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Chicago. Reading List for Industrial Organization. Stigler, 1959

 

The following (graduate) reading list comes from Zvi Griliches’ papers at the Harvard University Archives. In structure and content it matches George Stigler’s reading list from the University of Chicago in 1973 previously transcribed and posted, so there is no doubt where and from whom the reading list has come. There are indeed some additions and subtractions between the 1959 and 1973 versions which are indications of how the field evolved over those years, at least in George Stigler’s mind.

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READING LIST
INDUSTRIAL ORGANIZATION
1959

I. The Firm-Structure of Industries

1. The competitive concept in theory and quantitative studies

A. P. Lerner, “The Concept of Monopoly,” Review of Economic Studies, Vol. I
R. Triffin, Monopolistic Competition and General Equilibrium Theory, pp. 125 ff.
J. M. Clark, “Toward a Concept of Workable Competition,” American Economic Review, June 1950 or Readings in Social Control of Business
A. Marshall, Principles of Economics, Bk. V, Ch. 12
F. H. Knight, Risk, Uncertainty and Profit, pp. 76 ff.
E. Chamberlin, Theory of Monopolistic Competition, Ch. 1
G. Stigler, “Perfect Competition, Historically Contemplated,” Journal of Political Economy, 1957
R. Bishop, “Elasticities, Cross-elasticities, and Market Relationships,” American Economic Review, December 1952, June 1955
G. Rosenbluth, “Measure of Concentration,” in Business Concentration and Price Policy
T.N.E.C. Monograph 27, The Structure of Industry, Part 5
T. Scitovsky, “Economic Theory and Measurement of Concentration,” in Business Concentration and Price Policy

2. Some statistical studies

National Resources Comm., The Structure of the American Economy, Ch. 7, Appendix 7
Clair Wilcox, Competition and Monopoly, T.N.E.C. Monograph 21
The Structure of Industry, T.N.E.C. Monograph 27
Berle and Means, The Modern Corporation, Bk. II
G. Stigler, “Competition in the United States,” Five Lectures on Economic Problems
F.T.C., The Concentration of Productive Facilities
A. C. Harberger, “Monopoly and Resource Allocation,”American Economic Review, May 1954
A. D. Kaplan, Big Enterprise in a Competitive System

3. The trend of the structure

T.N.E.C. Monograph 27, Part I
G. W. Nutter, The Extent of Enterprise Monopoly
M. A. Adelman, “Measurement of Industrial Concentration,” in Industrial Organization and Public Policy
F.T.C. Changes in Concentration in Manufacturing, 1935 to 1947 and 1950

II. Factors Influencing Firm-Structures

1. Economies of scale

Cost Behavior and Price Policy, esp. Ch. 10
E. A. G. Robinson, The Structure of Competitive Industry, Ch. 2-7
J. M. Clark, Economics of Overhead Costs, Ch. 5, 6
W. Crum, Corporate Size and Earning Power
J. McConnell, “Corporate Earnings by Size of Firm,” Survey of Current Business, May 1945
J. Johnston. “Labour Productivity and Size of Establishment,” Oxford Institute of Statistics, 1954
R. C. Osborn, Effects of Corporate Size on Efficiency and Profitability
Caleb Smith, “Survey of Empirical Evidence,” in Business Concentration and Price Policy
J. S. Bain, “Economies of Scale, ….” in Industrial Organization and Public Policy
G. J. Stigler, “The Economies of Scale,” Law and Economics, 1958

2. Mergers

F.T.C., The Merger Movement
A. S. Dewing, “A Statistical Test of the Success of Consolidations,” Q.J.E., 1931
S. Livermore, “The Success of Industrial Mergers,” Q.J.E., 1935
A. S. Dewing, Corporate Promotions and Reorganizations, Ch. 20, 21
G. Stigler, “Monopoly and Oligopoly by Merger,” in Industrial Organization and Public Policy
Butters and Linter, “Effect of Mergers on Industrial Concentration,” Review of Economics and Statistics 1950
F.T.C. Report on Corporate Mergers and Acquisitions
J. Markham, “Survey of the Evidence and Findings on Mergers,” in Business Concentration
F. Machlup, Political Economy of Monopoly, pp. 105-17
J. F. Weston, The Role of Mergers in the Growth of Large Firms
G. Stigler, “The Statistics of Monopoly and Merger,” Journal of Political Economy, 1956

3. Raw materials

W. Y. Elliott, ed., International Control in the Non-ferrous Metals, essays on Nickel and Aluminum
E. A. G. Robinson, Monopoly, Ch. 3
R. H. Montgomery, The Brimstone Game, Ch, 4-9
D. H. Wallace, Market Control in the Aluminum Industry

4. Patents

A. Plant, “Economic Theory Concerning Patents for Invention,” Economica, 1934 (also companion article on copyrights)
Proceedings, American Econ. Assoc., May 1948 roundtable on patents
T.N.E.C. Monograph 31, pp. 109-15, 93-103
Seager and Gulick, Trust and Corporation Problems, pp. 280-303
Stocking and Watkins, Monopoly and Free Enterprise, Ch. 14
R. MacLaurin, “Patents and Economic Progress,” J.P.E., 1950

5. Taxation and tariffs

D. H. MacGregor, Industrial Combinations, pp. 127 ff.
Linter and Butters, “Effects of Taxes on Concentration,” in Business Concentration
T.N.E.C. Monograph No. 10

6. Unfair Competition

J. S. McGee, “Predatory Price Cutting,” Law and Economics, 1958

III. The Effects of Concentration

1. Collusion

R. B. Tenant, The American Cigarette Industry
W. Fellner, Competition Among the Few
W. Nicholls, Imperfect Competition Within Agricultural Industries, pp. 120-130
F. Machlup, Economics of Sellers’ Competition, Ch. 13

2. Prices

a. Discrimination

Burns, Decline of Competition, pp. 272-372
N.I.C.B., Public Regulation of Competitive Practices, pp. 63-85
J. P. Miller, Unfair Competition, Ch. 7-9
J. Robinson, Economics of Imperfect Competition, Bk. V
F. Machlup, The Basing Point System
J. M. Clark “Basing Point Methods,” Canadian Journal of Economics and Political Science, 1938
F.T.C., Price Bases Inquiry
T.N.E.C. Monograph 42
G. Stigler, “A Theory of Uniform Delivered Prices,” A.E.R. 1949
C. Kaysen, “Basing Point Pricing and Public Policy,” in Industrial Organization and Public Policy

b. Rigidity

G. Means, Industrial Prices and their Relative Inflexibility
Burns, Decline of Competition, Ch. 5
E. S. Mason, “Price Inflexibility,” Review of Economic Statistics, 1938
T.N.E.C., Monograph No. 1
Sweezy and Stigler, Articles in Readings in Price Theory
A. C. Neal, Industrial Concentration and Price Inflexibility
Machlup, Economics of Sellers’ Competition, Ch. 14

3. Profits

J. S. Bain, “The Profit Rate as a Measure of Monopoly Power,” Q.J.E., 1941
R. C. Epstein, Industrial Profits in the United States
J. S. Bain, “Relation of Profit Rate to Industry Concentration,” Q.J.E., August 1951

IV. Topics in Industry Behavior with Oligopoly

1. Advertising

E. Chamberlin, Theory of Monopolistic Competition, Ch. 6-7
N. Buchanan, Advertising Expenditures, J.P.E. 1942
N. Kaldor, “Economic Aspects of Advertising,” Review of Economic Studies, 1950

2. Vertical Integration

Smith, Wealth of Nations, Bk. I, Ch. 3
Marshall, Principles of Economics, Bk. IV, Ch. 10-13
A. Young, “Increasing Returns and Economic Progress,” E.J. 1928 (and in Clemence’s Readings in Economic Analysis 2 Vols.)
J. Jewkes, Factors in Industrial Integration, Q.J.E., 1930
S. Dennison, Vertical Integration and the Iron and Steel Industry, E.J. 1939
A. R. Burns, Decline of Competition, Ch. 9
Stigler, “Division of Labor is Limited by the Extent of Market,” J.P.E. 1951
M. Adelman, “Concept and Measurement of Vertical Integration,” in Business Concentration and Price Policy

3. Schumpeter’s Theory

Schumpeter, Capitalism, Socialism and Democracy, Ch. 7-8
K. Boulding, “In Defense of Monopoly,” Q.J.E., 1945
D. H. MacGregor, Industrial Combination, Ch. 12
G. Stigler, “Industrial Organization and Economic Progress,” in State of the Social Sciences.

V. Large Number Industries

1. Cartels

Stocking and Watkins, Cartels in Action, Ch. 4-11
Stocking and Watkins, Cartels or Competition, Ch. 3-7
C. Edwards, Economic and Political Aspects of International Cartels
Ben Lewis, Price and Production Controls in British Industry
A. F. Lucas, Industrial Reconstruction and the Control of Competition
R. Michels, Cartels, Combines and Trusts in Post-War Germany
R. Liefman, Cartels, Concerns and Trusts
C. Wilcox, Public Policies Toward Business, Ch. 16

2. Trade Associations

V. Mund, Government and Business, Ch. 11
Burns, Decline of Competition, Ch. 2
T.N.E.C. Monograph No. 18
H. Levy, Retail Trade Associations
Stocking and Watkins, Monopoly or Free Enterprise, Ch. 8, 10, 11

3. Retailing: Resale Price Maintenance

W. Bowman, “Prequisites and Effects of Resale Price Maintenance,” University of Chicago Law Journal, 1955
E. Grether, Price Control under Fair Trade Legislation
F.T.C., Resale Price Maintenance
W. Bowman, “Resale Price Maintenance,” Journal of Business, 1952
Mund, Government and Business, Ch. 21, 22

4. Government Cartels: Agriculture and Coal

W. Wilcox and W. Cochrane, Economics of American Agriculture Part VI
Readings on Agricultural Policy, Part II
C. Wilcox, Public Policy Toward Business, Ch. 15-16

VI. Anti-trust Policy

1. Early History

J. D. Clark, Federal Trust Policy
W. H. Taft, The Anti-trust Act and the Supreme Court
V. Mund, Government and Business, Ch. 10, 15, 16
H. B. Thorelli, The Federal Antitrust Policy

2. Major Dissolutions

E. Jones, Trust Problem in the United States, Ch. 18
Hale, “Trust Dissolution” in Columbia Law Review, 1940
W. S. Stevens, Industrial Combinations and Trusts, Ch. 14-15
S. Whitney, Antitrust Policies, 2 Vols.

3. Law of Conspiracy

U.S. v. Trenton Potteries, 273 U.S. 392 (1927)
F.T.C. v. Cement Institute, 68 Sup. Ct. 793 (1948)
M. Handler, T.N.E.C. Monograph 38
Report of Attorney-General’s National Committee on the Anti-trust Laws

4. Recent Decisions

U.S. v. Columbia Steel, 334 U.S. 495 (1948)
U.S. v. Aluminum Co., 148 F. (2nd) 416 (1945), 91 Fed Supp. 333 (1950)
Standard Oil v. Fed. Trade Comm., 71 Sup. Ct. 240 (1951)
E. H. Levi, “The Anti-trust Laws and Monopoly,” University of Chicago Law Journal, 1947
Economic Consequences of Some Recent Anti-trust Decisions, A.E.R., May 1949

5. Foreign Policy

F. A. McGregor, “Preventing Monopoly, — Canadian Techniques,” in Monopoly and Competition and their Regulation ed. by E. Chamberlin
C. D. Harbury and Leo Roskind, “The British Approach to Monopoly Control,” Q.J.E., 1953
M. Cohen, “Canadian Anti-trust Laws,” Canadian Bar Review, Vol. 16 (1938)
L. Reynolds, The Control of Competition in Canada
J. Jewkes, “British Monopoly Policy, 1944-56,” Law and Economics, 1958

6. Some Proposals and Issues

H. Simons, Economic Policy for a Free Society, Ch, 2, 3, 4.
C. Edwards, Maintaining Competition, esp. Ch. 4-8
The Sherman Act and the Enforcement of Competition, A.E.R., May 1918
Mund, Government and Business, Ch. 20, 24
S. C. Oppenheim, “Federal Antitrust Legislation,” Michigan Law Review, June 1952

Source: Harvard University Archives. Papers of Zvi Griliches, Box 130, Folder “Syllabi and exams, 1955-1959”.

Image Source:  George Stigler (1960). University of Chicago Photographic Archive (apf1-07960). Hanna Holborn Gray Special Collections Research Center, University of Chicago Library.

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Chicago Exam Questions

Chicago. Final exam for Economics 301, Price Theory. Telser, 1965

 

Chicago Price Theory boils down ultimately to a series of True-False-Uncertain examination questions. One of Lester Telser‘s contributions to the stock of questions comes to us from the Zvi Griliches’ papers at the Harvard Archives. A steady diet of this stuff would make for a dull economist in my opinion, but it was force fed to generations of Chicago economists, and many somehow survived to have productive (in a good sense) professional careers. Hence another important historical artifact that has earned digitization by Economics in the Rear-View Mirror.

