The scope of this interdisciplinary course from the mid-1960s is genuinely breathtaking. With his Harvard Ph.D. (1965) still fresh [Thesis: “Decentralized Resources Allocation With a Modicum of Increasing Returns.”], Stephen Marglin was on his famed meteoric rise to tenured professorship when he co-taught the following course on public investmen with political scientists and civil engineers.
For a later observation on his intellectual journey, see the brief profile article in The Harvard Crimson (14 November 2019) on “The Black Sheep of Harvard Economics” from which the image above has been clipped. He’s come a long way.
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Course Announcement
Economics 112 (formerly Government 257a). Public Investment: Techniques for Relating Economic Objectives, Engineering Analysis, and Government Planning (Offered Jointly with the Graduate School of Public Administration)
Half course (fall term). Th., 2-4, and a two-hour meeting to be arranged.
Assistant Professor S. Marglin and Professors Arthur Maass and H. A. Thomas.
New methods of economic, engineering, and governmental analysis in public investment planning. Techniques include those for converting broad community objectives into specific criteria used to design public projects. Emphasis on systems analysis.
Source: Harvard University, Faculty of Arts and Sciences. Courses of Instruction for Harvard and Radcliffe, 1966-1967, p. 110.
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Course Instructors
Stephen Alan Marglin (1938- ) Assistant Professor of Economics.
Arthur Aaron Maass (1917-2004), Frank G. Thomson Professor of Government.
Harold A. Thomas, Jr. (1913-2002), Gordon McKay Professor of Civil and Sanitary Engineering.
Peter P. Rogers (1937-2018) (Ph.D. in Engineering 1966) Lecturer in Systems Analysis in the Graduate School of Design and a research associate in the Center for Population Studies.
George Herman Quester (1936-2023), Instructor of Government.
Henry D. Jacoby (1935-), Harvard economics Ph.D. 1967. Instructor of Economics.
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Fall Term
1966-67
Economics 112
PUBLIC INVESTMENT: TECHNIQUES FOR RELATING ECONOMIC OBJECTIVES, ENGINEERING ANALYSIS, AND GOVERNMENT PLANNING.
Assistant Professor S. Marglin, Professors A. Maass and H. A. Thomas, Drs. P. Rogers and G. Quester, and Mr. H. Jacoby.
Course Outline
| A. Formulating Public Investment Criteria | Date | ||
| 1. | Introduction | SM | Sep. 29 |
| 2. | Production and the Theory of the Firm | HJ | Oct. 4 |
| Objectives: National Income and Its Distribution | SM | Oct. 6 | |
| 3. | Consumption and the Theory of the Household | HJ | Oct. 11 |
| Selection of the Unit of Analysis and the Definition of Benefits and Costs | HJ | Oct. 13 | |
| 4. | Intertemporal Criteria | HJ | Oct. 18 |
| Interest Rates and Uncertainty | SM | Oct. 20 | |
| 5. | Markets, Economic Efficiency and Welfare | HJ | Oct. 25 |
| The Design Process: Methods of Analysis and Problems of Measurement | HJ | Oct. 27 | |
| B. Objectives of Public Investment | |||
| 1. | Alternative Concepts of the Public Interest | GQ | Nov. 1 |
| Multiple Objectives in Public Investment Programs | AM | Nov. 3 | |
| 2. | Concepts of Decision Making | GQ | Nov. 8 |
| The Weighting of Objectives in the Political Process | AM | Nov. 10 | |
| C. Applying Criteria in Project Design | |||
| 1. | The Mathematics of Optimization | PR | Nov. 15 |
| Mathematical Models: Deterministic Models | HAT | Nov. 17 | |
| 2. | The Techniques of Systems Analysis | PR | Nov. 22 |
| (To be announced) | Nov. 29 | ||
| Mathematical Models: Stochastic Models | HAT | Dec. 1 | |
| 3. | Computation Laboratory | PR | Dec. 6 |
| Simulation | HAT | Dec. 8 | |
| (To be announced) | Dec. 13 | ||
| D. Summary and Conclusions | All | Dec. 15 |
Problem Sets
Problem set #1 is due on November 1.
