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Chicago. Reflections on what Makes Chicago School(s) so Special. Milton Friedman, 1974

What is the secret ingredient that has made the University of Chicago so outstanding? Milton Friedman identified it as “an undeviating emphasis on quality alone” — other nice stuff like balance and diversity are merely by-products from pursuing the single mandate of quality.

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THE 54TH ANNUAL
BOARD OF TRUSTEES’ DINNER FOR THE FACULTY

Remarks by MILTON FRIEDMAN
January 9, 1974

To economists the world over, “Chicago” designates not a city, not even a University, but a “school.” The term is used sometimes as an epithet, sometimes as an accolade, but always with a fairly definite — though by no means single-valued-meaning. In discussions of economic policy, “Chicago stands for belief in the efficacy of the free market as a means of organizing resources, for skepticism about government intervention into economic affairs, and for emphasis on the quantity of money as a key factor in producing inflation. In discussions of economic science, “Chicago” stands for an approach that takes seriously the use of economic theory as a tool for analyzing a startlingly wide range of concrete problems, rather than as an abstract mathematical structure of great beauty but little power; for an approach that insists on the empirical testing of theoretical generalizations and that rejects alike facts without theory and theory without facts.

These denotations of the Chicago school of economics are of long standing. They have prevailed for decades, with only minor though not negligible changes in meaning despite a complete change in the persons regarded as the “leaders” of the school. My personal experience with the Chicago school of economics began more than 40 years ago, as a graduate student, when Frank Knight, Jacob Viner, and Henry Simons were the acknowledged leaders of the Chicago school. Today, the Chicago school has an even broader base than it did then, numbering among its leaders not only some of us at the University but also economists at other institutions, some of whom have never been formally connected with the University. But all are students — direct or indirect — of Knight, Viner, and Simons, and, at a still longer remove, of Adam Smith — who but for the accident of having been born in the wrong century and the wrong country would undoubtedly have been a Distinguished Service Professor at The University of Chicago.

The mixture of irritation and pleasure that I have experienced at being alternately damned and applauded — and always, as I felt, misunderstood — as a member of the Chicago school has led me to become something of a collector of intellectual schools. One impression that I have formed from my casual collection is that The University of Chicago is a particularly fertile breeding ground for “schools” — though it clearly has no monopoly.

Already in 1903, William James greeted a book by John Dewey and several of his associates, Studies in Logical Theory, as “the signal of the birth of a ‘Chicago school’ of pragmatic philosophy.”1 Unfortunately, Dewey resigned his professorship at Chicago shortly thereafter, so that this Chicago school may not have had a long life.

In sociology, Albion Small — the initial head of the Department — laid the basis for the famous Chicago school of sociology led by W.I. Thomas, Robert Park, and Ernest Burgess — a school that reigned from 1920 to perhaps 1950. Morris Janowitz describes the central thrust of the Chicago school of sociology as consisting of emphasis “on empirical data and the need for integrating data into what they believed to be an appropriate theoretical framework”2 — a description that applies equally to one aspect of the Chicago school of economics.

In political science, “the Chicago school… led by Charles E. Merriam and… Harold D. Lasswell,” has been described as “diverse in its interests but united in its aim to explore new methods of studying political and administrative behavior”3 — again a description that could apply to economics and sociology.

Chicago pioneered in the social sciences and fostered active cooperation among them — most concretely by constructing a single social science building to house them all, so it is perhaps not surprising that “schools” should have flourished in the social sciences and should have had much in common. Witness the quotation from Lord Kelvin carved in stone on the Social Science Building: “When you cannot measure, your knowledge is meagre and unsatisfactory” — a quotation which Frank Knight one day contemplated at length and then muttered: “And if you cannot measure it, measure it anyhow. “

However, schools have flourished at Chicago not only in the social sciences, but elsewhere as well.

In English, a Chicago school of criticism was initiated and led by Ronald Crane. In theology, the larger part of a history of The University of Chicago Divinity School by Charles H. Arnold is devoted to tracing the 60-year history of the “Chicago School of Theology.” Members of this audience can, I am sure, add to that list, and I shall appreciate it very much if they do. Indeed, one reason I chose this topic for tonight’s talk is in order to add to my collection in the most painless and efficient way.

There are, of course, Cambridge schools and Oxford schools and Viennese schools and Harvard schools and I have made no exhaustive survey of them all. So I cannot claim to have demonstrated that Chicago is exceptionally fertile as a producer of “schools.” But I shall assume for the present that my impression to that effect is correct and turn to the main question I want to discuss: Why? What has there been about The University of Chicago that has given rise to schools?

When I asked one friend this question, his offhand remark was that perhaps Chicago’s geographical isolation had led people at Chicago to become inbred and to develop homogeneous, if offbeat, views.

This answer, while a very natural one, misconceives the nature of schools and is besides demonstrably wrong as a description of fact. A “school” may be, but need not be, a “cult.” None of the social science schools I have mentioned was a “cult.” All of them were rather pioneer attempts to open up new directions of research and analysis, new ways of looking at phenomena. All of them numbered among their members persons working on a wide variety of topics and holding diverse views. All of them affected the course of scientific research in their disciplines and have been in considerable measure absorbed in those disciplines. Rather than being “crank outsiders” their leaders were recognized and honored by their professional brethren, serving as presidents of their professional associations and editors of professional journals.

But while a “school” need not be a “cult,” neither, to go to the other extreme, is it simply a designation of excellence. To take another example from the social sciences, anthropology has always been an excellent department at Chicago, widely recognized as one of the best in the world. It has had many outstanding and famous members, yet apparently there has never been a Chicago school of anthropology, in the sense of a distinctive approach pursued by a number of leading scholars and propagated by their students.

If Chicago’s geographical location had an effect — as I shall argue later that it did — it was not by encouraging narrowness, homogeneity, and inbreeding. The fact is that none of the departments ever consisted primarily of members of the corresponding schools. In his discussion of the Chicago school of sociology, Morris Janowitz notes that “Albion Small… was eclectic in his interests and tastes,” and that “there was a continual effort to have all aspects of sociology actively represented.” Robert E.L. Faris, in his book on Chicago Sociology, states that “probably the most important factor in the growth at Chicago was the intelligent perception by Small, accepted enthusiastically by his colleagues and successors, of the inhibiting consequences of doctrines, schools of thought, and authoritative leaders. … This openness to influences from other traditions was also reflected in the decision to bring Ogburn to Chicago from Columbia, thus enriching the local sociological content with the research-method emphasis that had been developing at Columbia. In that period [1920s and 1930s] no Chicago-trained sociologist was brought into the department at Columbia or Yale. Brown first appointed a very young instructor from Chicago … in 1931…. Mid-century approached before Harvard ventured to bring in a representative of the Chicago sociology” — and I may add that Harvard has still not ventured to bring in a full-fledged representative of the Chicago school of economics, though it has, in recent years, hired a number of Chicago Ph.D.s.4

In political science, every biographical reference to Charles E. Merriam that I have seen has stressed his eclecticism, his tolerance of diversity, his concern solely for quality. And a political science department that in our days has simultaneously included Hans Morgenthau, David Easton, and Leo Strauss among its leading members can hardly be described as narrow and inbred.

In economics — where I am personally most aware of the charge of narrowness and parochialism — the situation is similar. The first head of the Department of Economics was James Laurence Laughlin — whose portrait hangs in Social Sciences 122 and who was characterized by a historian of the Chicago school of economics as “one of the most conservative economists in the country.” Laughlin was a leading “hard-money” man of his time, vigorously opposing the free-silver movement that reached its climax with William Jennings Bryan’s famous “Cross of Gold” speech in 1896. (Incidentally, to display one of my few bits of local lore, that speech was given, and Bryan subsequently nominated for the Presidency, in the neighborhood of The University of Chicago, roughly at what later became known as “sin corner” — 63rd and Cottage Grove. In 1896, there were open fields there, and the El provided convenient transportation, so the Democratic National Convention was held in large tents pitched for the purpose.) To return to Laughlin, he publicly debated in Chicago with William H. Harvey, whose pamphlet entitled “Coin’s Financial School” provided the most influential intellectual justification for the free-silver movement.

