — Consolidation — Regulation. The conduct of this course will be by the reading and discussion of cases from the law report. The cases selected cover the whole course of the industrial organization, so that both fact and law involved are informing.
Source: Harvard University. Faculty of Arts and Sciences. Division of History and Political Science Comprising the Departments of History and Government and Economics, 1904-05 (May 16, 1904), pp. 48-49.
__________________________
ECONOMICS 21
Mid-year Examination, 1904-05
Answer all questions.
In the case of each question give a specific answer about one line in length, then proceed in subsequent paragraphs to discuss the matter involved both upon principle and upon authority.
A is the manufacturer of the X infants’ food; B is the manufacturer of the Z infants’ food. B inserts an advertisement in various magazines, which contains the following clause: — “The Z food is twice as nutritious as the X food.” A sues B for the publication of this statement; in this suit he offers to prove by expert testimony that the X food is in fact more nutritious than the Z food. The court is asked by B to dismiss the action of A. What result?
A is a workman employed in the works of B. B carries an indemnity policy covering accidents, written by C. A gets his hand crushed in one of the machines, which is improperly guarded. C attempts to make a settlement with A at $500, which A refuses; thereupon C threatens to get A discharged by B, but A still refuses to compromise. Next, C goes to B and demands that A be discharged. B is at first unwilling, but when C threatens to take advantage of the clause in the policy permitting cancellation of the policy upon five days’ notice, B reluctantly undertakes to discharge A at the end of the week for which he is employed, protesting that A is a good workman and he had intended to give him regular employment. After A is thus discharged he brings suit against C for damages for loss of his employment. What result?
A is a manufacturer of tomato catsup. He puts his product on the market in a tapering bottle with a screw cap of tin; this bottle he packs in a round pastboard carton covered with manila paper; on the wrapper is a picture of a bottle filled with red catsup, around which in black type are the brand and address. B another manufacturer of tomato catsup puts his product on the market in much the same way — in a tapering bottle with a screw cap of tin, wrapped in a round carton of pastboard with a label showing a bottle of red catsup, but with the name of his brand in plain black letters, as also his own name and address. A seeks an injunction against B. What result?
The North American Soap Company is organized under the laws of New Jersey. It buys from A, B, C, D, E, F, and G, who are the principal manufacturers of soap in the United States, all of their soap factories. The North American Company in the case of each purchase from A, B, C, D, E, F, and G takes an agreement from each not to engage in the soap business for ten years in the United States. The scheme of the promoters is to get control of the market by this process. B starts a large soap factory in New York two years later. Can he be stopped by injunction?
A is a dealer in coal in San Francisco. An agreement is made between B, C, D, E, F, and G, who are the principal dealers in coal in that city that they will sell for one year at prices to be fixed by the majority. The combination then votes to cut prices 20% for the next 4 months. At the end of 3 months, A’s capital is exhausted by this cut throat competition, and he retires from business a ruined man. A now brings suit against B for his losses. What result?
In a certain factory operated by X, A is employed by the week with 300 others, among whom are B, C, D, E, F, and G. B, C and D propose the organization of a trades union which every employee joins, except A who refuses. The trades union, at an early meeting, votes unanimously that theirs must be a union shop. The committee accordingly waits on X and informs him that unless A is discharged a strike will be called at the end of the week. X reluctantly discharges A at the end of the week. A now sues G for damages. What result?
The X hotel corporation is duly organized by A, B, and C. It builds a hotel the next year. Three years later A buys from B and C all of their stock. The next week A executes a mortgage upon the hotel property to the Y bank to secure a loan himself of $10,000; this is signed: — “X company, by A.” The week following, A transfers one share to M and another to N. A meeting of the shareholders in the X corporation is then called, A, M, and N attending; at this meeting it is unanimously voted to borrow $10,000 from the Z bank and to execute a mortgage upon the corporate property to secure the loan, which A is authorized to execute in the name of the company. This mortgage upon the hotel property is accordingly executed to the Z bank, being signed: — “X company, by A.” Which of these mortgages, the Y bank or the Z bank, will come out ahead, if the hotel property is only worth $15,000, not enough to pay both?
The X corporation is organized with a capitalization of $100,000; its shares are subscribed on the basis of 50% paid down, and all are issued. A year later it issues $50,000 in first mortgage bonds, and the next year $20,000 in second mortgage bonds. In the third year it goes into insolvency owing $60,000 to general creditors for goods. The sale of its properties realizes $50,000. In the final winding up how do the following parties come out: the first bonds? the second bonds? the general creditors? and the stockholders?
Answer all questions. Give full reasons. Cite some authorities.
Can the following be stopped as unfair competition:—
(1) One steamship company gives a rebate of 25% to those shippers who agree to give all their business and not to deal with a rival steamship company; (2) A tobacco manufacturer gives jobbers 5% discount extra if they will agree not to handle any goods of rival companies which sell for less than its own brands; (3) A manufacturer of shoe machinery who sells his machines only upon an agreement by the purchaser to buy the staples fed into it of the manufacturer finds that a rival manufacturer is offering staples at 25% off; (4) An oil corporation controlling 80% of its market reduces prices 50% in districts where competitors appear while raising prices 50% in districts where competition has been crushed out; (5) A gas company decides not to deal with any applicant who has had electricity put in by a rival company.