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UNIVERSITY OF CHICAGO
DEPARTMENT OF ECONOMICS
Final Exam

Economics 301
Autumn, 1965

Mr. L. Telser
Time: 2.5 hours

Answer the following questions, true, false or uncertain and briefly defend your answer.

  1. An increase in the demand for the product of a monopoly results in a rise in the price of the product.
  2. If the supply schedule of an industry is perfectly elastic then the production function for the industry is characterized by constant returns to scale.
  3. A monopoly can never have a larger output and lower price than a competitive industry assuming that cost conditions would be the same for both.
  4. No one would resort to the cultivation of inferior lands if he did not run into diminishing marginal returns on fertile land. Since inferior lands are in cultivation, diminishing returns must be present.
  5. If there are empty seats on a train then marginal cost pricing requires that new passengers should ride free.

The following two questions require essay answers.

  1. The margin in stock trading is the fraction of the price of the stock which the trader must supply and the balance is lent to the trader by the broker. Hence the margin represents the trader’s equity and is analogous to a down payment. Assume there is no government regulation of the margin and that brokers are free to set any margin they please and to charge any interest rate they please on the loan they extend to traders. Assume there is perfect competition in the brokerage industry.
    1. Would you expect margins to be higher during periods of “active” speculation?
    2. Would you expect higher margins when stock prices are rising then when they are falling?
    3. Would a rise in the interest compensate for or be equivalent to a rise in the margin?
  2. In the theory of the household demand for perishable goods, for a given money income there is a fall in real income if the price of some good rises. The pure substitution effect is the effect on quantity demanded of a price change for constant real income. In the case of durables households own stocks of durables. Hence a rise in the price of durables causes the value of the stock of consumer owned durables to appreciate. Hence a price rise of perishable reduces the demand for perishables if money income is given and the income elasticity is positive while a price rise of durables increases the demand because it implies a rise in consumer wealth if the wealth elasticity of demand is positive.
    1. What are appropriate budget constraints for the demand for durables?
    2. Is the last statement beginning with “HENCE …” correct?
    3. Would it make a difference if the durable good had a fixed life or if it lasted forever?
    4. What are the counterparts of constant real income in the demand for durables?

Source: Harvard University Archives. Papers of Zvi Griliches. Box 130, Folder “Syllabi and exams, 1961-1969”.

 

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Chicago Exam Questions Suggested Reading Syllabus

Chicago. Course outline, readings, examination for introduction to econometrics. Marschak, 1949

The following course material was transcribed from copies found in Franco Modigliani’s papers at the Economists’ Papers Archive in the David M. Rubenstein Rare Book & Manuscript Library of Duke University. These items are also available in a scanned .pdf file at the Cowles Foundation website at Yale. Modigliani’s original mimeographed copy is for the most part much more legible than the on-line scanned copy at the Cowles Foundation. This is particularly true for the “terminal examination” questions. Over forty pages of typescript for the lectures are also found in the original Cowles Commission Discussion paper.

More on Jacob Marschak can be found in Robert W. Dimand’s “Keynesian Economics at the Cowles Commission” (Review of Keynesian Studies, vol. 2, 2020, pp. 22-25).

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J. Marschak. INTRODUCTION TO ECONOMETRICS
Economics 314
Spring 1949.

314. Introduction to Econometrics: Statistical testing of economic theories. Numerical estimation of demand and cost functions and other functions occurring in the theory of the firm and household, the theory of markets and the theory of national income. Estimation of economic models. Statistical prediction under conditions of changing economic structure and policy. Prerequisites: Econ 310, 311, 312 or equiv. Win [sic] TuTh 3-4:30; Marschak.

Source: University of Chicago.The College and the Divisions, Sessions of 1948-1949. In Announcements Vol. XLVIII (May 25, 1948) No. 4, p. 250.

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INTRODUCTION TO ECONOMETRICS
20 Lectures given at the University of Chicago in Spring, 1949*

Cowles Commission Discussion Papers, Economics: 266

[*To be used jointly with 24 Lectures (same title) given at the University of Buffalo in Spring, 1948.]

Part I. Non-stochastic economics [11 lectures]

  1. Best policy. Goal variable; non-controlled, controlled, strategic variables.
  2. Exogenous variables and structural parameters. Types of prediction.
  3. Determining the structure from theory and data.
  4. An example.
  5. Econometric “pitfalls” due to disregarded variables or relations. Non-idenifiable structures.
  6. [continued]
  7. The identification, continued
  8. Why does the identification problem arise in non-experimental sciences?
  9. Discussion of earlier problems.
  10. Discussion of earlier problems. [continued]
  11. When need we know the structure?

Part II. Stochastic economics: Population properties [8 lectures]

  1. Joint distributions, non-parametric.
  2. Mid-term examination.
  3. Parameters of joint distributions.
  4. Least-squares property of coefficients of linear regression. Properties of normal distributions.
  5. Exogenous and endogenous variables in stochastic economics.
  6. Identification and determination of structure by the method of reduced form: examples.
  7. More examples.
  8. Motion of an economic variable. Dynamic models. The assumption of independent successive disturbances and its implication.

Part III. Stochastic economics: Sample properties [1 lecture]

  1. Useful properties of certain least squares and maximum likelihood estimators. Obtaining maximum likelihood estimates of structure from those of reduced form.
Recommended reading.
Attached Materials**

J. Marschak, “Economic Structure, Path, Policy and Prediction”

__________, “Statistical Inference from Non-Experimental Observations—an Economic Example”

G. Hildreth, “Problems in the Estimation of Agricultural Production Functions”

[**As far as available.]

*     *     *

READING MATERIAL TO BE USED IN COURSE ON INTRODUCTION TO ECONOMETRICS,
SPRING QUARTER, 1949

  1. Allen, R. G. D., Mathematical Analysis for Economists.
  2. American Economic Association, “Survey of Contemporary Economics” (Blakiston Co., 1949).
  3. Haavelmo, T., “The Probability Approach to Econometrics” (Supplement to Econometrica, 194) .
  4. Haavelmo, T., “Quantitative Research in Agricultural Economics,” Journal of Farm Economics, Vol. 29, No. 4, November, 1947.
  5. Girshick, M. A., and T. Haavelmo, “Statistical Analysis of the Demand for Food,” Econometrica, Vol. 15, No. 2. April, 1947.
  6. Klein, Lawrence R., “The Use of Econometric Models,” Econometrica, April, 1947.
  7. Haavelmo, T., “Methods of Measuring the Marginal Propensity to Consume,” Journal of the American Statistical Association, March, 1947.
  8. Klein, Lawrence R., “A Post-Mortem on Transition Predictions,” Journal of Political Economy, August, 1946.
  9. Marschak, J., L. Hurwicz, Abstracts of papers: Econometrica, April, 1946, pp. 165-170.
  10. Koopmans, T., “Statistical Estimation of Simultaneous Economic Relations,” Journal of the American Statistical Association, Vol. 40, December, 1945.
  11. Marschak, J. and William H. Andrews, “Random Simultaneous Equations and the Theory of Production,” Econometrica, Vol. 12, No. 3-4, July-October, 1944.
  12. Marschak, J., “Money Illusion and the Demand Analysis,” The Review of Economic Statistics, 25, February, 1943.
  13. Marschak, J., “Economic Structure, Path, Policy, and Prediction,” American Economic Review, Vol. 37, May, 1947, pp. 81-84. Lil.
  14. Marschak, J., “Statistical Inference from Non-Experimental Observations,” Econometrica, January, 1948, p. 53.
  15. Hurwicz, L., “Some Problems Arising in Estimating Economic Relationships,” Econometrica, Vol. 15, July, 1947.
  16. Tinbergen, J., “Business Cycles in the U.S.A. 1919-1932” (Statistical Testing of Business-cycle Theories. II), League of Nations, Geneva, 1939.
  17. Koopmans, T., “Measurement without. Theory,” Review of Economic Statistics, 29, August, 1947.

*     *     *

J. Marschak.
INTRODUCTION TO ECONOMETRICS
Economics 314, Spring 1949.

Terminal Examination

Note: Try to answer all 4 problems first, omitting the questions (III) in problems 1 and 4. Answer the questions (III) if time remains.

Problem 1. The quantity x and the price p of a perishable farm product (each measured from its population mean) are determined as in the following model (subscripts indicate time):

(1.1) Demand: xt = αpt + ut

(1.2) Supply: xt = βpt-1 + ut

(1.3) The disturbance ut is not autocorrelated; nor is vt.

Show

(I) How to estimate α for a long time series.

(II) What other structural parameters are present?

(III) (If time remains): How would you estimate those other parameters?

Problem 2. The model of the previous problem is modified as follows:

(2.1) Demand: xt = αpt + ut  (ut not autocorrelated)

(2.2) Price fixation: p_{t}=p^{\ast }_{t} , a level fixed every year by decree.

Show

(I) How to estimate α and σuu?

(II) Is the estimate of α the same as in the previous problem?

Problem 3. National income y, consumption c, and annual (saving) investment i are all measured in dollars of constant purchasing power, and

(3.1) c = αy + β + u ;

(3.2) E(u);

(3.3) i = y – c (an identity);

(3.4) i is exogenous.

(I) Show how to estimate α, β, σuu from a long time series of data on y, c, i.

(II) Suppose y, c, i denote the income, consumption and saving of an individual family which can control its savings but not its income. How does this modification affect the model and the estimation procedure from a time series of family data, or from a survey of a large number of families?

Problem 4. A survey of very large number T of firms belonging to the same industry but located in places with different wage-rates w1, …, wT has been made. The price p of the product is the same for all firms. Wage-rates and price are fixed independently of the firms’ action. The output Xt of each firm depends on labor used only, Nt, according to the formula

(4.1) {X_{t}=B_{t}N^{A}_{t}}C , t = 1, …, T

(the elasticity A being the same for all firms.) Hence,

(4.2) xt = bt + Ant, t = 1, …, T

where the small letters (except for t) stand for the logarithms. Further assume that each firm pushes its output to the point where, apart from a random deviation, the ratio \left( w_{t}/p\right)  \equiv R_{t} equals the labor’s marginal product,

(4.3) Rt = (dXt/dN)⋅Ct, t = 1, …, T

where Ct is a random percentage deviation. Hence

(4.4) Rt = R_{t}=AN^{A-1}_{t}\cdot B_{t}C_{t} , t = 1, …, T

(4.5) rt = a + bt + ct + (A-1)nt, t = 1, …, T,

where again small letters indicate logarithms.

Questions:

(I) How to estimate A?

(II) What other structural parameters are present?

(III) (If time remains): How to estimate those?

Source: Duke University. David M. Rubenstein Rare Book & Manuscript Library. Economists’ Papers Archive. Franco Modigliani Papers, Box T1, Folder “Jacob Marschak’s Courses, 1940-1949.”

Image Source: Carl F. Christ. History of the Cowles Commission, 1932-1952

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Chicago Funny Business

Chicago. The Journal of Progressive Hedonists Against Radical Thought (P.H.A.R.T.), Rodney Smith & Roger Vaughan, 1971

During the first year and a half of their graduate studies in economics at the University of Chicago in the 1970s, Rodney Smith and Roger Vaughan collaborated in the publication of the (Monty Phython inspired) satirical Journal of Progressive Hedonists Against Radical Thought (a.k.a., P.H.A.R.T.). Smith and Vaughan came to Chicago from UCLA and Oxford, respectively, and clearly shared a common sense of smell. Both later worked as economists at the RAND corporation. Roger Vaughan was responsible for pen-and-ink artwork which will be featured in a later post. He passed away in October 2021, but Rodney T. Smith is alive and well, President of the economics and strategic planning consulting firm Stratton Inc.

The second issue of the Journal of P.H.A.R.T. transcribed for this post was found in Milton Friedman’s papers at the Hoover Institution.

Request: if any visitors to Economics in the Rear-view Mirror have a surviving copy of other issues of the journal or of Roger Vaughan’s Chicago artwork, please let it be copied/transcribed and/or posted here for the benefit of future generations of economists yet untrained.

_____________________________

Vol. 1, No. 2   May, 1971

P.H.A.R.T. EDITORIAL

Mother Apathy, blindfold across both breasts, was aroused, albeit temporarily, when it was announced recently that the dynamic new publication ‘P.H.A.R.T.’ (whose first edition is already a collectors’ item) had engulfed the revered, but aging, ‘P.E.C. Notes’. From the autumn of 1971, a spokesman said, both journals would be published jointly under the P.H.A.R.T. banner. The entire publishing world, normally oblivious to news worth printing, was thrown into confusion. Exclaimed a Time-Life editor, “I’m padlocking my staff to their desks by their private parts!”

Wall Street reacted with typical concern. Both P.H.A.R.T. shares changed hands many times, but speculation was terminated when the purpose of the flimsy pieces of paper was misunderstood and they were flushed into the Hudson.