Problem set #2 is due on December 1.
Problem set #3 is due on January 12.
Source: Harvard University Archives. Syllabi, course outlines and reading lists in Economics, 1895-2003, Box 9, Folder “Economics, 1966-1967”.
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Fall Term
1966-67
Economics 112
PUBLIC INVESTMENT:
TECHNIQUES FOR RELATING ECONOMIC OBJECTIVES, ENGINEERING ANALYSIS, AND GOVERNMENT PLANNING.
Reading List
Recommended for purchase:
Maass, Hufschmidt, Dorfman, Thomas, Marglin, Fair, Design of Water-Resource Systems (1962).
All other readings on Reserve at Littauer or Lamont Libraries
Optional readings are starred
Readings for October 4:
P. Samuelson, Economics (4th or 5th edition), Chapters 24 & 26 (including appendices).
R. Dorfman, The Price System, Chapters 1 & 2 (1964).
Readings for October 6:
K. Boulding, “The Economist and the Engineer: Economic Dynamics of Water Resource Development,” in S. Smith and E. Castle (eds.) Economics and Public Policy in Water Resource Development (1964).
W. Heller, “Reflections on Public Expenditure Theory,” in Edmund Phelps, ed., Private Wants and Public Needs(1962).
J. Krutilla and O. Eckstein, Multiple Purpose River Development, Chapter 2 (1958).
J. Krutilla, “Welfare Aspects of Benefit-Cost Analysis,” 69 Journal of Political Economy 226-235 (1961).
S. Marglin, Public Investment Criteria, pp. 1-36 (1965).
Readings for October 11:
R. Dorfman, The Price System, Chapter 3 (1964).
T. Scitovsky, Welfare and Competition, Chapter IV, pp. 51-65 (1951).
Readings for October 13:
S. Marglin, Public Investment Criteria, pp. 37-46, 91-100 (1965).
R. Haveman, Water Resource Investment and the Public Interest, Chapters 3, 4, 5 (1965).
J. Tinbergen, The Design of Development, pp. 36-41, 76-87 (1958).
*Maass, Hufschmidt, et. al., Design of Water-Resource Systems, pp. 40-87 (1962).
Readings for October 18:
P. Samuelson, Economics (4th or 5th edition), Chapter 29 (including appendix).
I. Fisher, The Theory of Interest, Chapters V & VI (1930).
H. Bierman and S. Smidt, The Capital Budgeting Decision, Chapters 2 & 3 (1960).
Readings for October 20:
S. Marglin, Public Investment Criteria, pp. 46-77 (1965).
J. Krutilla and O. Eckstein, Multiple Purpose River Development, Chapter 2, pp. 32-40, and Chapter 4 (1958).
R. McKean, Efficiency in Government Through Systems Analysis, Chapter 4 (1958).
Maass, Hufschmidt, et. al., Design of Water-Resource Systems, pp. 129-158 (1962).
J. Hirshleifer, “Efficient Allocation of Capital in an Uncertain World,” 54 AER 77-85 (1964), and comment by P. Samuelson, 95-96.
*J. Hirshleifer, “Investment Decision Under Uncertainty — Choice-Theoretic Approaches,” 79 QJE 509-536 (1965).
*J. Hirshleifer, “Investment Decisions Under Uncertainty: Applications of the State-Preference Approach,” 80 QJE 252-277 (1966).
Readings for October 25:
P. Samuelson, Economics (4th or 5th edition), pp. 678-689.
R. Dorfman, The Price System, Chapters 4-6 (1964).
J. Graaff, Theoretical Welfare Economics, Chapters 1-3 (1957).
Readings for October 27:
Maass, Hufschmidt, et. al., Design of Water-Resource Systems, Chapter 3, pp. 88-118, and Chapter 5 (1962).
J. Rothenberg, “Urban Renewal Programs” in R. Dorfman, ed., Measuring Benefits of Government Investments(1965). Also skim the other articles in this collection.
