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Exam Questions Fields Harvard Undergraduate

Harvard. Three Undergraduate Economic Field Exams, 1942

 

The Harvard undergraduate economics departmental exam and the essay topics for 1942 were transcribed for the previous post. Below we have three field exams for money & finance, market organization & control, and labor economics & social reform from the same year. In the Randall Hinshaw papers at Duke I did not find field exams for statistics & accounting or economic history that I suspect would have also been offered (judging from Part II of the economics departmental exam).

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DIVISION OF HISTORY, GOVERNMENT, AND ECONOMICS
Department of Economics
May 6, 1942

DIVISION SPECIAL EXAMINATION
Money and Finance
(Three hours)

PART I
(About one hour)

  1. Write an essay on ONE of the following topics:
    1. monetary conditions of full employment equilibrium,
    2. the functions and importance of the Federal Reserve System in the 1920’s, the 1930’s, and today,
    3. investment banking by commercial banks – theory and practice in the past and future,
    4. international monetary problems after the last war, and after this war,
    5. modern improvements on the classical theory of international trade,
    6. ideas for post-war liberation and control of international trade – conditions of progress in respect of justice to all nations and prosperity for all,
    7. modern federal taxation in peace and war times – functions, and types of taxes and tax programs required,
    8. ways of mitigating the undesirable future consequences of our mounting national debt,
    9. effects of the war on financial problems of state governments,
    10. the background of the modern vogue of monetary management and deficit finance, in fundamental economic changes over recent decades,
    11. prospective war-time and immediate post-war changes in America, in demand and supply conditions for investment funds and real capital,
    12. post-war problems and prospects in Anglo-American economic relations.

 

PART II
(About one hour)

All students must answer TWO questions. If you are a candidate for honors, at least ONE of these two must be a starred question.

  1. (*) “The spectre of ‘secular stagnation’, which threatened the capitalist world of the 1930’s, is being exorcised by this war and will probably not return after it, at least for some decades.”
  2. (*) Outline succinctly, and explain and discuss as fully as your time allows, what you regard as the best analysis – either one writer’s or your own compilation – of the fundamental causes of the business cycle.
  3. Explain, and discuss critically, several different concepts of “velocity” and “hoarding” found in the modern literature of monetary theory.
  4. “Just as banking policy was unable, in the 1930’s, to play any important part in producing recovery, it is now unable, for opposite and parallel reasons, to play any important part in combating war inflation.”
  5. (*) Discuss the economic and other causes of the world-wide growth of new nationalistic restrictions on international trade, in the interval between the last war and the present war.
  6. (*) “As a stabilizer of the monetary basis of international trade, nothing short of one world currency under the management of a central, international authority, can be an effective substitute for the 19 century’s international gold standard.”
  7. Discuss the effects which the “lend-lease” arrangements through which this country is aiding its allies in the war, are likely to have on our foreign trade, economic relations with the outer world, and economic position in the post-war period.
  8. “If country A has strong labor unions which force up and hold up wage-costs in all its industries, while country B enjoys cheap labor together with industries as modern and well mechanized as those of A, progressive depreciation by A of the external value of its currency is its only means of maintaining competition with B in world markets.”
  9. (*) Discuss the relative merits of compulsory savings plans, a further lowering of exemptions from the personal income tax, and a general sales tax, as methods of diverting a larger share of war-time wages from consumption expenditure to investment in the war effort.
  10. (*) “Federal expenditures on welfare projects, or benefaction’s to the under-privileged, are a national luxury which must be sacrificed to the war effort.”
    “No; on the contrary, the war increases our obligation to all we can for the well-being of our poorest citizens; for in relation to the war effort, their morale is more important than are all economies, which would benefit only the over-privileged – whose patriotism, we hope, will stand the strain.”
  11. Discuss the merits of the view that in wartime the income tax should be supplemented by a special, progressive tax on all increases of individual incomes above the average levels of the same incomes in a group of pre-war years.
  12. “The chief danger in severe taxation of business profits in wartime is that of causing under maintenance of industrial plant, to the extent of making the country pay for the war to largely by consuming its capital.”

 

PART III
(About one hour)

(Answer TWO questions)

  1. “Future alternations of prosperity and depression are unlikely to occur with the nearly exact regularity or periodicity, which has made the term ‘business cycle’ appropriate in the past. The ‘cycle’ in that sense was one of the regularities peculiar to a quasi–automatic, laissez-faire capitalism.”
  2. “Money and finance are of no importance in modern war; only physical resources and production count. The Axis countries are already bankrupt, but it makes no difference. And we, in order to win the war, will have to give our physical production experts – not our monetary and fiscal experts – a free hand.”
  3. “America is sure to have, before the war ends, an inflation that will largely wipe out the real incomes and wealth of all its professional people and small savers – the backbone of the middle-class – and divide the spoils between rich speculators and skilled, industrial wage-earners. And that will make impossible the future maintenance of the country’s conservative-liberal, political tradition.”
  4. “The effort to knit the Latin American economies into ours, and make the Western Hemisphere a largely unified and self-sufficient, regional economy, cannot succeed in any large and lasting way. Our principal, natural economic ties are with Europe, and so are those of the Latin American countries; and these old, natural tendencies will reassert themselves after the war.”
  5. “By ending the imperialism of the white race in the Orient, the war is ending what have been essential factors in the prosperity of England, Holland, and America – exploitation of cheap Oriental labor and rich natural resources acquired at little cost, and a market for ‘dumping’ industrial surpluses, so as to make something near to full employment in the Western countries compatible there with excessive prices for the same industrial products.”
  6. “The spread of industrialism throughout the world does not merely alter the incidence everywhere of ‘comparative advantage’, and the international division of labor; it increases the diversity of productive powers and the self-sufficiency of every country, and thus radically diminishes the total importance of international trade.”
  7. “Financial, or monetary and fiscal manipulations cannot save capitalism. They could, if the right manipulators could work freely and not be defeated by a ‘strike’ on the part of Capital. But every attempt, in a time of depression, to redistribute money income and thus restore consumption and employment, always will be defeated by the further decline of investment due to the fears of the capitalists, who fear what immediately attacks their positions more than they fear the eventual, socialist revolution that is certain to result in time from an unrelieved, severe depression.”
  8. “In opposition to the nineteenth century orthodox explanation and defense of interest as a payment necessary to induce, through saving, enough creation of real capital, Keynes in effect revives the basic idea and resulting attitude of Aristotle and the medieval writers against ‘usury’. Like them, he sees in the demand for interest only the reluctance of the rich to part with their money hoards, and thus makes it the villain of the economic drama.”
  9. “In the economic world, the ‘real’ in contrast with the ‘monetary’ factors do indeed determine, as the older economists thought, what everyone must do in order to reach true equilibrium. Where they went wrong was in supposing that everyone always does fairly soon reach true equilibrium, that is, adjustment to realities; that deceptive, monetary changes have only very brief, transitional, or ‘short run’ consequences. Money is much more important than they thought it was, because the truth is that activities supported only by illusions, of monetary origin, prolong and aggravate those illusions and themselves in a cumulative fashion until unreality, or non-adjustment to reality, becomes so drastic that it collapses violently and then gives way, only, to a like, prolonged departure from reality in the opposite direction.”

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DIVISION OF HISTORY, GOVERNMENT, AND ECONOMICS
Department of Economics
May 6, 1942

DIVISION SPECIAL EXAMINATION
Market Organization and Control
(Three hours)

PART I
(About one hour)

  1. Write an essay on ONE of the following topics:
    1. corporate profits,
    2. the problem of converting plants to war production,
    3. some recent developments in the study of costs of production,
    4. the war and American agriculture,
    5. why farmers are poor,
    6. the “parity” concept in agricultural policy,
    7. a wartime plan for the railroads,
    8. the future of private and public ownership in the public utility field,
    9. public utility rate-making: science or art?
    10. the relation of price control and rationing to fiscal policy,
    11. bureaucracy in industry and government,
    12. the Supreme Court and the regulation of economic life.

 

PART II
(About one hour)

All students must answer TWO questions. If you are a candidate for honors, at least ONE of these two must be a starred question.

  1. (*) Select any two American industries and compare their respective pricing methods and policies. Which seems to you more desirable from a public standpoint? Explain.
  2. Suppose you were put in charge of a trust fund with the duty of investing funds in corporate stock. What factors would you take into account in deciding which stocks to buy? Why?
  3. (*) Explain the relation, if any, between industrial price policies and the size of the national income.
  4. “The recent downward trend in the stock market is an utter absurdity from an economic point of view.” What facts and theories underlie this statement? Do you agree with it? Explain.
  5. (*) “We are now experiencing an agricultural revolution no less profound than the industrial revolution of 150 years ago.” Do you agree? Why or why not?
  6. (*) Discuss the chief problems of public policy connected with the growing and marketing of cotton.
  7. Discuss critically the recent agricultural policy of one foreign country.
  8. What are the principal changes that have been introduced in the methods and living conditions of American farmers by the internal combustion engine?
  9. (*) “Whenever you tried to define a public utility you will always come down finally to one and only one factor: discriminating monopoly.” What is a discriminating monopoly and what conditions favor its existence? Do you agree that discriminating monopoly is the distinguishing characteristic of public utilities? Explain.
  10. (*) What justification, if any, can be offered for the principle of railroad rate-making which attempts to equalize the competitive position of producers over a wide area?
  11. What conditions in the field of public utilities led to the passage of the Public Utility Holding Company Act of 1935?
  12. Discuss the relative merits of water-power and steam-power in the generation of electricity. Should it be public policy to favor one against the other (a) as a war measure, (b) in the post-war period? Explain.

 

PART III
(About one hour)

Answer TWO questions

  1. “It is an odd circumstance that capital fought for the right to incorporate, while labor fights against the compulsion to incorporate.” Discuss.
  2. “From an economic standpoint there is little to be said for excess profits taxation. As a method of controlling inflation it is obviously quite inadequate. Hence the only important consequence is an undermining of the financial position of precisely those corporations which are most essential in war production.” Discuss.
  3. Discuss the methods which have been employed in financing plant expansion requirements necessitated by the defense and war efforts. Why were these methods adopted? What is their significance for the post-war period?
  4. “The technical and managerial classes are slated to succeed the owners in the sequence of ruling classes.” Discuss.
  5. Some experts believe there is likely to be a great increase in the number and importance of corporate farms in the relatively near future. What are the reasons for this belief? Explain why you agree or disagree.
  6. Do you think direct control over wages is necessary to effective price control? Why or why not?
  7. Sketch the traditional policy of our government toward participation by American businessmen in international cartels and combines. Discuss the reasons for this policy and its results.
  8. “From the standpoint of economic organization, the Nazi economy represents the uninterrupted continuation of trends in German society which reach back at least to the 1870’s.” Discuss.

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DIVISION OF HISTORY, GOVERNMENT, AND ECONOMICS
Department of Economics
May 6, 1942

DIVISION SPECIAL EXAMINATION
Labor Economics and Social Reform
(Three hours)

PART I
(About one hour)

  1. Write an essay on ONE of the following topics:
    1. wages and war inflation,
    2. the closed shop,
    3. should the 40-hour week be abolished during the war?
    4. the problem of migratory labor,
    5. an ideal system of unemployment insurance,
    6. a population policy for America,
    7. class struggle – reality or propaganda slogan?
    8. the probable effect of the war on American movements of social reform,
    9. can socialism be achieved by a gradual process of reform?
    10. labor and the anti-trust laws,
    11. trade unions and political action,
    12. labor in World War I.

 

PART II
(About one hour)

All students must answer TWO questions. If you are a candidate for honors, at least ONE of these two must be a starred question.

  1. (*) Discuss the benefits which one important C.I.O. union has won for its members, and the methods and policies by which it has won them.
  2. (*) Assume that a new industrial union enrolls all the workers in a particular industry, and succeeds in raising their wages. Make, and stayed clearly, your assumptions about all the main economic conditions (supply and demand conditions in the various markets) relevant to this problem; and on your assumptions, analyze the determination of the shares of the cost of paying for this wage-increase, which will be born in the end respectably by (1) the employers in the industry, (2) the consumers of the product, and (3) groups connected with other industries as workers, employers, or consumers.
  3. Discuss the history, methods, and achievements of union-management coöperation in one American industry where it has become established.
  4. What principles, as to policy and procedure, would you advise the federal war labor Board to adopt as its guiding principles in dealing with industrial disputes during the war period? Explain your reasons for each principal you propose.
  5. (*) Is the Malthusian theory of population wrong? If so, in what respects and why? If not, what is the evidence to support it?
  6. (*) Explain and evaluate the theory of non-competing groups.
  7. Can fascism (including Nazism) be called the “revolution of the middle class”? Explain.
  8. What, in your opinion, would be the chief economic effects of a cessation in population growth? Why?
  9. (*) Discuss critically Marx’s theory of capitalist crises.
  10. (*) What kind of a “new order” from an economic standpoint do the Nazis want to create?
  11. Discuss the main characteristics and results of economic planning in the Soviet Union.
  12. According to a number of economists, the price policy of a socialist society should be based on one single principle: equate price to marginal cost. Explain the meaning of this rule and argue for or against its general validity.

 

PART III
(About one hour)

Answer TWO questions

  1. Discuss the relative advantages and disadvantages, from the workingman’s standpoint, of the sales tax and a tax on wages deducted at the source as methods of closing the gap between outstanding purchasing power in the quantity of consumer goods available in the war economy.
  2. “Whether profit-sharing be but a slight modification of the ordinary capitalist system or contained within itself the germs of a true coöperative system need hardly be discussed in view of the fact that its history has been a record of repeated failure. The cause of failure in almost every case has been the apparent incompatibility of profit-sharing with trade unionism.” Discuss.
  3. What is to be said for stabilization of money wages as a goal of monetary policy?
  4. “Can even the most ardent free-trader doubt that in the post-war world American labor will continue to demand and deserve protection from cheap foreign labor?” Discuss.
  5. Discuss the economic problems of the construction industry, placing the kind of unionism which prevails there in its proper setting.
  6. Discuss the structure, problems and policies of the labor movement in backward or colonial countries.
  7. “There is no mistaking the economic foundations of race prejudice in the contemporary world.” Discuss.
  8. “Historically the connection between freedom of enterprise and freedom in other fields of thought and action is obvious. Must we not, then, assume that the destruction of free enterprise would likewise deprive us all our cherished liberties?” Discuss.

 

Source:  Duke University. David M. Rubenstein Rare Book & Manuscript Library. Economists’ Papers Archive. Papers of Randall Hinshaw. Box 1, Folder “Schoolwork, 1940s”.

Image Source: Harvard Square from the Tichnor Brothers Collection of postcards. Boston Public Library, Print Department.

Categories
Exam Questions Fields Harvard Undergraduate

Harvard. Undergraduate Departmental Examination and Essay Questions, 1942

 

 

The next post will provide transcriptions of three division special (i.e. field) examinations from 1942.

The 1939 departmental examination and  essay questions have been posted earlier.

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DIVISION OF HISTORY, GOVERNMENT, AND ECONOMICS
Department of Economics
May 1, 1942

ESSAY PAPER
(One hour and a half)

Candidates for honors may write on ONE topic only. Others may, if they prefer, write on TWO topics. Please note on the front cover of the bluebook the number of each topic upon which you write.

  1. Economic imperialism.
  2. The pre-requisites of lasting peace.
  3. The economist who has most influenced your thinking.
  4. Some unsettled questions of economic science.
  5. Welfare economics.
  6. The relation of economics to sociology and political science.
  7. The distribution of wealth and income.
  8. The classical economists and their legacy.
  9. The nature and significance of general equilibrium analysis.
  10. Economic warfare.
  11. If Great Britain loses her empire.
  12. What killed laissez-faire?
  13. “The rise of political centralism is largely the product of economic centralism.”
  14. The relations and roles of the economic interests, and the social and cultural traditions, movements, and ideals, which are in conflict in the war.
  15. The American war effort and the profit system.
  16. Government controls which the American economy requires during the war, and those which it will require in the period of post-war adjustment.
  17. The applicability of traditional economic theory in explaining the course of economic life in totalitarian states.
  18. The future of capitalism.
  19. “The claim of economics to be a true science, like the modern physical sciences, must be given up as untenable.”
  20. Planned economies and human liberties.
  21. The value of training in economics, for success in business, and for good citizenship.
  22. “The physiologist’s task is not the physician’s; analysis and therapy are different; and economists, like physiologists, should confine themselves to explaining what happens, and leave the giving of advice to others.”

Source:  Duke University. David M. Rubenstein Rare Book & Manuscript Library. Economists’ Papers Archive. Papers of Randall Hinshaw. Box 1, Folder “Schoolwork, 1940s”.

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DIVISION OF HISTORY, GOVERNMENT, AND ECONOMICS
Department of Economics
May 4, 1942

DEPARTMENTAL EXAMINATION
(Three hours)

Answer SIX questions; at least ONE question must be answered in each part, but not more than THREE questions may be taken in Part II. A senior may not take more than ONE question in that section of Part II which covers his special field.

PART I

  1. Define: elasticity of demand, unit elasticity, elastic demand, inelastic demand. Say weather, and explain why, you would expect the demand for each of the following commodities (in normal times) to be elastic or inelastic: automobiles, milk, tobacco, fur coats, window glass, oriental rugs, quinine, coal.
  2. Suppose that industries A, B, and C are all “purely competitive”, and that A has constant costs, B increasing costs, and C decreasing costs, for increasing outputs. If all three of these industries experience rapid, marked, and lasting increases of the public’s demands for their products, what will be (a) the immediate and (b) the ultimate effects upon the prices of the three different products? Explain your answers, and illustrate each case by the appropriate diagram. If now a cost-reducing invention (new method or machine) is generally adopted in each industry, show on your diagrams the effects of this on their cost conditions, outputs, and prices, and explain.
  3. Suppose a firm to be operating under these conditions:

Its total fixed cost is $1000 per day.
Its total operating cost for 1 unit output per day is $1000.00; for 2 units, $1800.00; for 3, $2550.00; 4, $3400.00; 5, $4500.00; 6, $6600.00. It can sell at price $1800.00, 1 unit; at $1500.00, 2 units; at $1250.00, 3 units; at $1100.00, 4 units; at $1000.00, 5 units; at $925.00, 6 units.

