Author: Irwin Collier

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Exam Questions Harvard

Harvard. Exams for Elements of Accounting. W.M. Morse, 1909-1910

This post completes the collection of final exams for accounting taught at Harvard during the first decade of the 20th century.  With an enrollment of 212 students, it helped to add a note of business practice to Harvard’s liberal arts curriculum.

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Earlier Accounting Exams at Harvard

1900-01
1901-02
1902-03
1903-04
1904-05
1905-06
1906-07
1907-08
1908-09

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William M. Cole
His Textbook

Accounts. Their Construction and Interpretation for Business Men and Students of Affairs. Boston: Houghton Mifflin Company, 1908.

“The first issue of this book was brought out at a time when no general, non-technical, non-professional treatise on accounting had been published . The author had then been giving for eight years a course of instruction to seniors in Harvard College on the principles of accounting, and believed that many business men and students of affairs would be interested to see briefly but comprehensively how accounts are constructed and interpreted.”
Revised and enlarged edition, 1915.

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Course Enrollment
1909-10

Economics 18. Asst. Professor W. M. Cole, assisted by Messrs. J. J. Kaplan, R. M. Johnson, and H. B. Platt. [For biographical information about the teaching assistants, see the post for the 1908-09 course Economics 18] — Principles of Accounting.

Total 212: 3 Graduates, 99 Seniors, 56 Juniors, 9 Sophomores, 1 Freshman, 44 Others.

Source: Harvard University. Report of the President of Harvard College, 1909-1910, p. 45.

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[“1909-10” noted in pencil]

ECONOMICS 18

The following transactions are to be entered in complete form, with full details and index references; the resulting figures are to be carried through a six-column statement; the books are then to be closed as for the end of the year, and a Balance Sheet for the beginning of the new year is to be shown.

The books to be used are a journal, a special-column cash-book, a sales book, a purchase book, a sales ledger, a purchase ledger, and a general ledger. When insufficient details for a complete entry are given below, reasonable details are to be assumed. Interest and discount should be figured at 6%.

In determining and recording profit, all additional facts necessary to know are to be assumed at fairly reasonable figures. Care should be taken that all necessary additional facts are considered.

Do not attempt in this case to analyze the profit into its three elements, — wages of management, interest on investment, and pure profit, — but consider it an entity and carry it to the account representing the proprietor.

January

  1. You as sole proprietor begin business under the name of the Fair Deal Co. with the following capital: cash, 15,000; store building, 15,000; promissory notes to the amount of 5000 (as follows: Roderick Hudson, 1000, dated to-day, payable in two months; Silas Marner, 2000, dated Dec. 1, two months; Adam Bede, 500, dated Dec. 16, one month; Henry Esmond, 1500, dated Nov. 1, payable on demand with interest). Buy office and store furniture for cash, 500. Pay for postage, 15. Buy stationery, books, etc., for cash, 125.
  2. Buy goods of Oliver Twist, payment due in 10 days, 4000. Buy goods of David Copperfield for cash, 3000.
  3. Pay freight, 65. Pay telephone bill, three months, in advance, 25.
  4. Buy horses and wagon, cash, 500. Pay for advertising, 30.
  5. Sell goods to Enoch Arden, 30 days’ time, 700. Buy goods of Dombey & Son, cash, 6000

*  *  *  *  *  *  *  *  *  *  *  *

  1. Pay wages: bookkeeper, 25; three clerks, at 15 each; driver, 10.
  2. Buy goods of Richard Feverel, 10 ds., 7000. Accept Oliver Twist’s draft on you, payable in three days, for the amount of your bill.
  3. Discount at a bank your own note (signed by the Fair Deal Co.), face 5000, 30 days. Henry Esmond pays his note.
  4. Buy goods of David Balfour, cash, 6000.
  5. Discount at a bank Silas Marner’s note. Pay your acceptance of the 9th.
  6. Sell goods to Felix Holt, 10 ds., 575.

*  *  *  *  *  *  *  *  *  *  *  *

  1. Sell goods to Silas Lapham, 10 ds., 200.
  2. Adam Bede’s note is paid. Sell goods to John Nicholson for his note, 30 ds., 600.
  3. Sell goods to John Halifax, cash, 300.
  4. Borrow on your own note for 30 ds., bearing interest, 4000.
  5. Pay Richard Feverel in full. Pay insurance, 100.
  6. Pay freight, 75. Sell goods for cash, 150. Sell goods to Joseph Vance, 30 ds., 1200.

*  *  *  *  *  *  *  *  *  *  *  *

  1. Pay wages, two weeks, at the same rates as on the 8th. Pay for remodelling offices, 400. Three months’ rent is paid in advance by a tenant to whom one of the remodelled offices is let, 100.
  2. Felix Holt’s bill is paid. Paid for coal, 100.
  3. Pay subscription for flood sufferers, 100. Sell goods for cash, 1200.
  4. Draw a draft on Enoch Arden, payable in ten days, to your own order, for the amount of his bill due Feb. 4. Pay a dry-goods bill for your wife out of the cash drawer, 75. Silas Lapham’s bill is paid.
  5. You receive, accepted, the draft drawn on the 25th.
  6. You discount at a bank Enoch Arden’s acceptance.

*  *  *  *  *  *  *  *  *  *  *  *

  1. Sell goods to Silas Lapham, 30 ds., 1300.
  2. Pay wages as before.
  3. Pay for lighting, 15. You draw for your own use, 150.

Source: Harvard University Archives. HUC 8522.2.1. Syllabi, course outlines and reading lists in Economics, 1895-2003. Box 1. Folder: 1909-1910.

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ECONOMICS 18
Mid-year Examination, 1909-10

  1. Distinguish in nature between: —
    1. Bills Receivable account and Accounts Receivable account;
    2. Capital Stock account and Surplus account;
    3. Real Estate account and Rent account;
    4. Bond Discount account and Merchandise Discount account (supposing the latter to be of the common type);
    5. Insurance account and Repairs account.
  2. Show, in the form of a simple journalization, what should be debited and what credited in each of the following cases: —

Payment, by you, of wages in the form of merchandise.
Receipt, by you, of a bond which you have agreed to take in payment of an accepted draft.
Writing off a bad debt owed you by a customer.
Interest allowed you on your bank deposit.
A discovery that included in a bill for goods purchased to be sold as merchandise, and charged as merchandise, is included $100 worth of office supplies, and $100 worth of goods shipped to the proprietor’s residence, and broken goods to the value of $100.
Receipt of a promissory note for an account already written off as bad.

  1. The following is the trial balance of a manufacturing concern for January 1, 1910. Make any allowances and state any additional facts that you think probably necessary (any fairly reasonable figures will be accepted), and show the income sheet and the balance sheet, on the understanding that no profits are withdrawn by partners.
Proprietors $60,000
Plant and machinery $35,000
Merchandise purchases $38,000
Merchandises sales $95,000
Merchandise Inventory
(balance on closing the books a year ago, and unadjusted since then)		 $15,000
Wages and salaries $30,000
Traveling expenses $2,500
Interest $600
Stationery and printing $1,200
Rents and taxes $3,500
Discounts $1,250
Fuel $3,000
Insurance (one year from July 1, 1909) $1,150
Freight $1,500
General expenses $600
Bills Payable $5,000
Creditors $4,000
Accounts Receivable $25,000
Rent of steam power $1,500
Cash on hand $200
Bills Receivable $7,000
$165,500 $165,500
  1. Comment upon the condition of a corporation which shows the following changes from 1910 compared with 1909:––
1909 1910
Accounts Receivable $55,000 $66,000
Bills Receivable $20,000 $25,000
Accounts Payable $20,000 $23,000
Bills Payable $15,000 $16,500
Merchandise Inventory $30,000 $37,500
Cash $8,000 $8,500
Sales $300,000 $310,000
Purchases $225,000 $238,000
Surplus $10,000 $29,500
  1. You find, after charging $1000 to Maintenance of Buildings for repairs made this year, that the interruption of business caused by the repairs has cost $200, and that the repairs actually increased the value of the building to the amount of $200. Should you make any new entry? Why, or why not? If so, what?
  2. In a manufacturing business what accounts should you open and charge for the following expenditures? Should each of such accounts be treated at the end of the year as a capital account or as a revenue account? Defend your decision in each case.
    Taxes on a piece of real estate held for possible extension of plant.
    Wages of a chemist carrying on experiments for improvement of processes.
    Contributions to an agency for gathering information about foreign markets.
    Expense of maintaining an exhibit at an international exposition.
    Compensation to the owner of a piece of land when a lease on that land is by mutual agreement canceled.

Source: Harvard University Archives. Harvard University. Mid-year Examinations, 1852-1943. Box 8, Bound Volume: Examination Papers, Mid-Years 1909-10.

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ECONOMICS 18
Year-end Examination, 1909-10

  1. A trial balance for the ledger below shows error. Find the trouble.
PROPRIETOR
Sundries $16,000.00
BILLS PAYABLE
Merchandise $1,684.00
BILLS RECEIVABLE
Proprietor $2,000.00 Aaron Burr $1,527.10
MERCHANDISE
Cash $10,549.00 Aaron Burr $1527.10
Bills Payable $1,648.00
AARON BURR
Merchandise $1527.10 Bills Receivable $1,527.10
CASH
Proprietor $14,000 Merchandise $10,549.00
  1. A summary of transactions for the year 1909 shows the following changes:—
Increases Decreases
Notes held $2,000
Notes outstanding $3,000
Cash $7,000
Due from customers $5,000
Due to creditors $6,000
Goods on hand $11,000

The balance sheet, Dec. 31, 1909, was as follows:—

Merchandise $16,000 Capital Stock $25,000
Bills Receivable $7,000 Bills Payable $7,000
Accounts Receivable $10,000 Accounts Payable $8,000
Fixtures $2,000 Surplus $3,000
Cash $8,000
$43,000 $43,000

Show the balance sheet for Dec. 31, 1908.

