Author: Irwin Collier

I was surprised to find that as late as 1958-59 Harvard had no course on its books that even used the word “macroeconomics” in the title. The door to macroeconomics was instead found in undergraduate, graduate courses that were devoted to money and banking: Economics 141–Money, Banking, and Economic Fluctuations” and Economics 241–“Principles of Money and Banking”. I have to admit that I was somewhat puzzled to see the macroeconomist Warren Smith paired with the microeconomist Robert Dorfman for the graduate sequence. Maybe it was because Keynesian economics attracted the whiz-kids of mathematical economics of the time that the department turned to Robert Dorfman for graduate instruction in Keynesian economics, the main subject covered in his semester of the two semester Economics 241 course.

Before getting to the course outlines and exams, I provide memorial minutes  for Warren Smith, who was a visiting professor at Harvard that year from the University of Michigan, and Robert Dorfman, a member of the Harvard faculty, recently acquired from the Berkeley economics department.

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University of Michigan, LSA Minutes. Memorial.

WARREN L. SMITH
1914 – 1972

Professor Warren Lounsbury Smith was born in Watertown, New York, on March 23, 1914, He died in Ann Arbor on April 23, 1972, He had come to The University of Michigan as a freshman in 1940, and in 1943 he married fellow student Ann Elizabeth Schwartz of Ann Arbor, His studies were interrupted by military service during World War II, but he continued a brilliant career as a student here, earning the B.A.in 1947, the M.A. in 1949, and the Ph.D. in Economics in 1952.

Warren Smith’s professional life as an economist thus began relatively late, at the age of 38. His accomplishments during the all-too-brief span of only 20 years are, therefore, all the more remarkable. He taught both undergraduate and graduate courses in the Economics Department at Michigan while still a student. After teaching at the University of Virginia and Ohio State University, he returned to Michigan in 1957 with the rank of Associate Professor of Economics. He was promoted to full professor in 1959, and served as Chairman of the Department of Economics from 1963 to 1967 and again in 1970-71. Professor Smith was regarded by graduate and undergraduate students alike as an absolutely superb teacher. His devotion to his responsibilities to students, both in and out of the classroom, brought him the deepest admiration and respect of all those who were privileged to know him in this capacity.

Excellence in teaching, however, was not gained at the expense of scholarship and service to the Department, the University, and the Nation. As Chairman of the Department Professor Smith was unstinting in the time and energy devoted to the task of finding the means to satisfaction of the needs of the Department. His colleagues are universally agreed that a very large part of the qualities of excellence now found in the Department are attributable to his stewardship.

Professor Smith’s public service contributions were both extensive and highly acclaimed. He served as consultant to the Joint Economic Committee of the U.S. Congress, the Commission on Money and Credit, the Department of Justice, the U.S. Treasury Department, and the Council of Economic Advisers, and appeared frequently as a public witness before Congressional Committees. In 1962-63 he served as Senior Economist on the Staff of the President’s Council of Economic Advisers, and in 1968-69 he was a member of the Council.

But in the world of professional economists Warren Smith’s most magnificent monument, the living testimony to the greatness that he achieved, is to be found in his published articles and monographs and his Macroeconomics. As a scholar Professor Smith won world-wide renown, His work was always relevant, always expressive of the keenest insights, and always lucidly and forcefully presented. Few, if any, American economists have done more to shape current thinking on monetary and fiscal policy and debt management than Warren Smith.

To Ann Achwartz Smith, his wife, and to his children, Andrew, Samuel, and Catherine, we the faculty of the Department of Economics and of the College of Literature, Science, and the Arts convey our sense of deepest personal loss. No one in our midst has ever more fully and completely exemplified the finest qualities of friend, colleague, teacher, scholar, and public servant than Warren Lounsbury Smith. The lives of all of us have been enriched because we were privileged to know him.

Peter O. Steiner

Source: Warren Lunsbury Smith Memorial Minute, University of Michigan, Faculty History Project.

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Harvard University, Faculty of Arts and Science, Memorial Minute
Robert [Elihu] Dorfman

Robert Dorfman, the late David A. Wells Professor of Political Economy, Emeritus, was a leader in the introduction of mathematical methods to economics in the twentieth century. He died on June 24, 2002, at his home in Belmont, Massachusetts.

Dorfman made important contributions, particularly as a pioneer in the use of linear programming, characterizing production relationships in terms of individual activities with fixed coefficients. He collaborated in 1958 with MIT Professors (and later Nobel laureates) Robert M. Solow and Paul A. Samuelson on the classic Linear Programming and Economic Analysis.

