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Exam Questions Harvard Socialism

Harvard. Exams on European labor movement and history of socialism. Rappard, 1912-13.

 

William Emmanuel Rappard (b. April 22, 1883; d. April 29, 1958) was the co-founder and director of the Graduate Institute of International Studies in Geneva. At the 1947 inaugural meeting of the Mont Pèlerin Society, Rappard gave the opening address.  

You can see below from the excerpt from the 2000 article by Richard M. Ebeling about Rappard that he taught at Harvard during the 1911/12 and 1912/13 academic years. Besides a course “Economic Resources and Commercial Policy of the Chief European States” for students of business, William Rappard also taught courses on the European labor movement and the history of socialism in the economics department. Rappard left Harvard to accept a professorship at the University of Geneva following the death of d’Eugène de Girard.

This post provides course enrollments, descriptions and the final exams for these last two courses. From the examination questions it is clear that one important text for the courses was the published University of Chicago economics doctoral dissertation of Oscar D. Skelton, Socialism: A Critical Analysis (1911). [bibliography posted here at Economics in the Rear-view Mirror].

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Brief  Pre-war Biography

“…William Emmanuel Rappard was born in New York City on April 22, 1883, of Swiss parents, his father working in the United States as a representative of various Swiss industries. William Rappard did his graduate studies in economics at Harvard University from 1906 to 1908. During the academic year 1908-1909 he did additional study at the University of Vienna in Austria-Hungary, attending the seminars of Eugen von Böhm-Bawerk and Eugen Philippovich von Philippsberg, two of the leading figures of the Austrian school of economics before the First World War. And from 1911 to 1913, he was an adjunct professor [sic. Rappard’s first year was at the rank of instructor and his second year at the rank of assistant professor] of political economy at Harvard.

“In 1913 he was appointed professor of economic history and public finance at the University of Geneva in Switzerland. He also served as rector of the University of Geneva during 1926-1928 and 1936-1938. From 1917 to 1919, Rappard was a member of various Swiss diplomatic missions to Washington, D. C., London, and Paris, including service with the Swiss delegation to the peace conference in France that ended the First World War. He made a strong impression on President Woodrow Wilson and was highly influential in persuading him to choose Geneva as headquarters of the League of Nations beginning in 1920.

“From 1920 to 1925 he was the director of the Mandates Division of the League for overseeing the administration of colonial territories lost by the Central Powers at the end of the war, and was a member of the Permanent Mandates Commission of the League from 1925 to 1939. From 1928 to 1939 he also served as a member of the Swiss delegation to the annual meetings of the League’s General Assembly….”

*  *  *  *  *  *

The [above] brief summary of Rappard’s professional life draws from Albert Picot, Portrait de William Rappard(Paris: Editions de la Baconnière, 1963) and Victor Monnier, William E. Rappard: Défenseur des Libertés, Serviteur de Son Pays et de la Communauté Internationale (Geneva: Edition Slatkine, 1995).

Source: Richard M. Ebeling. “William E. Rappard: An International Man in an Age of Nationalism,” article posted at the Foundation for Economic Education Website (January 1, 2000).

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THE LABOR MOVEMENT IN EUROPE

ECONOMICS 6b
Course Description
1912-13

[Economics] 6b 2hf. Dr. Rappard. The Labor Movement in Europe. Half-course (second half-year). Tu., Th., Sat., at 10.

After an introductory sketch of the Industrial Revolution and of its social consequences, a summary review will be made of the thought of the leading social reformers and Utopian socialists before 1848. The attitude of the chief European states towards the new problems of industrial life and the beginnings of factory legislation will be briefly examined. The Communist Manifesto will then be made the basis for a study of the aims and policies of the national and international socialist movement. The positive political and institutional achievements of the social movement of the nineteenth century will be summed up in conclusion.

Source: Harvard University. Division of History, Government, and Economics, Courses of Instruction, 1912–13, p. 62

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Economics 6b.
Course Enrollment
Spring term 1912-13

Economics 6b 2hf. The Labor Movement in Europe. Asst. Professor Rappard.

Total 30: 5 Graduates, 12 Seniors, 9 Juniors, 1 Sophomore, 3 Other.

Source: Harvard University. Report of the President of Harvard College, 1912-13, p. 57.

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Final Exam 1912-13
ECONOMICS 6b

Arrange answers in order of questions. Students who wrote theses will omit the first three questions.

  1. Enumerate five of the effects which Engels says the Industrial Revolution had on the manufacturing population of England. What were Engel’s chief sources of information?
  2. How does Sombart distinguish between (a) Rational Socialism (Utopian Socialism and Anarchism) and (b) Historical Socialism?
  3. What effect, according to Marx, does machinery have
    1. Upon real wages?
    2. Upon nominal wages?
    3. Upon “relative surplus-value”?
    4. Upon “absolute surplus-value”?
  4. Why is it customary to mention the English enclosure movement in dealing with the history of labor in Europe in the 19th century?
  5. What were the historical relations between the doctrines of Godwin, Malthus and Darwin?
  6. What was Chartism? Saint-Simonism? Which was more radical? More socialistic? Give reasons.
  7. Write a biography of Marx (300 to 500 words).
  8. Compare the views of Marx and Vaudervelde on “Capitalist Concentration.”
  9. Give chapter headings of a thesis on “The Socialist Movement in Germany, 1860-1890” in six or more chapters.
  10. Distinguish between (a) Socialism (b) Anarchism (c) Syndicalism.
  11. “From each according to his abilities, to each according to his needs … To every laborer the entire product of his labor … At first sight, these two formulas are absolutely contradictory. We believe, however, that it is possible and necessary to reconcile them and to complete each by the other.” — Vaudewelde.
    How does the author do this? What practical suggestions does he make for arranging distribution in the socialist state?
  12. What difficulties does Skelton think a socialist state would encounter
    1. In administering the government?
    2. In determining what commodities should be produced?
    3. In distributing wealth?

Source: Harvard University Examinations. Papers set for final examinations in history, history of science, government, economics, philosophy, social ethics, education, fine arts, music in Harvard College. June, 1913. Cambridge, MA., pp. 45-46.

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THE HISTORY OF MODERN SOCIALISM

Course Description
Economics 16. The History of Modern Socialism

This course will be divided into three parts. First, the works of Marx and Engels will be minutely analyzed and discussed. Then their sources will be studied with a view to ascertaining the historical origin of the different elements of scientific socialism. Finally the various recent interpretations, restatements, and criticisms of the Marxian doctrine will be examined.
The course will be conducted by means of reports and informal discussions. It will involve reading in German and French as well as in English.

Source: From the Division of History, Government, and Economics 1912-13. Official Register of Harvard University, p. 64.

Course Enrollment
Spring term, 1913

Economics 16. The History of Modern Socialism. Asst. Professor Rappard.

Total 4: 4 Graduates.

Source: Harvard University. Report of the President of Harvard College, 1912-13, p. 58.

Mid-year Exam 1912-13
ECONOMICS 16

  1. (a) When and where was Marx born? Where did he spend his childhood? Where did he receive his secondary school training?
    (b) What do you know of his ancestry? of his immediate family surroundings? of his relations to the Westphalens?
    (c) What were his first strong intellectual interests? Where and how were they aroused and stimulated?
    Discuss briefly the influence of these various factors on his later social philosophy.
  2. Give a chronological bibliography of Marx’s and Engels’s works down to 1870.

Answer any 4 of the following 6 questions.

  1. Is there any part of the Communist Manifesto which may with certainty be exclusively attributed to Marx? to Engels? State your reasons.
  2. When and how was Marx’s attention first called to economic matters? How do we know it?
  3. In which of Marx’s works would you look for the following passages?
    (a) “If the value of a commodity is determined by the quantity of labor required to produce it, it naturally follows that the value of labor, or wages, must be equally determined by the quantity of labor which is necessary to produce the wages.”
    (b) “In order to take place, revolutions must have a passive element a material basis. Theory is never realized in a people, except in sofar as it is the realization of the wants of the people.
    State your reasons.
  4. Where, in Marx’s works, do we find the first clear statement of the class struggle theory? Do you recall any case or cases in which he attempted to apply it to the actual interpretation of history? Did these attempts in any particular modify the doctrine as he first expounded it?
  5. How does Marx explain:—
    (a) the value: of unimproved land? of diamonds? of commodities produced by highly skilled labor?
    (b) the relation between higher prices and more abundant money, consequent upon the increased production of gold in the sixteenth century?
  6. To which work or works of Marx would you refer a student who, having a week at his disposal for the task, wished to become acquainted with his fundamental doctrines? State your reasons.

Source: Harvard University Archives. Mid-year examinations, 1852-1943. Box 9, Bound volume: Examination Papers, Mid-Years. 1912-13.

Final Exam 1912-13
ECONOMICS 16
June, 1913

  1. Fill out the blanks in the following table according to the Marxian phraseology and theory.
Con-
stant capital		 Vari-
able capital		 Rate of surplus value Capital con-sumed Indi-vidual rate of profit Value of commo-dities pro-duced Cost price of commodities produced Average rate of profit Price of com-modities Deviation of price from value
90 10 50% 20
80 20 50% 10
70 30 50% —
  1. “The theory of value which Marx presents is a variation of the familiar labor-value doctrine.” Discuss.
  2. State the Marxian theory of rent.
  3. What is meant by the Bernstein-Kautsky controversy? State three of the principal points involved, with the arguments advanced on both sides.
  4. What, according to Skelton, are the distinctive features of Utopianism? How does Skelton classify the Utopian doctrines?
  5. What, according to Skelton, are the two “quite distinct interpretations” of which the Marxian materialist conception of history is susceptible?
  6. “In spite of himself, Marx was the last of the classical economists.” How does Skelton justify this assertion?
  7. “Had the third volume of ‘Capital’ appeared at the same time as the first, little would have been heard about ‘exploitation’ from socialist platforms.” Why not, according to Skelton?

Source: Harvard University Examinations. Papers set for final examinations in history, history of science, government, economics, philosophy, social ethics, education, fine arts, music in Harvard College. June, 1913. Cambridge, MA., pp. 54-5.

Image Source: William Emmanuel Rappard in the Harvard Class Album, 1912.

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Exam Questions Harvard Socialism Suggested Reading Syllabus

Harvard. Readings and Exams for Methods of Social Reform. Carver, 1902-03

Thomas Nixon Carver

 

“The trouble with radicals is that they only read radical literature, and the trouble with conservatives is that they don’t read anything.”

Thomas Nixon Carver quoted by John Kenneth Galbraith (A Life in Our Times)

This conservative Harvard economic theorist regularly taught the course on schemes of economic reform at Harvard early in the 20th century. He was certainly more forgiving than sympathetic to his radical subjects. 

Variations of this course syllabus have been transcribed earlier here at Economics in the Rear-view Mirror:

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Course Description

[Economics] 14. Methods of Social Reform, including Socialism, Communism, the Single Tax, etc. Tu.,Th, at 1.30. Professor Carver.

The purpose of this course is to make a careful study of those plans of social amelioration which involves either a reorganization of society, or a considerable extension of the functions of the state. The course begins with an historical study of early communistic theories and experiments. This is followed by a critical examination of the series of the leading socialistic writers, with a view to getting a clear understanding of the reasoning which lies back of socialistic movements, and of the economic conditions which tend to make this reasoning acceptable. A similar study will be made of Anarchism and Nihilism, of the Single Tax Movement, of State Socialism and the public ownership of monopolistic enterprises, and of Christian Socialism, so called.

Morley’s Ideal Commonwealths, Ely’s French and German Socialism, Marx’s Capital, Marx and Engels’s The Communist Manifesto, and George’s Progress and Poverty will be read, besides other special references.

The course will be conducted by means of lectures, reports, and classroom discussions.

Source: Harvard University, Faculty of Arts and Sciences. Division of History and Political Science comprising the Departments of History and Government and Economics 1902-03. The University Publications, New Series, No. 55 (June 14, 1902), p. 42

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Course Enrollment
(Harvard, 1902-03)

[Economics] 14. Professor Carver.— Methods of Reform. Socialism, Communism, the Single Tax, etc.

Total 15: 2 Graduates, 8 Seniors, 2 Juniors, 1 Sophomore, 2 Others.

Source: Harvard University. Report of the President of Harvard College, 1902-03, p. 67.

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Course Enrollment (Radcliffe, 1902-03)

[Economics] 14. Professor Carver.— Methods of Social Reform.

Total 6: 4 Undergraduates, 2 Others.

Source: Radcliffe College. Report of the President of Radcliffe College, 1902-03, p. 43.

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Economics 14
[handwritten note: 1902-03]

Topics and References
Starred references are prescribed

COMMUNISM

A
Utopias
1. Plato’s Republic
2. *Sir Thomas More.   Utopia.
3. *Francis Bacon.   New Atlantis.
4. *Tommaso Campanella.   The City of the Sun. (Numbers 2, 3, and 4 may be found in convenient form in Morley’s Ideal Commonwealths.)
5. Etienne Cabet.   Voyage en Icarie.
6. Wm. Morris.   News from Nowhere.
7. Edward Bellamy.   Looking Backward.

 

B
Communistic Experiments
1. *Charles Nordhoff.   The Communistic Societies of the United States.
2. Karl Kautsky.   Communism in Central Europe in the Time of the Reformation.
3. W. A. Hinds.   American Communities.
4. J.H. Noyes.   History of American Socialisms.
5. J. T. Codman.   Brook Farm Memoirs.
6. Albert Shaw.   Icaria.
7. G.B. Landis.   The Separatists of Zoar.
8. E.O. Randall.   History of the Zoar Society.

 

SOCIALISM

A
Historical
1. *R. T. Ely. French and German Socialism.
2. Bertrand Russell. German Social Democracy.
3. John Rae. Contemporary Socialism.
4. Thomas Kirkup. A History of Socialism.
5. W. D. P. Bliss. A Handbook of Socialism.
6. Wm. Graham. Socialism, New and Old.
7. [Jessica Blanche] Peixotto. The French Revolution and Modern French Socialism.

 

B
Expository and Critical
1. *Albert Schaeffle. The Quintessence of Socialism.
2. Albert Schaeffle. The Impossibility of Social Democracy.
3. *Karl Marx. Capital.
4. *Karl Marx and Fredrick Engels. The Manifesto of the Communist Party.
5. Frederick Engels. Socialism: Utopian and Scientific.
6. E. C. K. Gonner. The Socialist Philosophy of Rodbertus.
7. E. C. K. Gonner. The Socialist State.
8. Bernard Shaw and others. The Fabian Essays in Socialism.
9. The Fabian Tracts.
10. R. T. Ely. Socialism: An Examination of its Nature, Strength, and Weakness.
11. Edward Bernstein. Ferdinand Lassalle.
12. Henry M. Hyndman. The Economics of Socialism.
13. Sydney and Beatrice Webb. Problems of Modern Industry.
14. Gustave Simonson. A Plain Examination of Socialism.
15. Sombart. Socialism and the Social Movement in the Nineteenth Century.
16. Vandervelde. Collectivism [and Industrial Evolution].

 

ANARCHISM

1. *Leo Tolstoi. The Slavery of Our Times.
2. Wm. Godwin. Political Justice.
3. Kropotkin. The Scientific Basis of Anarchy. Nineteenth Century, 21: 238.
4. Kropotkin. The Coming Anarchy. Nineteenth Century, 22:149.
5. Elisée Reclus. Anarchy. Contemporary Review, 45: 627. [May 1884]

 

RELIGIOUS AND ALTRUISTIC SOCIALISM

1. Lamennais. Les Paroles d’un Croyant.
2. Charles Kingsley. Alton Locke.
3. *Kaufman. Lamennais and Kingsley. Contemporary Review, April, 1882.
4. Washington Gladden. Tools and the Man.
5. Josiah Strong. Our Country.
6. Josiah Strong. The New Era.
7. William Morris, Poet, Artist, Socialist. Edited by Francis Watts Lee. A collection of the socialistic writings of William Morris.
8. Ruskin. The Communism of John Ruskin. Edited by W. D. P. Bliss. Selected chapters from Unto this Last, The Crown of Wild Olive, and Fors Clavigera.
9. Carlyle. The Socialism and Unsocialism of Thomas Carlyle. Edited by W. D. P. Bliss. Selected chapters from Carlyle’s various works. [Volume 1; Volume 2]

 

AGRARIAN SOCIALISM

1. *Henry George. Progress and Poverty.
2. Henry George. Our Land and Land Policy.
3. Alfred Russell Wallace. Land Nationalization.

 

STATE SOCIALISM

An indefinite term, usually made to include all movements for the extension of government control and ownership, especially over means of communication and transportation, also street lighting, etc.

1. R. T. Ely. Problems of To-day. Chs. 17-23.
2. J. A. Hobson. The Social Problem.

 

WORKS DISCUSSING THE SPHERE OF THE STATE IN SOCIAL REFORM

1. Henry C. Adams. The Relation of the State to Industrial Action.
2. *D. G. Ritchie. Principles of State Interference.
3. D. G. Ritchie. Darwinism and Politics.
4. *Herbert Spencer. The Coming Slavery.
5. W. W. Willoughby. Social Justice.

Source:  Harvard University Archives. Syllabi, course outlines and reading lists in economics, 1895-2003. Box 1, Folder “Economics, 1902-1903”.