Infer from those figures, and draw on a diagram (as smooth curves) this firm’s average total unit cost, marginal cost, demand, and marginal revenue curves.
Now show on your diagram, and explain, the price and output required to maximize the firm’s profits.
Now assume “free entry” to the field, and that new competitors of this firm appear.
Show on your diagram, and explain, the ultimate effects of the new (increased) competition on this firm’s demand curve, output, average total unit cost, selling price, and profits.

  1. Explain as fully as you can, in terms of the relevant conditions of demand, supply, and marginal productivity, the present high wages of skilled workers in American war industries.
    To what extent, and how, do you think the efforts of trade unions make these wage-rates higher than they would be otherwise?
  2. In what principal ways do you think the war is affecting and likely to affect, while it lasts, the aggregate demand for and supply of capital and the level of interest rates within this country?
    What developments in the same respects do you think are most likely in the post—war period? Explain fully.
  3. Explain and discuss the significance of each of the following: total utility, law of diminishing utility, average and marginal utility, and consumers’ surplus.
  4. How would competition, if universally “pure”, tend to allocate resources, in a state of equilibrium of the whole economy?
    How is the equilibrium allocation altered by general prevalence of “monopolistic competition”?
    Explain concisely.
  5. Suppose that economic conditions in a country over a certain decade undergo the following changes. (1) The country’s population increases rapidly, while no additions are made to its territory or known natural resources. (2) Technological progress in all branches of production is steady and substantial; all innovations are capital-using, labor-saving inventions; physical outputs per man-hour of labor increase substantially. (3) A constant, rather high percentage of the national money income is annually saved and invested within the country. (4) Credit expansion is continually greater than the increase of total physical production, hence the price-level rises throughout the decade.
    Explain and discuss the probable, separate and joint effects of those developments on the absolute and relative shares of the national, real income respectively allotted, at the end as compared with the beginning of the decade, to (real) wages, economic rent, interest, and business profits. If you need to make assumptions more definite than those stated above, or additional assumptions, in order to reach definite conclusions, make clear the uncertainties in the problem as stated, and resolve them by explicit assumptions chosen as you please, at appropriate points in your discussion.

 

PART II
A
Statistics and Accounting

  1. Is it possible to devise an “ideal”, all-purpose, formula for price index numbers? Why or why not?
  2. What, in your judgment, are the greatest dangers that have to be guarded against in applying statistical methods to the available data of economic life?
  3. “Currently practiced accounting methods lead almost invariably to either overestimation or underestimation of true net earnings.” Explain carefully, indicating what is meant by “true net earnings” and why accepted accounting principles may lead to their misrepresentation. Do you think that in wartime, net earnings are likely to be overstated or understated?
  4. Answer concisely the following questions: (a) A corporation issues $100,000 par value stock to the promoters for nothing. In order to make the totals of the balance sheet equal, an item of “goodwill $100,000” is placed on the asset side. Assuming there is no reasonable ground for considering the “goodwill” to be actually valuable, how would you correct the balance sheet? (b) The amount of fixed assets – buildings and machinery – is less at the end of the year than at the beginning. What other changes would you expect to find on the balance sheet? Why? (c) In case a reappraisal of fixed assets shows a value in excess of value and it is desired to bring the appreciation into the books, how may this be done?

B
Modern Economic History

  1. What role would you assign to the National Banking System in the pattern of American business fluctuations from 1870 to 1914?
  2. Describe and explain the development of American tariff policy during the 19th century.
  3. Argue for or against the proposition that the Nazi economy is no more than the logical outcome of German economic policy from the time of Bismarck on.
  4. “The depression (1876-86) is, indeed, the watershed between the era of British industrial supremacy in the era of international competition.” Discuss.

 

C
Money and Finance

  1. Imagine that someone with no knowledge of economics asks you to explain to him, fully and clearly, why as an element of war finance government borrowing from the banks is peculiarly “inflationary”; and write out the explanation you would give.
  2. “Since government spending has become the main regulator of the volume and tempo of economic activity, Federal Reserve policy has become an academic subject of no real importance.”
  3. In a world at peace, with international trade proceeding normally, but with all countries on independent “paper standards” and exchanges “free” (with no fixed parities”, a position of general equilibrium and stable exchange rates has been reached. Now country A embarks, alone, on an internal monetary expansion which raises its price level.
    Trace and explain what effects, if any, this will tend to have on the balances of payments of A and other countries, foreign exchange rates, international transfers of products, factors, and “purchasing power”, and price levels in other countries. At what point, and how, will a new position of equilibrium be reached?
  4. “In the development of trade between an industrial nation, A, and an agricultural nation, B, both nations will gain by the trade, but the division of the gain will become unequal, in favor of A. The elastic demand for A’s products in B, and the inelastic demand for B’s products in A, will cause the terms of trade to shift in favor of A, as production in both countries in the trade between them expand.”
    Give a full and careful explanation of the concepts, assumptions, and reasoning suggested, and state any criticisms or qualifications that occur to you.
  5. Discuss the meaning and validity of the statement that a general sales tax is “regressive”; and the principal arguments for and against the view that this type of tax, even if undesirable in peace times, is peculiarly appropriate in wartime.
  6. “Our immense and upward-zooming federal debt is a prelude either to national bankruptcy, or else to socialism.”

 

D
Market Organization and Control

  1. Sketch the background, provisions, and chief consequences of the Sherman Anti-Trust Act.
  2. Is it possible for a Board of Directors to pursue a dividend policy which will consistently harmonize the interests of the corporation, its stockholders, and society as a whole? Explain.
  3. What are the methods which may be adopted to control war-time profits? What policy do you favor in this respect and why?
  4. “In the pricing of electrical energy no case can be made out on economic grounds for differential charges unless they are likely to lead to an improvement in the load factor, i.e., To a more uniform distribution of demand through time.” State your reasons for agreeing or disagreeing with this proposition.
  5. “Only a socialist has a right to complain about crop-restriction and price-raising in the field of agricultural production.” Discuss.
  6. “There seems to be little doubt that the complete ‘trustification’ of the economy, with the relative stability of prices which would follow therefrom, would go a long way toward eliminating business fluctuations.” Discuss.
  7. “Price stability is prima facie evidence of monopoly.” Discuss.

 

E
Labor Economics and Social Reform

  1. Outline and defend what you would advocate as the best national war-time policy in regard to wages, and whatever else you think must be controlled in order to control wages effectively.
  2. What principal, lasting effects do you think the war is likely to have on the American labor movement – union structures, strength, status, and policies? Explain your predictions and the evidence and reasoning on which you base them.
  3. “The current outcry against federal centralization of unemployment insurance, and in favor of ‘states rights’ in this field, is without merit, and a mere device of employer interests to limit the development of unemployment insurance and keep it as innocuous as possible.”
  4. “American labor unions are deluding themselves in blaming only the false propaganda put out against them by unprincipled opponents, for the better anti-union feelings of some millions of middle and lower-middle-class Americans. Real faults of union leadership and policy have done a great deal to cause and justify this public hostility, and the unions in their own interests can and must assuage it by putting their own houses in order.”
    Discuss this, as far as you can, in terms of concrete, illustrative situations and evidence of which you have some knowledge.
  5. “The Marxian theory that all property-incomes, or non-labor incomes, originate in exploitation of labor, is entirely compatible with the ‘marginal productivity’ theory of income distribution.” Explain and discuss.
  6. Outline, and discuss critically, what you regard as the logical, Marxist explanation of the origins and issues of the present war.
  7. What do you think American Labor, in supporting the war-effort, should put first among its “peace aims”, or aims in respect of the post-war settlement? Explain and defend your answer.

 

PART III

  1. “Economics can either explain the quasi-automatic operation of a true free enterprise economy, or devise a blue-print for rational planning in the socialist economy. But in a half-way house like our present society, where both private and public decisions must respond more often to political than to economic facts, economics can neither explain events nor guide public policy.”
  2. “After the last war, the reaction of business and the public against the war-time government controls gave a new lease of life to laissez-faire, with disastrous results; and there is danger that a like relapse will occur at the end of this war.”
  3. “The proper work of the economists, in helping to solve the problems of industry and society, may be said to begin where that of the engineers or technicians ends.”
  4. “If the opportunity for the employment of idle men and idle money is to be found in a free, private enterprise system then, obviously, we must find a way to stimulate new, private enterprises by encouraging the investment of private savings in them.”
  5. “The causes which bring trade barriers into existence and produce centralism in every form of economic activity must be attacked if a real system of free enterprise is to be re-established.”
  6. “To maintain and improve labor’s position economically is the traditional task of the unions. Today, not only the growth but even the existence of the unions has become in large measure a political problem.”
  7. “The last war, in its impact on the American economy, produced war-time overexpansion and post-war depression chiefly in agriculture. This time, it is the industrial sector of our economy which is threatened with that sequence, on a much more disastrous scale.”
  8. “The patriots who denounce, in war-time, all self-interested demands or actions on the part of business, labor, or farm groups, generally do not recognize the fact that rivalry of all interest-groups over distribution of war-time prosperity is inevitable under our profit-system, and cannot be eliminated unless we are willing to replace that system entirely, while the war lasts, with a governmental dictatorship of all economic life as complete is that now practiced in Germany, Japan, and Russia.”

Source:  Duke University. David M. Rubenstein Rare Book & Manuscript Library. Economists’ Papers Archive. Papers of Randall Hinshaw. Box 1, Folder “Schoolwork, 1940s”.

Image Source: John Harvard Statue from the Tichnor Brothers Collection of postcards. Boston Public Library, Print Department.

Categories
Chicago Exam Questions Fields Undergraduate

Chicago. Comprehensive Exams in Economics for B.A., 1941

Element from Social Science Research Bldg at U of Chicago

 

 

One presumes that a departmental comprehensive examination would cover material that would be expected of any student going on to graduate studies in economics.  The comprehensive examination for Harvard economics majors from 1953 has been previously posted as has Swarthmore’s comprehensive examination for 1931.

A few things worth noting:

  • Henry Simons and Paul Douglas were apparently enough at odds with each other’s economics to be unable to come up with a single principles examination in Part I.
  • Both accounting and basic statistics shared equally in the quantitative Part II.
  • Either U.S. or European Economic History was required to be one of the three field examinations in Part III. A student could even take both economic history examinations, so one can say economic history was very much part of the common core for economists-in-training.
  • From today’s perspective it is interesting to find that “transportation” was a field still having equal status with “labor” and “government finance”.

According to a handwritten note attached to the following comprehensive exam was used four times:  Spring 1940, Winter 1941, Autumn 1941, and (with slight correction) Winter 1942.

__________________

PART I

COMPREHENSIVE EXAMINATION FOR THE BACHELOR’S DEGREE IN ECONOMICS

(Start each new subject in a new examination book)

The comprehensive examination in Economics is divided into three parts:

PART I — Time: Approximately 2 ½ hours.

(a) Principles of Economics
(b) Principles of Money and Banking

PART II — Time: Approximately 2 ½ hours.

(a) Elementary Accounting
(b) Statistics

PART III — Time: Approximately 3 hours.

Write on either (a) or (b) and two other subjects. One of these may be the second subject in Economic History.

(a) Economic History of the United States
(b) Economic History of Europe
(c) Labor
(d) Government Finance
(e) Transportation

 

 

PART I

(a) Economic Principles

Write on either examination A or examination B. In view of the difference in reading lists, examination A is offered primarily for those who did their work in Economics 209 with Mr. Douglas, while examination B is for those who had this course with Mr. Simons.

Examination A.
(Answer all questions.)

  1. Describe in some detail why the demand curves for the products of an industry are negatively inclined and give and illustrate the formula for the measurement of elasticity.
    Why, under atomistic competition, is the demand curve for the products of an individual firm of infinite elasticity and indicate by graphs what forces determine equilibrium for the individual firms (a) with no alternation in their number, (b) in the longer run, where the numbers of firms may vary but where there is no change of the scale of the individual plant, (c) in the still longer run when both the numbers and the scale of plants vary.
  2. Discuss and illustrate equilibrium under conditions of “imperfect competition,” showing (a) the role of average and marginal revenue curves, (b) average and marginal cost curves. Discuss both short-run and long-run equilibrium and the light such conclusions throw upon whether competition is or is not desirable, the proper role of the state, etc.
  3. Trace the theory of production, showing the relative effect upon product of changes in the quantities of the three factors of production, i.e., land, labor and capital, and the steps by which the theory of distribution can be derived from the theory of production.

 

Examination B.
(Answer both questions.)

  1. (50 points)
    In an isolated community there are two kinds of land, and only one product, wheat. There are 100 farms of each The labor supply is homogeneous—i.e., all workers are equally efficient. There is private property in land and free contract for labor. Labor services are bought and sold only in units of one laborer per year. The markets for both labor and land (unless otherwise specified) should be assumed to be freely competitive.
    The table below shows the amounts of wheat which can be obtained from onesingle farm of each grade, with different numbers of laborers per year.
Number of Laborers Output on A-grade Farm Output on B-grade Farm
1 1,000 900
2 1,800 1,200
3 2,400 1,400
4 2,900 1,550
5 3,300 1,650

The labor population is 450 — all workers will seek to be fully employed at any wage rate above zero.

a. What will be the wages per man? Explain why.

b. What will be the rent of farms of each grade?

c. Explain how the productivity (product increment) of an A-grade farm may be determined.

d. What would happen to wages and rents if an output tax of 5 per cent were imposed upon the production of wheat?

e. What would happen to wages and rents if a tax of 100 bushels per farm were levied, the tax being payable by owners?

f. Suppose a minimum wage law is passed and enforced, requiring the payment of at least 700 bushels per year for labor. What will be the effect on total employment and on rents?

g. Suppose that workers on the A-grade farms organize into a trade union and enforce a minimum wage of 700 bushels per year on the A-grade farms. What will happen to rents? To numbers of workers employed on A-grade farms? To the wages of workers not employed on A-grade farms?

h. Suppose that workers organize only on the B-grade farms and enforce there a wage of 700 bushels per year. What will happen to rents? To wages on the A-grade farms?

  1. (50 points)
    Indicate the conditions or circumstances under which each of the following relationships is likely to obtain, in the short run if not in the long run, and explain briefly in each case:

    1. Marginal revenue is equal to price.
    2. Price is equal to average expense (total cost per unit) but far in excess of marginal expense.
    3. Marginal expense, for the industry as a whole, fare exceeds marginal expense for the individual firm.
    4. All firms in a highly competitive industry are maintaining outputs at which their average-cost curves are falling (negatively sloped).
    5. All firms in a highly competitive industry are maintaining outputs at which their marginal-expense curves are falling.
    6. The price of a productive service is equal to its product increment times product price.
    7. The price of a productive service is much less than its product increment times product price.
    8. The price of a productive service is much less than its product increment times marginal revenue (for the firm).
    9. The total output of all firms in an industry is such that marginal revenue, for the industry as a whole, is negative.
    10. Marginal expense and average expense are equal but both are far in excess of product price.

 

(b) Principles of Money and Banking

(Answer all parts in questions 1 and 2; if time permits answer question 3.)

  1. (25 points)
    The following statements are to be completed by filling in the blanks with the most nearly correct of the suggested answers:

    1. Excess reserves of the member banks of the Federal Reserve System are currently about _______ million dollars. (100; 1,000; 1,500; 3,500; 18,700)
    2. The Federal Open Market Committee consists of _______ (5; 7; 9; 12;19) members, of which (1; 3; 5; 7; 12) are members of the Board of Governors of the Federal Reserve System and the remainder selected by ____________________ (President of the U.S.; Board of Governors; U.S. Secretary of the Treasury; directors of the Federal Reserve banks).
    3. In recent months holdings of U.S. Government securities (direct and guaranteed) by the Federal Reserve banks have totaled about _______ million dollars (25; 500; 2,500; 6,000).
    4. A member bank in downtown Chicago is at present required to hold with its Federal Reserve Bank an actual net balance equal to _______ (10; 13; 17½; 22¾; 26) per cent of its net demand deposits.
    5. If the U.S. Treasury were to shift its present deposits from member banks to the Federal Reserve banks, excess reserves of member banks would probably _______ (increase; decrease; remain unchanged) and excess reserves of the Federal Reserve banks _______ (increase; decrease; remain unchanged).
    6. The Board of Governors of the Federal Reserve System is authorized to decrease existing reserve requirements for reserve city member banks to a minimum level of _______ (5; 13; 17½; 20; 100) per cent against its net demand deposits.
    7. The total volume of hand-to-hand money in circulation in the U.S. (in the hands of the public and in banks’ vault cash) has recently been approximately _______ (600; 8,000; 10,000; 50,000) million dollars, of which approximately _______ (0; 5; 25; 30) per cent has consisted of gold coin.
    8. In recent years member banks have held approximately _______ (10; 25; 55; 85; 98) per cent of all demand deposits (excluding inter-bank deposits) in all commercial banks of the country.
    9. If the Federal Reserve banks sold their present holdings of U.S. Government securities to the public, excess reserves of banks in the country would probably _______ (increase; decrease; remain unchanged).
    10. In computing its demand deposits subject to legal reserve requirements, a member bank may deduct from its gross demand deposits _______ (U.S. deposits held with it; balances due from other domestic banks except Federal Reserve banks; its vault cash; balances due to other domestic banks).
    11. In giving a correct statement of the quantity theory of money, it is necessary to state among other things the assumption _______ (that wage rates remain constant; that the country is not on a paper monetary standard; that the economy to which it refers is perfectly competitive; that the theory may not be applicable in the short run).
    12. The monetary gold stock of the United States is currently approximately _______ (3.5; 7.0; 22; 25) billion dollars.
    13. Treasury purchases of imported gold will result in the greatest reduction in excessreserves of banks (not including Federal Reserve banks) when the Treasury pays for the gold by _______ (issuing new gold certificates; borrowing funds from the public; borrowing funds from commercial banks; borrowing funds from the Federal Reserve banks).
    14. Time and demand deposits (excluding interbank deposits) in all banks of the United States currently total about _______ (25; 40; 60; 75) billion dollars, of which amount approximately _______ (10; 25; 40; 60; 98) per cent is fully insured by the Federal Deposit Insurance Corporation.
    15. Under present conditions the Federal Reserve banks can most effectively reduce excess reserves of member banks by _______ (raising the discount rates of the Federal Reserve banks; selling their holdings of U.S. Government securities on the open market; raising the legal reserve ratios of member banks to 100%).
  2. (75 points)
    A recent annual report of the Board of Governors of the Federal Reserve System contained the following statement:
    “Under existing conditions the Treasury’s powers to influence member bank reserves outweigh those possessed by the Federal Reserve System.”

