Harvard. Course Outline, Reading Assignments, Semester Exams. Principles of economics. Smithies, 1951-52

The self-confidence of the businessmen appointed to Harvard’s economics department visiting committee at mid-20th-century to weigh-in on all matters related to the scope and method of economics as a science and policy art is breath-taking, and I don’t mean that in a good way. For an earlier post I transcribed the November 1950 report submitted by the visiting committee and the January 1952 response from Harvard President James B. Conant. Reading Keller and Keller’s Making Harvard Modern: The Rise of America’s University (2001), I learned that Clarence B. Randall [Chairman of the Economics Visiting Committee] alleged that the economics chairman, Arthur Smithies, ripped off the first page of the syllabus for the principles of economics course to hide the list of main sources of readings for the course, knowing that some of the items would displease Randall.

This was enough to get me to look at the syllabus with assigned readings and the final examinations for Economics 1 “Principles of Economics” for the academic year 1951-52 now transcribed for this post. The first page of the syllabus appears to simply be tables of primary sources for the readings assigned in the fall and spring terms that permit abbreviated reference in the course syllabus. But since he was given the complete list of readings and an outline of the course, I find it more likely that Randall merely saw a tempest in a teapot. Others can examine the artifacts themselves and come to their own conclusions.

If I were in the jury, I would vote to acquit Smithies of the charge of willfully destroying or hiding evidence known to be relevant. Any idiot could figure out Karl Marx made a guest appearance in the Harvard course readings from the course outline and its reading assignments. Smithies provided sufficient evidence as to course content to Randall. Actually I think Smithies should have been awarded damages for having his honor impugned, or even a Purple Heart. Suffering fools has always been a part of the price of departmental service.

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Cf. An earlier version of the Syllabus for “Principles of Economics”

1949-50.  Economics 1 outline and exams.

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Smithies’ letter of Oct 31, 1951 to Randall

October 31, 1951

Mr. Clarence B. Randall
38 South Dearborn Street
Chicago 3, Illinois

Dear Mr. Randall:

I was very glad to get your letter and I do wish we had more opportunities to sit down to discuss the affairs of the Department in a more leisurely manner than is usually possible.

We have given a great deal of thought during the fall to the questions about the Department that you have raised with the President. I am afraid it might confuse things if I attempted to discuss those questions by letter so I shall forebear. I would like to say, however, that whether or not I agree with your conclusions I have always found your criticisms of the Department very helpful.

Dave Bailey called and asked us to keep Sunday evening, January thirteenth, free for a meeting with the committee. As you know, I do not think these single evening meetings serve any very useful purpose. They do not enable the Committee to talk at any length with members of the Department or to make any adequate appraisal of the Department’s program. Several members of the Committee have told me that oven the full day we devoted to the purpose last year was too short. Several members of the Department have also indicated to me that they feel that the Sunday evening meeting is to [sic] perfunctory. Therefore, I very much hope we can arrange another program of the kind we had last year.

Things seem to be going quite satisfactorily here. The enrollment has not shrunk to anything like the extent that was anticipated last spring.

This year we have extended tutorial to sophomores in Group III and above so that we have now practically restored the tutorial system that was eliminated during the war.

I am sending you a copy of the outline of Economics 1 which may interest you. I still regard it as by no means perfect but am more satisfied with it than with what we have had before. We are continuing to have occasional lectures in Economics 1 and during the course of the year I hope that most of the senior members of the staff will give at least one lecture.

Our contract with the Business School for Smith and Butters to teach Burbank’s courses is working out quite as well as I expected. I want to make this a permanent arrangement, but I would not be surprised at some time to see some resistance from the Business School. If we need it, I hope we can rely on your Committee’s support to continue this arrangement.

The defense program has made fewer inroads on the Department than we expected. It is absorbing a good deal of Mason’s sabbatical leave; Dunlop is spending a day or two a week with the Wage Stabilization Board; and I go to Washington for a couple of days a week as a consultant to Charles E. Wilson.

If there is any chance of seeing you during the fall, I would very much appreciate the opportunity. I am regularly in Washington on Thursdays — if you can every bring yourself to visit that unholy city.