Readings for November 1:
C. Friedrich, Constitutional Government and Democracy, Chapter 14.
R. Dahl and C. Lindblom, Politics, Economics and Welfare, pp. 25-56.
A. Downs, An Economic Theory of Democracy, pp. 3-74, 279-300.
Madison, The Federalist, No. 10.
D. Truman, The Governmental Process, Chapters 1, 2, 12 & 16.
Readings for November 3:
Maass, “Benefit-Cost Analysis: Its Relevance to Public Investment Decisions,” 80 QJE 208-226 (1966). Readpp. 208-218.
R. Musgrave, “The Public Interest: Efficiency in the Creation and Maintenance of Material Welfare,” Chapter 9 in Nomos 5: The Public Interest, C. Friedrich, ed. (1962).
G. Colm, “The Public Interest: Essential Key to Public Policy,” Chapter 10 in Nomos 5 (1962).
Maass, Hufschmidt, et. al., Design of Water-Resource Systems, Chapter 15 (1962).
C. Lindblom, “Decision-Making in Taxation and Expenditures” and Comments by A. Bergson and G. Colm, in Public Finances: Needs, Sources and Utilization (NBER Conference) pp. 295-336 (1961).
Readings for November 8:
R. Dahl and C. Lindblom, Politics, Economics, and Welfare, pp. 57-88, 294-368.
A. Downs, An Economic Theory of Democracy, pp. 114-163, 260-276.
E. Banfield, Political Influence, Chapter 12.
Readings for November 10:
A. Maass, “Benefit-Cost Analysis: Its Relevance to Public Investment Decisions,” 80 QJE 208-226. Read pp. 218-226.
D. Major, Decision Making for Public Investment in Water Resources Development, Chapters 2 & 6 (1965).
S. Dola, Passaic Valley Flood Control, mimeo (1965).
Readings for November 15:
R. Dorfman, “Mathematical or ‘Linear’ Programming: A Non-Mathematical Exposition,” 43 AER 797-825 (1953).
G. Hadley, Linear Programming, Chapter 1, pp. 1-21 (1962).
S. Gass, Linear Programming (2nd edition), Chapter 1, pp. 3-19 (1964).
*J. Henderson and R. Quandt, Microeconomic Theory, Appendices A2 & A3 (1958).
*P. Rogers, “A Note on Maximization,” mimeo (1964).
Readings for November 17:
H. A. Thomas and R. Revelle, “On the Efficient Use of High Aswan Dam for Hydropower and Irrigation,” in Management Science, Vol. 12, No. 8 (1966).
R. Dorfman, “Mathematical Analysis: Design of the Simple Valley Project,” in G. S. Tolley and F. E. Riggs (eds.) Economics of Watershed Planning (1960).
D. Kendrick, “Programming Investment with Interdependent Projects,” Center for International Studies, M.I.T., mimeo, pp. 1-16 (Jan. 1966).
Readings for November 22:
Maass, Hufschmidt, et. al., Design of Water-Resource Systems, Chapter 3, re-read pp. 129-158, and Chapter 12 (1962).
J. Kemeny and J. Snell, Mathematical Models in the Social Sciences, Appendix C, pp. 128-131.
*G. Hadley, Nonlinear and Dynamic Programming, Chapter 10, pp. 350-375 (1964).
*J.D.C. Little, “The Use of Water Storage in a Hydroelectric System,” J. Oper. Res. Soc. Am. 187 (1955).
*P. Massé, Optimal Investment Decisions, Chapter 7, pp. 320-335 (1962).
Readings for December 1:
Maass, Hufschmidt, et. al., Design of Water-Resource Systems, Chapter 13, pp. 524-539, and Chapter 14 (1962).
M. B. Fiering, “The Nature of the Storage-Yield Relationship,” Symposium on Streamflow Regulation for Quality Control, U.S.D.H.E.W., pp. 243-253 (June 1965).