Eight corporations, constituting eighty per cent. of the soap manufacturers of the United States form a partnership to handle sale. Each corporation pays in $10,000 as working capital. It is provided that every manufacturer in the partnership shall have the right to run his own works in his own way, producing as much as he pleases, selling at what price he pleases. But it is further provided that every manufacturer shall pay to the treasurer of the partnership 2½ cents per lb. upon all soap made and sold by him. By another clause any member of the association has the right to withdraw at the end of any quarter. At the end of each quarter, it is stipulated, the treasurer shall pay over to each member of the partnership a share of the fund thus accumulated pro rata according to the capacity of his plant. At the end of the first quarter the X corporation, a member, withdraws; it has paid into the partnership $322; the pro rata share due is $5800. The X corporation now asks counsel what its rights are (1) To the $322; (2) To the $5800; (3) As to the $10,000; (4) Suppose the partnership were insolvent, what would be the respective rights of the X corporation and the general creditors of the partnership? (5) If the X corporation is content to remain in the arrangement, can its dissenting majority stockholders who believe the policy unsafe force it to withdraw?
A and B are co-partners engaged in cotton spinning. One C comes to A and B, whom he finds together in the office of the firm, and offers them 10,000 bales of cotton at 11c. per lb. This is a very large purchase for this firm to make, and the price is rather high as the price is falling. The proposition appeals to A, who says to B, “shall we take the cotton?” B says, “No.” Then A turns to C, who has heard all, and says “we need that cotton, despite what B says, and we will sign a contract with you;” thereupon, against the continued protests of B, A and C executed a contract for the cotton. A signs it, “A & B by A,” B forbidding him to do so to the last. The partnership later refuses to carry out the contract; C sues B for the damages caused by the breach. (1) What result in case as stated? (2) Suppose the partnership was buying a large amount of cotton in order to corner the market, which fact was unknown to C; (3) Would your answer be different if A and C had contracted for the cotton in B’s absence, A secretly intending to sell the cotton and run away with the proceeds? (4) Suppose while A and C were contracting, but before they had struck the bargain, B died without either knowing it; (5) Suppose the purchase price of the cotton was higher than the market, it being understood that in consideration of this C should cancel a debt of $4000 which A owed him.
A buys a mining claim for $8000; he sells it to B and eight others for $12,000, who agree that if they are successful in unloading it upon a corporation which they are planning to form for that purpose he shall have the same share of profits that the rest get. After trying to sell it to various other people for $12,000 and failing to do so (the best offer they can get is $4000) they all form the X corporation with their office boys as stockholders and directors, who vote to buy the mining claim of them for $62,000. The mine when developed by the people who buy into the X company turns out to be worth $500,000 at the least calculation. (1) What are the rights of the X company against A? (2) Suppose it had turned out to be worth only $1000? (3) Suppose the X corporation had already been formed by other parties before this syndicate was made up and that the directors for the time being had foolishly bought the property from the syndicate for $62,000 when most people would say that it was only worth $8000, what could the stockholders of the X company do about it? (4) Suppose B happened to be one of this board of directors, what would be the rights of the stockholders of the X company? (5) Suppose B happened to be a stockholder in this X corporation that bought the mining claim under the circumstances described in (3), could minority stockholders in the X corporation which had voted by a small majority (which included B’s vote) prevent the purchase from being carried through?
Three gas companies, — the A Co., the B Co., and the C Co., are engaged in supplying gas in a certain city. The principal stockholders are friendly, and they desire to consolidate. The following schemes are proposed; how many of these may be put through in any way (a) if every stockholder in the A Co., the B Co., and the C Co. is willing? (b) if minority stockholders dissent? (1) The first scheme proposed is to have the shares in the constituent companies conveyed to a board of three trustees who shall issue trust certificates retaining the voting powers; (2) the second scheme proposed is to have the shares sold to a holding corporation organized to buy them, the shareholders in the a holding constituent companies being offered either the market price of the shares in cash or in shares in the holding corporation; (3) the third scheme proposed is for the constituent companies to vote to sell all their property and franchises for cash to a new corporation organized to buy the properties, the cash to be distributed to the stockholders in the old companies pro rata; (4) the fourth scheme proposed is for the shareholders in the constituent companies to agree to elect identical boards of directors in accordance with a vote among themselves; (5) a fifth scheme is for the A Co. and the B Co. to execute leases of all of their properties to the C Co.
Are the following laws constitutional or do they deprive of life, liberty, and property without due process of law?: (1) prohibiting any manufacturing corporation from stipulating in any employment contract that one half of the employee’s pay shall be in orders for supplies from the employer’s general store; (2) forbidding the manufacture of clothing in any room in any tenement house; (3) forbidding the running of a department store, which is defined as an establishment where two of the following businesses are carried on: the sale of foods, the sale of dry goods, the sale of furniture, the sale of hardware; (4) prohibiting the sale of oleomargarine colored yellow, and requiring any one who sells it to put a sign out which shall say in letters one foot high “Oleomargarine sold here”; (5) making eight hours the limit of time for which any one may be employed to work in any factory.
Are the following refusals to enter into business relations legal? (1) By a telephone company which will install an instrument in the office of only one telegraph company; (2) by a railroad which will only allow one telephone company to establish a pay station in a union station; (3) by an electric company which refuses to furnish electricity for power; (4) by a sleeping car company which after assigning a traveller to “lower 5” reassigns him half an hour later to “upper 8” without making any explanation; (5) by a railroad which refuses to furnish facilities for doing the express business itself upon the ground that it has entered into an exclusive arrangement with one express company.