    1. State briefly and concisely the powers of the U.S. Treasury to influence member bank reserves; evaluate and explain their importance with reference to:

(1) Increasing member bank excess
(2) Decreasing member bank excess reserves.

    1. If the Treasury were to use certain of its powers, it could increase its cash holdings (without borrowing or taxing) by 10 billion dollars. Assume that it does so today, and that it spends the 10 billion dollars for national defense goods (in addition to the expenditures previously budgeted) during the next two years. Analyze the effects of the spending, including in your analysis statements concerning the effects on:

(1) Employment and national income.
(2) The cash position of the public.
(3) The reserve position of commercial banks.
(4) The powers of the Federal Reserve System to reduce member bank excess reserves.
(5) Relative changes in important groups of prices.

Of what help is the quantity theory of money to you in explaining the price fluctuations of (5)?

  1. (30 points)
    (If time permits)
    Defend your answers to parts e, I, m, and o of question 1.

 

 

PART II

(a) Elementary Accounting

(Answer all questions; plan to spend at least 40 minutes on question 4.)

  1. Debits and Credits
    Directions: Read the data given and select from the “Numbers To Be Used” the appropriate debit and credit to be used. Write the numbers of these accounts in the appropriate column, indicating in each case the kind of account (A-L-P-E-I).

Numbers to be Used

(1) Accounts Payable (10) Notes Payable
(2) Accounts Receivable (11) Notes Receivable
(3) Bad Debts (12) Office Expense
(4) Cash (13) R. Smith, Capital
(5) Furniture and Fixtures (14) Purchases
(6) General Expense (15) Sales
(7) Interest Cost (16) Wages and Salaries
(8) Interest Income (17) Rent Expense
(9) Merchandise Inventory

 

Debit Credit
Sample: A customer pays us cash on account (4) (A) (2) (A)
1. R. Smith invested cash in a mercantile business 1.
2. Paid cash for rent of store building 2.
3. Bought fixtures for cash 3.
4. Bought merchandise on account 4.
5. Bought office supplies for cash 5.
6. Sold merchandise for cash, note, balance on account 6.
7. Gave a trade creditor a note on account 7.
8. Paid a trade creditor cash on account 8.
9. Paid note payable due a creditor, with interest 9.
10. Received cash on account from a customer 10.
11. Received payment of note due from customer, with interest 11.
12. Paid wages and salaries 12.
13. Paid miscellaneous expenses 13.
14. A customer goes bankrupt and pays only a part of his account, the rest being uncollectible 14.
15. Bought merchandise for cash, note, balance on account 15.
16. Traded merchandise for furniture and fixtures 16.

 

  1. The following statements are to be marked by circling “T” if true, or “F” if false. A statement which is in any part incorrect is to be considered false.

T or F. The declaration of cash dividends results in a current liability on the balance sheet.

T or F. For a corporation having only common stock outstanding, the book value of the common stock is equal to the result obtained by dividing the difference between the total assets and the total liabilities by the number of common shares outstanding.

T or F. Customers’ accounts with credit balances should be shown on the balance sheet as current liabilities.

T or F. If the ending raw materials inventory is valued at too low a figure (other data on the statements correct), the cost of goods sold will be too small.

T or F. If depreciation of an asset is overestimated, that asset will be overvalued on the balance sheet.

T or F. A partnership is always automatically dissolved by the death of any one of its members.

T or F. Stock-dividends declared but not yet issued are shown on the balance sheet as current liabilities.

T or F. If all the stockholders of a corporation die, the corporation ceases to exist.

T or F. Holders of cumulative preferred stock have an unconditional right to dividends that are in arrears.

T or F. If the goods in process inventory at the beginning of an accounting period is overstated (other data on the statements correct), the gross profit for that period will be too small.

T or F. A corporation with a $200,000 surplus account could have no difficulty in paying a $100,000 cash dividend to stockholders.

T or F. Patents are written off to factory expense over the period of their economic life which cannot be more than 17 years.

T or F. Capital surplus represents the amount of profits which the stockholders and directors have been willing to leave invested in the business.

T or F. Expenditures which increase the usefulness of an asset, or prolong its life, are capital expenditures.

T or F. The introduction of controlling accounts for expenses makes necessary some change in the form of the journals used by that business.

T or F. Discount on Stock may be correctly shown on the balance sheet as a deferred charge.

T or F. A sinking fund reserve is set up to prevent the use of sinking fund cash for dividend purposes.

T or F. Preferred stock is never entitled to preference in the distribution of assets in liquidation, unless specified in the stock agreement.

T or F. A firm which has incurred a loss for the year may have more cash on hand at the end of the year than it had at the beginning of that year.

T or F. The cost of repairing a second-hand machine, before it is put to use in the factory, should be charged to factory expense.

 

  1. You are given a Statement of Profit and Loss of the Northwestern Manufacturing Company for the year ended December 31, 1940. Profit is shown as $121,380 Upon investigation you find that the accountant had proceeded as follows:
    1. Inventory had been valued at Market, $180,000; Cost was $150,000.
    2. Depreciation had been calculated on new machinery (purchased January 1, 1940) at a 10% rate. The general experience of competitors indicated that the life of the equipment was five years. The cost of the machine under question was $38,000.
    3. Wages due salesman for services rendered, $8000, had been overlooked.
    4. A garage owned by the Company was destroyed by fire. The building had a book value of $30,000. The insurance company had agreed to pay $20,000. The Company had signed a release but no record had been made of the fire or agreement.
    5. Accounts Receivable were valued at Gross, $200,000.
    6. Competitors had found that about 2% of gross accounts were uncollectible. About $1000 in cash discounts applicable to 1940 were expected to be taken.

What changes would you make on the Balance Sheet and the Statement of Profit and Loss for each of the above items?

  1. List the problems associated with the valuation of fixed assets: (a) at the time of acquisition, (b) of changes subsequent to the time of acquisition. Explain the relationship between these problems and cost determination in a manufacturing enterprise. Suggest solutions which the accountant has used in the past and discuss these critically in terms of economic theory.

 

(b) Statistics

(If time permits, answer all questions; note the unequal weighting, however. Plan to spend approximately 30 minutes on question 3.)

  1. (25 points)
    In the space to the left of each of the following statements indicate whether the statement is true (T) or false (F). Do not guess; if you don’t know whether a statement is true or false, don’t market.

_____ a. In a series of positive numbers the algebraic sum of the deviations of the individual items from their arithmetic mean is positive.

_____ b. In a simple linear correlation the slopes of the two elementary regression lines are always the same.
_____ c. Fisher’s Ideal Index Number formula satisfies both the time reversal and factor reversal tests.
_____ d. A moving average of points which lie along a straight line will reproduce the line.
_____ e. The sum of the squared deviations from the median of the frequency distribution is less than the sum of the squared deviations from any other average of the same frequency distribution.
_____ f. In simple linear correlation the two elementary lines of regression are identical if the simple correlation coefficient (r) is plus one and perpendicular to each other if the simple correlation coefficient is -1.
_____ g. The time series of the population of the United States plots is a straight line on semi-log paper; therefore, we may conclude that the population of the United States has grown at a constant relative rate.
_____ h. The simple correlation coefficient (ryx) is the arithmetic mean of the two simple regression coefficients (bxy and byx).
_____ i. In every frequency distribution 68% of the cases lie within plus and minus one standard deviation from the arithmetic mean.
_____ j. If the simple linear correlation coefficient between X and Y is small, it shows that there is very little relationship of any kind between X and Y.
_____ k. The standard error of estimate for the regression of Y on X depends upon the units in which Y is measured.
_____ l. The aggregative price index with base year quantity weights is identical to the arithmetic index of price relatives weighted by values of the base year.
_____ m. The sampling distribution of means of samples (all of the same size) drawn at random from a normal universe is also normal.
_____ n. The product of the individual items of a series of numbers is unchanged if each of the items is replaced by the geometric mean.
_____ o. The ratios-to-trend method of obtaining an index of seasonal variation is valid only if the underlying trend his linear.
_____ p. If the probability of getting a tail in a single toss of a bias coin is 1/4, the probability of getting three heads in three independent tosses of the same coin is 3/4.
_____ q. The sampling distribution of means of samples (all of the same size) drawn at random from a non-normal universe is less normal than the universe itself.
_____ r. The standard deviation of the sampling distribution of means drawn at random depends upon the size of the samples.
_____ s. The simple geometric average of relative prices satisfies the time reversal test.
_____ t. If a frequency distribution is symmetric when plotted on the arithmetic scale, the geometric mean, the median, and the mode will all coincide.
_____ u. If a frequency distribution is symmetric when plotted with a logarithmic scale on the X-axis, it will be skewed when plotted on the arithmetic scale.
_____ v. The harmonic mean of a series of positive numbers is sometimes greater in the geometric mean.
_____ w. The median is less affected than the arithmetic mean by the magnitude of extreme observations.
_____ x. The probability that two independent observations drawn at random from the same normal universe will both deviate by more than one standard deviation from the arithmetic mean of the universe is approximately 0.32 (= 32%).

  1. (35 points)
    State the reasoning behind your answer to the following parts (seven in all) of question 1:

(a or n)
(b, f, or h)
(c or s)
(i)
(j)
(p or x)
(r)

In each case, if you marked the statement true demonstrate its truth; if you marked it false, revise it so that it is correct, and demonstrate that your revision is true. Use mathematics where convenient.

  1. (40 points)
    The ABC Corporation which manufactures and sells over 1,000,000 packages of cigarettes (20 cigarettes per package) per year advertises of that on the average their cigarettes will burn for 15 minutes (per cigarette).
    The XYZ Corporation, making and selling over 2,000,000 packages of cigarettes per year (20 cigarettes per package) asserts that on the average its cigarettes will burn for 16 minutes (per cigarette).
    The Honesty-in-Advertising Association samples each manufacturer’s cigarettes, taking one sample of 145 cigarettes (not packages) of each Corporation’s. The following is a tabulation of their findings:
Maker of Cigarette Mean Burning Time
(in Minutes)		 Sample of [sic] Standard Deviation of Burning Time
(in Minutes)
ABC Corporation 14.5 6.0
XYZ Corporation 15.0 4.0

On the basis of the above findings,

a. Do you feel that the claims of each manufacturer are justified?

b. Do you feel that XYZ cigarettes on the average burn longer than ABC cigarettes.In answering these questions make use of whatever relevant logical techniques you have learned. State your reasoning carefully; your reasoning is even more important than your arithmetic.
Note: The square root of 52 is 7.2.

 

 

PART III

Write on either (a) or (b) and two other subjects.
One of these may be the second subject in Economic History. (Approximately 3 hours).

(a) Economic History of the United States

(Answer the first three questions and, if time remains, the fourth.
Answer in outline form so far as possible.)

  1. Briefly describe or explain.

a. colonial indentured servant;
b. growth of slavery in the colonies;
c. coinage act of 1792;
d. rise of steamboats in the Mississippi Valley;
e. tariff of 1833;
f. railroad land grants of 1862-71;
g. transportation act of 1920;
h. War Industries Board;
i. Congress of Industrial Organization;
j. wages and hours act of 1938.

  1. Enumerate the chief causes for:

a. adoption of the public land act of 1820;
b. decline of canals after 1860;
c. decline of the general price level, 1865-1896;
d. shifted to a favorable balance of commodity trade after 1873;
e. restriction of immigration after 1921;
f. distressed condition of agriculture since 1920;
g. demand for a New Deal in 1933.

  1. Compare the chief exports and imports of about 1860 with those of the post-World War period. Carefully explain the chief economic developments responsible for the changes that took place.
  2. Outline and explain the history of the merchant marine, 1789-1940.

 

(b) Economic History of Europe

(Answer two questions.)

  1. Discuss the significance of any two of the following authors for the student of modern European economic history: Buckle, Tawny, Spengler, Clapham.
  2. Compare the role of the state in industrial enterprise in France and England during the seventeenth century. Did the French or the English government do the most for the general welfare of its people by its industrial policies?
  3. Compare the influence of either the railway or the canal upon the economic development of France, England, and Germany.

(c) Labor

(Answer both questions.)

  1. Discuss:

a. the main features of the various state minimum wage laws and the federal Fair Labor Standards Act;
b. the economic theories upon which they are based;
c. the constitutional issues involved.

  1. Discuss the issues involved as regards structure, membership, aims and methods in the following struggles:

a. The A. F. of L. versus the Knights of Labor.
b. The I.W.W. versus the A. F. of L.
c. Shop committees (or so-called employee representation plans or as sometimes termed “company” and “independent” unions) versus so-called “outside” unions.
d. The C.I.O versus the A.F. of L.

 

(d) Government Finance

(Answer all questions.)

  1. (35 points)

Mark each of the following propositions “True” or “False” and explain briefly (on separate paper):
The exemption, under federal personal-income tax, of interest on the obligations of state and local governments
_____ a. Involves a kind of federal subsidy or grant which is not commendable in terms of the basis on which the different states share relatively.
_____ b. Probably involve serious inequity as among large income receivers of similar income circumstances.
_____ c. Lowers the rate of interest which state and local governments must pay on their new borrowings.
_____ d. Probably serves to retard or delay recovery from severe depressions.
_____ e. Imposes indirectly a significant burden upon persons of small income in their capacity as savers.

  1. (25 points)
    It is often argued that income taxes, while having great merit in other respects, are ill-suited for a predominant place in revenue systems because their revenue-yield fluctuates so widely between years of prosperity and depression. Are such wide fluctuations a fault or virtue in a federal tax? Discuss.
  2. (25 points)
    In spite of its excellent cumulative features, the federal gifts tax leaves large opportunities for avoidance of estates tax through the distribution of property by gift. Explain “cumulative features”; and indicate the relevant facts about the law which have to do with the avoidance opportunities.

 

(e) Transportation

(Answer all questions. Note weighting of questions.)

  1. (10 points)
    In the following statements, underline the figure, or concept, that most nearly accords with accuracy.

    1. Operating expenses of a railroad may be expected to vary in accordance with:
      tons of freight carried; passenger-miles; train-Miles; car-mile; miles of track
    2. The standard gauge of American railroads is:
      3 ft. 6 in.; 4 ft.; 4 ft. 8 in.; 5 ft. 2 in.; 5 ft. 5 in.
    3. The average freight traffic density of American railroads is:
      100,000; 500,000; 1,000,000; 1,500,000; 5,000,000; 10,000,000
    4. The Interstate Commerce Commission was given power to prescribe actual railroad rates in:
      1906; 1903; 1887; 1911; 1920
    5. The carrying capacity of ocean ships is customarily expressed by:
      gross registered tons; deadweight tons; net registered tons; displacement tons; cargo tons of 40 cu. ft.
    6. The regulation of the rates of waterway common carriers in interstate commerce was authorized by Congress in:
      1900; 1916; 1920; 1933
  2. (15 points)
    The following diagram represents two railroad roots and 6 stations, the figures indicating the mileage between each pair of stations. The East and West Railroad serves all these points.

Indicate which of the rate situations stated below are departures from the provisions of the 4th Section of the Interstate Commerce Act:

a. A rate of 50¢ on commodity “X” from A to E, and 75¢ from E to B.

b. A rate of 25¢ on commodity “X” from A to B, and 20¢ from A to C.

c. A rate of 40¢ on commodity “X” from A to D, and 60¢ on commodity “Y” from A to C.

d. A rate of 45¢ on commodity “X” from A to C, and 50¢ on the same commodity from C to E.

e. A rate of 75¢ on commodity “X” from A to F via C, and 50¢ from A to F via E on the same commodity.

  1. (10 points)
    Draw up definitions of “common carrier” and “contract carrier” for the purpose of establishing a system of regulation of water carriers in interstate commerce of the United States.
  2. (20 points)
    The following diagram represents the line of a single railroad with 8 stations. The numbers represent the distances between stations:

Suppose that the rate structure on traffic between these points is represented by the 1st and 5th class rates, and commodity rates on furniture, and steel products, such as sheets, bars, rods.

From A
to		 All rates are cents per 100 lbs.
1st Class 5th Class Furniture Iron and Steel
B 25 20 10 16
C 31 22 12 20
D 20 19 10 17
E 37 25 13 22
F 48 30 17 29
G 50 33 20 31
H 50 36 20 31

Assume neither water nor highway competition. What departures from principles of rate-making do you detect in this rate structure?

  1. (15 point)
    The Omnibus Transportation Bill which passed in the House of Representatives last Summer, inter alia, contain the following provisions: “In order that the public at large may enjoy the benefit and economy afforded by each type of transportation, the Commission shall permit each type of carrier or carriers to reduce rates so long as such rates maintain a compensatory return to the carrier or carriers after taking into consideration overhead and all other elements entering into the cost to the carrier or carriers for the service rendered…”Should such a provision be finally adopted into the law and seriously enforced by the Commission, what effect presumably would it have on the freight rate structures, and on the distribution of commodities? Why?
  1. (10 point)
    In which of the following cases is a certificate of public convenience and necessity required? Check the affirmative cases.