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Economics 14
Mid-year Examination, 1902-03

  1. Give an account of More’s Utopia.
  2. Is there any ground for supposing that Utopian schemes have influenced social development? Give reasons.
  3. What were the periods of greatest activity in the founding of communistic settlements in America? What stimulated the activity in each period, and what were the general conditions favorable to such activity?
  4. Does the history of communistic experiments in America throw any light on the probable success or failure of socialism on a large scale? Give reasons.
  5. Give an account of the communistic plans and activities of Etienne Cabet.
  6. Describe the Communist Manifesto. What place does it hold in socialistic literature, and why?
  7. Compare the socialism of Rodbertus with that of Karl Marx.
  8. Outline Marx’ theory of surplus value.

Source: Harvard University Archives. Mid-year Examinations 1852-1943. Box 6. Papers (in the bound volume Examination Papers Mid-years 1902-1903).

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Economics 14
Year-End Examination, 1902-03

  1. Give some account of Fourier and the Fourieristic experiments in the United States.
  2. Distinguish between Utopian and Scientific Socialism.
  3. What part has religion played in the history of Communistic Experiments?
  4. How does Karl Marx explain the existence of poverty?
  5. Trace briefly the history of the German Social Democratic Party.
  6. Distinguish between land and other forms of property.
  7. How do you account for the share of the capitalist in distribution?
  8. Is there any relation between the unequal distribution of workers among different occupations and the unequal distribution of wealth?
  9. What is meant by the term “Natural Monopolies.”
  10. Define “Christian Socialism” and explain how it differs from Marxian Socialism.

Source:  University Archives. Examination Papers 1873-1915. Box 6. Papers Set for Final Examinations in History, Government, Economics, History of Religions, Philosophy, Education, Fine Arts, Architecture, Landscape Architecture, Music in Harvard College, June 1903 (in the bound volume Examination Papers 1902-1903).

Image Source: Harvard Class Album, 1906.

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Exam Questions M.I.T. Suggested Reading Syllabus

M.I.T. Core Economic Growth and Dynamics. Readings and Final Exam. Solow, 1968

 

The reading list and examination questions for the “Economic Growth and Short-run Fluctuations” course taught by Robert Solow in the core graduate macro sequence has been posted earlier for 1966. There were many changes in the readings chosen between 1966 and 1968.

Solow’s 1973 course material for a later revised version (Growth and Capital Theory), that was moved to be the final course in the core macro sequence has also been posted.

Here a glimpse at what students thought about this course (as well as the other courses and instructors in the core theory courses, both micro and macro).

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R.M. Solow
Spring 1968

READING LIST
14.452

As a background text you should have a copy of R.G.D. Allen, Macro-Economic Theory (Macmillan, 1967). For review, read Chapters 1, 3, 7, 8.

ECONOMIC GROWTH

  1. Factual Basis

Kendrick & Sato, “Factor Prices, Productivity and Growth”, American Economic Review, December 1963.
Bureau of the Census, Long-Term Economic Growth, 1860-1965  (This is an excellent compendium of time series. You should spend a few hours with it, and might like to buy a copy from Supt. of Documents, Government Printing Office, Washington, D.C. 20402, $2.75)
Thurow & Taylor, “The Interaction between the Actual and Potential Rates of Growth,” Review of Economics and Statistics, November, 1966.

  1. One-Sector Real Theory

Allen, Chaps. 11, 14.
Hahn & Matthews, “The Theory of Economic Growth: A Survey”, Economic Journal, December 1964, Parts I, II except pp. 812-21.
Modigliani, “Comment” in Behavior of Income Shares (NBER), pp. 39-50.
(Optional: Johnson, “The Neo-Classical One-Sector Growth Model…,” Economica, August, 1966, pp. 265-79 only).

  1. Technical Progress

Allen, Chaps. 13, 15.
Solow et al., “Neoclassical Growth with Fixed Factor Proportions,” Review of Economic Studies, April 1966, pp. 27-89 only).

  1. One-Sector Monetary Theory

Tobin, “Money and Economic Growth”, Econometrica, October 1965.
Sidrauski, “Inflation and Economic Growth,” J.P.E., December, 1967.
Johnson, pp. 279-87 in article cited above.
See also Tobin-Johnson exchange in Economica, February, 1967.

  1. The Golden Rule and Optimal Growth

Marty, “The Neoclassical Theorem”, A.E.R., December 1964.
Diamond, “National Debt in a Neoclassical Growth Model”, A.E.R., December 1965, esp. pp. 1126-1135.
Koopmans, “Objectives, Constraints, and Outcomes in Optimal Growth Models,” Econometrica, January, 1967.

  1. Two (or more) Sector Real Theory

Hahn & Matthews, pp. 812-21.
Allen, Ch. 12.
(Optional: Shell & Stiglitz, “Allocation of Investment in a Dynamic Economy,” Quarterly Journal of Economics, November, 1967).

  1. Income Flows in Long-Run

Thurow, “A Policy Planning Model of the American Economy,” dittoed.

SHORT-RUN FLUCTUATIONS

  1. Cyclical Mechanisms

Samuelson, “Interaction between Multiplier Analysis and the Principle of Acceleration”, Review of Economics and Statistics, 1939, reprinted in A.E.A., Readings in Business Cycle Theory.
Metzler, “The Nature and Stability of Inventory Cycles”, Review of Economics and Statistics, 1941.
Kaldor, “A Model of the Trade Cycle”, Economic Journal, 1940, reprinted in Hansen and Clemence, Readings in Business Cycles and National Income and in Kaldor, Essays on Economic Stability and Growth.

  1. Income Analysis Models

Klein, “The Econometrics of the General Theroy,” Ch. IX in The Keynesian Revolution, SECOND edition.
Okun, “Measuring the Impact of the 1964 Tax Reduction,” xerox.
Surte, “Forecasting and Analysis with an Econometric Model,” A.E.R., March, 1962.
De Leeuw & Gramlich, “The Federal-Reserve-MIT Econometric Model,” Federal Reserve Bulletin, January, 1968.

  1. Inflation

Johnson, “A Survey of Theories of Inflation,” in Essays in Monetary Economics.
Solow, “Recent Controversies in the Theory of Inflation,” dittoed.
Solow & Stiglitz, “Output, Employment and Wages in the Short Run,” dittoed.

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FINAL EXAMINATION
14.452
May 23, 1968

Please answer each question in a separate examination booklet. Indicate on the front page of each booklet whether you are seeking only a grade in 14.452 or a grade in the general examination in economic theory. Those who seek only a grade in 14.452 should answer two questions in Part I and two questions in Part II. Those who are taking the general examination and economic theory should answer two questions in Part II and two in Part III.

Part I

  1. Construct a difference-equation model embodying the following assumptions:
    1. Consumption is a linear function of disposable income lagged one time-unit;
    2. Tax revenue is proportional to national product;
    3. Investment is the sum of a component proportional to the current change in consumption and the component proportional to national product lagged one time-unit;
    4. Imports are proportional to national product lagged one time-unit; exports constant;
    5. Government purchases are constant.

Write down formally the conditions for and an oscillatory response of the model to disturbance. When are the oscillations damped? How do variations in the tax rate affect these conditions? Suppose part of government purchases were made negatively proportional to the last observed change in national product?

  1. Why is technical progress an important part of the usual model of economic growth? Could increasing returns to scale play the same role? What is the special role of purely labor-augmenting (i.e. Harrod-neutral) technical progress?
  2. Imagine a planned economy choosing among steady states in the one-sector model, without technical progress. The planner values both consumption per head and capital per head (as a measure of national strength, say) and his preferences can be expressed by a system of conventionally-shaped indifference curves in consumption per head and capital per head.

Use this indifference map and the requirements for a steady state to show how the optimal steady-state is chosen. Prove that the optimal capital per head will exceed the “Golden-Rule” (maximal consumption per head) level. Show what happens to the optimal position if the rate of population growth increases. Discuss briefly the case of a one-time upward shift in the production function.

 

Part II

  1. In the generalized multiplier-accelerator model, the equation \frac{dK}{dt}=I\left( Y,K \right) means that “investment decisions are always carried out”, so that when I\left( Y,K \right)\ne S\left( Y \right) “unintended consumption or saving” occurs. Replace the above equation with \frac{dK}{dt}=S\left( Y \right), and interpret and analyze the resulting model. Compare its behavior with this with the case analyzed in class.
  2. Suppose I =I(Y,K) and S= S(Y) are the schedules of desired investment and saving. In what sense is (I-S) a measure of excess demand in the aggregate commodity market?
    How is it that no specific supply variables (labor force, for example) appear in this measure? Under what circumstances is it natural to suppose that \frac{dY}{dt} responds to (I-S)? (Y = real output, P = commodity price level). Under what circumstances is it natural to suppose that \frac{dP}{dt} responds to (I-S)?
  3. Consider it a one-sector non-monetary model of growth under the following assumptions:
    1. The production function in intensive form is q= Akb;
    2. The wages equal to the marginal product of labor;
    3. Investment demand is such that the after-tax return on capital is always at a target level r*;
    4. There is a tax on profits at rate t in the government spends all its revenue on consumption;
    5. The savings rates from wages and after-tax profits are both equal to a constant s.

Find the tax rate that will permit a steady-state at full employment. When will it be between zero and one? How does it change if this changes? Interpret.

  1. Considered a one-sector growth model, with two factors of production (capital and labor), constant returns to scale, and no technical progress. Suppose that the propensity to save out of profits and capital gains is equal to one, and the propensity to save out of wages and transfer payments (taxes = negative transfers) is zero.

Money, which is non-interest-bearing government debt, is the only alternative asset to capital. The desired money-capital ratio is of the form \frac{m}{k}=L\left( {f}'\left( k \right)+{{\left( {{\dot{p}}}/{p}\; \right)}^{e}} \right) where m is the real per capita stock of money,k is the capital-labor ratio, and {{\left( {{\dot{p}}}/{p}\; \right)}^{e}} is the expected rate of inflation which is equal to the actual rate \left( {{\dot{p}}}/{p}\; \right) in the steady-state.

  1. Government purchases are zero and the budget deficit, which is equal to the excess of transfers over taxes, is financed by issuing money.
    1. Describe the steady-state characteristics of the model.
    2. Find the rate of inflation that maximizes steady-state consumption per head.
    3. Suppose that {{\left( {{\dot{p}}}/{p}\; \right)}_{0}} is the rate of inflation in (b) that maximizes steady state consumption per head. Would a higher rate of inflation lead to a higher or lower long-run capital-labor ratio?

 

Part III

  1. Write a comprehensive essay on the subject of “The Problem of Weights in National Income and Index-Number Construction”.
    Explain the criteria which are used, should be used (for what purpose?) and why.
  2. Discuss the economic effects of an increase in the stock of money. Include an evaluation of the positions of several (not less than two) prominent economists familiar to you. How would you test the correctness of their positions?
  3. Discuss the effects of inflation on the level of real investment.

 

Source: Duke University, David M. Rubenstein Library. Economists’ Papers Archives. Papers of Robert M. Solow, Box 67, Folder “Exams”.

Image Source:  Robert Solow (right) from MIT Museum website.

Categories
Chicago Exam Questions Undergraduate

Chicago. Introduction to money and banking. Final exam. A.G. Hart, Summer 1933

 

 

In an earlier post you will find (i) the official course description for the undergraduate course “Introduction to Money and Banking” taught by A. G. Hart at the University of Chicago during the mid-1930s as well as (ii) the course syllabus.

A subsequent post provides the final exam for the Fall Quarter 1932; midterm exam for the Summer Quarter 1933; final exam for the Winter Quarter 1933; final exam for the  Winter Quarter 1934; and final exam for the Fall Quarter 1935.

Today I found the following misfiled final examination for the summer quarter of 1933. Before I forget to fill the gap, I add this item to the Economics in the Rear-view mirror collection of artifacts.

_______________________

A.G. Hart
Econ 230

FINAL EXAMINATION, AUGUST 25, 1933

Answer the first two questions and any two others. (One hour)

  1. It has been proposed to require that no bank in the U.S. be permitted to accept deposits to an amount over five times its capital and surplus; any bank wishing to expand deposits after reaching this limit would then have to increase its capitalization. Would this regulation make the depositor’s position more secure than at present? Explain.
  2. Briefly contrast the monetary series of Fisher and Hawtrey.
  3. Discussed the advantages and disadvantages of the scheme just going into effect for guaranteeing bank deposits through a central fund derived largely from assessments on the insured banks.
  4. The circulation of Federal Reserve Notes has decreased from about $4,300,000,000 on March 15 to about $3,000,000,000 last week. Officials of the Federal Reserve System deny that this constitutes deflation, and insisted does not run counter to the government’s announced program of inflation. Is the denial justified? Discuss.
  5. Outline an explanation for the rise of the price of francs from a bit less than four cents early in April to over five cents recently. If prices in this country do not rise appreciably above the present level, what is likely to happen to the price of francs in dollars over the next year? How will these prospects be affected by repudiation or resumption of foreign war debt payments due to the U.S.? Justify your answer.
  6. By what means can the Federal Reserve Banks stop an undesirable credit expansion? An undesirable credit contraction? Evaluate the effectiveness of these powers.
  7. Explain the difference between Federal Reserve Notes and the recent issues of  Federal Reserve  Bank  Why is there just now a tendency for the circulation of the former to contract and that of the latter to expand from week to week?

 

Source:  Columbia University Libraries, Manuscript Collections. Albert Gailord Hart Collection. Box 60, “Folder Exams: CHI Qualifying”.

Image source: “Albert Gailord Hart, Economist, Dead at 88.” Columbia University Record, Vol. 23, No. 5 (October 3, 1997)

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Exam Questions Harvard Syllabus

Harvard. Economics of Transportation and Public Utilities. Exams, Readings for Public Utilities. Crum, Cunningham, C.O. Ruggles, 1940-41

 

 

 

The following course on public utilities and transporation regulation was co-taught by William Leonard Crum, professor of statistics in the department of economics, William J. Cunningham, professor of railroad operations and transportation at the Graduate School of Business, and  Clyde Orval Ruggles, professor of public utility management at the Graduate School of Business.

Cunningham was a member of the original faculty of the Harvard Business School, having gone from working in railroad management and administration to teaching railroad operations. He had an honorary A.M. degree from Harvard in 1921 but apparently never possessed another formal academic credential (other than an honorary D.Sc. awarded him upon his 1946 retirement by the Clarkson College of Technology).

The only part of the course syllabus in the Harvard Archives’ course folder was for the portion taught by Professor Ruggles, transcribed below.

Looking for other biographical information about William J. Cunningham, I just discovered that there is a folder with course material at Harvard Business School’s Baker Library: Baker Library Special Collections, Harvard Business School, Harvard University William J. Cunningham papers Series II. Teaching Records, 1920-1941 Economics 163, 1940-1941.

_____________________________

Course Announcement

Economics 163. Economics of Public Utilities (including Transportation). Mon., Wed., at 4, and a third hour at the pleasure of the instructors. Professors Crum, Cunningham, and Ruggles.

This course deals with the economic problems of the Public Utility industries including railways. Attention is given to rates and rate structures, valuation, the issue and regulation of securities, utility managements, the relation of the commissions to the courts, and public ownership of utility enterprises.

Source: Division of History, Government, and Economics containing an Announcement for 1940-41. Official Register of Harvard University, Vol. XXXVII No. 51 (August 15, 1940), p. 62.

_____________________________

Course Enrollment

[Economics] 163. Professors Crum, Cunningham and Ruggles. — Economics of Public Utilities (including Transportation).

Total 18: 9 Graduates, 7 Seniors, 2 Radcliffe.

Source: Harvard University. Report of the President of Harvard College, 1940-41, p. 60.

 

_____________________________

READINGS FOR ECONOMICS 163

[Note: only for the Ruggles’ portion of the course]

Unless otherwise indicated, all references marked with the asterisk are required.

March 17

Legal and Economic Criteria Regarding the Public Utility Concept.

Read three of the following marked with the asterisk:

*Clay, C. M. Regulation of Public Utilities (1932). Part I, pp. 3-130.

*Jones & Bigham. Principles of Public Utilities (1931). Chapter II, “Characteristics of Public Utilities,” pp. 62-101.

*Wilson, Herring and Eutsler. Public Utility Industries. Chapter I, “The Characteristics of Public Utilities,” pp. 1-25.

Glaeser, Outlines of Public Utility Economics (1927).  Chapter I, “Nature and Scope of Public Utility Economics,” pp. 1-22.

*Thompson and Smith, Public Utility Economics (1941). Chapter IV, “What Is a Public Utility?” pp. 56-74;  Chapter V, “Economic Characteristics of Public Utilities,” pp. 75-98.

March 19

Competition, Load Factor, Output, and Economic Conditions as Affecting Rate Making.

*Behling, B.N. Competition and Monopoly in Public Utility Industries (University of Illinois Press, 1938). A Ph.D. thesis, p. 175.

*Bernstein, E.M. Public Utility Rate Making and the Price Level (1937). Chapter IX, “Rate Making in Prosperity and Depression,” pp. 105-119.

*Clark, J.M. Studies in the Economics of Overhead Costs (1923). Chapter XVI, “Public Utilities,” pp. 318-334.

Eisenmenger, H.E. Central Station Rates in Theory and Practice (1921). Appendix II, Explanation of the Terms “Load Curve” and “Load Factor” (For the Non-technical Reader), pp. 260-266.

Hardy, C. O. Recent Growth of the Electric Light and Power Industry. The Brookings Institution, Pamphlet Series Vol. I, No. 1, April, 1929, p. 60.

March 24

Rate Structures; Reasonableness of Rates; Theory of Rate Making in the TVA Act.