Do the following constitute illegal discriminations in commercial dealings? (1) By a steamship company which gives 20 per cent. rebate to all shippers who ship 1000 tons per year; (2) by a railroad which charges ten cents excess fare to passengers who have no tickets, even if they have found the ticket office closed; (3) by a hotel keeper who refuses to take in late at night a man and his wife who find themselves unable to get into their own house nearby because they have lost their key; (4) by a gas company which refuses (although offered prepayment) to sell gas to a rival company; (5) by a gas company which finds itself unexpectedly unable to supply its customers; (6) by an electric company which makes it a rule to supply the transformer free to such applicants only who have the wiring of their houses done by it.
Source: Harvard University Archives. Harvard University, Examination Papers 1873-1915. Box 7, Bound volume: Examination Papers, 1904-05; Papers Set for Final Examinations in History, Government, Economics,…,Music in Harvard College (June, 1905), pp. 38-42.
“Principles of Accounting” was one of three courses offered by the department of economics that were specifically targeted to advanced students who intended to start business careers after graduation. William Morse Cole, A.M. was the instructor. An earlier post provides an overview of his career.
[Economics] 18 1hf. The Principles of Accounting. Half-course (first half-year). Mon., Wed., and (at the pleasure of the instructor) Fri., at 3.30. Mr. W. M. Cole.
This course is designed primarily for students who expect to enter a business career, and wish to understand the processes by which the earnings and values of industrial properties are computed. It is not intended to afford practice in book-keeping, but to give students a grasp of principles which shall enable them to comprehend the significance of accounts.
In order that students may become familiar with book-keeping terms and methods, a few exercises will be devoted to a brief study of the common systems of recording simple mercantile transactions. The chief work of the course, however, will be a study of the methods of determining profit, loss, and valuation. This will include an analysis of receipts, disbursements, assets, and liabilities, in various kinds of industry, and consideration of cost of manufacture, cost of service, depreciation and appreciation of stock and of equipment, interest, sinking funds, dividends, and the like. Published accounts of corporations will be studied, and practice in interpretation will be afforded. Attention will also be given to the functions and methods of auditors.
The instruction will be given by lectures, discussions, reading, and written work.
Course 18 is open to Seniors and Graduates who have taken Economics 1.
Source: Harvard University. Faculty of Arts and Sciences. Division of History and Political Science Comprising the Departments of History and Government and Economics, 1904-05 (May 16, 1904), pp. 47-48.
__________________________
ECONOMICS 18
Mid-year Examination, 1904-05
Construct an imaginary trial balance of at least eight items, of which not over three shall represent persons or corporations.
In a proprietor’s absence the books of a business are opened and kept by a bookkeeper who keeps accurate record of transactions reported to him but cannot be trusted to figure valuations or profits. At the end of a year, the records show, before the books are closed and simply as the result of regular transactions, the following figures:
Proprietor’s investment, $100,000; Bills Payable, $17,000; Bills Receivable, $26,000; Real Estate, $20,000; Accounts Payable, $15,000; Accounts Receivable, $20,000; Cash, $5,000; Merchandise on hand, valued at cost, $75,000; Merchandise Dr. on ledger, $49,500; Expense, $12,000; Interest balance received, $500.
Now the proprietor returns and wishes to close his books for the year. If he needs any information not given above, what questions will he ask in obtaining it? Assume any fairly reasonable answers to such questions, if any, and then show what is the proprietor’s present investment in the business.
The annual report of a corporation shows the following figures: Profit and Loss credit balance at the beginning of the year, $20,000; Merchandise profit, $140,000; Expense, $100,000; appreciation of Real Estate, $10,000; permanent Surplus set aside at the end of the year, $15,000; Dividends, $50,000. Present in rough ledger form i.,e. debit and credit items, the Profit and Loss account for the year, showing the balance at the end of the year.
Explain the significance of each of the following accounts appearing, with a balance on the side indicated, on (1) a balance sheet for the beginning of a new fiscal year, and (2) a trial balance taken in the ordinary course of business during the year: Wages, Cr.; Interest, Dr.; Merchandise, Dr.; Profit and Loss, Dr.; Reserve Fund, Cr.; Supplies, Dr.
An annual report of a corporation shows, either on the income sheet or on the balance sheet, an item of which the title means little or nothing to you, e.g., “Pro rata share of bonds of H.R.L. Co.” Assuming the accounts to be kept properly, explain to what extent the position and the treatment of the item throw light upon its character.
A corporation shows the following statements:—
1903.
1904.
Plant
$450,000
$440,000
Supplies
59,000
27,000
Real Estate
100,000
95,000
Cash
15,000
15,000
Bills Receivable
50,000
60,000
Accounts Receivable
20,000
15,000
Merchandise
83,000
108,000
Capital Stock
500,000
500,000
Bills Payable
150,000
150,000
Accounts Payable
100,000
90,000
Wages
7,000
10,000
Profit and Loss
20,000
10,000
Proceeds from sales
600,000
Direct cost of production
500,000
General expenses, fixed charges, etc.
70,000
Tell all you can about the history of the corporation for the year 1903-04.
If bonds on hand were bought at a premium, should that fact show upon the income sheet or in any way affect it?
The books of three concerns are open to your inspection. Outline briefly a scheme for consolidating the three concerns into a corporation.