He believed that mathematical methods were key – both as analytical tools and as means of exposition. In this regard, Jerry Green, John Leverett Professor in the University and David A. Wells Professor of Political Economy, said at Dorfman’s memorial service in 2002, “He was an ambassador for the future of our field.”

Dorfman wrote in 1954: “Is mathematics necessary in social science? I suppose not. It is quite conceivable that all problems could be solved by verbal means, just as it is possible to find that the square root of CXCVI is XIV. Such methods, though, would be not only painful but fearfully inefficient.”

Dorfman also made significant contributions to environmental economics. Beginning in 1972, he edited with his wife, Nancy S. Dorfman, three editions of Economics of the Environment. Testimony to the lasting value of this work is the fact that it is now in its sixth edition (edited since 2000 by Robert Stavins, Albert Pratt Professor of Business and Government at the Kennedy School).

In this realm, Dorfman understood the importance of the underlying natural science. His analysis of water resources in Pakistan, for example, drew on collaborations with engineers and hydrologists. He was for many years an affiliate of Harvard’s Center for Population Studies, where he helped introduce optimization methodologies for resource management to developing countries.

Dorfman’s career at Harvard spanned 32 years. He was Professor of Economics from 1955 to 1972, and then David A. Wells Professor of Political Economy until his retirement in 1987. He was known by junior colleagues as a marvelous mentor. Henry Rosovsky once said that the kindest five words that can be said to a young scholar are, “I have read your thesis.” Jerry Green has observed, “That was exactly what Bob said to me the first time we met. I am sure he said the same to many others.”

From 1976 to 1984, Dorfman served as editor of the Quarterly Journal of Economics. Green, an associate editor, observed his style: “I saw how he worked with articles and authors of all kinds. Diamonds in the rough had to be polished.”

Dorfman enjoyed a reputation as a masterful teacher, especially at the graduate level. He taught mathematical economics, microeconomic theory, macroeconomic theory, and econometrics, and thereby – in the words of Dale Jorgenson, Samuel W. Morris University Professor – “almost single- handedly brought the Harvard graduate program to the level of competing institutions.” Jorgenson recalls the course he took from Dorfman, and counts himself among “the fortunate students who were brought to the frontier of research in economic theory.”

In the 1970s, Dorfman launched a seminar series on the economics of information and organizations with Professor Kenneth Arrow and Richard Zeckhauser, Frank Plumpton Ramsey Professor of Political Economy at the Kennedy School. Generations of young scholars benefitted from this colloquium, including Green, who later became a co-chair. Zeckhauser recalls that “the most faithful presenter was Eric Maskin (now Professor of Economics), who was then starting to develop his pioneering work in mechanism design that would ultimately win him the Nobel Prize.”

Born on October 27, 1916, in New York City, Dorfman received his B.A. in mathematical statistics from Columbia College in 1936 and an M.A. in economics from Columbia University in 1937. Dorfman was a wartime pioneer in operations research. From 1939 to 1943, he worked as a statistician for the federal government, and then served during World War II as an operations analyst for the U.S. Army Air Force, based in the Southwest Pacific theater and in Washington, D.C.

After the war, Dorfman enrolled at the University of California, Berkeley, earning his Ph.D. degree in economics in 1950. He joined the faculty at Berkeley, where he was an associate professor of economics when he moved to Harvard in 1955.

Among his scholarly contributions were four classic articles in the American Economic Review: “Mathematical or ‘Linear’ Programming” (1953), “Operations Research” (1960), “An Economic Interpretation of Optimal Control Theory” (1969), and “Incidence of the Benefits and Costs of Environmental Programs” (1977).

Dorfman was a Distinguished Fellow of the American Economic Association and a Fellow of the American Academy of Arts and Sciences, as well as vice president of the American Economic Association, and vice president of the Association of Environmental and Resource Economists. In 1972, when Dorfman was inducted as a Distinguished Fellow of the American Economic Association, his citation included this summary: “Robert Dorfman’s characteristic intellectual style is based on a deep and painstaking mastery of the theoretical fundamentals, leading to a clear intuitive grasp of intellectual questions and thence to masterly exposition.”

Thirty years later, his co-author Robert Solow characterized him as “always polite, even self- deprecating, never assertive, he nevertheless stood his ground. If Bob Dorfman mildly and quizzically expressed some hesitation about your pet idea, it was always a good move to look up, just in case a boulder was about to crash down on you—politely, of course.”