*Nash, L.R. Rate Structures (1933). Chapter II, “Rate Classifications and Forms,” pp. 11-29; Chapter IX, “Promotional Rates,” pp. 152-197; and Chapter XIII, “Economic Factors in Rate Making,” pp. 296-330.

*Jones and Bigham. Op. Cit. Chapters VII and VIII, “Rate Structures,” pp. 288-386.

*Bauer. Effective Regulation of Public Utilities (1925). Chapter XI, “Rate Schedules,” pp. 275-301.

Barker, H. Public Utility Rates (1917). Chapter III, “Various Bases for Rates,” pp. 10-17.

Bryant and Hermann. Elements of Utility Rate Determination (1940).

Eisenmenger, H.E. Op. Cit. Section II, “The Price of Electric Service,“ pp. 62-102.

March 26

Discrimination in Rate Making; Service and Minimum Charges.

*Havilik, H.F. Service Charges in Gas and Electric Rates (1938). A Ph.D. thesis, Columbia University, p. 234.

*Kennedy, W.F. The Objective Rate Plan (1937, Columbia University Press), p. 83.

Nichols, E. Public Utility Service and Discrimination (1928). Chapter XXVII, “Discrimination in Rates Generally,” pp. 856-901; Chapter XXVIII, “Rate Discrimination in Favor of Particular Classes,” pp. 902-934; Chapter XIX, “Rate Discrimination in Favor of Public Welfare, Educational, and Social Organizations,” pp. 935-949; Chapter XXX, “Rate Discrimination in Favor of Contract Holders of Equipment,” pp. 950-966; Chapter XXXI, “Rate Discrimination in Favor of Large Consumers and Industrial and Commercial Enterprises,” pp. 967-975.

Batson. The Price Policies of German Public Utility Undertakings (1933). Chapter IX, “Electricity-Supply Charges,” pp. 143-182; Chapter XII, “Conclusion,” pp. 213-216.

April 7

The Geographical Unit for Rate Making; Municipal, Statewide, and Regional Uniformity in Rates.

*Decision of Wisconsin Supreme Court in Eau Claire v. Railroad Commission. Public Utility Reports (P.U.R.) 1922 D666.

*Georgia and Alabama Commissions Install Uniform Electric Rates. Public Utility Fortnightly, Vol. IV, pp. 773-774 (1929).

*Decision of the Pennsylvania Superior Court in Borough of Ambridge v. Pennsylvania Commission, 31 P.U.R. (N.S.) 50. (1939).

*Annual Report, Secretary of the Interior, 1938, p. 84 (Bonneville Rates).

*Commissioner Maltbie’s (New York) Criticism of Implications in Federal Power Commission’s Data on Public Utility Rates. Electrical World, January 14, 1939, p. 112.

*Statement of Chairman of Tennessee Rural Electrification Authority. Public Utility Fortnightly, Vol. XXV, p. 631 (May 9, 1940).

*Bonbright, J.C. Price Policy and Price Behavior. Papers and Proceedings of American Economic Association, Vol. XXX, No. 5, February, 1941, pp. 379-389.

April 9

The Rate Base; Theories in (a) Federal Water Power Act, 1920; (b) Transportation Act of 1920.

*Bonbright, J. C. Valuation of Property (1937). Vol. II, Chapter XXX, “Valuation for Rate Making Purposes: Economic Theory versus Legal Doctrine,” pp. 1078-1110; Chapter XXXI, “Valuation for Rate Making Purposes: Methods of Appraisal; Non-utility Price Fixing,” pp. 1111-1165.

*Bauer, John. Op. Cit. Chapter IV, “Valuation Primarily a Legislative Responsibility,” pp. 47-60; Chapter V, “Court Decisions on Valuation” pp. 61-103; Chapter IX, “Systematic Maintenance of the Rate Base,” pp. 228-252.

Hartman, H.H. Fair Value (1920). Chapter IV, “The Theory of Valuation,” pp. 77-93.

*Glaeser. Op. Cit. Chapter XIV, “The Movement for Physical Valuation,” pp. 311-338.

*Clark. Social Control of Business (2d ed., 1939). Chapter XX, “Fair Value and Fair Return — The Legal Doctrine,” pp. 303-319; Chapter XXI, “Fair Earnings and Fair Value from the Economic Standpoint — Two Phases of One Fact,” pp. 320-336.

Tendency of Supreme Court decisions to favor reproduction cost less depreciation. Indicated in Q.J.E. XVII (1912-1913), pp. 27 and 616.

Graham, W.J. Public Utility Valuation; Reproduction Cost as a Basis for Depreciation and Rate-Base Determination. Studies in Business Administration, University of Chicago (1934), Vol. IV, No. 3, p. 95.

Barnes, I.R. “Shall Going Value Be Included in the Rate Base?” Journal of Land and Public Utility Economics, November, 1940, pp. 430-437.

April 14

Rate of Return; Capital Structure; Control of Investment and Issue of Securities.

*Bernstein. Op. Cit. Chapter VIII, “The Fair Rate of Return,” pp. 91-104.

*Smith, N.L. The Fair Rate of Return in Public Utility Regulation (1932). Chapter I, “Regulation, Valuation and the Rate of Return,” pp. 1-48; Chapter II, “Elements of the Fair Return,” pp. 49-79.

*Thompson and Smith. Op. Cit. Chapter XVII, “Fair Rate of Return,” pp. 349-361.

*Waterman, M.H. Financial Policies of Public Utility Holding Companies, Michigan Business Studies, Vol. V (1932), Chapter 4, “Trading on the Equity,” pp. 78-99.

*Jones and Bigham. Op. Cit. Chapter XI, “Regulation of Securities,” pp. 495-547.

Report of the Public Utilities Division, Securities and Exchange Commission, on “The Problem of Maintaining Arm’s Length Bargaining and Competitive Conditions in the Sale and Distribution of Securities of Registered Public Utility Holding Companies and Their Subsidiaries” (December, 1940), p. 46. (Comprehensive Appendices A to F inclusive.)

April 16

Sliding Scale and other “Automatic” Devices for Controlling Rates and Rate of Return; Rate of Return and Efficiency in Management.

*Bussing, Irwin. Public Utility Regulation and the So-Called Sliding Scale. Columbia University Press, 1936, p. 174. (A Ph.D. thesis)

*Clark. Social Control of Business (2d ed., 1939). Chapter XXII, “Regulation, Service, and Efficiency,” pp. 337-349.

Morgan, C.S. Regulation and Management of Public Utilities (1923). Chapter V, “Methods at Present Used to Promote Efficiency in the Management of Public Utilities,” pp. 144-233.

April 21

The Holding Company; Corporate Simplification and Physical Integration under the Public Utility Holding Company Act.

*Bonbright and Means. The Holding Company (1932). Chapter V, “The Public Utility Holding Company — Organization of the Major Systems,” pp. 90-148; Supplement to Chapter VI, “Advantages and Disadvantages of Different Types of Utility Integration,” pp. 188-199.

*Lillienthal, D.E. “The Regulation of the Holding Company.” 29 Columbia Law Review 404-440 (April, 1929).

*Wright, Warren. “Tests of Reasonableness for Charges of Services from Holding Company to Subsidiary.” Journal of Land and Public Utility Economics, Vol. 6 (November 1930), pp. 417-423.

Waterman, M.H. Op. Cit. Chapter 3, “Parent Company versus Subsidiary Company Financing,” pp. 45-77.

National Association of Railroad and Utilities Commissioners. Proceedings of Fortieth Annual Convention, 1928. “Report of the Committee on Capitalization and Intercorporate Relations,” pp. 504-511.

April 23

Regulatory Policies and Efficiency and Inefficiency in Management.

*Morgan, C.S. Op. Cit. Chapters I-III, pp. 1-117, and Chapter VII, pp. 307-346.

*Lyon, Abramson, and Associates. Government and Economic Life (1940). Chapter XXI, Sec. I, “The Rationale of Regulation,” pp. 618-625; Sec. II, “The Structure and Process of Regulation,” pp. 626-671; Sec. III, “The Substantive Problems of Regulation,” pp. 672-728.

Bauer, John. Op. Cit. Chapter XIII, “Effect upon Service and Efficiency of Operation,” pp. 328-349.

Fainsod, Merle. “Regulation and Efficiency in Management.” Yale Law Review, May, 1940, pp. 1190-1211.

April 28

National Power Policy; Public Ownership and the Government Corporation.

Voskuil, W.H. The Economics of Water Power Development (1928). Chapters I-III, pp. 1-43.

*Bird, F.L. The Management of Small Municipal Lighting Plants (1932). Chapters II-III, pp. 9-53, and Chapters VIII-IX, pp. 106-139.

Hodge, C.L. The Tennessee Valley Authority (1938). Chapter II, pp. 29-49; Chapter VIII, 201-248.

Mason, E.S. The Street Railway in Massachusetts (1932). Chapters 8 and 9, pp. 163-192.

Dimock, M.E. British Public Utilities and National Development (1933). Chapter I, “The Setting,” pp. 19-62; Chapter VI, “National Electricity Planning,” pp. 195-227; Chapter VII, “Electrical Progress and the National Economy,” pp. 228-262.

McDiarmid, John. Government Corporations and Federal Funds (1936). Chapters I and II, pp. 1-50; Chapter IX, “Conclusions,” pp. 209-232.

*Taussig. Principles of Economics. Vol. II, Chapter 66, pp. 472-489.

*Lyon, Abramson, and Associates. Op. Cit. Vol. II, Chapter XXI, Sec. IV, “Public Ownership and Operation,” pp. 369-377.

*Clark, J.M. Social Control of Business. Chapter XXIV, “Public Control versus Public Operation,” pp. 369-377.

Abrams, E.R. Power in Transition (1940). Chapter II, “National Power Policies and Activities,” pp. 20-41; Chapter IX, “Threats of Public Power Projects and National Power Policies,” pp. 297-306.

*Bonbright, J.C. Public Utilities and the National Power Policies. (Public lectures at Columbia University, 1940), p. 82.

April 30

Legislative, Judicial, and Administrative Regulation.

*Jones and Bigham. Op. Cit. Chapter III, pp. 102-156, and Chapter IV, pp. 157-190.

*Glaeser. Op. Cit. Chapter VII, “The Common Law Basis of Public Utility Regulation,” pp. 156-180; Chapter VII, “The Constitutional Basis of Public Utility Regulation,” pp. 181-194; and Chapter XXXIII, “General Summary and Forecast of the Development of Regulation,” pp. 733-754.

*Mosher and Crawford. Public Utility Regulation (1933). Chapter IV, “Judicial Review of Commission Determination,” pp. 41-53.

*Clay. Op. Cit. Part III, “Conclusion,” pp. 273-297.

*Fainsod, Merle. “Some Reflections on the Nature of the Regulatory Process.” Chapter X, pp. 297-323, in Public Policy, a Yearbook of the Graduate School of Public Administration, Harvard University (1940), edited by Friedrich, C.J. and Mason, E.S.

Landis, James M. “Crucial Issues in Administrative Law: The Walter-Logan Bill.” Harvard Law Review, May, 1940, pp. 1077-1103.

*National Association of Railroad and Utilities Commissioners, Report of the Committee on Progress in Public Utility Regulation. Utility Regulation and National Defense, December, 1940. Section IV, “Critical Utility Regulatory Problems,” pp. 125-147.

Herring, E.P. Federal Commissioners, A Study of Their Careers and Qualifications. Harvard University Press, 1936, pp. 1-104.

Parsons, R.H. Early Days of the Power Industry (English), 1940. Chapter XI, “Legislation Affecting the Electrical Industry,” pp. 184-200.

Pegrum, D.F. “The Public Corporation as a Regulatory Device.” Journal of Land and Public Utility Economics, August, 1940, pp. 335-343.

Smith, N.L. “The Outlook in Regulation,” Journal of Land and Public Utility Economics, November, 1940, pp. 386-392, and February, 1941, pp. 48-53.

Source: Harvard University Archives. Syllabi, course outlines and reading lists in Economics, 1895-2003. Box 2, Folder “Economics, 1940-41”.

_____________________________

HARVARD UNIVERSITY
ECONOMICS 163
FINAL EXAMINATION
June 1941.

(Answer 6 questions, selecting 3 from Part 1 and 3 from Part 2. Use a separate blue book for each part.)

PART I—TRANSPORTATION

I

In his discussion of the cost of transportation Healy draws a distinction between “joint costs” and “common costs.” Give illustrations which for each of the two groups will make the distinction clear and discuss the bearing of such costs (whether designated as joint or common) on the determination of commodity rates.

II

The commodities clause of the Interstate Commerce Act has since 1908 prohibited a railroad from transporting commodities which it produced or in which it had any direct or indirect interest. That prohibition was continued in the 1940 revision of the Act but it has not been made applicable to common or contract carriers by highway, water or pipe line.

(a) What was the purpose of the prohibition when first applied to railroads in 1908?

(b) Does public interest now require the continuation of the prohibition?

(c) If continued for railroads should it be made applicable also to other carriers, especially common carrier pipe lines?

III

The Transportation Act of 1940 provides for the establishment of a transportation board which, among other things, would investigate and report on “the relative economy and fitness” of the several carriers for transportation service “or any particular classes or descriptions thereof.” Discuss this section of the Act from the following viewpoints:

(a) The need for the creation of such a board

(b) The criteria for the determination of relative fitness

(c) The problems of greatest difficulty in reaching conclusions as to how “there may be provided a national transportation system adequate to meet the needs of the commerce of the United States, of the postal service and of the national defense.”

IV

The present rule of rate making (Section 15a of the 1940 Transportation Act) applying to common carriers by rail, highway, water and pipe line is:

“In the exercise of its power to prescribe just and reasonable rates the Commission shall give due consideration, among other factors, to the effect of rates on the movement of traffic by the carrier or carriers for which the rates are prescribed;to the need, in the public interest, of adequate and efficient railway transportation service at the lowest cost consistent with the furnishing of such service; and to the need of revenues sufficient to enable the carriers, under honest, economical, and efficient management, to provide such service.”

(a) What was the main reason for departing from the principle of the 1920 Act requiring the Commission to set rates so as to yield, for the railroads collectively, a fair return on value?

(b) Why did the railroads object to the inclusion, in first place, of the factor of “effect of rates on the movement of traffic”?

(c) The present law differs from the 1933 law only by the addition of the words “by the carrier or carriers for which the rates are prescribed” (italicized above). What is the significance of the added words?

V

From the viewpoint of a sound financial structure of a railroad discuss the significance of:

(a) The ratio of funded debt to total capitalization

(b) Provision for sinking funds on mortgage bonds

(c) Provision for a stated sum annually, or a percentage of operating revenues, for routine capital improvements, such provision to take precedence in claim on net income over interest charges on income bonds and dividends on stock.

 

PART 2—PUBLIC UTILITY ECONOMICS

VI

Explain the economic significance of a peak demand upon (a) an electric power utility, (b) a gas utility, (c) a local transit utility, and (d) a telephone utility.

VII

Explain the basis upon which utility service should or should not be extended that may not initially cover (a) the utility’s increment costs and (b) in addition to increment costs, some return upon an approved base.

VIII

Distinguish between (a) minimum and (b) service charges for public utility service and explain which type of rate you prefer.

IX

Discuss the economic significance of such modes of rate making as employ (a) such “escalator” devices as fuel clauses and (b) the so-called “sliding scale,” which relates rates to the utility’s rate of return.

X

What is the purpose of a depreciation charge? Of the following methods of determining annual depreciation, explain which you prefer and why: (a) a percentage of gross revenue, and (b) a percentage of depreciable property.

XI

Explain the difference in the theory of valuation of public utility property in (a) the Transportation Act of 1920 and (b) the Federal Water Power Act of 1920. Indicate which of the theories you approve and why.

 

Source: Harvard University Archives. Harvard University. Final examinations 1853-2001.Box 5. Faculty of Arts and Sciences. Papers Printed for Final Examinations—History, History of Religions,…, Government, Economics,…, Military Science, Naval Science. June 1941.

Image Sources:  Crum from the  Harvard Class Album 1941, Cunningham and Ruggles from the Harvard Business School Yearbook, 1946-47 and 1937-38, respectively.

 

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Chicago Exam Questions

Chicago. Money, banking and monetary policy prelim examination, 1956

 

Fourteen graduate students took the prelim exam for the field of money, banking and monetary policy during the summer quarter at the University of Chicago in 1956. These examination questions were found in Milton Friedman’s papers at the Hoover Institution Archives along with the points awarded for each question along with the final grade recommendation by Friedman and the examination committee.

______________________

MONEY, BANKING AND MONETARY POLICY

Preliminary Examination
Summer Quarter, 1956

Write your number and not your name on your examination paper.