[Do not allow yourself to get involved in the fascinating details of such a scheme at the expense of time needed for other things. This may well be left for surplus time and energy. Bookkeeping entries are not required. Show how the accounts of the three concerns can be interpreted for such a purpose.]
Source: Harvard University Archives. Harvard University, Examination Papers 1873-1915. Box 7, Bound volume: Examination Papers, 1904-05; Papers Set for Final Examinations in History, Government, Economics,…,Music in Harvard College (June, 1905), pp. 37-38.
Image Source: Harvard Alumni Bulletin, Vol. XIX, No. 16, p. 308. Portrait of William Morse Cole colorized by Economics in the Rear-view Mirror.
Future generations of economics graduate students and junior faculty, having been raised in a world of TikTok and able to bring the tools of sound and image processing to their media productions, will probably find the following sixty-some year old Chicago economics skit dull reading. Even the curator of Economics in the Rear-view Mirror, a veteran of this art-form from M.I.T. in the mid-1970s [cf. Analysis in Wonderland, Wizard of E-52-383c, Casablank], finds this Chicago artifact in need of a major revise-and-resubmit. But we transcribe our artifacts as we find them, with minor editorial revisions to improve formatting, corrections for obvious misspellings, and annotations that have become necessary due to the passage of time. Material in square brackets (in italics) have been added to the transcription.
1929. Born 20 November in New York City.
1951. B.A. Queens College, City University of New York. Phi Beta Kappa.
1955. M.A. University of Chicago.
1957-59. Statistical analyst, Federal Reserve Bank of Chicago.
1959-71. Research Economist, University of Chicago (research assistant to George Stigler).
1933. Born 13 March in Bend Oregon.
1954. A.B. Harvard University.
1955. M.A. University of Chicago.
1962. Ph.D. University of Chicago. Thesis: The Demand for Alcoholic Beverages.
1957-61. Defense policy analyst at RAND.
1962-64. Director of special studies in the Office of the Secretary of Defense.
1964-70. Director of Program Analysis Division at the Institute for Defense Analyses.
1970-1972. Assistant director for evaluation of the Office of Management and Budget.
1972-75. Professor of economics at the University of California, Berkeley.
1975-80. Chief economist of Ford Motor Company.
1980-81. Professor in the Graduate School of Management, UCLA
1981-85. Member of the Council of Economic Advisers.
1985-2008. Chairman of the board of directors, Cato Institute.
2008-11. Chairman emeritus, Cato Institute.
2011. Died October 26 in Washington, D.C.
See: William A. Niskanen, A Life Well Lived (Cato Institute, 2012). Above screen-shot is from that memorial presentation.
1929. Born July 1 in Los Angeles, CA.
1952. B.S. UCLA.
1954. M.A. UCLA.
1958-62. Research Economist, Northwestern University.
1961. Ph.D. University of Chicago. Thesis: Labor as a Quasi-Fixed Factor of Production.
1962-67. University of Washington
1967-. Professor, Graduate School of Management, University of Rochester.
1993. Elected a Fellow of the American Academy of Arts and Sciences.
1995. Named Distinguished Fellow of the American Economic Association.
2000. Received the Secretary of Defense Medal for Outstanding Public Service.
2013. Died December 24 in Brighton, N.Y.
Image Source: University of California Los Angeles. Yearbook Southern Campus, 1952, p. 176.
true false or uncertain
[Note: a good chunk of the canonical prelim exam at Chicago featured questions having this format: example ]
Ficticious characters are in this scene
They bear no resemblance to Human bein’s.
Let the liquor flow
get on with the show,
Don’t let the faculty get out the door
They want to go home
to their little babes
To see if they’ve finished
with the prelim. grades.
_____________________
BRAVE OLD WORLD
A Tragic Comedy in Three Acts by the Adam Smithsonian Players.
by Clare [sic] E. Friedland, William A. Niskanen,
& Walter Y. Oi
Cast of Characters:
Julius Freemarket [Milton Friedman]: Popular leader of Marshallia and Head of the Ministry of Money.
Capt. Marc Caganthony [Phillip Cagan]: Freemarket’s first lieutenant and pilot of the plane.
Llaius Mysticus: [The initials happen to match Lloyd Metzler. The double “Ll” is the give-away.] A soothsayer, and prophet of things to come.
Gregaryous Wrecker [Gary Becker]: A dope peddler.
A. Sovereign Consumer [Representative Graduate Student]: Exerciser of the right of free choice and beneficiary of the fruits of capitalism.
Carlos Cassius [Perhaps a reference to Carl F. Christ?]: Proprietor of the “Do it Yourself, Ph.D. Components” shop. A leading citizen of the community.
H. Greggo Brutus [H. Gregg Lewis]: Seller of Ph.D.’s New and Used, also a leading member of the business community.
G. Dale Jolly [D. Gale Johnson]: The Key Resource Person of the Ministry of Money.
Sancho Humbugger: Former brainchild of the Chicagocrats. [probably played by Marto A. Ballesteros, Chicago Ph.D. 1957].
Act I: Bliss
Narrator: The scene takes place in the brave old world of 1894 — or some permutation thereof.
If this scene seems utopian, a slight word of explanation may be in order.