In these ways, Laughlin would be regarded by many as sharing some of the characteristics of the present Chicago school, though I hasten to add that in other respects, he differed drastically. In particular, he was a firm opponent of the quantity theory of money — largely because it had been used by the free-silver advocates to justify their proposals — and as long ago as 1910, he analyzed inflation as arising from the monopolistic practices of trade unions and large enterprises rather than from increases in the quantity of money — a decidedly non-Chicago position.

Despite his own strong views and active participation in political controversy, Laughlin sought out quality and diversity in the men he appointed to the faculty. As A.W. Coats remarks: “Laughlin was, indeed, a rigid thinker, an uncompromising and sometimes unfair polemicist, and an extreme conservative. Nevertheless, during his 24 years at Chicago his department became a leading center and breeding ground of economic heterodoxy. … Laughlin was an unrelenting individualist who genuinely respected the independence of his colleagues, and he was as outspoken in his resistance to Harper’s encroachments upon his departmental independence as he was toward the encroachments of government upon individual freedom.”6

At the very outset, Laughlin brought with him from Cornell to The University of Chicago Thorstein Veblen, whom Laughlin liked “precisely because Veblen was different in his background, in his point of view, and even in his personal characteristics.” Veblen served as the first managing editor of the Journal of Political Economy and remained on the faculty until 1906, even though “Laughlin on occasion had difficulty in getting Veblen’s contract renewed and in securing advances for him.”7 Similarly, one of the students of Robert Hoxie, who joined the faculty in 1906, wrote: “generally speaking, Hoxie and Laughlin were as far apart as West and East, but it speaks worlds for Laughlin’s tolerance that he brought Hoxie to, and kept him in his Department.”8 Laughlin appointed such diverse persons as Wesley C. Mitchell, Alvin Johnson, Walton Hamilton, and John Maurice Clark — all moreover not after they had become famous but when they were in the early stages of their careers. Scientific excellence, not conformity, was clearly his major criterion. Of course, we have never been able to monopolize excellence — each of these four famous scholars served most of their careers at other institutions.

Laughlin’s example has been followed to this day. When I was a student at Chicago, Paul Douglas, hardly a full-fledged member of the Chicago school in the policy sense, was a leading member of the department. The disputes between Douglas and Knight and between Knight and Viner formed an important part of our education. The department included also Harry Alvin Millis, Simeon Leland, and John U. Nef, to mention only some of the outstanding non-Chicago Chicagoans. Subsequently, the department appointed Oskar Lange, a proclaimed Socialist, later Poland’s representative to the U.N., and still later a member of Poland’s Communist government — but also an outstanding economic scholar.

In 1964, during the Johnson-Goldwater presidential elections, my friend and colleague George Stigler remarked that Chicago was one of the few major universities, if not the only one, that without difficulty could staff a highly qualified Council of Economic Advisers for both Johnson and Goldwater. Many another university could have staffed (and did) a Johnson Council. Two or three others could have staffed a Goldwater Council. But only Chicago — and less easily, Columbia — could readily have staffed both.

To cite one other statistic. The American Economic Association awards a John Bates Clark medal every second year to the economist under 40 “adjudged to have made a significant contribution to economic thought and knowledge.” Since its inception, 13 medals have been awarded. Nine of the 13 recipients were either teaching at Chicago when they received the award, or had taught at Chicago before receiving the award. Of the remaining four, two had studied at Chicago, and the remaining two had received offers from Chicago.

Clearly, Chicago has not been an enclave outside the professional mainstream. On the contrary, I believe that no other major university has consistently had so wide a spectrum of views represented on its economic faculty as has Chicago. Chicago is noted for free market and anti-Keynesian views, not because they are the only ones represented at Chicago, but because Chicago is one of the few universities at which they are strongly and effectively represented, albeit, even here, by only a minority of the Department.

Not isolation and uniformity, but tolerance for diversity, stress on scientific quality as the decisive criterion for appointments, and success in identifying and attracting future leaders of their profession — these are the sources of the Chicago proclivity to generate ‘schools.” But what in turn accounts for these characteristics? This is a topic for a specialist in the sociology of knowledge, not for a mere economist. Yet perhaps my personal involvement will excuse my presumption in venturing to suggest a possible answer.

Part of the explanation for Chicago’s proclivity to generate schools was suggested to me by Edward Shils — who is a specialist in the sociology of knowledge. The University of Chicago, he pointed out, was the first major university, with the possible exception of Johns Hopkins, that was not established primarily as either a finishing school for the children of the upper classes, or as a seminary for training clerics. From the very beginning, Chicago was established as a center of learning, devoted to advancing and transmitting knowledge. Harper’s vision led to the assembling at The University of Chicago of an exceptionally able and dedicated faculty — and for our purposes, the critical feature is that they were dedicated not to training gentlemen for gentlemanly pursuits, not to spreading particular religious or ethical or social doctrines, but to the objective pursuit of knowledge — to science in the broadest sense. It is crucial also that Harper chose them not only for their ability but also for their personal force and demonstrated executive ability.

The group of extraordinarily able men could write on a tabula rasa. There was no deadwood to be eliminated, no vested interests to be rooted out, intellectual or personal. The result was to establish from the outset a tradition of which we all remain the beneficiaries, these eight decades later, a tradition of objective scholarship for its own sake, of stress on the intellectual quality of people, with little regard for their personal idiosyncracies or political views, and above all, of tolerance and respect for diversity.

To complete Shils’ explanation, I believe that this tradition was able to flourish and to be successful at The University of Chicago largely because of our geographic location. Had the University been established in or near New York City under precisely the same auspices and the same initial personnel, I believe that the results would have been very different.

I have been led to this view largely by personal experience. In 1964-to the disgust and dismay of most of my academic friends — I served as an economic adviser to Barry Goldwater during his quest for the Presidency. That year also, I was a Visiting Professor at Columbia University. The two together gave me a rare entree into the New York intellectual community. I talked to and argued with groups from academia, from the media, from the financial community, from the foundation world, from you name it. I was appalled at what I found There was an unbelievable degree of intellectual homogeneity, of acceptance of a standard set of views complete with cliché answers to every objection, of smug self-satisfaction at belonging to an in-group. The closest similar experience I have ever had was at Cambridge, England, and even that was a distant second.

The homogeneity and provincialism of the New York intellectual community made them pushovers in discussions about Goldwater’s views. They had cliché answers but only to their self-created strawmen. To exaggerate only slightly, they had never talked to anyone who really believed, and had thought deeply about, views drastically different from their own. As a result, when they heard real arguments instead of caricatures, they had no answers, only amazement that such views could be expressed by someone who had the external characteristics of being a member of the intellectual community, and that such views could be defended with apparent cogency Never have I been more impressed with the advice I once received: “You cannot be sure that you are right unless you understand the arguments against your views better than your opponents do.”

To come back to our present topic, this kind of intellectual homogeneity is destructive of tolerance. It is no accident that in the New York— or more generally, the Eastern — environment, divergent views take the form of cults not schools. One of the great economists of all time, Ludwig von Mises, who recently died at an advanced age, was barely tolerated for years in a peripheral academic position at New York University. He was never accepted as being in the intellectual mainstream, even though he had a far greater influence than all but a handful of the more prestigious professors of economics at Columbia, Yale, Princeton, or Harvard. Mises had disciples but few students because of the overpowering and stultifying intellectual atmosphere of New York.

The great good fortune of our University was that it was not established on the East Coast. If it had been, it would very likely have become like all the other Eastern universities. May Johns Hopkins not be a case in point? A university that was unable to achieve its initial promise except in the area of medicine.

Fortunately, we were established in Chicago, a new, raw city, bursting with energy, far less sophisticated than New York, but for that very reason far more tolerant of diversity, of heterodox ideas. New York looked East, to the Old World. It sought above all to be recognized by that world and therefore imitated it and was hostile to any influences that might cause the Old World to look down its nose at the New.

Chicago, like other cities this side of the Appalachians, looked West, to the frontiers — though needless to say it had its share of mindless fawning on Europe, as witness Colonel McCormick’s love-hate affair with England. But this did not prevent Chicago from being characterized by diversity in every dimension, by a willingness to experiment, to judge people by their performance rather than their origins, to judge ideas by their consequences rather than their antecedents.