Answer all questions. Time: 4 hours. [120 points total]

  1. (a) What is the Keynesian “investment multiplier” in its simplest form? How can it be computed from the consumption function? [5 points]
    (b) Keynes assumed that the consumption function is expressed in wage units and that the average propensity to consume is greater than the marginal propensity. He further assumed as a first approximation that an increase in income is fully reflected in real income with prices stable up to “full employment” and in prices with real income stable, thereafter. What, if any, is the effect of the shift from below full employment to full employment on the numerical value of the “multiplier”? Explain in terms of the properties assigned to the consumption function by Keynes. [15 points]
  1. (a) Compare very briefly the essential parts of the a “fiscal operation” and a “monetary operation,” as they are usually described in the literature, and the way in which they affect prices and employment. Then discuss what the following statement might mean. Is it a meaningful comparison? If not, why not? If so, in what way? “Fiscal policy is more effective than monetary policy.” [10 points]
    (b) Suppose the Treasury engaged in a fiscal operation by running a budget deficit and paid for it by selling bonds to the public. Suppose further the Federal Reserve simultaneously engaged in a monetary operation by selling the public an amount of bonds equal to the deficit. What is likely to be the net effect of these two operations on prices in the short run? In the long run? Explain. What questions of fact did you need to consider in arriving at your answer? [10 points]
  1. “What, by the way of comparison, is likely to be the monetary mechanism of a price-wage spiral? When wages are increased, the immediate finance may be provided either by drawing on firms’ balances which would otherwise have been idle in the short period in question, or by increased borrowing from the banks.” – A. J. Brown
    Discuss, paying special attention to the relation implied between an increase in wages and the willingness of firms to hold smaller cash balances or engage in larger borrowing.
    (a) Discuss both the case of a wage increase in a particular sector and for “all” labor. [5 points]
    (b) Do the two cases differ?
    (c) Does “wages” as used in the second sentence of the quotation refer to “wage rates” or “wage payments”? Does it matter? [5 points]
    (d) If so, why? If not, why not? [5 points]
  2. (a) Sketch the development of the quantity theory of money. [7 points]
    (b) Compared the Cambridge and the Fisherine versions of this theory. [6 points]
    (c) What are the differences and similarities in the formulation of the demand for money between the Cambridge version of the quantity theory and the liquidity-preference function used by Keynes in his General Theory? What are the assumptions underlying these two formulations? What seems to you the most useful formulation of the demand for money? [7 points]
  1. “Inasmuch as the total quantity of purchasing media is expected to increase more or less in parallel with the production of gold and goods, the importance of a given amount of inflationary purchasing media will depend on its relation to the non-inflationary purchasing media in use… The commercial banks are able to [create inflationary purchasing media by acquiring investments in securities and noncommercial loans greater in dollar value than the total of their time deposits and capital], because the banks can create the purchasing media (demand deposits) with which they buy such assets. The inflationary purchasing media thus created are initially in the form of credits (bookkeeping additions) to the accounts of depositors…As these inflationary purchasing media are spent by the original recipients, the funds flow into the channels of trade and are indistinguishable from other demand deposits and currency that represent gold and goods being offered in the Nation’s markets. Thus great additions to the purchasing media used to buy goods can occur without corresponding increases in the goods available in the market; hence the upward pressure on prices and related developments of an inflationary boom.” – American Institute for Economic Research, Current Economic Trends, (June, 1955), p. 7.(a) What is meant by “inflationary purchasing media” in this quotation? [7 points]
    (b) How does their creation allegedly produce “an inflationary boom?” [6 points]
    (c) Evaluate the reasoning implied in the last sentence [7 points].
  1. “There cannot, in short, be intrinsically a more insignificant thing, in the economy of society, then money; except in the character of a contrivance for sparing time and labor. It is machine for doing quickly and commodiously, what would be done without it; and like many other kinds of machinery, it exerts a distinct and independent influence of its own when it gets out of order.” – John Stuart Mill, Principles of Political Economy, Ashley addition, p. 488.

(a) Formulate your conception of money that is in order [5 points],
(b) sketch the monetary experience of one or more countries [5 points],
(c) indicate clearly when you think money was “out of order,” [5 points] and
(d) explain the results [5 points].

 

From Friedman’s handwritten table we find the following distribution of points by question as well as the final grade awarded for the preliminary examination (failure, MA candidacy, PhD candidacy). The committee final grades awarded are designated in boldface. Friedman judged four exams to be borderline cases.

 1. 2. 3. 4. 5. 6. Total Final Grade
ID no. (a) (b) (a) (b) (a) (b) (c) (a) (b) (c) (a) (b) (c) (d)

1

 4 0 7 4 5 2 4 7 6 4 6 4 3 2 1 59 PhD
2 5 8 4 3 7 4 3 5 1 3 1 3 3 5 1 56

PhD

3

 4 12 5 6 6 2 5 5 5 3 3 5 4 3 1 69 PhD
5 5 0 7 6 13 3 4 7 0 4 3 4 3 3 1 63

PhD

6

 4 3 4 5 3 3 3 2 0 2 0 3 4 2 2 40 MA/F
7 5 8 7 4 10 3 6 6 3 1 4 3 5 5 3 71

PhD

8

 3 0 3 0 7 2 1 3 2 0 0 3 5 2 0 31 F
10 4 2 5 4 8 3 3 6 5 3 5 3 2 2 1 56

PhD

11

 5 5 5 2 0 0 3 5 0 0 0 — — — — 25 F
12 5 7 4 6 3 2 3 3 0 3 1 2 1 2 0 42

MA/F

13

 4 3 6 6 5 4 3 4 1 1 1 3 3 2 0 46 MA
14 5 4 5 4 2 3 3 4 0 3 1 1 3 1 0 39

MA/F

15

 4 5 3 2 5 2 1 3 5 2 4 3 5 4 2 50 MA/PhD
16 5 6 9 4 10 4 4 6 5 3 4 4 5 3 0 72

PhD

Source: Hoover Institution Archives. Papers of Milton Friedman. Box 76, Folder 10.

Image Source: University of Chicago Photographic Archive, apf1-06231, Special Collections Research Center, University of Chicago Library

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Cambridge Exam Questions

Cambridge. Examination Papers in Political Economy, 1871-1872

 

This post takes us back nearly 150 years to the University of Cambridge and to when political economy was merely one among several moral sciences worthy of study. Below you will find sets of three examination papers in Political Economy from each of the (i) Moral Sciences Tripos, (ii) Second Special Examination in Moral Science for the Ordinary B.A. Degree, and (iii) Special Examination in Moral Science for the Ordinary B.A. Degree for the 1871-1872 academic year.

One notes the relative prominence given to the work of Frédéric Bastiat. In contrast John Stuart Mill’s name does not appear in the examination questions.

________________

CAMBRIDGE UNIVERSITY EXAMINATION PAPERS
MICHAELMAS TERM, 1871 TO EASTER TERM, 1872.

MORAL SCIENCES TRIPOS.

TUESDAY, Nov. 28, 1871. 1 to 4.
POLITICAL ECONOMY.

  1. EXPLAIN the nature of the distinction between fixed and circulating capital.
    A timber merchant gradually disengages his capital from that business, and invests it in an omnibus company: what effect is produced thereby upon the fixed and circulating capital, respectively, of the country?
  2. What is meant by the Effective Desire of Accumulation? In discussing this desire is it assumed that old men, as a rule, save as much as young men; and, if so, is the assumption correct? Examine Bastiat’s definition of “saving.”
  3. State, without any further explanation, the Ricardian theory of Rent.
    If a farmer were to insist that rent enters into the cost of production of his corn, because, without having to pay rent, he could have afforded to sell his corn at 30s. a quarter, but, paying rent, only at 40s.; what should you reply?
  4. What is meant by “gratuitous” and “onerous utility”? What laws determine their relative proportion?
  5. How is our silver coinage guarded against any present danger of being melted down, and from what causes could such a contingency arise?
  6. Explain, in their usual sense, the following terms:— Free trade, excise duties, prohibitive duties, ad valorem duties, direct and indirect taxation.
  7. By what arguments is the “right to employment” supported? How does Bastiat endeavour to meet them?
  8. If any one had private information that war was about to break out between England and America, what sort of changes in his investments might it be prudent for him to make?

Source: Cambridge University Examination Papers. Michaelmas Term, 1871 to Easter Term, 1872 (Cambridge, 1873), p. 25.

 

MORAL SCIENCES TRIPOS.

THURSDAY, Nov. 30, 1871. 9 to 12.
POLITICAL ECONOMY.

[Not more than four of these questions are to be attempted. Full marks may be obtained by adequate treatment of any one.]

  1. SUPPOSE that a comparison were made between the capital of this country now and a century ago: describe the principal respects in which you would expect to find an increase.
  2. What are the principal causes which determine the average rate of interest in a country, and its temporary fluctuations?
    To what extent is the price of shares in British and in Foreign railways affected by the varying rate of interest at home
  3. What are the advantages and disadvantages, and to what classes of society, of the enclosure of common lands? Illustrate your views historically.
  4. Estimate the probable effect of Post Office savings banks upon the capital and wealth of the country.
  5. Has Political Economy or Ethics the most to learn from the other?
  6. Discuss the social and political effects of the custom of primogeniture as compared with those of a law of equal division.
  7. Examine the probable results, to the different classes of English society, if the anticipated decline and ultimate exhaustion of our coal-fields were to commence at once.
  8. “The Internationale however goes much farther than this. It proposes that the central authority in Switzerland shall abolish all indirect taxation whatever, even we presume upon alcohol, and substitute for all a property-tax estimated by valuation, as in America, but increasing in rate with the increase of the fortune upon which it is levied, and accompanied by a heavy succession duty…With the revenue thus accumulated the central authority is to create a State Bank, with the sole right of issuing notes, and is, with those notes, to furnish all associations of operatives with the capital they require, thus superseding the necessity for the individual capitalist. The State itself would be the sole employer of labour, the payment or receipt of wages would be prohibited by statute, and all profits would be divided equally amongst those who earned them. The capitalist would thus be summarily extinguished…every citizen being declared entitled to poor relief, first from his Commune, and afterwards, if the Commune is over pressed, from the State. No condition whatever, except poverty, is annexed to this relief.”
    Do you consider any of the above provisions wise or feasible?

Source: Cambridge University Examination Papers. Michaelmas Term, 1871 to Easter Term, 1872 (Cambridge, 1873), p. 27.

 

MORAL SCIENCES TRIPOS.

FRIDAY, Dec. 1, 1871. 1 to 4.
POLITICAL ECONOMY.

  1. WHAT exactly is meant by the Cost of Production of an article? Take, as an example, a bottle of old vintage port.
  2. Why is it that people at watering-places find it cheaper to live in lodgings than in hotels?
  3. Explain what is meant by the principle of Cooperation, as applied to manufactures and to trades. What limits to its extension, if any, do you anticipate?
  4. What does Prof. Cairnes understand by a monopoly rent, and in what respects does he contrast it with an agricultural rent?
  5. What do you consider to be the effects of Freedom of Trade, with and without reciprocity?
  6. Illustrate the principal mistakes which have been made, or which might be made, in taxing imported commodities.
  7. Indicate briefly the opinions held by Adam Smith upon the following points:

(1) “The different effects of the Progress of Improvement upon three different sorts of rude produce.”

(2) The principal forms of Circulating Capital in any country.

(3) The evidences of any change in the value of silver before the discovery of the American mines.

(4) The objects of the Navigation Act.

(5) The causes which have interfered with the “Natural course of things,” in respect of the order of priority of agriculture, manufactures, and foreign commerce.

(6) The Methuen treaty.

(7) Taxes upon the Wages of Labour.

(8) The objections to taxes upon luxuries.

Source: Cambridge University Examination Papers. Michaelmas Term, 1871 to Easter Term, 1872 (Cambridge, 1873), p. 28.

________________

SECOND SPECIAL EXAMINATION IN MORAL SCIENCE FOR THE ORDINARY B.A. DEGREE.

THURSDAY, Nov. 30. 9 to 12.
POLITICAL ECONOMY.

  1. EXPLAIN the terms Fixed and Circulating Capital.
    An omnibus proprietor gradually disposes of his business, and invests his capital instead in the wine trade; what sort of change is produced thereby, so far as he is concerned, upon the fixed and circulating capital respectively, of the country?
  2. Describe the causes which render manufactures on a large scale more profitable than those on a small scale.
    Why then is not the manufacture of every particular article in a country carried on in a single establishment?
  3. What exactly is meant by saying that profits depend, not upon wages but, upon the cost of labour?
  4. Explain the principal reasons why cotton goods are cheaper now than they were a century ago, whereas butcher’s meat is much dearer.
  5. Discuss, with examples of your own, the causes which procure a permanently higher rate of wages for some employments than for others.
  6. Distinguish between Value and Price.
    What sort of connection would you expect to find between the prices respectively of beef, of milk, and of hides?
  7. What is meant by saying, of certain articles, that their value depends upon demand and supply? Apply your remarks to the case of corn in spring and autumn. What sort of articles are likely to vary most in market value?
  8. If any one were to melt a quantity of our silver coins, and then sell the bullion, he would find that he lost by the process. Explain (1) why this is so, (2) the object of the mint regulations by which this result is secured.

Source: Cambridge University Examination Papers. Michaelmas Term, 1871 to Easter Term, 1872 (Cambridge, 1873), p. 52.

SECOND SPECIAL EXAMINATION IN MORAL SCIENCE FOR THE ORDINARY B.A. DEGREE.

THURSDAY, Nov. 30, 1871. 1 to 4.
POLITICAL ECONOMY

  1. To what extent, in you: opinion, does the Science of Political Economy furnish rules for human action?
  2. Compare economically the advantages and disadvantages of large and small farms.
    Supposing that serf-labour on large farms were found cheaper than free, what objection could be made, economically, to its employment?
  3. Adam Smith says, “There seem, however, to be two cases in which it will generally be advantageous to lay some burden upon foreign, for the encouragement of domestic industry.” What are those cases?
  4. Quote Adam Smith’s remarks upon the system of taking fines on the renewal of agricultural leases.
  5. “A militia, however, in whatever manner it may be either disciplined or exercised, must always be much inferior to a well-disciplined and well-exercised standing army.”
    By what arguments does Adam Smith support this assertion?
  6. Give a brief account of the Agricultural systems of Political Economy.
  7. What is Adam Smith’s opinion of Treaties of Commerce?
  8. Shew that in consequence of International Trade it may be profitable to the trader to sell articles in the foreign country at a price which does not exceed their market price in his own by the cost of carriage.
    To what limit do you consider that the difference in price of the same article in the home and foreign countries would ultimately tend?
  9. The rate of Discount has varied, within the last few years, between one per cent, and ten per cent. Indicate the causes on, which such variations depend.
    Should you expect to find any corresponding variations in the price of the Public Funds?

Source: Cambridge University Examination Papers. Michaelmas Term, 1871 to Easter Term, 1872 (Cambridge, 1873),  pp. 53-54.

SECOND SPECIAL EXAMINATION IN MORAL SCIENCE FOR THE ORDINARY B.A. DEGREE.

FRIDAY, Dec. 1, 1871. 9 to 12.
POLITICAL ECONOMY

  1. QUOTE some of Bastiat’s arguments in favour of “free-trade.”
  2. Give a sketch of the “mercantile system” as described by Adam Smith.
  3. State Bastiat’s definition of “Value;” and quote his criticisms upon the definitions of other political economists.
  4. Bastiat says:
    “Each step of progress annihilates value.”
    “In all departments of industry value increases with the density of population.”
    How does he argue in support of these propositions?
  5. Bastiat asserts that “There is not in the entire price of the corn (offered for sale in any market) a single farthing which does not go to remunerate human services.”
    Examine the validity of this assertion.
  6. “The Bankers,” says Adam Smith, “invented therefore another method of issuing their promissory Notes, by granting, what they called, Cash accounts.”
    How does he describe the effect of these “cash accounts” on trade?
  7. Adam Smith says, “There are no public institutions for the education of women, and there is accordingly nothing useless, absurd, or fantastical in the common course of their education.”
    Give a sketch of the argument in the course of which this statement is made.
  8. Discuss some of the common objections to the fairness of an Income Tax.
  9. Discuss the policy of the English Poor Law from an economical point of view.

Source:  Cambridge University Examination Papers. Michaelmas Term, 1871 to Easter Term, 1872 (Cambridge, 1873), p. 54.

________________

SPECIAL EXAMINATION IN MORAL SCIENCE FOR THE ORDINARY B.A. DEGREE.

Monday, June 3, 1872. 9 to 12.
POLITICAL ECONOMY.

  1. DEFINE Political Economy: investigate the relation between it and Political Philosophy: and discuss the statement that it is hard-hearted and selfish.
  2. Define Wealth, Capital, Productive Labour, Metayer Tenancy; and distinguish between Direct and Indirect Taxation.
  3. Compare the economical benefits of large and small farming.
  4. What is Communism? Explain and criticize the schemes of Communism proposed by St. Simon and Fourier respectively.
  5. State Ricardo’s theory of Rent, and examine any arguments which have been brought against it.
  6. What are the principal causes of the different rates of wages in different trades?
  7. Explain the statement that ‘There cannot be a general rise in values, but there can be a general rise in prices.’
  8. How do you account for the fact that both wages and profits are generally high in a new colony?
  9. State Adam Smith’s four ‘Canons’ of taxation, and give examples illustrating their infringement.
  10. Who really pays the poor-rates, (a) upon farms, (b) upon houses in an ordinary village, (c) upon shops in Regent Circus, (d) upon cotton-mills?

Source:  Cambridge University Examination Papers. Michaelmas Term, 1871 to Easter Term, 1872 (Cambridge, 1873), p. 10.

 

SPECIAL EXAMINATION IN MORAL SCIENCE FOR THE ORDINARY B.A. DEGREE.

MONDAY, June 3, 1872. 1 to 4.
POLITICAL ECONOMY.