    1. A railroad desires to refund a maturing issue of bonds.
    2. Two motor highway common carriers wish to consolidate properties and operations.
    3. John Smith wishes to inaugurate a highway service between Chicago and St. Louis. He has a contract with a St. Louis manufacturer to haul enamel ware to Chicago; and this will take all his facilities northbound. But he desires to secure return loads and will haul any traffic that is offered.
    4. A railroad is about to acquire a new Diesel stream-lined train.
    5. A water common carrier, finding operations entirely unprofitable, decides to abandon operations.
  2. (10 points)
    A common carrier subject to the jurisdiction of the Interstate Commerce Commission files a tariff containing new schedules of rates, embodying a number of changes. Which of the following statements most accurately describes the Commission procedure in dealing with the tariff.

    1. The tariff is passed around among the 11 commissioners, each of whom examines it for possible violations of the first four sections, and the 6 Section of the Act. If the majority of prove it, the tariff is accepted.
    2. The Commission refers it to the standing rate committees of the carriers for determination of the lawfulness of the rates contained therein.
    3. The tariff is received by the Terrace Bureau of the Commission, and checked by its rate clerks for conformance to the provisions of the sixth Section of the Act. If conforming thereto, it is accepted and is permitted to become effective.
    4. The tariff is returned to the carriers with the statement, that since the burden of proof rests upon the carriers to justify the new rates, they must prove that the rates are lawful under the Act before the tariff can be allowed to become effective.
  3. (10 points)
    An ocean steamship line quotes a rate of $10 W/M on automobiles, New York to Liverpool. What would be the ocean freight on an automobile so shipped, weighing 4,000 pounds boxed, and measuring 120 in. by 60 in. by 50 in.?

Source:  University of Chicago Archives. Department of Economics, Records. Box 39, Folder 28.

Image Source: Element from the Social Science Research Building. University of Chicago Photographic Archive, apf2-07449, Special Collections Research Center, University of Chicago Library.

Categories
Chicago Fields Suggested Reading Syllabus

Chicago. Industrial Organization Reading List. Stigler, 1973

 

While the asterisks in the following reading list probably indicate the subset of required course readings, the  list in its entirety may be considered George Stigler’s universe of readings relevant for a graduate student intending to take a comprehensive examination in the field of industrial organization at Chicago. An autobiographical note by George Stigler from 1982 is included at the Nobel Prize website.

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READING LIST
INDUSTRIAL ORGANIZATION
George J. Stigler

Spring, 1973
Business 305
Economics 380

  1. The Definition and Empirical Determination of Competition and Monopoly
    1. Analytical literature

A. P. Lerner, “The Concept of Monopoly”, Review of Economic Studies, Vol. 1

F. H. Knight, Risk, Uncertainty and Profit, p. 76 ff.

G. J. Stigler, “Perfect Competition, Historically Contemplated”, Journal of Political Economy, 1957 (reprinted in Essays in the History of Economics).

*G. J. Stigler, The Organization of Industry, Ch. 2, 3, 4.

*G. Rosenbluth, “Measure of Concentration”, in Business Concentration and Price Policy.

E. F. Fama and A. B. Laffer, “The Number of Firms and Competition”, AER, Sept. 1972.

T. Scitovsky, “Economic Theory and Measurement of Concentration”, in Business Concentration and Price Policy.

M. O. Finkelstein and Richard Friedberg, “The Application of an Entropy Theory of Concentration”, Yale Law Review, March 1967.

H. Demsetz, “Why Regulate Utilities?”, Journal of Law and Economics, April 1968.

    1. Statistical studies

*A. C. Harberger, “Monopoly and Resource Allocation”, American Economic Review, May 1954.

G. Rosenbluth, Concentration in Canadian Manufacturing Industries.

R. Evely and I. M. D. Little, Concentration in British Industry, Ch. 1, pp. 104 ff., 160 ff.

P. Pashigian, “Market Concentration in the United States and Great Britain”, Journal of Law and Economics, October 1968.

Ralph C. Nelson, Concentration in the Manufacturing Industries of the United States, Ch. I-IV.

Carl Eis, “The 1919-1930 Merger Movement in American Industry”, Journal of Law and Economics, October 1969.

F. L. Pryor, “An International Comparison of Concentration Ratios,” Review of Economics and Statistics, May 1972.

M. Gort, “Analysis of Stability and Change in Market Shares”, Journal of Political Economy, 1963.

R. W. Kilpatrick, “A Choice Among Alternative Measures of Industrial Concentration”, Review of Economics and Statistics, May 1967.

*Irvin Grossack, “the Concept and Measurement of Permanent Industrial Concentration, Journal of Political Economy, July/Aug 1972.

  1. Determinants of the Firm-Size Structure
    1. The Economies of Scale

J. McConnell, “Corporate Earnings by Size of Firm”. Survey of Current Business, May 1945.

J. Johnston, Statistical Cost Functions, esp. pp. 110 ff., Ch. 6.

J. Haldi and D. Whitcomb, “Economies of Scale in Industrial Plants”, Journal of Political Economy, 1967.

J. S. Bain, Barriers to New Competition.

*J. S. Bain, “Economies of Scale…” in Readings in Industrial Organization and Public Policy.

*G. J. Stigler, The Economies of Scale, The Organization of Industry, Ch. 7.

P. E. Hart, “The Size and Growth of Firms”,Economica, February 1962.

*F. Modigliani, “New Developments on the Oligopoly Front”, Journal of Political Economy, June 1958.

D. Osborne, “The Role of Entry in Oligopoly Theory”, Journal of Political Economy, 1964.

L. Weiss, “The Survivor Technique and the Extent of Suboptimal Capacity”, Journal of Political Economy, June 1964.

T. Saving, “Estimation of Optimum Size of Plant by the Survivor Method”, Quarterly Journal of Economics, Nov. 1961.

L. Telser, Competition, Collusion and Game Theory, Ch. 8.

    1. Mergers

A. S. Dewing, “A Statistical Test of the Success of Consolidations”, Quarterly Journal of Economics, 1921.

G. J. Stigler, “Monopoly and Oligopoly by Merger”, The Organization of Industry, Ch. 8.

F. T. C., Report on Corporate Mergers and Acquisitions.

*J. Markham, “Survey of the Evidence and Findings on Mergers”, in Business Concentration.

J. F. Weston, The Role of Mergers in the Growth of Large Firms.

G. J. Stigler, “The Statistics of Monopoly and Merger”, Journal of Political Economy, 1956.

*Ralph Nelson, Merger Movements in American Industry.

H. G. Manne, “Mergers and the Market for Corporate Control”, Journal of Political Economy, April 1965.

  1. The Effects of Concentration
    1. Collusion

*D. H. MacGregor, Industrial Combination, Part II, Ch. 1.

W. Fellner, Competition Among the Few.

W. Nicholls, Imperfect Competition Within Agricultural Industries, pp. 120-130.

F. Machlup, Economics of Sellers’ Competition, Ch. 13.

*G. J. Stigler, The Organization of Industry, Ch. 5.

W. Nutter, “Duopoly, Oligopoly, and Emerging Competition”, Southern Economic Journal, 1964.

Lester Telser, Competition, Collusion and Game Theory, Ch. 5.

    1. Price Discrimination

N. I. C. B., Public Regulation of Competitive Practices, pp. 63-85.

J. P. Miller, Unfair Competition, Ch. 7-9.

J. Robinson, Economics of Imperfect Competition, Bk. V.

F. Machlup, The Basing Point System.

G. J. Stigler, A Theory of Uniform Delivered Prices, The Organization of Industry, Ch. 14.

    1. Price Rigidity

*G. Means, Industrial Prices and Their Relative Inflexibility.

Sweezy and Stigler, articles on the kinked oligopoly demand curve in American Economic Association, Readings in Price Theory.

A. C. Neal, Industrial Concentration and Price Inflexibility.

*Stigler, Administered Prices and Oligopolistic Inflation, The Organization of Industry, Ch. 19.

*Stigler & Kindahl, The Behavior of Industrial Prices, Ch. 1, 4, 5.

Government Price Statistics (Joint Economic Committee, 1961, also, National Bureau of Economic Research), Staff Papers No. 8 and 9.

R. Selden and C. dePodwin, “Business Pricing Policies and Inflation”, Journal of Political Economy, 1963.

L. Weiss, “Business Pricing Policies and Inflation Reconsidered,” Journal of Political Economy, 1966.

    1. Profits

*J. S. Bain, “Relation of Profit Rate to Industry Concentration”, Quarterly Journal of Economics, August 1951.

N. R. Collins and Lee E. Preston, Concentration and Price-Cost Margins in Manufacturing Industries.

G. J. Stigler, Capital and Rates of Return in Manufacturing Industries, Ch. 3.

Y. Brozen, “The Antitrust Task Force Deconcentration Recommendation”, Journal of Law and Economics, October, 1970.

S. I. Ornstein, “Concentration and Profits”, Journal of Business, Oct. 1972.

  1. Topics in Industry Behavior
    1. Advertising

E. Chamberlin, Theory of Monopolistic Competition, Ch. 6-7.

L. Telser, “Advertising and Cigarettes”, Journal of Political Economy, October 1962.

*N. Kaldor, “Economic Aspects of Advertising”, Review of Economic Studies, 1950.

*L. Telser, “Advertising and Competition”, Journal of Political Economy, December 1964.

*G. J. Stigler, “The Economics of Information,” The Organization of Industry, Ch. 16.

J. Peterman, “The Clorox Case and the Television Rate Structure”, Journal of Law and Economics, Oct. 1968.

W. S. Comanor and T. A. Wilson, “Advertising Market Structure and Performance”, Review of Economics and Statistics, 1967.

Phillip Nelson, “Information and Consumer Behavior,” Journal of Political Economy, April 1970.

    1. The Nature of the Firm and Vertical Integration

*R. Coase, “The Nature of the Firm”, Readings in Price Theory.

H. Demsetz, “The Exchange and Enforcement of Property Rights”, Journal of Law and Economics, October 1964.

A. Smith, Wealth of Nations, Bk. I, Ch. 3.

Marshall, Principles of Economics, Bk. IV, Ch. 10-13.

A. Young, “Increasing Returns and Economic Progress”, Economic Journal, 1928 (and in Clemence’s Readings in Economic Analysis, 2 vols.)

G. J. Stigler, “Division of Labor is Limited by the Extent of the Market,” The Organization of industry, Ch. 12.

*M. Adelman, “Concept and Measurement of Vertical Integration”, in Business Concentration and Price Policy.

M. Gort, Diversification and Integration in American Industry.

    1. Conglomerate Mergers

C. Edwards, “Conglomerate Progress as a Source of Power”, in Business Concentration and Price Policy.

J. Lorie and P. Halpern, “Conglomerates: The Rhetoric and the Evidence”, Journal of law and Economics, April 1970.

FTC, Economic Report on Corporate Mergers (1969).

    1. Schumpeter’s Theory

*Schumpeter, Capitalism, Socialism and Democracy, Ch. 7-8.

E. Mansfield, “Size of Firm, Market Structure, and innovation”, Journal of Political Economy, 1963.

A. Plant, “Economic Theory Concerning Patents for Invention”, Economica, 1934.

*John McGee, “Patent Exploitation”, Journal of Law and Economics, Oct. 1966.

P. Swan, “Market Structure and Technological Progress”, Quarterly Journal of Economics, 1970.

  1. Large Number Industries
    1. Cartels

G. J. Stigler, The Theory of Price, (1966), Ch. 13.

Clair Wilcox, Public Policies Toward Business(3rd) Ch. 30.

C. Edwards, Economic and Political Aspects of International Cartels.

    1. Trade Associations

*Mancur Olson, The Logic of Collective Action, esp. pp. 125-167.

T. N. E. C. Monograph No. 18, Trade Association Survey.

    1. Retailing: Resale Price Maintenance

W. Bowman, “Prerequisites and Effects of Resale Price Maintenance”, University of Chicago Law Journal, 1955.

F. T. C., Resale Price Maintenance.

*L. Telser, “Resale Price Maintenance”, Journal of Law and Economics, October 1960.

B. Yamey, The Economics of Resale Price Maintenance.

  1. Anti-trust Policy
    1. History

J. D. Clark, Federal Trust Policy.

W. H. Taft, The Anti-trust Act and the Supreme Court.

H. B. Thorelli, The Federal Antitrust Policy.

Robert Bork, “Legislative Intent and the Policy of the Sherman Act”, Journal of Law and Economics, October 1966.

R. Posner, “A Statistical Study of Antitrust Enforcement”, Journal of Law and Economics, 1970.

G. Stigler, “The Economic Effects of the Antitrust Laws,” Journal of Law and Economics, Oct. 1966.

    1. Major dissolutions

E. Jones, Trust Problem in the United States, Ch. 18.

Hale, “Trust Dissolution”, Columbia Law Review, 1940.

W. S. Stevens, Industrial Combinations and Trusts, Ch. 14-15.

S. Whitney, Antitrust Policies, 2 vols.

    1. Law of Conspiracy

U. S. v. Trenton Potteries, 273 U.S. 392 (1927).

F. T. C. v. Cement Institute, 68 Sup. Ct. 793 (1948).

Report of Attorney-General’s National Committee on the Anti-trust Laws.

 

Source: University of Chicago Archives. George Stigler Papers, Box 2, Folder “1970’s: course notes + related: Industrial org. + microeconomics”.

Image Source: George Stigler (November 1977). University of Chicago Photographic Archive, apf3-00844, Special Collections Research Center, University of Chicago Library.

 

Categories
Exam Questions Fields Johns Hopkins

Johns Hopkins. Ten comprehensive economics PhD exams, 1965

 

 

This is what a full set (more-or-less) of written comprehensive examinations from a Ph.D. program in economics looks like as of 1965. The archival records from Johns Hopkins University are in pretty good shape for their graduate program. Earlier exams will be transcribed and posted down the road on the installment plan.

Six exams from 1961 are posted here.

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[Handwritten Note:   Christ. FULL SET EXCEPT: 1) Hist of Theory: oral 2) Ops Res: Courses.]

Ph.D. Written Comprehensive Examination in MICROECONOMICS

DEPARTMENT OF POLITICAL ECONOMY
THE JOHNS HOPKINS UNIVERSITY
April 19, 1965

Candidates should answer each question; all questions are assigned equal weight.

  1. “If a price system did not exist, it would be necessary to create one.” Discuss in some detail recent developments in general equilibrium theory (i.e. in the last fifteen years) that have increased and deepened our understanding of the meaning and limitations of this aphorism.
  2. Suppose that a firm, faced with a downward sloping demand curve for its single product, is maximizing its income from sales at an output where total average cost is rising. The firm is then sold on a competitive market to the highest bidder, who—it is assumed—will also maximize his income when he operates the firm.
    1. What considerations will determine the price paid for the firm?
    2. What will be the income of the new owner from operating the firm?
    3. How will the new output compare with the old?
    4. How will the slope of the total average cost curve in its new situation differ from that in the old?
  3. In a letter to Edgeworth, Marshall once wrote: “You know I never apply curves or mathematics to market values. For I don’t think they help much. And market values are, I think, either absolutely abstract or terribly concrete and full of ever-varying (though individually vital) side-issues. Also Ox for market values measures a stock and not a ‘flow’; and I found that if I once got people to use Demand and Supply curves which discussed stocks along this axis of x, they could not easily be kept from introducing the notion of a stock when flow was essential.”
    Discuss the following: (a) the relation of the ideas expressed in this quotation to Marshall’s period analysis of the firm and industry; (b) the Walrasian treatment of the same issues; (c) the current treatments of these issues, as exemplified in good textbooks on price theory; (d) your own opinion of the validity, relevance and usefulness of the distinction which Marshall is making here.
  4. The cost of providing service on a road bridge at a certain crossing of the Chapaqua River is C = dX + e. The consumer demand for the services of the bridge may be expressed as T = f – gX, ignoring differences in types of traffic. The time spent crossing the bridge by the average user is H = a + bX + cX2, and it is assumed that the opportunity cost of the average user is valued at 80 cents per hour.
    What toll should be set on this bridge?
    (C = cost, in dollars; H = time spent on bridge, in hours; T = toll per vehicle, in dollars; X = number of vehicles using bridge; a, b, c, d, e, f, g are constants in the problem.)
  5. “The real content of the equilibrium concept is to be found not so much in the state itself as in the laws of change which it implies.” (John Chipman).
    Would you agree with this characterization? If so, why? If not, why not? Analyse the concepts which are currently used in order to derive laws of change from consideration of equilibrium states.

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Ph.D. Written Comprehensive Examination in MACROECONOMICS

DEPARTMENT OF POLITICAL ECONOMY
THE JOHNS HOPKINS UNIVERSITY
April 20, 1965

[There are 180 points on the exam – allocate your time carefully.]

  1. Choose 4 from the following set of 5 questions. [Each is worth 25 points.]
    1. Suppose you were the Chairman of the Council of Economic Advisers. Outline and defend your policy program for the next year, paying particular attention to the problems of full employment, growth, stability and the balance of payments.
    2. An extremely general form of an investment function may be written as:
      I = f(y, r, k-1, I-1)
      where I = investment, y = income, r = interest rate, k = capital stock.
      Relate this to

      1. the acceleration principle
      2. the Keynes-Hansen stagnation thesis
      3. the Goodwin model of the business cycle
      4. empirical studies of investment behavior
    3. Discuss the present state of empirical knowledge concerning the nature and properties of the consumption function.
    4. Here are two statements by prominent economists:
      1. “That Keynes’ theory of under-employment equilibrium depends on the assumption of rigid wages should be clear to everybody.” G. Haberler, QJE, Nov. 1949, p. 570.
      2. “The numerous remarks throughout the literature that Keynes relied on wage inflexibilities to obtain his results are entirely unsubstantiated.”
        R. Klein, The Keynesian Revolution, 1947, p. 90.