To return to my personal experience. I could hold the views I did at Chicago, and even be an adviser to Goldwater, without losing the respect of either town or gown, but rather while still being accepted as a responsible member in good standing of the intellectual community. Had my career been in New York, and had I held the same views, I suspect that that would not have been possible. I would have been regarded as a “kook” and no doubt would have begun to act like one even earlier than I did.

If this amateur exercise in the sociology of knowledge has any validity, it has important implications for our University. First and foremost, if we are to preserve our heritage, we must continue to insist that intellectual quality and intellectual quality alone be the basis of appointments to the faculty — not political or social views, not personal attractiveness or sex or race, not grantsmanship, not even potential contribution to a balanced faculty. Balance and diversity have been and will continue to be valuable by-products of an undeviating emphasis on quality alone. They are not objectives to be sought directly.

Second, as we face severe financial pressure in the coming years, it is well to recall that the schools that developed at Chicago owed far more to a handful of geniuses than to the lavish expenditure of funds. The availability of funds certainly helped. But far more crucial was the success of the faculty in seeking out the young scholars who had within them the capacity to strike out in new directions and the willingness of the administration to back the faculty’s judgment. These remain the key to success in surmounting our present problems. And identification of potential geniuses remains the one element that only the faculty can provide. Trustees, alumni, and other friends of the University can prepare the seedbed for excellence; only we can furnish the seeds.

Milton Friedman is the Paul Snowden Russell Distinguished Service Professor of Economics.

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  1. International Encyclopedia of the Social Sciences, Vol. 4. p.155.
  2. Foreword to Robert E. L. Faris, Chicago Sociology, 1920-1932 (Chicago: University of Chicago Press, 1970).
  3. International Encyclopedia of the Social Sciences, Vol. 8, p. 366.
  4. Quotations from Faris, op. cit., pp. ix, 128, 130.
  5. A. W. Coats, “The Origins of the ‘Chicago School(s)’?” Journal of Political Economy, Vol. LXXI (October 1963), pp. 487-493; quotation from p. 489.
  6. Ibid., p. 491.
  7. Alfred Bornemann, J. Laurence Laughlin (Washington: American Council on Foreign Affairs, 1940), p. 28.
  8. Ibid., p. 29.

Source: Remarks by Milton Friedman at the 54th Annual Board of Trustees’ Dinner for the Faculty (January 9, 1974) published in The University of Chicago Record, Vol. 8, No. 1 (February 21, 1974), pp. 3-7.  Digital archive of the University of Chicago Library, Campus Publications.

Image Source: Time Magazine, December 19, 1969.

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Northwestern. Ranking of top 18 economics departments. Robert J. Gordon, 1979-1980

Robert J. Gordon calculated his own ranking of the top 18 economics departments in the United States and provided a description of his methodology in 1981. His motivation was to sell Northwestern’s program to prospective graduate students.

In an earlier post we encounter a couple of earlier attempts at departmental rankings.

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NORTHWESTERN UNIVERSITY
COLLEGE OF ARTS AND SCIENCES

Robert J. Gordon
Professor of Economics

Department of Economics
Evanston, Illinois 60201
Telephone (312) 492-3616

May 18, 1981

Professor E. Cary Brown
Department of Economics
E52-373A
Massachusetts Institute of Technology
Cambridge, MA  02139

Dear Cary:

As you may know, for several years I have attempted to provide an independent rating of the quality of faculty at the top 20 U.S. economics departments.  I am writing to you to obtain the information needed to update the last quality ranking that I did two years ago.

Because the questionnaire form for the Boddy survey has just been distributed, you may rightly ask why an additional department ranking is necessary or desirable.  The strength of the Boddy survey is its wide coverage and large sample of respondents, but its weakness is that no information is provided to respondents to inform them accurately of the current members of the faculties of the departments on the list.  The average respondent may be several years out of date in knowing that Professor A has migrated from Department B to Department C, and in the case of many departments may have no information at all.  Also, there is no standard criterion on which to judge contributions of younger versus older faculty members, and contributions of economists in other parts of the university, e.g., business schools.

My own rating system is a complement to, not a substitute for, the Boddy survey.  As described in the attached sheet, the strengths of the system are that it includes only tenured faculty, is based on actual faculty lists, and provides a uniform treatment of economists in business schools and other outside departments.  The assignment of quality scores to individuals obviously must contain a subjective element, but is based as much as possible on objective criteria, e.g., prizes, awards, outside job offers, and citations.

I hope you will help me provide the information I need about your department.  This consists of:

    1. Your faculty list for 1981-82. If this is not yet typed, please send a list for 1980-81 and pencil in any changes that involve tenured faculty members.  Indicate any members who are on leaves of two years or more in government or administrative jobs.
    2. Just as important, please provide a list, which can be handwritten, of tenured economists in other departments (Business School, Law School, etc.) who make a significant contribution to the life of economics graduate students by (a) giving courses taken by substantial numbers of economics graduate students, (b) regularly attending seminars in economics, (c) serving on dissertation committees, etc.

Originally this rating system was used to provide information to prospective Northwestern graduate students (even though Northwestern has never ranked higher than eighth).  Now the results have taken on a life of their own, so I would appreciate any improvements in the methodology that you would like to suggest (so long as it does not involve rating non-tenured faculty members, which I think is basically impossible).

Sincerely,
[signature: Bob]
Robert J. Gordon

Enclosure

RJG/JR

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

EXPLANATION OF METHOD USED TO COMPILE
1979-80 “GORDON QUALITY SCORE”

As a partial substitute I have compiled a quality ranking for each of the top 18 departments in the United States.  In consultation with several highly regarded economists, all permanent (tenured) faculty members in the top 18 U.S. departments have been rated with a “quality score” ranging from one (low) to 10 (superman).  Then the total scores in each department of faculty members rated “6” or above have been added up.  While my score is obviously subjective, whereas the Boddy score is based on a large sample, nevertheless there are two primary advantages to my method.  (1) The ratings are current, taking account of the movements in Summer 1979 of J. Stiglitz from England to Princeton and in Summer 1978 of K. Arrow from Harvard to Stanford, R. Hall from M.I.T. to Stanford, T. Bewley from Harvard to Northwestern, and D. McFadden from Berkeley to M.I.T.  (2) The ratings are based on a great deal more information than was available to most if not all of the Boddy respondents — I obtained complete faculty listings from all 18 departments in May, 1978, and have consulted with a wide variety of individuals and other sources of information in making the individual faculty rankings.

Because many economists have expressed an interest in the methods used in establishing the ranking, a few details are included here for the record:

  1. Only tenure members are included, reflecting the risk that nontenure members may depart a department before new graduate students can benefit from them, as well as the difficulty of rating young professors who are not yet widely known or cited.
  2. Heavy weight is given to objective evidence in establishing the rankings–winners of the Nobel Prize and the A.E.A.’s John Bates Clark award are all awarded scores in the “9” or “10” category, as are several close contenders for those prizes.Another useful piece of information is the list of Fellows of the Econometric Society, perhaps the only honor in economics in which the selection is made annually by a worldwide electorate of distinguished economists.  Other honors, including selection to the NSF advisory panel and the editorial boards of leading journals, are taken into account as well.
  3. Some account is taken of recent productivity, reflecting the fact that a faculty member who is currently working on the frontier is likely to be more useful to a graduate student than an established “star” whose main achievements date back to the 1940s or 1950s. A helpful and objective guide is the comprehensive Social Science Citations Index.1/
  4. The ranking of each department is not limited to the tenure economists who happen to be on the premises with full-time appointments in the economics department.Quality scores are allocated, and a weight of one-half given, to (a) economists in closely related departments (usually business schools, but also law schools, statistics departments, and schools of public administration); (b) economists who now have a full-time job in the university administration; and (c) economists who are on a multi-year leave in Washington and who may be unavailable to graduate students for several years.

1/These criteria have offsetting biases.  For instance, young mathematical economists tend to be elected relatively easily to the Fellowship of the Econometric Society but do not tend to be cited often in the Citations Index.