  1. Comparing two trial balances of the same business six months apart, you find the only changes to be an increase of debits to nominal accounts amounting to $12,000 and a corresponding increase of credits to accounts not nominal. What does this disclose? Illustrate by an imaginary case.
  2. What entries should you make for the following?
    1. Collecting an account previously written off to Bad Debts.
    2. Redeeming an endorsed discounted note on which the maker has defaulted.
    3. Paying wages to a cabinet maker regularly in your employ in a furniture factory when he has been working at sorting woods recently bought for manufacturing purposes.
    4. Paying off debt by a sinking fund previously accumulated and carried on both sides of the balance sheet.
    5. Depreciation on a machine found to be so poorly built that its life will be only half that assumed in previous allowances for its depreciation.
    6. Purchasing a new machine to replace, at the same purchase price, one superannuated.
    7. Purchasing out of an accumulated replacement fund a new machine that costs the same as the one which it replaces but will save one-fourth in the costs of operation.
    8. Purchasing in the natural process of maintenance a new machine that will do the same work as that which it replaces and at the same cost of operation but costs only three-fourths as much at purchase.
  1. Show what should be entered on the books for the collection of the last, and maturing, interest payment, and the payment of principal, on a bond with a book value on the preceding interest-date of $1,002.45, when the interest payment is $25.
  2. Schedule I was the balance sheet at the beginning of the year. Schedule Il is the trial balance at the end of the year. The proprietor, intending to close his business, has brought all matters to a settlement at the end of the year, and there are therefore no outstanding or accrued items, and no inventories. Give in the form most intelligible to persons not acquainted with accounts a history of the business for the year past. Then show entries for closing out the business, so that no balances remain on the books.
I
Real Estate $10,000 Proprietor $45,000
Merchandise $25,000 Bills Payable $5,000
Bills Receivable $8,000 Accounts Payable $12,000
Accounts Receivable $12,000 Accrued liabilities $610
Cash $7,610
$62,610 $62,610
II
Proprietor $43,000
Bills Payable $4,000
Accounts Payable $10,000
Real Estate $41,350
Bills Receivable $6400
Accounts Receivable $8,000
Cash $1,516
Repairs $88
Freight $249
Insurance $250
Expense $2,740
Purchases $64,550
Sales $67,167
Interest $740
Commission $236
$125,143 $125,1143

Source: Harvard University Archives. Harvard University, Examination Papers, 1873-1915. Box 9, Bound vol. Examination Papers 1910-11; Papers Set for Final Examinations in History, Government, Economics,…,Music in Harvard College (June, 1910), pp. 50-52.

Image Source: U.S. Patent Office. Patent for green eyeshade by W. F. Mahony in 1903. Wikipedia.

Categories
Exam Questions Harvard Public Finance

Harvard. American Taxation, course description, enrollment, and final exam. Bullock and Huse, 1909-1910

It is not only inquisitorial; but public morality forbids that the taxpayer should be forced to do any more hard swearing than he already does.

Time to add more economics course artifacts from Harvard in the early 20th century. By 1910 the division of labor regarding the economics curriculum was well-established with Charles Jesse Bullock serving as point man in public finance, especially for taxation.

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Readings

Cf.  “Taxation” bibliography by Charles Jesse Bullock in Francis G. Peabody, et al. A Guide to Reading in Social Ethics and Allied Subjects, Lists of Books and Articles Selected and Described for the Use of General Readers. Cambridge, Mass.: Harvard University, 1910, pp. 54-56.

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Previously posted material
from earlier years

1906-07
1907-08
1908-09
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Course Announcement and Description
1909-10

*16 1hf. American Taxation. Half-course (first half-year). Mon., Wed., Fri., at 9. Professor Bullock.

This course is designed for graduate students and for undergraduates who are especially interested in public finance. It cannot be elected by students who have taken Economics 7 [Public Finance course exclusively offered to undergraduates], except by express consent of the instructor.

The course is devoted to American Taxation, — federal, state, and local. One or more reports calling for independent investigation will ordinarily be required. Special emphasis will be placed upon questions of American finance.

Source: Official Register of Harvard University, Vol. VI, No. 29 (23 July 1909). History and Political Science Comprising the Departments of History and Government, and Economics, 1909-10, p. 60.

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Course Enrollment
1909-10

Economics 16 1hf. Professor Bullock and Dr. [Charles Phillips] Huse. — American Taxation.

Total 31: 6 Graduates, 12 Seniors, 10 Juniors, 2 Sophomores, 1 Other.

Source: Harvard University. Report of the President of Harvard College, 1909-1910, p. 45.

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ECONOMICS 16
THE THEORY AND METHODS OF TAXATION
Mid-year Examination, 1909-10

  1. On what two distinct grounds has progressive taxation been advocated? Give your opinion of each.
  2. Discuss the incidence of a tax on the gross profits of a monopoly; on a real estate mortgage; on the land and buildings in a decadent city.
  3. Describe the Massachusetts method of taxing personal property, mortgages, income.
  4. What are the defects of the general property tax as administered in Massachusetts? What remedies have been suggested to correct these?
  5. Compare the British and the Prussian income taxes, pointing out similarities and differences. What lessons can be learned from a study of these taxes?
  6. What has been the experience of the United States with income taxes?
  7. Compare the customs systems of the United States and England. Write a brief history of each since 1890, for the purpose of bringing out its merits or defects.
  8. Describe the Massachusetts method of taxing corporations. How does the rate of the Massachusetts tax compare with that of the Federal corporation tax?

Source: Harvard University Archives. Harvard University, Examination Papers, 1873-1915. Box 9, Bound vol. Examination Papers 1910-11; Papers Set for Final Examinations in History, Government, Economics,…,Music in Harvard College (June, 1910), p. 50.

Image Source: No Income Tax! by Charles Jay Taylor, a scene at the Income Tax Office with a crowd clamoring at the door where a notice states “One at a Time”; inside, a wealthy man is standing by a desk, on the floor at his feet, in his hat, are papers labeled “Personal Property Tax Sworn Off”, “Tax on Capital Sworn Off”, and “Tax on Investments”, he kisses the Bible while a government official sits at the desk with his right hand raised. Cover of Puck, v. 34, no. 881, (1894 January 24). Library of Congress Prints and Photographs Division Washington, D.C.

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Exam Questions M.I.T. Social Insurance Suggested Reading Syllabus

M.I.T. Reading List and Final Examination for Social Insurance. Diamond and Summers, 1981

The following reading list and final exam were found in the Peter Diamond papers at Duke University’s Economists’ Papers Archive. No instructor is named on either the reading list or the exam. While transcribing for this post, I thought I had better base the small detail of the course instructor on some evidence. Checking the published course catalogue for the 1980-81 academic year at M.I.T., I was able to confirm my suspicion that Peter Diamond was indeed a course instructor. Not surprising in hindsight was that the course was co-taught with Lawrence H. Summers (a.k.a. “Larry” Summers) of most recent infamy.

On Summers’ Jeffrey Epstein connection: see the series of articles in the Harvard Crimson by Dhruv T. Patel and Cam N. Srivastava, Exhibit #1, Exhibit #2, Exhibit #3 (with Elise A. Spenner).

Once I go to the trouble of preparing an artifact for posting, I cannot resist the compulsion to share it. I ask my visitors to accept this post as a tribute to Peter Diamond’s contribution to graduate economics education à la M.I.T. rather than a rehabilitative look at the young Larry Summers in the Rear-view Mirror.

The evil that men do lives after them; The good is oft interred with the archival records. 

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14.476 Social Insurance

Prereq.: 14.121, 14.122
Year: G (2)

Theory of social insurance and examination of some of existing and proposed US programs including some subset of Social Security, Unemployment Compensation, Worker’s Compensation, National Health Insurance.

P. A. Diamond, L. H. Summers

Source: Massachusetts Institute of Technology. Bulletin 1980-81. Courses and Degree Programs Issue 1980-81, p. 513.

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14.476 Social Insurance
Spring 1981

