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M.I.T. Department of Economics Annual Report by E. Cary Brown, 1975-1976

The following annual report of the M.I.T. department of economics was most likely written for the care and feeding of administrators and the members of the department’s visiting committee. This report covers what was my second year of graduate school, so for folks from that time it reads like an annual Holiday newsletter to the family.

_______________________

Department of Economics
1975 – 76

Undergraduate Program

The long-run impact of the past year’s changes in the Institute Requirement in the Humanities, Arts, and Social Sciences is not yet clear. Unquestionably they have increased the Department’s enrollment, but the precise amount is uncertain because simultaneously a major revision was made in the two introductory economics subjects. In the past year enrollments were larger than previously, but smaller than in the transition of the previous year. Nearly 200 of the Class of 1976 concentrated in economics for their Humanities, Arts, and Social Sciences Requirement. Of all students presently enrolled, 327 (primarily juniors and seniors) have elected to concentrate in economics.

Undergraduate majors remain steady in numbers. As in 1974-75, 20 degrees were awarded. In the spring term the Undergraduate Economics Association was reactivated. Its weekly meetings with faculty led to several proposals for revision of the undergraduate program, and several student-faculty socials were organized.

Graduate Program

Enrollment has been remarkably steady in the graduate program. The number of applications for admission was virtually identical to the average of the previous six years. Next year’s entering class of 32 will be slightly larger than average, and will have fewer foreign students and more women, reflecting a shift in the percentage of applications from these groups. Four students from minority groups are expected to be in this class.

Financial support for the graduate student has changed very little over the last several years. We are still fortunate in having from one-third to one-half of the entering students on National Science Foundation Fellowships. For the whole student body, there has been an increase in the support by US foundations (other than NSF) and a decrease in support provided by M.I.T.

The number receiving the Doctor of Philosophy increased somewhat in the past year to 21. For the first time, two American blacks received degrees.* The class fared well in placement, their median salary offer totaling 24 percent above that of 1971. Like the past average, 86 percent went into teaching and 14 percent into non-teaching positions.

*Samuel Myers, Jr. Ph.D. thesis: “A Portfolio Model of Illegal Transfers”, supervised by Robert Solow.
Glenn Loury. Ph.D. thesis: “Essays in the Theory of the Distribution of Income”, supervised by Robert Solow.
See: William Darity Jr. and Arden Kreeger, “The Desegregation of an Elite Economics Department’s PhD Program: Black Americans at MIT“, History of Political Economy 46 (annual suppl.)

The Graduate Economics Association awarded the outstanding teacher in the Department prize to Professor Stanley Fischer.

PUBLIC SERVICE ACTIVITIES

The faculty has always been involved in public service activities tying research to the public interest. In connection with M.I.T.’s participation in the Bicentennial Celebration, Professor Jagdish N. Bhagwati set up a recent conference on the New International Economic Order: Professor Ann F. Friedlaender is planning one for this fall on Air Pollution and Administrative Control. Through the German Marshall Fund, Professor Richard S. Eckaus is organizing a fall conference on economic problems of Portugal. Professor Franco Modigliani arranged a conference through the Bank of Finland on International Monetary Mechanisms.

Various Congressional committees and government agencies have been advised. Professor Peter A. Diamond served on the Consultant Panel on Social Security for the Congressional Research Service. Professors Rudiger Dornbusch and Fischer and Institute Professor Paul A. Samuelson prepared a report for the US Department of Commerce on international financial arrangements. Professor Robert E. Hall was a member of the Advisory Committee on Population Statistics, Bureau of the Census. Professor Jerry A. Hausman served on the Econometrics Advisory Committee to the Federal Energy Administration. Institute Professor Modigliani was a consultant and member of the Committee on Monetary Statistics, Board of Governors of the Federal Reserve System. Institute Professor Samuelson consulted with the Board of Governors of the Federal Reserve System, the US Treasury, and the Congressional Budget Office. Professor Charles A. Myers was a member of the National Manpower Policy Task Force. Institute Professor Robert M. Solow served as Deputy Chairman, Federal Reserve Bank of Boston.

Several faculty members have been involved with the National Academy of Sciences and its related organizations. Professor Eckaus prepared a report, Appropriate Technology for Developing Countries, for the Board on Science and Technology for Developing Countries of the National Academies of Science and Engineering. Professor Franklin M. Fisher served on a National Academy panel on the Effects of Deterrence and Incapacitation; Professor Friedlaender was on the Executive Committee, Assembly of Behavioral and Social Sciences, National Research Council; Institute Professor Modigliani was on the Finance Committee; Institute Professor Samuelson served on the Editorial Board of the Proceedings; and Institute Professor Solow chaired the Steering Committee on Environmental Studies.

Professor Eckaus led an OECD Mission to Portugal that included Professors Lance Taylor and Dornbusch.* Professor Paul L. Joskow was a consultant to OECD in energy. Professor Evsey D. Domar was a member of a delegation of economists sent by the American Economic Association to the Soviet Union. Institute Professor Modigliani, who gave much time to the problems of stabilization in Italy, was a member of the Board of Directors of the Italian Council for Social Sciences.

*Along with several graduate students among whom were Paul Krugman, Andrew Abel and Jeffrey Frankel. Paul Krugman has written a short note about this experience with a picture!

The Brookings Institution Panel for Economic Activity included Professors Dornbusch and Hall, with Institute Professors Modigliani, Samuelson, and Solow as senior advisors to it. Professor Friedlaender served on the examining committee, Graduate Records Examination, Educational Testing Service. Institute Professor Modigliani served on the Committee on Economic Stabilization, Social Science Research Council. Professor Fisher is a member of the Board of Governors of Tel Aviv University. Institute Professor Solow continues as Trustee for the Institute of Advanced Study.

