Today’s post includes not only the questions for the economic theory preliminary examinations (Part I and Part II) from the summer quarter of 1952 at the University of Chicago, but also some interesting background material. From Milton Friedman’s papers at the Hoover Institution archives I have transcribed copies of the entire schedule of preliminary examinations for summer 1952 along with the correspondence between Friedman, Frank Knight and the departmental secretary. We can compare Friedman’s suggested questions with the questions that were actually used for the exam along with Friedman’s rankings of the anonymous examinations. Two sentences in Frank Knight’s letter to Friedman (after the grades had been compared among the graders and the veil of ignorance regarding the identities of the examinees was lifted) is definitely worth considering in light of current discussions about systemic elements of racism in the discipline of economics.
“I feel that these Negroes are in the same position as the Chinese students only more so in that they compete in a completely different market, and they are never really compared with our “full fledged” Ph.D. graduates. (Besides, between you and me, I have attended 4 or 5 Ph.D. exams this summer and thought very few of them ought to pass but they all did).”
I have gone on to track down the top eight examinees as ranked by Milton Friedman. Fun facts: Gary Becker won the bronze medal and Abba Lerner’s son, Lionel Lerner, placed fourth.
The summer 1951 theory preliminary exams were posted earlier.
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Schedule for the Preliminary Examinations
Summer 1952
July 15, 1952
To: Committee members of Preliminary examinations
From: J. Barker, Departmental Secretary
Re: Schedule and committees for Preliminary Examinations, Summer Quarter, 1952.
| Date | Examination | Committee | Registration |
| Tues., July 29 | Economic Theory I | M. Friedman, Chr., F. H. Knight G. Tolley |
26 |
| Thurs., July 31 | Economic Theory II | (as above) | 4 |
| Tues., July 29 | Government Finance | P. Thomson, Chr. H. Lewis |
1 |
| Thurs., July 31 | Industrial Relations | F. Harbison, Chr. A. Rees M. Reid |
1 |
| Tues., Aug. 5 | Money, Banking & Monetary Policy | L. Mints, Chr. E. Hamilton J. Marschak |
21 |
| Tues., Aug. 5 | Statistics | T. Koopmans, Chr. W. Wallis |
4 |
| Thurs., Aug. 7 | Agricultural Economics | D. Johnson, Chr. T. Schultz P. Thomson |
8 |
| Thurs., Aug. 7 | International Econoics | L. Metzler, Chr. C. Hildreth H. Lewis |
9 |
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Friedman to Knight and Tolley
Carbon copy
Orford, N.H.
July [19 or 20], 1952
F. H. Knight
G. Tolley
Dear Knight and Tolley:
I have just received word from Miss Barker that I am chairman of the Theory prelim committee for this summer, that you are the other members, and that the exams are to be in her hands by July 22.
I wish you could join me here for a session to get out the exams—and I am sure you do too if what we have been hearing about the weather in Chicago bears any resemblance to the truth.
Since you cannot, I enclose some suggested questions for both Part I and Part II. I wonder if the two of you could get together and combine these or such of them as you think worthy of retention with your own questions. Time does not permit of rechecking with me and I assure you I shall be more than satisfied with whatever decisions the two of you make.
As to the papers, have them sent to me at any stage that suits your own plans best, since mine are very flexible. I shall try to read them promptly and return them promptly. If I send you in my grades, perhaps the two of you can combine them with your own. I realize this puts more of the work on you, but I know not what else to do. I do hope we can get the grades in reasonably promptly, and certainly before the end of the quarter, which also means before I return.
Many thanks, and apologies. Best regards too.
Yours,
_________________________
Friedman’s proposed theory exam questions
Summer 1952
M. Friedman
Suggested Questions for Theory Prelim, Summer, 1952
Part I
- Define the following terms precisely and indicate briefly the use made of each in economics:
- Demand
- Supply
- Equilibrium
- Indifference Curve
- Marginal
- Rate of Substitution
- Marginal value product
- Marginal efficiency of capital
- Production function
- Time preference
- Profit
- Rent
- Run
- Net advantages
- Variable Costs
- (a) “I wouldn’t take it if you paid me”. Draw the consumption indifference curves implied by this statement. (You may find it helpful to suppose first that there is some finite minimum price per unit at which the speaker would take “it”; then approach the limit implied by the quotation.)