According to his wife, Nancy, Dorfman turned to mathematics in college as a substitute for poetry, after concluding that he did not have a future as a poet. But his love of literature was reflected in the clarity and grace with which he explained complex economics in simple terms.

Robert Dorfman is survived by his wife, Nancy, of Lexington; his son, Peter, of Belmont; his daughter, Ann, of Newton; granddaughter, Joni Waldron, of Washington, D.C.; and grandson, Loren Waldron, of Newton.

Respectfully submitted,

Jerry Green
Dale W. Jorgenson Peter P. Rogers
Robert N. Stavins, Chair

Source: The Harvard Gazette, November 14, 2012.

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Course Announcement.

Economics 241. Principles of Money and Banking

Full course. M., W., (F.), at 12. Professor Dorfman (spring term) and Associate Professor Warren Smith (University of Michigan).

Source:  Official Register of Harvard University. Vol. LV, No. 20 (September 3, 1958), p. 95.

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Course Enrollment.

[Economics] 241 Principles of Money and Banking, (F) Associate Professor Warren Smith (University of Michigan); (S) Professor Dorfman. Full course.

(F) Total 20: 16 Gr., 2 Ra., 2 Others.
(S) Total 18: 16, 1 Ra., 1 Other.

Source: Harvard University. Report of the President of Harvard College, 1958-1959, p.73.

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HARVARD UNIVERSITY

Outline and Reading List
Economics 241: Principles of Money and Banking

Fall, 1958-59

1. Monetary Mechanics
   1. (Sept. 22-29) Determinants of Member Bank Reserves and Money Supply Assignments:

Assignments: W. H. Steiner, E. Shapiro, and E. Solomon, Money and Banking (4^th, 1958), Part III; E. S. Shaw, Money, Income, and Monetary Policy (1950), Chaps. II, III, X, XI; Bank Reserves: Some Major Factors Affecting Them (1953); The Treasury and the Money Market (1954).

References: J. P. Powelson, Economic Accounting (1955), Chaps. 13, 25; M.A. Copeland and D.H. Brill, “Banking Assets and Money Supply Since 1929,” Federal Reserve Bulletin, Jan. 1948, pp. 24-32; “A Flow-of-Funds System of National Accounts: Annual Estimates,” Federal Reserve Bulletin, Oct. 1955, pp. 1085-1124; Board of Governors of the Federal Reserve System, Flow of Funds in the United States, 1939-53 (1955); M. A. Copeland, A Study of Moneyflows in the United States (1955); M.A. Copeland, A Study of Moneyflows in the United States (1952).

1. 2. (Oct. 1-6) Bank Credit Expansion

Assignments: A.G. Hart, Money, Debt, and Economic Activity (2d ed., 1953), Chap. IV; Shaw, Money, Income, and Monetary Policy, Chaps. VI, VII.

References: J.W. Angell and K. Ficek, “Expansion of Bank Credit,” Journal of Political Economy, XLI, 1933, pp. 1-32, 152-193; W.F. Crick, “The Genesis of Bank Deposits,” Economica, VII, 1927, pp. 191-202, reprinted in F.A. Lutz and L.W. Mints (eds.), Readings in Monetary Theory (1951), pp. 41-53; D. Vining, “A Process Analysis of Bank Credit Expansion,” Quarterly Journal of Economics, LIV, 1940, pp. 599-623.

1. 2. Monetary Policy
      1. (Oct. 8-17) Techniques of Control

Assignments: E.A. Goldenweiser, American Monetary Policy (1951), Chap. V; Monetary Policy and Management of the Public Debt (Patman Committee Documents), Replies to Questions and Other Material, Part 1, pp. 275-299; R.V. Roosa, Federal Reserve Operations in the Money and Government Securities Markets (1956); W.L. Smith, “The Discount Rate as a Credit-Control Weapon,” Journal of Political Economy, LXVI, April 1958, pp. 171-177.

References: Steiner, Shapiro, and Solomon, Money and Banking (4^th), Chaps. 12-14; Hart, Money, Debt, and Economic Activity, Chaps. V, VI; W. W. Riefler, Money Rates and Money Markets in the United States(1930); D.A. Alhadeff, Monopoly and Competition in Banking (1954); G. L. Bach, Federal Reserve Policy Making (1950); L. Currie, The Supply and Control of Money in the United States (1934); C.O. Hardy, Credit Policies of the Federal Reserve System (1932); S.E. Harris, Twenty Years of Federal Reserve Policy (1933), 2 vols.; Patman Committee Documents (1952).