RESEARCH

International topics seem to dominate the research interests of the faculty. Professor Bhagwati, in addition to his work in developing countries and international trade theory, has given attention to a proposal for applying taxation to the brain drain. Professor Eckaus studied the role of financial markets and their regulation and the behavior of income distribution in economic development. Professor Taylor had three major areas of research: the development of nutrition planning models in Pakistan, international food aid and reserve policies, and growth and income distribution in Brazil.

Professor Morris A. Adelman’s continuing research on the world oil market, Professor Joskow’s analysis of the international nuclear energy industry, and Professor Martin L. Weitzman’s examination of OPEC and oil pricing involve applied microeconomics with international implications.

Research in various applied microeconomics areas was responsible for the second largest fraction of faculty effort. Institute Professor Solow continued to research the economics of exhaustible resources, and Professor Weitzman completed his analysis of the optimal development of resource pools. Professor Joskow has explored the future of the electric utility industry and its financing, the future of the US atomic energy industry, and the pattern of energy consumption in the US. He is developing a simulation model of the energy industry, and is reviewing the regulatory activities of government agencies in general and the health care sector in particular. Professor Hausman examined the Project Independence Report and is analyzing the choice of new technologies in energy research.

In the transporation field, Professor Friedlaender surveyed the issues in regulatory policy for railroads and alternative scenarios in federal transporation policy. Professor Jerome Rothenberg examined such problems in urban transportation as pricing policies, demand sensitivity to price, and modeling locational effects. Professor William C. Wheaton considered an optimal pricing and investment policy in highways under a gasoline tax.

Inextricably intertwined with urban transportation are questions of urban location and housing. Professor Rothenberg carried out research in such aspects of this problem as microeconomics of internal migration, supply-demand for housing in multizoned areas, the impact of energy costs on urban location, and the development of a model of housing markets and of metropolitan development and location that can be applied to general policy questions. Professor Wheaton developed an equilibrium model of housing and locational choice based on Boston experience.

Institute Professor Modigliani also conducted research on the housing market, but his interest comes primarily from the side of stabilization policies and similar macroeconomic problems. He also participated in a review after 20 years of his life cycle hypothesis of saving, made monetary policy prescriptions for both the US and Italy, reflected on the description of financial sectors in econometric models, and explored more deeply the application of optimal control to the design of optimal stabilization policies in economic models. Institute Professor Samuelson reviewed the art and science of macromodels over the 50 years of their development. Professor Friedlaender completed a quarterly macromodel of the Massachusetts economy. Professor Hall developed a model to deal with income tax changes and consumption.

Public economics has both macro and micro aspects, both of which are represented in the Department’s research. With Visiting Professor James A. Mirrlees, Professor Diamond theorized about public shadow prices with constant returns to scale, and about the assignment of liability. He also has generalized the Ramsey tax rule and continued his research into an optimal Social Security system. Professor Hausman is reexamining the cost of a negative income tax; Professor Rothenberg analyzed the distributional impact of public service provision; and Professor Wheaton explored intertemporal effects of land taxes, fiscal federalism in practice, and the financial plight of American cities.

Besides such theoretical research, there was significant research of an entirely pure nature. Professor Robert L. Bishop reexamined the measurement of consumer surplus. Professor Fisher extended his exploration of the stability of general equilibrium and of aggregate production functions. Professor Weitzman investigated the welfare significance of national product in a dynamic economy. Professor Hal R. Varian further explored the theory of fairness, non-Walrasian equilibria, and macromodels of unemployment and disequilibrium. Professor Hausman examined the econometric implications of truncated distributions and samples, of probit models, and of simultaneous equation models. In historical research, Professor Domar was concerned with serfdom, while Professor Charles Kindleberger investigated the role of the merchant in nineteenth-century technologic transfer.

Publications

Professor Bhagwati edited Taxing the Brain Drain: A Proposal and Brain Drain and Taxation: Theory and Empirical Analysis, and coauthored Foreign Trade Regimes and Economic Development: India. Professors Dornbusch and Kindleberger published numerous papers on implications of the new international monetary exchange structure for exchange rates, price stability, international trade, and international capital movements. Professor Weitzman continued his study of the Russian economy with a paper on the new Soviet incentive model.

With Visiting Professor of Management Ezio Tarantelli*, Institute Professor Modigliani published Labor Market, Income Distribution and Private Consumption (in Italian) and various papers on stabilization policy in Italy. He also wrote papers on inflation and the housing market and edited New Mortgage Designs for Stable Housing in an Inflationary Environment. Professor Hall’s labor market research resulted in papers on persistence of unemployment, occupational mobility, and taxation of earnings under public assistance. Professor Michael Piore wrote on labor market stratification and the effect on industrial growth of immigration from Puerto Rico to Boston. Professor Fisher had several publications on indexation and adjustment of mortgages to inflationary episodes. In the realm of economic history, Professor Temin published Reckoning with Slavery and Did Monetary Force Cause the Great Depression?

*Ezio Tarantelli was the victim of a Red Brigades’ assassination in 1985.

Institute Professor Samuelson published theoretical papers on factor price equalization and trade pattern reversal. In the realm of pure research, he put out papers on nonlinear and stochastic population analysis, optimal population growth, and the optimal Social Security system implied in a lifecycle growth model. He also brought out the tenth edition of his famous text, Economics: An Introduction Analysis.

FACULTY

Visiting Professor John R. Moroney was here from Tulane University; Visiting Professor Mirrlees came in the spring term from Nuffield College, Oxford University. Regular faculty on leave were Professors Fisher and Joskow in the fall and Professor Weitzman in the spring.

It is a pleasure to report the promotion to Associate Professor of Jerry A. Hausman. A new appointee, Professor Jeffrey E. Harris, with the unusual background of an M.D. and a Ph.D. in economics, will provide long-sought coverage in health economics.