In an attempt to conform to the justice and impartiality of the marketplace, a new electoral system has been inaugurated, according to which one dollar equals one vote. Thus, the Chicagocrats (with the aid of John D. [Rockefeller] & sundry other foundations) have become the majority party and a new regime has been established based upon the principle of free enterprise, in which Julius Freemarket has become the popular leader of the entire stationary state of Marshallia. All artificial market restrictions and evidences of paternalism, such as child labor laws, pure food and drug acts and compulsory sewage disposal, have been abolished; and in response to price incentives of the purest kind, we find many new industries flourishing in the marketplace.
The scene opens as we find Julius Freemarket, together with his trusted lieutenant Marc Caganthony, taking their morning constitutional — as all important people must — observing the well oiled functioning of the competitive mechanism.
_______________
Enter Freemarket and Caganthony
_______________
Free: Isn’t it wonderful that all is in static equilibrium?
Cagant: Yes, it certainly is.
Free: Except, of course, those things which are in moving equilibrium.
Cagant: Yes, of course.
_______________
Enter soothsayer, Llaius Mysticus
_______________
Llaius: Julius! Julius!
Free: Ha! Who calls? I hear a tongue shriller than all music calling “Julius!”. Speak, Freemarket is turned to hear.
_______________
Llaius comes up to Freemarket and tugs at sleeve.
_______________
Llaius: Beware the Ides of March.
_______________
Freemarket, turning to Caganthony
_______________
Free: What man is that?
Cagant: A soothsayer bids you beware the Ides of March.
Free: It is only Llaius Mysticus. He is a dreamer, a dreary prophet of gloom and doom. He has no empirical basis for his prophesies. Let us leave him and visit with Gregaryous Wrecker.
_______________
Enter Gregaryous Wrecker, singing “I’m an Old Dope Peddler”
[Tom Lehrer song (1953), Lyrics, Performance] Upon completion of song, enter A. Sovereign Consumer (coded “Cons.”)
_______________
Cons.: (in hushed tone) Psst,…psst…hey buddy.
Free: Don’t be bashful young man. Just step right up there and tell the gentleman what you want. There’s nothing to be afraid of now. The dollar’s almighty.
Wreck: Current price is one dollar,… but March futures are fifty cents.
Cons.: Yeah? So high?
Wreck: Well, you see, the idea is this. We’ve got the phenonmener [sic] that the stuff has become a teenage fad, ever since the kids found out Alvis Regs-ley [Elvis Presley] is a user.
[Almost the same word “phenomener” appears in the Tom Lehrer song “Don’t Major in Physics”. Lyrics, Backstory.
…More often a king weds a commoner Than a physicist makes a housewife, For they only are versed in phenomener That have nothing to do with real life.
….
I like physics and my girl does not. I tried showing her my apparatus, But a blank smile was all that I got. She asked me why I was in Physics, And advised me to transfer to Ec, And whenever I tried to talk Physics, All she wanted to do was to neck! ]
Cons.: You got anything cheaper?
Wreck: Well, advertised brands, like Tiajuana Marijuana sell for a few cents more than cheaper substitutes, but they’re worth it for the prestige.
Cons.: Prestige hell! I’ll have plenty of that when I get my Ph.D. Give me the cheap one.
_______________
Exit, Gregaryous Wrecker, as A. Sovereign Consumer moves from that booth to the booth of Carlos Cassius who is found on the telephone.
_______________
Cass.: “Do it Yourself, Ph.D. Components”, … Carlos Cassius speaking. Well, I’ve got simple and multiple regressions, higher r-squares are a bit more expensive. I’ve got a sale on permanent and transitory variables (in an aside to audience) I stole these out of Speedy Read’s [“speed reading” is implicit, one may suppose. The gendered pronoun makes it clear that Margaret Reid was being referred to] wastebasket when she wasn’t looking——— Oh! You’re at Haskell High. [Perhaps a reference to “Haskell Hall”?] Well then, I’ve got some spurious correlations here, ——— very cheap———I lose money on every one of these, but I make it up in the volume. … No, we can’t guaranty that you’ll pass your thesis seminar with these. (pause) Alright, thank you very much for calling. (turns to consumer). What can I do for you?
Cons.: Wow! I see you got a new jomping [sic] point. I’ll take it.
Cass.: Well, that ought to just about complete your set.
_______________
A. Sovereign Consumer moves away from Cassius’s desk to that of H. Greggo Brutus, who is found on the telephone.
_______________
Brutus: This is Greggo Brutus speaking … “Labor Exchange, Ph.D.’s new and used”.
Well, I’ve got a Ph.D. in physics for $2,000, and one in economics from Cambridge for $3,000. (pause) What? … you’ve got only $350? Well, the best I can do for you then, is a Masters degree in planning. (pause) Very fine, I’ll have Mrs. Jones send it out to you first thing in the morning.
(in an aside to audience) Great Jupiter! Here comes another one of those Israelis. Every time I sell one of them a degree, I begin to worry about my job. [Possibly a reference to Zvi Griliches (Ph.D., 1957)?]
(to consumer) Good morning.
Cons.: I want to buy a Chicago Ph.D.
Brutus: I have one here that I’m selling for a customer named Frank Fright, [Frank Knight] who’s decided to give it up and go into Hindu Philosophy. It’s a little old, but I can throw in his endowed chair, and 400 of his reprints, at a price that’s a bargain for the set.
Cons.: A tie in sale? You’re nothing but a reactionary. … a throwback to the old regime. (As he walks off) Heretic! Subversive! Thief!