1. 1. 2. (Oct. 20-Nov. 5) How Monetary Policy Works

Assignments: Hart, Money, Debt, and Economic Activity (2^nd), Chaps. XVII, XVIII; J. Tobin, “Liquidity Preference and Monetary Policy,” Review of Economics and Statistics, XXIX, May 1947, reprinted in A. Smithies and J.K. Butters (eds.) Readings in Fiscal Policy (1955), pp. 233-247; H.S. Ellis, “The Rediscovery of Money,” and R.V. Roosa, “Interest Rates and the Central Bank,” both in Money, Trade, and Economic Growth: In Honor of John Henry Williams (1951), pp. 253-269 and 270-295, respectively; “Influence of Credit and Monetary Measures on Economic Stability,” Federal Reserve Bulletin, March 1953, pp. 219-234; J.G. Gurley and E.S. Shaw, “Financial Aspects of Economic Development,” American Economic Review, XLV, Sept. 1955, pp. 515-538; W.L. Smith, “On the Effectiveness of Monetary Policy,” American Economic Review, XLVI, Sept. 1956, pp. 588-606; “Consumer Instalment Credit” (A Review Article), American Economic Review, XLVII, Dec. 1957, pp. 966-984; and “Monetary Policy and the Structure of Markets,” in The Relationship of Prices to Economic Stability and Growth, Compendium of Papers Submitted by Panelists Appearing before the Joint Economic Committee (1958), pp. 493-511; D. Carson, “Recent Open Market Committee Policy and Technique,” Quarterly Journal of Economics, LXIX, Aug. 1955, pp. 321-342; A.H. Hansen, The American Economy (1957), Chaps. 3,4.

References: G.L.S. Shackle, “Interest Rates and the Pace of Investment,” Economic Journal, LVI, March 1946, pp. 1-17; F.A. Lutz, “The Interest Rate and Investment in a Dynamic Economy,” American Economic Review, XXXV, Dec. 1945, pp. 811-830; T. Wilson and P.W.S. Andrews, Oxford Studies in the Price Mechanism (1951), Chap. I; W.H. White, “Interest Inelasticity of Investment Demand—The Case from Business Attitude Surveys Re-examined,” American Economic Review, XLVI, Sept. 1956, pp. 565-587; J.R. Meyer and E. Kuh, The Investment Decision (1957); R.A. Musgrave, “Credit Controls, Interest Rates, and Management of the Public Debt,” in Income, Employment, and Public Policy: Essays in Honor of Alvin H. Hansen (1948), pp. 221-254; and “Monetary-Debt Policy Revisited,” in C.J. Friedrich and J.K. Galbraith (eds.), Public Policy, Vol. V, 1954; W.L. Smith and R.F. Mikesell, “The Effectiveness of Monetary Policy: Recent British Experience,” Journal of Political Economy, LXV, Feb. 1957, pp. 18-39; H.P. Minsky, “Central Banking and Money Market Changes,” Quarterly Journal of Economics, LXXI, May 1957, pp. 171-187; United States Monetary Policy: Recent Thinking and Experience (Joint Committee on the Economic Report, 1954); Monetary Policy: 1955-56 (Joint Economic Committee, 1956); E. Miller, “Monetary Policy in a Changing World,” Quarterly Journal of Economics, LXX, Feb. 1956, pp. 23-43; Symposium on Monetary Policy, Bulletin of the Oxford Institute of Statistics, April, May, and August 1952; J. Tobin, “Monetary Policy and the Management of the Public Debt: The Patman Inquiry,” Review of Economics and Statistics, XXXV, May 1953, pp. 118-127; P.A. Samuelson, “Recent American Monetary Controversy” Three Banks Review, March 1956, pp. 3-21; and statement to the Patman Committee, Monetary Policy and Management of the Public Debt, Hearings, pp. 691-698; H.G. Johnson, “The Revival of Monetary Policy in Britain,” Three Banks Review, June 1956, pp. 3-20; J.K. Galbraith, “Market Structure and Stabilization Policy,” Review of Economics and Statistics, XXXIX, May 1957, pp. 124-133; C.R. Whittlesey, “Monetary Policy and Economic Change,” Review of Economics and Statistics, XXXIX, Feb. 1957, pp. 31-39; A.H. Hansen, “Monetary Policy,” RES, XXXVII, May 1955, pp. 110-119; S. Weintraub, “Monetary Policy: A Comment,” RES, XXXVII, Aug. 1955, pp. 292-296; J.H. Karekin, “Lenders’ Preferences, Credit Rationing, and the Effectiveness of Monetary Policy,” RES, XXXIX, Aug. 1957, pp. 292-301; R.S. Sayers, Central Banking after Bagehot (1957); Board of Governors of the Federal Reserve System, Consumer Instalment Credit, 6 vols. (1957); Financing Small Business, Report to the Committees on Banking and Currency and the Select Committees on Small Business by the federal Reserve System, Parts 1 and 2 (1958); Investigation of the Financial Condition of the United States, Hearings before the Senate Finance Committee, Parts 1, 2, and 3 (1957).