  1. “THE real price of everything is the toil and trouble of acquiring it.” In what way is this statement ambiguous? How should you mend it?
  2. What are the principal artificial causes mentioned by Adam Smith, as producing inequalities in the wages and profit in different employments?
  3. Adam Smith makes one division of rude produce to consist of those articles which it is scarce in the power of human industry to multiply at all. What other divisions does he take account of? Give examples of each sort.
  4. Give a brief account of the principal restraints upon importation and encouragements to exportation which were formerly supported by statesmen and economists. On what ground are they now generally condemned?
  5. What was the nature and object of the laws against forestalling and engrossing?
  6. What kinds of trade does Adam Smith consider suitable for joint-stock companies? What general judgment does he pronounce upon the management of the East India Company?
  7. What are Capitation Taxes? What taxes of this description have been actually imposed in England or France?
  8. “The progress of the enormous debts which at present oppress, and will in the long run probably ruin, all the great nations of Europe has been pretty uniform.” Give some account of the progress of our national debt since these words were written. What circumstances have contributed to avert, in our case, the fate here anticipated?
  9. Discuss the policy of attempting to pay off a national debt, shewing to what extent your conclusion is affected by the circumstances, social commercial or otherwise, of the particular country in question.
  10. Mention some of the principal taxes which have been remitted in England during the last ten years, and the grounds of their remission.

Source: Cambridge University Examination Papers. Michaelmas Term, 1871 to Easter Term, 1872 (Cambridge, 1873), p. 11.

SPECIAL EXAMINATION IN MORAL SCIENCE FOR THE ORDINARY B.A. DEGREE.

TUESDAY, June 4, 1872. 9 to 12.
POLITICAL ECONOMY.

  1. “TAKE up the Collection des Economistes, and read and compare all the definitions [of value] which you will find there. If there be one of them which meets the case of the air and the diamond, two cases in appearance so opposite, throw this book into the fire.”
    Describe the difficulty here alluded to, and give some account of the way in which Bastiat considers that he has solved it.
  2. “Of all the elements of which the total value of any product is made up, the part which we should pay for most cheerfully is that element which we term the interest of the advances or capital.” Why so?
  3. To what extent is Utility, according to Bastiat, dependent upon labour? Illustrate your answer by examples of your own.
  4. Indicate, as precisely as you can, the extent to which you consider Bastiat to be in error on the subject of Rent.
  5. If twelve pence were melted or defaced the metal would not be worth a shilling. Explain clearly why this is so, and what is the nature and object of the legislation by which the inequality is secured.
  6. What is meant by saying that the foreign exchanges are against any particular country?
  7. What is meant by saying that the current rate of discount is four per cent.?
    To what extent are the fluctuations in the value of Railway and other Stocks dependent upon the rate of discount?
  8. Describe the principal mistakes to be avoided in levying taxes upon imported commodities.

Source:  Cambridge University Examination Papers. Michaelmas Term, 1871 to Easter Term, 1872 (Cambridge, 1873), p. 12.

Image Source: George Arents Collection, The New York Public Library. “Bridge of Sighs” St. John’s College, Cambridge, England.” New York Public Library Digital Collections. Accessed April 8, 2019. http://digitalcollections.nypl.org/items/510d47e2-362a-a3d9-e040-e00a18064a99

 

 

Categories
Berkeley Exam Questions Suggested Reading Syllabus

Berkeley. Syllabus and exams. Regulation and Antitrust. Woroch, 1996

 

Every so often I plunge into the Wayback Machine to search for “ancient” economics course materials from as far back as the 1990’s. Today I return with a syllabus, suggested readings for presentations and for paper topics, and some final examination questions for what has/had been the traditional second course in the field of industrial organization that covers regulation and competition policy. 

The course instructor at UC Berkeley was Glenn Woroch who had received his Ph.D. in economics from the University of California, Berkeley in 1983. According to his August 2013 homepage he taught that graduate course “Regulation and Antitrust” three times (Spring 1994, 1996, 1997).

__________________

Glenn Woroch: Short Bio

Dr. Glenn Woroch is Adjunct Professor of Economics, University of California, Berkeley, and Executive Director of the Center for Research on Telecommunications Policy. Dr. Woroch is an internationally recognized expert in the economics of the telecommunications industry, and has served as a consultant to governments and the private sector on a wide range of telecommunications issues.
Dr. Woroch has published numerous articles on industrial organization, regulation, antitrust, corporate strategy and intellectual property. He served on the editorial boards of Information Economics & Policy, the Journal of Regulatory Economics, and Telecommunications Policy and was a founding member of the International Telecommunications Society.
Dr. Woroch is regularly retained as an economic expert witness on litigation matters involving monopolization claims, mergers, intellectual property infringement, and economic damages. Besides his expertise in telecommunications, Dr. Woroch has extensive experience in the broadcast and cable television, computer software, personal computer, computer networking, ecommerce, electric power and food and beverage industries. Dr. Woroch has been an economic advisor to government agencies including the U.S. Departments of Energy and Justice and the Office of Technology Assessment. In addition to his U.S. engagements, he has consulted to private and public sector clients in Latin America, the Pacific Rim and Western Europe.
Previously, Dr. Woroch taught economics at the University of Rochester and Stanford University, and was Senior Member of Technical Staff at GTE Laboratories. He holds a Ph.D. in Economics and M.A. in Statistics from Berkeley.

Source: Short bio of Glenn Woroch linked to his August 2013 webpage. Archived copy at the Wayback Machine internet archive.

__________________

Department of Economics
University of California
Economics 220B, Spring 1996
REGULATION & ANTITRUST
Glenn Woroch

Description. This is the second of two graduate courses in industrial organization. It will cover regulation and antitrust policy, concentrating on control of natural and artificial monopoly in theory
and in practice. Emphasis will be on theoretical developments although an occasional empirical study or case study will illustrate key points.

Instructor. Glenn Woroch, 669 Evans, 642-4308, glenn@econ.berkeley.edu.

Office hours: Wednesday, 2:30-4:00 PM.

Textbooks. No textbook is assigned for this course, but several books cover large portions of the material and have been put on reserve:

Sandy Berg and John Tschirhart, Natural Monopoly Regulation, Cambridge University Press.
Alfred Kahn, The Economics of Regulation, volumes I and II, (2nd edition) John Wiley, 199?.
Jean-Jacques Laffont and Jean Tirole, A Theory of Incentives in Procurement and Regulation, 1993.
William Sharkey, The Theory of Natural Monopoly, Cambridge University Press, 1982.
Daniel Spulber, Regulation and Markets, MIT Press, 1991.
Kenneth Train, Optimal Regulation, MIT Press, 1991.

Assignments. Students will select a paper, either one of the optional readings or a paper that we agree upon, and present it to the class. Each student will also write a paper of moderate length on a topic
related in some manner to the economics of regulation. I will distribute a list of suggested topics shortly. Lastly, there will be a final exam.

READING LIST

* – required, in reader. + – recommended for presentation.

I. NATURAL MONOPOLY AND ITS REGULATION

1. Natural Monopoly

* Panzar, J., “Technological determinants of firm and industry
structure,” Chapter 1 in Handbook of Industrial Organization, (Vol.
1) North-Holland, 1989.
* Faulhaber, G., “Cross-subsidization: pricing in public enterprises,”
American Economic Review, 1975.
Baumol, W., “On the proper cost tests for natural monopoly in a
multiproduct industry,” American Economic Review, December 1977.
Faulhaber, G., and S. Levinson, “Subsidy free prices and anonymous
equity,” American Economic Review, 1981.
+ Evans, D. and J. Heckman, “Multiproduct cost function estimates and
natural monopoly tests for the Bell System,” in Breaking Up Bell,
edited by David Evans, 1983.

2. Efficient Pricing

* Baumol, W. and D. Bradford (1970), “Optimal departures from marginal
cost pricing,” American Economic Review, June.
* Willig, R., “Pareto-superior nonlinear outlay schedules,” Bell
Journal of Economics, 1979.
Baumol, W., E. Bailey and R. Willig, “Weak invisible hand theorems on
the sustainability of prices in a multiproduct monopoly, American
Economic Review, 1977.
Braeutigam, R., “Optimal policies for natural monopoly,” in Handbook
of Industrial Organization, (Vol. 2) 1989.
+ Brock, W., and W.D. Dechert, “Dynamic Ramsey pricing,” William Brock
and W. D. Dechert, International Economic Review, October 1985.
+ Braeutigam, R., “Optimal pricing with intermodal competition,”
American Economic Review, 38-49, 1979.
+ Panzar, J., “The Pareto domination of usage-sensitive pricing,” in
Proceedings of the 6th Telecommunications Policy Research
Conference, H. Dordick (ed.) 1979.

3. Reality Check: Alternative Explanations of Regulatory Policy

* Stigler, G., “The Theory of Economic Regulation,” The Bell Journal of
Economics, 1971.
* Peltzman, S., “The economic theory of regulation after a decade of
deregulation,” Brookings Papers: Microeconomics, 1989.
* Joskow, P., “Pricing decision of regulated firms: a behavioral
approach, Bell Journal of Economics, 1973.
Peltzman, S., “Towards a more general theory of regulation,” Journal
of Law & Economics.
Noll, R., “Economic perspectives on the politics of regulation,” in
Handbook of Industrial Organization (Vol. 2) 1989.
Posner, R., “Taxation by regulation,” Bell Journal of Economics,
1971.
+ Winston, C., “Economic deregulation: days of reckoning for
microeconomists,” Journal of Economic Literature, September 1993.

II. REGULATION IN PRACTICE

1. Rate of Return Regulation

* Baumol, W. and A. Klevorick, “Input choices and rate of return
regulation: an over of the discussion,” Bell Journal of Economics,
1970.
* Averch, H. and L. Johnson, “Behavior of the firm under regulatory
constraint,” American Economic Review, December, 1962.
* Spence, A.M., “Monopoly, quality and regulation,” Bell Journal of
Economics, Autumn 1975.
+ Petersen, C., “An empirical test of regulatory effects,” Bell Journal
of Economics, Spring 1975.
+ Bailey, E., “Regulation and innovation,” Journal of Public Economics,
December 1974.

2. Contracting vs. Administration

* Demsetz, H., “Why regulate utilities?” Journal of Law & Economics,
1968
* Goldberg, V., “Regulation and administered contracts,” Bell Journal
of Economics, 1976.
* Williamson, O., “Franchise bidding for natural monopoly: in general
and with respect to CATV, Bell Journal of Economics, 1976.”
+ Zupan, M. “The efficacy of franchise bidding schemes in the case of
cable TV: Some systematic evidence,” Journal of Law and Economics,
October 1989.

3. Price Cap and Benchmark Regulation

* Brennan, T., “Regulation by capping prices,” Journal of Regulatory
Economics, 1989.
* Brauetigam, R., and J. Panzer, “Effects of the change from rate of
return to price cap regulation,” American Economic Review, 1993.
* Shleiffer, A. “A theory of yardstick competition,” Rand Journal of
Economics, 1985.
Vogelsang, I., “Price cap regulation of telecommunications services:
a long-run,” Rand Report, 1988.
+ Cabral, L. And M. Riordan, “Incentives for cost reduction under price
cap regulation,” Journal of Regulatory Economics, 1989.
+ Sappington, D., and D. Sibley, “Strategic nonlinear pricing under
price-cap regulation,” Rand Journal of Economics, Spring 1992.
+ Armstrong, M., S, Cowan and J. Vickers, “Nonlinear pricing and price
cap regulation,” Journal of Public Economics, September 1995.

III. DESIGN OF OPTIMAL REGULATORY MECHANISMS

1. Iterative and Dynamic Mechanisms

* Vogelsang, I. and J. Finsinger, “A regulatory adjustment process for
optimal pricing by multiproduct monopoly firms, Bell Journal of
Economics, 1979.
* Sappington, D., “Strategic firm behavior under a dynamic regulatory
adjustment process,” Bell Journal of Economics, Spring, 1980.
Salant, D., and G. Woroch, “Trigger price regulation,” Rand Journal
of Economics, Spring 1992.
+ Gilbert, R., and D. Newbery, “The dynamic efficiency of regulatory
constitutions,”Rand Journal of Economics, Winter 1994.
+ Blackmon, G., and R. Zeckhauser, “Fragile commitments and the
regulatory process,” Yale Journal on Regulation, 9:1, Winter, 1992.
+ Logan, J., R. Masson and R. Reynolds, “Efficient regulation with
little information: reality in the limit?” International Economic
Review, 30:4 November 1989.

2. Agency Approach

* Loeb, M., and W. Magat, “A decentralized method for utility
regulation,” Journal of Law & Economics, 1979.
* Baron, D., and R. Myerson, “Regulating a monopolist with unknown
costs,” Econometrica, July 1982.
* Laffont, J.-J., “The new economics of regulation ten years after,”
Econometrica, 1994.
Laffont, J.-J., and J. Tirole, “Using cost observation to regulate
firms,” Journal of Political Economy, 1986.
Baron, D., “Design of regulatory mechanisms and institutions,” in
Handbook of Industrial Organization, (Vol. 2), 1989.
+ Lewis, T., and D. Sappington, “Regulating a monopolist with unknown
demand,” American Economic Review, December 1988.
+ Wolak, F., “An econometric analysis of the asymmetric information
regulator-utility interaction,” draft.

IV. DEREGULATION

1. Regulation with Horizontal Competition

+ Auriole, E., and J.-J. Laffont, “Regulation by duopoly,” Journal of
Economic Management and Strategy, 1993.
+ Riordan, M., “Regulation and preemptive technology adoption,” Rand
Journal, Autumn 1992.
Biglaiser, G., and A. Ma, “Regulating a dominant firm: unknown demand
and industry structure.” Rand Journal of Economics, Spring 1995.

2. Regulation with Vertical Competition

* Laffont, J.-J. and J. Tirole, “Optimal bypass and creamskimming,”
American Economic Review, 1990.
* Panzar, J., “Sustainability, efficiency and vertical integration,” in
Regulated Industries and Public Enterpirse, edited by Paul
Kelindorfer and Bridger Mitchell, 1979.
Vickers, J., “Competition and regulation in vertically-related
markets,” Review of Economic Studies, January 1995.
Baumol, W. “Some Subtle Pricing Issues in Railroad Regulation,”
International Journal of Transport Economics, August 1983.
+ Gilbert, R., and M. Riordan, “Regulating complementary products: a
problem of institutional choice,” Rand Journal of Economics, 1995.
+ Laffont, J.-J. and J. Tirole, “Access pricing and interconnection,”
European Economic Review, 1994.

VI. ANTITRUST POLICY

1. Predation

* McGee, John, (1958), “Predatory Price Cutting: The Standard Oil
(N.J.) Case,” Journal of Law and Economics, pp. 137-169.
* Ordover, J., and G. Saloner, “Predation, monopolization and
antitrust,” chapter 9 in Handbook of Industrial Organization,
(Vol. 2) 1989.
Milgrom, P., and J. Roberts, “Limit pricing and entry under
incomplete inforamtion: an equilibrium analysis,” Econometrica,
1982.
Ordover, J., and R. Willig, “An economic definition of predation:
pricing and product innovation,” Yale Law Journal, 1981.

2. Merger to Monopoly

* Department of Justice, “The Merger Guidelines.”
* Farrell, J., and C. Shapiro, “Horizontal mergers,” American Economic
Review.
+ Baker, J., and T. Bresnahan, (1985), “The Gains from Merger or
Collusion in Product Differentiated Industries,” Journal of
Industrial Economics, 33:4, pp. 427.

3. Exclusion and Foreclosure

* Krattenmaker, T., and S. Salop, “Anticompetitive exclusion: raising
rivals’ costs to achieve power over price,” Yale Law Journal, 1986.
* Ordover, J., G. Saloner, and S. Salop, “Equilibrium Vertical
Foreclosure,” American Economic Review, 1990.
Ordover, J., A. O. Sykes and R. Willig, “Nonprice Anticompetitive
Behavior by Dominant Firms toward the Producers of Complementary
Products,” in Antitrust Regulation: Essays in Memory of John J.
McGowan, Franklin Fisher (ed.), 1985
Whinston, M., “Tying, Foreclosure, and Exclusion,” American Economic
Review, 1990.
+ Salinger, M., “Vertical mergers and market foreclosure,” Quarterly
Journal of Economics, 1988.
+ Economides, N., and G. Woroch, “Interconnection and foreclosure of
network competition,” draft, 1995.

 

Source: Spring Semester 1996 syllabus archived at the Wayback Machine.

________________________

Department of Economics
University of California
Economics 220B, Spring 1996
ADDITIONAL READINGS FOR PRESENTATIONS
Glenn Woroch

Lawrence Pulley and Yale Braunstein, “A Composite cost function for multiproduct firms with an application to economies of scope in banking,” Review of Economics & Statistics, 1992.

Besanko, David and Donnefeld, Shabtai, and Lawrence J. White, “The Multiproduct Firm, Quality Choice, and Regulation,” Journal of Industrial Economics, 1990, vol. 36, pp. 411-429.

Ma, Ching-to Albert and James Burgess, “Regulation, Quality Competition, and Price in the Hospital Industry,” mimeo, 1991.

Fudenberg, Drew and Jean Tirole, “‘A Signal-Jamming’ Theory of Predation,” Bell Journal of Economics, 1986, vol. 17, no. 3, pp. 366-376.

Ordover, Janusz and Robert Willig, “Antitrust for High Technology Industries: Assessing Research Joint Ventures and Mergers,” Journal of Law and Economics, 1985, vol. 28, pp. 311-333.

Guerin-Calvert, Margaret, “Vertical Integration as a Threat to Competition: Airline Computer Reservations Systems,” in L. White and J. Kwoka Jr. (eds.), The Antitrust Revolution, (pp. 338-370). 1989.

Sappington, David, and David Sibley, “Regulating without cost information: the incremental surplus subsidy scheme,” International Economic Review, 29:2, May 1988.