(x) – optional

  1. Introduction
    1. (x) H. Kunreuther et al, Disaster Insurance Protection, Chapters 1, 10.
    2. (x) P. Diamond, “A Framework for Social Security Analysis,” Journal of Public Economics, 1977, 275-98.
    3. (x) Debreu, G., Theory of Value, Chapter 7. Also in P. Diamond and M. Rothschild, Uncertainty in Economics.
    4. (x) Feldstein, M., “The Theory of Social Insurance,” Public Policy, 1977.
    5. (x) FTC Staff Report, “Life Insurance Cost Disclosure.”
  2. Moral Hazard
    1. (x) M. Pauly, “Overinsurance and Public Provision of Insurance,” Quarterly Journal of Economics, 1974, 44-54. Also in Diamond and Rothschild.
    2. Shavell, “On Moral Hazard and Insurance,” Quarterly Journal of Economics, November 1979.
  3. Adverse Selection
    1. Diamond and Rothschild, Uncertainty in Economics, Chapters 14, 16.
    2. Akerlof, “The Market for Lemons,” Quarterly Journal of Economics, 1970, 488-500. Also in Diamond and Rothschild.
    3. Rothschild and J. Stiglitz, “Equilibrium in Competitive Insurance Markets,” Quarterly Journal of Economics, 1976, 269-650. Also in Diamond and Rothschild.
  4. Property Insurance
    1. Joskow, “Cartels, Competition and Regulation in the Property-Liability Insurance Industry,” Bell Journal, 1973, 375-427.
    2. (x) Stone, J., “Opinion, Findings and Decision on 1978 Automobile Insurance Rates, Part II.” Also in Division of Insurance, Commonwealth of Massachusetts, Automobile Insurance Risk Classification: Equity and Accuracy.
    3. Smallwood, D., “Competition, Regulation, and Product Quality in the Automobile Insurance Industry,” in A. Phillips, ed., Promoting Competition in Regulated Markets.
    4. Shavell, “On Moral Hazard and Insurance,” mimeo version, Section 6, Experience Rating.
    5. State Farm Insurance Company, Research Department, “The Effect of a Suburban Driving Population on Urban Auto Insurance Premiums.”
    6. DuMouchel, “Computing Territorial Relativities which Include the Effects of Travel Between Territories on Claims Costs.”
  5. Pension and Social Security
    1. (x) Munnell, A., The Future of Social Security, Brookings.
    2. (x) Boskin, M., ed., The Crisis in Social Security, 1977.
    3. (x) Myers, R.J., Social Insurance.
    4. Pellechio, A., “Social Security Financing and Retirement Behavior,” AER, May 1979.
    5. Boskin, M., “Social Security and Retirement Decision,” Economic Inquiry, 1977.
    6. Quinn, J., “The Early Retirement Decision,” Journal of Human Resources, Summer 1977.
    7. Bulow, J., “Analysis of Pension Findings under ERISA,” mimeo, 1979, National Bureau of Economic Research working paper.
    8. Hagens, J., “Social Security as Retirement Insurance,” mimeo.
    9. Crawford and Lilien, “Social Security and the Retirement Decision,” mimeo.
    10. Mirrlees, J., “Intended Labour Supply.”
    11. Mirrlees J. and Diamond, P., “A Model of Social Insurance with Variable Retirement,” Journal of Public Economics, 1979, 295-336.
    12. __________ and __________, “Payroll Tax Financed Social Insurance with Variable Retirement.”
    13. __________ and __________, “Social Insurance where the Value of Retirement Varies.”
    14. __________ and __________, “Social Insurance with Variable Retirement and Private Savings.”
    15. HEW Task Force on the Treatment of Women Under Social Security, Report.
    16. HEW, “Social Security and Changing Roles of Men and Women.
    17. (x) 1979 Advisory Council on Social Security, Report.
    18. (x) National Commission on Social Security, Report.
    19. (x) President’s Commission Pension Policy, Interim Report.
  6. Unemployment
    1. (x) Unemployment Compensation: A Background Report, Background Paper 15, Congressional Budget Office, 1976.
    2. (x) “The Economics of Unemployment Insurance: A Symposium,” Industrial & Labor Relations Review, 30:4, July 1977.
    3. (x) Baily, M.N., “Unemployment Insurance as Insurance for Workers,” in J. Hight, ed., Symposium on the Economics of Unemployment Insurance.
    4. (x) Shavell, S., and L. Weiss, “The Optimal Payment of Unemployment Insurance Benefits over Time,” Journal of Political Economy, December 1979.
    5. (x) Hall, R., and D. Lilien, “Efficient Wage Bargains under Uncertain Supply and Demand,” AER, December 1979.
    6. Feldstein, M., “Private and Social Costs of Unemployment,” American Economic Review, May 1978, 155-8.
    7. Feldstein, M., “The Impact of Unemployment Insurance on Temporary Layoff Unemployment,” AER, March 1979.
    8. Clark, K., and L. Summers, “Labor Market Dynamics and Unemployment: A Reconsideration,” BPEA, 1979:1.
    9. Clark, K., and L. Summers, “Unemployment Insurance and Labor Market Transitions,” mimeo.
    10. (x) Baily, M., “On the Theory of Layoffs and Unemployment,” Econometrica, 1977, 1043-64.
    11. (x) Flemming, S., “Aspects of Optimal Unemployment Insurance, Journal of Public Economics, 1978, 403-425.
    12. (x) Jovanovic, B., “Job Matching and the Theory of Turnover,” Journal of Political Economy, 1979, 972-990.
    13. (x) “Firm-Specific Capital and Turnover,” Journal of Political Economy, 1979, 1246-1260.
    14. (x) Burdett, K. and Mortensen, D., “Search, Layoffs, and Labor Market Equilibrium.”
    15. (x) Holmstrom, B., “Equilibrium Long-Term Labor Contracts.”
    16. (x) Akerlof, G. and Main, B., “Pitfalls in Markov Modeling of Labor Market Stocks and Flows.”
    17. (x) __________, “Unemployment Spells and Job Tenures.”
    18. (x) National Commission on Unemployment Compensation, Report.
    19. Gustman, National Bureau of Economic Research working paper.
    20. Nickell, S., “The Effect of Unemployment and Related Benefits on the Duration of Unemployment,” Economic Journal, 89, 1979.
    21. Atkinson, A., “Unemployment Benefits and Incentives,” unpublished.

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14.476
Spring 1981
Final Exam

Answer four questions. They all count equally.

  1. “Unlike the case of adverse selection, with moral hazard but no adverse selection, competitive equilibrium is efficient.” Comment.
  2. Using a two period model of labor supply with uncertain incidence of (unobserved) disability, explain the effect of private savings opportunities on the ability of the government to provide disability insurance.
  3. Discuss the cases for and against cross-subsidization of different risk classes for automobile insurance (assuming that auto insurance as a whole breaks even).
  4. Discuss the advantages and disadvantages of annual sharing of husband’s and wife’s earnings for Social Security purposes.
  5. Discuss the determinants of the optimal waiting period for unemployment benefits. Be clear about the criteria you are using and the separate moral hazard problems affected by the waiting period.

Source: Duke University. David M. Rubenstein Rare Book & Manuscript Library. Economists’ Papers Archive. Peter Diamond papers, Box 4. Folder “Teaching Material”.

Image Sources: Portrait of Peter Diamond (2003) by Donna Coveny/MIT in “An Interview with Peter Diamond”, Macroeconomic Dynamics, 11, 2007, 543-565. Portrait of Lawrence H. Summers (1982) from MIT Museum.

Categories
Methodology Northwestern Suggested Reading

Northwestern. Readings on Economic Theory and Methods. Clower, 1970

Most of the items on Robert Clower’s 1970 list of recommended readings regarding the methodology of economics will be familiar to regular visitors of this blog. Still I expect even specialists in matters methodological will find a few unfamiliar references in this Northwestern University course.

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Economics D-12
Economic Theory and Methods
Robert W. Clower, Fall 1970

METHODOLOGY

Recommended Readings

  1. Tarski, Alfred, Introduction to Logic and to the Methodology of Deductive Sciences, Oxford Univ Press, NY, 2nd ed., 1946, Ch. VI.
  2. Polya, G., Patterns of Plausible Inference, Vol. II of Mathematics and Plausible Reasoning, Princeton U Press, Princeton, N.J. 1954. Chs. XII and XIII.
  3. Russell, B., “Non-Demonstrative Inference,” Basic Writings of B. Russell, Egner and Devonn, eds. Pp. 647-659.
  4. Cairnes, J.E., The Character and Logical Method of Political Economy, MacMillan and Co, London, 1875, 2nd ed.
  5. Keynes, John Neville, The Scope and Method of Political Economy, 4th ed., MacMillan and Co, London, 1917.
  6. Weber, Max, The Methodology of the Social Sciences, trans. and edited by Edward A. Shils and Henry A. Finch, the Free Press, Glencoe, Ill., 1949.
  7. Kuhn, T.S., The Structure of Scientific Revolutions, Chicago, 1962.
  8. Kaufmann, Felix, Methodology of the Social Sciences, The Humanities Press, NY, 1958. Ch XVI.
  9. Robbins, Lionel, An Essay on the Nature and Significance of Economic Science, 2nd ed., Macmillan and Co, London, 1940.
  10. von Mises, Ludwig, Human Action — A Treatise on Economics.
  11. Hayek, Friedrich A., The Counter Revolution of Science, essay “Scientism and the Study of Society,” reprinted from Economica (Aug., 1942; Feb., 1943, Feb ., 1944).
  12. Kirzner, Israel M., The Economic Point of View, Van Nostrand, 1960.
  13. Papandreou, Andreas, “Types of Empirical Relevance in Modern Economics,” Economica Internazionale, v.2 (Maggio, 1952), 3-14.
  14. Friedman, Milton, Essays in Positive Economics, U. of Chicago, Chicago, 1953, ch. 1.
  15. Rotwein, Eugene, “On the Methodology of Positive Economics,” The Quarterly Journal of Economics, Nov., 1959.
  16. Koopmans, Tjalling C., Three Essays on the State of Economic Science, McGraw-Hill, NY, 1957, Essay II.
  17. Clower, R.W., “Monetary History and Positive Economics,” Journal of Economic History, September 1964, pp. 364-380.
  18. Nagel, Ernest, “Assumptions in Economic Theory,” AER, LIII, 2, May, 1963, pp. 211-219.
  19. Samuelson, Paul A., “Problems of Methodology: Discussion,” AER, LIII, 2, May, 1963, pp. 231-236.
  20. Machlup, Fritz, “Professor Samuelson on Theory and Realism,” AER, LIV, 5, September, 1964, pp. 733-736.
  21. Samuelson, Paul A., “Theory and Realism: A Reply,” AER, LIV, 5, September, 1964, pp. 736-739.
  22. Helmer, Olaf, and Nicholas Rescher, “On the Epistemology of the Inexact Sciences,” Management Science, Vol. 6, No. 1, Oct. 1959, pp. 25-52.
  23. Gordon, D.F., “Operational Propositions in Economic Theory,” JPE, 63, pp. 150-161, April, 1955.
  24. Stigler, George J., Five Lectures on Economic Problems, Longmans, Green and Co., 1949, Lecture IV.
  25. Keynes, J.M., “Alfred Marshall,” Essays in Biography.

Source: Duke University. David M. Rubenstein Rare Book & Manuscript Library. Economists’ Papers Archive. Robert W. Clower papers, Box 4, Folder “Econ D-12. Economic Theory and Methods, 1968-1970. Syllabus, Strotz notes”.

Image Source: Robert W. Clower page at The History of Economic Thought website.

Categories
Chicago Exam Questions Theory

Chicago. Preliminary Exam in Economic Theory, Summer 1956

One oddity in the economic theory preliminary examination from the summer quarter of 1956 transcribed below is that the True-False-Uncertain section consisted of 23 questions for a total of 140 points.

The mimeographed copy of the exam was fished from the papers of Zvi Griliches (U. Chicago Ph.D., 1957) at Harvard University Archives.

_________________________

Previously transcribed and posted Preliminary and Field Exams from the economics graduate program of the University of Chicago

Note: The chronological ordering of quarters at the University of Chicago during a calendar year goes Winter, Spring, Summer, Autumn. For this reason the following is arranged chronologically.

_________________________

ECONOMIC THEORY
Preliminary Examination
Summer Quarter 1956

Write your number and not your name on your examination paper. Answer all questions. Time: 4 hours.
Total points: 240.