        1. Using a macro model of your choice, present the details of this classical argument.
        2. Either (1) attempt to reconcile these opposing views,
          or (2) pick one side and defend it.
  1. Give two analyses of macroeconomic behavior, (a) for full employment and (b) for unemployment, using the equation MV = Py (or M = kPy) in each case, where M = money stock, V = 1/k = velocity of money, P = price level, y = real income.
  1. Answer all of the following 5 questions (Each is worth 16 points).
    1. “In growth models of the Harrod-Domar type, behavioral shifts toward more saving have a stimulating effect on GNP, yet in a simple Keynesian model, the opposite is true.” Is this contradiction apparent or real?
    2. Attack or defend the following proposition: “Microeconomics and macroeconomics are not two distinct fields, but are one and students should not be asked to study them separately and be examined in them separately.
    3. Briefly summarize the several empirical and theoretical arguments which support the hypothesis that the stock of money willingly held should be a function of the interest rate.
    4. Discuss briefly the “Patinkin controversy” concerning Say’s law and the quantity theory of money.
    5. “Compensatory fiscal policy must have a weaker effect in the short run if consumption depends on ‘permanent income’ than if consumption depends on current income, other things the same.” Discuss.

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Ph.D. Written Comprehensive Examination in AMERICAN ECONOMIC HISTORY

DEPARTMENT OF POLITICAL ECONOMY
THE JOHNS HOPKINS UNIVERSITY
April 22, 1965

Do both questions in Section I and three out of six in Section II.

  1. a. The attached table presents information on an American industry. Discuss the technological change evident in the data. Is the pattern typical of other nineteenth century industries? Does the pattern tend to substantiate Habakkuk’s position?
    1. Choose any open question in American economic history. Discuss the current thought about this problem and propose some feasible approach to the problem which might dispel much of the uncertainty now obvious in the literature.
  2. a. The nineteenth century immigrant was attracted to the United States by the high American standard of living. Discuss.
    1. What were the principle sources of capital for industry and transportation in the pre-Civil War era?
    2. What role did the foreign sector play in American development during the nineteenth century?
    3. Except for short 3-6 year fluctuations, the rate of growth of the United States has remained relatively stable. Discuss.
    4. Discuss and evaluate one development policy followed by the government in the nineteenth century orthe governmental development policies in one area during that period.
    5. A recent proposal suggests that the growth process can be considered in three stages – each characterized by the principle constraint to growth. During the first stage growth is constrained by the insufficiency of skill, during the second by a lack of domestic capital, and during the final stage by considerations of foreign imbalance. Discuss the application of such a theory to the American experience.

Table

Year U.S. Mass. Large Firms
OUTPUT
(Physical Units)
1820 3,053 468
1831 23,046 7,923 1,264
1837 12,632 3,545
1845 17,568 4,843
1849 76,368 29,875 7,221
1855 31,500 9,165
1859 114,825 41,529 10,560
CAPITAL
(Machine Sets)
1820 215 20
1831 1,246 340 52
1837 565 136
1845 817 174
1849 3,527 1,288 254
1855 1,520 331
1859 5,235 1,673 362
EMPLOYEES
1820 153
1831 621 133 12
1837 198 28
1845 207 33
1849 980 287 45
1855 348 54
1859 1,220 385 53

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Ph.D. Written Comprehensive Examination in INTERNATIONAL ECONOMICS

DEPARTMENT OF POLITICAL ECONOMY
THE JOHNS HOPKINS UNIVERSITY
April 23, 1965

3 hours, maximum points 180.

PART I (10 points each). Answer all.

  1. Explain the principle of comparative advantage, and illustrate with a diagram.
  2. Derive the expression giving the equilibrium relationship between the spot exchange rate and the 90-day forward rate in a two country model with interest rates assumed fixed in both countries.
  3. The official U.S. measure of a balance-of-payments surplus or deficit is the “overall balance.” Define the “overall balance” and indicate the principal shortcomings of this measure.
  4. Define “terms of trade” and indicate the significance of the concept.
  5. What is the “transfer problem”?
  6. Derive the expression for the change in national income resulting from an autonomous increase in exports.

PART II Answer 3 out of 5 (40 points each).

  1. Utopia is a small, highly developed country with capital (K) as its only factor of production. Utopia consumes two goods, x1and x2, and its community utility function is given by U=x1x2. Its production function for x1 is x1= a1K, and its production function for x2 is x2= a2Kb. (a1, a2, b are all greater than zero). Its endowment of capital is K. Since Utopia is a small country, it takes the world prices of x1and x2 as given.
    1. For what values of b is it certain that Utopia will produce either all x1 and no x2 or all x2 and no x1?
    2. If b = 1/2, at what world price of x2 in terms of x1 will Utopia produce only x2?
    3. If b = 1/2, at what world price of x2 in terms of x1 will Utopia produce only x1?
  2. It has been argued that a fixed exchange rate system works better the greater the interest elasticity of international capital flows, and that a flexible rate system works better the smaller the interest elasticity. Being careful to define “works better”, discuss the assumptions that might underlie this contention.
  3. “In a purely static analysis it is clear that a country, far from being annoyed, should be delighted when foreign countries “dump” their exports on world markets at low prices. But dumping invariably gives rise to cries of dismay in the country importing the dumped goods, and rightly so. A consideration of the dynamic effects of dumping leads to the conclusion that a protective tariff is justified in this case.” Discuss.
  4. “In a sense, practically all arguments for tariffs are second-best arguments. If it is desired to alter the internal distribution of income, then the “first-best” policy would be to do so by direct taxes and subsidies. If this is not possible (i.e. there is a constraint in tax policy), it may be done by tariff protection. But while this will achieve the aim it will also have side effects which are adverse, and the welfare attained with the tax constraint will not be as high as without it; indeed, welfare could fall. (Corden)
    Discuss the above contention with respect to any possible aim or aims of tariff policy other than income redistribution.
  5. “The verdict, so far, on the various attempts to test the Heckscher-Ohlin trade theory is, quite simply, ‘inconclusive’.” Discuss this with respect to the predictions of the theory and one or more of the tests to which these have been subjected.

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Ph.D. Written Comprehensive Examination in LABOR

DEPARTMENT OF POLITICAL ECONOMY
THE JOHNS HOPKINS UNIVERSITY
April 23, 1965

PART I. (2 hours, 15 minutes)

  1. Why do people travel faster today than they used to?
  2. Some people believe that there has been no technological change in the education “industry”. Others believe that there has been the same rate of technical change in this area as in the rest of the economy. What implication does this have for the question of whether the rate of return on education has changed over time?
  3. G. Lewis maintains that unions have not raised wages in the U.S. by very much. Do you think this is an accurate statement? Are there any circumstances under which unions might have a substantial effect on real wages?
  4. Do you think that there are any circumstances under which the introduction of featherbedding into a collective bargaining agreement would yield a better allocation of resources?

PART II. (45 minutes)

  1. Define, and comment briefly on each of the following terms:
    1. equalizing difference
    2. secondary boycott
    3. structural unemployment
    4. productivity
    5. wage-push inflation
  2. Most Keynesian macro models include the assumption that the supply of labor is infinitely elastic, at least up to full employment, at the existing money wage. Can this macro rigid money wage assumption be reconciled with the micro assumption that only relative prices matter?

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Ph.D. Written Comprehensive Examination in LOCATION

DEPARTMENT OF POLITICAL ECONOMY
THE JOHNS HOPKINS UNIVERSITY
April 24, 1965

Do all three sections.

  1. Choose an unsettled problem in location theory. Discuss and criticize the current state of the literature. How would you proceed in extending the present knowledge concerning this problem?
  2. a. How would you proceed in analyzing the factors influencing the location of a single industry?
    1. Apply your method to some industry.
  3. a. Discuss the effect of external economies on some industry. (You may not use the industry of section II, part (b).)
    or

    1. Discuss and criticize the technique used in measuring the geographical concentration of industry and regional specialization.

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Ph.D. Written Comprehensive Examination in MATHEMATICAL ECONOMICS

DEPARTMENT OF POLITICAL ECONOMY
THE JOHNS HOPKINS UNIVERSITY
April 23, 1965

Answer 4 questions.

  1. The following are well-known equations summarising certain aspects of the behavior of an individual consumer
    \frac{\partial {{x}_{s}}}{\partial {{p}_{r}}}=-{{x}_{r}}\frac{\partial {{x}_{s}}}{\partial M}+{{x}_{rs}}\,\,\,\,\,\,\,\,\left( r,s=1,2,\ldots ,n \right)
    where xj, pjrepresent quantity and prices of the jthcommodity, M represents money income, and  {{x}_{rs}}=\lambda \frac{{{U}_{rs}}}{U}, where U is the consumer’s utility function.

    1. Derive the equations from a standard model of consumer behavior.
    2. Discuss the sign of the term xrr
    3. Give an interpretation of \lambda .
    4. Outline the effects on the equations of replacing U by f(U), where f´(U) > 0 for all U.
  2. Choosing any suitable general equilibrium model which involves both production and consumption, define an equilibrium for the model, set out postulates which are sufficient to guarantee the existence of the equilibrium, and sketch out the role played by each postulate in giving the guarantee of existence.
    What, in your opinion, is the function of proofs of the existence of an equilibrium?
  3. In a linear production model, there are two activities which use three resources in quantities (2, 1, 1) and (1, 3, 1), respectively, per unit activity level. The resources are available in quantities (10, 10, 5.5) at most. Receipts from unit levels of the two activities are (4,3).
    1. Set up the problem of maximizing total receipts in linear programming form.
    2. Write down the dual problem.
    3. The solution is included among activity vectors (4,2), (4.5,1), (3.25, 2.25) and dual vectors (1,0,2) (0,3,1). Identify the infeasible activity vector and the optimal activity vector, giving reasons.
    4. State the maximum prices the firm would be willing to pay for its resources.
    5. Discuss the relationship between dual variables in linear programming theory and prices in economic theory.
  4. Set out the leading properties of square non-negative matrices. Show how these properties are used in economic theory in relation to
    (a) input-out models of Leontief type, and
    (b) stability analysis of multi-market equilibrium.
  5. Carefully describe the Von Neumann growth model, interpreting its chief results and relating them to other, not necessarily linear, multisector growth models.

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Ph.D. Written Comprehensive Examination in MONEY

DEPARTMENT OF POLITICAL ECONOMY
THE JOHNS HOPKINS UNIVERSITY
April 23, 1965

PART I (60 points). Indicate whether each of the following statements is true, false, or uncertain, and explain your answer.

  1. If the quantity theory holds, the level of real output and the price level are independent of the supply and/or mix of non-money financial assets.
  2. At full employment the equation of exchange goes from an irrefutable identity to a useful price-level empirical relationship.
  3. The rate of interest is purely a real phenomenon if money is neutral.
  4. The Treasury should lengthen the average maturity of the public debt when long-term interest rates are low.
  5. The demand for money is a function of the real rate of interest rather than the money rate of interest.
  6. If a commercial bank raises new capital by a common stock issue, its reserves will rise permitting a multiple expansion in the money supply.

PART II (60 points). Listed below are four proposals for new legislation. For each proposal, discuss the probable economic effects were the proposal to be enacted and indicate your views on the desirability of the proposal. (Consider each proposal separately; i.e., as you discuss one proposal assume that none of the others has been enacted.)

  1. Require the Federal Reserve to support the prices of Government securities whenever their yields reach 4 ¼ percent.
  2. Allow commercial banks to pay any interest they deem proper on demand and time deposits.
  3. Require the Federal Reserve to produce a money supply which is as close as is practicable to a 3 percent annual rate growth path.
  4. Provide that members of the Board of Governors of the Federal Reserve System may be appointed to, or removed from, office at any time by the President of the United States.

 

PART III. (60 points). Answer two.

[Handwritten note: THIS PAGE WAS NOT GIVEN. (i.e. Part III)]

  1. “Economists are frequently skeptical about the effects of price flexibility in goods markets because they feel that price declines will lead to expectations of further price declines resulting in a reduction in consumption. If expectations as to future prices of long-term bonds are determined in a similar way, the liquidity trap will not exist and, in fact, the economy will be very sensitive to changes in monetary policy.” Discuss.
  2. Today, monetary policy is generally considered to be useful for dealing with economy-wide stabilization problems but not with regional stabilization problems; overheated regions and depressed regions must be treated with different medicines. But the Federal Reserve System consists of twelve regional banks and its founders thought a regional monetary policy was possible. What economic conditions would have to prevail before a regional monetary policy would be possible?
  3. Outline the major aspects of the Gurley-Shaw hypothesis, and discuss its merits. What empirical observations would lead you to accept or reject the hypothesis? (Is the fact relevant that in recent months the rate of growth of money supply plus time deposits has remained unchanged while the rate of growth of money supply alone has declined substantially?)

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Ph.D. Written Comprehensive Examination in PUBLIC FINANCE

DEPARTMENT OF POLITICAL ECONOMY
THE JOHNS HOPKINS UNIVERSITY
April 24, 1965

PART I (40 min.)

For each of the following indicate whether the statement is true, false, or uncertain, and then explain your reasoning. (Statements in parentheses may be taken as correct.)

  1. (In a suburban Los Angeles owner-occupied housing development in a recent year, real estate tax payment as a fraction of annual family income was higher for lower-income families than for higher-income families.) The foregoing fact shows that the residential real estate tax is a regressive tax.
  2. There is no advantage or disadvantage to the investor in holding tax-exempt municipal bonds because market demands will have adjusted so as to equate the after-tax yields on the two.
  3. (Available empirical evidence indicates that the after-tax rate of return on equity in the corporate sector has changed very little since the late 1920’s despite the fact that the corporate income tax rate has increased from 11% to over 50%.) From this evidence one can conclude that the effect of the tax has been to raise corporate product prices or to lower the prices of corporate-hired factors of production, or some combination of these two, so that the tax has been simply shifted away from corporate profits with no change in resource allocation.
  4. Marginal cost pricing should be employed for all public utility undertakings.

 

PART II (70 min.) Answer any 2 of the following:

  1. Discuss briefly the issues raised by the proposal of Mr. Heller (former chairman of the Council of Economic Advisers) to transfer certain Federal tax receipts to the states.
  2. Discuss briefly the consequences of Representative Patman’s proposal to finance the Great Society by a loan of $25 billion from the Federal Reserve to the Treasury at an interest rate of ¼ of 1% per year.
  3. Discuss the likely impact of the current proposal to reduce excise taxes upon
    1. The level of aggregate demand
    2. The degree of automatic stabilization of the economy
    3. The distribution of income if taxes on luxury items are eliminated.
  4. Compare, contrast, and evaluate the effects and merits of the following programs to stimulate investment:
    1. Militant easy money programs
    2. Tax inducements such as
      1. Accelerated depreciation
      2. Investment tax credits
      3. Shifts to consumption-expenditure taxation away from income taxation.

 

PART III (70 min.) Answer any 2 of the following:

  1. Indicate the role of government in promoting economic growth in the following models:
    1. Neo-classical models of economic growth à la Solow.
    2. Fixed-proportions models à la Domar.
    3. An economy where government stabilization policy is required to maintain full employment.
  2. Define a public good; a social want. What special problems do they pose to a government which is interested in both resource allocation and optimal income distribution?
  3. Two countries decide to join in an economic union. They wish to have free trade and optimal resource allocation within the union.
    1. One country has a tax system relying solely on a value-added tax and the other one has a proportional income tax. Would an adjustment to exporters or importers be necessary for these taxes?
    2. Suppose the taxes were a value-added tax and a proportional tax on consumption. Would your answer be the same?
  4. How could the government use fiscal measures to improve resource use in transportation?

____________________

Ph.D. Written Comprehensive Examination in ECONOMETRICS

DEPARTMENT OF POLITICAL ECONOMY
THE JOHNS HOPKINS UNIVERSITY
April 24, 1965

Part I

Define or explain briefly:

  1. multicollinearity
  2. consistent estimator
  3. asymptotically efficient estimator
  4. asymptotic variance of an estimator
  5. asymptotically normally distributed estimator
  6. best linear unbiased estimator
  7. Monte Carlo study
  8. specification bias
  9. specification error
  10. autoregressive disturbances

 

Part II (answer two out of three)

  1. Write an essay on the identification problem in which you indicate (a) the definition of “identification”, (b) why the problem arose in the economic literature rather than in the broader statistical literature, (c) the relation of identification to estimation, and (d) some of the important theoretical results concerning identification criteria. In (d), be careful to state carefully the assumptions on which the results rest.
  2. Describe the two-stage least squares estimator in words. Then write down a mathematical expression for it, defining your symbols.
  3. Discuss some of the principal difficulties in estimation that are sometimes encountered when disturbances are serially dependent, and indicate under what circumstances each arises or does not arise. Indicate also what techniques (if any) are available to deal with each difficulty, and how they deal with the difficulty.

 

Part III (answer two out of four)

  1. Suppose that current consumption ct were a linear function of current expected income yet, with an additive disturbance ut that is serially independent with mean zero and constant variance. Suppose also that current expected income is a weighted average of current actual income yt and lagged expected income ye,t-1, with constant weights and with an additive disturbance vt that is independent of ut and serially independent with mean zero and constant variance. Suppose also that income is exogenous. What problems would be encountered in the attempt to obtain consistent and asymptotically efficient estimators of the slope and intercept of the consumption function described? What information and techniques would enable you to solve them? Explain.
  2. Discuss the effects of multicollinearity upon the estimation of parameters by ordinary least squares. In your discussion assume that the distribution of disturbances is spherical and that the regressor observation matrix X is fixed in repeated samples.
  3. Specify the necessary conditions under which the method of instrumental variables provides consistent estimators in circumstances where ordinary least squares fails to do so.
  4. If a regressor is correlated with the disturbance then classical least squares estimation will result in a biased estimator of the influence of variations in the regressor on variations in the regressand. What can you say about the direction and extent of this bias?