3. Fiscal Policy
   1. (Nov. 7-14) Fiscal Policy and National Income

Assignments: R.L. Bishop, “Alternative Expansionist Fiscal Policies: A Diagrammatic Analysis,” in Income, Employment, and Public Policy: Essays in Honor of Alvin H. Hansen, pp. 317-340; R.A. Musgrave, “Alternative Budget Policies for Full Employment,” American Economic Review, XXX, June 1945, pp. 387-400, reprinted in Smithies and Butters (eds.), Readings in Fiscal Policy, pp. 291-306; and “Money Liquidity, and the Valuation of Assets,” in Money, Trade, and Economic Growth: In Honor of John Henry Williams(1951), pp. 216-242.

References: J.A. Maxwell, Fiscal Policy, (1955); O.H.Brownlee and E.D. Allen, Economics of Public Finance(2d ed.; 1954), Part II; J.F. Due, Government Finance: An Economic Analysis (1954), Chaps. 25-28; H.M. Somers, Public Finance and National Income (1949), esp. Part VI.

1. 2. (Nov. 17-19) Automatic Fiscal Stabilizers

Assignments: R.A. Musgrave and M.H. Miller, “Built-In Flexibility,” American Economic Review, XXXVIII, March 1948, pp. 122-128, reprinted in Smithies and Butters (eds.), Readings in Fiscal Policy, pp. 379-386; Hart, Money, Debt, and Economic Activity (2d ed.) Chaps. XXVII and XXVIII; M. Friedman, “A Monetary and Fiscal Framework for Economic Stability,” AER, XXXVIII, June 1948, pp. 245-264, reprinted in Lutz and Mints (eds.), Readings in Monetary Theory, pp. 369-393; Committee for Economic Development, Taxes and the Budget: A Program for Prosperity in a Free Economy (1947); W.W. Heller, “The CED’s Stabilizing Budget Policy after Ten Years,” AER, XLII, Sept. 1947, pp. 634-651.

References: D.W. Lusher, “The Stabilizing Effectiveness of Budget Flexibility,” together with comments thereon, in Policies to Combat Depression (National Bureau of Economic Research, 1956), pp. 77-122; W. Egle, Economic Stabilization: Objectives, Rules and Mechanisms (1952), Chaps. 3-7; E.C. Brown, “The Static Theory of Automatic Fiscal Stabilization,” Journal of Political Economy, LXIII, Oct. 1955, pp. 427-440.

1. 3. (Nov. 21-Dec.1) Discretionary Tax and Expenditure Adjustments Assignments:

Assignments: Hart, Money, Debt, and Economic Activity (2d ed.) Chaps. XXIX and XXX; A. Smithies, “Federal Budgeting and Fiscal Policy,” in H.S. Ellis (ed.), A Survey of Contemporary Economics, Vol. I (1948), pp. 174-209; P.A. Samuelson, “Principles and Rules in Modern Fiscal Policy: A Neo-Classical Reformulation,” in Money, Trade, and Economic Growth: In Honor of John Henry Williams (1951), pp. 157-176.

References: G. Haberler, Prosperity and Depression (3d ed., 1946), Chap. 13; R. Goode, “Anti-Inflationary Implications of Alternative Forms of Taxation,” AER Papers and Proceedings, XLXX (May 1952), pp. 147-160; G. Colm, “The Corporation and the Corporation Income Tax in the American Economy,” J.K. Butters, “Taxation, Incentives, and Financial Capacity” (reprinted in Readings in Fiscal Policy, pp. 502-520); and J. Lintner, “The Effect of Corporate Income Tax on Real Investment,” all in AER Papers and Proceedings, XLIV, May 1954, pp. 486-503, 504-519, and 520-534, respectively; E.C. Brown, “Consumption Taxes and Income Determination,” AER, XL, March 1950, pp. 74-89; R. Blough, The Federal Taxing Process (1952); A. Smithies, The Budgetary Process in the United States (1955) H.M. Somers, Public Finance and National Income, Part II; Federal Tax Policy for Economic Growth and Stability, Papers Submitted by Panelists Appearing before the Subcommittee on Tax Policy of the Joint Committee on the Economic Report (1955); Federal Expenditure Policy for Economic Growth and Stability, Papers Submitted by Panelists Appearing before the Subcommittee on Fiscal Policy of the Joint Economic Committee (1957).