I. (140 points) True, False, or Uncertain. Explain your answer in each case. Your score will depend heavily on your explanations.
  1. If a firm is producing in the region of rising marginal costs, the firm is realizing profits.
  2. If a commodity has a negative income elasticity, the function relating price and quantity consumed may have a positive slope.
  3. If two goods are substitutes in consumption, a fall in the price of one will always result in a fall in the price of the other.
  4. A demand schedule for labor shows the amount of labor in physical units that will be taken at each wage. A demand schedule for capital shows the amount of capital in physical units that will be taken at each interest rate.
  5. For a single consumer, the sum of the income elasticities of demand for all commodities is unity, while the sum of their price elasticities is zero.
  6. An excise tax affects the allocation of resources among different uses, whereas an income tax does not.
  7. The competitive firm attempts to equalize price, marginal cost and average cost.
  8. The marginal cost of producing a commodity is equal to the price of any one factor divided by its marginal physical product, even though many factors are used in producing the commodity.
  9. An effective price ceiling on cotton, i.e., one that holds its price below the free market level, will decrease the market price of textiles.
  10. A subsidy of a fixed number of dollars per unit of output might be used as part of a program to control a monopoly in the public interest.
  11. If the “true cost of living” for a consumer is interpreted to mean the cost of staying on a given indifference surface, then upper and lower limits for the change in a consumer’s true cost of living between period 0 and period 1 are given respectively by the Laspeyres and Paasche indexes using the consumer’s own purchases as weights.
  12. The supply curve for the output of a monopolist is inelastic at the point of maximum monopoly profit.
  13. Resources are seriously misallocated in the broadcasting industry in the U.S., through the fact that the cost of broadcasts is borne by advertisers rather than by listeners and viewers directly.
  14. The rate of interest in a stationary state would be zero.
  15. It is a convention in economics to draw consumption indifference curves convex to the origin, but we have no way of knowing whether they really are.
  16. Assume that if the prices of farm products fall farmers will expend more effort in an attempt to maintain their income. Under these circumstances, a reduction in effective farm price supports will increase the volume of farm surpluses.
  17. If a worker’s utility function in the two dimensions, (1) leisure and (2) all other goods and services, is homogeneous of first degree, then his supply curve of labor will be backward sloping.
  18. If it takes one day to catch a beaver and two to catch a deer, one deer will exchange for two beavers.
  19. Almost all railroads are reported to have gross revenues from dining car service that are less than the direct expenses of providing the service. In their own interest the railroads should increase the price of dining car meals.
  20. Because of the facts stated in number 19, the railroads should discontinue dining car service.
  21. The elasticity of a linear supply function that passes through the origin is always unity.
  22. The price of haircuts in Chicago is approximately 40 per cent higher than in New York; therefore, average earnings of barbers in Chicago are higher than in New York.
  23. Take it as a fact that grade one cocoa commands a premium on world markets over inferior grades; that the Nigerian Cocoa Marketing Board (which is the sole purchaser from producers) has set a differential between grades in prices paid to producers wider than the world market differential; and that they have succeeded in this way in raising sharply the proportion of Nigerian production which is grade one. By so doing, they have greatly improved the efficiency of the Nigerian economy.
II. (60 points)

The competitive private enterprise form of economic organization is regarded by many economists as a sort of ideal which it would be desirable to approximate in practice.

(a) On a purely theoretical level, use the tools of economic analysis to explain to a skeptic precisely in what way(s) and why the competitive private enterprise form is so good. State whatever assumptions and define whatever terms you require, and state explicitly the criteria of excellence that you are using.

(b) Assume an economy that is perfectly competitive. What important economic problems, if any, may still be unsolved despite the fact that perfect competition has been achieved? Explain in each case why the problem is important and why perfect competition does not solve it, or explain why there are no unsolved problems.

III. (40 points)

Some prominent manufacturers such as Sunbeam, Eastman Kodak, and Bayer Aspirin, set minimum prices below which retailers may not resell their products. In most states an agreement to this effect between a manufacturer and some retailers is legally enforceable on all retailers.

(a) What is the probable effect of this practice on the net rate of return on factors of production used in retailing?

(b) What is the probable effect of this practice on the net profits of the manufacturers concerned?

Explain your answers fully.

Source: Harvard University Archives. Papers of Zvi Griliches. Box 129. Folder “Preliminary Examinations, 1955-1957”.

Image Source: University of Chicago Photographic Archive, Zvi Griliches portrait (undated), apf1-06565, Hanna Holborn Gray Special Collections Research Center, University of Chicago Library.

Categories
Harvard Suggested Reading Syllabus

Harvard. Course Readings for Economics and Social Ethics, 1920-1921

Old Gate at Harvard College (August 6, 1920)

The artifact transcribed and linked for this post was found in last of ten boxes in the Harvard Archives collection “Syllabi, course outlines and reading lists in Economics, 1895-2003”. I had worked through the previous nine boxes containing folders chronologically ordered by academic year. Box 10 contained five folders of poorly sorted course materials that were undated, requiring some effort to establish a probable time range for any of the artifacts. 

In the first folder I found an eight page typed list of courses, with the names and assigned readings (for most of the courses offered to both undergraduate and graduate students, though no reading lists for the courses that were primarily offered for graduate students) which was relatively easy to date by looking at the course staffing announced in the annual catalogue for the Division of History, Government, and Economics, 1920-21. There is one reference to Taussig’s third edition (Dec. 1921) in the list which would suggest that the list was probably prepared for the 1921-22 or 1922-23 year using materials gathered from the earlier 1920-21 academic year. But the perfect correspondence of course staffing between the transcribed list below and the published announcement for 1920-21 is sufficient for me to assign the 1920-21 academic year to the post.

Square brackets […] have been used to distinguish additional information from the typed list. All explicit titles have been linked, increasing the value of this post considerably.

______________________

Course Descriptions for
Economics and Social Ethics,
1920-21

Division of History, Government, and Economics, 1920-21 published in the Official Register of Harvard University, Vol. XVII (May 22, 1920) No. 27.

______________________

One Harvard Graduate’s Memoir
of the 1920s

Carlson, Valdemar. “The Education of an Economist before the Great Depression: Harvard’s Economics Department in the 1920’s.” The American Journal of Economics and Sociology, vol. 27, no. 1, 1968, pp. 101–12.

______________________

ASSIGNED READINGS IN ECONOMICS

A. PRINCIPLES OF ECONOMICS

[Assistant] Professor [Harold Hitchings] Burbank and assistants

Readings:

Taussig, [Frank William], Principles of Economics

[First Edition (1911): Volume I; Volume II]
[Second Edition, Revised (1915): Volume I; Volume II]
[Third Edition, (Dec. 1921): Volume I; Volume II]
[Fourth Edition (1939) requires readers to set up an individual account at archive.org for temporary access: Volume I; Volume II]

[Questions on the Principles of Economics by Edmund Ezra Day and Joseph Stancliffe Davis (Revised for the thrid edition of Taussig’s Principles of Economics) edition, 1922.]

*  *  *  *  *  *  *  *  *  *  *  *

1a. ACCOUNTING

Asst. Professor [Joseph Stancliffe] Davis

Readings:

[none listed]

*  *  *  *  *  *  *  *  *  *  *  *

1b. STATISTICS

Asst. Professor [Joseph Stancliffe] Davis

Readings:

Secrist, Introduction to Statistical Methods, 1-77, 116-424

King, Elements of Statistical Method, pp.1-19, 64-82, 167-196

Elderton, W. P. and E. M., Primer of Statistics, ch. 1-4

U.S. Census, The Story of the Census, 1790-1915

Field, “Some Advantages of the Logarithmic Scale in Statistical Diagrams,” Journ. Pol. Econ., Oct. 1917

Persons, W. M., Measuring and Forecasting General Business Conditions

Joint Committee on Graphic Standards, Preliminary Report
[Publications of the American Statistical Association 14, no. 112 (1915): 790–97. https://doi.org/10.2307/2965153]

Additional;

Unprescribed portions of King and Secrist

List of references appended to chapters in King and Secrist

References for Statistical Work (Prepared for Economics 1b, 1920)

Questions and Exercises in Statistics (Prepared for Economics 1b, 1920)

The Review of Economic Statistics

Lists of references in specific fields

*  *  *  *  *  *  *  *  *  *  *  *

2a. EUROPEAN INDUSTRY AND COMMERCE IN THE NINETEENTH CENTURY

Dr. [Edmund Earle] Lincoln

Readings:

See printed bibliography on file in Tutorial Library

*  *  *  *  *  *  *  *  *  *  *  *

2b. ECONOMIC HISTORY OF THE UNITED STATES

Dr. [Edmund Earle] Lincoln

Readings:

See printed bibliography on file in Tutorial Library

*  *  *  *  *  *  *  *  *  *  *  *

3. MONEY, BANKING, AND COMMERCIAL CRISES

Professor [Allyn Abbott] Young

Readings:

[none listed]

*  *  *  *  *  *  *  *  *  *  *  *

4a. ECONOMICS OF TRANSPORTATION

Professor [William Zebina] Ripley

Readings:

Ripley, Railroad Rates, vol. 1, (not vol. II)

Ripley, Railway Problems

*  *  *  *  *  *  *  *  *  *  *  *

4b. ECONOMICS OF CORPORATIONS

Professor [William Zebina] Ripley

Readings:

Ripley, Trusts, Pools, and Corporations

Haney, Business Organization and Combination

*  *  *  *  *  *  *  *  *  *  *  *

5a. PUBLIC FINANCE, EXCLUSIVE OF TAXATION

Asst. Professor [Harold Hitchings] Burbank

Readings:

Bastable, Public Finance

Bullock, Selected Readings in Public Finance
[Second edition, 1921]

Daniel [sic], Public Finance [Possibly: Winthrop More Daniels, Elements of Public Finance (1899)]

Adams, H. C., Public Finance [sic]
[Probably: The Science of Finance, An Investigation of Public Expenditures and Public Revenues (1912)]

Seligman, Essays in Taxation

Darwin, Municipal Trade

Stourm, The Budget

*  *  *  *  *  *  *  *  *  *  *  *

5b. THE PRINCIPLES AND METHODS OF TAXATION

Asst. Professor [Harold Hitchings] Burbank

Readings:

Bastable, Selections on Public Finance

Bullock, Selected Readings in Public Finance
[Second edition, 1921]

Seligman, Essays in Taxation

Means, Methods of Taxation

*  *  *  *  *  *  *  *  *  *  *  *

6a. TRADE-UNIONISM AND ALLIED PROBLEMS

Professor [William Zebina] Ripley

Readings:

Webb, Industrial Democracy

Commons, Trade Unionism

*  *  *  *  *  *  *  *  *  *  *  *

7a. THEORIES OF VALUE AND DISTRIBUTION

Professor [Edmund Ezra] Day

Readings:

Marshall, Principles of Economics

Carver, The Distribution of Wealth

Taussig, Principles of Economics (1921 edition)
[Third Edition, (Dec. 1921): Volume I; Volume II]

Clark, The Distribution of Wealth

Walker, Political Economy

Fisher, The Rate of Interest

Böhm-Bawerk, Capital and Interest

Fetter, Economic Principles

Davenport, Economics of Enterprise

Veblen, The Theory of Business Enterprise

Hobson, Work and Wealth

Anderson, Social Value

Anderson, The Value of Money

*  *  *  *  *  *  *  *  *  *  *  *

7b. SOCIALISM, ANARCHISM, THE SINGLE TAX

Professor [Thomas Nixon] Carver

Readings:

See printed circular on file in the Tutorial Library

*  *  *  *  *  *  *  *  *  *  *  *

8. PRINCIPLES OF SOCIOLOGY

Professor [Thomas Nixon] Carver

Readings:

Bristol, Social Adaptation

Carver, Sociology and Social Progress

Sumner, Folkways

Spencer, Principles of Sociology [Vol. 1, Vol. 2, Vol. 3]

Carver, Essays in Social Justice

Giddings, Sociology

Tardl [sic], Social Gains [sic]   [Looks like a typographical error. Probably Social Laws, An Outline of Sociology by Gabriel Tarde (1899 translation from the French)[

Kidd, Social Evolution

*  *  *  *  *  *  *  *  *  *  *  *

9a. ECONOMICS OF AGRICULTURE

Professor [Thomas Nixon] Carver

Readings:

Carver, Principles of Rural Economics

Carver, Selected Readings in Rural Economics

Various bulletins and reports

*  *  *  *  *  *  *  *  *  *  *  *

9b. INTERNATIONAL TRADE AND TARIFF POLICIES

Professor [Frank William] Taussig

Readings:

Taussig, Free Trade, the Tariff and Reciprocity

Mill, Principles of Political Economy

Smith, Wealth of Nations

State Papers and Speeches on the Tariff

Taussig, Selected Readings (to appear shortly)

*  *  *  *  *  *  *  *  *  *  *  *

10. ECONOMIC THOUGHT AND INSTITUTIONS

Dr. [Arthur Eli] Monroe

Readings:

Aristotle, Politics, Bk. I, ch. 1-11; Bk. II, ch. 1-6; IV, ch. 11-13; V, ch. 1-9

Maine, Ancient Law, ch. 5-8

Ashley, Economic History of England, vol. I, ch. 3

Mun: England’s Treasure by Forraign Trade

Turgot, Reflections on the Formation and Distribution of Wealth

Smith, Wealth of Nations, Bk. I, 1-3, 5-9, 11 (secs. 1,2)

Smith, Wealth of Nations, Bk. II, 3-5; IV, 1, 2, 9

Malthus, Essay on Population, [Vol. I, 6th ed. ] Bk I, 1, 2; Bk. II, 13; [Vol. II, 6th ed.] III, 2, 3; Bk. IV, 1, 2, 3. (Or selections in Ashley’s Classics)

Mill, Political Economy [Vol. I], Bk. I, 5; Bk: II, 11; Bk. III, 1-5

Mill, Political Economy [Vol. II], Bk. IV, 3,4; Bk. V, 8, 10, 11 (sec. 1-9)

List, National System of Political Economy, Bk. II, 2-5, 7

Carlyle, Past and Present (selected chap.) or
Ruskin, Unto this Last, ch. 1, 3

 Bücher, Industrial Evolution, chs. 3, 4

Ashley, Economic Organization of England, ch. 1-7

Wells, Mankind in the Making

(Several optional assignments to be announced later)

*  *  *  *  *  *  *  *  *  *  *  *

11. ECONOMIC THEORY

Professor [Frank William] Taussig
[“Maurice Beck Hexter’s notes from Harvard University, 1921-22” and “Supplemental notes from F.W. Taussig’s Course in economic theory with contributions by A.A. Young” edited by Marianne Johnson and Warren J. Samuels in Research in the History of Economic Thought and Methodology, Vol. 28-C (2010), pp. 11-176]

Readings:

Ricardo, Principles of Political Economy
[Third edition, 1821]

Mill, Principles of Political Economy

Marshall, Principles of Economics

Clark, Distribution of Wealth

Böhm-Bawerk, Positive Theory of Capital

Fetter, Principles of Economics

Hobson, Work and Wealth

Veblen, Theory of Business Enterprise

Divers separate articles and chapters in other books

*  *  *  *  *  *  *  *  *  *  *  *

9a. THE DISTRIBUTION OF WEALTH

Professor [Thomas Nixon] Carver

Readings:

Carver, Distribution of Wealth

Marshall, Principles of Economics

Böhm-Bawerk, Positive Theory of Capital

Fisher, The Rate of Interest

Clark, The Distribution of Wealth

Taussig, Work [sic] and Capital [Wages and Capital]

*  *  *  *  *  *  *  *  *  *  *  *

14. HISTORY AND LITERATURE OF ECONOMICS TO THE YEAR 1848

Professor [Charles Jesse] Bullock

PRIMARILY FOR GRADUATES

*  *  *  *  *  *  *  *  *  *  *  *

15. MODERN SCHOOLS OF ECONOMIC THOUGHT

Professor [Allyn Abbott] Young

PRIMARILY FOR GRADUATES

*  *  *  *  *  *  *  *  *  *  *  *

31. PUBLIC FINANCE

Professor [Charles Jesse] Bullock

PRIMARILY FOR GRADUATES

*  *  *  *  *  *  *  *  *  *  *  *

32. ECONOMICS OF AGRICULTURE, WITH SPECIAL REFERENCE TO AMERICAN CONDITIONS

Professor [Thomas Nixon] Carver

PRIMARILY FOR GRADUATES

*  *  *  *  *  *  *  *  *  *  *  *

33.  INTERNATIONAL TRADE AND TARIFF PROBLEMS

Professor [Frank William] Taussig

PRIMARILY FOR GRADUATES

*  *  *  *  *  *  *  *  *  *  *  *

34. PROBLEMS OF LABOR

Professor [William Ripley] Ripley

PRIMARILY FOR GRADUATES

*  *  *  *  *  *  *  *  *  *  *  *

35a. BUSINESS CORPORATIONS

Asst. Professor Davis

PRIMARILY FOR GRADUATES

*  *  *  *  *  *  *  *  *  *  *  *

35b. BUSINESS COMBINATIONS

Asst. Professor [Joseph Stancliffe] Davis

PRIMARILY FOR GRADUATES

*  *  *  *  *  *  *  *  *  *  *  *

36a. PUBLIC OWNERSHIP: HISTORICAL, THEORETICAL, AND PRACTICAL ASPECTS

Dr. [Edmund Earle] Lincoln

PRIMARILY FOR GRADUATES

*  *  *  *  *  *  *  *  *  *  *  *

36b. PUBLIC REGULATION AND CONTROL OF PRIVATE INDUSTRY WITH PARTICULAR REFERENCE TO PUBLIC SERVICE INDUSTRIES

Dr. [Edmund Earle] Lincoln

PRIMARILY FOR GRADUATES

*  *  *  *  *  *  *  *  *  *  *  *

37. COMMERCIAL CRISES

Professor [Warren Milton] Persons

PRIMARILY FOR GRADUATES

*  *  *  *  *  *  *  *  *  *  *  *

38. SELECTED MONETARY PROBLEMS

Professor [Allyn Abbott] Young

PRIMARILY FOR GRADUATES

*  *  *  *  *  *  *  *  *  *  *  *

[ASSIGNED READINGS]
IN SOCIAL ETHICS

1. SOCIAL PROBLEMS AND SOCIAL POLICY

Asst. Professor [Robert Franz] Foerster and Asst. Professor [James] Ford

Readings:

Booth, Life and Labour of the People of London, vol. 1 of Series 1, 3-8, 24-73, 131-171

Conklin, Heredity and Environment, rev. ed. pp.197-242, 256-258, 297-306, 416-456, 475-497

Dewey, and Tufts, Ethics, ch. 15, pp. 297-304; ch. 18-26, pp. 364-606

Flexner, and Baldwin, Juvenile Courts and Probation, Pts.1, 2, pp. 3-78

Oppenheimer, The Rationale of Punishment, pp. 1-4, 171-175, 234-295

Spencer, Principles of Sociology, vol. 1, pt. 3, ch. 9 and 12, pp. 686-724, 745-756

Warner, American Charities, 3rd ed., ch. 4, 6-10, 12, 14-15, 17-22, pр. 64-90, 113-225, 248-284, 305-346, 363-476

Wines, Punishment and Reformation, ch. 8, 10, 12-14 (3rd ed.) pp. 133-167, 199-234, 265-412

Committee of Fifty to Study the Liquor Problem, Summary of Investigations, pp. 15-134

Burritt, Dennison, Gay, Heilman, and Kendall, Profit Sharing, pp. 159-257

Commons and Andrews, Principles of Labor Legislation, pp. 1-414, 454-464

Fay, Cooperation at Home and Abroad, pp. 273-285, 310-354

Foerster, A Promising Venture in Industrial Partnership, Annals American Academy of Political and Social Science, Pub. 703, November 1912, pp. 97-103

Hoxie, Scientific Management and Labor, pp. 25-139

King, Industry and Humanity, ch. 7, 8, pp. 167-303; ch. 10, pp. 364-390

British Labor party, Sub-committee on Reconstruction, report, Labor and the New Social Order, reprint from the New Republic, Feb. 16, 1918, pp. 12