Brutus: (reflectively) Could it be possible, that I, H. Greggo Brutus have been throwing sand into the wheels of the competitive machine? Perhaps, I have erred ——— yes he is right. Oh those Israelis, they see through everything.
From George Orwell’s dystopian novel 1984, film version (1956)
Nar: So…, life in Marshallia goes merrily on its way.
Guided by the velvet glove of the invisible iron hand and watched by Freemarket’s careful eye, consumers happily go around computing their marginal utilities, and entrepreneurs are rocking happily in the cradle of competitive equilibrium.
Freemarket has preserved only one authority from the government of the decadent Past — the Ministry of Money. This Ministry is really quite harmless, as its activities are entirely financed out of the secular rate of growth of the money supply. As the only equipment of the Authority consists of a printing press and an airplane [by the end of the 1960s Friedman’s metaphor had morphed into one using helicopters], the costs are in any case quite meagre.
We now visit the Headquarters (and sole office) of the Ministry in a tower at Halfway Airport [“Midway” was the actual name of Chicago’s airport], to see Freemarket’s weekly meeting with his Key Resource Person, G. Dale Jolly, Time: Morning, March 1.
Free: Everything in equilibrium today as usual, Jolly?
Jolly: (Laughs) I have a catastrophe to report, sir.
Free: Catastrophe? Impossible! We’ve purged all the reactionary elements, smoothed all the frictions, removed all the controls, dissolved the rigidities, exiled all the labor organizers, and turned Harvard Yard [Note:the “competition” in Cambridge Mass was still Harvard and not M.I.T.] into a parking lot.
Jolly: It’s the price index, Freemarket; remember, you told me never to take my eyes off the price index.
Free: Of course; this is the variable we chose to stabilize as a guide to our monetary policy. (aside) See my JPE article of 1951, reprinted in my Essays in Negative Economics [reference to Friedman’s “Essays in Positive Economics” (1953)], only $5.75, at the bookstore.
Jolly: See for yourself: The Multivac [a fictional supercomputer that was to appear in over a dozen Isaac Asimov science fiction stories] shows that wholesale prices have dropped 20 points in the last week.
Free: A random-transitory-stochastic type shock, no doubt. Nothing to worry about. What is the money supply, Jolly?
Jolly: (Laughing) I think I lost the series, sir. It was either lost or stolen; in this section of Chicago you can’t be sure which.
Free: You lost the whole series?
Jolly: Not all of it. Some of the data is…
Free: (Quickly) You mean “data are”
Jolly: Data is, are, (we didn’t use such fancy language down on the farm), not all missing.
Free: This poses a serious problem. Capt. Caganthony, what do the rules state for this situation?
Cagant: (typically thumbing through phone book) Rule 412, Section A2 states that 80,000 assorted $10, $20, and $50 bills be dropped in a Latin Square design [see the Wikipedia article, probably application in statistics] over each city of over one million population.
Jolly: (Leaving) I won’t rest until I find the lost money data, sir. (Exit)
Free: Marc, the loss of that money series is quite serious, but I trust Jolly.
Let me have men about me that are fat;
Sleek-headed men and such as sleep of nights,
Blond Cassius, for example, has a lean and hungry look.
He thinks too much: such men are dangerous.
Cagant: Fear Cassius not, Freemarket, he’s not dangerous.
Free: Would he were fatter.
Such men as he be never at hear’ts [sic] ease
While they behold models better than their own.
Cagant: But the rules, the rules!
Free: Oh yes, the rules. Your watch should read 0800, Capt. Caganthony. Release the money over Chicago at exactly 0900 hours and over the other specified cities at subsequent 3-hour intervals.
Cagant: Roger, and off. (Exits, runs askew, whirring like a plane.)
_______________
Sound effects: Wagner’s Ride of the Valkyries.
_______________
Act II — Scene 2
Props: Table, chair, candle lit on table.
Nar: Let your eyes now adjust to the darkness of a cellar at the home of H. Greggo Brutus. The time, the evening of March 14.
_______________
On stage, Brutus.Enter Cassius.
_______________
Brut: How now Cassius. How goes the night?
Cass: (Shaking money from his coat) Did I go thru a tempest dropping money? This disturbed sky is not to walk in. But worst of all, paper has risen so high in price, due to this mad money-printing that I am forced to run my correlations on the backs of twenty dollar bills.
Brut: This glut of currency is slowing the chariots on the streets. Jolly reports it is smothering the crops. Who knows what adverse expectations it may cause in the marketplace.
Cass: All was prosperous until the ministry of money was moved to action. And now prices fall all the more as each new planeload of manna falls. It is as though the fundamental equation might contain some fundamental flaw.
Brut: Speak not such heresy in my house Cassius. Freemarket is a true and noble Marshallian. Did he not refuse the title of Supreme Bureaucrat when it was offered him by Cagananthony? I am certain he will be swayed from this policy when Jolly finds the lost money series and he sees the extreme to which he has gone.