Readings for December 6:
R. Fano and F. Corbató, “Time Sharing on Computers,” in Scientific American, Sept. 1966, pp. 128-148. Also flip through other articles in this issue.
Readings for December 18:
Maass, Hufschmidt, et. al., Design of Water-Resource Systems, Chapter 10 (1962).
G. Orcutt, “Simulation: A Symposium,” 50 AER 893-907 (1960).
G. Orcutt et. al., Microanalysis of Socioeconomic Systems, Chapters 1, 2 & 14 (1961).
M. Hufschmidt and M. B Fiering, Simulation Techniques for Design of Water-Resource Systems, Chapter 2 (1966).
Source: Harvard University Archives. Syllabi, course outlines and reading lists in Economics, 1895-2003, Box 9, Folder “Economics, 1966-1967”.
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HARVARD UNIVERSITY
Department of Economics
Final Examination
Economics 112
February 1, 1967
Answer any four of the following six questions. All questions are of equal weight. Please place each of your answers in a separate bluebook, and put your name on the cover of each book.
- “If lump sum transfers were administratively feasible, governments would be well advised to plan all investments to maximize profits, counting profits in the same way that private enterprise does.”
Comment in the light of income redistribution and merit-want objectives, market imperfections (such as monopoly) and other considerations you think relevant.
- “If the government’s social rate of interest based on time preference differs from the marginal productivity of investment in the private sector, it is wrong to use the social rate of interest to plan public investment. The error arises from the fact that using the social rate of interest precludes the government from taking into account the value of private alternatives to public investment.”
Comment.
- The problem is to compare and evaluate two ways of designing and authorizing public works projects:
(1) There are no useful legislated standards, so that engineers must use their engineering judgment for design. Projects so designed are then considered by policy makers (President and Congress) for inclusion in omnibus authorizing bills.
(2) Policy makers initiate, debate, and adopt standards for design of projects. Engineers design them, and any projects that conform to the standards are considered to be authorized.
Assume that partisan mutual adjustment is the criterion for comparing and evaluating the two design methods — i.e., that “bargaining is at the heart of the governmental process.” Compare and evaluate the design methods using the criterion given.
Evaluate the utility of partisan mutual adjustment as the evaluative criterion for this specific problem.
- Economists assume that the individual behaves selfishly on issues relevant to his monetary income; yet they ask political scientists to define an explicit public interest function as if such a function were of more than academic significance for participants in the legislative process.Is this inconsistent, or is there some political value to specifying an explicit public interest to be contrasted with the personal preferences of individuals?
- “Simulation methods are more useful for the planning of large scale public investment projects than the analytic methods of mathematical programming.”
Discuss this statement and give your reasons for agreeing or disagreeing with it.
- The following simple model of a water resource system involves two reservoirs and two uses.One use is for domestic water supply for which no monetary benefit function is available but a water requirement is specified; the other use is one for which there is a direct market value.
The two reservoirs are shown in the sketch together with outflow vectors. The outflow from Reservoir A can only be used for meeting the water supply requirement. The outflow from Reservoir B can be routed to either or both uses. All flows are assumed to be non-stochastic. The following cost and benefit functions are assumed:
cost function for reservoir A C1 = a+x2 dollars,
cost function for reservoir B C2 = b+½(y+z)2 dollars,
benefit function for other use B = pz dollars,
where
x = safe yield of reservoir A,
y = portion of safe yield of reservoir B diverted to municipal supply,
z = portion of safe yield of reservoir B diverted to other use,
p = price per unit of flow to other use, and
a,b = the given constants.
The municipal water requirement is
R = x+y .
The problem is to find the sizes of x, y and z which maximize the net economic benefits of the system subject to the water supply constraint. Write the Lagrangean function for the constrained optimization and indicate how you could find the optimal design of the system and the marginal imputed value of municipal water supply.
Would the design be different if we merely asked for a least cost design?
Source: Harvard University Archives. Papers Printed for Mid-Year Examinations. History, History of Religions, Government, Economics, …. January 1967.