Lee, Play in Education, pp. 319-391, 423-494

Schaeffle, Quintessence of Socialism, pp. 39-127

Schloss, Industrial Remuneration, pp. 286-309

Spargo, Applied Socialism, pp. 87-325

Veiller, Housing Reform, pp. 3-190

Williams, Profit-sharing, pp. 17-42, 146-171

*  *  *  *  *  *  *  *  *  *  *  *

4. AMERICAN POPULATION PROBLEMS: IMMIGRATION AND THE NEGRO

Asst. Professor [Robert Franz] Foerster

Reading:

Byington, Homestead: The Households of a Mill Town, ch. 9-11, pp.131-157

Fairchild, Immigration, ch. 1-5, 7, 9, 10, 12-14, 16, pp. 1-105, 123-143, 163-212, 233-368, 393-415

Foerster, The Italian Emigration of Our Times, ch. 21-24, pp. 415-525

Ibid. Quarterly Journal of Economics, Aug.1913, Review of Hourwich’s book on immigration, pp. 656-671

Hourwich, Immigration and Labor, ch. 4, 5, 12-15, 18, 23, pp. 82-112, 284-352, 375-383, 489-501, 414-431 and in chapter 21, Report of the MASS. COMMISSION ON IMMIGRATION, 1914, pp. 54-104

Millis, The Japanese Problem in the United States, ch. 1, pp. 1-29

Reely, Selected Articles on Immigration (Debaters’ Handbook) pp. 131-134, 200-204, 219-222, 225-229

Roberts, The New Immigration, ch. 9, 11-13, pp. 124-138, 156-199

Ross, The Old World in the New, ch. 1-4, 6, 11, pp. 1-92, 120-140, 259-281

U. S. Immigration Commission, vol. 39, pp. 5-81, 127-129

Walker, Discussions in Economics and Statistics, vol. 2, pp. 417-426

Warne, Slav Invasion, pp. 28-38, 47-83

U. S. Immigration Commission, vol. 1, pp. 491-541; vol. 4, pp. 239-281, 337-348

Ovington, Half a Man, ch. 4-8, pp. 75-217

Shaler, The Neighbor, pp. 278-336

Stone, Studies in the American Race Problem, pp. 149-208

Tillinghast, The Negro in Africa and America, Amer. Econ. Review, May 1902, pp. 28-45, 60-79, 102-170

*  *  *  *  *  *  *  *  *  *  *  *

6. UNEMPLOYMENT AND RELATED PROBLEMS OF THE WORKING CLASSES

Asst. Professor [Robert Franz] Foerster

Readings:

Beveridge, Unemployment, pp. 1-237

Webb, Seasonal Trades, ch. 1, 2, pp. 1-90

U. S. Bureau of Labor, Report on Women and Child Wage-Earners, vol. 7, pp. 43-60, 64-67, 177-192

Barnes, The Longshoremen, pp. 55-92, 199-206, 210-227

Chicago, Report of the Mayor’s Commission on Unemployment, 1914, pp. 107-165

U. S. Bureau of Labor Statistics, Bulletin 206, B. Lasker, British System of Labor Exchanges, pp. 1-56

Kellor, Out of Work, Ch. 6, pp. 157-193

Gibbon, Unemployment Insurance, pp. 187-203

Dawson, Vagrancy Problem, ch. 4, 11, pp.104-132; 229-249

Ibid. Social Insurance in Germany, ch. 2-4, 7-9, pp. 22-127,182-265

Gibbon, Medical Benefit …Germany and Denmark, ch. 2, 6, 9, 12, 18 pp. 10-14, 43-52, 81-106, 125-131, 192-203

Rubinow, Standards of Health Insurance, Ch. 5-9, pp.67-152

Belloc, The Servile State, pp. 155-189

24th Annual Report of the U.S. Commissioner of Labor, 1909, Vol. 2, pp. 1499-1530, 1540-1544

Foerster, The British National Insurance Act, Q. J. of Econ., Feb. 1912, pp. 275-298, 305-312

Bernhard, Undesirable Results of German Social Legislation, pp. 39-75

Mass. Commission on Old Age Pensions, 1910 Report, pp. 112-122, 164-203, 224-259, 268-284, 300-344

U. S. Bureau of Labor Statistics Bulletin 195, Unemployment in the United States, 1916

Source: Harvard University Archives. Syllabi, course outlines and reading lists in Economics, 1895-2003. Box 10, Folder “Economics, undated (1 of 5)”.

Image Source: Old Gate at Harvard College (Leon H. Abdalian, photographer). Boston Public Library Arts Department.  [No Copyright – United States]

Categories
Economists Harvard

Harvard. Letter supporting Mason written by Taussig, 1925

The following memo to the Dean for the files tells us probably as much about its subject, a rising star in the Harvard economics department Edward Sagendorph Mason, as it does about what academic talent-spotters in the 1920s thought important. Of course, demonstrated academic brilliance has generally been of primary importance, but in an environment notably rich in brilliance, other qualities become distinguishing. “…he is a handsome, upstanding chap. His very appearance makes an impression on the young fellows.” 

__________________________

February 12, 1925

Dear Clifford:

                  Carver tells me that you would welcome a line from me about E. S. Mason.

                  He is a very unusual fellow. His special examination for the doctorate, which he took about a week ago, by agreement of the examiners was not less than brilliant. As you know, he was three years at Oxford as a Rhodes Scholar, and learned a lot there not merely in philosophy and letters, but in ways of handling the boys. He is one of the very best of our tutors, and one of the very best of our instructors in Economics A. And he is a handsome, upstanding chap. His very appearance makes an impression on the young fellows. It being our policy to keep men of that sort in our own service instead of putting them in a position where they cannot well help but accept a tempting offer from elsewhere, he ought to be given the very best treatment we can afford.

Cordially yours,
F. W. Taussig

Professor Clifford H. Moore

Source: Harvard University Archives. Department of Economics, Correspondence and Papers 1930-1961, Box 2 (American-Appointments, 1925), Folder “Appointments for 1913-26”.

Image Source: Portrait of Edward S. Mason included in the Harvard Class Album 1932.

Categories
Exam Questions Harvard Suggested Reading Syllabus Theory

Harvard. Advanced Economic Theory. Reading lists and exams. Schumpeter, 1948-1949

With the 2025 Nobel Prize in Economics honoring work that has expanded upon Joseph Schumpeter’s felicitous description of economic innovation as a process of “creative destruction”, Economics in the Rear-view Mirror is happy to add the following Schumpeter teaching artifacts from the 1948-49 academic year at Harvard from his course on advanced economic theory. Keeping on the subject of Nobel prizes, it is worth noting that nine future economics laureates were included in Schumpeter’s reading lists for the course.

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Previous Posts:
Schumpeter’s Courses on Economic Theory

Economics 11. Economic Theory, Second Semester, 1934-35. [taken by Wolfgang Stolper]

Economics 11. Economic Theory, 1935-36. [taken by Paul Samuelson]

Economic 101. Economic Theory, 1936-37. [formerly 11]

Economics 101. Economic Theory, 1937-38.

Economics 103. Advanced Economic Theory, 1941-42.

Economics 103b. Advanced Economic Theory, 1947-48. [103a taught by Gottfried Haberler]

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Course Enrollment
1948-49

[Economics] 203  (formerly Economics 103a and 103b). Advanced Economic Theory (Full Course). Professor Schumpeter

Fall Term:
Total 21. 17 Graduates, 2 Public Administration, 2 Radcliffe.

Spring Term:
Total 10. 8 Graduates, 2 Public Administration.

Source: Harvard University. Report of the President of Harvard College, 1948-49, p. 77.

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1948-49
Economies 203a
Fall Term

The primary object of this course is to train the students in the art of conceptualizing the salient features of the economic process. But discussion of individual problems will give the opportunity of rehearsing critically large parts of traditional theory, old and new. The program for this term includes, first, a preliminary survey of certain fundamental nations, especially determinateness and stability, second, the general dynamics of economic aggregates, third, the general theory of the behavior of households and firms. Though some knowledge of the calculus and of differential equations is desirable, purely mathematical aspects will not be stressed.

The student is supposed to be familiar with such standard works as Marshall’s Principles, Wicksell’s Lectures, Vol. I, Keynes’ General Theory,* Chamberlin’s Monopolistic Competition, Hicks’ Value and Capital, and Fisher’s Theory of Interest (out of print). To these, which are also required in several other courses, and part of every student’s equipment, should be added.

*(not available until October 29)

E. Lundberg, Studies in the Theory of Economic Expansion (King & Son, 1937) and for students with adequate mathematical preparations.

P. A. Samuelson, Foundations of Economic Analysis, 1947.

Students must use their own judgments as regards the extent to which they will avail themselves of the following additional suggestions which also stand instead of reading-period assignments:

P. A. Samuelson, Statics, “Dynamics, and the Stationary State,” Review of Economic Statistics, February 1943.

J. Tinbergen, “Suggestions on Quantitative Business Cycle Theory,” Econometrica, July 1935.

F. Modigliani, “Liquidity Preference, Interest, and Money,” Econometrica, January, 1944.

Allen and Bowley, Family Expenditure, 1935.

Colin Clark, The Conditions of Economics Progress, 1940.

Arthur Smithies, “The Boundaries of the Production Function and the Utility Function” (in Explorations in Economics, Essays in Honor of F. W. Taussig, 1936, II, Ch. 11).

T. De Scitovszky, “Price under Monopoly and Competition,” Journal of Political Economy, October, 1941.

T. Haavelmo, “The Interdependence between Agriculture and the National Economy,” Journal of Farm Economics, November, 1947.

G. Cooper, “The Role of Econometric Models in Economic Research,” Journal of Farm Economics, February 1948.

M. Reder, “Monopolistic Competition and the Stability Conditions,” Review of Economic Studies, Vol. VIII, No. 2.

N. Kaldor, “A Classificatory Note on the Determinateness of Equilibrium,” Review of Economic Studies, Vol. I, No. 2.

Source: Harvard University Archives. Syllabi, course outlines and reading lists in Economics, 1895-2003. Box 4, Folder: “Economics, 1948-49 (2 of 2)”.