Professor Kindleberger will retire as Ford Professor and become a Senior Lecturer on a half-time basis. Since 1948, when he came as an Associate Professor, Professor Kindleberger has been an effective teacher, scholar, participant in faculty governance, and counselor to governments and the public. He has trained the leading international economists of the next generation; he has produced a dozen books and more than a hundred articles in international trade and finance and in economic history. He epitomizes the highest kind of academician.

Several honors were bestowed on members of the Department. Institute Professor Modigliani will complete his year as President of the American Economic Association. Professor Myers received a Distinguished Alumni award from Pennsylvania State University. Professor Fisher was F.W. Paish Lecturer to the Association of (English) University Teachers of Economics. Institute Professor Solow received a D. Litt. from Warwick University, and Institute Professor Samuelson, a D.Sc. from the University of Rochester.

EDGAR CARY BROWN

Source: MIT Libraries, Institute Archives and Special Collections. MIT Department of Economics Records, Box 1, Folder “Annual Report 1975-6”.

Image Source: Building E52, Alfred P. Sloan Jr. Building, later Morris and Sophie Chang Building

 

https://mitmuseum.mit.edu/collections/subject/building-e52-alfred-p.-sloan-jr.-building-later-morris-and-sophie-chang-building-52

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Economics Programs M.I.T. Undergraduate

M.I.T. Economics department committee (re-)organization. 1976-78

During my second year in graduate school at M.I.T. (1975-76), the economics department professors were engaged in a discussion about reforming the administration of their department. At the time I was completely unaware of this discussion that had been provoked by the following memorandum written by then Department Head, Professor E. Cary Brown, based on his experience with the growing overload of administrative chores and responsibilities in a department with the scale of that attained by M.I.T.’s economics department.

Brown’s memo to the faculty is followed by a transcription of a copy of the letter Brown wrote to Robert Solow, who as an administrative reorganization committee member, must have been asked for some further testimony. The entire committee’s (Peter A. Diamond, Stanley Fischer, Jerry Hausman, Paul Joskow, Robert M. Solow) report was completed two months after Brown’s memo. In the same departmental file from the M.I.T. archives, one finds a copy of the actual assignment of administrative responsibilities for the academic year 1977/78.

Many, if not most, of the administrative tasks had been allocated and faithfully executed before this “reorganization”. I know that Evsey Domar had long been covering the placement of new Ph.D.’s and also proudly serving as the departmental representative for library-related affairs. I sense reading these documents that the truly neglected child all along was the undergraduate program for which some arm-twisting was required to achieve equitable burden-sharing among the faculty. But perhaps there were other specific items that had been sore points too. Maybe Brown simply wanted an explicit organization chart to forestall “whataboutism” from the mouths of relatively uncooperative colleagues. But like I wrote above, this was a discussion that was invisible to me (appropriately so) at the time.

Cf. The committee assignments in the Harvard economics department during the 1972-73 academic year. 

__________________________

MASSACHUSETTS INSTITUTE OF TECHNOLOGY
DEPARTMENT OF ECONOMICS
CAMBRIDGE, MASSACHUSETTS 02139

March 12, 1976

Economics Department Faculty

Dear [blank]

For some time I have become increasingly dismayed at the increase in the administrative burden in the Department, and now find the present job as Head to be a nearly impossible one. If the job is to be made tolerable, it must have substantial additional faculty support in some form to cut it down to a scope manageable either by me or a successor.

There are two basic ways that this can be achieved: (1) by spreading the administrative activities and responsibilities more widely among the faculty; or (2) placing these tasks on essentially an associate departmental head, whose precise title could take various forms Executive Officer, Academic Officer (e.g., Tony French in Physics), or Associate Head. I personally would favor the Associate Head route, but regard it as an open question subject to further discussion and consideration, and to Administration approval. This new structure should be treated as an experiment, to last no longer than until the next Head is chosen, and to be reconsidered at that time.

My own thinking about the administrative tasks of the Department separates them into four major areas: undergraduate programs, graduate programs, research programs, and personnel and budgeting. While these can be headed by an administrator or by faculty, it seems to me that the first two programs should have formal faculty control regardless of the form the administrative reorganization takes. The graduate program nearly has that form now and largely runs itself, with the exception of a few odds and ends that now lie outside the responsibility of the graduate registration officers. The undergraduate program is a long way from this structure and will require a good deal of imagination, initiative and effort to resuscitate the Undergraduate Economics Association and provide more guidance and support for majors. The research programs (student and faculty) focus more or less clearly under the Committee on Economic Research. Personnel and budgeting are an administrative responsibility. They have involved increasing amounts of time as budgets have tightened, space has tightened, and the search for new faculty has expanded.

The administrative structure is an important matter to the Department. Because it involves departmental administration and the role of the Department Head, it concerns the Administration through Dean Hanham. He has asked me to appoint the following committee to consider these questions of reorganization and to make recommendations: Bob Solow, Peter Diamond, Stan Fischer, Paul Joskow, and Jerry Hausman. Please give your views to members of the committee as soon as you can.

Sincerely,
[signed “Cary”]
E. Cary Brown, Head

ECB/sc

__________________________

Brown to Solow

March 16, 1976

Professor Robert Solow
E52-383

Dear Bob:

I shrink from making organization charts, but the following diagram is intended to give some idea of the orders of magnitude of faculty involvement in departmental chores.

Chairman, Committee on Undergraduate Studies

  1. Faculty counselors (we have agreed with the UEA to keep members to 10 or less, and let faculty build up expertise by staying adviser for freshman, sophomore, junior, or senior year).