The results are:

1975 Boddy Ranking

Rank Department

1979-80 Gordon Quality Score

Quality of Graduate Faculty

Effectiveness of Graduate Program

1. Harvard

179

1 (tie)

5 (tie)

2. Yale

155

4

2 (tie)

3. M.I.T.

148

1 (tie)

1

4. Princeton

141

7

5 (tie)

5. Chicago

140

1 (tie)

2 (tie)

6. Stanford

136

5 (tie)

4

7. Pennsylvania

130

8

10 (tie)

8. Northwestern

128

9 (tie)

8 (tie)

9. Berkeley

100

5 (tie)

7

10. U.C.L.A.

97

12 (tie)

14 (tie)

11. Minnesota

96

9 (tie)

8 (tie)

12. Wisconsin

90

9 (tie)

10 (tie)

13. Michigan

67

13 (tie)

10 (tie)

14. Columbia

60

13 (tie)

17

15. Maryland

57

(Below 20)

(Below 20)

16. Rochester

56

13 (tie)

13

17. Carnegie-Mellon

37

17

14 (tie)

18. Brown

33

18 (tie)

18

Source: M.I.T. Institute Archives and Special Collections. MIT. Department of Economics. Records. Box 3, Folder “Quality Rankings”.

Image Source: Robert J. Gordon at First Bank of Japan Monetary Conference, June 1983. Detail from picture with James Tobin.

 

 

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Chicago Exam Questions Theory

Chicago. Graduate preliminary examination in economic theory, incomplete. Winter, 1956

 

Artifacts displayed in museums, especially ancient artifacts, are perhaps more often as not, flawed. So too with the documentary record. Sometimes we have gaps. Rather than mourn the missing documents, we celebrate what we have gotten our hands and eyes on. And so this post gives us the True-False-Uncertains questions of the winter quarter 1956 economic theory prelim exam from the department of economics at the University of Chicago.

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Links to previously posted Chicago prelim exams.

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ECONOMIC THEORY
Preliminary Examination
Winter Quarter 1956
(incomplete)

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

  1. (40 points) True, False or Uncertain. Explain your answer.
    1. Since the costs of finding oil are virtually constant over the relevant range of exploration now going on, the depletion allowance which amounts to a subsidy to companies which extract the oil they find is purely a device which increases the profits of the oil companies at the expense of the taxpayer.
    2. A minimum wage law may reduce the demand for labor by some firms and may have no effect on the demand by other firms, but will never increase it.
    3. The sum of the income elasticities of demand for all commodities (by a single consumer) is unity, while the sum of their price elasticities is zero.
    4. If the marginal utility of each commodity diminishes with increases in the rate of consumption, then no commodity will be an inferior commodity.
    5. The fact that new commodities are typically introduced into a consumer’s budget when his income rises implies that the marginal utility of the commodities he was already consuming must have been falling.
    6. Although the demand schedule for a productive service by a firm buying competitively must have a negative slope, the demand schedule for a productive service by a monopsonistic firm may have either a positive or negative slope.
    7. The futures price of a commodity equals the current spot price plus the cost of storing the commodity for the length of the futures contract.
    8. The existence of effective rent control on old dwellings decreases the demand for new dwellings.
    9. Family size has declined in the United States from 1900 to 1950; yet per capita income has increased. If there were no change in tastes, this would imply that children are an inferior commodity.
    10. The existence of firms of different sizes in the same industry implies that there is a horizontal marginal cost curve for firms in the industry.
    11. Immigration to the United States of a million unskilled laborers from abroad would increase the average per capita income of everyone previously living in the United States.
    12. The fact that managers of many large corporations in the United States own a small fraction of the common stock of these corporations implies that the policies of these corporations are often not in the best interests of the stockholders.
    13. The figures for national income show that during the 20th century, per capita national income has grown at a faster rate in the United States than in India. This implies that Indians have been saving a smaller fraction of their incomes.
    14. If we replaced the income tax in the United States by a sales tax, the change would induce persons to shift away from occupations that have large nonpecuniary advantages.
    15. The competitive firm attempts to equalize marginal cost, average cost and price.
    16. When a firm’s average cost is decreasing, its marginal cost is decreasing and is less than average cost.
    17. Between 1951, and 1956 farm product prices (relative to prices paid by farmers) fell by about 20 percent; farm output increased by about 9 percent. This implies that the supply function for farm products is backward bending.
    18. If all firms paid each factor the value of its marginal product and if all product prices were equal to their respective marginal costs, it would not be possible to increase the output of one product without decreasing the output of some other product.
    19. Two products are produced in fixed proportions. An increase in the demand for one of the products would result in a fall in the price of the other product and, all other things constant, the fall in the price of the second product will be the greater, the greater the relative importance of the second product in the total receipts derived from producing the two joint products.
    20. The existence of overtime pay at premium rates proves that the supply of labor is backward bending.

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

Image Source: Coat of arms of the University of Chicago.

The University Coat of Arms, a shield displaying the phoenix below and the book and motto above, was adopted by the Board of Trustees on August 16, 1910. The University motto Crescat scientia; vita excolatur was adopted by the Board on January 17, 1911 and added to the Coat of Arms on the pages of the open book.
The Coat of Arms was designed by Pierre de Chaignon la Rose, a heraldic specialist in Boston working under contract to the Board of Trustees. No surviving documents make clear precisely why the phoenix was adopted as the central element on the Coat of Arms, but the most probable assumption is that the phoenix can be seen as a symbol of the city of Chicago, which was seriously damaged by the great Chicago Fire of 1871 and then was successfully rebuilt, or reborn, within just a few years.

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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.

Categories
Chicago Exam Questions Theory

Chicago. Economic Theory Prelim. Parts I and II. Summer 1953

 

 

Links to previously posted Chicago prelim exams.

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Economic Theory, Part I

Written examination for the Ph. D. and A.M. Degrees,
Summer Quarter 1953

Answer all questions.  Time: 4 hours.

Question 1.

Each year large sums of public funds are spent to find and make known improvements in agricultural technology.  Most rationalizations for this practice picture it as “helping the farmer.”  To what extent and under what conditions can promotion of technical improvements –

(a) increase rent of land used for agriculture?
(b) increase net incomes of farmers who are tenants?
(c) increase gross receipts of farmers as a class?

Question 2.
    1. “If the purchase tax on new cars should be reduced in the coming budget, there will be a sharp drop in all second-hand prices to bring them into line with the reduced list prices of the new cars.”(Economist, March 21, 1953, p. 821.)  Discuss, including an analysis of the channels, if any, whereby the reduction in purchase tax (in our terminology, excise tax) would affect the prices of used cars.
    2. A monopolist is initially producing 1000 units of output which he sells for $30 per unit.Assume that conditions remain unchanged except for the government actions listed below.  What can you tell about the effects of each action on output, price paid by consumers, and the return (after tax) to the monopolist?  Consider the actions as separate alternatives, no two are in effect together.  If some answers depend on special assumptions make these explicit.
      1. A tax of $10 per unit is imposed on the first 500 units produced.
      2. A tax of $10 per unit is imposed on the first 1200 units produced.
      3. A subsidy of $10 per unit is granted on all units produced in excess of 500.
      4. A subsidy of $10 per unit is granted on all units produced in excess of 1000.
      5. The price is arbitrarily set at $28.  The government guarantees sale of the monopolist’s entire output.
Question 3.

The present value of a collection of assets equals the sum of discounted gross returns that the owner expects it to yield.  Explain the determination of the discount rate: how is it related to the owner’s tastes and opportunities and to the tastes and opportunities of other people?

Question 4.

Consider a firm using several factors of production and making several products.  “There is no reason why an equal proportional increase in all factors should not enable all products to be increased in the same proportion as the factors have been increased.”  But in this case “it is not possible for the price of one factor (or product) to change, there being no change in the prices of all other factors and products, without upsetting equilibrium altogether.  If the price of a product rises, output will become infinite; if the price of a factor rises, it will become zero…  Our analysis threatens to break down altogether.”  (Hicks).  Is this conclusion correct?  If so, show a) how it follows from the premises; b) how it can be reconciled with observed facts.  (Note: You may start with the case of one factor and one product.)

Question 5.

“The operatives are perfectly right in thinking that if all worked on Sunday, seven days’ work would have to be given for six days’ wages; but so long as the great mass of employments are suspended, the small number who for the enjoyment of others must still work, obtain a proportional increase of earnings; and they are not obliged to follow those occupations if they prefer leisure to emolument.”  (J. S. Mill, in “On Liberty.”)

      1. How would Mill have justified his conclusions in terms of the economic doctrines of his time? Indicate briefly the intellectual history of the relevant doctrines.
      2. Analyze his conclusions in light of current economic theory.
Question 6.