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HARVARD UNIVERSITY
ECONOMICS 203a
February 1949

One question may be omitted. Arrange your answers in the order of the questions.

  1. Consider the concept of the Stationary State both as a state of society that is to be expected in the near or distant future and as a methodological tool. When considering it in the latter sense, contrast it with the concepts of Economic Statics and of Static Equilibrium.
  2. Analyze the profit item of the usual income statement of a corporation.
  3. State the theory of interest which you prefer to others and give your reasons for this preference; then discuss, from the standpoint of this theory, how “technological progress” affects the rate of interest.
  4. Discuss Cournot’s Duopoly and explain the shortcomings of this schema.
  5. What has been, in your opinion, the upshot of the recent controversy on the “marginal-productivity theory of wages?”
  6. What are the reasons for expecting that monopoly prices are more “rigid” than competitive prices?

Source: Harvard University Archives. Harvard University, Final examinations 1853-2001. Box 16, Bound volume Examinations, Social Sciences Feb. 1949.

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Spring Term
1948-49
Economics 203b

Reference is made to the Reading List for the preceding term, both as regards the general scope of this course and as regards certain fundamental works with which students are supposed to be, or to make themselves, familiar (Marshall, Wicksell, Keynes, Chamberlin, Fisher, Lundberg, and Samuelson) and all of which are available in the Harvard libraries, although sone are out of print. The topics to be dealt with in this term are grouped into four approximately equal parts, each of which is to cover about three weeks. Of the books and papers to be mentioned below, three are taken over from the fall term list.

  1. Restatement, with some additions and further illustrative applications, of the essentials treated in the Fall Term.

American Economic Association, H. S. Ellis ed., Survey of Contemporary Economics, Chs. 10 (Samuelson) and 11 (Leontief).

  1. The Process of Accumulation and the idea of Balanced Advance

R. F. Harrod, Towards a Dynamic Economics, 1948

R. G. Hawtrey, “Mr. Harrod’s Essay in Dynamic Theory,” Economic Journal, September, 1939

E. D. Domer, “Capital Expansion,” Econometrica, April, 1946

E. D. Domar, “The Problem of Capital Accumulation,” American Economic Review, December, 1948

H. Froehlich, “Income Determination and Investment,” ibid. March, 1948

T. C. Schelling, “Capital Growth and Equilibrium,” ibid. December, 1947

L. R. Klein, “Notes on the Theory of Investment,” Kyklos, International Review of the Social Sciences, Bern, Volume II, 1948, fasc. 2

J. M. Keynes, “The Process of Capital Formation,” Economic Journal, September, 1939

  1. Money and Real Income. Wages and Employment

A. C. Pigou, Equilibrium and Employment, 1941.

S. C. Tsiang, “Professor Pigou on Real Wages and Employment,” Economic Journal, December 1944

T. Haavelmo et al., “Multiplier Effects of a Balanced Budget,” Econometrica, October, 1945, and April, 1946

H. M. Somers, “The Impact of Fiscal Policy on National Income,” Canadian Journal of Economics and Political Science, August, 1942

J. L. Mosak, “Wage Increases and Employment,” American Economic Review, June, 1941

J. T. Dunlop, “The Demand and Supply Functions for Labor,” American Economic Review, May, 1948

J. T. Dunlop, “Productivity and the Wage Structure,” Income, Employment and Public Policy (Norton & Company, 1948)

H. W. Singer, “Wage Policy in Full Employment,” Economic Journal, December, 1947

N. Kaldor, “Stability and Full Employment,” Economic Journal, December, 1938

  1. Transformation or Disintegration of Capitalism

C. Clark, The Conditions of Economic Progress, 1940

G. J. Stigler, Trends in Output and Employment (National Bureau Publ. 1947)

Source: Harvard University Archives. Syllabi, course outlines and reading lists in Economics, 1895-2003. Box 4, Folder: “Economics, 1948-49 (2 of 2)”.

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1948-49
HARVARD UNIVERSITY
ECONOMICS 203b

One question may be omitted. Arrange your answers in the order of the questions.

  1. Prove and discuss Haavelmo’s theorem that the imposition of a tax may lead to an increase of gross national income by an amount exactly equal to the tax.
  2. Discuss Kaldor’s proposition that a state of full employment is essentially unstable.
  3. In what sense is it true (a) that capital accumulation tends to exhaust investment opportunities and (b) that exhaustion of investment opportunities induces not only stationary conditions but also depression (underemployment)?
  4. Analyze the relation between employment and a general variation (e.g. an increase) of (a) money wage rates (b) real wage rates. What has either case to do with the so-called Ricardo effect?
  5. Discuss Harrod’s “dynamical schema.”

Source: Harvard University Archives. . Harvard University, Final examinations 1853-2001. Box 16, Papers Printed for Final Examinations, History, History of Religions, Government, Economics,….June 1949.

Image Source: Joseph Schumpeter in his Harvard office published in the Harvard Class Album 1946.

Categories
Chicago Exam Questions

Chicago. Economic Theory Preliminary Examination. Griliches Copy. Winter, 1957

There is something of a mystery about the following transcription of the “Economic Theory I” Preliminary Examination for the Ph.D. and A.M. Degrees at the University of Chicago from the Winter quarter of 1957 that I found in the Zvi Griliches papers at the Harvard University archives. It does not match the Economic Theory I preliminary examination from the same Winter Quarter found in the Milton Friedman papers at the Hoover Institution archives. The most likely explanation is that some anonymous soul simply failed to have updated the quarter of the exam in a copy-and-paste rough draft.. The mystery then, is which came first, the Friedman copy or the Griliches copy?

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Previously transcribed and posted Preliminary and Field Exams from the economics graduate program of the University of Chicago

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ECONOMIC THEORY I
Preliminary Examination for the Ph.D. and A.M. Degrees

Winter Quarter 1957

WRITE THE FOLLOWING INFORMATION ON YOUR EXAMINATION PAPER:

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

Results of the Examination will be sent to you by letter after results on all preliminary examinations have been received.

Answer all questions: Time: Four hours.

Do section I of the examination on this paper and turn it in to the proctor with the rest of your examination. You are to do sections II-VII separately.

  1. Indicate whether each of the following statements is true (T), false (F), or uncertain (U). Explain briefly the basis for your answer.
    1. A tax on a product whose supply is of zero elasticity will have no effect on resource allocation.
    2. If factors of production are used in absolutely fixed proportion in the production of a particular product, the demand for each of the factors by the producers of the product will be completely inelastic with respect to price.
    3. Since 1951 interest rates have risen by about 50 percent whereas real wages have risen only by approximately 24 percent. This implies that firms are and will be using more labor per unit of capital than they did in 1950.
    4. An income tax has no resource misallocating effects.
    5. A competitive firm will increase its demand for factor A as a result of a fall in the price of factor B.
    6. “A monopolist has no supply curve.” Hence it is impossible to predict his response to a shift in the demand curve facing him.
    7. Budget studies have yielded an income elasticity of demand for food of .5 for urban families and of . 35 for farm families. This implies that farm families have substantially different tastes or consumption habits.
    8. Price stabilization at the mean of fluctuating prices would harm consumers.
    9. Product A is one of the major inputs used in the production of product B. Price control is imposed on product A, but not on product B, at a level below the equilibrium price of A. This will result in a fall of the price of B.
    10. A tax of 50% of the gross sale price of all new automobiles in the U. S. will in the short run tend to double the market value of used automobiles, and in the long run tend to double the gross market price of new automobiles as well.
  2. Suppose the armed forces want to raise a fixed number of men. One way to do this would be to set a price at which the number of volunteers would equal the number wanted. Another way would be to set a lower price and draft the difference between the number wanted and the number volunteering. Assume that each person receiving a draft notice would be permitted not only to enter as a draftee but also either to buy a substitute or to be a substitute for someone else.
    Contrast the two schemes in terms of the personnel secured, the pay received, and the source of this pay.
  3. In a recent study, David Blank and George Stigler note the existence of an interrelation between the demand for higher education and the supply of faculty for institutions of higher education. “For”, they write, “the very presence of a much increased demand [for higher education] … carries with it a much increased supply of trained individuals” from whom faculty members can be recruited.
    1. What do you regard as the essential feature of the interrelation? Can you cite other examples? Contrast with specific examples where this particular interrelation does not arise.
    2. Suppose the increased demand for higher education led to no increase in the student body but was met entirely by severer rationing, by price or otherwise, of entry into college. Would the statement quoted above be rendered false?
      Justify your answer.
  4. Producers in one area of goods that are also produced elsewhere often claim that the distant producers keep their high quality product at home and sell only their low quality goods elsewhere. On the other hand, consumers often complain that local producers ship all their high quality products elsewhere and sell only the poor quality material locally (as in the standard California complaint that you can’t but a decent orange in retail markets in California). Obviously, either group might be right in some special case. But can you think of any general factors that would on the average tend to produce the one result or the other? I.e., in any particular case, what indirect information would you consider relevant in forming a judgment about which was right?
  5. We frequently speak of “the substitution of capital for labor”. What do you take this phrase to mean (a) for an individual firm; (b) for the economy as a whole? Does your interpretation allow for the fact that the major part of the cost of new capital equipment is labor cost?
  6. Indicate briefly the meaning of each of the following phrases, identify the economist (or economists) associated with each, and state his major contribution to economics:
    1. Pareto optimum
    2. Pigou effect
    3. Walrasian equilibrium
    4. Schumpeterian innovators
    5. Cobb-Douglas production function
    6. Conspicuous consumption
    7. Wicksellian natural rate of interest
    8. Contract curve
  7. Many families carry life insurance for the husband, and very few carry it for the wife or children. There have been several attempts to explain this. Some say that the loss from the death of the wife or children is mostly a psychic loss, and psych losses cannot be insured. Others say that the loss from the death of the wife or children is too small to be worth insuring. Evaluate these arguments. Can you give an explanation consistent with rational behavior?

Source: Harvard University Archives. Papers of Zvi Griliches. Box 129. Folder “Preliminary Examinations, 1955-1957”.