(b) “I’ve reached the point of diminishing returns, so I better quit”. Analyze, indicating under what conditions and for what definition of diminishing returns this is a valid inference from the conditions for a maximum. - (a) Complaints are often heard about the “high” incomes of bootleggers in dry states, or gamblers where gambling is illegal, or smugglers, etc. Are high incomes in such cases evidence of the success or the failure of the laws? Explain your answer.
(b) A man buys a ticket in a lottery and wins. View this as a business transaction. How much, if any, of his prize is properly regarded as “profit”? Does your answer use the concept of “profit” implicit in the common statement “entrepreneurs seek to maximize profit”? Justify your answer and indicate the difference, if any, between the two concepts. - (a) Outline the theory of joint supply
(b) What factors determine the elasticity of the derived supply curve of one of a pair of jointly supplied items? Show the direction of influences and prove your statements graphically or otherwise.
* * * * * * * * * * * * *
M. Friedman
Suggested questions for theory prelim, Summer, 1952
Part II
- During every hyper-inflation there are always recurrent complaints of a “shortage of money.” How do you explain this phenomenon?
- The following quotation is from an article on the illicit gold traffic:
“Traffic on the Asian gold-smuggling trails has doubled since Korea…Meanwhile savings which could be productively invested by banks lie idle; paper money is snubbed for gold, depreciates with every rise in the gold price, and becomes a weaker and weaker factor in national economies.” (H.R. Reinhardt, The Reporter, July 22, 1952, p.21).
Analyze this quotation. Precisely what effect would the willingness of people to hold bank deposits instead of gold have on productivity or productive investment, and through what channels? What of sense and what of nonsense is there in the statements after the semi-colon? - There has been much talk of the so-called “wage-price spiral.” What is generally meant by this term? Give a theoretical analysis of the so-called spiral, indicating under what circumstances you think it could or could not arise.
_________________________
Actual Economic Theory Preliminary Examination Questions
Summer, 1952
Summer, 1952
ECONOMIC THEORY I
Time: 4 hours
Answer all questions.
- Define the following terms precisely and indicate briefly the use made of each in economics:
- Demand
- Supply
- Indifference Curve
- Rate of Substitution
- Marginal value product
- Marginal efficiency of capital
- Production function
- Time preference
- (a) Outline the theory of joint supply
(b) What factors determine the elasticity of the derived supply curve of one of a pair of jointly supplied items? Show the direction of influences and prove your statements graphically or otherwise. - Assume that Crusoe is interested in economizing the use of his resources and that during the period in question there is no change in his knowledge of production techniques. How does capital and interest theory aid in explaining the following observations?
(a) After several years, Crusoe begins to obtain berries by planting and cultivation rather than simply by picking them as he had done previously.
(b) After an additional number of years, he reverts to picking wild berries.
- What theories do you offer to explain the following phenomena?
(a) During a prolonged rise in the general level of prices, the price of soft drinks remained at five cents with no change whatsoever in the physical characteristics of the product.
(b) During a prolonged rise in the general level of prices the price of candy bars remained at five cents, at the same time, however, as the size of the bars decreased.
- Using diagrams, briefly discuss the long-run cost curve for a competitive industry. Indicate, with diagrams, the response to be expected from (a) an expansion of demand, (b) a decrease of demand, within periods too short for a significant change in the fixed investment.
- Briefly state the main changes in the body of accepted price theory at the turn from “classical” to “Austrian” (the subjective-value school), i.e., at the “revolution” of the 1870’s. Similarly describe the transition from Austrian to “New-classical” (Marshallian) doctrine.
* * * * * * * * * * * * *
Summer, 1952
ECONOMIC THEORY II
Time: 2 ½ hours
Answer all questions.
- During every hyper-inflation there are recurrent complaints of a “shortage of money.” How do you explain this phenomenon? Compare the situation during acute depression.
- A part of the nation’s productive capacity is destroyed, say by a war. Ignoring any possible expectational and distributive effects, how will this affect: (a) the division of the national income between consumption and investment? and (b) the income-velocity of money. How, if at all, does your answer depend on whether wealth is a variable which influences behavior?