Yours sincerely,

Arthur Smithies

Enclosure

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Randall alleges sleight-of-hand by Smithies regarding the Economics 1 reading list.

“Besides their ideological concerns, the Overseers worried about the department’s ability (and desire) to teach undergraduates. [Chairman of the Economics Committee, Clarence B.] Randall fretted that research-obsessed professors were away too much; senior professors avoided teaching lowerclassmen. And he agreed with [President James B.] Conant that the field ‘has reached a point of ethereal content which is as lifeless to me as much…modern poetry. It just doesn’t seem to matter.’ Conant concede that the department ‘has not faced up to the problem of making a real effort ot improve the instruction in the introductory courses in Economics.’ Feeling the pressure, chairman [Professor Arthur] Smithies proposed an extensive plan to strengthen undergraduate teaching. Randall appreciated Conan’s response to his criticisms. He left the visiting committee in the fall of 1952, but not without a final disappointment. He heard that when he asked the chairman for a copy of the Economics A [sic, Principles of Economics last listed as “Economics A” in 1947-48. Beginning 1948-49 it was given the number “Economics 1″ ] reading list, Smithies tore off the first page because he thought that Randall would disapprove of many of the authors (as in all likelihood he would have). ‘I bear no animosity about that,’ Randall told Conant, ‘but it does make me a little heartsick. I am always shocked when I find amongst either professors or preachers ethical practices below the standard prevailing in business.”

Source:  Morton Keller and Phyllis Keller, Making Harvard Modern: The Rise of America’s University (Oxford University Press, 2001), pp. 84-85.

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Course Announcement

Economics 1. Principles of Economics

Full course. Mon., Wed., Fri., at 12. The major part of the course is conducted in sections. However, throughout the year there will be occasional lectures on Wed. at 12. Mon., Wed., and Fri., will be the normal hour for section meetings but sections will be scheduled at other hours. Professor Smithies and other Members of the Department.

Economics 1 may be taken by properly qualified Freshmen with the consent of the instructor.

Economics 1 is designed to introduce students to the methods of economic analysis that bear on the issues that confront this country and the world. The course will thus serve the needs both of those students who plan no further work in economics and those who desire to obtain the groundwork for more advanced courses in the field.

Source: Harvard University. Faculty of Arts and Sciences. Courses of Instruction, 1951-52 pp.  75-76.

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Economics 1
Syllabus and Readings
1951-52

[first page begins]

ECONOMICS 1
1951-52
Fall Term

Sources:

	Bowman and Bach,	Economic Analysis and Public Policy, Second Edition (1949)
**	Clark, J.M.,	Common and Disparate Elements in National Growth and Decline
	Daugherty and Daugherty	Principles of Political Economy, vol. II
		The Midyear Economic Report of the President, July 1951
	Editors of Fortune,	U.S.A. — The Permanent Revolution
*	Gayer, Harriss, and Spencer,	Basic Economics, A Book of Readings
	Hart,	Defense Without Inflation
	Marx,	The Communist Manifesto
	Mill, J. S.,	Principles of Political Economy
*	Morgan, T.,	Introduction to Economics
	Office of Defense Mobilization,	Meeting Defense Goals
	Ruggles, R.,	National Income and Income Analysis
	Schumpeter, J. A.,	The Theory of Economic Development
	Slichter, S.,	The American Economy
**	Spengler, J. J.,	Theories of Socio-Economic Growth
	[“Baumol	Economic Analysis” inserted here]

* To be purchased.
** To be handed out in section meeting.

[end of first page]

ECONOMICS 1
Fall Term

PART I. The American Economy—Its Growth, Complexity, Institutions and Problems

1. The Growth of the U.S. Economy and Its Present Complexity
   1. Change in productivity and income; the increase in population, capital accumulation, and the supply of natural resources.
   2. The functions of the economy.
   3. The complex division of labor and specialization within the U.S. economy for performing these functions.
   4. The role of the price system and market mechanism — the circular flow of economic activity.