Categories
Exam Questions Harvard Macroeconomics

Harvard. General Exam in Macroeconomic Theory. Spring 1993

 

 

The following general examination for macroeconomic theory (Spring 1993) has been transcribed from a collection of general exams at Harvard from the 1990s provided to Economics in the Rear-view Mirror by Abigail Waggoner Wozniak (Harvard economics Ph.D., 2005). Abigail Wozniak was an associate professor of economics at Notre Dame before being appointed a senior research economist and the first director of the Federal Reserve Bank of Minneapolis’ Opportunity & Inclusive Growth Institute.

Economics in the Rear-view Mirror is most grateful for her generosity in sharing this valuable material.

Because the “Wozniak collection” is over 90 pages long, it will take some time for all the exams to get transcribed. To date the following transcriptions are available for:

Spring 1991

Microeconomics; Macroeconomics

Spring 1992

Micro- and Macroeconomics

Fall 1992

Micro- and Macroeconomics

Spring 1993

Microeconomics

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HARVARD UNIVERSITY
DEPARTMENT OF ECONOMICS

Economics 2010d: Final Examination
and
GENERAL EXAMINATION IN MACROECONOMIC THEORY

Spring Term, 1993

For those taking the GENERAL EXAM in macroeconomic theory:

  1. You have FOUR hours.
  2. Answer a total of SIX questions subject to the following constraints:

— answer both questions from Part I;
— answer two questions from Part II;
— answer two questions from Part III.

For those taking the FINAL EXAMINATION in ECONOMICS 2010d (not the General Examination):

  1. You have THREE hours.
  2. Answer a total of four questions subject to the following constraints:

— DO NOT ANSWER ANY questions from Part I;
— answer two questions from Part II;
— answer two questions from Part III.

PLEASE USE A SEPARATE BLUE BOOK FOR EACH QUESTION, AND WRITE THE QUESTION NUMBER ON THE FRONT OF THE APPROPRIATE BLUE BOOK.

PLEASE PUT YOUR EXAM NUMBER ON EACH BOOK.

PLEASE DO NOT WRITE YOUR NAME ON YOUR BLUE BOOKS.

*  *  *  *  *  *  *  *  *  *  *  *  *  *

Part I. (Answer both questions)

Question 1:

Consider the following dynamic, perfect-foresight version of the IS-LM model:

R=R-\dot{R} /\rho

r=\alpha y-\beta m

\dot{y} =\gamma \left( d-y \right)

d=\lambda y-\theta R+g

where

R is the long-term interest rate,
r is the short-term interest rate,
y is output,
m is (exogenous) real money balances,
d is demand,
g is a measure of (exogenous) fiscal policy,
and all parameters are positive and 0<\lambda <1.

    1. Give an interpretation of each equation.
      (Hint: When long-term interest rates rise, bond prices fall.)
    2. Write the model using two variables and two laws of motion. Identify the state (non-jumping) variable and the costate (jumping) variable.
    3. Draw the phase diagram, including the steady-state conditions, the implied dynamics, and the saddle-point stable path.
    4. Describe the effects of an immediate permanent decrease in g. What happens to short-term and long-term interest rates?
    5. Describe the effects an announced future permanent decrease in g. (This scenario is also known as the Clinton plan). What happens to short-term and long-term interest rates?

Question 2:

Endogenous Money

Monetary aggregates, such as the monetary base and broader concepts like M1 or M2, appear to be procyclical. It is sometimes argued that this pattern can be explained from models of “endogenous money,” that is, frameworks in which money moves in response to changes in the economy.

  1. Suppose that the monetary authority varies the money supply in order to maintain a desired path of the price level, for example, to maintain price stability. Can this monetary rule create a procyclical pattern for money even if money has no effect on real variables? What happens if the monetary authority targets a nominal interest rate instead of, or in addition to, the price level?
  2. Suppose that the monetary authority wants to peg an exchange rate, rather than the domestic price level. Would the targeting of an exchange rate create a procyclical pattern for money?
  3. Does the idea of endogenous money imply that broad aggregates like M1 or M2 will be more procyclical than a narrow aggregate like the monetary base?
  4. Can the idea of endogenous money explain why money and output move together on a seasonal basis (using seasonally-unadjusted data!)?
PART II

Answer any two of the following three questions. Be sure to use a separate bluebook for each answer.

  1. “It’s absurd to think that monetary policy actions, as conventionally implemented by central banks in advanced industrialized economies, have any more than a trivial impact on either real economic magnitudes or prices. For example, in the United States an enormous financial market holds and trades approximately $4 trillion of government securities and more than that amount of debt securities issued by other borrowers, yet supposedly the difference between a highly “expansionary” monetary policy and a highly “restrictive” monetary policy amounts to whether the central bank buys $10 billion more or less of government securities over the course of an entire year. Hah! Open market operations in such trivial amounts (compared to the size of the economy and the financial markets) can’t have much impact on anything. Further, since the majority of U.S. bank liabilities are not subject to reserve requirements, the idea that these open market operations affect the economy by regulating the banking system’s ability to create money and/or extend credit doesn’t make sense either.”
    Construct the strongest argument you can to disagree with this statement.
  2. The U.S. Treasury has just announced its intention to change the maturity structure of its outstanding debt by issuing fewer long- and medium-term securities and more short-term securities. The stated rationale for this change is to save on the government’s interest payments. (Long-term Treasury bonds currently yield around 7%, short-term bills around 3%, and medium-term notes somewhere in between depending upon the maturity.)
    1. Under what assumptions would this kind of debt management action actually deliver reduced interest costs over the long run?
    2. Under what assumptions would this kind of debt management action not deliver reduced interest costs over the long run?
    3. Under what assumptions would this kind of debt management action not deliver reduced interest costs over the long run, but reduce the government’s budget deficit over the long run anyway?
  3. —
    1. Evidence drawn from the experience of OECD countries over the last three decades strongly suggests that disinflations (that is, reductions in the rate of increase of prices) are typically costly, in the sense of involving foregone real output compared to what a disinflating economy would otherwise have produced if its inflation rate had remained unchanged. What features of economic behavior account for this foregone output? In answering, be specific about how the elements to which you point affect real output. Also indicate whether your answer implies that disinflations brought about by restrictive monetary policy are likely to be more or less costly (again, in the sense of foregone output) than disinflations that occur for other reasons.
    2. In light of your answer to (a), why do you think there is not more discussion of the “gain” associated with increasing inflation rates, to parallel the usual discussion of the “sacrifice” associated with disinflation?
Part III. (Answer two questions)

Answer any two of the following three questions.

Question 6

    1. Consider a small open economy characterized by the following equations

Y\  =\  C\left( Y \right) +I\left( r^{\ast} \right) +G+X\left( e \right) -eM\left( e \right)

M/P\ =\ L\left( Y,r^{\ast} \right)

where all variables have their standard meaning, e is the real exchange rate, e = EP*/P and * denotes a foreign variable. Assuming that the price level is fixed, what is the effect of an increase in G on output and net exports under fixed and flexible exchange rates? What assumptions on X and M do you need to make in the flexible rate case?

    1. Now consider another small open economy with a representative agent that chooses consumption to maximize the present discounted value of consumption

\max_{\left\{ c_{t} \right\}} \int_{0}^{\infty} e^{-\alpha t}\  ln\  c\  dt

where c denotes consumption, α the discount rate, and t indexes time. The agent receives a constant flow income of \bar{y} and can borrow and lend at the world interest rate which is also α. What is the economy’s current account? Suppose that at time 0 the government decides to erect a monument to its own greatness. The monument will cost γ in time 0 income. What is the effect on the current account if the government finances construction by confiscating αγ from \bar{y} at each instant? What is the effect on the current account if the government issues bonds to finance construction and postpones the implementation of the income tax until time t=\Gamma >0?

(c) Speculate as to why the effect on the current account in the flexible rate part of (a) differs from the bond financing part of (b)?

Question 7

Suppose that the exchange rate (x) depends on some fundamentals (f) and the expected rate of appreciation or depreciation as follows:

x\left( f_{t} \right) =f_{t}+\frac{1}{dt} E_{t}dx\left( f_{t} \right).

Suppose further that fundamentals follow a Brownian motion without drift

df=\sigma dw

where w is a Wiener process.

    1. Use Ito’s lemma to write a differential equation for x and solve it. [Hint: the solution should contain three terms, two of which should involve exponentials and the third should be f].
    2. Suppose that initially f < \bar{f} and that each time the fundamentals reach the level \bar{f} , the government follows a policy of resetting the fundamentals to \bar{f} -  c < \bar{f}. What boundary conditions allow you to solve for x(f). (Hint: consider what happens when the government intervenes and when f approaches -∞.)
    3. Graph the solution for x(f) from (b). What effect does the policy of intervention at \bar{f} have on the variance of x? Is var(x) < var(f)?
    4. What does your answer in part (c) lead you to conclude about the desirability of exchange rate systems such as the European Monetary System in which the currency government maintains the currency between two bands?

Question 8

Consider a firm with the following loss function

\Pi \left( p_{i},p,m \right) =-\gamma \left( p_{i}-p-\alpha \left( m-p \right) \right)^{2}

where pi is the firm’s nominal price, p is a price index, m is the money supply, and \gamma is a positive constant. All variables are in logs. Suppose that initially

pi = p = m = 0.

    1. Suppose that the firm incurs a fixed cost β each time it alters its nominal price. Characterize the optimal policy in the face of a once and for all change in m given that the price index remains constant and that the firm discounts future losses at the rate r. How does this policy depend on the curvature of the loss function (γ) and the discount rate (r)?
    2. Suppose that the economy is made up of many firms just like the one above and that the log price index is just the average of their log prices

\left( p=\int p_{i}di \right).

What policy would these firms follow in the face of a once and for all change in the money supply if they could agree to follow identical strategies? How does your answer differ from part (a). Interpret the role of α.

    1. How would you expect your answer to part (a) to change if instead of a one time change, the money supply followed a process with variance σ.

Source: Department of Economics, Harvard University. Past General Exams Spring 1991-Spring 1999, pp. 53-59. Copy provided to Economics in the Rear-view Mirror by Abigail Wozniak.