1. 4. (Dec. 3-10) Debt Management

Assignments: E.R. Ralph, “Principles of Debt Management,” AER, XLVII, June 1957, pp. 301-320; R.V.Roosa, “Integrating Debt Management and Open Market Operations,” AER Papers and Proceedings, XLII, May 1952, pp. 214-235, reprinted in Smithies and Butters (eds), Readings in Fiscal Policy, pp. 265-288; Committee for Economic Development, Managing the Federal Debt (1954) E.A. Goldenweiser, American Monetary Policy, Chap. III.

References: J.M. Buchanan, Public Principles of Public Debt (1958); H.C. Murphy, The National Debt in War and Transition (1950); L.V. Chandler, Inflation in the United States, 1940-48 (1951); C.C. Abbott, The Federal Debt: Structure and Impact (1953); Patman Committee Documents (1952); General Credit Control, Debt Management and Economic Stabilization (Joint Committee on the Economic Report, 1951); Investigation of the Financial Condition of the United States, Hearings before the Senate Finance Committee, Parts 1, 2, and 3 (1957); “Proposal for a Special Reserve Requirement against the Time and Demand Deposits of Banks,” Federal Reserve Bulletin, Jan. 1948, pp. 14-23; J. Cohen, “A Theoretical Framework for Treasury Debt Management,” American Economic Review, XLV, June 1955, pp. 320-344.

1. 5. (Dec. 12-19) Co-ordination of Stabilization Policies

Assignments: P.A. Samuelson, “The New Look in Tax and Fiscal Policy,” in Federal Tax Policy for Economic Growth and Stability, (Joint Committee on the Economic Report, 1955), pp. 229-234; R.A. Musgrave, “The Optimal Mix of Stabilization Policies,” in The Relationship of Prices to Economic Stability and Growth, Compendium of Papers Presented by Panelists Appearing before the Joint Economic Committee (1958), pp. 597-609; W.L. Smith, “Monetary-Fiscal Policy and Economic Growth,” Quarterly Journal of Economics, LXXI, Feb. 1957, pp. 36-55; A. Smithies, “The Control of Inflation,” Review of Economics and Statistics, XXXIX, Aug. 1957, pp. 272-283.

References: P.A. Samuelson, “Full Employment versus Progress and other Economic Goals,” in M.F. Milliken (ed.), Income Stabilization for a Developing Democracy (1953), pp. 547-580; R.A. Musgrave, “Monetary-Debt Policy Revisited,” in C.J. Friedrich and J.K. Galbraith (eds.), Public Policy, Vol. V, 1954; J. Tobin, “Monetary Policy and Management of the Public Debt: The Patman Inquiry,” RES, XXV, May 1953, pp. 118-127; G.L. Bach, “Monetary-Fiscal Policy Reconsidered,” Journal of Political Economy, LVII, Oct. 1949, pp. 383-394, reprinted in Smithies and Butters (eds.), Readings in Fiscal Policy (1955), pp. 248-264.

General References

Federal Reserve Bulletin (monthly), Board of Governors of the Federal Reserve System.

Treasury Bulletin (monthly), U.S. Treasury Department.

Survey of Current Business (monthly), U.S. Dept. of Commerce.

Monthly Review of Credit and Business Conditions (monthly), Federal Reserve Bank of New York. Monthly bulletins are also published by the other eleven Federal Reserve banks.

International Financial Statistics (monthly), International Monetary Fund.

Report on Assets, Liabilities, and Capital Accounts—Commercial and Mutual Savings Banks (semiannually), Federal Deposit Insurance Corporation.

Federal Reserve Chart Book on Financial and Business Statistics (monthly), Board of Governors of the Federal Reserve System.

Historical Supplement to Federal Reserve Chart Book (annually in September), Board of Governors of the FRS.

Annual Report, Board of Governors of the FRS.

Annual Report, FRB of New York. The other eleven Federal Reserve Banks also publish annual reports.

Annual Report, Comptroller of the Currency.

Annual Report, Secretary of the Treasury.

Annual Report, Federal Deposit Insurance Corporation.