- There has been much talk of the so-called “wage-price spiral.” What is generally meant by this term? Give a theoretical analysis of the so-called spiral, indicating under what circumstances you think it would or would not arise.
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Theory Prelim, Summer, 1952, Part I. Grades by M. Friedman
General notes:
- I have classified the papers into five groups.
P—clear pass for the Ph.D. (7 papers)
P(?) Questionable pass for Ph.D. (5 papers)
A.M. Pass for a.M./questionable fail for Ph.D. (5 papers)
F(?) Questionable fail for A.M., clear fail for Ph.D. (4 papers)
F Clear fail for both (4 papers)
Should emphasize that as always this is somewhat arbitrary. In particular, difference between two fail classes is particularly small in this batch.
- In addition to the above class mark, Igive the ranking by my numerical grades. 1 is the best paper, 2, the next best, etc., to aid in seeing whether any differences among members of the committee reflect differences in absolute or relative grading.
| # of candidate. | Class grade | Rank | Remarks |
| 1 | AM | 16 | |
| 2 | F | 24 | |
| 3 | P | 6 | |
| 4 | P(?) | 8 | |
| 5 | P | 5 | |
| 6 | F(?) | 21 | |
| 7 | AM | 14 | |
| 8 | P(?) | 11 | |
| 9 | AM | 15 | |
| 10 | P | 4 | |
| 11 | P(?) | 12 | |
| 12 | F | 25 | |
| 13 | P | 2 | This and 15 distinctly the two best papers |
| 14 | F(?) | 18 | |
| 15 | P | 1 | See under 13 |
| 16 | AM | 13 | |
| 17 | AM | 17 | |
| 18 | F | 23 | |
| 19 | F | 22 | |
| 20 | P | 7 | |
| 21 | P | 3 | |
| 23 | F(?) | 19 | |
| 25 | P(?) | 10 | |
| 26 | F(?) | 20 | |
| 27 | P(?) | 9 |
PART II OF THEORY PRELIM
Not one of the three papers submitted on this part seems to me satisfactory. #1 is the best of the three, though not by much, and might deserve a questionable pass. Both of the others seem to me clear failures.
_________________________
THE UNIVERSITY OF CHICAGO
Chicago 37, Illinois
Department of Economics
September 8, 1952
Mr. Milton Friedman
Orford
New Hampshire
Dear Milton:
Tolley and I have just gone over our three reports and find them fairly well in agreement. The most serious exception is #7—John J. Klein, whose paper you marked passable for the A.M. only, while both Tolley and I gave him a clear pass. Your rank was 14, as you probably have the record to show. What do you suggest? It will be no great hardship to us to re-read the paper, and we shall do so with the next day or so. Do you want to see it again? Or what can we report?
Another questionable case is Adolph Scott (Colored). Here I am the odd man, as I marked him passable, while you ranked him 23 out of 25, and Tolley ranked him 24. I yield as far as passing him for the Ph.D. is concerned but wondered what you would think about passing him for the A.M. He seems to have squeezed through in International Trade at the A.M. level. This would allow him to get the Master’s degree. I feel that these Negroes are in the same position as the Chinese students only more so in that they compete in a completely different market, and they are never really compared with our “full fledged” Ph.D. graduates. (Besides, between you and me, I have attended 4 or 5 Ph.D. exams this summer and thought very few of them ought to pass but they all did).
On Part II there is also some discrepancy. I had Mints read these papers, and he and I agree that #2, Mrs. Mullady, was passable. But you and Tolley both wrote failure and as she failed “flat” on Part I and has also failed a second time in another field, it looks as though that disposes of her case. This leaves S. Smidt who has your vote, a questionable pass, Tolley’s a clear pass, and Mints and I though a very very [sic] dubious pass. But Smidt passes Part I with colors flying. I am perfectly willing and in fact disposed to yield on him and pass him as I don’t feel competent to grade these Part II papers anyway.
Cordially,
(Dictated but not read)
Frank H. Knight
Source: Hoover Institution Archives. Milton Friedman Papers. Box 76. Folder 2 “University of Chicago ‘Economic Theory’”.
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Identities of eight examinees given passing grades
by Milton Friedman by rank
First place
Seymour Smidt. University of Chicago Ph.D. (1954). Dissertation: “Efficient Management for Government Wheat Stocks”.