Cass: Why must he sit in his airport tower and wait upon the money series? Is the error of his ways not obvious to every Marshallian who but looks about him? Brutus, think not that Freemarket is above the weaknesses of ordinary men. Did I not swim with him in the Tiber the other day and see him nearly carried away by the foam? So it is with this new power with which he seems drunk. Has not our noble sage, Frank Fright [Knight], warned us that “Power corrupts and absolute power corrupts, absolutely”? [Knight clearly was quoting Lord Acton (1889)]
Brut: There is truth in what you say. Freemarket promised us an economy free of all government interference. (Did he not condemn Adam Smith for suggesting that a state might build roads and schools and provide for the common defense?) Yet he insisted on this one ministry which would harmlessly follow a set of prescribed rules. And now he blindly follows his model and his rules, we know not where. Perhaps he has started us on the dreaded Road to Serfdom. [Homage à Hayek (1944)]
Cass: Then you are with us Brutus. I have moved already some of the noblest-minded Marshallians to undergo with me a plan. But there is none among us who is schooled in planning anymore.
Brut: Wait? …approach Sancho Humbugger, the brain-child of the Chicagocrats before Freemarket’s victory! He was suspected of deviationist tendencies and exiled to some southern outpost.
_______________
Enter Sancho, to Latin tune, wearing a huge sombrero and serape.
_______________
Sanche: Ole! (with wide sweep of hand)
Cass: Sancho! You’ve been away too long. Was it hot down there?
San: No, Chile.
Brut: Time enough later for such nonsense. Sancho, how do you happen to be in Marshallia?
San: Well, I was on this luxury airliner, see, when I starts up a conversation with this dame sitting next to me see. It seems she’s a white sox fan like me, see. (She wuz wit some slob who just made a killing selling cheap paper to the Marshallian Ministry of Money.) And she tells me how going from Professor to Bureaucrat was too much for Freemarket, and so he’s dropping this dough like mad. So I thought I’d take a hop to Marshallia and see if I could do something to help maybe.
Cass: Sancho, you must construct a plan for us to restore the price index to its former level, by any devious means, even (ugh?) Public Works, so as to stop the exercise of Freemarket’s excessive power with (Stage whisper) countervailing power.
[Clear reference to Galbraith’s American Capitalism: The Theory of Countervailing power (1952)]
Our whole way of life rests on your shoulders, Sancho.
San: You need a plan eh? I get the picture. Let’s see now.
(Paces nervously, mumbling, grabs for pencil & paper, scribbles furiously.)
I’ve got it! This is our action! We’re home!
_______________
All join in huddle.
_______________
Brut: (emerging) Do so; and let no man abide this deed but we the doers.
Act II — Scene III
Props: telephone, table, chair, sign (askew)
Nar: More men than these are disturbed on this troubled eve.
Free: (Alone, tired, slowly walking the room.)
Nor heaven, nor earth have been at peace tonight. That phone has screamed at each hour of the clock. (phone rings)
Jolly? What? The second derivative of prices is now falling? Oh, well, I’ll merely follow rule 205 next. Go bid the Multivac do present calculate and bring me its clanking opinion of success.
(picks up phone again.)
Capto Caganthony? He’s asleep? (With amazement and anger.) Give him this urgent message: “Another plane.” No, that’s all. He’ll know what to do.
Act III — Scene I
Props: Desk, chair, sign, blackboard.
Nar: The ides of March are come…but not gone. And, as we shall see, the events of the early day are false portent of the fate which for Freemarket lay.
_______________
Freemarket sits at desk, chin in hands, brooding.
Capt. Caganthony is at stage left and rear. Enter Jolly, whistling “Whistle as you work”. [From the Disney Film “Snow White and the Seven Dwarfs” (1937)]
_______________
Jolly: Tra, la, la, la, la, la, la (Whistles again.)
Free: Jolly, this is no time for glee; look, now my hair has started to fall out. [merelygratuitous bald-shaming of Friedman]
Jolly: (Laughing) But I’ve found it! Under my tractor seat cushion!
Free: My hair?
Jolly: No, that’s been gone too long. I found the lost money data.
Free: Thank Jupiter. Oh, Jolly, I could kiss you. Now all our troubles are over. Did you hear that, Marc, he’s found it. I knew I could trust you, Jolly.
Cagant: Now all our troubles are over. (In a monotone)
Free: (To Jolly) Tell me, did you put the data through the Multivac?
Jolly: Yes I did. But there are some strange results. (Laughing) Prices are still falling in all the cities on which money was dropped. But there has been a phenomenal reflation in the backward river valleys of the South and West.
Free: Are you certain?
Jolly: Yes, if my assumptions are true.
Free: That’s irrelevant. Just the facts, Jolly, just the facts. [Probably an indirect homage à Sgt. Joe Friday from the then popular radio/TV series Dragnet]
Jolly: (Laughing) Of course, Freemarket, Just the facts. There are disturbing signs that the permanent component of the income of farm laborers has increased substantially.
Free: Impossible, my book is not published yet. Those cotton pickers will be buying Ph.D.’s next. (To Cagant) Marc, are you sure you dropped the money only in large metropolitan areas?
Cagant: (Monotone) Your instructions were carried out explicitly, so help me Mints. [Friedman’s old Chicago teacher in money matters, Lloyd Mints]
Free: (To himself, disturbed) The money must have been dropped in the wrong place. Marc, when was your last eye check?
Cagant: Why, when I worked for the National Bureau.
Free: That explains it, they hire anybody. Come, Marc, sit here.
_______________
Cagant is blindfolded, turned away from blackboard toward audience.