 

Source:  Johns Hopkins University, Eisenhower Library, Ferdinand Hamburger, Jr. Archives. Department of Political Economy, Series 6, Box 1, Folder “Comprehensive Exams for Ph.D. in Political Economy 1947-1965”.

Image Source: From the Johns Hopkins University seal on the cover of the 1966 yearbook Hullabaloo.

Categories
Chicago Exam Questions Fields

Chicago. Money and banking prelim exam questions, 1969

 

In Milton Friedman’s papers at the Hoover Institution Archives are filed copies of three preliminary exams for graduate students in economics from the Winter Quarter of 1969. Recent posts featured the transcriptions of the price theory prelim and the macroeconomics prelim ( or “income, employment and price level” as was the Chicago wont to say). This post takes a walk on the monetary side, namely, with the prelim for the field of money and banking. This exam was followed in the archival folder by a handwritten table by Friedman with the points awarded for the seventeen candidates who took the exam. Out of a maximum score of 240 possible points, the top exam received 189 points.  Failing grades were for 118 points and below (four examinees). The exams have Friedman’s mostly illegible notes written on them, presumably indications of the correct answers. Perhaps some day there will be a brave soul with greater patience than I possess who will try transcribing these academic scribblings of a few years back. 

The reading list for Milton Friedman’s money course from the Winter Quarter 1970 has been posted earlier.

_________________

MONEY AND BANKING
Preliminary Examination for the Ph.D. and the A.M. Degree
Winter Quarter, 1969

WRITE THE FOLLOWING INFORMATION ON YOUR EXAMINATION PAPER:

Your code number and NOT your name
Name of examination
Date of examination

Results of the examination will be sent to you by letter

Answer all questions. Time: 4 hours

  1. [40] The Federal Reserve has recently altered the method of calculating required and actual reserves. Required reserves are now calculated on the basis of average deposits two weeks earlier. Actual reserves equal average cash in vault two weeks earlier plus deposits at Federal Reserve Banks the current week. (There are a few other minor technical details that can be neglected.)
    Under this new system, the adjustment mechanism of the banking system is in principle dynamically unstable (explosive) for any one week by itself.

(a) Explain why the system is dynamically unstable.
(b) What factors render the system stable in practice?
How does the new system affect:
(c) The Federal Reserve’s ability to control the money supply;
(d) The significance of excess reserves, free reserves, and borrowings.

  1. [25] “Central bankers were highly receptive to the Keynesian analysis of monetary policy because it fitted in with their own preconceptions, which were based on the real-bills doctrine.” Explain why you agree or disagree, in the process summarizing the history of the real-bills doctrine.
  1. [25] A major relationship in most income-determination models is the negative interest elasticity of investment. But during the post war period in the U.S., falling interest rates have been accompanied by declining rates of investment in plant and equipment and a rising volume of residential construction.

(a) Does that suggest that residential construction is more interest-elastic than investment in plant and equipment?
(b) How far, if at all, has the observed pattern been related to central bank policy and the structure of financial intermediaries?

  1. [40 ]

(a) Construct a model for the analysis of economic policy in a closed economy, with an exogenous money supply, an income-elastic tax system, flexible prices, and saving a constant fraction of income.
(b) For a unique equilibrium, which variables do you regard as determined by this model, and which outside the model?
(c) Distinguish between monetary and fiscal policy in terms of your model.
(d) Can monetary policy be used to maintain stable prices? Can fiscal policy? Indicate the conditions in the model necessary for only one or the other to be effective.

  1. [40] Consider the problem of explaining the response in a stationary economy to a change that leads to increased unemployment of resources, such as an unanticipated fall in the demand for goods and services. Suppose that any increases in unemployment are temporary, with dynamic properties of the system such that there will be a return to an “equilibrium” or “natural” rate of unemployment if no further unanticipated shocks occur.

(a) Explain what the “natural rate of unemployment” means.
(b) Assume that the quantity of money is constant. Sketch out an explanation of the time path of output, employment of labor, price of goods, price of labor, and interest rate.
(c) Indicate what each of the following concepts means and how, if at all, each is relevant in explaining the adjustments: search unemployment, labor as a quasi-fixed factor of production, Phillips curve, expectations.

  1. [40] The loss in real value of money during inflation has been likened to a tax. Assume that inflation is fully anticipated. How much is the tax, who bears it, and who receives the proceeds:

(a) If there are 100 percent reserves and the central bank pays no interest on reserves, with commercial banks otherwise regulated?
(b) Same as (a) except there is fractional reserve banking?
(c) If there is fractional reserve banking and the central bank pays no interest on reserves, with commercial banks forbidden to pay a nominal rate of interest deposits higher than would be paid in the absence of inflation?
(d) Same as (c) except banks are also forbidden to charge nominal interest rates on loans higher than would prevail in the absence of inflation?
(e) If there is fractional reserve banking, no interest rate regulation on commercial banks, and the central bank pays interest on reserves totaling to the interest payments earned on its assets?

  1. [30] Assume that the U.S. stops pegging the price of gold and of other currencies, and in reaction to this measure[?], the European common market countries form a currency bloc linked internally by fixed exchange rates and permit the exchange rates of the common market currencies to float relative to the dollar. Assume that all other currencies float relative to the dollar.
    Compare monetary adjustment within the two currency areas (i.e. adjustment of the fifty states of the U.S. as compared to adjustment of the six countries of the common market).

 

Source: Hoover Institution Archives. Papers of Milton Friedman, Box 77, Folder 8 “University of Chicago , Econ 331”.

Image Source:  Milton Friedman (undated) from University of Chicago Photographic Archive, apf1-06231, Special Collections Research Center, University of Chicago Library.

Categories
Exam Questions Fields M.I.T.

M.I.T. General exam questions, fiscal economics, 1963

 

The following general exam in fiscal economics was found in Evsey Domar’s papers at Duke University’s Economists’ Papers Archive. Two students apparently took this examination and were graded by Domar:  Michael Repplier Dohan (MIT Ph.D., 1969) and Silva (unable to determine first name).

_________________

September 23, 1963

GENERAL EXAMINATION IN FISCAL ECONOMICS
THREE HOURS

Please answer THREE QUESTIONS, ONE from each part. Use a separate examination book for each question.

Part I.

  1. Write an essay on the subject of “The Effect of Built-In Stabilizers on the Growth and Fluctuations of the American Economy.”
    Explain what they are and how they work.
  2. State the economic objectives which the American Federal Government, in your opinion, should pursue at the present time and explain how well (or badly) the details of the proposed tax reduction; indicate, however, what kind of reductions you have in mind).

 

Part II.

  1. Explain as fully as you can the economic effects of a, say, 50 per cent income tax imposed on (a) corporations, and (b) all businesses. Indicate the positions taken by the authorities in the field, your own position, and methods of testing them.
  2. Abba Lerner has suggested that the best tax would be a kind of a poll tax imposed on each individual not in relation to his actual income but to his potential income (what he could earn) as estimated by the tax authorities.
    Leaving the practical aspects of this proposal aside, explain the following:

    1. What objectives was Lerner trying to accomplish by means of this unusual tax?
    2. What does this proposal tell you about Lerner’s general economic philosophy?
    3. What defects in our existing (federal) tax structure was Lerner trying to eliminate by this proposal?
    4. How would you deal with the defects indicated in (c)? Be specific.

 

Part III.

  1. Explain as fully as you can the objectives to be pursued and the problems likely to be encountered by recurrent deficit financing (an excess of expenditures over receipts) if practiced by the following organizations:
    1. The American Federal Government
    2. The national government of India or of some other underdeveloped country
    3. An American state (or local) government
    4. American business as a whole
    5. An American business corporation.
  2. Amoz Morag, an Israeli economist, once said that our whole theory of public finance, having been developed mostly in England and in the United States, is based on certain economic philosophy natural to these countries but not to the underdeveloped ones. For the latter, a very different approach to public finance is required, frequently leading to conclusions and methods diametrically opposed to the usually accepted ones.
    Comment fully.

 

 

Source:  Duke University. David M. Rubenstein Rare Book and Manuscript Library. Economists’ Papers Archives. Evsey Domar Papers, Box 16, Folder “Ph.D. examinations, Fiscal Economics”.

Image Source:  Evsey Domar from the MIT Museum website.

Categories
Chicago Economics Programs Fields

Chicago. Memo to Dean from Chair of Economics. Strengths & Weaknesses, 1955

 

What I found particularly striking in the following memo, written by the chairman of the Chicago department of economics in 1955, is the number of fields in which the department saw itself weak or at least in need of support: labor, international, mathematical economics and econometrics, development, and industrial organization. Perhaps this was just a matter of administrative strategy, beg for assistance for five fields and hope to actually get assistance for three. That said, Schultz does not appear to be engaging in three-dimensional chess here. Will be interested in hearing what other people think about the this memo.

_______________________

Carbon Copy of Strengths and Weaknesses Memo
T.W. Schultz to Dean Chancy D. Harris

September 22, 1955

[To:] Dean Chancy D. Harris
[From:] Theodore W. Schultz
[Re:] Department of Economics

 

It may be helpful to have me briefly state the major elements of strength and, also, of weaknesses which I see in economics, in the hope that these notes may serve you as you prepare your presentation for the trustees.

Elements of Strength

  1. A comparatively young faculty strongly committed to research and graduate instruction.
  2. Research and related seminars are effectively organized as small scale enterprises:
    1. Workshop on Money
    2. Workshop on Public Finance
    3. Resources Research Enterprise
    4. Technical Assistance Studies
    5. Studies of Russia Agriculture
    6. Inventory Studies
  3. Satisfactory foundation support for some of the workshops and research enterprises now underway:
    1. Rockefeller Foundation supporting the money and public finance workshops.
    2. Resources for the Future supporting the resources research.
    3. Ford Foundation supporting the technical assistance studies.
    4. Also, for individual research, the Rockefeller Foundation support of economic history of Professor Hamilton.
  4. U. S. Government contracts and grants are proving satisfactory in financing some research:
    1. The inventory studies
    2. Russian agriculture work
  5. Financial support for competent advanced graduate students doing research is available from the several small scale research enterprises and, also, from SSRC (Griliches this year); from Earhart funds (Nerlove); and from corporations (Oi)
  6. Our new Ph.D. theses procedure is proving most effective in bringing student and faculty resources to bear on productive research.
  7. The new Economic Research Center of the Department is now proving important and necessary overhead facilities and services required by faculty and students working in the several small scale research enterprises.
  8. The new arrangements with the University Press to publish our Studies in Economics represents a major advance.
  9. The Journal of Political Economy continues strong as Prof. Rees and Miss Bassett take over.
  10. While we are not satisfied with the “quality” of many of our graduate students, we appear to be holding our own in a period when many averse factors are at work in lowering the quality of students in most branches, and also in economics generally as it appears.

 

Elements of Weakness

  1. Too many of the faculty are now in junior roles and there are too few major staff members on indefinite tenure in view of the fields of specialization in economics, the range and number of advanced graduate students, and the research work that is underway.
  2. With Professor Harbisons’s leaving and the non-functioning of the Industrial Relations Center in economics, our work in labor economics needs to be reorganized and strengthened. This replanning is now underway. Research resources are required: about $20,000 a year would be optimum.
  3. We are not prepared to serve adequately most of the many (representing about 30% of our graduate students) foreign students working in economics:
    1. Many of them should be in a modified Master’s program.
    2. Relevant research should concentrate on “developmental” problems.
    3. More effort is required to guide their work.
  4. The Department is now weak in International Economics because of the illness of Professor Metzler.
  5. The work in consumption economics has not been made as effective as it should be in bringing major graduate students into play in research.
  6. The reorganization and staffing of work in Mathematical Economics and Econometrics, with the Cowles Commission leaving, is unfinished business:
    1. Professor Hans [a.k.a., “Henri”] Theil is here this year as visiting Professor.
    2. Plans beyond this year await action.
    3. No research support at present for advanced students or for complementary staff in this important area.
  7. The broad area of Economic Development requires major attention and it should be placed high on our agenda as we develop plans and staff during the next few years:
    1. This area is needed to serve especially graduate students from foreign countries.
    2. The economic problems are important to the U.S. scene also.
    3. The Research Center for Economic Development and Cultural Change and importantly the “Journal” it has established need to be drawn into this new effort.
    4. Major new research resources are required.
  8. The long neglected field of Industrial Organization.

 

Some Concrete Steps

  1. To establish the work in Mathematical Economics about $20,000 a year will be required for a “professor” to head this work, for complementary staff, and related research.
  2. To establish the new enterprise now contemplated in Economic Development about $50,000 a year appears essential.
    In this area, a professorship, a visiting professor for each of the next several years, complementary staff, student research in a workshop and support for the Journal “Economic Development and Cultural Change.”
  3. Also in Labor Economics we need to move to a professorship and research support of about $20,000 a year.
  4. How to strengthen the work in International Economics must await developments affecting Professor Metzler’s recovery.
  5. There remains then the long neglected area usually referred to as Industrial Organization. Since no major individual has emerged here or elsewhere, we are compelled to “invest” in a younger person in breaking into this area.

 

Source:   University of Chicago Archives. Department of Economics Records. Box 42, Folder 8.

Image Source:  T. W. Schultz, University of Chicago Photographic Archive, apf1-07484, Special Collections Research Center, University of Chicago Library.

Categories
Chicago Economic History Economist Market Economists Fields

Chicago. Report of the Bailey-Christ-Griliches Committee, 1957

 

Today’s artifact provides a collection of suggestions from three young faculty members of the University of Chicago department of economics in 1957 regarding (inter alia) thesis writing, linkages with business/law/statistics faculty, long-term staffing, and the creation of a working-papers series. After reading the report, I guess one should not be terribly surprised that all three of these young turks would ultimately end up spending the lion’s share of the rest of their working lives elsewhere than Chicago. Basically what we have below is a young insider’s view of how to proceed in promoting excellence at Chicago, though it does not really have the ring of a majority view of that faculty. For fans of Saturday Night Live, one might say Christ et al. wanted “less cowbell” but the “more cowbell” faction was stronger. [An alternate source for the SNL sketch]

The following report was written by Carl Christ who incorporated assessments by his fellow committee members Martin J. Bailey and Zvi Griliches.  These guys were only ca. 34, 30, and 27 years old, respectively, in 1957. One suspects that the acting chair of the department of economics at the University of Chicago, D. Gale Johnson, was hoping to tap the minds of the younger faculty members for some fresh ideas. Both Friedman and Stigler had already entered mid-life at 45 and 46 years of age, respectively. 

I have added footnotes to the text in square brackets, e.g. [1], where descriptions of the reader’s markings by T. W. Schultz are provided.

_______________________

T. S. Schultz’s handwritten notes attached to Report

I.  Christ-G-B

  1. dust off Master’s (hold)
  2. treatment of the weak
  3. rec[commend?] students with more enthusiasm
  4. more history (underway)
  5. combine workshops?

II. Business –Law-Statistics

O.K.     more cross listing of courses. List of faculties for use in assigning committees (underway)

III. Information

prong 1. Special seminar (tied to more visitors)
prong 2. more 1 & 2 year visitors
prong 3. dist our staff (2 v.G.
prong 4. reprint service (underway)

 

_______________________

copy of T. W. S.

REPORT OF THE BAILEY-CHRIST-GRILICHES COMMITTEE*

            *The committee was appointed by D. Gale Johnson, acting chairman of the Department, pursuant to a motion passed at a department meeting late in the spring quarter of 1957. The report was written by Carl F. Christ, chairman of the committee, and has been approved in substance by Martin J. Bailey and Zvi Griliches, the other two committee members.

 

The committee has met together several times. In addition, each of us has “held hearings” with colleagues on numerous informal occasions. Our original terms of reference centered on a long range view of the question of staffing the department. But in our discussions we have ranged very widely.

We have dealth [sic] with five broad topics, some of which are interconnected. The five are, loosely speaking:

  1. Instruction, training and placement of students.
  2. Relations with the business, law, and statistics faculties.
  3. Information about the department for its members, for the economics profession and for prospective students.
  4. The allocation of resources in economics research.
  5. Kinds of economists the department ought to try to hire.

On some of these topics we have concrete suggestions, on some we have vague suggestions, and on some we merely have questions. This report provides a brief account of our discussions, and in the course of it it the suggestions and questions will appear.

 

(1) Instruction, training and placement of students.

This topic has not been a major one in our discussions. However we have several points under it.

First, the M.A. degree ought to be dusted off and made more respectable and more meaningful to students, so that those who do not choose or are not able to continue for the Ph.D. can go away from here with the feeling that they have made a worthwhile investment, to our credit as well as theirs.

Second, we ought to do a better job with our relatively weak Ph.D. aspirants in two respects: First, in discouraging or prohibiting from Ph.D. work any student who, in our opinion, is not capable of success by our standards. Second, once a student has been permitted to go ahead on his thesis, in encouraging and assisting him so that he is able to finish within a reasonable period of time and to have the feeling that he has been treated fairly. The reason for mentioning this point is that we have come across reports of several students who worked long and hard on theses and went through several revisions, with the result that they felt we had been unreasonably exacting and had unnecessarily delayed their degrees. [1]  If the M.A. degree is made more respectable as suggested above, there should be less difficulty in maintaining our Ph.D. standards and at the same time avoiding long-drawn-out struggles with marginal Ph.D. students. [2]

Third, we ought to be more vigorous and more liberal in recommending our students for jobs. There appears to be some evidence that in making recommendations we typically assume that the prospective employer has standards as high as ours, and so sometimes fail to place some of our people in jobs that instead are filled by less qualified students from elsewhere. [3]

Fourth, we ought to give at least some of our students a better knowledge of history and inability to make use of it in economics. Too many of our students go away with only poor knowledge in this area. At the same time, in Earl Hamilton and John Nef, not to mention others, the department has access to some of the best historical talent that is to be found anywhere. Can it not be turned to the advantage of more students? [4]

Fifth, we ought to economize our resources a bit by combining into one the workshop appearance in the thesis seminar of those students whose workshop performances appear ex post to have served the purpose of the thesis seminar. It might also be possible to combine the Ph.D. oral examination with the seminar appearance in some cases, thus making a further saving.
Sixth, we ought to take more advantage of the resources in the business, law, and statistics faculties, and be prepared to let them do the same with us (see topic 2 below). [5]

 

(2) Relations with the business, law, and statistics faculties.