In economic theory, the indifference maps and opportunity (transformation) functions are stated to have certain properties. Which are these properties and how can they be inferred from factual evidence?

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Economic Theory, Part II

Written examination for the Ph.D. and A.M. Degrees,
Summer Quarter 1953

Answer all questions.  Time: 3 hours.

Question 1.

The income velocity of circulation appears to have been falling rather steadily in the United States over the past 100 years to about one-third its initial value.  What factors might in your view explain this secular decline?

Question 2.

Assuming continuing technological progress, suppose that the practice of negotiating for real rather than money wage rates spreads over all industries of the country.  What effect would this have upon price level, employment and the distribution of income, under various assumptions about monetary policy?

Question 3.

What are the principal “automatic stabilizers” of prices and business activity now operative?  In your view, what additional step is most needed to improve the prospect that automatic stabilization will work reasonably well? Explain.

Question 4.

Does it have any practical significance whether the maximum difference or the maximum ratio between the amount of currency in circulation and the Central Bank reserve (in metal or foreign exchange) is fixed?  Give historical examples of both kinds of rules.

Source: Hoover Institution Archives. Milton Friedman Papers, Box 76, Folder “76.10”.

Image Source:  Social Science Research Building (Lecture Hall 1). University of Chicago Photographic Archive, apf2-07482, Special Collections Research Center, University of Chicago Library.

__________________________

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.

Categories
Chicago Exam Questions Theory

Chicago. Graduate Economic Theory Prelim Questions. Winter, 1953

 

Links to previously posted Chicago prelim exams.

_____________________

ECONOMIC THEORY I
Part I

Written examination for the Ph.D. and A.M. Degrees Winter Quarter, 1953
  1. I. —
    1. a. —
      1. 1.  [5 points] What will be the relation between the demand curve for a product at retail and the demand curve for the same product at the manufacturing level? Which would you expect to be the more elastic at the relevant equilibrium price and why?
      2. 2. [5 points] What, if anything, is implicitly assumed in the wording of the above question about the state of competition at either the retail or manufacturing level?
    2. b.  —
      1. 1.  [5 points] Draw a system of production indifference curves showing the alternative combinations of two factors of production (A and B) required to produce given outputs of X. What properties of the shapes of your curves can be justified in general.
      2. 2. [2 points] Show how to determine the combination of factors that will be used for a given relative price of A and B.
      3. 3. [3 points] Show how to determine the effect of changes in the relative price of A and B on the combination of factors.
  2. II.—
    1. a. [10 points] Consider two industries: X which is competitive, and Y, monopolistic. The supply curve in X is horizontal, the marginal cost curve of the monopolistic firm in Y is also horizontal (constant marginal cost). Demand declines by 25% in both industries in the sense that the quantity demanded at each price declines by 25%. The supply and cost curves are unaffected. What happens to price in X? In Y?
    2. b. [10 points]  “Rubber growers have long complained that American synthetic rubber, produced in government plants, is sold below its true cost, thus subsidising its consumption at the expense of natural rubber. Since the new Administration is expected to dispose of the synthetic plants to private owners, the growers are now hoping that an economic price will soon be charged for the product … The potential range of prices at which private industry might sell synthetic rubber … obviously … would depend to a considerable extent on the terms at which the American Government might transfer the plants. Mr. Heilman (in an article in Natural Rubber News) suggests that if the plants are leased, or sold at depreciated book values, the new operators would be able to sell ‘standard cold synthetic rubber’ at only 22 cents a lb, assuming that annual output did not exceed 600,000 tons. If the factories were to be sold at their full replacement cost, the selling price might be 25-26 cents a lb for output of up to 450,000 tons of cold rubber a year, rising to 28-30 cents a lb for output up to 600,000 tons.

“Whatever disposal arrangements are made, realistic provision against obsolescence, at replacement costs, would in Mr. Heilman’s opinion fix the long-term selling price between 25 and 30 cents … a lb.”
The Economist, January 24, 1953, p. 238 (underlinings added)

Do you agree with the underlined statement? Justify your answer.

  1. [20 points] In Chicago, as in most other large cities, taxicab fares are fixed by the municipality. Suppose, (though this is not the case), that anyone who wants to operate a taxi at these fares is automatically granted a license to do so, subject perhaps to some objective test of ability to drive, so that entry is essentially free. Analyze the equilibrium position corresponding to any given fare. Contrast the characteristics of this equilibrium position when the fare which is set relatively “high” and relatively “low”, in terms of number of cabs, income of cab drivers or owners, and any other relevant characteristics of the equilibrium.
  2. [20 points] Summarize briefly the principal contributions to economic thought of the following; indicating their approximate chronological order:
    1. Eugen von Böhm-Bawerk
    2. Leon Walras
    3. Wesley C. Mitchell
    4. Joan Robinson
    5. Irving Fisher
    6. Thorstein Veblen
    7. Francois Quesnay
    8. Johann von Thünen
    9. Antoine Augustin Cournot
  3. V. [20 points] It is argued by some that a permanent program of subsidies to farmers benefits farmers at the expense of the rest of the community. It is argued by others that it benefits no one, but simply imposes a loss on the community as a whole.
    Does the difference between these two reflect an error in analysis or a difference in empirical assumptions? Explain your answer.
  4. VI. [20 points] Keynes and Knight find it necessary to define the “marginal efficiency of capital” or the “rate of return on investment”, as the rate of return that makes cumulated costs equal to discounted returns. Why do they use this indirect procedure of solving an equation instead of the direct procedure used for labor, say, of calculating the rate at which total product changes per unit change in the amount of labor for given amount of the factors of production?

_____________________

ECONOMIC THEORY, PART II

Written examination for the Ph.D. and A.M. Degrees
Winter Quarter, 1953

Write on questions 1, 2, and 1 other.  Time: 2½ hours.

Do not place your name on your paper.  Give only your number.

  1. How are the following concepts related to each other and what role do they play in explaining the level of prices and of national income?
    1. Velocity of circulation
    2. Average proportion of individuals’ wealth held in cash
    3. Average ratio of individuals’ cash to their income
    4. Liquidity preference
    5. Effect of expected change in prices upon cash balances
    6. Effect of the interest rate upon cash balances
  2. What are the relative merits of a national monetary system with free exchange rates, and an international gold standard? Why should not each of the 48 states have its own monetary system?

Answer any one of the following:

  1. Discuss the points of view in the following statement on the decontrol of prices:

What the long-range effect of decontrol will be nobody knows. Some members of Congress say wage increases will now start another inflationary spiral, but others think the country’s productive capacity will effectively control prices unassisted by a tightening of government credit and money policies.

  1. There has been some agitation in recent years for raising the buying price of the U. S. Treasury for gold. What are the arguments in favor of such action? What would be the probable effects on the following countries: Great Britain, South Africa, the United States, Russia?
  2. Outline the outstanding monetary and banking legislation in the United States from 1861 to 1935.

Source: Hoover Institution Archives. Papers of Milton Friedman, Box 76, Folder “76.10”.

Image Source: Social Science Research Building. University of Chicago Photographic Archive, apf2-07490, Special Collections Research Center, University of Chicago Library.

__________________________

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.

 

Categories
Chicago Exam Questions Theory

Chicago. PhD Exam in Economic Theory. Autumn 1946

 

Links to previously posted Chicago prelim exams.

_____________________

ECONOMIC THEORY

Written Examination for the Ph.D. Degree
Autumn Quarter, 1946

Ph.D. Candidates:  4 hours.  Answer all the questions.  Papers will be taken up after 10 or 15 minutes warning.