—10 faculty: 2 for each class. 4 for seniors

  1. Faculty adviser for humanities concentration in economics (advises and signs up students); also considers the eligibility of economics subjects, what we consider concentration, etc.
  2. Closely related to (2) is possible membership on the so-called Humanities Committee that approves and reviews the whole Humanities, Arts, and Social Science requirement and program. (We have no one on this year but as the largest concentration will surely need to have a presence.)
  3. Approval of transfer of credits from other schools to M.I.T.
  4. Advising with Undergraduate Economic Association in matters academic, professional, social.
  5. Undergraduate placement, while an Institute responsibility, could be supervised and assisted by a faculty member who would keep up to date on summer placement, interning possibilities, salaries. The experience our students have applying to graduate schools, actual jobs offered and taken.
  6. Design of curriculum, cooperative program, etc.
  7. Various activities, such as providing information to undergraduates in their choice of major (Midway in fall, seminar in spring), Open House activities, Alumni activities, etc.
  8. Relations with other Departments at undergraduate level, such as subject offerings, subject content, etc.
  9. Supervision and staffing of undergraduate subjects with multiple sections — 14.001, 14.002, 14.03, 14.04, 14.06, 14.30, 14.31.
  10. Catalog copy.

Chairman, Committee on Graduate Studies

  1. Graduate Registration Officers, so far one each for first two years, and one for thesis writers. Has been suggested that we have an additional adviser for foreign students and minority and women?
  2. Admissions Committee has, in the past, had three members.
  3. Placement, both summer and permanent.
  4. Supervision of core subjects.
  5. Ph.D. and M.S. requirements, program, size.
  6. Financial aid — coordinating various GRO; Admissions Committee, and Budget limitations.
  7. Graduate School Policy Committee meetings.
  8. Annual revision of brochure.
  9. Graduate Economics Association, Black Graduate Economics Association.
  10. Catalog copy.
  11. Various activities — professional and social that are not contained within a particular class.

Chairman, Committee on Economic Research (I faculty)

  1. Organized list of faculty projects requiring research assistants and the supply of them (both graduate and undergraduate). Assignment of R.A.’s.
  2. Assistance in research proposals.
  3. Inventory of internships and off-campus research.
  4. Supervision of unscheduled subjects, such as UROP, Undergraduate Seminar, and thesis.
  5. Supervision of M.I.T. Working Paper Series.
  6. Allocation of computer funds, developing rules, developing alternative sources.

Personnel and Budgeting (Administrative Officer and a large chunk of my time)

  1. Personnel
    1. Nonfaculty is supervised by the Administrative Officer.
    2. Faculty Personnel

(1) Employment — new Ph.D.’s and senior faculty
(2) Review and promotion
(3) Assignments, leaves, research

    1. Postdoctoral personnel
  2. Space allocations, revisions.
  3. Budget Proposals
  4. a. Proposals
    b. Implementation

Telephone
Xerox & Ditto
Supplies
Equipment

There may be other matters that I am leaving out – routine meetings average probably a day a week, and things like that. Consultations with faculty, students, and other Departments, would probably add a couple more days.

If there are questions, I’ll oblige, of course.

Sincerely,
E. Cary Brown, Head

ECB/sc

__________________________

MEMORANDUM

May 10, 1976

TO:       Department Faculty
FROM: Committee on Reorganization (PAD, SF, JH, PJ, RMS) [Peter A. Diamond, Stanley Fischer, Jerry Hausman, Paul Joskow, Robert M. Solow]

SUBJECT:         Reorganization

ECB’s [E. Cary Brown] letter of March 12, which created this committee, starts from the premise that the administrative burden on the Department Head has become essentially impossible. This seems clearly to be the case. It has happened because the department has increased in size and complexity without any corresponding adaptation of its administrative arrangements. Every new function has fallen into the Head’s lap. (Top that, anyone.) Apart from the sheer burden of work thus created, another problem is the difficulty of communications, because that is also time-consuming.

After some palaver and negotiation, we have a reorganizational package to suggest. It rests on two conditions; since it is something of an interconnected web, it will probably unravel if the two conditions can not be met. (1) Since the only way to correct an excessively centralized structure is to decentralize it, we propose to diffuse administrative responsibility more widely through the department; there will be at least one serious administrative post for everyone, or perhaps two minor posts instead, but everyone will have to participate. (2) The administrative load attached to the undergraduate program has increased with the size of the enrollment and the improvement of the curriculum; no one wants to manage an inadequately staffed program. We propose, therefore, that the normal teaching load for everyone in the department be agreed to be half graduate and half undergraduate teaching. This definition should be extended to everyone on the departmental budget: joint appointees, visiting professors, etc. As soon as there are a couple of exceptions to this understanding, there will be more. Then the management of the undergraduate program will break down, and it will revert or default to the Department Head, and that is what we are trying to stave off.

The particular organization we have in mind is as follows.