The committee met for an hour with Allen Wallis, James Lorie, and Arnold Harberger to discuss informally the probable future course of relations between the department and the school. From this it appeared that the school intends to continue to send many of its advanced students to the department for training in price theory and monetary and income theory, and also that the school will welcome students from the department who wish to study topics that are offered in the school. [6] It also appeared that the school intends to invest fairly heavily in staff in the areas of industrial and market organization in the public regulation of business (this interested us because we feel that one of the main weaknesses in the department’s coverage lies here; see topic 5 below). [7]

We discussed the fact that while relations between the department and the school have always been cordial, there has not been as much flow back and forth as desirable, and in particular that some of our students would be interested in the business school’s work fail to follow up this interest because our demands on their time are quite heavy. We concluded that if there were more cross-listing of courses in the catalog and time schedules (the business school now does a better job of this than we do), and if some of their faculty came to our seminars and oral examinations and vice versa, and if there were more preliminary examination committees and thesis committees with members from both the school and the department, then in the course of meeting their degree requirements, any interested economics department students will find it easier to draw on the resources of the business school and vice versa.[8]

A similar approach to law and statistics would appear promising.

 

(3) Information about the department for its members, for the economics profession, and for prospective students.

One of the most commonly recurring themes in our discussions with each other and with “witnesses” in our “hearings” was that we do not provide good enough information for each other and for outsiders about the kind of work that is going on here, and the advantages we believe we have. Our discussions on this point have led to one of the two major suggestions we have to offer (the other appears below in section 5).

The suggestion is to set up a four-pronged program something like the following. (We will quickly list the four prongs, and then return with some comments.) First, set up a sort of special seminar (which might be called the Economics Research Center Seminar) to meet more or less regularly about twice a month, at which the best work that students and faculty and guests are doing would be presented to the department and its guests. Second, have a larger number of one-year or two-year visitors from all over the U. S. and the world, either as post-doctoral fellows or research associates or the like, whose main responsibility here would be to work on their own research and participate in the special seminar, as well as to take part in one or more workshops and research projects. Third, distribute dittoed copies of our essentially finished work to a selected mailing list of economists in the US and abroad, as the Agricultural Economics group already does informally. And fourth, have a reprint series that would carry the best published articles and papers by our faculty, students, and guests.

It is clear that if such a special seminar is set up and no cut is made in the number of meetings of the other workshops and seminars, the faculty workload will increase. Since we feel that it is already pretty high, it seems sensible to suggest that each workshop skip one meeting each month. This should approximately compensate for the extra load created by the special seminar.*

*A crude survey of the faculty attendance at the Agricultural Economics Seminar and the Chile, Labor, Money, Public Finance, and Econometrics Workshops yields the estimate that about 40 faculty-hours (that is, about 20 man-seminars) per week go into these workshops. Assuming that about 10 faculty members would come to each special seminar, about every two weeks, this would require a weekly average of about 10 faculty-hours (or about 5 man-seminars), which would be released if the frequency of meetings of the workshops were reduced about 25%. Another economy measure in this direction is mentioned under topic (2), fifth item.

(In response to the special seminar idea, some colleagues have suggested that the important thing is to circulate advance notice of particularly good work that is about to be presented, so that interested faculty members and others can attend, and that if this can be done, there is no need to have a special seminar; the regular workshop sessions will suffice. If the idea is accepted that particularly good work ought to be publicized within the department before it is presented, then the question of whether to do this via notices of regular workshop meetings or via a special seminar can be discussed as a procedural matter.) [9]

The special seminar idea is tied in with the idea of more visitors, for one of the results we hope for is that the visitors will see our best work, and will spread the word about what kinds of things are being done here, when they leave and go elsewhere. [10]

The reprint series and the distribution of the dittoed manuscripts will, we hope, have a similar effect. Further, but dittoed manuscripts will enable some members of the profession at large to become familiar with our results many months before they can be brought out in published form. [11]

Other simpler measures that might improve the flow of information are the following: Putting out a special department circular or flyer describing the department, the workshops, the interchange of research among faculty and advanced students, and the large amount of faculty attention paid to students; returning to the practice of giving brief descriptions of courses in the catalog (and in the above-mentioned circular), instead of merely course titles as our department has been doing recently; and publishing an annual report for the Economics Research Center. [12]  The matter of job recommendations for our students, which is related to the topic of providing information, was touched on under topic (1) above.

 

(4) The allocation of resources and economics research.

The area of economics that is the most fully developed, the most systematic, the most firmly established, and probably the most reliable for understanding and controlling economic events is the more or less traditional theory of prices, distribution, and the allocation of resources, based on the tools of supply, demand, and marginal analysis. Because it’s postulates (including utility maximization, profit maximization, and a fairly widespread knowledge of market alternatives) appear to be rather unrealistic, this theory has the reputation among many people of being dry, abstract, and of little or no practical value. In the opinion of the committee and of many economists in our department and elsewhere, this theory is a powerful one and can lead to highly useful results when applied to real-world problems. Indeed, one of the most productive kinds of activity for economists appears to be to apply this theory to situations where public and private policies are inappropriate to the goals people have in mind. [13]

In our opinion, the main strength of our department lies in just this kind of activity. We have a group of people who are very devoted to and very good at discovering important, unsolved economic problems that can be solved with the aid of this kind of theory, and solving them. [14]

Our agricultural economists’ approach to the farm problem is one example. Their work on optimum storage rules and on the development of natural resources or others. Our department’s work on economic growth in a sense is another, since when we find that the growth in national product is not fully accounted for by inputs of labor and capital is usually measured, we begin to look for some missing input, either in the form of something that shifts the production function, or in the form of some quality improvements that we have missed in the labor and/or capital: knowledge in either case. This is related to work by Friedman, Becker, in the labor workshop on the value of education as an investment, and to Knight’s concept of human beings as a form of capital. Harberger’s work on depletion allowances, and on the welfare costs of the U.S. tax system, are other examples. Friedman’s and Cagan’s work on the demand and supply of money are examples too, in the sense that attention is focused on the behavior of economic units seeking to maximize their utility or profit in their holding of money and their borrowing and lending operations. Friedman’s and Reid’s consumption work is similar in that into rests on the same view of individual behavior. The whole Chile project is an example par excellence. Friedman’s suggestions for allowing the price system more scope in the fields of education, military recruiting, and the like, for which Friedman and indirectly, the department are so well known, are still others, as is Becker’s free banking scheme, though there is probably more disagreement among economists generally about questions like these that about the other work mentioned above.

While it is clear to us that applications of the familiar theory of allocation of resources very productive, it seems equally clear that the real frontiers of economics lies elsewhere. Some areas that have claimed attention so far are economic history, political science, sociology and social psychology and cultural anthropology, psychology (including learning theory), information theory, statistical decision theory, linear programming, the theory of games. It seems at least as likely that major advances in economics will come by one of these routes or some as-yet-unidentified route as they will come from applications of the familiar resource-allocation theory.

The foregoing statement is so broad that it is almost certain to be true, and almost useless as a guide to research workers interested in major advances. The committee polled itself as to where it thinks pay dirt lies, and where it does not lie, with results something like the following: Among the areas particularly likely to be fruitful are the borderland with learning theory and psychology concerning choice and decision-making  [15], the borderland with statistics concerning decision theory and game theory [16], the borderland with anthropology concerning culture and values [17], the borderland with political science concerning political institutions [18]. Also promising, we feel, are mathematical approaches generally, including mathematical approaches to some of the above mentioned borderlands. [19] None of us wanted to rule out linear programming, though none of us was enthusiastic about input-output.

In summary of this topic, we have two statements: First, the familiar resource allocation theory is a powerful tool and there remains a rich field for its application. Second, it seems to us that if some resources are invested in related but different areas such as those mentioned in the preceding paragraph, there is now a worthwhile chance of that substantial pay-off in the form of new knowledge relevant to economics.

 

(5) Kinds of economists the department ought to try to hire.

Over the past few years several members of the department (and a good many outsiders!) have expressed the view that our department is too homogeneous in several ways. [20] Most of us rely heavily on resource allocation theory, as suggested in the preceding section of this report, and do not emphasize peripheral and possibly frontier areas such as decision theory, learning theory, information theory, psychology, anthropology, and the like. [21] Most of us were trained at Chicago at some stage, are essentially anti-socialist, [22] have essentially similar views about monetary and fiscal policy, have similar views about how far public policy should rely on the price mechanism and how far it should interfere with it, and are primarily theoretically and analytically oriented as opposed to institutionally oriented.

In recent department meetings, our discussion of this matter has often gone something like this: First, we more or less agree that we ought to diversify by seeking a socialist, or an institutionalist, or something of the sort. [23]  Then we considered names of economists who might qualify, and one by one we reject them on the ground that they are not really good economists. The discussion ends when someone says, “There’s really nobody good in that category.”

Granted that we want to maintain a high level of quality in the department, there are at least two difficulties involved in any attempt to diversify. One is that in hiring people we like to feel that we know them pretty well, so as to make informed decisions. And the younger people whom we know the best, by and large, are our own former students and fellow-students. This creates and perpetuates a bias in favor of people trained at Chicago. [24] The bias is not so strong, of course, in the cases of people who have published and made reputations, but even here it appears to exist (look at the people who were brought here as associate professor from elsewhere, and ask how many have had training at Chicago).

A second difficulty is simply that it is hard to separate judgment about the quality of an economist from judgment about his position on questions of research strategy and of economic policy. We agree in principle that high quality is very important, and also that it is possible for powerful and prolific minds to disagree in good faith concerning research strategy and public policy. Still there is a temptation to feel that one’s own views sincerely arrived at are best, and that somehow an economist who disagrees strongly with them cannot really be a very good economist. [25]

It seems to the committee that the real issue is not diversification per se. We see the issue somewhat as follows: As we said in the foregoing section of the report, we believe that the real frontiers of economics lie in directions that are somewhat unorthodox by the lights of the department. [26] We also believe that there are high-quality economists who are unorthodox in the same sense. If these two premises are correct, then our interest as a department in pushing forward the frontiers of economics must prompt us to make a serious attempt to add a few such people to our staff. It is only in this sense the diversification seems to be a worthwhile aim.  [27]

The question of what sort of people the department ought to try to hire includes not only the problem of finding economists of high quality who appeared to have productive unorthodox approaches. [28] It also includes the problem of rounding out the subject-matter coverage of the department.

The committee pulled itself again, this time as to the subject matter areas that the department ought to pay special attention to, in seeking new faculty. The results were as follows.

For replacement of staff lost in recent years, the two high-ranking fields were mathematical economics-econometrics, and industrial and market organization in social control of business. [29]  (The second of these seems less urgent for us, in the light of the business school’s intention to invest in it; see topic 2 above.) Ranking almost as high was the history of economic thought. [30]

For expansion, we thought of business fluctuations, the economics of the firm, and American economic history (the latter mainly so as to free Earl Hamilton to give work in his real specialty, European economic history, without sacrificing our offering in the American field).

The last two sections of the report may be summarized thus (and here is the second major suggestion referred to earlier). It is the feeling of the committee (1) that we should place a high value on quality, and (2) that in view of our belief that the present composition of the department is weak in areas where the frontiers of economics are to be found, we should make a serious attempt to find high quality people whose interests and competence give promise of advancing the frontier, as suggested in the end of the preceding section of the report. We also suggest that the department pay special attention to the fields mentioned in the foregoing paragraph. In particular, we suggest that the department undertake to appoint a person in the mathematical economics-econometrics area beginning in the fall of 1958. [31]

There is no reason why one or more of these things should not be combined in the same person. And, of course, there is no reason why we should pass up opportunities to hire good economists who are essentially orthodox by our lights, if our resources will permit us to do that as well as meet our author needs.

 

Handwritten Markings and Remarks

[1] Vertical line in left margin marks the last two sentences of paragraph.

[2] Question mark in left margin for this sentence.

[3] “a good point” in left margin for second sentence of paragraph.  “need to ask[?] terms of the specific job + not general letters” in the right margin

[4] “good” in left margin. Vertical line in left-hand margin marks the entire paragraph.

[5] “OK” in left margin. Vertical line in left-hand margin marks the entire paragraph.

[6] “good” written in left margin next to this sentence.

[7] Vertical line in left margin marks the last sentence of the paragraph.

[8] “get list from these committees” in left margin for this sentence.

[9] “OK” in left margin for the last sentence of this paragraph.

[10] “OK” in left margin next to this paragraph.

[11] “OK” in left margin for the last sentence of this paragraph.

[12] underlined “merely course titles as our department has” and “publishing an annual report for the Economics”

[13] Four vertical lines in the left margin mark the last sentence of this paragraph.

[14] Vertical line in the left margin marks the entire paragraph.

[15]  Underlined: “borderland with learning theory and psychology concerning choice and decision-making”,  “(1)” in left margin.

[16] Underlined: “statistics concerning decision theory and game theory”,  “(2)” in left margin.

[17] Underlined: “anthropology concerning culture and values”,  “(3)” in left margin.

[18] Underlined: “political science concerning political institutions”,  “(4)” in left margin.

[19] “(5)” with a vertical line in the left margin marking “mathematical approaches generally, including mathematical approaches to some of the above mentioned borderlands.”

[20] “is too homogeneous in several ways” is underlined.

[21]  “decision theory, learning theory, information theory, psychology, anthropology” is underlined.

[22] “anti-socialist” is circled

[23] “socialist” and “institutionalist” are each circled.

[24] Vertical line in left margin marking the second, third, and fourth sentences of this paragraph.

[25] Vertical line in left margin marking this entire paragraph.

[26] “economics lie in directions that are somewhat unorthodox” is underlined.

[27]  Vertical line in left margin marking the last two sentences of this paragraph.

[28] “productive unorthodox approaches” is circled

[29] “mathematical economics-econometrics” is circled  “also Stigler” written in left hand margin with reference to “industrial and market organization”

[30] “history of economic thought” is underlined, connected with short line to bottom margin note “Stigler”.

[31] Curly vertical line in the left margin marks the entire paragraph.

 

Source: University of Chicago Archives. Department of Economics Records, Box 42, Folder 8.
Mimeograph copy without marginal notes also found in Harvard University Archives. Papers of Zvi Griliches, Box 129, Folder “Correspondence, 1954-1959”.

Image Source: Professor Carl F. Christ in Johns Hopkins University yearbook. Hullabaloo 1962.

 

Categories
Economics Programs Fields M.I.T.

M.I.T. Graduate Economics Program Brochure, 1961

 

 

 

Robert Solow served as the graduate registration officer of the Department of Economics and Social Science at M.I.T. perhaps even as late as when the graduate program brochure (transcribed below) was printed in 1961. Since Solow went down to Washington to serve as a senior staff economist on the Council of Economic Advisers in 1961, it seems likely that the brochure would have been drafted sometime before John F. Kennedy’s inauguration. This brochure is striking in many ways, e.g. its 100% informational content, presumably reflecting significant authorship/editor responsibilities of Robert Solow.

Five cherry-picked quotes from the brochure I found particularly sweet:

“The M.I.T. program does not concentrate on mathematical economics”
[It’s not what you say, it’s what they hear.]

“The department welcomes applications from qualified women”
[Apparently in the DNA of the department since World War II nearly emptied the pool of qualified male applicants.]

“The purpose of the minor program is to broaden the interests or capacities of the student in other areas than those of his major intellectual objective. While some latitude is allowed in particular cases, the spirit of this purpose is always held in view.”
[As opposed to the commandment “Thou shalt stay in thy lane”.]

“Students who are prepared for graduate work in economics are almost never deficient in humanities. Similarly, deficiencies in science are infrequent; but candidates are frequently admitted without preparation in calculus.”
[You go to war with the army you have.]

“In judging promise, special weight is naturally given to letters of recommendation from economists known to members of the department. The difficulty of evaluating records in foreign institutions and of judging foreign references constitutes a serious but no impassable barrier for foreign applicants.”
[Signal extraction problem vs. the problem of old boy networks]

Incidentally, neither “microeconomics” nor “macroeconomics” appear in the document at all. The preferred terms seen here in the brochure are “price and allocation theory” and “income analysis”.

____________________________________

The Graduate Program in Economics

School of Humanities and Social Science
Massachusetts Institute of Technology
[1961]

This brochure has been prepared especially for students who may enter the graduate program in economics at M.I.T. Its purpose is to answer a number of questions which have been recurrently raised about the program and to add to the information which is given in the M.I.T. catalogue.