Smiled a P.H.A.R.T. staffer from his tax-deductible air mattress in sun drenched Lake Michigan, “Anyone who can print the kind of *%¢#$* that we do, is bound to succeed in a place like the Economics Department.

Comparison with Hugh Hefner’s Empire is obvious, a comparison which seems even closer in light of P.H.A.R.T.’s intention of running a pull-out center-fold of economics books without covers.

Certainly the new combined journal should prove to be a bright super-nova in the Gutenberg Galaxy.

P.H.A.R.T. INTERVIEWS

Chicago Charlie: In this issue we are honored to have a pleasantly in depth interview with an obscure, but nevertheless vital, member of the economics community, an economics groupie. We all know that surfers are followed by beach bunnies, musicians are plastered by groupies, but few of us are aware that economists have their own followers who admire them for their abstractions. Enough of such preliminaries. Let’s get it on. How long have you been an economics groupie?

Economics Groupie: I was a know-nothing college dropout until I, sort of, wandered into this economics class and saw this guy draw this groovy diagram. Minutes later I was the virtuous path of abstraction wherein what I adored was emphasized, and what I abhorred was forgotten. Like, nobody else would have me.

C.C.: Very interesting. Which abstraction really turns you on. I mean, what do you really hold near?

E.G.: What to, duckie? I cherish the nominal versus the real distinction; compensated versus uncompensated elasticities, and market versus non-market activities.

C.C.: A strange collection. What exactly do you mean by the latter?

E.G.: Man, like sometimes it’s a drag to hurl my bod on the market just to get what the traffic will bare. Non-market activity can be really heavy, like just getting an economics biggy to fondle my copy of Smith’s ‘Wealth of Nations’, I mean….

C.C.: Thank you. Have you ever had any bad experiences… that is, as an economics groupie?

E.G.: Yes; whenever I attend conventions, like five people on the same abstraction…

C.C.: Who are your favorite personalities?

E.G.: Friedman’s money, Lewis’ labor, Becker’s fertility, Harberger’s compensated triangles, Chez’s jiggles, Nerlove’s heteroscedasticity, Johnson’s distribution, Zecher’s….

C.C.: Really! Familiarity breeds contempt!

E.G.: No, baby, just frustration.

C.C.: Well, I must draw this interview to a close.

E.G.: Regretfully, we never started.

 

P.H.A.R.T.’s NEWS IN BRIEF

Boston: Following on the immense commercial success of rock musicals ‘Hair’ and ‘Tommy’, the songwriting team of Samuelson and Solow is rumored to be working on a rock opera based on the formers’ best selling ‘Foundations of Economic Analysis’. The star part of ‘Negative Semi-Definite Matrix’ is rumored to be played by Samuelson himself, but speculation is rampant concerning the famous nude scene in which cross-elasticities emerge, bare to the world, from the matrix determinant.

Chicago: The long held belief that all economists orbit around Chicago was cast into serious doubt, when, with the aid of powerful econometric telescopes, at least 200 economists were observed going ‘round in circles in the Boston area. “We are submitting the model builder to close questioning”, said a spokesman for the Chicago Inquisition. “I think we can show that these so-called observations were: (a) never made, and (b) not ‘proper’ economists anyway.”

New York: Although much doubt has been cast on the ‘as if’ approach to economic theology, Chicago feels it has, at last, come up with vindication for its views. After experimenting with several hundred dogs on the top of the brand new Trade Center, a Chicago scientist reported, “After we held each dog some five feet from the parapet, every single canine behaved as if they fully understood the Newtonian laws of gravity.” Surveying the pulp-covered street, he added, “That’s exactly the kind of empirical data we like to build on.”

Houston: Initial reports on analysis on moon rock samples brought back by Apollo 11, 12, and 14 confirm the fact that the moon is made of money, spokesman announced here today. “At first glance”, he read from a prepared statement, “they appear to be 19th century British gold sovereigns, with a picture of Milton Friedman and the inscription ‘Veni, Vidi, Vici.’”

London: The real purpose of the American policy of benign neglect towards international payments, masterminded by Harvard’s Gottfried Haberler became evident today when an English postman reported being molested by “A kind of satan-like figure, with an American accent, shouting something about my soul and throwing dollars everywhere”. Under separate questioning, the Federal Reserve admitted to attempting to buy the world and promised that next time, its agents would behave with more discretion and dignity.

Philadelphia: The following rumor, entirely unsubstantiated by P.H.A.R.T. foreign correspondent in Philadelphia, is circulating concerning famed British economist, Sir Roy Harrod. It appears that Sir Roy, unadjusted to the American matriarchal society was accustomed to addressing a sexually integrated class at the University of Pennsylvania, as “Gentlemen”. As attendance dwindled he was faced one day with an entirely female class. He gazed around for a few seconds, and then left muttering, “Since there is no one here, I shall not lecture”. Norman Mailer, eat your heart out.

 

P.H.A.R.T.’s LIVES OF THE GREAT ECONOMISTS

In a bold attempt to instill in economists a sense of pride in the historical development of their discipline, P.H.A.R.T, brings you, in each issue, a brief sketch of one of the giants upon whose shoulders we stand.

Crasso the Greek (? – 410 BC)

It is fitting that the first reference we have to this great economist occurs in the poetry of Obesia, the Fat-Woman of the caves, in those oft-quoted lines.

“The hills are alive with the sound of Crasso,
As he and his acolytes perform the dance of the drachma.”

Already the young Crasso, and his ‘Crassic’ followers were famous for running naked into holy shrines and leaving the walls covered in ‘graphiti’ (or graphs) illustrating some of the new concepts they had discovered. It is to this early period that the world owes the famous Crassic doctrines.

“When prices rise, things tend to become more expensive.”
“What lays ahead of us is in the future.”

Little else is heard of Crasso until he sprung to fame when called to the service of the King of Sicily to fight a serious outbreak of inflation. He successfully stemmed the fearsome tide of price rises by offering 21,000 warm chicken livers to the God, Hypa (a method, incidently, the Federal Reserve is currently considering). His triumph was short lived and as serious food poisoning decimated the population, popular feeling ran against him and he was forced to dust his naked body with flour and escape disguised as a statue.

He moved to Lydia where he perfected a technique of depicting, with amazing clarity, small cameo-like pictures of unequalled pornography on round pieces of metal. His art work became immensely popular, and although known deprecatingly by the Greeks as “Khoynos Pornos” (Foreign Filth) they circulated in Crasso’s native land and became popularly known as Khoyns.

Immensely wealthy, he returned to his native Corrinth idling his time gambling on the innumerable Greco-Persian wars, and was bankrupt when he offered 100 to 1 on Persia at Salamis.

He never again achieved his former glory, and in spite of nearly discovering the formula for the velocity of money, inventing, during hard winter, the concept of a wages freeze, and writing a prodigious number of strange tracts he moved slowly downhill. He gave one or two guest lectures, but was jeered from the podium when he spoke, with missionary zeal, of money floating down from the heavens. He is last recorded as the tragic model for Thucydides’ description of the effects of the plague during the Peloponnesian Wars.

P.H.A.R.T. MISCELLANY

As Others See Us

(From Berman’s ‘The Underground Guide to the College of Your Choice’.)

“The graduate school here (Chicago) is the old apprenticeship type of learning. The difference between the University of Chicago and other universities is like the difference between English Justice and French Justice — at other universities the professors consider you innocent of stupidity until you prove otherwise while here you are presumed guilty of stupidity until you prove yourself innocent.”

* * *

We hope, in each issue, to bring you some of the ‘bon mots’ that are the obvious concomitant of a concentration of high powered minds.

Stigler: “The government take-over of the railways is a vain and abortive attempt to make the post office look efficient.”

Johnson (H.G.): “When a professor leaves M.I.T. for Harvard, the average intelligence in both places rises.”

Samuelson: “If you take a 15 trillion year plan, then the theorem is correct.”

* * *

P.H.A.R.T. would take great privilege in awarding its most treasured prize, a corroded plastic waterbed, to all those sophisticated individuals who manage to reduce student-faculty visits to informal economics seminars. At the risk of belaboring the obvious, P.H.A.R.T, would like to announce, that:

(a) the esoteric economic pun is the lowest form of humor;

(b) there just may be someone in the room who is less than enthralled by the ability to play ‘Obscure-Journal-Article-Snap’ with all comers:

(c) the breath-taking account of how to take-apart a speaker, complete with a 20 minute digression of ‘statistical- discrepancies-I-have-seen-through’, should be saved for the autobiography.

It takes considerable ignorance to assume that everyone present is fascinated by economics 24 hours a day. Those who do have nothing else to talk about should try not to see it as a virtue. A more comprehensive ‘weltanschauung’ would make brighter living.

It was not clear, when the fire and smoke-laden Delphic rumblings had passed, whether or not the Nobel Laureate had actually said anything. After following the pillar of fire around the campus like the children of Israel, the Economics Department received a ‘lecture’, an experience not unlike speed reading a Dictionary of Quotations while being assaulted by a poorly-programmed 360. The quality of evening speakers this year has rarely risen above the esoteric. To quote Leijonhuvfud: “If this is how economics develops — where will it end?”

* * *

P.H.A.R.T. REVIEW OF BOOKS

In response to our previous reviews, readers submitted the following:

The Sensuous Criminal, by G.G. (Alcatraz, 1971) . Discusses in frank, no-nonsense language, the implications of over fifty Neuman-Morgenstern utility functions for criminal behavior. Explains why criminals with Moebius-strip utility functions usually get caught; why most extortionists have homogeneous-of-degree-less-than-one time preference functions; and many, many more. J. Edgar Hoover loved it — you will too. yours for only U= a + bI dollars!

The Godfather (A Story of Money, Interest, and Prices), by Donaldo Patinkini (Extortion Press, 1971). An inside man reveals the true interworkings of a powerful group of variables. Gives a detailed but chilling analysis of how inept government has allowed the Ma Fed to extract millions from society through monetary control.

The Holy Bible (The King Milton Version) Heavenly Press, 1971. In the beginning God created money. That took 6 days, on the 7th day he rested, and so nothing else matters.

 

P.H.A.R.T. CONTRIBUTIONS TO ECONOMIC THOUGHT

A Scatological Theory of Nominal Income*

Few things stand the economics profession in such shame than the narrowness of the treatment accorded to the determination of nominal income. The intensity of the Keynesian/Monetarist debate has obscured the more fundamental limitations of the logical possibilities examined.

It is the contention of this paper that this entire debate is hollow, and it is to the agricultural sector and the determinants of the demand for guano1 that we must look for any truly logical transmission mechanism. In Section 1 of this paper, below, the basic model for the determination of income is outlined, while Section 2 examines some of the implications for the American economy today.

Section 1: The Model

The rapid pace of industrialization in England has long proved a fertile hunting ground for the economist anxious to achieve tenure. Weber blamed it on the Church, Marx on the greedy bourgeois, McLuhan on the printing press, and Rostow argued that take-off was a result of take-off. Few have linked the unbinding of the industrial Prometheus to the discovery of guano deposits in Peru by strong-stomached British sailors in the first half of the 19th century.

Consider the fundamental identity,

Q= k Sh. Y

where Q is the quantity of agricultural output, Sh. is the quantity of soil nutrients, and Y is the quantity of land. It should be obvious that an increase in Sh., holding Y and k constant, will increase Q.2 It is not for nothing that the favorite Anglo-Saxon toast has come to be: “May the Bird of Paradise add nutrients to your soil.”

Neither is it a coincidence that British development should slow adown disastrously in the later 19thcentury when this supply dried up, and the wily Peruvians, under a seagull dictator, clamped a high tariff on this most valuable of bowel-movements.

Section 2: Post Guano Ergo Propter Guano?

It is only recently that the amazing correlation between the depth of guano deposits and the rate of growth of real output has received the attention it richly deserves. Since it avoids the quagmire of nominal and real debates, so long the bane of monetarism, the Federal Reserve has recently taken to publishing guano depth-counts taken at strategic points along the New England coast, and is currently contemplating setting up manure counting stations (M1 and M2) in. Nebraska and New Jersey. However, much pseudo-scientific pressure is levelled against this approach by economists who should know better, and there has been not a little reluctance to admit to using it. Few people, in fact, realize that the oft-repeated ‘1065’ figure was, in fact, the depth to which a now-famous aide to the budget supervisor sunk (in millimeters)3 when supervising one the first ‘counts’.

The theory leads to some important policy regulations:

(1) The removal of the welfare distorting Regulation P, by which a 10¢ surcharge is levelled on guano booths throughout the country.

(2) The conversion of banks into mere guano warehouses, to act as receptacles for such deposits and withdrawals, with a 100% reserve requirement.

(3) The automatic issuing of Feen-A-Mints with food stamps.

(4) The regulation of the guano growth rate to a fixed 5% per annum by an intensive, federally sponsored, seagull training program.

(5) The appointment of seagulls to replace Connally, Schultze, and Nixon to engender a harmonious, non-political environment in which to stabilize the economy.