Readings:

Slichter, Ch. 1, The American Economy

Gayer, et al., Nos. 6, 7, 8, 9, 59

Bowman and Bach, Ch. 3, The Economic System — A Summary View; Chapter 4, Private Enterprise, Profits, the Price System

2. Prerequisites for a Growing Economy
   1. Climate and natural resources, attitudes of the population, capital and technology, institutional conditions and systems, etc.
   2. Comparisons among different economies

Readings:

Clark, Common and Disparate Elements in National Growth and Decline

Daugherty and Daugherty, Ch. 34, Modern Economic Society

3. Institutions of an Advanced Industrial Economy
   1. Large scale enterprise — the organization of business
   2. The organization of labor and agriculture
   3. The role of the monetary system and its organization
   4. The role of the government

Readings:

Morgan, [Introduction to Economics]

Ch. 4, The Scale and Location of Production

Ch. 5, The Organization of Business

Ch. 6, The Rise of Labor Unions; Social Legislation of the 1930’s

Ch. 7, The Nature of Money

Ch. 8, The Supply of Money

Ch. 9, The Demand for Money

[“Ch. 28” inserted here]

Ch.10, The Control of Money

Ch. 3, Economic Decisions under Laissez-Faire, a Mixed Economy, and Socialism

Editors of Fortune, Ch. 4, The Transformation of American Capitalism

Gayer, et al., Nos. 51, 54, 65 [“, 12” inserted here]

4. Some Views on Economic Growth
   1. The classical economists
   2. Schumpeter
   3. Marx
   4. Other socio-economic views

Readings:

Mill, Vol. II, Bk. IV, Ch. 6, Of the Stationary State

Schumpeter, Ch. 2, The Fundamental Phenomenon of Economic Development

Marx, The Communist Manifesto

Spengler, Theories of Socio-Economic Growth

5. The Problems of a Growing and Complex Economy
   1. Business fluctuations and economic stability
   2. Competition and monopoly
   3. The distribution of income
   4. International problems
   5. Economic Power

Readings:

Morgan, Ch. 1, Economic Problems and Economic Progress, pp. 3-7

Slichter, Ch. 6, How Good is the American Economy

PART II. Fluctuations in National Income — The Problem of Economic Stability

1. The Measurement of National Income
   1. Components of national income and their statistical measurement.
   2. Correcting national income figures for price changes over time — the real national income.

Readings:

Morgan, [Introduction to Economics]

Ch. 25, The National Income

Ch. 26, Fluctuations in the Real National Income: The Problem of Index Numbers

[“Ch. 27 Production & Employment” inserted here]

2. The Sources of the Expenditures Determining National Income
   1. Consumption expenditures.
   2. Investment expenditures.
   3. Government expenditures.

Readings:

Morgan, Ch. 31, The Sources of Expenditure

3. Fluctuations in National Income
   1. The determination of the level of national income.
   2. The effect of changes in spending—the multiplier and acceleration effects.
   3. Business cycle experience of the past.
   4. Counter-cyclical policies
   5. The problem of the national debt

Readings:

Morgan, Ch. 32, Fluctuations in Production and employment

Ruggles, Ch. 12, Economic Policy and the Level of Activity

Morgan, Ch. 36, Part C, The Burden of Public Debt, pp. 685-696

Gayer, et al., Nos. 81, 85

PART III. Economic Mobilization

1. 1. The pattern of mobilization.
   2. Methods of meeting the defense goals.
   3. The problem of checking inflation in the mobilization period.

*  *  *  *  *  *  *  *  *  *

[first page begins]

ECONOMICS 1
1951-52
Spring Term

Sources:

	Allen and Brownlee,	The Economics of Public Finance
	Blakiston Company,	Readings in the Social Control of Industry
	Buchanan and Lutz,	Rebuilding the World Economy
	Dean, J.,	Managerial Economics
	Ellsworth, P. T.	The International Economy
		Federal Budget in Brief, latest available
*	Gayer, Harriss, and Spencer,	Basic Economics, A Book of Readings
	Galbraith, J. K.,	American Capitalism
*	Morgan, T.,	Introduction to Economics
	Peterson, S.,	Economics
	Schumpeter, J. A.,	Capitalism, Socialism, and Democracy
**	Slichter, S.,	Profits in a Laboristic Society

* To be purchased.
** To be handed out in section meeting.