Frank Matthewson and Ralph Winter, “An economic theory of vertical restraints,” Rand Journal of Economics.

Ralph Bradburd, “Privatization of natural monopoly public enterprises: the regulation issue,” Review of Industrial Organization, 1995, 247-67.

Michael Whinston, “Tying foreclosure and exclusion,” American Economic Review, Sept 1990.

Paul Joskow and Richard Schmalensee, “Incentive regulation for electric utilities,” Yale Journal on Regulation, 4:1, Fall 1986.

Baron, David, “Price regulation, quality and asymmetric information,”American Economic Review, March 1981.

Harris, R., and E. Weins, “Government enterprise: an instrument for the internal regulation of industry,” Canadian Journal of Economics, February 1980.

 

Source: Additional Readings for Presentations from the Spring Semester 1996 archived at the Wayback Machine.

________________________

Department of Economics
University of California
Economics 220B, Spring 1996
SUGGESTIONS FOR TERM PAPER TOPICS
Glenn Woroch

The miscellaneous topics listed below are intended to get you thinking about a term paper. Most are applications to specific industries or specific regulatory policies. There are many more possibilities for research in theoretical aspects of regulation.

Problems of erecting incentives for efficient investment and operation of natural monopoly facilities placed under common ownership in a specific case such as an electric power grid or an internet backbone.

Efficient design of auctions to assign rights to common property resources such as radio spectrum or mineral/grazing rights.

Compare the trend toward re-emergence of end-to-end monopoly in telephone with the vertical divestiture in electric power in terms of the tradeoff between vertical economies and anticompetitive behavior.

Efficient design of duopoly policy in markets that are potentially natural monopoly (e.g., cellular telephone)

The increased concentration of hospitals and HMOs through mergers and joint ventures and the implications for the price and availability of health services.

Potential of labor and management sharing in the rents that accrue in trucking, railroad or other regulated industries.

Motivation and long-run sustainability of bypass in the natural gas distribution industry under different regulatory regimes.

Winners and losers from price ceilings, rationing and strategic reserves in the market for oil and gas.

Effectiveness of different ratemaking practices (e.g., ROR vs. price caps) to encourage adoption of new technologies in a specific industry (e.g., electric power, telephone, health care).

Apply principles of economic models of regulation to understand the passage of a particular piece of legislation that regulates, deregulates or re-regulates an industry (e.g., Airline Deregulation Act of 1978, Cable Act of 1992, Telecom Act of 1996).

Cross country comparison (e.g., U.S. vs. Japan) of policy formation on a specific regulatory issue (e.g., regulation of nuclear power or deregulation of telephones), and the relation between the outcome and the possibilities for rent seeking under the different political systems.

Policy alternatives toward a dominant firm that achieves a de facto standard in an industry exhibiting strong complementaries among component products (e.g., Microsoft and Intel).

The use of structural separations or Chinese walls to guard against leveraging market power into complementary product markets.

Compare performance of public enterprises relative to regulated private firms within or across industries (e.g., water, electric power, cable TV, airlines) and relate to management incentives and/or regulatory policies.

Success of regulatory policy that uses a government-owned firm to compete against a dominant private firm.

The relative effectiveness of alternative regulatory mechanisms to elicit relevant information, e.g., yardstick vs. iterative mechanisms.

Success of privatization initiatives based on the nature of the post-privatization regulatory scheme especially with regards to rate regulation and the ease of competitive entry.

Creating efficient incentives for disposal of nuclear and other kinds of hazardous waste.

Tradeoff between efficiency and anti-competitiveness of mergers/alliances/joint ventures among local/long distance/cable/wireless companies aimed at exploiting multimedia opportunities.

Comparison of solutions to pricing interconnection sold to competitors across different industries (e.g., phone v. electric power) or for a single industry across different countries.

Source: Suggested Paper Topics from the Spring Semester 1996 archived at the Wayback Machine.

________________________

Department of Economics
University of California
Economics 220B
Glenn Woroch

TAKEHOME FINAL EXAM
Spring 1996

INSTRUCTIONS: Answer each of the first four questions and then choose just one of the last two questions In each case keep you answers concise. Due the end of business on Friday, May 17th.

  1. Suppose that all firms have available the technology characterized by the cost function:

C(y1, y2) = a y1 + b y2 + c max {y1, y2}

where y1 and y2 are quantities of the two goods, 1 and 2. Further suppose that the market demand for y1 exceeds that for y2 at all relevant output prices.

(a) For y1 > y2 > 0, determine whether this cost function exhibits economies of scope, economies of scale over the entire product set, economies of scale specific to good 1 or economies of scale specific to good 2.

(b) Find the first-best output price for the industry to charge for the two goods. Determine the configuration of firms in the industry that products the corresponding industry wide outputs at least cost for the industry.

(c) Prove that the industry configuration and prices given in you answer to part (b) satisfies the requirements of sustainability

(d) Describe in words what kinds of circumstances might lead to cost functions like this one.

  1. A regulated firm produces two products: A and B. The firm is required by regulators to earn no more than is necessary to cover its operating costs plus a competitive return on invested capital.
    Assume that product B exhibits constant marginal cost of production equal to cB.

(a) Describe the solution to the Ramsey pricing problem. In the process be certain to make explicit whatever demand and cost assumptions you need to support your answer.

(b) Now suppose that an unlimited number of unregulated firms can enter into the market for product B at a constant marginal cost of cE where cE > cB. How does this affect the regulated firm’s pricing, and what is the effect on consumer welfare?

(c) Now suppose that cE < cB. Demonstrate that the regulated firm might gain by selling product B at a price (slightly) below cE.

(d) Since, in general, the regulator does not know the relative sizes of cB and cE , what are the pros and cons of allowing the regulated firm to produce B?

  1. Many schemes for regulating natural monopolies have been tried, and many more have been proposed. Listed below are some the schemes studied in this class.

(i) Rate-of-return regulation
(ii) Vogelsang-Finsinger iterative mechanism
(iii) Yardstick regulation
(iv) Price cap regulation
(v) Demsetz-type franchise auction

Choose two off of this list, and compare their relative merits in terms of each of the following criteria:

(a) short-run allocative efficiency,
(b) speed and likelihood of achieving first/second best outcomes over the long run,
(c) cross subsidization across products
(d) the rents that accrue to producers,
(e) vulnerability to political influence by producers and/or consumers,
(f) incentives to invest in cost-reducing innovations,
(g) informational requirements for implementing the mechanism.

  1. [WARNING: THIS PROBLEM HAD SPECIAL CHARACTERS THAT DID NOT SURVIVE THE ASCII FORMAT SAVE. WHERE YOU SEE A “z”, I HAVE ONLY GUESSED.] Consider the application of the Baron-Myerson Bayesian incentive mechanism to the following special situation. Suppose that production requires an unknown constant marginal cost and a
    known fixed cost: C(y, z) = z y + F, where z is distributed uniformly over the unit interval [0,1]. Let demand for the single product be linear: D(p) = a – bp. Assume that a/b > 1. Finally, assume that the weight attached to consumer surplus, V(p(z),t(z)), is one and the weight attached to firm z’s profit is � where 0 < � < 1.

(a) Find the optimal two-part pricing rule: p(z), t(z). What values do they take on at the extreme of least cost z = 0 and at highest cost z = 1?

(b) At the optimal solution compute the consumer surplus and the firm’s profit as a function of . Again find the values they take on at the extreme of least cost = 0 and at highest cost = 1.

(c) Describe the unit price, fixed fee, consumer surplus and firm profit as z approaches 1.

(d) Compute the profit-maximizing uniform price p(z). Find values for z and for which this unregulated monopoly price is less than the regulated price.

  1. Choose one of the following industries and periods:

(i) Electric power generation and distribution in the 1960s
(ii) Long distance telephone service in the 1970s
(iii) Passenger air transportation in the 1980s
(iv) For-profit hospitals in the 1990s

In that case describe what economic research has to say about the presence of economies of scale and scope, vertical economies and the prevalence of transactions costs. Describer the predominant form of regulation in that industry during that period in the U.S. Evaluate the match between the cost conditions and the form of regulation based on efficiency criteria.

  1. Intense debate has broken out over the years over whether certain industry practices represent an efficient response to market conditions, or an expression of anti-competitive behavior. Identify one of the following practices:

(i) predatory pricing
(ii) exclusive dealing
(iii) product bundling or tying
(iv) resale price maintenance

For the practice that you chose, describe the current antitrust treatment based on court decisions and policies of antitrust authorities. (These may not be unambiguous.) Report the positions of the different sides of the debate, especially the arguments that view the practice as efficiency enhancing and as competitively harmful. Make a persuasive argument for one of these two positions, or for a third position.

Source:  Takehome Final Exam from the Spring Semester 1996 archived at the Wayback Machine.

________________________

Department of Economics
University of California
Economics 220B
Glenn Woroch

FINAL EXAM
Spring 1994

INSTRUCTIONS: The exam has FOUR parts. Please answer each one. To
guide your time allocation, a total of 100 points is distributed as
follows:

Part I: 24 points (= 6 x 4 points)
Part II: 30 points
Part III: 28 points
Part IV: 18 points

  1. Answer TRUE or FALSE and EXPLAIN with 2 or 3 sentences.
    1. If an industry configuration is sustainable, then
      production is cost efficient.
    2. A Ramsey price vector is necessarily subsidy free.
    3. In Peltzman’s private interest model applied to monopoly
      regulation, price obeys an inverse elasticity rule typical
      of efficiency but income distribution may be skewed.
    4. In Joskow’s behavioral model of rate-of-return regulation,
      rate reviews do not occur when unit costs are rising.
    5. Producer and consumer surplus increase with the HH Index in
      a Cournot oligopoly.
    6. The so-called “double markup” that results from monopoly
      power at both the manufacturing and the retail levels can
      be eliminated with a two-part tariff.
  1. Two schemes that are designed to regulate natural monopoly
    are:

(i) Rate-of-return regulation
(ii) Vogelsang-Finsinger iterative mechanism

Evaluate each of the schemes relative to the unregulated
outcome in terms of their effects on:

(a) short-run allocative efficiency,
(b) the rents that accrue to producers,
(c) the welfare of consumers.

  1. Auctioning off monopoly franchises has often been proposed
    as a way to inject some competition into natural monopoly
    markets.
    1. In terms of economic efficiency, compare the following two
      rules for awarding the franchise: give it to the bidder
      with the most attractive price-service-quality package, or
      give it to the bidder that offers the largest cash payment
      for the franchise.
    2. What are the informational requirements needed to implement
      the schemes proposed by Demsetz and by Loeb and Magat?
    3. What difficulties arise over the course of the franchise
      contract that hamper the performance of this scheme?
    4. Under what conditions will the outcome be improved as the
      length of the firm-regulator relationship becomes infinite?
  1. Consider the Baron-Myerson approach to regulating a firm
    with private cost information. For concreteness, let the
    cost function of the firm be C(y,b) which is increasing
    in output of the good y and a cost parameter b.

1. What is meant by an “information rent”? How is it paid to
the firm in the Baron-Myerson scheme?

2. In what sense does a cross subsidization occur across
different cost realizations?

3. What additional features do Laffont and Tirole build into
their model of regulation that generalizes Baron-Myerson?
How does their pricing optimum differ?

Source:  Wayback Machine Archived copy June 1, 2002.

Image Source:  Glenn A. Woroch’s Berkeley webpage (modified 13 Jan 1999). Archived copy at the Wayback Machine internet archive.

Categories
Cambridge Exam Questions

Cambridge. Intercollegiate and preliminary examinations in economics, 1931-33

 

The following examinations were included in a publication of the Cambridge University Economics Tripos for 1931-33. Appended to the publication of the 1921-1926 Cambridge Economics Tripos Papers are the “Papers set in the qualifying examinations 1925 & 1926”. So the following three exams most likely served as an early hurdle to clear before being admitted to the Economics Tripos.

 

Intercollegiate Examination of Economics (June 1931)

Principles of Economics
Subjects for an Essay
Trade and Finance
Industry and Labour

Intercollegiate Examination of Economics (June 1932)

Economic Theory
Currency and Banking
Industry and Trade
Labour

Preliminary Examination in Economics (June 1933)

Principles of Economics
Industry, Labour and Money. Paper I
Industry, Labour and Money. Paper II
Modern Economic History

_________________________

 

INTERCOLLEGIATE EXAMINATION IN ECONOMICS.

Monday, June 8, 1931. 9—12.
PRINCIPLES OF ECONOMICS.

  1. What is meant by a perfect market? To what extent must fundamental economic theory be modified in view of the fact that in practice markets are not perfect?
  2. “The representative firm was devised to meet the difficulties occurring in the analysis of supply when there is a disparity of efficiency as between different producers.” Comment.
  3. Are there any reasons, for purposes of economic analysis, for drawing a distinction between the royalties received by owners of mining properties and the interest received by debenture holders in mining companies?
  4. “Increasing returns maybe due to external economies or to internal economies.” What are external and internal economies, and under what conditions, and in what sense, can increasing returns be said to be due to each?
  5. “If we were content to dispense with further industrial progress we should no longer have to pay tribute in the form of profits to business men.” Discuss.
  6. What is likely to be the effect on the price and output of agricultural produce of levying a land tax from which agricultural land is exempt?
  7. In what circumstances is a rise in the general level of wages likely to be (a) compatible, (b) incompatible with full employment for labour?
  8. Consider carefully under what conditions the control of an industry by a monopolist is likely to be in the social interest.
  9. “The Theory of Distribution is but a particular application of the Theory of Value.” Elucidate this statement.
  10. How far do economic and social considerations justify the right of private bequest?

 

Monday, June 8, 1931.  1. 30—4. 30.
SUBJECTS FOR AN ESSAY.

Write an essay on one of the following subjects:

  1. “For our great-grandchildren the problem will be how to live rather than how to keep alive.”
  2. The Electrification of the Railways.
  3. “Democracy has had its chance and has failed: let us pass on.”
  4. The Control of the World’s Wheat.
  5. “The Five Years Plan.”
  6. The Economics of Advertising.
  7. “La République n’a pas besoin de Savants.”

 

Tuesday, June 9, 1931. 9—12.
TRADE AND FINANCE.

  1. “Ten years of industrial depression measures the cost to this country of the Return to Gold.” Discuss.
  2. Would you agree that the world price level of the next twenty years is at the discretion of the Central Banks in the chief industrial countries? Why, or why not?
  3. What bearing has the proportion of their resources that people choose to hold in the form of money upon the value of money?
  4. In October 1929 the market rate of discount was about 6¼ % while the yield of fixed-interest stocks was about 4¾ % in March 1931 the former was about 2½ % and the latter about 4½ %. How would you account for these facts?
  5. “To-day, as in the middle of the last century, Free Trade is the best policy for this country: the reasons may be different, the conclusion is the same.” Investigate this argument.
  6. What are the relative advantages or disadvantages for this country of a fixed fiduciary issue as compared with a proportional reserve system of note issue?
  7. State clearly the differences in organisation between the money markets of London and New York, and indicate how these differences affect the nature and extent of the influence of the Bank of England and the Federal Reserve Bank of New York in the two markets respectively.
  8. With what truth is it alleged that whereas before the war the sources of disturbance to the Foreign Exchanges automatically set in motion corrective forces, to-day this no longer tends to be so?
  9. How do you account for the differences in the levels of wages normally prevailing between different countries?
  10. What criteria should a Government hold in view in framing a system of taxes?

 

Tuesday, June 9, 1931.  1. 30—4. 30.
INDUSTRY AND LABOUR.

  1. “It was once regarded as the duty of the State to curb the power of monopoly, but it now does everything possible to encourage it.” Discuss the truth of this statement and the desirability of the change to which it alludes.
  2. Examine the effect that would be produced on the wages of skilled workers by the introduction of a national minimum weekly wage.
  3. Give a reasoned account of what you imagine is likely to be the position of the British cotton industry in ten years time.
  4. Describe the British Trade Boards system. What conditions are necessary for the establishment of a Trade Board in a particular industry and what conditions do you think ought to be necessary?
  5. Consider how far the existence of surplus capacity in an industry can be regarded as socially undesirable.
  6. “Since the war there has been a strong positive correlation between rates of real wages and unemployment.” Explain. Can any moral be drawn?
  7. What are the factors that determine the size of firms? Illustrate your answer by reference to actual industries.
  8. Discuss in the light of the experience of other countries the possibility of improving the efficiency of British farming on the side of (a) production, (b) marketing.
  9. How far and for what reasons is labour in this country immobile at the present time? What benefits, if any, would you expect from increased mobility?
  10. Is it possible for technical improvements in production to be adopted faster than is in the interests of the working classes? Illustrate your answer by reference to the conditions of to-day.

 

Monday, June 6, 1932. 9—12.
ECONOMIC THEORY.

  1. Explain the difficulties involved in measuring the total utility derived from any commodity in terms of money.
  2. “Under private enterprise the consumer is king.” How far do the teachings of modern psychology cast doubt upon the truth of this assertion?
  3. Give examples of the way in which the development of economic theory has been moulded by the course of historical events.
  4. Explain the forces which determine the value of a commodity “in the short period,” making plain what you mean by a “short period.”
  5. Is the existence of monopoly (a) a necessary, (b) a sufficient condition for the existence of a system of differential prices?
  6. “Since rents are merely transfer payments from one member of the community to another, it is impossible for an industry to be conducted under conditions of increasing cost from the standpoint of the community as a whole.” Discuss.
  7. Is there any reason, from the standpoint of the public interest, why the freights and fares on the English railways should be maintained at a level sufficient to yield a normal rate of interest on the capital originally invested in the railways?
  8. How far can the doctrine that each factor of production tends to be rewarded in accordance with its marginal productivity be applied to the factor risk-taking?
  9. “Since cuts in wage-rates destroy purchasing-power, they are bound to prolong and aggravate a trade depression.” Comment.
  10. Is the present pace of agricultural and industrial improvement likely in your opinion to make the problem of chronic unemployment greater in the 20th century than in the 19th?