It is hoped that this analysis proves a fertile hunting ground for the development of economic theory.

*The original idea was suggested by John Graffiti, although the author accepts all credit for the penetrating analysis. The future of 5 assistants is inextricably entwined with any potential faults.

1 Guano (Spanish). Literally, “the food from the heavens” or, more colloquially, “birdshit”, (Ed.).

2 For this proof, the author is indebted to a small, but persistent, Lake Michigan seagull.

3 Believed to proximate the distance from his feet to his neck, (Ed.).

 

P.H.A.R.T. PUZZLE CORNER

Answers to last issue’s questions:

  1. (a) False

(b) Uncertain. Such activity would involve income redistribution from bakers to hens.

(c) False. 1.5976 is, of course, the nominal number of students, which would be about 0.002 in real terms.

(d) True.

  1. (a) What do you receive when purchasing a buffalo?

(b) Which of the following can be categorized as an inferior good: sex or drink?

(c) What is the equilibrium weekly wage of an M.B.A.?

(d) Which?

  1. The quote, of course, was Keynes, page 40, and he was illustrating the importance of choosing units.
  2. H.A.R.T. FORKED TONGUE AWARD remains unawarded.
  3. H.A.R.T. MOST PERFECT COMPETITOR TROPHY is awarded to that perceptive reader who pointed out that the market for splinters from the cross of Christ would seem to fulfill Smith’s conditions an infinite number of buyers, a large number of suppliers, and an amazing invisible hand. More copies of this beautiful sculpture remain to be won for more insights into ‘Our Competitive Environment’.

This issue’s questions:

  1. Quote of the month. What amazing economist wrote the following and where?

“latex$ \left( X^{\prime }_{\ast }X_{\ast }\right)^{-1}  X_{\ast }\bar{y}&s=2$”

(This is to test that you are doing your reading.)

  1. TRUE, FALSE, IGNORANT.

Your grade will be largely independent of anything you write.

(a) Since when care packages were dropped into prisoner of war camps it was cigarettes and not prunes that were adopted as currency: prisoners were not acting rationally.

(b) Three helicopters in formation at sunset is an omen of inflation.

(c) Racehorses sometimes earn tens of thousands of dollars in stud services. Since economists are rarely paid as much for similar services, they are either being exploited, or earn non-pecuniary benefits.

  1. An economist of repute defined homotheticity in the following way: “You stand at the origin and jiggle your head this way and that way and nothing changes.” Utilizing this definition, determine whether the following is true. A compensated jiggle of the head will cause a non-homothetic function to appear homothetic.
  2. If Irving Fisher had defined the money stock as M7, then the business cycle would be the dance of the 7 veils?

* * *

SHELDON DE F’ART SAYS : “PER ARDUA AD INSOMNIA”

* * *

P.H.A.R.T, is an underground journal of negligible literary merit dedicated to the proposition that some followers of economics may possess a sense of humor. It is hoped to stimulate everyone into some form of response. For those who are leaving and wish to subscribe, the cost is $1.00 per annum, plus postage, for 8 copies (or more)

Most of the blame, any personal inquiries, submissions, letters, or donations should be directed to Rodney Smith or Roger Vaughan.

P.H.A.R.T.
Box P
Department of Economics
Social Science Building
West 59th Street
Chicago, Illinois 60637
U.S.A.

Source: Hoover Institution Archives. Papers of Milton Friedman, Box 79, Folder “79.6 University of Chicago Miscellaneous”.

Categories
Chicago Exam Questions

Chicago. Exams for second graduate price theory course. Griliches, 1965

 

A few posts ago Economics in the Rear-view Mirror presented the exams for the first quarter of graduate price theory (Economics 300) at the University of Chicago taught by Giora Hanoch in the autumn quarter of the 1964-65 academic year. In this post we have the exam questions for the winter quarter’s second graduate price theory course taught by Zvi Griliches.

As I transcribe these mind-numbing true-false-uncertain questions, I have wondered if there ever was a University of Chicago graduate student who answered all of the questions “uncertain” and tortured the graders with special cases, counter-examples, and intricate ad-hoc-ceteris-not-so-paribus explanations. But then I think of the canonical image of a WWII bomber that has returned to base with flak damage. Goodnight Mrs. Calabash, wherever you are.

________________________________

ECONOMICS 301
February 10, 1965
Two-hour Midterm Examination

I. (70 points)

Answer whether the statement is true, false, or uncertain. In each case, write a few sentences explaining your answer. Your grade will depend heavily on your explanation.

  1. The elasticity of a linear supply function that passes through the origin is always unity.
  2. If a firm is producing in the region of rising marginal costs, the firm is realizing profits.
  3. An effective price ceiling on cotton, i.e., one that holds its price below the free market level, will decrease the price of textiles.
  4. 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.
  5. Firms try to minimize unit costs; at the point where unit costs are at a minimum, they equal marginal costs; therefore, firms tend to operate where their unit and marginal costs are equal.
  6. Marginal productivity theory does not apply if factors are always used in fixed proportion.
  7. Since all firms in competitive industry have the same marginal costs, it is meaningless to speak of more or less efficient firms.
  8. If a Paasche price index is higher than the Laspeyres’ index, tastes must have changed.
  9. The demand for a product at the market price is inelastic. It follows that the product must be produced under conditions of net internal diseconomies.
  10. “Commodities with higher, income elasticities have higher demand (price) elasticities.” (Stigler, 1952 ed., p. 45)
  11. If X and Y are substitutes, a decline in the price of X can increase the amount of Y demanded only if Y is an inferior good.
  12. The elasticity of demand for a group of commodities with respect to the average price of the group can never be larger in absolute value than the largest of the individual price elasticities of the commodities which comprise the group.
  13. A rational consumer is insatiable.

II. (30 points)

A. The demand function for a product is P = 115 — Q. The total cost of producing Q units in one plant is given by TC = 400 — 100Q2 + Q3. Only one-plant firms are allowed.

(a) What is the long run competitive solution (price, quantity, and the number of firms in this industry)?

(b) 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?

B. Assume now that a firm may have more than one plant. What is the monopoly solution? How much profit will it make?

________________________________

March 15, 1965

ECONOMICS 301
Z. Griliches

FINAL EXAMINATION
Winter, 1965

2 HOURS TO COMPLETE EXAM

I. (80 points)

Answer each question “true”, “false”, or “uncertain”, and explain your answer briefly. Your grade will depend heavily on your explanation.

  1. A competitive firm will increase output as the result of a fall in the price of one of its inputs.
  2. In equilibrium, a competitive firm has all the business (sales) it wants. Hence advertising is incompatible with either competition or equilibrium.
  3. Duopolists with different cost functions cannot achieve a monopoly price without transfer payment between the firms.
  4. A multiplant firm will schedule its output so that the marginal costs are equal in all plants.
  5. The price of haircuts in Chicago is approximately 40 percent higher than in New York; therefore, average earnings of barbers in Chicago are higher than in New York.
  6. The supply curve of a monopolist is inelastic at the point of maximum monopoly profit.
  7. If it takes one day to catch a beaver and two to catch a deer, one deer will exchange for two beavers.
  8. Assume that the world demand elasticity for tin is -2 and that Bolivia produces 1/3 of the world’s tin. Therefore, the elasticity of demand for Bolivian tin is at least -6.0 (in absolute value).
  9. A safety ordinance prohibiting the use of automobiles older than 10 years will increase the long run demand for new automobiles.
  10. The own-price elasticity of demand for a commodity is no smaller in absolute value, than the marginal propensity to consume that commodity.
  11. For a single consumer the sum of income elasticities of demand for all commodities is unity, while the sum of their price elasticities is zero.
  12. It is a convention in economics to draw consumption indifference curves convex to the origin, but we have no way of knowing whether they really are.

II. (10 points)

Each firm in an industry is given a license to operate and no new firms are allowed to enter. The value of a license rises over time. Does this prove that firms operate subject to diseconomies of scale?

III. (30 points)

It is often asserted that Americans love money more than Englishmen (or Europeans, or Latin Americans). Can you think of a way to test this proposition?

Source: Harvard University Archives. Papers of Zvi Griliches. Box 130, Folder “Syllabi and exams, 1961-1969”.

Source: From an image of the Brazilian immigration/visa card for Zvi Griliches dated 18 Aug 1959 that can be found at the ancestry.com website.

Categories
Chicago Exam Questions

Chicago. First price theory course exams. Hanoch, 1964

Giora Hanoch graduated with a doctorate in economics from the University of Chicago in December 1965 with his dissertation “Personal earnings and investment in schooling.” He held the rank of assistant professor of economics for the academic year 1964-65, after which, according to his entry in the AEA 1969 Biographical Listing of Members,  he returned to Hebrew University, Jerusalem, in 1965. With many visiting appointments throughout his career, his academic home was Hebrew University.

Clearly the faculty thought highly enough of him in his fourth year at Chicago to entrust him with the first quarter of the 300-level price theory sequence (Autumn Quarter, 1964).

_________________________

Giora Hanoch, Professor Emeritus of Economics
Hebrew University of Jerusalem

1932. Born in Haifa, Israel
1960. A.B. Hebrew University.
1961. A.M. Hebrew University.
1965. Ph.D. University of Chicago. Thesis “Personal Earnings and Investment in Schooling”
1970. Visiting Lecturer, Harvard University.
1974. Visiting Lecturer, Harvard University.
1975. Visiting Lecturer, University of California, Los Angeles
1975— Fellow of the Econometric Society.

Source: “Giora Hanoch, economist”, Prabook website.

_________________________

Economics 300
G. Hanoch

Mid-Term Examination
November 18, 1964

I. (60 points)

Answer the following True, False, or Uncertain. Explain your answer briefly.

  1. If two individuals engage in barter, or direct exchange of goods, then always either: a) One individual benefits by the transaction while the other one is hurt; or b) Both are neither benefited nor hurt.
  2. In a perfect market economy, each consumer participates equally in determining what is produced.
  3. If an increase in the demand for X results in an increase i n the price of X, the demand for X is upward sloping.
  4. If the demand for X has unitary elasticity (η = -1), changes in the price of X will not affect the total expenditures on all other goods.
  5. If one good is inferior, at least one other good purchased by the consumer has to be income-elastic (ηxI> 1).
  6. If the marginal revenue is decreasing with an increase in the quantity X, the demand for X is inelastic.
  7. The substitution effect of a decrease in price, as defined by Slutsky, is positive for a normal good and negative for an inferior good.
  8. If the market for beef is in a stable equilibrium, changes in the supply of beef will have little or no effect on its price.
  9. It is possible for a consumer to buy a fixed positive) quantity of X every month, whatever the price of X may be. (i.e., his demand for X has zero elasticity for all prices).
  10. The demand for agricultural products is inelastic; hence plentiful harvests result in lower incomes for farmers, in a free market economy.
  11. In view of (10), each individual farmer can improve his own position by destroying a part of his production in good years.
  12. A linear and downward-sloping demand curve is always elastic at high prices and inelastic at low prices.
  13. If the Laspeyres quantity index between two periods is 1.10 and the Paasche index is 0.90, the consumers’ taste must have changed,
  14. The cross-elasticity of demand for left shoes with respect to the price of right shoes is zero.
  15. A consumer with a utility function is in equilibrium if the marginal utility of each good is proportional to its price.
  16. If all prices increase by 10%, but money income remains the same, the quantity of each good purchased will decrease.
  17. The demand of a consumer for X cannot be infinitely elastic at every quantity of X, because of the budget constraint.
  18. In an economy where the king distributes all the goods and services as free gifts to the consumers, all the prices are zero. Hence there is no place for price theory in that country.
  19. The demand for X is of unitary elasticity, and 200 similar firms sell X. A reduction of 1% in the price PX charged by one firm will result in doubling that firm’s sales, if other firms sell the same quantity at any price.
  20. Because of transportation costs, prices will differ in different geographical locations, whether or not there exists free competition in the market.

II. (40 points)

Two consumers, A and B, have equal and stable tastes and incomes. In December, each spent his entire monthly income on x units of X and y units of Y, when the prices in the market were $2.00 for X and $5 for Y. Consumer A accepted an offer of his employer to be paid in kind, by receiving the same quantities y and y every month directly. (He could still exchange any quantity of X and Y at the market, for the current market prices). B’s money income remained the same.

The following prices prevailed in the market during the next few months:

Month

 $ per unit of X $ per unit of Y
1 2.00 5.00
2 2.20 5.50
3 2.00 5.50
4 2.00 4.50
5 1.80 4.50
6 2.20 4.50

1) Compare consumer A’s position in each of these months with his position in December (was he better-off, worse-off, or indifferent?)

2) Compare the positions of A and B in each month.

NOTE: Use budget lines (and, if necessary, indifference curves) for your analysis. Do not attempt to answer more questions than you were asked. Be brief and clear.

_________________________

ECONOMICS 300
G. Hanoch

FINAL EXAMINATION
December 14, 1964

(two hours)

I. (40 points)

Mark the following True, False, or Uncertain. Explain your answers very briefly.