Banking and Monetary Statistics, Board of Governors of the FRS, 1943.

Business Statistics (biennially), U.S. Dept. of Commerce.

National Income Supplement to the Survey of Current Business, latest edition 1954, U.S. Dept. of Commerce.

Economic Report of the President (annually in January), U.S. Government Printing Office.

Hearings on the Economic Report before the Joint Economic Committee (annually),

Monetary Policy and Management of the Public debt (Patman Committee documents), 3 vols.:

1. Hearings before the Subcommittee on General Credit Control and Debt Management of the Joint Committee on the Economic Report, 82d Congress, 1952

2. Replies to Questions and Other Material for the Use of the Subcommittee on General Credit Control and Debt Management, Part I, 82d Congress, 1952.

3. Replies to Questions and Other Material for the Use of the Subcommittee on General Credit Control and Debt Management, Part 2, 82d Congress, 1952.

Investigation of the Financial Condition of the United States, Hearings before the Senate Finance Committee, Parts 1, 2, and 3, 85^th Congress, 1957.

United States Monetary Policy: Recent Thinking and Experience. Joint Committee of the Economic Report, 83d Congress, 1954.

Monetary Policy: 1955-56, Joint Economic Committee, 84^th Congress, 1956.

Consumer Instalment Credit, Board of Governors of the Federal Reserve System, 1957.

B.H. Beckhart (ed.) Banking Systems (1955).

P.G. Fousek, Foreign Central Banking: The Instruments of Monetary Policy, Federal Reserve Bank of New York, 1958.

[Reading Period: Ec. 141 Fall Term. No further assignment]

Source: Harvard University Archives. Syllabi, course outlines and reading lists in Economics, 1895-2003, Box 7, Folder “Economics, 1958-1959, (1 of 2)”.

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ECONOMICS 241
Money and Banking

Midterm Examination
January 22, 1959

I.

“At times short-term interest rates have been higher than long-term interest rates, while on other occasions long-term rates have been higher than short-term rates. Moreover, while short- and long-term rates usually move in the same direction, short-term rates ordinarily fluctuate over a wider range than long-term rates, but long-term security prices fluctuate more widely than short-term security prices.” Show how these patterns of behavior can be explained by the so-called expectational theory of the rate structure.

II.

“The sensitivity of output, employment, and prices to changes in the money supply may vary greatly depending upon the reaction coefficients of the economy and on the prevailing conditions.” Discuss.

III.

Proponents of the so-called “new monetary policy” have argued that even though expenditure schedules may be interest inelastic, restrictive monetary policy may be quite potent due to its effects on the supply of funds. Explain and evaluate their arguments, indicating some of the criticisms that have been advanced.

IV.

In principle at least, a given stabilization objective can be achieved by means of various combinations of monetary and fiscal measures. Taking an inflationary situation as your context, discuss the considerations, both theoretical and practical, which should be taken into account in choosing the optimal mix of stabilization policies.

V.

“If markets were reasonably competitive and prices correspondingly flexible, economic stability would be assured.” Discuss.

Source:  Harvard University Archives. Final Examinations, Social Sciences, January 1959. (HUC 7000.28) Vol. 122. Papers Printed for Final Examinations [in] History, Government, Economics,…, Naval Science, Air Science. January, 1959.

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HARVARD UNIVERSITY
Department of Economics
Economics 241

READING LIST NO. 1
Spring, 1959

Framework of Keynesian Analyis

A.P. Lerner, “The General Theory (1),” S.E. Harris, ed., The New Economics, Ch. 11.

J. Lintner, “The Theory of Money and Prices,” S.E. Harris, ibid., Ch. 37.

L. Tarshis, “An Exposition of Keynesian Economics,” R.V. Clemence, ed., Readings in Economic Analysis, Vol. I, pp. 197-208.

L.R. Klein, The Keynesian Revolution, Chs. 3 and 4.

The Consumption Function

J.M. Keynes, General Theory, Book III.
(NOTE: All assignments in the General Theory imply assignment of the corresponding passages in A.H. Hansen, A Guide to Keynes.)

R.P. Mack, “Economics of Consumption,” Survey of Contemporary Economics, Vol. II, pp. 39-78.

J.S. Duesenberry, Income, Saving and the Theory of Consumer Behavior, Ch. 3.

Irwin Friend, Individuals’ Saving, esp. Ch. 8.