  1. The central functions (budgeting, space, leaves, relations with the MIT hierarchy, etc.) will be in the hands of the Department Head and an Associate Head namely PAD [Peter A. Diamond]). In addition, one of them (probably ECB [E. Cary Brown]) will be an ex officio member of the Committee on Undergraduate Studies to be proposed below, and the other will be an ex officio member of the Committee on Graduate Studies. The precise division of labor is obviously a matter of taste; for the moment, ECB [E. Cary Brown] will probably do most of the relations with the MIT structure and PAD [Peter A. Diamond] will concentrate on intra-departmental matters.
  2. There will be a Director of Undergraduate Studies (PT [Peter Temin]), who will be chairman of a Committee on Undergraduate Studies (with 2 or 3 additional members, possibly RD [Rudiger Dornbusch], PJ [Paul Joskow] and one other). This committee will be responsible for revisions of the undergraduate curriculum adding and subtracting subjects, staffing them, degree requirements, etc. In recent discussions with the Undergraduate Economics Association, the proposal has merged that there should be a larger number of Undergraduate Advisors (i.e., registration officers) than there is now, with each taking care of at most 10 students. That suggests we would need about 8 such advisors. The members of the Committee might serve as advisors, plus others. Merely serving as registration officer for 10 undergraduates is by itself not an onerous job.
  3. There seems to be no need for change in the organization of graduate studies in the department. We suggest that there be a Director of Graduate Studies (RSE [Richard S. Eckaus]) and a Committee on Graduate Studies which would, as now, consist of the other two Graduate Registration Officers. Things are going very well now with REH [Robert E. Hall] handling the first-year students. MJP [Michael J. Piore] the second-year students and RSE [Richard S. Eckaus] the thesis-writers. REH [Robert E. Hall] is prepared to take on the task or devising a scheme to keep track of post-generals students, and see that they find themselves a reasonable thesis topic in a reasonable amount of time. The scheme may need another person to look after it.
  4. We suggest the creation of Committee on Staffing whose functions would include looking after the hiring of assistant professors, the dovetailing of visiting professors with faculty leaves, and the rationing of visiting scholars. The picture we have is that the members of committee would do the interviewing and preliminary screening of new Ph.D.’s at the annual meetings, and decide which of them to invite to come and give seminars. At that stage and thereafter, the whole department faculty would be in on the act, and final decisions would be made, as they are now, in a department meeting. The main time-consumer for this committee would be the correspondence in connection with hiring. Since that would fall on the Chairman, that post would be a major one. For the other members of the committee, the burden would be relatively light. We suggest REH [Robert E. Hall] as chairman, plus perhaps 3 others.
  5. There seems to be no reason to change the way the Admissions Committee now functions.
  6. We see no need for major change in the Placement process. Our only suggestion are (a) perhaps to provide EDD [Evsey D. Domar] with another person to share the load, and (b) to have a pre-season department meeting, analogous to the post-generals meeting, at which each graduate student entering the market could be discussed by the full facuIty, and information and ideas collected.
  7. There are other details. RLB [Robert L. Bishop] is functioning as advisor to MIT undergraduates thinking about economics as part of their Humanities requirement, and we are happy to preserve that human capital. MAA [Morris A. Adelman] who has been our representative to CGSP is to begin a term on the CEP, which should count as a major administrative burden. We need his successor on CGSP.

One last point: we hope that each committee chairman will promptly send a written notice of each substantive decision to the Head and Associate Head for distribution to the department faculty, so that communications are well looked after. That plus rational expectations should do the trick.

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

__________________________

DEPARTMENTAL ADMINISTRATIVE RESPONSIBILITIES:
ECONOMICS DEPARTMENT 1977-78
  1. UNDERGRADUATE COMMITTEE
Chairman: Peter Temin
Members: Cary Brown Senior Faculty Counsellor, Ex Officio
Jerry Rothenberg Senior Faculty Counsellor
Peter Temin Senior Faculty Counsellor
Rudiger Dornbusch Junior Faculty Counsellor
Jeffrey Harris Junior Faculty Counsellor
Jagdish Bhagwati Sophomore Faculty Counsellor (Fall)
Henry Farber Sophomore Faculty Counsellor (Spring)

Summer Jobs: Jeffrey Harris
Humanities Adviser: Robert Bishop
Transfer of Credits: Cary Brown

  1. GRADUATE COMMITTEE
Chairman: Richard Eckaus Thesis, Graduate Registration Officer
Members: Paul Joskow/Mike Piore Second Year Graduate Registration Officer
Marty Weitzman First Year Graduate Registration Officer
Jerome Rothenberg CGSP Representative
Stan Fischer, Ex Officio

Admissions Committee:

Chairman: Robert Bishop
Members: Frank Fisher and Lance Taylor

Placement: Evsey Domar
Harvard-MIT Theory Seminar: Eric Maskin
Theory Workshop: Kevin Roberts

  1. OTHER DEPARTMENTAL ACTIVITIES

Staffing Committee: Chairman: Rudiger Dornbusch

(For New Ass’t Profs.) Members:

Paul Joskow
Jerry Hausman
Stan Fischer, Ex Officio
(Added for Temporary Visitors: Robert Solow)

Independent Activity Period: Jeffrey Harris/Marilyn Simon
Unstructured Subjects Committee: Peter Temin, Undergraduate; Richard Eckaus, Graduate
Computer Allocation: Richard Eckaus

ADDENDUM: INSTITUTE COMMITTEES

CEP: Morris Adelman
Associate Chairman of the Faculty: Michael Piore
Visual Arts: Jerry Rothenberg
Library System, Chairman: Evsey Domar

Image Source:  For this portrait of members of the M.I.T. economics department in 1975 see the Economics in the Rear-view Mirror post that provides identifications.

Categories
Chicago Funny Business Harvard M.I.T. Princeton

M.I.T. Faculty Skit, Playing Monopoly at Lunch, 1986

 

It has been a while since I have added an artifact to the MIT economics skits wing of the Funny Business Archives here at Economics in the Rear-view Mirror. Apparently the following script was a, if not the sole, late-20th century MIT faculty skit not written by Robert Solow. I can believe that. In any event, today’s post is further grist to the mill for social historians of economics.

Again a grateful tip of the hat to Roger Backhouse is in order.

__________________

1986 FACULTY SKIT

(Skit opens with Dornbusch, Fischer, Diamond, Eckaus and McFadden seated around MONOPOLY board. Farber is standing alongside, watching the game. Fisher and Hausman are in the wings to make walk-on appearances).