  1. Define or explain:
    1. Elasticity of Demand; point and arc elasticity; income elasticity; cross elasticity.
    2. Demand curve; utility curve; indifference curve; indifference map; marginal rate of substitution.
    3. Substitution effect and income effect.
    4. Complementary goods.
    5. Real vs. alternative cost.
    6. Price-determined vs. price-determining cost.
    7. Rent and quasi-rent.
    8. Profit.
  2. In what sense and under what conditions (if at all) does cost of production determine price, (a) in the long run, (b) in the short run.(If it never does, explain the fallacy.)
  3. Briefly describe the three or four main contributions (naming the chief author of each) to the development of the concept of capital and theory of interest, beginning with Ricardo and ending with what you consider “correct” doctrine.In each case bring out the relation of capital to other “productive factors” and to money, and that of its yield to other forms of income.
  4. —
    1. Define profit for the purpose of distribution theory.
    2. Discuss the social advisability of a legal limitation, in advance from the beginning, on the rate of return on investment in fields where it is highly uncertain (such as public utilities and explorative and development of natural resources – i.e. single tax).
    3. Comment on the ethics and policy of imposing such a limitation, by regulation or taxation, on enterprises already proven highly profitable.
  5. Discuss the wisdom of the policy described in the following quotation:

“In conversations with gold mining engineers a phrase glibly and frequently repeated is ‘sweetening the ore.’ By this phrase reference is made to the practice of diverting production in profitable periods to the poorer ores and perhaps restricting output in the richer fields. Under this practice the better ores are preserved for periods in which mining costs have risen so that over a long period of time output can be held more steady. Contributing also to a policy of sweetening the ores is the reluctance of producers to install capital equipment in a period in which the tendency is for mining expenses to increase with the general advance of wages and living costs. By the time the equipment is installed it might be expected that wages and price levels would be adjusted to the increased price of gold.”

Source: Hoover Institution Archives. Milton Friedman Papers, Box 76, Folder “76.2 “University of Chicago ‘Economic Theory’”.

Image Source: Detail from the Social Science Research Building. University of Chicago Photographic Archive, apf2-07448, Hanna Holborn Gray Special Collections Research Center, University of Chicago Library.

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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.

Categories
Chicago Columbia Economist Market Economists

Columbia. Background inquiry regarding John Maurice Clark. Seligman, 1925

Apparently what happened in Chicago didn’t have to stay in Chicago, judging from the casual background check on John Maurice Clark seen in the letter sent to the chairman of the political science department there, Charles E. Meriam (Columbia PhD, 1900), by Edwin R.A. Seligman, the executive officer [chairman] of the department of economics at Columbia. It would be interesting to know whether or what the colleagues at Chicago answered. In any event John Maurice Clark was appointed professor of economics as of the academic year 1926-27. I must say November 1925 seems rather late in the game to be making such discrete inquiries. Was Seligman looking to cover his backside or was he looking for evidence to possibly block Clark’s appointment. Under either interpretation, the matter would have been delicate.

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Cast of Characters

The economists have been introduced in other posts here at Economics in the Rear-view Mirror:

John Maurice Clark. …graduated from Amherst in 1905 and received his Ph.D. at Columbia five years later. He taught at Colorado College, Amherst and the University of Chicago before joining the Columbia faculty in 1926. He retired in 1956.

Source: From his obituary in the New York Times (June 28, 1963).
Incidentally, the biographical notes for Clark have incorrect dates for his professorship, but for the sake of completeness I include the link to the finding guide to his papers. Columbia University Libraries, Rare Book & Manuscript Library. John Maurice Clark papers, 1920-1963. Collection Overview.

Image Source: John Maurice Clark. University of Chicago Photographic Archive, apf1-0171.  Special Collections Research Center, University of Chicago Library.

Edwin R. A. Seligman. Columbia A.B. 1879; A.M. 1884; L.L.B. 1884; Ph.D. 1885; L.L.D. 1904. Seligman served on the Columbia University faculty 1885-1931; the Tax Committee of New York City 1914-1916 and of New York State 1929-1931; the League of Nations committee on economics and finance 1922-1923; financial advisor to Cuba in 1931; editor of the Political Science Quarterly and the Encyclopedia of Social Sciences, among many other roles.

Source: Columbia University Libraries, Rare Book & Manuscript Library. Edwin Anderson Seligman papers, 1750-1939. Collection Overview.

*  *  *  *  *  *  *  *  *

Ernst Freund, 1864-1932, was professor of law at the University of Chicago from 1902 to his death. Born in New York City during a brief visit by his German parents, Freund was raised in Dresden and Frankfurt-am-Main. He was educated at the Universities of Berlin and Heidelberg, receiving a Doctor of Law degree from the latter in 1884. Soon after, Freund immigrated to the United States where he practiced law in New York City. In 1892, he expanded his career by accepting a position as acting professor of administrative law at Columbia College. This position sparked an interest in teaching, which led Freund, in 1894, to abandon his law practice in order to accept a full-time appointment on the political science faculty at the University of Chicago as instructor of Roman law and jurisprudence. During his early years at Chicago, Freund pursued a part-time graduate career at Columbia, which awarded him a Ph.D. in political science in 1897.

Ernst Freund played a significant role in the founding of the University of Chicago Law School. William Rainey Harper’s original plan for legal education at Chicago was to integrate a research-oriented institute of jurisprudence into the graduate programs of the university proper. In spite of his interest in political science and jurisprudence, Freund urged Harper to develop instead a professional graduate law school whose standards would surpass those of Harvard and Columbia. It was Freund’s argument that legal research was already being conducted in the Departments of History, Political Science, Sociology, and Political Economy. If the new Law School attracted a quality faculty interested in the teaching of law, a research relationship would naturally develop. Freund’s idea of legal curriculum incorporated traditional methods with a new emphasis on the Law School’s responsibility to the University and community at large. In addition to standard courses, Freund advocated the teaching of constitutional and international law, administrative law, and various courses under the rubric of jurisprudence, which were then being taught in other departments of the University. This curriculum broke with the Harvard plan that stressed more strictly legal subjects which was then accepted as the model for American legal education. In spite of this concept of legal education, Freund turned to Harvard for leadership in organizing the new Law School. He recommended that Harper recruit Harvard’s Joseph H. Beale, one of the foremost legal scholars in the nation, on a two-year appointment to put the new school in order. Beale accepted Harper’s offer only after making it clear that Freund’s plan would have to be modified. The resulting curriculum is described by Frank Ellsworth in his Developments in American Legal Education at the Turn of the Twentieth Century (University of Chicago Ph.D. dissertation, 1976). Ellsworth writes:

By merging the traditional technical insight of Beale with the innovative ideals of Freund, a blend of the traditional and a farsighted curriculum occured and resulted in the first significant effort to liberalize the curriculum in legal education since Langdell’s work at Harvard.

Freund joined the faculty of the new Law School as Professor in 1902. He continued in that position until 1929 when he was appointed the first holder of the John P. Wilson Professorship in Law, a position he held until his death in 1932.

Freund’s career was composed of three basic parts: teacher, scholar, and advisor. In each of these areas, he integrated traditional legal scholarship, augmented by his experience in the German university, with a new emphasis on the interdisciplinary approach to legal education. Freund taught subjects which ranged from administrative law to social legislation and domestic relations. His scholarship rested on such significant contributions as The Police Power: Public Policy and Constitutional Rights (1904) and Standards of American Legislation (1917) for which he was awarded the James Barr Ames medal of the Harvard Law School. Along with these and other major works were numerous articles in the Social Science Review, Labor Legislation Review, and the Political Science Quarterly, which dealt with subjects that ranged from health insurance to illegitimacy. Freund played a major role as advisor to legislative agencies around the United States. He served as commissioner from Illinois to the National Conference of Commissioners on Uniform State Laws. He drafted the act creating the Illinois State Immigrant’s Commission and served as president of the Immigrant’s Protective League. His devotion to these and other social welfare activities led Jane Addams to eulogize him as one who, “never once failed to be sensitive to injustice and preventable suffering.”

Source: Guide to the Ernst Freund Papers 1882-1934. University of Chicago Library, Hanna Holborn Gray Special Collections Research Center.

*  *  *  *  *  *  *  *  *

Charles E. Merriam was a Political scientist and politician. A.B., Lenox College, 1893; A.B., State University of Iowa, 1895. A.M., Columbia University, 1898; Ph.D., 1900. Docent in political science, University of Chicago, 1900-1902; associate, 1902-1903; instructor, 1903-1905; assistant professor, 1905-1907; associate professor, 1907-1911; professor, 1911-1940; chairman, Department of Political Science, 1923-1940; Morton D. Hull Distinguished Professor of Political Science. Chicago alderman, 1909-1911 and 1913-1917. Candidate for mayor of Chicago, 1911 and 1919. Founder, Social Science Research Council, 1924.

Source: Guide to the Charles E. Merriam Papers 1893-1957, p. 8. University of Chicago Library, Hanna Holborn Gray Special Collections Research Center.