 

Highlights of the M.I.T. Graduate Program in Economics

  1. The program is almost entirely for doctoral candidates. The master’s degree at M.I.T. is given in either economics and engineering or economics and science; it requires the equivalent of the M.I.T. undergraduate content in engineering or science.
  2. The M.I.T. program does not concentrate on mathematical economics. All students are required to have and use a minimum of mathematics. Students who enter without calculus may make up their deficiency in the first term with a one-semester subject (Mathematics for Economists—14.101), given in our own department. Most of the work in most fields, however, is nonmathematical.
  3. The program is limited in size. Approximately twenty-five students are admitted in any year; sixty or so students are in residence at one time. The department has more than thirty faculty members, twenty of whom have a major responsibility in the graduate program.
  4. The department welcomes applications from qualified women.
  5. All applicants are urged to take the Graduate Record Examination no later than during the January preceding the September in which they wish to enter. They should take the quantitative and verbal aptitude tests as well as the test in economics (Write to the Graduate Record Examinations, educational Testing service, 20 Nassau Street, Princeton, New Jersey, for information on these examinations. Students in western states should write to 4640 Hollywood Boulevard, Los Angeles 27, California.)
  6. Visits to the M.I.T. Campus are helpful both to the candidate and to the departmental admissions committee. Appointments are desirable but are not generally essential, since members of the committee are likely to be available.
  7. The department would like each applicant to submit a statement (one or two pages) explaining his interest in economics. An informal questionnaire is provided for general guidance.
  8. Admission in February is granted only on an exceptional basis, because many subjects given in the spring are continuations of work given in the fall. In any event, fellowship assistance is given only as a consequence of the annual March competition, for students entering in the following September.
  9. Fellowships and scholarships in amounts up to $3250 are available for entering graduate students.
  10. Winners of outside fellowships are welcome to use them at M.I.T. It is entirely appropriate to apply for a Woodrow Wilson, G.E., A.A.U.W., National Science Foundation, or other outside fellowship at the same time that one applies to M.I.T. As a rule, M.I.T. learns of the outside award prior to making its own announcements.
  11. Liberal second-year fellowships are available both to students entering with fellowships and to those who enter without financial assistance. Awards are made on the basis of first-year performance.
  12. Teaching assistantships are ordinarily available for third-year students only, although some second-year students may do a small amount of teaching. Assistantships are not available to entering students unless they have had prior graduate study and teaching experience elsewhere.
  13. I.T. these are written in residence. Following an Institute rule, theses are prepared in residence except where the special requirements of the subject, such as field work, dictate otherwise. All theses are written in residence.
  14. For further information, write the Graduate Registration Office of the Department of Economic and Social Science, Professor Robert M. Solow.

 

S.M. in Economics and Engineering or Economics and Science

The department offers a Master of Science degree only in the combined fields of economics and engineering or economics and science. This degree is available primarily to students whose undergraduate work was in either engineering or science. Its purpose is to enable scientists and engineers, and in particular graduates of the undergraduate Courses in Economics and Engineering or Science (Course XIV) at M.I.T., to carry their economics training to the graduate level in order to equip them more fully for work in industry or government.

 

Ph.D. Degree

Ph.D. degrees are awarded in economics (including industrial relations) and in political science. In addition, candidates occasionally work for a doctorate in two or more fields—for example, economics and mathematics, economics and operations research, or economics and regional planning. These candidates are examined by special committees, on which members of the Department of Economics and Social Science serve jointly with members of the other departments concerned. Most of the graduate work in the department is directed towards the doctor’s degree. This pamphlet deals exclusively with the Ph.D. in economics; a separate bulletin describing graduate work in political science is available on request.

There are four departmental requirements for the Ph.D. degree: the passing of a general examination in a number of approved fields within the area of economics and social science; the satisfactory completion of a “minor” program in another department; demonstration of ability to read two foreign languages of significance in economics; and preparation and defense of a dissertation.

 

Major Program and General Examinations

Work taken in the Department of Economics and Social Science for the doctorate in economics is divided—broadly speaking—into two separate options: economics and industrial relations. But there is considerable overlap between the two.

All students in both options are examined five fields. Among the fields presently available are the following: economic theory, advanced economic theory, monetary and fiscal economics, industrial organization, economic development, international economics, economics of innovation, labor economics and labor relations, personnel administration, human relations in industry, statistical theory and method, and economic history. Each student selects one field as having primary importance for this professional career; ordinarily this is the field in which he writes his dissertation, though exceptions may be made. The remaining four fields are designated secondary fields. One of the five fields must be economic theory.

Students are also required to have at least a minimum knowledge of statistics and economic history. This minimum is presently interpreted to mean one semester of work in each at the graduate level. Candidates who present statistics or economic history as a primary or secondary field normally take two or three semester subjects in the field and automatically satisfy the requirements in that area.

Students may qualify in one of the secondary fields through course work only, provided that they receive a mark of B or better in two subjects. Students are examined in writing in the remaining four fields during an eight-day period (Monday, Wednesday, Friday, and Monday). The theory examination is four hours long (divided roughly between microeconomics and macroeconomics), while the other three are each three hours long.

Following these written examinations, the student takes a two-hour oral examination which covers theory, his primary field, and one secondary field.

 

Foreign Languages

Doctoral candidates must show reading knowledge of two foreign languages; the standard set is the ability to read works of scientific interest at a relatively slow pace. Acceptable languages are German, French, Russian, or any other language which has a literature in economics or which will advance the educational program planned by the individual student. Students are examined by the Department of Modern Languages.

Students whose language preparation has been limited may take subjects which prepare specifically for the language examinations. Students with no previous training in a language frequently are able to attain the necessary minimum proficiency during a single semester of fairly intensive study. Others, who have already had some introduction to a language, often pass the requirement at some time before the end of the semester.

 

Minor Program

Every candidate for the doctor’s degree at M.I.T. must complete a program in a minor field in another department of the Institute. This program consists of a minimum of 24 units, which ordinarily implies three one-semester subjects. The choice of the minor field is made by the student, with the approval of the Department of Economics and Social Science. The content of the program within the other department is a matter for that department’s determination. Satisfactory completion of a minor is ordinarily contingent upon an average rating of 3.5 (in effect, a minimum of two B’s and a C). The normal standard is that the minor work shall be beyond the level required of M.I.T. undergraduates. Students who have done advanced undergraduate work in some field other than economics may often use it to meet part of the minor requirement.

Students in economics have met the minor requirement in such fields as mathematics, industrial management, history, international relations, other social sciences, literature, city planning, chemistry, and electrical engineering. Subjects taken in the minor program must not duplicate work which may be offered for one of the five fields in economics. A minor program in history may include only one term of economic history, since two terms would qualify the student to offer it as a field in economics. Similarly, students minoring in industrial management may not concentrate in such areas as personnel administration. The purpose of the minor program is to broaden the interests or capacities of the student in other areas than those of his major intellectual objective. While some latitude is allowed in particular cases, the spirit of this purpose is always held in view.

 

Courses at Harvard

Students regularly enrolled at M.I.T. are permitted to take a limited number of subjects at Harvard University—about two miles distant in Cambridge—on an exchange basis, without paying extra tuition. Such subjects may be taken as a part of the minor program. Fields for the major program other than those described above may sometimes be offered on the basis of work at Harvard.

 

Residence Requirements

The minimum residence requirement for the Ph.D. degree, including thesis, is the equivalent of one and one-half full-time academic years. No specific number of subjects is required for the general examinations. In general, however, it is recommended that students have at least the equivalent of three semesters of work at the graduate level for the primary field; four semesters in economic theory; and two semesters in each of the other fields. Work on the graduate level at other institutions is considered in meeting these broad approximations of the requisite preparation. Since there are no formal course requirements, there is no occasion to have graduate credits from other schools transferred.

A full-time student is expect to take the equivalent of five subjects each semester for credit; this may include one “reading subject,” in which the student will broaden his reading in his regular subjects. A half-time student is permitted to take approximately three subjects, and a third-time student two subjects. Auditing of additional subjects is permitted as an overload.

 

Dissertation and Special Examination

The Institute requires that all dissertations be prepared in residence, during which period tuition must be paid. Field work may be necessary to gather material; but the analysis of this material must take place at the Institute, under supervision of the instructor in charge of the dissertation. In some cases the writing of the final, polished version of the thesis may be completed elsewhere.

As in other institutions, the dissertation is expected to make a contribution to knowledge in the subject. Shortly after each candidate has submitted his thesis, he is examined on its subject. This examination is oral, conducted by a committee generally consisting of three faculty members, and usually is one hour in length.

 

Total Program of Course Work

The typical student comes to the Institute directly from college with no previous graduate study, having a deficiency in one subject and the ability to pass the reading examination in one language. He can usually prepare for the general examinations in four semesters (two academic years) taking five subjects in each, divided as follows:

 

In the Department of Economics Economic theory—four subjects
One primary field—three subjects
Three secondary fields—six subjects
Statistics—one subject
In other departments Deficiency—one subject
Language—one subject
Minor—three subjects
Total: Twenty subjects
[sic, total of the above is nineteen]

This program is only illustrative, of course, and a wide number of variations are to be expected. Additional work may be required because of additional deficiencies or lack of language preparation. The number of subjects may be reduced by absence of deficiencies, by better preparation in languages, by postponing one or more requirements (such as a part of the minor) until after the general examinations, or by incorporating economic history and/or statistics as primary or secondary fields.

 

Time Required for the Ph.D. Degree

A student entering the program with only a bachelor’s degree may expect to receive the Ph.D. degree in three years under optimum conditions. This will entail taking the general examination in May of the second year and completing a satisfactory dissertation in two semesters of full-time work thereafter. Normally, however, somewhat more time is needed, either in summer work or in some part of a fourth year. Students may need this additional time for more extensive preparation before the general examination, for the thesis, or (in the ordinary case) because teaching duties prevent full-time progress as a student. Many students who plan to enter the teaching profession take advantage of the opportunity to teach part-time at M.I.T. Teaching assistantships are available for students who have passed their general examinations, and occasionally for second-year students.

General examinations are given in the department at the beginning of each semester—in September and February—an again in May. Defense of the dissertation is arranged individually at any time.

Students enrolling in the Ph.D. program with a master’s degree from another institution, based on one or more years of residence at that institution, are urged to take their general examinations earlier than May of their second year at M.I.T. It is not usual, however, for a student to be able to transfer between institutions without some loss of time.

 

Summer School

The department does not offer any subjects at the graduate level during the summer session. However, students may enroll during the summer for thesis credits, for which tuition must be paid. Scholarships are only rarely available for payment of summer school tuition.

 

Admission

To be admitted into the program, a student must hold a bachelor’s degree from an accredited college or university. To be admitted without deficiencies, he must have taken one year of college mathematics, including at least one semester of calculus; one year of college science; and a minimum of three years of college work in the humanities and social sciences. While an undergraduate degree in economics is not indispensable, students are expected to have done a considerable amount of undergraduate work in this field. Students who are prepared for graduate work in economics are almost never deficient in humanities. Similarly, deficiencies in science are infrequent; but candidates are frequently admitted without preparation in calculus.

 

Special Students

Special students, taking from one to five subjects, may be admitted to the Institute and to the department from time to time under special circumstances. Admission of special students automatically lapses each semester; application for re-admission, in the case of students wishing to continue course work, must have the approval of the instructor concerned and the department.

 

Deficiencies

Students who, upon admission, are deficient in mathematics may make up this deficiency by taking a special one-semester subject offered by the Department of Economics—Mathematics for economists (14.101.) Since calculus is required for some of the work in economic theory and statistics, students entering with a deficiency in this area are required to make it up as soon as possible. Though this is not specifically recommended, some students may be able to make up a deficiency in calculus by studying at a summer school prior to fall enrollment at the Institute.

 

Fellowships, Scholarships, and Financial Assistance

Fellowships and scholarships are awarded on a competitive basis only. First-year awards are made on April 1 for the academic year beginning in the following September. Second-year and subsequent departmental awards are made in June. No academic assistance is available for students applying after April 1, or (until the following September) for those entering in February.

Fellowships cover the tuition fee of $1500 and some cash payment toward living expenses. A fellowship of $3200 will thus include $1500 tuition and $1700 cash. The cash award is paid in two equal installments, at the beginning of each semester.

The total of fellowship assistance varies from year to year. There are several name fellowships: the Goodyear, varying from $3000 to $3500; the United States Steel, at about $3100 for each of two years (awarded every other year); the RAND Corporation Fellowship in Mathematical Economics, varying from $3000 to $3500; the Hicks, for students of industrial relations, ranging from $2000 to $3000; and the Center for International Studies Fellowship in Economic Development, ranging from $3000 to $3500; In addition to these, the Institute awards Whitney Fellowships ($3000 in 1961), open only to first-year graduate students coming from outside M.I.T., upon recommendation of the department; and the department has limited funds with which it makes scholarship and fellowship awards varying from $1500 to $3000.

In offering scholarships and fellowships, the department takes into account a variety of factors; academic achievement, career promise, and need. In judging promise, special weight is naturally given to letters of recommendation from economists known to members of the department. The difficulty of evaluating records in foreign institutions and of judging foreign references constitutes a serious but no impassable barrier for foreign applicants.

In general, outside fellowships are financially better than all but a few of the department’s awards. Applicants are therefore urged to seek Woodrow Wilson, Danforth, National Science Foundation, and similar fellowships for use at M.I.T., if they think they stand a good chance of success in the national competition.

Students who perform effectively in their first year are assured of financial support needed to finish the degree. Part of this takes the form of fellowships, in amounts somewhat lower than first-year awards; the rest consists of teaching and research assistantships and instructorships. The half-time teaching assistantship covers the half-time tuition fee of $1000 and pays $180 a month for nine months—a total of $2620. The half-time instructorship, which is reserved for students who have demonstrated effective teaching as an assistant, pays the same tuition and $235 monthly–$3115 for the academic year. The few research assistants appointed each year receive a higher rate of pay than teaching assistants but pay their own tuition. They have the advantage, however, of working on a subject related to their thesis. The department is occasionally able to obtain assistantships for applicants in other parts of the Institute, such as the School of Industrial Management or the Operations Research Group.

Third-year students are also encouraged to compete for outside assistance in supporting their thesis research, such as the Ford Foundation Doctoral Dissertation Awards, the Social Science Research Council Fellowships, and Fulbright Awards.

 

The Faculty in Economics and Industrial Relations

Morris A. Adelman, Professor of Economics
Ph.D. Harvard 1948
Industrial organization, government regulation

Albert K. Ando, Assistant Professor of Economics
Ph.D. Carnegie Institute of Technology 1959
Statistics and econometrics, economic fluctuations

Francis M. Bator, Associate Professor of Economics
Ph.D. M.I.T. 1956
Price and allocation theory, income analysis, economic growth

Robert L. Bishop, Professor of Economics, in charge of the department
Ph.D. Harvard 1949
Price and distribution theory, industrial organization, history of economic thought

E. Cary Brown, Professor of Economics
Ph.D. Harvard 1948
Public finance, income analysis, fiscal economics

Evsey D. Domar, Professor of Economics
Ph.D. Harvard 1947
Income analysis, economic growth, Soviet economics, fiscal economics

Robert Evans, Jr., Assistant Professor of Industrial Relations
Ph.D. Chicago 1959
Labor economics, industrial relations

Franklin M. Fisher, Assistant Professor of Economics
Ph.D. Harvard 1960
Econometrics, price and allocation theory

Harold A. Freeman, Professor of Statistics
S.B. M.I.T. 1931
Statistical theory, experimental design probability methods

Ralph E. Freeman, Professor of Economics, Emeritus; Lecturer
A.M. McMaster 1914, B. Litt. Oxford 1919
Monetary economics

Everett E. Hagen, Professor of Economics
Ph.D. Wisconsin 1941
Economic development, income analysis

Ralph C. James, Jr., Assistant Professor of Insutrial Relations
Ph.D. Cornell 1957
Labor economics, industrial relations

Charles P. Kindleberger, Professor of Economics
Ph.D. Columbia 1937
International economics, monetary theory and policy

Edwin Kuh, Associate Professor of Economics
Ph.D. Harvard 1955
Econometrics, income analysis

Max F. Millikan, Professor of Economics
Ph.D. Yale 1941
Economic development, income analysis

Charles A. Myers, Professor of Industrial Relations
Ph.D. Chicago 1939
Labor economics, industrial relations

Paul Pigors, Professor of Industrial Relations
Ph.D. Harvard 1927
Personnel administration, industrial relations

Paul N. Rosenstein-Rodan, Professor of Economics
Dr.Rer.Pol. Vienna 1925
Economic development

Walt W. Rostow, Professor of Economic History
Ph.D. Yale 1940
Economic history, economic growth

Paul A. Samuelson, Professor of Economics
Ph.D. Harvard 1941
Price and allocation theory, income analysis, monetary theory and policy

Abraham J. Siegel, Associate Professor of Industrial Relations
M.A. Columbia 1949
Labor economics, industrial relations

Robert M. Solow, Professor of Economics
Ph.D. Harvard 1951
Price and allocation theory, income analysis, econometrics

 

Graduate Subjects

Price and allocation theory

14.121, 122 Economic Analysis
14.123 Advanced Economic Theory
14.132 Schools of Economic Thought
14.151 Mathematical Approach to Economics

 

Income analysis

14.451 Theory of Income and Employment
14.452 Economic Growth and Fluctuations

 

Economic history and economic development

14.161,162 Economic History
14.171 Theory of Economic Growth
14.172 Research Seminar in Economic Development
14.182 Capitalism, Socialism, and Growth

 

Economics of industry

14.271 Problems in Industrial Economics
14.272 Government Regulation of Industry

 

Statistics and econometrics

14.371,372 Statistical Theory
14.374 Design and Analysis of Scientific Experiments
14.381 Statistical Method
14.382 Economic Statistics
14.391 Research Seminar in Economics
15.032 Sampling of Human Populations1

 

Monetary and fiscal economics

14.461,462 Monetary Economics
14.471 Fiscal Economics
14.472 Seminar in Fiscal and Monetary Policy

 

International economics

14.581,582 International Economics
14.584 Seminar in International Economic Theory

 

Industrial relations

14.671 Problems in Labor Economics
14.672 Public Policy on Labor Relations
14.674 The Labor Movement: Theories and Histories
14.681,14.682 Seminar in Personnel Administration
14.691,692 Research Seminar in Industrial Relations
14.693 Collective Bargaining and Union-Management Cooperation
14.694 Seminar in Union-Management Cooperation

1School of Industrial Management

 

[Production Credits]

Editorial service by the M.I.T. Office of Publications. Design by Brigitte Hanf. Typesetting by the Lew A. Cummings Company, Inc., Manchester, New Hampshire, and The Composing Room, Inc., New York. Production by the Lew A. Cummings Company, Inc. January, 1961.

 

Source: MIT Archives, Department of Economics Records, Box 2, Folder “Department Brochures”.

Image Source: MIT beaver mascot, Tim,  from Technology Review in 1914.