 

Monday, June 6, 1932. 1. 30—4. 30.
CURRENCY AND BANKING.

  1. “The Purchasing Power of Money is a phrase which admits, not of one, but of many meanings, some more useful than others.” Elucidate this statement.
  2. Explain briefly the points at issue between the Currency and Banking Schools in the eighteen-forties. How far was the doctrine of the victorious school justified by the events?
  3. What support does history afford to the contention that the gold standard leads to one set of results in theory, and to quite another set in practice?
  4. “The duty of banks is to act merely as honest brokers between people who have made savings and people who want to use them.” Explain and discuss.
  5. Discuss the relation between changes in long-term and in short-term rates of interest.
  6. Why would you agree, or disagree, with the view that the price-level is the one passive element in the equation of exchange?
  7. How do you account for the course which the prices of imported goods in this country have followed since our suspension of the gold standard in September last?
  8. How far are existing arrangements as to bank reserves adapted to ensure efficient control by the Central Bank over the other banks in the London and New York money markets respectively? What alterations, if any, would you propose?
  9. “The trade cycle constitutes recurrent proof of the absence of tendencies towards equilibrium in the economic system.” Examine the validity of this assertion.
  10. Consider, with reference (a) to past experience, (b) to present circumstances, the relation of the export of capital to equilibrium in our balance of payments.

 

 

Tuesday, June 7, 1932. 9—12.
INDUSTRY AND TRADE.

  1. Show the importance, in past years, of the emigration traffic to the shipping companies of this country and the railroad systems of the New World.
  2. Give some account of the direction and composition of British overseas investment between 1850 and 1900.
  3. “It is obviously to the general interest that sources of supply should grow up as near as possible to centres of consumption; subject to the condition that, where one source has a natural advantage in climate, mineral resources, or deep-set human aptitudes for a particular industry, it may be advantageously developed even at the cost of somewhat large expenditure of labour and material on marketing its products.” (Marshall.)
    Examine, in the light of this statement,
    Either (a) the aggregation of industries in Birmingham and the Black Country;
    Or (b) the location of the milling industry in North America and England.
  4. Define a public utility. How would you approach the problem of whether a particular public utility should be owned and operated by the public?
  5. What evidence would you require to convince you that the organised Produce Exchange renders an indispensable service to the farmer?
  6. Why have the producers of agricultural staples in the New World and in England fared so badly in the last few years? What is the position in continental Europe?
  7. “The 20th century has shown clearly that competitive industry never ends in complete monopoly.” Critically examine this statement.
  8. Seeing that mass production gives decreasing costs, is it not reasonable to suppose that industrial progress and a falling price level will go hand in hand? Consider, in this connection, the price record of soap, automobiles, and electric power.
  9. “Advertisement is a necessary business cost, but of no value to the community as a whole.” Criticise this.
  10. Examine the various causes which may set a limit to the size of a business unit.

 

 

Tuesday, June 7, 1932.  1. 30—4. 30.
LABOUR.

  1. “Our democratic age will be remarkable to posterity for having dimmed the time-honoured belief in the virtues of the poor” (Bosanquet). Is this fair comment on the extension of the Social Services during the past half century?
  2. Discuss the effect of recent changes in the distribution of the National Income on the volume and direction of saving.
  3. Discuss the probable effect on the earnings of workers in the electrical engineering industry of the introduction of a six-hour day coupled with the shift system.
  4. Examine the view that the future of labour organisation lies in Industrial Unionism. Is it supported by the history of Trade Unions in this country?
  5. An industrial combine employing some 30,000 people wishes to introduce a scheme for periodic consultation and discussion between management and employees. Draft an outline constitution. What subjects, if any, would you exclude from discussion?
  6. Give a critical account of the history of government intervention in labour disputes in this country.
  7. Consider the problems involved in the introduction of a means test for claimants to transitional payments under the Unemployment Insurance legislation.
  8. Discuss the decay of apprenticeship. What alternative systems of recruitment are desirable and practicable?
  9. Consider the probable effects of a permanent ban on immigration by the countries of North and South America.
  10. What value do you attach to the suggestions which have been put forward for arresting the growth of unemployment by the speeding-up of expenditure on public works?

 

_________________________

PRELIMINARY EXAMINATION IN ECONOMICS.

Monday, June 5, 1933. 9—12.
PRINCIPLES OF ECONOMICS.

  1. “Natura non facit saltum.” How far can this be regarded as a satisfactory axiom in Economics?
  2. “It is easier to interpret the classical doctrine that ‘Rent does not enter into the cost of production’ in a sense in which it is not true, and to scoff at it, than in the sense in which it was intended and is true. It seems best therefore to avoid the phrase.” Explain and discuss.
  3. State carefully the conditions which must be satisfied in order that an industry may be in long-period equilibrium.
  4. In what circumstances could the distribution of the resources of a community between different uses be improved by government intervention?
  5. On what theoretical grounds can the varying differences between the wages of skilled and unskilled workers in different countries be explained?
  6. “The doctrine that the earnings of a worker tend to be equal to the net product of his work has by itself no real meaning: since in order to estimate net product we have to take for granted all the expenses of production of the commodity on which he works other than his own wages.” Explain the difficulty involved here.
  7. What is the meaning of “normal profits”? How far is it true that profits in all industries tend to reach a uniform “normal” level?
  8. If you had to calculate the most profitable method and rate of exploitation of a mine with a limited supply of ores of varying grades, what factors would you take into account?
  9. Discuss the meaning which is to be attached to the word “utility” in the Theory of Value.
  10. “Increasing and diminishing returns are attributes rather of production as a whole than of production in one individual industry.” Discuss.
  11. In what circumstances if any would you regard it as desirable that a seller should discriminate in the prices charged to different consumers?
  12. “The chief factors determining the rate of interest are the growth of population and the rate of invention.” Discuss.

 

Monday, June 5, 1933. 1½—4½ .
INDUSTRY, LABOUR AND MONEY.

Paper I.

  1. How far is it true to say that the world gold standard before the War was (i) automatic, (ii) managed, (iii) dependent upon the economic and financial policy of England?
  2. “The Quantity Theory of Money throws no light upon the forces which most directly and actively influence the price level.” Discuss this statement.
  3. “The limit of wealth is never deficiency of consumers but deficiency of productive power” (John Stuart Mill). Discuss.
  4. To what extent do you consider that the progressive supersession of private businesses by joint stock companies has been a gain from the point of view of the community as a whole?
  5. Compare, with reference to any industries with which you are familiar, the relative importance of proximity to the market and proximity to the source of raw materials as factors in determining industrial localisation.
  6. Give an account of the difficulties which confront the Lancashire cotton industry in the world markets to-day. What remedies have been attempted or proposed in recent years for improving the position of the industry?
  7. How far does the nature of the product determine the possibilities of success in the co-operative marketing of agricultural produce?
  8. “In disputes between employers and workpeople, the stoppage of work is analogous to a war, or still more to a trade embargo, in disputes between nations.” Discuss.
  9. Give a rough estimate of the proportions of workpeople whose wage-rates are laid down in collective agreements, or fixed by the various statutory wages boards. How far and in what way do these wage-rates affect the levels of wages in unorganised and unregulated trades and services?
  10. Discuss compulsory arbitration in labour disputes from the standpoint of (a) principle, (b) practice, with illustrations from experience at home or abroad.

 

Tuesday, June 6, 1933. 1½—4½.
INDUSTRY, LABOUR AND MONEY.

Paper II.

  1. What would be the probable effects on the economic system of a country which was previously in equilibrium, if the people were to decide to save an additional £100 million per annum and to put the whole of the money thus saved on deposit account with the banks?
  2. Assuming that an important cause of the present depression in England lies in the fact that prices are below the level of costs, consider the relative merits of attempting (a) to raise prices to meet costs, (b) to lower costs to meet prices.

December 1931

December 1932
Treasury Bills outstanding…

£m. 605

£m. 928
Deposits of 12 Joint Stock Banks

£m. 1,806

£m. 2,049
Advances of 12 Joint Stock Banks

£m. 918

£m. 785
Investments of 12 Joint Stock Banks

£m. 298

£m. 488
Bankers’ Deposits at Bank of England

£m. 82

£m. 134
Wholesale prices (1927=100)

65.8

61.1

How do you account for the changes shown in the above table?

  1. Do you consider that discrimination against road transport in favour of the railways would be advantageous to the community as a whole in England to-day?
  2. “‘The optimum firm’ is a meaningless phrase unless we know the price of machinery, the rate of interest and the rate of invention in a given industry.” Discuss this statement.
  3. “The typical manufacturer of the more elaborate goods tends to become little more than an assembler of components bought from specialist makers.” How far is this true? What effects, if any, is it likely to have on labour and industrial organisation?
  4. Why have so many countries been compelled to take special steps for the re-organisation of their agriculture?
  5. In a firm belonging to an industry in which employers and workpeople are well organised, a dispute arises between some of the workpeople and the management as to how many workers, of what grade, and at what wage, shall operate a new type of machine. Describe the kind of agreements that are likely to exist for settling the issue without a stoppage of work, and sketch the procedure.
  6. “Under well organised production the distinction between payment by time and payment by results disappears. The manager who introduces or retains piece-work or bonus systems thereby stands confessed a second-rate organiser.” Discuss.
  7. Discuss the changes in the functions and status of the foreman consequent upon “scientific management” and “labour control,” and the problems such changes create.
  8. Recount briefly the history of any joint industrial council of employers and employed. Discuss the causes of its successes and failures and suggest any reforms you think desirable.

 

Tuesday, June 6, 1933. 9—12.
MODERN ECONOMIC HISTORY.

  1. “Mercantilism was the economic expression of the militant nationalism which sprang out of the social and political changes of the sixteenth century.” Discuss this. Was mercantilism peculiar to England?
  2. Estimate the importance of Spanish silver to the development of capitalism in Great Britain and Europe.
  3. Why was England the mother country of the Industrial Revolution?
  4. Did John Law seriously damage the economic and financial position of France?
  5. Explain the steps by which England originally reached a gold standard.
  6. What was the teaching of Malthus on the subject of population? Was his problem our problem?
  7. Estimate the economic consequences of the Napoleonic regime to Western Europe.
  8. Examine the points at issue between the Currency and Banking Schools in the 1840’s.
  9. Show the relation between the corn law controversy (1813 to 1846) and the formation of economic theory.
  10. How did German thought and policy between 1800 and the death of Bismarck react to English fiscal doctrine?
  11. Give some account of the rise of Socialism on the continent of Europe.

 

Source:  Cambridge University. Economics Tripos Papers 1931-1933, with the Papers Set in the Intercollegiate and Preliminary Examinations 1931-1933. Cambridge, UK: University Press, 1933, pp. 71-83.

Source: Trinity College, Cambridge University. Library of Congress Prints and Photographs Division Washington, D.C.

Categories
Cambridge Exam Questions

Cambridge. Economics Tripos, 1933

 

Examination questions for the Cambridge Economics Tripos from 1921, 1931 and 1932 have been posted earlier. Today we add the 1933 Economics Tripos for good measure.

Economics Tripos Part I (1933)

General Principles I
Social Problems
General Principles II
Essay Subjects
English Economic History
Economic Structure

Economics Tripos Part II (1933)

Economic Principles
Industry
Money
Essay Subjects
Labour
Principles of Politics
Public Finance
The Economic Development of the United States
Statistics
International Law

______________________________

 

PART I.

Monday, May 29, 1933.  9—12.
GENERAL PRINCIPLES I.

  1. “Economics may be described as a scientific study of the best means of avoiding waste.” Discuss.
  2. “Value in all cases tends to equal cost.” Consider the most important ways in which this dictum requires modification or amplification, and bring out clearly what is meant by “cost.”
  3. Is it possible for a community to save and invest too much for its own welfare?
  4. “Since it is evident that any industry is liable in the course of expansion to flood the market with its products and find its profits falling to zero or below zero, it seems pointless to pick out particular industries, such as agriculture, as being special cases requiring the use of the classificatory term ‘Diminishing Returns.'” Comment.
  5. What effects would you expect a great increase in the income of all classes to have upon (a) the rate of interest, (b) the size of the population?
  6. How far is it true to say that capital is free to migrate from declining to expanding industries?
  7. In what way does the true rent of land either resemble or differ from (a) the rent of buildings, (b) the high incomes of successful professional men?
  8. “The rate of interest tends to equality with the marginal net yield on the capital in use.” How does this come about? Is it an adequate explanation of the forces governing the rate of interest?
  9. Why do the prices of some commodities fluctuate much more than others?
  10. What are the chief benefits that might accrue to the community as a whole if a highly competitive industry were compulsorily converted into a monopolistic corporation?

 

Monday, May 29, 1933. 1½—4½
SOCIAL PROBLEMS.

  1. What evidence, if any, is there that poverty has diminished during the present century?
  2. Discuss the difficulties involved in abolishing or modifying the “means test.”
  3. Can relief of unemployment be dealt with on an insurance basis?
  4. Would a uniform national reduction of wages increase employment?
  5. Is England over-populated?
  6. Discuss the proposal to build a million houses in five years and pay for them with new bank credits and notes.
  7. By what chief methods are industrial disputes settled in Great Britain?
  8. Could a general strike improve the position of the wage- earning class?
  9. How do you account for the growing use of piece-rates in Russia since they seem inconsistent with the communist principle, “From each according to his capacity, to each according to his needs”?
  10. Would you support the proposed international convention for a 40-hour week?

 

Tuesday, May 30, 1933. 9—12.
GENERAL PRINCIPLES II.

A.

  1. Discuss the more important ways in which the world with which Economics is concerned differs from that of real life.
  2. Explain what you mean by “the supply of labour” and discuss how far it is affected by changes in the rates of remuneration offered.
  3. What do you understand by the phrase “the representative producer”? For what purposes is the idea useful?
  4. Two commodities are produced under conditions of joint supply. A given tax per unit is laid upon the output of one. Consider the effect upon the price of the other.
  5. What conditions are most favourable to the success of a combination of workpeople in order to raise the price of their labour?
  6. In what ways is the burden of risk in production and trade distributed under present-day conditions?

B.

  1. Give an account of the factors influencing the value of money.
  2. Discuss the difficulties involved in the construction and use of index numbers of the cost of living.
  3. How is the rate of exchange determined between two inconvertible paper currencies?
  4. Describe the working of the London Discount Market and indicate where its importance lies for the student of monetary conditions.
  5. Expand the statement that “the ability of any one bank to extend credit depends partly at least on the policy of the others.”
  6. How far is “the stabilisation of the level of prices” likely to promote the stability of general business conditions?

 

Tuesday, May 30, 1933. 1½—4½.
ESSAY SUBJECTS.

Write an essay on one of the following subjects:

  1. The final goal of society.
  2. “A little college is a dangerous thing.”
  3. Statesmanship and economics.
  4. Hoarding.
  5. The future of the English village.

 

Wednesday, May 31, 1933. 9—12.
ENGLISH ECONOMIC HISTORY.

  1. “Until the end of the seventeenth century England’s economic position was only of secondary importance.”
    Account for this and for the change which took place in the ensuing century.
  2. What was the “yeoman class”? When and why did it decline in importance?
  3. What was the influence of the wars of the Revolutionary and Napoleonic period on the economic development of England?
  4. Outline the events and the discussions which preceded the Bank Charter Act of 1844 and consider the settlement then achieved.
  5. Give a brief account of the “humanitarian movement” and indicate its rôle in the economic and social life of this country.
  6. Give some account of the principal factors which influenced the history of British shipping in the second half of the nineteenth century.
  7. What were the main features of the financial policy of Gladstone?
  8. Indicate and account for the principal changes in the general level of gold prices between 1821 and 1873.
  9. What is meant by “economic imperialism”? What forms did it take in this country in the generation preceding the outbreak of the World War?
  10. Contrast the structure and general situation of British agriculture in 1850 and in 1914.

 

Wednesday, May 31, 1933. 1½—4½.
ECONOMIC STRUCTURE.

  1. “A shift in the geographical distribution of industrial activities is usually associated with technical changes.” Discuss this, giving examples from recent changes in Great Britain.
  2. How do you explain the rapid growth in the proportion of the population employed in the distributive trades?
  3. “In expanding industries productive capacity can be created far more rapidly than of old.” Consider this statement, giving illustrations.
  4. If to-morrow you were appointed dictator of the Lancashire cotton industry for ten years, what would you do? Give your reasons.
  5. Give some account of recent developments in retail trading in this country.
  6. Under what conditions will an increase in the total output of an industry be secured most cheaply (a) by the expansion of existing plants, (b) by the opening of branches, (c) by the establishment of new firms?
  7. In what ways do you consider that public control over the provision of capital for industrial purposes can be improved?
  8. In what circumstances will organised restriction of output in any one industry be in the public interest?
  9. “It may be a true instinct which foresees the decadence of national prosperity in any special change of industry.” Comment.
  10. “Business is becoming a profession which requires a professional training and outlook.” Discuss the truth of this, and its possible effect on the efficiency of management.