ANNOUNCER: One of the most important unwritten rules in the Economics Department is that no one but Bob Solow writes the skit. This year, Bob reportedly outdid himself and wrote a sitcom in which Bob Lucas is struck by a blinding light while driving to work and transformed into a neo-Keynesian. The skit, titled “I’m OK, You’re OK,” follows Lucas’ attempts to explain why he is estimating Phillips curves to Lars Hansen and Tom Sargent.

Unfortunately, Bob is unable to be with us tonight, since he is delivering the presidential address to the Eastern Economic Association in Philadelphia. When we opened the envelope marked “SKIT” which Bob left for us, we were surprised to discover only a copy of his presidential address. We suspect he had a somewhat bigger surprise when he opened his envelope in Philadelphia. [Address published as “What is a Nice Girl Like You Doing in a Place Like This? Macroeconomics after Fifty Years” Eastern Economic Journal, July-September 1986]

We were of course scared skitless when we realized our predicament, and we were tempted to re-run some of the great Solow skits of the past. There was the 1974 Watergate Skit, in which Paul Colson Joskow testifies to Senator Sam Peltzman that he would run over his grandmother to get a t-statistic above two. There was the 1978 Star Wars skit, in which Milton Vader and his minions capture the wookie Jerrybaca and hold him captive in the Chicago Money Workshop. And in the incredible 1973 MASH skit, Hawkeye Hall and Trapper Jerry Hausman find Radar Diamond and Hot Lips Friedlaender cavorting in the Chairman’s office. (If that doesn’t give Solow Rational expectations, what does?)

We guessed that you had all seen these re-runs on late-nite channel 56, however, and therefore decided to try something new and provide a partial answer to the age-old question: What Really Goes On in the Freeman Room at Lunchtime on Wednesdays? We now invite you to join us for a brief look at one of these infamous gatherings…

 

MCFADDEN: (Rolling dice). “Who owns Oriental Avenue?”

DORNBUSCH: Me. That’s six dollars.

FISCHER: My turn? (Rolls dice). Damn. Inflation tax again; Here’s ten percent of my cash balances. I passed go, didn’t I?

DIAMOND: Uh huh. Here’s $186 dollars.

FISCHER: I should get $200.

DIAMOND: Not since Gramm-Rudman. Everything’s reduced seven percent across the board.

DORNBUSCH: My turn. (Rolling dice). Four. (Reaches over and moves marker).

ECKAUS: No way, Rudi—you just moved six places. No overshooting in this game. (Hands Dornbusch Chance card)

DORNBUSCH: Ah. Go directly to Brazil. Do not return until the day classes start.

HAUSMAN: (Walking in from side of stage) How come you guys are playing MONOPOLY? I thought you usually played RISK…

DIAMOND: Oliver [Hart] took that game home. You know, his contract calls for RISK-sharing…

HAUSMAN: Can you believe the graduate students scheduled the skit party for the Friday before income taxes are due? The only people who’ll come are graduate students and people like theorists who file 1040 EZ’s. (walks off)

(FISHER walks in)

DIAMOND: (Rolling dice). My turn. Oriental again. Six more dollars for Dornbusch.

FISCHER: That’s a pretty profitable property, Rudi.

FISHER: How many times do I have to say it! You can’t possibly tell that from accounting numbers! (Pause). Why don’t we ever play fun games, like Consultant?

ECKAUS: I hear Jorgensen and Griliches play that all the time up at Harvard. Maybe you should give them a call.

FISHER: They’re never around.

DIAMOND: Of course not, Frank—that’s how you play consultant.

(FISHER exits.)

FARBER: Speaking of Harvard, how are we doing on graduate recruitment this year? I heard there was some Princeton scandal.

DIAMOND: The AEA put them on probation for recruiting violations. People could look the other way when they offered prospective students money and cars, but this year Joe Stiglitz promised to write a joint paper with all entering students.

FARBER: They’re really giving out cars?

DIAMOND: Sure. Yugo’s.

FARBER: All I got was a motorcycle…

MCFADDEN: Harvard and Princeton have been dumping all over us. Every prospective student has heard that Jerry Hausman cashed in his Frequent Flyer miles for a 727. And some even know that Marty Weitzman has a Harvard offer.

FISCHER: Well, that offer was certainly no surprise. The Harvard deans read THE SHARE ECONOMY and decided they should hire more workers.

DIAMOND: Still, we’re getting the best students. This morning I signed a Yale undergrad by offering him Solow’s office. I figured Bob can share E52-390 with Krugman, Eckaus, and Farber next year. But what happens when we run out of river-view offices?

FARBER: How’s Harvard doing on recruiting?

ECKAUS: Not too well. They’re on a big kick to look relevant. Mas-Collel’s going nuts—Dean Spence has a new rule that any agent in a theoretical model has to have a proper name. Andreu’s having real problems with his continuum papers…

MCFADDEN: I hear the Kennedy School’s helping their visibility. Have you heard about the new Meese Distinguished Service Medal?

DIAMOND: No. Who’s getting them?

MCFADDEN: Sammy Stewart for Distinguished Relief Pitching,
Martin Feldstein for Distinguished Empirical Work,
Larry Summers for Distinguished Dress,
NASA for distinction in Travel Safety,
Bob Lucas and Bob Barro for Distinguished Plausible Assumptions,
Ferdinand Marcos for Distinguished Contributions to Charity,
and John Kenneth Galbraith for Distinguished Use of Mathematics.

DORNBUSCH: Harvard’s visibility campaign’s paying off. Just last week one of their junior guys hit the cover of PEOPLE magazine with a paper about marriage rates among movie stars.

FISCHER: You read PEOPLE?

FARBER: The National Enquirer had a story about a Harvard student who claimed to have a picture of Jeff Sachs in Littauer. Just like the old days with Howard Hughes…

DORNBUSCH: Perhaps we should return to the game.

(MODIGLIANI walks on).