  1. A monopolist can afford to pay wages below the market wage rates.
  2. A rise in the price of gasoline will lead to a rise in the price of tires.
  3. In a long run competitive equilibrium, the marginal firms produce where marginal costs equal average total costs.
  4. If a firm is in long run equilibrium, it is also in short-run equilibrium, whether it is a competitive or a monopolistic firm.
  5. If a production function is characterized by constant returns to scale, an increase in the use of one factor by 10% will increase output by less than 10%.
  6. A rise in the price of any factor used by the firm (other things unchanged) will always lead to a decrease in production by the firm.
  7. A firm producing the same product in many plants will determine the quantity produced in each plant so that average costs will be equal in all the plants.
  8. If a firm has zero variable costs, then its best profit output is where the elasticity of demand for the product is unitary.
  9. A firm will carry production to the point where the marginal productivities of all variable factors are equal.
  10. In a competitive industry with external economies, the total short run supply curve of the industry shifts to the left when there is a permanent decrease in demand for the product.

Il. (30 points)

A monopolist is faced with the following stable demand schedule for his patented machines:

Price per machine
(thousand dollars)

 Quantity
per month		 TR MR TC MC
40 1
35 2
30 3
25 4
20 5
15 6
10 8
5 10

The Costs of production are $5000 per machine, and the fixed costs are $16000 per month.

1.) Compute total and marginal revenue and total and marginal costs in the table above.

2.) Find the equilibrium price, quantity and profits of this firm.

3.) A tax of $60,000 per month is imposed on the firm. Find the new price, quantity and profits.

4.) Instead, a tax of 60% of the market price is imposed on the machines. What will be the monopolist price, output, profits? The tax revenues?

5.) Alternatively, a tax of $24000 per machine is levied. What are the equilibrium price, quantity, profits and tax revenues? What will be the long-run equilibrium quantity?

6.) If no tax is imposed, but a maximum price of $10,000 is enforced, what will be the quantity sold? The Profits?

7.) State your preference among the 5 alternatives ((2) – (6)) above, and justify your choice briefly.

III (30 points)

The current charge for telephone service in city C is $6.40 per month, allowing the consumer 80 free local calls every month, Each additional call costs five cents. Installation is free, and no long-distance calls are available.

NOTE: In the following, assume that each consumer behaves rationally, has constant money income and tastes, with convex indifference curves and no saturation in the relevant range.

Use separate diagrams for each sub-problem. Be precise.

  1. Use a diagram with money-income Y and phone calls X on the axes, to show a consumer’s budget constraint. Be careful to show all the combinations of X and Y available to him, including the case where no service is installed.
    (This portion is crucial for the rest of the problem).
  2. Use indifference curves between Y and X to analyze the consumer’s decision whether to have a telephone installed or not.
  3. Consumer A chooses to have a telephone, and he uses 120 calls every month. Show his equilibrium position geometrically. What is the average price (in cents) of a phone call for him? What is his marginal rate of substitution between money and phone calls?
  4. If the current rates are replaced by a flat rate of 7 cents a call for any number of calls,

(a) Show consumer A’s new budget line, compared with the current position.
(b) Would he now use more or less than 120 calls per month?
(c) Would he be better-off, indifferent, or worse-off relative to the current position?

  1. Consumer A claims that he would prefer to pay a flat rate of 84 per call rather than the current rates. Could he be rational? (demonstrate your answer geometrically).
  2. Consumer B uses only the 80 “free” calls every month, given the current rates. Compare (as in (4)) his consumption and welfare positions with the alternative of being charged a flat rate of 8¢ per call for any number of calls. Could he be indifferent with respect to the two alternative rates?

 

Source: Harvard University Archives. Papers of Zvi Griliches. Box 130, Folder “Syllabi and exams, 1961-1969”.

Image Source: Giora Hanoch in “These Israelis Were Present at the Declaration of Independence.”  Haaretz. Apr. 17, 2018

Categories
Berkeley Chicago Economics Programs Economists

Chicago. The Education of Zvi Griliches. Through Ph.D. 1957

 

The two documents transcribed for this post provide wonderful detail about the economics training received by Zvi Griliches whose academic career passed from Hebrew University, through the University of California, Berkeley, and ultimately through the University of Chicago to Harvard.

Griliches was responsible for graduate admissions in the Harvard economics department back when I was applying to graduate school (1974). When I went to Cambridge to visit the Harvard and M.I.T. departments, I pressed Griliches (the only professor at Harvard with whom I could get an appointment) for him to tell me what in his opinion the difference between Harvard and M.I.T. was. He smiled (hopefully amused by my naive presumption) and replied that M.I.T. provided more of a “bootcamp training” than Harvard would. He did make that sound like a bad thing. In any event, M.I.T. was better at recruiting, able on short notice to line up appointments to talk with Evsey Domar and Charles Kindlberger plus a handful of graduate students. Still I have to admit that Griliches did warn me what I was getting myself into.

Zvi Griliches was awarded a Social Science Research Council Research Training Fellowship in 1955-56, and from information in the supplementary statements below, it is clear that the application was written sometime in the early months of 1955 (Chicago’s Winter Quarter 1955). So while it is possible that he was applying for more than this single fellowship, there is no indication of any other fellowship at that time being considered in Griliches’ papers in the files at the Harvard Archive that I consulted.

Questions for the Price Theory prelim exam for the Winter Quarter 1955 have been posted earlier. From Milton Friedman’s papers, we know that Griliches got the top grade (by a long shot) on that particular exam.

Griliches received a two year appointment at Chicago beginning Oct 1, 1956— “to give service for the National Science Foundation Econometric Model Research Project on a ninety per cent time basis and for the Department of Economics on a ten per cent time basis with total salary of $5,000 per annum”. So it was certainly reasonable for him at the start of the second year of his contract to put his academic record on file with the University of Chicago Vocational Service and Employment Office. That is the second document transcribed below.

Economic in the Rear-view Mirror’s “Believe it or not!”

Graduates listing themselves with the University of Chicago’s Vocational Service and Employment Office were asked even as late as the Autumn Quarter of 1957:

Any racial or religious institutions in which you would prefer to teach?
Any racial or religious institutions in which you would prefer not to teach?

Easy to believe, and the documentary record indeed shows, that Zvi Griliches answered “No” to both questions.

___________________________________

Supplementary Statements from Winter Quarter 1955 in Griliches’ fellowship application for 1955-56

 Zvi Griliches

SUPPLEMENTARY STATEMENT “C”:

For attainment of the objectives outlined above I think that the following knowledge and training is desirable:  1) economic theory including mathematical economics; 2) statistics and econometrics including all the modern developments and also experience with efficient computational procedures; 3) agricultural economics; and 4) some knowledge of historical methods.

  1. Economic theory and mathematical economics will be very important in my future work because they provide the framework for the actual quantitative work. They suggest which are the important variables in different problems and indicate something about the form of their interrelationships. They also provide a check on the internal consistency of our models and are the source of most of our hypotheses. I believe that I have a good knowledge of basic economic theory and a reasonable familiarity with mathematical economics. My major graduate courses in this field were:

R.G. Bressler Jr. — Production Economics — In this course I was introduced to the pure theory of production and to the interrelationships of cost and supply curves.

R.G. Bressler Jr. — Seminar in Agricultural Marketing Organization — This course, in spite of its name, dealt primarily with problems of cost measurement, location theory, and general equilibrium.

Robert Dorfman — Advanced Economic Theory A-B1 — This was the major graduate course in Economic Theory at the University of California, covering Price Theory, Distribution Theory, and introducing us to Income and Employment Theory.

Robert Dorfman — Mathematical Methods in Economics — This was my introduction the Mathematical Economics proper. It dealt with general maximization problems, the pure theory of consumers’ choice, and in particular with dynamic difference equations models. The last topic will be very important in the construction of my model.

A.C. Harberger — Price Theory A — Covered more advanced topics in price theory and problems of definition and measurement of utility.

D. Gale Johnson — Price Theory B3 — This course covers distribution theory and related topics.

            I have also taken in the past and intend to take in the future a series of courses in Monetary and Fiscal Theory which I shall not list here.

            I also intend to participate in the Seminar in Mathematical Economics to be given in the spring quarter of 1955 by G. Debreu at the University of Chicago. In spite of all the above, I shall still lack adequate knowledge of Mathematical Economics. I need especially a better knowledge of growth models and of stochastic difference equations. I think, however, that I shall be able to acquire this necessary knowledge through individual study, as my work progresses.

            I am aided in my knowledge of mathematical economics and also of statistics and econometrics by a good undergraduate training in calculus and an individually acquired knowledge of matrix and vector algebra. Nevertheless, this is not enough. As it forms a basis for most of the other fields, I should learn more mathematics. I intend to do so after I have completed the preliminary Ph.D requirements both through intensive studying on my own and also by auditing some courses at the university.

 

  1. A good knowledge of statistics and econometrics is indispensable for quantitative work in agricultural economics. Though this is a field where there is always more to learn, nevertheless, I think that I have a basic knowledge of the most important techniques. My major courses in this field were:

George Kuznets — Analytical Methods A — This was my introduction to the theory and methods of multiple regression, weighted regression, testing hypotheses, and non-parametric tests. Within the framework of this course I wrote a paper “Demand for Clingstone Peaches on the Grower Level” which introduced me to modern computational procedures and the use of modern computational equipment.

Ivan Lee — Analytical Methods B — In this course I was introduced to simultaneous equations, the identification problem, maximum likelihood estimates, analysis of variance, and sampling theory. Within the framework of this course I wrote a paper “Clingstone Peaches: Demand and Supply Relationships on the Grower Level” applying both least squares and limited information techniques.

Roy Radner — Statistical Problems of Model Construction1 — Introduced me to decision theory, covered in greater detail the Markov Theorem and maximum likelihood estimates.

Martin Beckman — Allocation of Resources in Production3 — This course is introducing me to the valuable new technique of activity analysis (linear programing).

W.H. Kruskal —  Mathematical Statistics I2 — The principal topics of this course are: point and set estimation; hypothesis testing; elements of multivariate analysis; elements of linear hypothesis theory; typical nonparametric procedures.

            In the addition to the above I profited greatly from work with Professors Varden Fuller and Ivan Lee (Summer 1953), which made me familiar with census data, BAE publications, and other major sources of data in agriculture: and from my work with Professor Sidney Hoos (Summer 1954), which provided practical experience in the application of modern econometric techniques. I also have participated and shall continue to participate in the Seminar in Econometrics conducted by members of the Cowles Commission at the University of Chicago.

            All this of course is not enough. I shall have to learn much more. Some of it I shall still get at the university, but the greater part I shall have to learn on my own as my work progresses.

 

  1. A thorough knowledge of agricultural economics is important as it will provide both the framework and background of my work. I believe that I possess a reasonably good knowledge of this field. I have received both the B.S. and M.S. degrees in agricultural economics and have read widely in the field. Some of my courses in this field were:

George Mehren — Seminar in Agricultural Marketing — Introduced me to the practical and theoretical problems arising in the administration of agricultural marketing and adjustment programs.

Murray Benedict — Agricultural Production Economics — Dealt with the theoretical issues underlying policy problems in agriculture.

Varden Fuller — Seminar in Agricultural Policy1— Dealt with current policy issues and their economic implications.

C.M. Hardin — Seminar in Agricultural Policy2 — This course is introducing me to the consideration of current agricultural policy issues from the point of view of Political Science.

T.W. Schultz — Choice and Possibilities in Economic Organization — Dealt primarily with economic development and its impact on agriculture.

D. Gale Johnson — Incomes Welfare, and Policy3 — This course is introducing me to more advanced topics in agricultural economics and policy.

            I have gained also from participation in departmental meetings and seminars, both at the University of California and at the University of Chicago. Three years of my life spent working on farms (1947-50) and a summer (1952) as a research assistant with the California Packing Corporation collecting yield data have enriched my understanding of agriculture and its problems.

 

  1. As time series are used to a great extent in quantitative work, some knowledge of historical methods is quite important. I am fortunate in this respect to have had a very intensive and profitable year of undergraduate study in History at the Hebrew University, and in particular a course in “Introduction to historical literature and methods” by Professor Richard Koebner

            The only way one really becomes adept in quantitative work is by doing quantitative work. In a sense, this is the purpose of my project. As a result of work on my project I should gain experience and facility in using both theory and quantitative methods.

I have a good knowledge of Russian, German and Hebrew.

—————————————–

1 I audited this course
2 I am auditing this course
3  am currently taking this course

 

SUPPLEMENTARY STATEMENT “D”:

I shall have completed all the required course work by June 1955. I intend to take the Ph.D. preliminary examination in Winter 1955, and the preliminary examinations in Money and Banking, and Agricultural Economics in Summer 1955. I have already taken and passed a reading examination in German, and I shall take the examination in Russian in February of 1955. Hence, I hope to have completed all the requirements toward the Ph.D. degree, except the dissertation and final oral examination, by August 1955, and before the fellowship goes into effect.