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What’s John Maurice Clark really like?… asking for a friend?

[Copy of typed letter]

Also to Professor Ernst Freund

November 4, 1925

Professor Charles E. Merriam,
University of Chicago,
Chicago, Illinois.

My dear Merriam:

            I am taking the liberty of writing to you on a very private and confidential matter and I hope that you will respond in an equally frank and confidential way. The point is this: we are thinking of adding to our corps of professors in the Faculty of Political Science (and we are on the lookout for the biggest man in the United States who is available). One of the two or three men that I have in mind is Maurice Clark, who of course I know very well as an old and excellent student. I want, however, to ascertain a little more about the following points:

1) Is it true, as is sometimes stated, that he is an exceptionally poor teacher and that he does not even interest the best graduate students, for the alleged reason that he is more of a closet philosopher who takes very little interest in human beings?

2) Is it true that he does not pull his oar in the ordinary departmental and faculty work and that he is of a rather non-cooperative disposition?

As to his brilliancy and creative power, I need no advice because those qualities are perfectly familiar to me, and while I am not at all sure that even if your answers to my questions were in the affirmative, those defects would outweigh his qualities, but I do count upon your giving me confidentially your opinion about these matters.

Of course it goes without saying that things are still in the embryo condition and that all I am trying to do now is to get a little more light on the situation so that I can bring it to the attention of my colleagues.

I am by no means sure that even if we should decide that Clark was the right man for us, he could be prevailed upon to leave the place where he is so happy as he is with you, — but all that is in the distant future.

With kind regards,

Faithfully yours,

P.S. Of course you will say nothing of this to anyone else.

Source: Columbia University Libraries, Manuscript Collections. Seligman, Edwin Robert Anderson Collection, Box 37 (Box 100: Columbia 1924-1930).

 

Categories
Chicago Exam Questions Microeconomics

Chicago. Price Theory Prelim Exam. Summer Quarter, 1968

 

Links to previously posted Chicago prelim exams.

___________________________

CORE EXAMINATION

Price Theory
Summer, 1968

Preliminary Examination for the Ph.D. Degree

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.

Answer all questions.  Time: 3 hours.  [Handwritten: Return question sheets with blue books.]

  1. (70 points) Indicate whether each of the following statements is true, false, or uncertain, and explain briefly
    1. The competitive demand for an input to a production process is never more elastic than the demand for the product of the production process.
    2. An ad valorem tax on the sale of gasoline for highway use would produce a more stable flow of revenue for the state than does the (existing) specific tax.
    3. If the growers of oranges increase their own consumption of oranges more than they increase the total output of oranges when orange prices rise, oranges must be an inferior good.
    4. Because a monopolist has no supply curve, one cannot predict the effect of, say, a ten per cent tax on his output.
    5. In designing an investment project, the firm should attempt to maximize the internal rate of return.
    6. It is inconsistent to explain the rise in the price of a security by “heavier buying” and a fall by “heavier selling.”
    7. For an individual, the sum of the income elasticities of demand for all commodities is unity, and similarly, the sum of their price elasticities is zero.
    8. Within a crop season, September to September, it is impossible for the actual June price to be below the actual March price of wheat because of storage costs.
    9. One would expect the price elasticity of demand for food to be lower in poorer countries than in rich ones simply because food accounts for a larger fraction of the budget in the former.
    10. If the marginal product of labor depends only upon the ratio of labor to capital, and similarly with capital, the competitive firm will have constant returns to scale.
    11. No product can have an elasticity of demand of unity throughout its entire range because no one can pay the nearly infinite price for extremely small quantities.
    12. In order that the amount of food marketed by the agricultural sector be inversely related to price, it is required that the income elasticity of demand for non-food items in that sector be increasing with income.
    13. An excise tax collected from the buyer can never differ in its effect from the same tax collected from the seller.
    14. If production occurs under conditions of constant returns to scale, the marginal product of an input always declines as the relative quantity of that input increases, hence short-run marginal cost always increases with increases in output.
  2. Essay Questions [Handwritten: “Part II. Answer all questions.”]
    1. (25 points)
      Ronald Coase has argued, in an important article on “The Problem of Social Cost” that in the absence of transaction costs, there would be no external economies: every one affected by an action would enter a contract to alter the action. Monopoly behavior has external diseconomies: the costs are borne by the customers but the benefits accrue to the monopolist. How, in the absence of transaction costs, would the monopolists and their customers behave?
    2. (30 points)
      Recent federal legislation authorizes a regulatory body to require various changes in automobiles to increase safety. The cost of the requirements for 1967-68 model cars is estimated at $50 to $100 per car, or $500 million to $1 billion in the aggregate.

      1. How will these regulations affect the prices of used automobiles?
      2. Assuming buyers of automobiles act “rationally” and with full information, are there any safety devices that are in the social interest that will not be installed in response to consumer demand?
      3. If automobile producers were made liable for all damages to occupants of automobiles in accidents, would the socially optimum amount of safety be built into automobiles?
    3. (25 points)
      Suppose that the armed forces wishes to recruit a given number of men. One alternative would be to set a wage such that the number of volunteers equaled the number desired. Another way would be to set a lower wage and to draft a number of men equal to the difference between the number wanted and the number volunteering. In the latter case, assume that each person receiving a draft call would be permitted to hire a substitute for himself or to sell himself as a substitute for some other person. Compare these two schemes in terms of the number of personnel secured, the total pay received by the men, and the sources of this pay. Do not concern yourself with either the existing scheme or probable changes therein.
    4. (30 points)
      The English are much concerned about a “brain drain,” that is, the emigration of highly educated workers. Answer the following questions, assuming constant returns to scale.

      1. Is there any difference, in the effects on the per capita income of those remaining behind, between the emigration of a professional worker and the emigration of a non-professional worker who takes an equivalent amount of capital with him?
      2. Suppose one unskilled worker emigrates with £100 (his per capita share of England’s capital). Will the per capita effects be different–on those who remain–than if one-third of the English labor force migrates?
      3. Reverting to the “brain drain,” will it make any difference–to those who remain–whether the education of the skilled emigrants was paid for by themselves or subsidized by the state?
      4. How will the immigration of these workers into the United States affect U.S. skilled and unskilled workers?

Source:  Harvard University Archives. Papers of Zvi Griliches, Box 130, Folder “Preliminary Examinations, 1965-1968.”

Image Source: “The School of Chicago 1972” by Robert Vaughan at theHarvard University Archives. Papers of Zvi Griliches, Box 129. Folder “Posters, ca. 1960s-1970s”.

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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.

Categories
Chicago Exam Questions Theory

Chicago. Economic Theory Prelim Exam. Summer Quarter, 1958

 

Links to previously posted Chicago prelim exams.

___________________________

ECONOMIC THEORY PRELIMINARY EXAMINATION

SUMMER, 1958
AUGUST 1, 1958

ANSWER ALL QUESTIONS

The true-false-uncertain questions, as a group, and the essay questions, as a group, are to be given equal weight in grading the examination.

GROUP I

Indicate in the space provided the correct answer–True (T), False (F), or Uncertain (U). Explain your answer in the space provided on the pages following. Do not write more than can be included in the space provided. [Note: four T-F-U questions fit on a single page]

True (T), False (F), Uncertain (U)