[end of first page]

ECONOMICS 1
Spring Term

PART IV. Economic Behavior of the Individual

1. 1. The problem of choice — the manner in which the individual will use his services and property to earn income and the way he will allocate his income among consumer goods.
   2. The factors influencing his decisions — marginal utility, prices and types of products and services, “conspicuous consumption,” technology, advertising, habit, etc.

Readings:

Peterson, ch. 19, pp. 478-488

Gayer, et al., Nos. 15, 18

PART V. Business Behavior in a Dynamic Economy

1. Profit-making as the main objective of business enterprises.

The relevance of the time period, liquidity and safety, potential competition, the anti-trust laws, etc., for profit maximizing.

2. The influence of market structure on the range of decisions by the firm.

Pure competition — agriculture;
Oligopoly or monopolistic competition — industry;
Monopoly — a limiting case.

1. 1. Conditions of product demand — income levels, availability of substitutes, the price and nature of the product, advertising, etc.
   2. Sales promotion plane and product improvement strategy — research.
   3. Investment decisions — choosing the best plant size and operating it in the most efficient manner.
   4. Pricing policies.
   5. Labor relations.

3. The interactions of such decisions among business firms in a dynamic economy.
4. The effectiveness of business behavior in satisfying consumer demand, allocating resources, and stimulating growth.

Readings:

Dean, Ch. 1, Sections 1, 2, 4, 5

Morgan, Chs. 12, 11, 15, 16

Dean, Ch. 7

Schumpeter, Ch. 8

Gayer, et al., Nos. 20, 21, 26

5. Public Programs of Promotion and Control of Business.
   1. The historical development of government regulation.
   2. The anti-trust approach.
   3. Public utility regulation.
   4. Government sponsored restraints of competition.
   5. Evaluation of government regulation.

Readings:

Gayer, et al., No. 35

Morgan, Ch. 17

Readings in the Social Control of Industry, Ch. 1

Gayer, et al., Nos. 34, 38

PART VI. The Division of the National Income among the Major Groups

1. 1. The facts on distribution — past and present.
   2. The manner in which demand and supply factors affect the income of the means of production.
   3. The study of these elements in the determination of wages, rents, interest, and profits.
   4. Interactions among prices, profits, wages and property incomes in a dynamic, industrial economy.
   5. The influence of the government on the distributive shares.

Readings:

Morgan, Chs. 23, 18-22

Gayer, et al., Nos. 42, 41

Slichter, Profits in a Laboristic Society

Galbraith, Chs. 9-11, 14

Gayer, et al., Nos. 44, 50, 88 (Henry George)

PART VII. The International Economy

1. 1. The development of the world economy.
   2. The breakdown of the world economy.
   3. Reconstructing the world-economy-post-war problems and policies.

Readings:

Buchanan and Lutz, Ch. 1

Morgan, Ch. 38

Ellsworth, The International Economy, Ch. 5, 111-120 or

International Economics, Ch. 2

Gayer, et al., Nos., 100-102, 104, 105

PART VIII. Government Finance and Fiscal Problems

1. Revenues and Expenditures of the Government
   1. The historical change in the role of the government.
   2. The structure of the Federal Budget.
   3. Financing expenditures from sources of taxation — types of taxes, who pays them, and their effects on the economy.
   4. The use of government borrowing to finance expenditures. Should we have an annual balanced budget? What is the burden of the National Debt.
   5. The role of the government as a credit agency.

Readings:

Allen and Brownlee, Ch. 1

Morgan, Ch. 24

Federal Budget in Brief.

Gayer, et al., Nos. 89, 90, 92, 95

PART IX. The Prospects and Fundamental Problems of the American Economy

1. 1. The problems of economic growth, economic stability, competition and monopoly, the distribution of income, and international economic relations.
   2. How can these problems best be met within the framework of democratic capitalism?

Readings:

To be assigned later.

Source: Harvard University Archives. Syllabi, course outlines and reading lists in Economics, 1895-2003. Box 5, Folder “Economics, 1951-1952 (1 of 2)”.

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1951-52
HARVARD UNIVERSITY
ECONOMICS 1
[Mid-Year Examination, January 1952]

(Three hours)

Answer FIVE of the following SEVEN questions. Divide your time equally among each of the FIVE questions.