The preliminary title of my thesis is “A study of the factors determining the development, distribution, and acceptance of new technology”.

The faculty adviser is Professor D. Gale Johnson,

 

SUPPLEMENTARY STATEMENT “E” :

1950-51. A student at the Hebrew University, Jerusalem.

1951-54. Student at the University of California, Berkeley.

Summer 1952. Research Assistant with the California Packing Corporation. Collection of yield data. $1.10 per hour.

Fall 1952. Awarded the D. Solis Cohen Scholarship. This scholarship was awarded to me during the following two semesters.

May 1953. Election to Phi Beta Kappa.

June 1953. Awarded the degree of Bachelor of Science with highest honors in Agriculture.

Summer 1953. Research Assistant with the John Haynes Foundation, working under the direction of Prof. Varden Fuller, at the University of California. Salary: $325/month

1953-54. Jesse D. Carr Fellow in Agriculture at the University of California.

Summer 1954. Research Assistant at the Gianini Foundation of Agricultural Economics, University of California; working under the direction of Professor Sidney Hoos. Salary —$290 a month.

September 1954. Awarded a Master of Science degree in Agricultural Economics by the University of California.

1954-55. A University Fellow and full time student at the University of Chicago.

 

SUPPLEMENTARY STATEMENT “F”:

  1. “Demand for Clingstone Peaches on the Grower Level”, Berkeley,  January 1954, Typewritten manuscript,
  2. “Clingstone Peaches for Canning: Demand and Supply Interrelationships on the Grower Level”, Berkeley, June 1954,
  3. “The Differential Spread of Hybrid Corn: A Research Proposal”, Chicago, December 1954, pp. 1-20.

All three papers are available on loan from me. All are unpublished typewritten manuscripts.

 

Source: Harvard University Archives. Papers of Zvi Griliches, Box 129, Folder: “Correspondence, 1954-1959.”

_______________________________

THE UNIVERSITY OF CHICAGO
VOCATIONAL GUIDANCE AND PLACEMENT

EDUCATIONAL REGISTRATION FORM

Date: September 30, 1957
Name in Full: Hirsch Zvi Griliches
Current Address: 6011 Kimbark, Chicago 37, Ill.
Telephone: Bu 8-1975
Permanent Address: ditto

 

PERSONAL DATA

Date of birth: 9/12/1930. Place: Kaunas, Lithuania
Are you a U.S. citizen? No
If through naturalization give date. If not, explain status: Permanent resident (immigrant), expect. naturalizt. in 2 yrs.
Height: 5’11
Weight: 160
Marital status: Married
Number and ages of children: 1 daughter, 9 months.
Are you a veteran? Of the Israeli Army.
Physical handicaps: None
Church (if you wish to indicate): Jewish
Scholastic honors: S.B. with Highest Honors in Agriculture (U of Calif., 1953), Phi Beta Kappa
Scholarships (give dates and schools): Solis D. Cohen Scholarship, Univ. of Calif., 1952-53
Fellowships (give dates and schools): Jesse D. Carr (Univ of Calif., 1953-54), University (U of Chicago, 1954-55), Social Science Res. Council Research Training Fell. 55-56
Certificates held: None

 

EDUCATIONAL AND RELATED EXPERIENCE

List chronologically all work experience (including teaching, government, business, practice teaching, and experience in armed services)

June 1953 to Sept 1953. John Hanes Foundation, Berkeley, Calif., Research Assistant

June 1954 to Sept. 1954. Univ. of Calif., Berkeley, Research Assistant, Price Analysis.

Oct. 1954 to Sept 1955. Office of Agricult. Economic Research, Chicago, Research Assistant.

Oct. 1956 to date, U of Chicago, Assistant. Prof., Ag. Economics, Gen. Econ. Theory.

 

ACADEMIC AND PROFESSIONAL TRAINING

(If this space is insufficient, attach another sheet)

UNDERGRADUATE COURSES: (List title, not catalogue number, and follow with the number of semester hours; e.g. Shakespeare, 3. One full course in the College of the University of Chicago equals 3 semester hours.)

First Year

 Second Year Third Year

Fourth Year
Hebrew 10 Geology 6 Botany 3
English 8 Introd. Econ 6 Calculus 6
Latin 8 Intern. Trade 3 Ag Econ Theory 6
Russian 4 Statistics 3 Ag. Marketing 3
Westr. Civil. 6 Agric Policy 3 Ag Policy 3
Polit. Theories 8 Range Mangmnt 3 Hist. of Ec. Thght 3
Medieval History 8 Zoology 3 Irrigation Econ. 3
Sociology 8 Agronomy 3
Intnat.Econ. 3

 

GRADUATE COURSES AT THE UNIVERSITY OF CHICAGO (List Course Title.) (One full course in the Divisions of the University of Chicago equals 3½ semester hours)

Instructor

 Title of Course Instructor

Title of Course
Harberger Price Theory A Hamilton Banking and Monetary Policy
Monetary and Fiscal Policy Metzler Monetary Asp. of Inter’l Trade
Recent Dev. in Economics Beckman Alloc’n of Res. in Prod.
Schultz Choice & Possib. in Econ. Org. Audited:
Econ. Org. for Stability Savage Introd. To Probability Theo.
Regression & Anal. of Varian.
Johnson Price Theory B Theil Math. Economics
Income, Welfare, & Policy Radner Econometrics
Friedman Price Theory A & B
Tolley Money

 

GRADUATE COURSES TAKEN ELSEWHERE (University of California, Berkeley)

Instructor

 Title of Course Instructor

Title of Course
Clark Agric Marketing 3 Kuznets Analytical Methods A 3
Mehren Agric Marketing. Sem. 3 Lee Analytical Methods B 3
Bressler Ag Market Organ. Sem. 3 Dorfman Math Methods of Econ 3.
Bressler Ag Production Theory A 3 Audited:
Benedict Ag Production Theory B 3 Dorfman Econ Theory A & B 6

 

SUMMARY OF ACADEMIC AND PROFESSIONAL TRAINING AS OF Oct. 1, 1957

 MAJORS SEMESTER HOURS MINORS
(OR RELATED FIELDS)

SEMESTER HOURS

Undergraduate

 Agric Econ 15 History 22
Economics 15 Math and Statistics

9

Graduate

 Agric Econ 24 Econometrics & Stat 6 + 9 aud.
Econ Theory & Math Econ 15 +15 aud Money

12
Thesis field and preliminary fields: Agricultural Economics, Economic Theory, Monetary Theory.
Education Courses:  None

 

ACADEMIC AND PROFESSIONAL TRAINING

List all schools attended. Begin with high school from which you graduated. Include work in progress at the University of Chicago and Foreign [Universities]

Dates of Attendance

 Institutions—Location Major Subject Minor Subject

Degree and Date Awarded
6/50 Dept. of Education, State of Israel External Matriculation exams passed 1950
9/50 to 6/51 Hebrew University, Jerusalem History Sociology —
10/51 to 6/54 University of California, Berkeley Agric. Econ Agric. Market. S.B. 1953
S.M. 1954
10/54 to 8/57 University of Chicago, Chicago Economics Agric. Econ. A.M. 1955
Ph.D. 1957

Title of Master’s thesis: no thesis

Title of Doctor’s thesis: Hybrid Corn: An Exploration in Economics of Technological Change.
Thesis adviser: T.W. Schultz

 

EXTRA-CURRICULAR ACTIVITIES

Single check activities in which you have participated. Double check those which you can direct [coach/play].

Assemblies, Athletics, Audio-Visual, Band, Camping, Chorus, Civic Organizations, Crafts, Curriculum Planning, Debate, Dramatics, Gymnasium Activities, Orchestra, Parent-Teachers activities, Piano, Playground, Public Addresses, Pupil Participation in Government, Reading, Rhythms-Dances, School Clubs, School Publications, School Publicity, Speech, Vocational Guidance.

[Note:  Only School Clubs was checked (single checked) from the list. It was the Political Economy Club in college]

What foreign languages do you speak? Hebrew, Russian, German, Lithuanian, Yiddish.

Can you type? Poorly. Take dictation? No. Bookkeeping knowledge? No.

 

ADDITIONAL INFORMATION

(For our use only—not included in credentials mailed to employers.)

PUBLICATIONS:

“Specification bias in estimates of production functions,” Journal of Farm Economics, February 1957.

“Hybrid Corn: An Exploration in the Economics of Technological Change,”Econometrica, October 1957.

Book reviews in the Journal of Political Economy

MEMBERSHIPS:

American Economic Association
American Farm Economics Association
Econometric Society
Fellow of Royal Economic Society

 

REFERENCES
Instructors at the University of Chicago

List at least two University of Chicago instructors who are able to evaluate your course work.

T.W. Shultz
A.C. Harberger
D.G. Johnson
Carl Christ

 

INSTRUCTORS AT OTHER COLLEGIATE INSTITUTIONS

List instructors at other schools from whom you would like to have letters of recommendation.

R.G. Bressler. Dept. of Agric. Economics, Univ. of Calif., Berkeley.
Sidney Hoos.  Ditto.

 

ADMINISTRATIVE OFFICERS

If you have had teaching or administrative experience, list administrative officers who can report on your work (one for each position you have held).

D.G. Johnson, Univ. of Chicago. Act. Chairman
H.G. Lewis, Univ. of Chicago. Director of Research Center.

 

At what other university or college placement office are your letters of recommendation on file?   None.

 

OCCUPATIONAL CHOICES

List three position choices. Be very specific as to (1) courses you can teach within your own department (e.g., if Sociology-Social Psychology, Marriage and Family, Theory); (2) kinds of institutions (University, Liberal Arts College, State Teachers College, Junior College, High School, Junior High School, or grades); (3) other types of positions (Registrar Dean, Superintendent, Business Manager, Critic, Supervisor, etc.).

University, Land Grant or Liberal Arts College, teaching position with opportunities for research. Economic Theory, Agricultural Econ., Econometrics, Money.

Date available (month and year) September 1, 1958
Locality preferred East or West Coast.
Are you limited to that area? No.
Would you apply for positions in foreign countries? Yes
Any racial or religious institutions in which you would prefer to teach? No
Any racial or religious institutions in which you would prefer not to teach? No
Present or last salary $6500 (Confidential) for 11 months.
Minimum salary you would consider $7000 (Confidential) for 11 months.

Your registration is incomplete without six photographs (not larger than 2 ½ by 3 ½ inches).
Pictures are important.

Source: Harvard University Archives. Papers of Zvi Griliches, Box 129, Folder: “Correspondence, 1954-1959.”

Image Source:  Zvi Griliches from the University of Chicago Photographic Archive, apf1-06565, Special Collections Research Center, University of Chicago Library.

Categories
Chicago Economists Harvard

Harvard. Course Transcript of economics Ph.D. alumnus (1922), Jacob Viner

 

Besides the collection and careful transcription of historical course syllabi and examination questions from leading centers of economics education in the United States, Economics in the Rear-view Mirror also shares information on the structure of undergraduate and graduate economics programs as well as the granular detail found in the transcripts of individual students. 

Recently I posted the Harvard graduate transcript of Edward Chamberlin. Today’s post provides us the Harvard course record of that economist’s economist, Jacob Viner, later of Chicago and Princeton fame.

__________________________

THE GRADUATE SCHOOL OF ARTS AND SCIENCES
Record of Jacob Viner

Years: 1914-15, 1915-16

 

[Previous] Degrees received.

A.B. McGill 1914

First Registration: 28 Sept. 1914

1914-15

Grades
First Year Course

Half-Course

Economics 11

A

Economics 12

A-

Economics 17

A

Economics 33 (full)

A

Economics 34

B+

German A

B+
Division: History, Government, & Economics
Scholarship, Fellowship: University
Assistantship:
Austin Teaching Fellowship:
Instructorship:
Proctorship:
Degree attained at close of year: A.M.

 

1915-16

Grades
Second Year Course

Half-Course

Economics 2a1

A-

Economics 2b2

abs.

Economics 81

A

Economics 14

“excused”

Economics 18a2

cr. for[…]

Economics 31

“exc.”

Philosophy 182

abs.

Philosophy 25a1

A-
Division:
Scholarship, Fellowship: Henry Lee Memorial
Assistantship:
Austin Teaching Fellowship:
Instructorship:
Proctorship:
Degree attained at close of year:  Ph.D. 1922 (Feb.)

Source: Harvard University Archives. Graduate School of Arts and Sciences. Record Cards of Students, 1895-1930, Sun—Walls (UAV 161.2722.5). File I, Box 14, Record Card of Jacob Viner.

__________________________

Courses Names and Professors

1914-15

Economics 11. Economic Theory. Professor Taussig.

Economics 121. (half course) Scope and Methods of Economic Investigation. Professor Carver.

Economics 17. Economic Theory: Value and Related Problems. Assistant Professor B.M. Anderson, Jr.