  1. _____ A negative income elasticity of demand implies a positive price elasticity.
  2. _____ The demand curve for leisure is upward sloping.
  3. _____ Steel prices and output usually move together during business cycles. This means that the income effect of a rise in price is greater than the substitution effect.
  4. _____ If the price elasticity of demand is -1.0 each for commodities A and B separately, then the price elasticity of A and B taken together, the price elasticity of the joint demand for A and B, can be higher than -1.0 in absolute value.
  5. _____ When average costs are increasing, marginal costs are also increasing.
  6. _____ Prices that change only rarely constitute evidence of monopoly power.
  7. _____ A proportional income tax will have no effect on occupational choice, while a progressive income tax (same total revenue) does have an effect.
  8. _____ The price elasticity of demand for an input depends mainly upon the elasticity of demand for the final product and the relative share of total costs represented by payments for the specific input.
  9. _____ Inputs A and B are used in the production of the same product. An increase in the price of A (due to a shift in the supply function for A) will result in a decline in the price of B.
  10. _____ If the rate of interest is stable over time, firms may change the ratio of machines to labor.
  11. _____ When the borrowing and lending rates facing a firm differ, a firm may make the appropriate investment decision by maximizing the present value of the firm.
  12. _____ If the amount of capital which a firm can invest is fixed, it will choose the same investment whether it maximizes the average internal rate of return or the present value of the investment.
  13. _____ The long-run elasticity of supply of labor per person (supply measured in hours of work per lifetime) cannot exceed unity numerically.
  14. _____ The white persons who gain the most by market discrimination against Negroes are those with the greatest tastes for discrimination against Negroes.
  15. _____ If a union succeeds in raising wages, it will cause the ratio of the costs of the union labor to total costs to rise.
  16. _____ An effective minimum wage law will tend to cause labor to move out of employments having relatively great net non-pecuniary advantages.
  17. _____ Since the marginal productivity of labor rises as the ratio of capital to labor rises, wages will be higher in industries with high capital-labor ratios than in industries with low capital-labor ratios.
  18. _____ Long-run marginal cost cannot exceed short-run marginal cost.
  19. _____ If the price of wheat in market A is $2.00 per bushel and the cost of transporting a bushel of wheat from market A to market B is $0.10, the price of wheat in market B is $2.10.
  20. _____ If equal percentage changes in labor and land lead to the same percentage change in the output of wheat, and if labor yields increasing average products, the world’s wheat could be grown in a flower pot, if the pot were small enough.

GROUP II

  1. Describe briefly the major contributions of the following economists:

(1) W.S. Jevons
(2) A.A. Cournot
(3) V. Pareto
(4) Irving Fisher

  1. —
    1. The demand function for a product is P = 115-Q. The total cost of producing Q units in one plant is given by
      TC = 40Q – 10Q² + Q³. Only one-plant firms are allowed.

      1. What is the long run competitive solution (price and quantity)? [Handwritten margin note: “…and the number of firms in the industry”]
      2. What would be the approximate price charged and the quantity produced if there was only one one-plant firm and it maximized its profits. (Work only with round figures.) How much profit would it make?
    2. Assume now that a firm may have more than one plant. What is the monopoly solution? [Handwritten addition: “How much profit will it make?”]
  1. The C.E. Company, a mining company, currently operates a commissary at which employees of the company may obtain free of charge a variety of food and clothing items. The amount of each item that an employee may obtain per week may not exceed a specified amount (ration), the same for all employees. The company proposes to close the commissary next month and simultaneously to give the employees an increase in weekly wages equal to half the market value of the ration. The company, learning that you are an economist, has asked you whether the putting into effect of their proposal would increase, decrease, or leave unchanged the real weekly wages of its employees.
    1. Could you give them a definite answer without additional information? Explain.
    2. If your answer to (A) is “no”, what additional information, if any, would enable you to be certain that their proposal would decrease real weekly wages? Would increase real weekly wages? Would leave real weekly wages unchanged? Explain your answers.
  2. A study of the relationship between changes in employment by industry groups and changes in wage rates for the period from 1929 to date in the United States does not reveal a significant positive relationship between the two variables, i.e., larger changes in employment were not associated with larger changes in wage rates.
    Comment on this result in terms of the degree of competition in labor markets and the effect of wage differentials in inducing labor transfers.
    What would have been the implications if there had been a positive correlation between the variables? If there had been a negative relationship?

Source:  Harvard University Archives. Papers of Zvi Griliches, Box 130, Folder “Preliminary Examinations, 1957-1965.”

Image Source: University of Chicago Photographic Archive, apf2-07449, Hanna Holborn Gray Special Collections Research Center, University of Chicago Library.

__________________________

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.

 

Categories
Chicago Exam Questions Microeconomics

Chicago. Price Theory Prelim Exam. Winter Quarter, 1968

Links to previously posted Chicago prelim exams.

___________________________

PRICE THEORY

Preliminary Examination
for the Ph.D. and the A.M. Degree
Winter Quarter, 1968

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

Answer all questions.  Time: 3 hours

  1. Indicate whether each of the following statements is True (T) or False (F), and justify your answer briefly.
    1. ________ Consider a competitive firm’s demand for a factor of production as a function of the factor price for given prices of other factors. In case A, also hold output fixed. In case B, instead hold the price of the product fixed. The elasticity of demand is greater for B than A.
    2. ________ Firms will devote no more resources to accident prevention when they pay the costs of employees injured by industrial accidents than they would if the employees bore the costs.
    3. ________ The demand elasticity for Ford cars is -4.2; the elasticity for Chevrolet cars is -3.0. If Ford’s market share is 1/3 and Chevrolet’s is 2/3, then the elasticity of both brands together is -3.4.
    4. ________ If Congress passes safety legislation outlawing the use of automobiles over 7 years old, in the long run, the number of automobiles on the road will be decreased but the annual purchases of new automobiles will be increased.
    5. ________ Nightclubs often have an admission or cover charge in addition to the price of food or drinks. This implies the absence of marginal cost pricing.
    6. ________ A patent usually entitles the owner of an invention to charge as much as he wishes for the right to use his invention. Hence, a patented cost-reducing invention will not affect the price of the product because the optimal royalty rate will just equal the cost reduction.
    7. ________ A rational person may gamble at unfair odds.
    8. ________ Since we observe that competitive firms operate their plants at a higher rate at business cycle peaks than at business cycle troughs, they must be operating in the range of rising short-run marginal costs.
    9. ________ The recent rise in the postage rate was accompanied by a “shortage” of stamps, providing us with an example of the Giffen paradox.
    10. ________ “Time is money,” hence an invention which decreased the hours required for sleep would lead to a rise in real income as conventionally measured.

II. —

    1. How is it possible for coffee beans of the same brand and same freshness to sell at a higher price per pound than the same coffee ground and canned?
    2. The same typewriter could have recently been bought at $130 from Toad Hall, $125 from Sears under its own label, and for $117 from a mail-order discount house (Monroe). Does this mean that the retail typewriter market is very imperfect?
    3. Some years back, when the Federal campaign against cigarette smoking was beginning, Time reported that “when someone offers a cigarette to pipe-puffing Surgeon General Luther Terry, he always grabs it. ‘Every one I accept I tear up,’ he says. ‘That way there’s one less cigarette.'”
      Analyze the economics of the Surgeon General’s policy. In doing so, assume, of course, that a substantial class of people with similar beliefs behave the same way, so the effect is at least potentially appreciable. Would it contribute to his objective of reducing smoking? If so, through what channels?
  1. Suppose a traffic department enforcing parking regulations in the business section of a large city has a fixed force available to it which means an approximately constant probability p that an illegally parked car will be ticketed. Assume that each person has the choice of parking legally at X dollars per day or illegally, paying a fine of F dollars each time his car is ticketed.
    1. Assume first the sole aim of the traffic department is to discourage illegal parking. Assume that all drivers have constant marginal utility of income and try to maximize expected money income (i.e., minimize their expected loss from parking). What fine F should the traffic department impose on parking in order to achieve its aim?
    2. If all drivers maximized expected utility, had diminishing marginal utility of income, and experienced neither utility nor disutility from obeying the law, how would this affect your answer to a? If they had increasing marginal utility of income?
    3. Suppose the traffic department received all the fines and desired to maximize its expected revenue. How should it set the fine F? Indicate what additional information, if any, it needs in order to do so.
  1. Assume that production functions are Cobb-Douglas of the first degree and that competition reigns. Let there be only two factors, say, labor (L) and capital (C).
    1. What is the Cobb-Douglas form?
    2. Show that the share of wages in the total output is independent of the quantity of labor, and equal to the exponent of labor, say, a.
    3. Let there be one additional worker.
      1. Because wages are equal to marginal product, he gets the whole of what he adds to output.
      2. Yet by (b), labor gets only the fraction a of the additional output.

How do you reconcile (i) and (ii)?

  1. “The exemption of college students from the draft has been attacked as discrimination in favor of middle and upper income classes. Yet a cold-blooded economic analysis shows that in fact it promotes greater equality in the distribution of income, and so benefits the lower-income classes.”
    Provide the “cold-blooded economic analysis.”

Source:  Harvard University Archives. Papers of Zvi Griliches, Box 130, Folder “Preliminary Examinations, 1965-1968.”

__________________________

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.