Second place
Conrad Jan (Coen) Oort. University of Chicago A.M. (1954). Doctor of Economics, University of Leiden (1958).
Professor economics, U. Utrecht, The Netherlands, 1960-1971; professor economics, University of Michigan, Ann Arbor, 1956-1957; treasurer-general, Treasury, The Hague, The Netherlands, 1971-1977; managing director, Algemene Bank Nederland Bank (now Algemene Bank Nederland-AMRO), Amsterdam, The Netherlands, 1977-1989; non-executive director various companies, The Netherlands, since 1989; professor economics, Maastricht, The Netherlands, since 1986. Chairman KLM, Amstelveen, Netherlands, 1992, Robeco Group, Rotterdam, Netherlands, 1989. Vice chairman Aegon Insurance, The Hague, 1990.
Source: Prabook webpage for Conrad Jan Oort.
Third place
Gary S. Becker. University of Chicago Ph.D. (1953). Dissertation: “The Economics of Racial Discrimination”.
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1992.
Fourth place
Lionel John Lerner. [son of Abba P. Lerner and Alice Sendak]. University of Chicago A.B. (1950) and A.M. (1952). Johns Hopkins University Ph.D. (1955). Dissertation: “Theories of Imperialist Exploitation.”
Source: Johns Hopkins University, Sheridan Libraries, Special Collections. Commencement Program 1955, p. 19.
Fifth place
Edward J. Kilberg. Hofstra University B.A. (1949). Duke University A.M. (1952). University of Chicago A.M. (1957).
Apparently Kilberg was never awarded a Ph.D. in economics by the University of Chicago for his dissertation “Commercial bank holdings of cash and liquid items”. Most likely reason is that he died in the crash of a Northeast airliner at Nantucket Airport on August 15, 1958. Kilberg left a research job at the Mutual Life Insurance Company in 1957 to go to the NBER where he worked as assistant to Arthur F. Burns for the book Prosperity Without Inflation (1958).
Sixth place
Hugh Roy Elliott. In the list of economics Ph.D. dissertations kept by the department of economics at the University of Chicago we find “Hugh R. Elliott. Dissertation: Savings Deposits as Money (Summer 1964)” which seems rather late in the game. But then we see: AER Sept. 1957, p. 838 “Hugy [sic] R. Elliott, B.A. Harvard 1950; M.A. Chicago 1952.” Thesis in preparation at Chicago “Savings deposits as money”.
Seventh place
Irwin Ira Baskind. I have found the following item “Baskind, Irwin. Postwar Monetary Policy in Belgium (Ph.D., Chicago)” from U.S. State Department, Bureau of Intelligence and Research. External Research. A List of Studies Currently in Progress, Western Europe, ER list no. 5.14 (April 1960), p. 9. Note: Baskind’s name does not appear in the list of economics Ph.D.’s kept by the Chicago department of economics.
Eighth Place
Paul Gabriel Keat. Baruch School of the City University of New York B.B.A. (1949). Washington University A.M. (1950). University of Chicago A.M. (1952, 1956). University of Chicago Ph.D. (1959). Dissertation: “Changes in Occupational Wage Structure 1900-1956”.
Keat, Paul G. PhD 88, passed away on April 2, 2014.Born in Prague, Czechoslovakia May 2, 1925. A WWII vet who served in Ardennes, Normandy and Rhineland. Decorated with the European African Middle Eastern Services Medal, Good Conduct Medal and WWII Victory Medal. Discharged 1946. Graduated 1959 from the University of Chicago with an M.A. and PhD in economics. Student of his cherished professor, Dr. Milton Friedman. Earned B.B.A. in accounting from Baruch School of the City University of New York and M.A. from Washington University. Paul’s work with IBM was extensive in both the United States and in the European headquarters based in Paris. He taught both finance and economics at the graduate level in numerous universities including Syracuse University, Washington University, the City University of New York, Iona College and the Lubin Graduate School of Business at Pace University. In 2013 he co-authored and published the seventh edition of his textbook “Managerial Economics”.
Source: Arizona Republic, Phoenix. April 13, p. F9.
Images: The economic theory prelim examiners, Friedman, Knight, and Tolley. From the University of Chicago Photographic Archive.