1. “Although Schumpeter was influenced to a great extent by Marx’s ideas, his views of capitalistic development differed in many basic respects from those of Marx.”
   Develop the major points of similarity and difference of their theories of the process of capitalistic development.
2. Define Gross National Product and National Income. Discuss some of the conceptual and statistical problems in measuring these economic aggregates including the difficulty of comparing Gross National Product at different times. Comment upon the usefulness of these concepts as measures of economic growth.
3. Economic growth in the United States has been accompanied by bigness in business, labor, finance, and government. Should this concentration movement be regarded as inevitable in the process of capitalistic development? In your opinion has this trend towards bigness interfered with economic growth or accelerated it?
4. (a) What powers does the Federal Reserve System have to combat inflationary and deflationary movements in the level of economic activity? Explain the manner in which the application of each measure is designed to influence the economy.
   (b) How has Treasury financing policy during the last decade interfered with the usefulness of these powers as a means of economic control?
5. Discuss the behavior and interactions of consumption and investment expenditures as Gross National Product fluctuates over the course of the business cycle.
6. “The Mobilization People seem to have two main goals – to maintain stability, i.e., prevent prices from rising, and to increase production. They are both laudable objectives by themselves. But those Washington bureaucrats don’t seem to realize they can’t have their cake and eat it too. They try to maintain stability by high taxes plus price and resource controls. Yet these are the very measures which strangle the businessman and take away his incentive to increase production. I say, forget the controls. American production in a free economy will achieve both goals.”
   Discuss the issues raised in this statement and, in so doing, suggest the kind of economic policies that you think will best meet our mobilization needs as presently conceived by the federal government.
7. What in your opinion are the main factors which account for the different rates of growth in real income per capita at different periods of history and in various areas of the world.

Source: Harvard University Archives. Harvard University, Final examinations 1853-2001 (HUC 7000.28). Vol. 90 Final Exams [in] Social Sciences, January 1952.

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 1951-52
HARVARD UNIVERSITY
ECONOMICS 1
[Year-end Examination, May 1952]

PART I
(One hour)
Answer (a) and (b)

1. (a) Assuming perfect knowledge and the desire to maintain profits, explain briefly the manner in which the price and output of a commodity are determined (1), under purely competitive conditions and (2) under conditions of pure monopoly.
   (b) How relevant and useful are these theories in adequately explaining business behavior:

(1) under industry conditions in which competitors are few and products differentiated,
(2) when short-run profit maximization may impair the long-run profit position, and
(3) in accounting for the phenomenon of innovation and company policy toward expansion.

PART II
(Two hours)
Answer any FOUR questions. Each will be counted equally.

2. “The failure of traditional economic analysis to develop a theory of profits which links them to economic growth has in some ways resulted in an unrealistic anti-monopoly program.” Discuss.
3. In what ways are wages related to the marginal productivity of labor? How does collective bargaining influence wages and employment?
4. “Equality is a good thing, but so are rising living standards and greater opportunity.”
   To what extent do you think attempts to redistribute income are compatible with policies promoting economic growth? In your answer be careful to distinguish types of redistributive measures and their various effects.
5. This year every presidential candidate is faced with the need for advancing a tax and expenditure program. As a citizen what economic issues would you want a candidate to cover and what criteria would you employ in evaluating his program?
6. Answer (a) or (b).

(a) “We shall never have a sound system of international trade until we return to the Gold Standard.” Discuss critically the reasoning underlying this statement, particularly with regard to its implications as to the compatibility of domestic stability and international equilibrium.

(b) “Events in the past fifty years have seen the rise of the United States to a position of dominance in international trade. Yet it may be questioned whether we are willing to accept the responsibilities which our role in the world economy entails.”
Evaluate the statement in the light of the development of United States foreign economic policy in recent years.

Source: Harvard University Archives. Harvard University, Final examinations 1853-2001 (HUC 7000.28). Vol. 93 Final Exams [in] Social Sciences, June 1952.

Images Sources: Smithies from From Harvard Class Album 1952;
Portrait of Trustee of the University of Chicago, Clarence B. Randall, from the University of Chicago Photographic Archive, apf1-03000-082, Hanna Holborn Gray Special Collections Research Center, University of Chicago Library.