DIAMOND: My turn again? (Rolls dice and moves piece). Community Chest. (Looking at card) You are elected department head. Lose three turns.

(Someone walks up and hands DIAMOND a telephone message. He stands up.)

DIAMOND: I nearly forgot. I’m scheduled to join Mike Weisbach who is taking a prospective student windsurfing this afternoon. Figured it was the least I could do to convince him we were as laid back as Stanford. Franco—do you want to take my place?

MODIGLIANI: (Sitting down in Diamond’s place) So, what are the new developments on the Monopoly front? [Famous Modigliani paper “New Developments on the Oligopoly Front,” JPE, June 1958] (Pause) Now, which of these pieces is Peter’s?

MCFADDEN: The coconut. [Reference here to Diamond’s coconut model of a search economy.]

MODIGLIANI: My turn now?

FISCHER: No Franco—but go ahead. [presumably a reference to Modigliani’s propensity to talk, and talk, and talk.]

MODIGLIANI: (Rolls dice and moves marker). Chance. (McFadden hands him a card). What is this? You have won second prize in a Beauty Contest, Collect $10? This is NOT POSSIBLE. This year I win only FIRST PRIZES [reference to 1985 Nobel Prize for Economics].

DORNBUSCH: (To audience) Wait till he gets the bequest card… [cf. the JEP Spring 1988 paper by Modigliani that surveys the bequest motive]

FISCHER: Franco, I have a deal for you. I’ll trade you Mediterranean and the Water Works for North Carolina and an agreement that you never charge me rent on either property. If you renege, I’ll order Chinese food.

MODIGLIANI: No deal. But what’s this about Chinese food?

FISCHER: It’s a new thing I learned from Garth [Soloner]—it makes the deal sub-gum perfect.

MCFADDEN: My turn. (Rolls and draws a Chance card). My favorite card: Advance Token to the Railroad with the Highest Logit Probability Value. Let me see which one that is… (pulls out a calculator)

FISCHER: While we’re waiting for Dan to converge, how did we do in junior hiring? Did we get that Princeton theorist?

ECKAUS: No dice. All the Princeton guys told him not to come.

DORNBUSCH: Why?

ECKAUS: They said “Go to Yale, go directly to Yale.”

MODIGLIANI: What about senior appointments?

FARBER: Ask Peter [Temin]. He’s on the Search Committee.

MCFADDEN: (Looking up from calculator). I’m having convergence problems. Maybe we should postpone the game for a few minutes while I run down to the PRIME.

[the image of the last page at my disposal is very blurred, fortunately it is only the wrap-up by the announcer]

ANNOUNCER: As you all know, NOTHING takes a few minutes on the PRIME. So until next year, when the [?] [?] Solow who accompanied Stan, 3PO and R2D2 to [?] the [?] [?] from Chicago returns to produce another skit. Good night.

 

Source: Duke University, David M. Rubenstein Rare Book and Manuscript Library. Economists’ Papers Archive. Papers of Robert M. Solow, Box 83.

Categories
M.I.T. Suggested Reading Syllabus

M.I.T. Reading List for Monetary Economics II. Dornbusch, 1976

 

Associate Professor Rudiger Dornbusch covered the second course in the graduate money field during the Fall term 1976 at M.I.T. This was a course taught by his colleague Stanley Fischer (I took that course in 1975). The syllabus was more-or-less unchanged from the one used when Fischer taught the monetary theory course. According to the department staffing report for the term, 22 students were registered for credit and 2 students audited the course.

___________________________

MONETARY ECONOMICS II
14.463
Professor R. Dornbusch
Fall 1976

*denotes required reading

There is no textbook for this course. The following books and surveys should be useful.

Robert Barro and Herschel Grossman, Money, Employment and Inflation, Macmillan, 1976.

Robert W. Clower (ed.), Monetary Theory, Penguin Books, 1969.

Milton Friedman, The Optimum Quantity of Money and Other Essays, Aldine, 1969.

Robert Mundell, Monetary Theory, Goodyear, 1971.

Robert J. Barro and Stanley Fischer, “Recent Developments in Monetary Theory,” Journal of Monetary Economics, April 1976.

 

I. BACKGROUND

*Friedman, Milton, “The Quantity Theory of Money—A Restatement” in Studies in the Quantity Theory of Money, Friedman, ed., University of Chicago Press, 1956, 3-24.

___________, “A Theoretical Framework for Monetary Analysis,” JPE, March/April 1970, 193-238. (See also Symposium on this article in Sept./Oct. 1972 JPE.)

*Johnson, Harry G., “The Keynesian Revolution and the Monetarist Counter-Revolution,” AER, May 1971, 1-14.

Keynes, J.M., General Theory of Employment, Interest and Money, Harcourt Brace, 1964.

*Leijonhuvud, Axel, “Keynes and the Classics: Two Lectures on Keynes’ Contribution to Economic Theory,” London, Institute of Economic Affairs, 1969. Occasional Paper 30. (This is a reasonably coherent account of his book.)

*Patinkin, Don, Money, Interest and Prices, Harper and Row, 1965, Part II.

Tobin, James, “Money, Capital and Other Stores of Value,” AER Papers and Proceedings, May 1961, 16-37.

*___________, “A General Equilibrium Approach to Monetary Theory,” JMCB, Feb. 1969, 15-29.

___________, Chapter I of Manuscript, on reserve.

___________, “Money and Income: Post Hoc, Ergo Propter Hoc?” QJE, May 1970, (and discussion with Friedman, same, 318-329).

___________, The New Economics One Decade Older, Princeton University Press, 1974.

 

II. DISEQUILIBRIUM ANALYSIS

*Barro, Robert J. and Herschel Grossman, “A General Equilibrium Model of Income and Employment,” AER, March 1971, 82-93.