M. Friedman, A Theory of the Consumption Function, Ch. 9 at least.

A. Marshall, Principles of Economics (8^th edn.), pp. 228-236.

The Multiplier

G. Haberler, “Mr. Keynes’ Theory of the Multiplier,” Readings in the Theory of Business Cycles, Ch. 9.

F. Machlup, “Period Analysis and Multiplier Theory,” ibid., Ch. 10.

R.M. Goodwin, “The Multiplier,” The New Economics, Ch. 36.

G.L.S. Shackle, “Twenty Years On,” Ec. Journal, 61, June 1951.

Investment

J.M. Keynes, General Theory, Chs. 11, 12, 16.

A.P. Lerner, Economics of Control, Ch. 25.

I. Fisher, Theory of Interest, Chs. 5-11.

David Durand, “Costs of Debt and Equity Funds for Business,” Universities-National Bureau Committee for Economic Research, ed., Conference on Research in Business Finance, pp. 215-261, 328-330, 333-334.

Interest

J.M. Keynes, General Theory, Chs. 13, 14, 15, 17, 18.

A.P. Lerner, in The New Economics, Chs. 45, 46.

W. Fellner and H.M. Somers, “Alternative Monetary Approaches to Interest Theory,” Rev. of Ec. Stat., Feb. 1941.

B. Ohlin, “Some Notes on the Stockholm Theory of Saving and Investment,” Readings in Business Cycle Theory, Ch. 5.

F.A. Lutz, “The Outcome of the Saving-Investment Discussion,” ibid. Ch. 6.

J.M. Keynes, Economic Journal, 47 (1937), pp. 241-252, 663-669.

B. Ohlin, Economic Journal, 47 (1937), pp. 423-427.

R.W. Clower, “Productivity, Thrift and the Rate of Interest,” Economic Journal, March 1954.

S.C. Tsiang, “Liquidity Preference and Loanable Funds Theories,” American Economic Review, September 1956.

F.A. Lutz, “The Structure of Interest Rates,” Readings in the Theory of Income Distribution, Ch. 26.

T. Wilson and P.W.S. Andrews, eds., Oxford Studies in the Price Mechanism, Ch. 1

Reading Period: Ec. 141 Spring Term

United States Monetary Policy: Its Contribution to Prosperity without Inflation (The American Assembly, Columbia University, 1958).

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ECONOMICS 241
Money and Banking

Final Examination
May 28, 1959

READ CAREFULLY: Answer Question 1 (40 points) and any three others (20 points each).

1.

Trace through in detail three of the following economic mechanisms, stating the special assumptions on which they rest:

1. The manner in which an increase in the level of investment affects the level of income according to the period interpretation of the multiplier.
2. The manner in which a decrease in wage rates affects the level of employment, according to Keynes.
3. The manner in which an increase in the money supply leads to an increase in the price level without an increase in the interest rate, according to the “classical” doctrine.
4. The manner in which an excess of ex ante investment over ex ante saving leads to a cumulative expansion, according to Ohlin and the Swedish school.
5. The manner in which an excess of the warranted rate of growth over the natural rate of growth leads to chronic depression, according to Harrod.

2.

Explain in some detail the classical theory of investment, as exemplified by Fisher, and then spend most of your time on describing the defects and shortcomings of that theory.

3.

In what way does the theory of income determination employed by Hicks (or Modigliani, if you prefer) differ from Keynes? Explain in full detail the model of income determination used by Hicks or Modigliani, emphasizing (a) the technical devices employed and (b) the deficiencies of the model.

4.

Describe the consumption functions advocated by (a) Duesenberry (early), (b) Friedman, (c) Pigou (late) and discuss the implications of these various consumption functions (as contrasted with Keynes’) for an overall theory of income determination.

5.

Explain the “cost of capital” theory of investment (also called the “corporate investment approach”) and discuss its implications for an overall theory of income determination, as contrasted with the implications of the Fisher-Keynes theory.

6.

Write a belated book review of Keynes’ General Theory of Employment, Interest and Money. In the course of it raise the major criticisms and objections that have been advanced by previous reviewers and commentators, and indicate how they affect your appraisal giving, of course, your reasons.

Source: Harvard University Archives. Final examinations, 1853-2001. Box 27, Final Exams—Social Sciences-June, 1959. Papers Printed for Final Examinations [in] History, History of Religions,…, Economics,…Naval Science, Air Science. June, 1959.

Image Sources: Warren Smith (left) from the University of Michigan Faculty History Project. Robert Dorfman (right). AEA Distinguished Fellow 1992. The American Economic Review, Vol. 83, No. 3 (Jun., 1993).