Economics 33. International Trade and Tariff Problems in the United States. Professor Taussig

Economics 34. Problems of Labor. Professor Ripley.

German A. Elementary Course (prescribed for students who cannot show that they have a satisfactory knowledge of Elementary German)

1915-16

Economics 2a1. European Industry and Commerce in the Nineteenth Century. Professor Gay, assisted by Mr. A.H. Cole and Mr. Ryder.

Economics 2b2. Economic and Financial History of the United States. Professor Gay, assisted by Mr. A.H. Cole and Mr. Ryder.

Economics 81. Principles of Sociology. Professor Carver, assisted by Mr. Bovingdon.

Economics 14. History and Literature of Economics to the year 1848. Professor Bullock.

Economics 18a2. Analytical Sociology. Asst. Professor Anderson.

Economics 31. Public Finance. Professor Bullock.

Philosophy 182. Present Philosophical Tendencies. A brief survey of contemporary Materialism, Pragmatism, Idealism, and Realism.

Philosophy 25a1. Theory of Value. Professor R.B. Perry.

Sources: Harvard University, Faculty of Arts and Sciences. Course of instruction. 1879-2009; Harvard University. Report of the President of Harvard College, 1826-1995.

__________________________

Ph.D. in Economics Awarded 1922

Jacob Viner, A.B. (McGill Univ.) 1914, A.M. (Harvard Univ.) 1915.

Subject, Economics. Special Field, International Trade. Thesis, “The Canadian Balance of International Indebtedness, 1900-1913.”
Assistant Professor of Political Economy, University of Chicago.

Source: Harvard University. Report of the President of Harvard College, 1921-1922, p. 65.

Image Source: Jacob Viner (pipe smoker in the center) playing cards with Messrs. Grabo, Prescott, and Ralph Sanger (mathematician).  University of Chicago Photographic Archive apf1-08487, Special Collections Research Center, University of Chicago Library.

Categories
Chicago Funny Business

Chicago. Economics Christmas Skit Material, 1969

While no date is given for the following two pages, we can be confident that the material was prepared and one presumes performed at the Chicago Economics Department Christmas Party of 1969. Photos from the December 1970 Christmas party have been posted by Robert J. Gordon–they do not correspond to the texts below.

The events of campus unrest at Columbia, Cornell, Harvard and San Francisco State referred to all took place 1968-69, so the earliest possible date for this skit would have been in December 1969.

I have added the “true” lyrics to the chosen tunes as well as links to videos with the corresponding melodies for readers who wish to try their luck in the privacy of their own offices. Replication probably requires a cocktail or two to establish the appropriate a-critical mood. 

Your sober scribe was not particularly amused. OK, maybe the lighting, costuming, and orchestral arrangements were fantastic–hard to know. I pity though the poor future historians of present economics who will have to deal with audio and video evidence and not just the written record. 

________________________

SONGS FOR SKIT

University of Chicago
Economics Department
Skit Song Lyrics

“The Merry Minuet
(They’re rioting in Africa…)
https://youtu.be/L8-BI89mb9A
They’re rioting at C’lumbia

La La La La La La La

They’re shooting up Cornell

La La La La La

They’re plowin’ up ole Harvard Yard

La La La La La La La

And Hiyakowa’s catching hell.

La La La La La

Academia is festering with strife and discord

The faculty hate students cause they’re paranoid

But we can be certain and brimming with cheer

That none of this nonsense will ever happen here.

 They’re rioting in Africa
They’re starving in Spain
There’s hurricanes in Florida
And Texas needs rain
The whole world is festering with unhappy souls
The French hate the Germans,
the Germans hate the Poles
Italians hate Yugoslavs,
South Africans hate the Dutch
And I don’t like anybody very much
But we can be thankful and tranquil and proud
That Man’s been endowed with the mushroom shaped cloud
And we know for certain that some lovely day
Some one will set the spark off and we will all be blown away
They’re rioting in Africa
There’s strife in Iran
What nature doesn’t do to us
Will be done by our fellow man!

 

University of Chicago
Economics Department
Skit Song Lyrics

 Santa Claus is Coming to Town
https://youtu.be/HSmsq2iq4bQ
You’d better watch out
You’d better not strike
You’d better not riot
I’m (or We’re) telling you why
The National Guard is coming to town.
They know what you’ve been smoking
They know when you’ve been bad
They know when you’ve been sitting-in
So get out…do you understand!!
They’re making a list
And checking it twice
They’re going to find out
Whose [sic] Commie or nice
The National Guard is coming to town.		 Oh! You better watch out
You better not cry
You better not pout
I’m telling you why
Santa Claus is coming to town
He sees you when you’re sleeping
He knows when you’re awake
He knows if you’ve been bad or good
So be good for goodness sake!
He’s making a list
Checking it twice
Gonna find out
Who’s naughty or nice
Santa Claus is coming to town

 

 

University of Chicago
Economics Department
Skit Song Lyrics

 On Top of Old Smokey
https://youtu.be/P51eCjKN2Kw
On top of a mountain
In central Vermont
Resides Milton Friedman
Of wisdom the fount.
The scene is idyllic
On that mountain peak
But here in Chicago
The outlook is bleak.
Since Telser to Belgium
Has decided to roam,
Just Zecher and Gorden [sic]
Are left here at home.
No thesis prospectus
Are we able to give
Faculty all neglect us
As their prerogative.
Heed our ultimatum
Before it’s too late
Move the MONEY workshop
To the Green Mountain State.		 On top of old smokey
all covered with snow
I lost my true lover
for courting too slow
For courting’s a pleasure
and parting’s a grief
And a false hearted lover
is worse than a thief
For a thief will just rob you
and take all you save
But a false hearted lover
will lead you to the grave
And the grave will decay you
and turn you to dust
Not one girl in a hundred
a poor boy can trust
They’ll hug you and kiss you
and tell you more lies
Than cross lines on a railroad
or stars in the skies
So come all your maidens
and listen to me
Never place your affections
on a green willow tree
For the leaves they will wither
and the roots they will die
You’ll all be forsaken
and never know why.

 

 

University of Chicago
Economics Department
Skit Song Lyrics

Mickey Mouse Club Song
https://youtu.be/x4C_lUy58Rw
Who’s the leader of the club
That’s made for you and me
M-i-l-t-o-n Da Da Da Da De[e]
Uncle Miltie,
Uncle Miltie
Forever let us sing his praises high
[…high, high, high]
He’s the man with just one theory
When others must use two
M-i-l-t-o-n Da Da Da Da Do[o]
Milt the Stilt (Paul the Small)
Milt the Stilt (Paul the Small)
In our hearts we know which one is  right […] [right, right, right]
Velocity is constant
The Phillips curve’s a fraud
M-i-l-t-o-n Da Da Da Da Da[w]
Money matters,
money matters
As long as prices
do not rise too fast.
What’s the purpose of the club
That’s made for you and I
U of C Ph.D. M-O-N-E-Y
Permanent Income,
Permanent income
It makes it all worthwhile, or so they[…]
[…]say. [say, say, say]
Rules and not discretion
And let me tell you why
M-I-L-T-O-N  M-O-N-E-Y		 Who’s the leader of the club
That’s made for you and me
M-I-C-K-E-Y M-O-U-S-E
Hey! there, Hi! there, Ho! there
You’re as welcome as can be
M-I-C-K-E-Y M-O-U-S-E
Mickey Mouse! (Donald Duck)
Mickey Mouse! (Donald Duck)
Forever let us hold our banner
High! High! High! High!
Come along and sing the song
And join the jamboree!
M-I-C-K-E-Y M-O-U-S-E
Mickey Mouse club
Mickey Mouse club
We’ll have fun
We’ll meet new faces
We’ll do things and
We’ll go places
We’re marching all around the world
Who’s the leader of the club
That’s made for you and me
M-I-C-K-E-Y M-O-U-S-E
Hey! there, Hi! there, Ho! there
You’re as welcome as can be
M-I-C-K-E-Y M-O-U-S-E
Mickey Mouse! (Donald Duck)
Mickey Mouse! (Donald Duck)
Forever let us hold our banner
High! High! High! High!
Come along and sing a song
And join the jamboree!
M-I-C-K-E-Y M-O-U-S-E(yay Mickey)
(yay Mickey)
(yay Mickey Mouse Club!)

 

 

University of Chicago
Economics Department
Skit Song Lyric

 

O Tannenbaum (O Christmas Tree)

https://youtu.be/27JleM39TPY
Now that we’ve lost our faculties
To real world positions
We can observe to ascertain
What were their life ambitions
Lester Telser for his amusement
Investigated advertisement
So now we find him having fun
On the avenue called Madison.
Those who had taught development
Have left to form a settlement
With Harberger as President
An economist in residence
With [Larry] Sjastaad in an advisory task
They’re sure to find their golden path
And on their farms up with the sun
Are Teddy Schultz and Gale Johnson.
Bob Fogel has aspired to be
The president of the Santa Fee
Gregg Lewis we all should know
Leads the AFL and CIO
And Friedman’s gone up to Ely
To found his university
Big Harry with his knife so free
Now runs a toothpick factory.

[Handwritten addition:]

Uzawa + Mundell have gone to instigate at the Sorbonne
And [Erwin] Diewert is a lumberjack
Up near the straits of Mackinac

Geo. T who’s of urban fame [George S. Tolley]
Has taken over Lindsay’s game [NYC mayor]
And since there is no more faculty
We’ve all enrolled at MIT.

 O Christmas Tree, O Christmas tree,
How lovely are your branches!
O Christmas Tree, O Christmas tree,
How lovely are your branches!
Not only green in summer’s heat,
But also winter’s snow and sleet.
O Christmas tree, O Christmas tree,
How lovely are your branches!
O Christmas Tree, O Christmas tree,
Of all the trees most lovely;
O Christmas Tree, O Christmas tree,
Of all the trees most lovely.
Each year you bring to us delight
With brightly shining Christmas light!
O Christmas Tree, O Christmas tree,
Of all the trees most lovely.
O Christmas Tree, O Christmas tree,
We learn from all your beauty;
O Christmas Tree, O Christmas tree,
We learn from all your beauty. 

 

Your bright green leaves with festive cheer,
Give hope and strength throughout the year.
O Christmas Tree, O Christmas tree,
We learn from all your beauty.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Some dialogue:

Opening scene, faculty seated around a table, one member is reading a newspaper:

One faculty member: (reading newspaper, shakes head) The students are revolting!

(All concur)

Another member: But thank God—ah I mean Milton—that we’re at Chicago. Our students are well behaved, well ordered, normal, continuous and homothetic.

Another: (questioning) But how do you know about their sex lives?

(Pause for a few seconds, for all the uproarious laughter, then break into song—“They’re rioting at Columbia….” [See above].)

(After song, and during, students enter, their spokesman present list of demands to Stigler).

Student spokesman: We’ve come to present our nonnegotiable demand schedule for reform in the department.

(All faculty in shock and dismay)

We have decided to bring the free market economy into the university. Therefore:

(1) We demand that prelim grades be bought and sold freely—thereby bringing greater efficiency into the production of economists.

(2) We demand the immediate return of all industrial organization exams from the public enterprise post office.

And (3) We demand the removal of all artificial floors and ceilings in the Department.

Stigler: (unrolls list of demands and exclaims) Heck—we’re saved. Your demand schedule is upward sloping (a pause)

(turns sheet of paper to audience)

And therefore nonexistent.

(All faculty sigh in relief)

 

Source: Harvard University Archives, Papers of Zvi Griliches, Box 129, Folder “Faculty skits, ca. 1960s”.

 

Categories
Chicago Exam Questions Suggested Reading Syllabus

Chicago. Syllabus and Final Exam, International Monetary Economics. Metzler, 1971

The two items below (syllabus and final exam) were incorrectly filed in Lloyd A. Metzler’s papers at Duke. I accidentally stumbled upon both today and thought that rather than trusting my memory of the locations of the syllabus and final exam for Economics 370 in 1971, I’d just transcribe and post the two artifacts today. According to the biographical note below, Lloyd Metzler retired from the University of Chicago in 1971 so this must have indeed been the last time that he taught international monetary economics at Chicago.

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Biographical Note

Lloyd Appleton Metzler was born on April 3, 1913 in Lost Springs, Kansas. He attended the University of Kansas, where he studied economics under John Ise and earned a Bachelor’s degree in 1935 and an MBA in 1938. Metzler then entered Harvard University. He served as an instructor and tutor at Harvard and completed a Ph.D. in economics in 1942. His dissertation, “Interregional Income Generation,” earned him the Wells Prize. That same year, Metzler was the recipient of a Guggenheim fellowship.

From Harvard, Metzler went on to Washington, D.C., where worked for the Office of Strategic Services and several economic policy and planning commissions between 1943 and 1946. Metzler joined the research staff of the Board of Governors of the Federal Reserve System in 1944. In 1946 he returned to academia when he accepted a teaching position at Yale University. He soon left Yale for the University of Chicago in 1947, where he remained for the rest of his career.