_______________
Free: Now, as I write these symbols on the board, read them back to me. [as if reading a chart in an eye examination]
Cagant: Why? [punning on “Y” and “Why” sounding alike] I don’t know. I saw Z as in Z. I said, Zed. [perhaps just a silly rhyme “said”/“Zed”]
Free: (Calmly) Don’t repeat yourself, Marc. Let’s go over this last line again.
Cagant: M= KPZ
Free: Now, Marc, you don’t really want to go back to the National Bureau, do you? You know what these symbols are.
Cagant: You look at Y, I look at Z. Utility preferences differ, you know.
Free: (In a rage) This is a matter of doctrine, not of consumer choice!
Cagant: (Angrily) Under the new free-market system, this is a matter to be settled in the market place, not by a government decree.
_______________
Cagan [sic] stalks out agrily.
_______________
Free: (Upset) Jolly, the fundamental Truth of the Fundamental Equation has been questioned Call the Chamber of Chaos into session — I need reassurance.
Jolly: Stand firm, Freemarket these men are fallible; (in a shocked tone) they could even utter a non-sequitur! (Exit)
_______________
Enter Cassius, Brutus, and Humbugger
_______________
All except Free: Hail, Freemarket, Hail. You called for us?
Free: Yes, come in, Cassius, come in, noble Brutus. Ah, worthy Humbugger is with you. Good. Let me put our problem in my own terms.
Sancho: (Aside to Cassius and Brutus) Our cause is dead if he does.
Cass: (Quickly) No, glorious Freemarket, we know the problem and we know its cause. Pray hear friend Sancho speak for us.
San: Witness, noble Freemarket, how, with these quick strokes, if
(Writing on blackboard, allowing audience to see)
I = I*
G = G*
C = a + bY
and
Y = C+ I + G
then we’re home!
Free: Great Jupiter, is this the Keynes’ mutiny [punning Herman Wouk’s novel The Caine Mutiny (1952)]? This is heresy!
San: Heresy or no,
We have this to show,
Prices still fall in Chicago.
But in the West and South, on my advice,
Migrant workers have picked up quite a slice
Of permanent income; the rest don’t rhyme so nice.
Free: (Sharply) Doesn’t rhyme as nicely. Your grammar is abominable, Sancho.
San: By organizing unions to boost their wages,
By building dams to water their crops,
Income increased first by stages,
And then by leaps, and bounds, and hops.
Free: (in fury) Damn! Damn! Damn!
San: Yes Freemarket.
It is Dams we built this day.
And thru these public works disaster did allay.
Free: I must warn thee, Sancho.
These symbols and your reasoning
Might fire the blood of ordinary men,
And turn pre-ordinance and first decree
into the law of children.
(Sternly)
Thy model, and thyself, by decree, are banished.
Know all, Freemarket doth not wrong, nor
without cause will he be satisfied.
Cass: I, Cassius, do beg enfranchisement of Sancho’s model.
Free:
I could be well moved if I were as you.
If I could pray to move, prayers would move me.
But I am as constant as velocity
(Becoming emotional)
Of whose true fixed and resting quality
There is no variable in the literature.
Cassius, stand you with Humbugger?
_______________
Cassius walks in front of Freemarket to stand beside Sancho, and remains silent.
_______________
Free: (Disturbed)
Good Brutus, when all is said and done
Stand you with models with equations four,
Or with the Fundamental One?
_______________
Brutus silently joins Cassius and Sancho.
_______________
Et tu, Brute! Then die, Freemarket, die!
_______________
Freemarket clutches at sign, pulls it down, and collapses on table. The whole cast gathers around the table on which Freemarket lies, as an audience for the following speech:
_______________
Cagant:
Friends, Marshallians, Chicagocrats, lend me your ears.
I come to bury Freemarket, not to praise him.
The models that men build live after them,
Their meaning oft interred in their books.
So let it be with Freemarket.
All (including MAB): [almost certainly, Marto A. Ballesteros]
How many ages hence
Shall this our lofty scene be acted o’er
In states unborn and accents yet unknown.
Source: Harvard University Archives. Papers of Zvi Griliches, Box 129, Folder “Faculty skits, ca. 1960s.
Note on Marto A. Ballesteros identification for “MAB”
Fellow 1957—Asst Prof. 1960 at the University of Chicago according to the 1969 AEA Directory of Members.
Publications
Argentine Agriculture, 1908-1954: A Study in Growth and Decline By Marto A. Ballesteros (University of Chicago, 1958). (PhD thesis)
Ballesteros, Marto A. Desarrollo agrícola chileno, 1910-1955. Santiago: Pontificia Universidad Católica de Chile, Facultad de Ciencias Económicas y Sociales,1965. p. 7-40.
Newspaper Accounts
The Peninsula Times Tribune (13 Sep 1957). Marriage to Jill Sidnell Geer of Los Altos. Off to Chile to live for one year. His parents are from Madrid, his undergraduate studies were at the University of Madrid, MA and PhD at the University of Chicago. Just received his doctorate in economics from the University of Chicago, Junior fellow at the Center for Advanced Study in the Behavioral Sciences for a year 1956-57.
The Galion Inquirer (23 Sep 1957) that “[Balesteros] will be doing research and teaching in economics at the Universidad Catolica de Chile, Centro De Investigaciones Economicas, Santiago, Chile, under sponsorship of the University of Chicago and the International Cooperation Administration of the U.S. Government”.
Miami Herald (8 Apr 1965), “Dr. Marto Ballesteros, chief of the Pan American Union’s public finance unit”.