 

______________________________

 

PART II.

Monday, May 29, 1933. 9—12.
ECONOMIC PRINCIPLES.

  1. State and criticise the case for the view that the conception of Utility is superfluous in economic theory.
  2. With what qualifications is it legitimate to suppose that the quantity of a commodity demanded at a given place and time is a function of the price of that commodity only?
  3. “The specious symmetry of the expressions ‘law of diminishing returns’ and ‘law of increasing returns’ conceals differences of fundamental importance.” Explain.
  4. What part, if any, do the principles governing the increase of population play in the modern theory of value? If you hold that they play no part, show precisely how population theory has been extruded.
  5. “Collective bargaining can only secure wage advances at the price of unemployment.” Discuss.
  6. Is there any respect in which the laws which govern the rent of land differ from those which govern the value of other factors of production in equilibrium?
  7. On what principles should a socialist state determine the optimum rate of saving for the community?
  8. Construct, if possible, a general definition of normal profit that will cover the cases both of perfect and of imperfect competition. Or, if that is impossible, give specific definitions appropriate to each case. Justify your procedure.
  9. On what grounds would you decide whether a practice of price discrimination was to be condemned?
  10. If a particular factor of production is not fully employed in a community, its employment can normally be increased by a reduction in the price at which it is offered. What relevance has this for the problem of raising output in a community in which none of the factors is fully employed?
  11. What facts would you need to know in order to measure the advantage which a country derived from its foreign trade?
  12. “Monetary theory is destined soon to swallow up the general theory of value.” Discuss.

 

Monday, May 29, 1933. 1½—4½.
INDUSTRY.

  1. How do you account for the increase since the War in the proportion of the occupied population engaged in the distributive trades? Is this increase to be deplored from the economic standpoint?
  2. Do you think it is correct to regard the last quarter of the nineteenth century as a period of stagnation for British industry, and the early years of the present century as a period of recovery? What evidence is available in support of or in opposition to this view?
  3. How would you explain the spread of international industrial combinations since the War? Do the post-War international combinations differ in any important respect from the pre-War international combinations? Have they contributed to economic stability?
  4. It is said that the State regulation of railway charges and services has been developed on the assumption that the railway companies are monopolists. Discuss this contention, and consider how State regulation affects the present distribution of traffic between railways and roads.
  5. What are “secret reserves”? Does the provision of “secret reserves” afford any advantages to business concerns? Can they be justified from the standpoint of the investor and the public?
  6. What is the economic significance of the recent extension of instalment selling? Has this development had an adverse or a favourable effect on the stability of economic life?
  7. Discuss the broad changes in industrial localization within Great Britain during the last hundred years, and their bearing on the theory of industrial localization.
  8. Do you think that the State is ever justified in enforcing rationalization on an industry? What evidence should the State regard as relevant in considering action of this kind?
  9. It is said that certain costs which are variable or prime costs from the standpoint of the employer are overhead costs from the standpoint of the community. Discuss this contention, and consider its bearing on the question of State interference in industrial affairs.
  10. Account for the progressive decline in the British cotton industry during the last decade.
  11. Discuss the causes of the extension of valorization schemes in world agriculture during the post-War period. Estimate the main economic effects of these schemes.

 

Tuesday, May 30, 1933. 9—12.
MONEY.

  1. What light, if any, does the experience of the last three years throw on the comparative merits of the British, German and American systems of deposit banking?
  2. Examine the view that an index number of prices must be differently weighted according as to whether the forces determining the value of money are analysed with the aid of the conception of velocity of circulation or with the aid of the conception of a demand for “real balances.”
  3. How do you account for the popular notion that money, to serve its purpose well, must be “backed by” some particular kind or kinds of asset? Give instances of the expedients which have been adopted to satisfy this notion in times of crisis.
  4. Examine, with special reference to the course of events in the United States in 1922-29, the theory that economic crises are brought about by a deficiency of saving.
  5. “The controversy which culminated in the Bank Act of 1844 was simply an episode in the agelong warfare between inflationist and deflationist.” Discuss.
  6. Examine the nature, and estimate the strength, of the forces which, in the absence of pressure from a central bank, will tend to bring about adjustment in a country’s balance of payments.
  7. Some people hold that, if productivity per head is increasing, the stabilisation by a world monetary authority of an index number of wholesale prices of raw materials would have seriously inflationary consequences. Do you agree with this view? Can you propose any better objective of international banking policy?
  8. The present slump has been compared with that of the early ‘nineties. Explain the main points of resemblance and difference.
  9. If a Government in a slump spends £100 million, raised by loan, on public works, would you expect the “indirect employment” created to last only as long as the “direct employment,” or to outlast it?
  10. You are Finance Minister of an “off gold” country which has decided to re-adhere to an international gold standard. What considerations would you take into account in deciding upon the new parity of exchange?
  11. “Foreign investment on a generous scale by the creditor countries was the root cause of the world crisis: it is also the only possible remedy.” Discuss.
  12. Discuss the influence of central banking operations on the relation between long and short interest rates, with special reference to the maxim that a central bank should endeavour to secure the equality of natural to market rates of interest.

 

Tuesday, May 30, 1933. 1½—4½.
SUBJECTS FOR AN ESSAY.

  1. Japanese Expansion in Asia.
  2. Rivers.
  3. The Economic Background of the Present Situation in Germany.
  4. The Place of Technological and Psychological Factors in Economic Analysis.
  5. Graft.
  6. The Creative Artist in a Socialist State.
  7. The Colour Problem in Africa.
  8. Class War.

 

Wednesday, May 31, 1933. 9—12.
LABOUR.

  1. Compare broadly the standard of comfort attained by the mass of the people in Great Britain with the standards attained in Germany and the United States of America; and briefly account for the differences.
  2. “Unless drastic action is taken to effect a change in the ownership of property, no substantial advance can be made in the direction of equalizing incomes.” Discuss the grounds for this opinion.
  3. Did the legislation passed by Parliament between 1832 and 1850 on balance promote or retard the material progress of the working class? Give reasons for your opinion.
  4. Explain how the volume of employment in Great Britain would probably be affected if the hours of work for all manual workers in industry and commerce were reduced to 40 per week, without any reduction in weekly wage-rates, (a) in this country only, (b) in all countries.
  5. “Experience shows that, while sickness is an insurable risk, unemployment is not, and ought therefore never to have been brought within the scope of social insurance.” Discuss this view.
  6. In a recent enquiry into the Sheffield cutlery trade, relating to the period July—December 1931, information was obtained from 67 manufacturing firms (approximately one-third of those known to be engaged in the trade) selected at random, from the outworkers employed by them and from a number of other outworkers. It showed the following results for men and women of 21 years and over:
Earnings per Hour
(Pence)		 Earnings per Week
Upper Quartile Median Lower Quartile Upper Quartile Median Lower Quartile
Time Workers:
Men 15.7 13.7 11.5 61s. 1d. 54s. 10d. 45s. 0d.
Women 6.7 5.9 5.5 26s. 0d. 23s. 0d. 21s. 0d.
Piece Workers:
Men 18.2 14.1 11.1 — — —
Women 8.4 6.9 5.4 — — —

Of the 2,926 workpeople covered by the enquiry, 61.1% were males and 38.9% females. According to figures supplied by representatives of the trade unions, it would appear that in 1932 less than 20% of the workers in the trade were organized in trade unions. If you had been Minister of Labour, would you have regarded this information as affording sufficient ground for applying the Trade Board Acts to the trade? And how would you have defended your decision?

  1. “To show that wages in a depressed industry with an international market are higher than those paid for similar work in the same industry abroad does not afford sufficient reason for thinking that a reduction of wages is an appropriate remedy for its depression: in order to establish that conclusion it must be shown also that they are higher than those paid for the same skill and efficiency in other industries at home.” Examine this contention.
  2. It has been proposed that a national authority, constituted similarly to the railways’ National Wages Board, should be established to regulate wages and conditions of work in coal mines throughout the country. Discuss the merits of this proposal.
  3. “The differences of structure and policy between the trade union movements of England and the United States are to be traced to historical accidents rather than to any differences in the present character or organisation of the industries of those countries.” How far is this true?
  4. What statistical or other scientific evidence is there as to the effect of (a) noise, (b) rest-pauses, (c) temperature upon output?
  5. Explain, with reference to the history and the underlying economic conditions of the two industries, why the “sliding-scale” principle of wage-settlement worked successfully in the iron and steel trade, but failed to preserve industrial peace in the coal trade.

 

Wednesday, May 31, 1933. 1½—4½.
PRINCIPLES OF POLITICS.

  1. “The Nation, by its power and its duration, is an organism, with an existence, ends and means of action superior to that of the individuals, separate or grouped, who compose it.” (Italian Charter of Labour, 1927. ) Discuss this view.
  2. “The normal course of improvement starts from origination by pure social invention, and passes subsequently, if at all, into adoption by the State” (Bosanquet). Discuss the view of the relation between Society and the State which is implied in this statement.
  3. What are the limits, if any, to the application by the State of the principle of Equality among its members?
  4. “Liberty is not one, but many, and its various forms may contradict one another.” Discuss this statement.
  5. Discuss the idea that law is the enforcement by the community upon its members of a moral minimum of conduct.
  6. How far can an international sovereign authority co-exist with national State-sovereignty?
  7. Would you agree with the view that a system of representative institutions for the economic world ought to be placed by the side of representative political institutions?
  8. On what principles may the State seek to regulate or control the freedom of thought of its members?
  9. On what grounds would you seek to justify the necessity of party and party-organisation for the proper working of Government?
  10. The French Declaration of Rights of 1789 includes the right of resistance among les droits de I’homme et du citoyen. In what sense, if any, can a citizen have a “right” to resist the State?
  11. Discuss, with reference to your general conception of rights, the idea of a “right to work.”
  12. Would you agree that the “separation of the powers” (or functions) of government is a necessary principle of politics?

 

Thursday, June 1, 1933.  9—12.
PUBLIC FINANCE.

  1. Consider the attempts that have been made to frame general rules for Expenditure analogous to those established for Taxation. Account for the relatively backward condition of the former division of Public Finance.
  2. Examine the views that have been put forward concerning the principle according to which motor-vehicle owners should be taxed, and consider the principle or principles to which the present taxes on motor-vehicle owners tend to conform.
  3. Discuss the extent to which the main differences between the various theories of taxation may be attributed to divergent views of the functions and the nature of the State.
  4. What is there to be said for and against having a quinquennial instead of an annual budget?
  5. On what considerations is the maxim that a government should not issue loans below par based? Does the maxim admit of exceptions?
  6. Discuss the view that the Government should spend the revenue derived from death duties on capital purposes.
  7. As a means to increasing prosperity, it has been proposed (a) to reduce taxation without reducing government expenditure, or, alternatively, (b) to increase government expenditure without increasing taxation. Compare the probable effects of these two policies.
  8. “The law of diminishing utility is sound enough when applied to a particular commodity, but it cannot be extended to wealth in general: consequently all the elaborate arguments and formulae for tax-graduation are without logical foundation.” Comment.
  9. Explain exactly what is meant by Most Favoured Nation treatment, and examine the view that its prevalence constitutes an obstacle to the recovery of world trade.
  10. Discuss, with reference to the practice of other countries, possible alternatives to the methods of local taxation at present in force in England.
  11. Is there any foundation for the view that inter-governmental war-debts are more harmful to trade than (a) other debts owed by governments to foreigners, (b) internal war-debts?
  12. Compare the effects, (a) on home producers, (b) on consumers, of an import duty and an import quota.

 

Thursday, June 1, 1933. 1½—4½.
THE ECONOMIC DEVELOPMENT OF THE UNITED STATES.

  1. “America is really a federation of sections rather than of States.” Consider this statement from the economic point of view as applied to American conditions in 1789, 1850 and to-day.
  2. Examine, in the light of the first half century of American history after 1789, the economic powers which the constitution gave to the National Government.
  3. Discuss the policy of the United States Government in dealing with the Public Lands down to the Homestead Act of 1862.
  4. Criticize the methods used by the North to finance the Civil War.
  5. “Southern experience before and since the Civil War condemns slavery as an economic institution.” Discuss this statement.
  6. Illustrate the influence of the westward movement within the continent on the economic outlook of the American.
  7. What problems were created by the consolidation of the railways and what measures were taken as a consequence to protect the public interest?
  8. Account for the leading position acquired by the United States in the iron and steel industry.
  9. Explain the change that has taken place in the twentieth century in the American attitude towards immigration.
  10. To what extent have economic motives influenced the oversea expansion of the United States?
  11. “America has no national economic history, in the sense in which France or England has, until the generation after 1880.” Discuss this statement.

 

Thursday, June 1, 1933. 1½—4½.
STATISTICS.

Part A.

  1. Estimate the average, mode and median for the group of rents in Table A. Criticise the use of the formula skewness = (average—mode) \div standard deviation in this case, and suggest or calculate an alternative measurement.

Table A. Three-roomed tenements.

Rent Number
Under 2s. 6d. 1
2s. 6d. to 5s. 3
5s. to 7s. 6d. 14
7s. 6d. to 10s. 29
10s. to 12s. 6d. 27
12s. 6d. to 15s. 13
15s. to 17s. 6d. 11
17s. 6d. to 20s. 2
100

 

  1. Fit a straight line by least squares or any other method to the series of index-numbers in Table B.

Table B. Index of Production.

Years
Quarters 1927 1928 1929 1930 1931
1st 110 105 108 109 84
2nd 107 103 110 100 80
3rd 105 95 107 90 80
4th 107 104 114 92 90
Average 100

Make a graph of the figures, marking in (1) the straight line found and (2) moving averages based on eight successive quarters.
Comment on the results.

  1. If \bar{x},\,\bar{y} are the averages of n observations of (x, y) pairs, and in the array \bar{x}+{{x}_{s}} at there are ns cases with average \bar{y}+{{y}_{s}}, show that r=\frac{\sum{{{n}_{s}}{{x}_{s}}{{y}_{s}}}}{n{{\sigma }_{x}}{{\sigma }_{y}}}.

Work out r and the correlation ratio for the figures in Table C.

Table C.

Number of earners Number of families Average number
of dependents
x ns \bar{y}+{{y}_{s}}
0 8 1.5 \bar{x}=1.6
1 54 2.1 \bar{y}=2.0
2 19 1.8 {{\sigma }_{x}}=1.13
3 11 2.0 {{\sigma }_{y}}=1.42
4 5 2.2
5 3 2.5
100

Make a graph of the averages showing the regression line. Comment on the utility of the procedure in this case.

  1. From a large population 100 workmen are selected at random and are classified thus:
Occupation
Birthplace Skilled Unskilled
Town of residence 30 38
Elsewhere 10 22

Do you find any relationship between skill and birthplace? Table D may be used if needed.

Table D. Values of P.

{{\chi }^{2}}
Number of Compartments 0 0.5 1.0 1.5 2.0
2 1 0.48 0.32 0.22 0.16
3 1 0.78 0.61 0.47 0.37
4 1 0.92 0.80 0.68 0.57

 

Part B.

  1. What data are used for forecasting the future trend of population and what assumptions are made? Consider also the more limited question of determining whether a population is self-productive or is tending towards diminution.
  2. Among the statistics used for studying the change of the industrial position are (a) an index of physical production, (b) the number of insured persons in employment, (c) an index of wage-rates, (d) occasional accounts of average earnings. What relationships do you expect to find between these statistics in a period of increasing depression or in a period of recovery?
  3. Explain in some detail the construction of index-numbers of average prices and of volume of trade from statistics of exports and of imports. Describe some of the purposes for which these figures are used and consider whether they are sufficiently accurate for these purposes.
  4. Examine carefully the question whether index-numbers of wages and of cost of living can be combined so as to show the relative movements of real wages in different countries.
  5. Describe one of the mathematical methods of constructing “demand curves” from existing data, and consider in what sense they can be called demand curves.

 

Friday, June 2, 1933. 9—12.
INTERNATIONAL LAW.

  1. Comment upon the international status (if any) of the following:

(a) The Dominion of Canada;
(b) The Saar Basin;
(c) The State of California;
(d) Switzerland.

  1. What are the main legal consequences that flow from the independence of States?
  2. Show in what respects a mandated territory differs from (a) a colony, (b) a protectorate. What (if any) is the sanction for the enforcement of the terms of a mandate?
  3. Describe the constitution and purpose of the International Labour Organisation and the method of the composition of the delegations sent by members to its Conferences. Mention any two of the Labour Conventions adopted by it and now in force.
  4. How far has the process of codification been applied to international law? What are the difficulties in the way of further codification?
  5. Describe the three principal methods for the settlement of disputes prescribed by the Covenant of the League.
  6. Discuss the lawfulness and the effectiveness of an economic boycott,

(a) when applied by the nationals of one State against the commerce of another;
(b) when applied by the international community against a wrongdoing State.

  1. Summarise the effect of the outbreak of war upon

(a) treaties to which all the belligerents and no neutrals are parties, and
(b) contracts between the nationals of opposing belligerents.

  1. How much of the Declaration of Paris, 1856, has in your opinion survived the developments of maritime warfare in the Great War?
  2. In what respects do you consider that the Covenant of the League, the Kellogg-Briand Pact, and the Convention on Financial Assistance (1930) have modified the law of neutrality?

 

Source:  Cambridge University. Economics Tripos Papers 1931-1933. Cambridge, UK: University Press, 1933, pp. 53-70.

Image Source: King’s College, Cambridge, England. Library of Congress Prints and Photographs Division Washington, D.C. 20540.