Dr. Metzler survived surgery for a brain tumor in 1952, and with the help of his wife Edith, managed to continue teaching and writing for the next twenty years. He served as Editor of the Journal of Political Economy from 1966 until his retirement in 1971. Metzler made numerous contributions to business cycle literature, macro-monetary theory, tariff theory, mathematical economics, and the field of international trade. The Metzler paradox, Laursen-Metzler effect, and Metzler matrix, all bear his name. He died on October 26, 1980.

Source: University of Chicago Library. Guide to the Lloyd A. Metzler Papers 1941-1948.

__________________________

For Intertemporal Comparison

Syllabus and readings for Economics 370 in 1950.

Exam for Economics 370 in 1953.

Syllabus, readings and final exam for Economics 370 from Winter Quarter 1967.

__________________________

ECONOMICS 370

Monetary Aspects of International Trade
Major Topics and Reading List
Winter, 1971

  1. Mechanism of the Foreign Exchange Market
    1. Alan R. Holmes and Francis Schott, The New York Foreign Exchange Market. New York: The Federal Reserve Bank of New York, 1965, Chapters 1-6.
    2. Frank A. Southard, Jr., Foreign Exchange Practice and Policy. New York: The McGraw-Hill Book Company, 1940.
    3. Norman Crump, The ABC of the Foreign Exchange. London: MacMillan and Company, Ltd., 1951.
    4. James E. Meade, The Theory of International Economic Policy: Vol. I. The Balance of Payments. London: Oxford University Press, 1951, Chapter 1.
  2. The Quantity of Money, the Rate of Interest, and the Price Level
    1. James Tobin, “The Monetary Policy and the Management of the Public Debt: The Patman Inquiry,” Review of Economics and Statistics, Vol. XXXV, No. 2, May 1953, pp. 118-27.
    2. Subcommittee on General Credit Control and Debt Management of the Joint Committee on the Economic Report, Hearings on the Question, What Should our Monetary and Debt Management Policy Be? 82nd Congress of the United States 1952, pp. 688-711, 691-98. (These pages include the testimony of Milton Friedman and Paul Samuelson).
    3. Robert V. Roosa, “Interest Rates and the Central Bank,” In Money, Trade, and Economic Growth, in honor of John Henry Williams, New York: The Macmillan Company, 1951.
    4. Lloyd A. Metzler, “Wealth, Saving, and the Rate of Interest,” Journal of Political Economy, Vol. LIX, No. 2, April 1951, pp. 93-116.
    5. Robert A. Mundell, “The Public Debt, Corporate Income Taxes, and the Rate of Interest,” Journal of Political Economy, Vol. LXVIII, No. 6, December 1960, pp. 622-26.
    6. George Horwich, “Real Assets and the Theory of Interest,” Journal of Political Economy, Vol. LXX, No.2, April 1962, pp. 158-69.
    7. Don Patinkin, Money, Interest, and Prices, 1st edition, Evanston: Row, Peterson and Company, 1956, Part II.
  3. The Role of Money in International Adjustment: Full Employment and Under-Employment
    1. J. M. Keynes, Treatise on Money: Vol. 1. The Pure Theory of Money. London: Macmillan and Company, 1935, Chapter 21.
    2. Lloyd A. Metzler, “The Theory of International Trade,” from A Survey of Contemporary Economics, Howard S. Ellis, Editor, Homewood, Ill.: R.D. Irwin, Inc., 1948.
    3. Lloyd A. Metzler, “The Process of International Adjustment Under Conditions of Full Employment: A Keynesian View,” first delivered before the Econometric Society, 1960, republished in AEA, Readings in International Economics, Vol. XI, Richard Caves and Harry Johnson, editors, Homewood, Ill.: R. D. Irwin, Inc., 1968, Chapter 28.
  4. Free-Market Exchange Rates
    1. A. J. Brown, “The Foreign Exchanges,” in Oxford Studies in the Price Mechanism, T. Wilson and P.W.S. Andrews, editors, Oxford at the Clarendon Press, 1951, Part II.
    2. Sidney Alexander, “Effects of a Devaluation on a Trade Balance,” International Monetary Fund Staff Papers, Vol. Il, No. 2, April 1952.
    3. Milton Friedman, “The Case for Flexible Exchange Rates,” in Essays in Positive Economics, Chicago: The University of Chicago Press, 1953, pp. 157-203.
    4. Joan Robinson, “The Foreign Exchanges,” in Essays in the Theory of Employment. Oxford: Basil Blackwell, 1947, Part III.
    5. Lloyd A. Metzler, “Exchange Rates and the International Monetary Fund,” in International Monetary Policies, Postwar Economic Studies, No. 7, Washington, D.C.: The Board of Governors of the Federal Reserve System, September 1947.
    6. Rudolph R. Rhomberg. “A Model of the Canadian Economy under Fixed and Fluctuating Exchange Rates,” Journal of Political Economy, Vol. LXXII, No. 1, February 1964, pp. 1-31.
  5. Forward Exchange Rates
    1. Paul Einzig, The Theory of Forward Exchange. London: Macmillan and Company, Ltd., 1937.
    2. Paul Einzig, A Dynamic Theory of Forward Exchang. London: Macmillan and Company, New York: St. Martin’s Press, 1961.
    3. Alan R. Holmes and Francis Schott, The New York Foreign Exchange Market. New York: The Federal Reserve Bank of New York, 1965, Chapters 7-8.
    4. Paul Einzig, “Some Recent Development in Official Forward Exchange Operations,” Economic Journal, Vol. LXXIII, No. 290, June 1963, pp. 241-53.
    5. Paul Einzig, “Some Recent Changes in Forward Exchange Practices,” Economic Journal, Vol. LXX, No. 279, September 1960, pp. 485-95.
  6. The Balance of Payments and the Concepts of Income
    1. R. F. Bennett, “Significance of International Transactions in National Income,” in Studies in Income and Wealth, Vol. VI. New York: The National Bureau of Economic Research, 1943.
    2. U. S. Department of Commerce, Income and Output, 1958 Supplement to the Survey of Current Business.
  7. The Theory of Income Transfers
    1. J. M. Keynes, “The Transfer Problem,” Economic Journal, Vol. XXXIX, No. 153, March 1929, pp. 1-7.
    2. B. Ohlin, “The Reparation Problem: A Discussion. I. Transfer Difficulties, Real and Imagined,” Economic Journal, Vol. XXXIX, No. 154, June 1929, pp. 172-78.
    3. J. M. Keynes. “The Reparation Problem: A Discussion. II. A Rejoinder,” Economic Journal, Vol. XXXIX, No. 154, June 1929, 179-82.
    4. J. Rueff, “Mr. Keynes’ Views on the Transfer Problem,” Economic Journal, Vol. XXXIX, No. 155, September 1929, pp. 388-99.
    5. B. Ohlin, “Rejoinder to J. Rueff,” Economic Journal, Vol. XXXIX, No. 155, September 1929, pp. 400-04.
    6. J. M. Keynes, “Reply to J. Rueff,” Economic Journal, Vol. XXXIX, No. 155, September 1929, pp. 404-08.
    7. L. A. Metzler, “The Transfer Problem Reconsidered,” Journal of Political Economy, Vol. L, No. 3, June 1942, pp. 397-414.
    8. H. G. Johnson, “The Transfer Problem and Exchange Stability,” Journal of Political Economy, LXIV, No. 3, June 1956, pp. 212-25, Republished in International Trade and Economic Growth. London: George Allen and Unwin, Ltd., 1958, Chapter VII.
    9. L. A. Metzler, “Flexible Exchange Rates, The Transfer Problem, and the Balanced-Budget Theorem,” Rivista Internazionale di Scienze Economiche e Commerciale, Anno XIII, No. 4, April 1966, pp. 301-18. Republished in Essays in Honor of Marco Fanno, Vol. II, Tullio Bagiotti, editor, edizioni cedam, Padova, 1966, pp. 449-76.
  8. Evolution of the International Monetary System
    1. Randall Hinshaw. Toward Currency Convertibility. Princeton University, Essays in International Finance, No. 31, 1958.
    2. Robert Triffin, Europe and the Money Muddle, New Haven: Yale University Press, 1957.
    3. Charles P. Kindleberger. The Dollar Shortage, Cambridge, Mass.: The Technology Press, New York: John Wiley and Sons, Inc., 1950.
    4. Robert Triffin, “The International Monetary Position of the United States,” in The Dollar in Crisis, Seymour E. Harris, editor, New York: Harcourt, Brace and World, Inc., 1961.
    5. Hal B. Lary, Problems of the United States as World Trader and Banker, Princeton: Princeton University Press for the National Bureau of Economic Research, 1963.
    6. Robert Triffin, The Evolution of the International Monetary System: Historical Reappraisal and Future Perspectives. Princeton Studies in International Finance Section. Princeton University, 1964.

Source: Duke University. David M. Rubenstein Rare Book and Manuscript Library. Economists’ Papers Archive. Lloyd Appleton Metzler Papers, Box 9, Folder “The Dust Proof File”.

__________________________

L. A. Metzler

ECONOMICS 370
FINAL EXAMINATION
WINTER, 1971

Answer all questions

  1. It is frequently said that forward purchases and sales have a two-fold effect upon the assets and liabilities of the bank making the forward transactions. When a bank makes a forward purchase, for example, it is entitled to receive a given amount of foreign currency some time in the future and this right to receive foreign currency constitutes an asset. On the other hand, when the bank receives the foreign currency, it is obligated to pay a given amount of its own currency, and exchange, and this obligation constitutes a liability. Conversely, when the bank makes a forward sale, it is obligated to deliver a given amount of foreign currency some time in the future and such an obligation constitutes a liability. But when the bank delivers the foreign currency, it is entitled to receive a given quantity of domestic currency to complete the transaction, and this receipt constitutes an asset.
    1. In view of the two-fold effect of both forward sales and purchases, how can you justify the inclusion of forward sales as liabilities and the inclusion of forward purchases as assets in an account of the bank’s foreign currency position?
    2. If it is actually true that both sales and purchases increase assets and liabilities by the same amount, what does this imply with respect to the bank’s ability to put itself in a closed position by means of operations on the forward exchange market?
  2. The table, below, presents the yield on 90-day Canadian treasury bills (rc), the yield on 90-day U.S. treasury bills (rus), the 90-day forward exchange rate (FR), and the spot exchange rate (SR) for Canadian currency. The yields for both Canadian and United States bills are stated on an annual basis and the exchange rates represent the price, in United States dollars, of one unit of Canadian dollars. The table covers various periods of time, from A to I.
Period of time Yield on
90-day Canadian treasury bills (rc)		 Yield on
90-day
U.S.
treasury bills (rus)		 90-day forward exchange rate (FR) Spot exchange rate (SR)
A .05 .06 1.0100 1.000
B .06 .05 1.0050 1.000
C .06 .04 1.0025 1.000
D .07 .03 0.9975 1.000
E .05 .04 0.9900 1.000
F .04 .05 0.9950 1.000
G .02 .04 0.9975 1.000
H .02 .06 1.0025 1.000
I .01 .05 2.0050 2.000

On the basis of the information given in the table above, you are asked to:

    1. Indicate which periods are periods of short-term potential capital outflow (O), and which periods are periods of short-term capital inflow (I) from the point of view of U.S. banks.
    2. Prepare a table showing the profits or losses on security transactions, the profits or losses on currency transactions, and the net outflow or inflow margin for all time intervals from A to I.
    3. Show what transactions a U.S. bank would make in carrying out a short term covered capital outflow and what transactions the bank would make in carrying out a short term capital inflow. From this information, show that arbitrage activities of the U.S. bank always influence rc, rus, FR, and SR in such a way as to put the market values back on the interest parity line.
    4. Comment on the stabilizing effects of interest arbitrage.
  1. Professor Alexander maintains that devaluation will be ineffective unless fiscal measures are taken to control spending.
    1. Discuss Alexander’s argument.
    2. Is it also applicable against a system of flexible exchange rates? Explain.
  2. Country A and Country B are trading with each other under a system of flexible exchange rates. Country A makes a unilateral transfer of t currency units, payable in the currency of B. On the assumption that both countries balance their budgets, prove that factor income remains unchanged in both countries while net output rises in A and falls in B. Give both an algebraic and a commonsense explanation of these results. What bearing do these results have on the controversy between Keynes and Ohlin concerning German reparations?
  3. The success of the Canadian experiment with flexible exchange rates is frequently given as an argument for the introduction of flexible exchange rates as a means of eliminating the deficit in the U.S. Balance of Payments.
    1. Would Alexander’s absorption principle apply to this situation?
    2. Can you see any reason why the comparison between Canada and the United States might be inappropriate?

Source: Duke University. David M. Rubenstein Rare Book and Manuscript Library. Economists’ Papers Archive. Lloyd Appleton Metzler Papers, Box 9, Folder “Econ 371 [sic] Reading List.”

Source Image: Posting by Margie Metzler on the Metzler Family Tree at the genealogical website, ancestry.com.