___________, Money, Employment and Inflation, MacMillan, 1976.

Benassy, J.P., “Neo-Keynesian Disequilibrium Theory in a Monetary Economy, Unpublished, 1974.

*Clower, Robert, “The Keynesian Counterrevolution: A Theoretical Appraisal,” in The Theory of Interest Rates, F.H. Hahn and F.P.R. Brechling (ed.), MacMillan, 1965.

Iwai, K., “On Disequilibrium Economic Dynamics,” Parts I & II. Cowles Discussion Papers #385 and #386, 1974, 1975.

Patinkin, Don, Money, Interest and Prices, Chapter 13.

 

III. DEMAND FOR MONEY

Barro, Robert J., “Inflation, the Payments Period, and the Demand for Money,” JPE, Nov./Dec. 1970, 1228-1263.

___________, “Integral Constraints and Aggregation in an Inventory Model of Money Demand,” Journal of Finance(forthcoming).

*Baumol, W.J., “The Transactions Demand for Cash: An Inventory Theoretic Approach,” QJE 66 (Nov. 1952), 545-556. (Reprinted in Thorn, R.S., ed. Monetary Theory and Policy, Ch. 6.)

*Cagan, P., “The Monetary Dynamics of Hyperinflation,” in Friedman, M., ed., Studies in the Quantity Theory of Money.

Goldfeld, S.M., “The Demand for Money Revisited,” in Okun, A.M. and Perry, G.L., Brookings Papers on Economic Activity, 1973:3.

*Hicks, J.R., “A Suggestion for Simplifying the Theory of Money,” in AEA Readings in Monetary Theory, pp. 13-32.

*Miller, M.H. and Orr, D., “A Model of the Demand for Money by Firms,” QJE 80 (August 1966), 413-435.

*Modigliani, F., R. Rasche, and J.P. Cooper, “Central Bank Policy, The Money Supply and the Short-Term Rate of Interest,” JMCB, 2 (May 1970), 166-217.

*Tobin, J., “The Interest-Elasticity of Transactions Demand for Cash,” REStat. 38 (August 1956), 241-247.

___________, “Liquidity Preference as Behavior Toward Risk,” REStud 25 (Feb. 1958), 65-86. (Reprinted in Thorn, Ch. 7)

Whalen, E.L., “A Rationalization for the Precautionary Demand for Cash,” QJE (May 1966), 314-324.

 

IV. MONEY, INFLATION DYNAMICS AND GROWTH

*Brock, William A., “A Simple [Perfect Foresight] Model of Money and Growth,” on reserve.

*Cagan, Phillip, op. cit.

Fischer, Stanley, “Keynes-Wicksell and Neoclassical Models of Money and Growth,“ AER, Dec. 1972.

Friedman, Milton, “The optimum Quantity of Money,” in The Optimum Quantity of Money and Other Essays, Aldine, 1969, 1-50.

*Foley, Duncan K. and Miguel Sidrauski, “Portfolio Choice, Investment and Growth,” AER, March 1970, 44-63.

Levhari, David and Don Patinkin, “The Role of Money in a Simple Growth Model,” AER, Sept. 1968, 713-753.

Mundell, Robert A., “Growth, Stability and Inflationary Finance,” JPE, 1965, 97-109.

*___________, Monetary Theory, Goodyear, 1971.

*Sidrauski, Miguel, “Inflation and Economic Growth,” JPE, Dec. 1967, 796-810.

*___________, “Rational Choice and Patterns of Growth in a Monetary Economy,” AER, Papers and Proceedings, May 1967, 534-544.

Dornbusch, Rudiger and Frenkel, Jacob, “Inflation and Growth Alternative Approaches,” Journal of Money, Credit and Banking, Feb. 1973, 141-156.

 

V. RATIONAL EXPECTATIONS

Barro, Robert J., “Rational Expectations and the Role of Monetary Policy,” Unpublished, 1975.

Black, Fischer, “Uniqueness of the Price Level in Monetary Growth Models With Rational Expectations,” JET, Jan. 1974, 53-65.

*Fama, E.F., “Efficient Capital Markets: A Review of Theory and Empirical Work,” JF, 25 (May 1970), 383-417.

*Fischer, S., “Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule,” Unpublished, 1975.

*Lucas, Robert E., “Expectations and the Neutrality of Money,” JET, April 1972, 103-124.

__________, “Some International Evidence on Output-Inflation Tradeoffs,” AER June 1973, 326-334.

__________, “Econometric Policy Evaluation: A Critique,” Mimeo, on Reserve.

Muth, J.F., “Rational Expectations and the Theory of Price Movements,” Econometrica 29 (July 1961), 315-335.

Phelps, E.S. and J.B. Taylor, “Stabilizing Properties of Monetary Policy Under Rational Price Expectations,” Unpublished, 1975.

*Sargent, T.J. and N. Wallace, “’Rational’ Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule,” JPE (April 1975), 241-254.

__________, “Rational Expectations and the Theory of Economic Policy,” Federal Reserve Bank of Minneapolis, Part I and II.

 

VI. TEMPORARY EQUILIBRIUM, THE CONSUMPTION LOANS MODEL, AND THE BURDEN OF THE DEBT

*Barro, R.J., “Are Government Bonds Net Wealth?” JPE, Nov./Dec. 1974, 1095-1117.

Cass, D. and M. Yaari, “Individual Saving, Aggregate Capital Accumulation and Efficient Growth,” in K. Shell (ed.), Essays in the Theory of Optimal Growth, M.I.T. Press, 1967.

*Diamond, P.A., “National Debt in a neoclassical Growth Model,” AER, Dec. 1965, 1126-1135.

Feldstein, M., “Perceived Wealth in Bonds and Social Security: A Comment,” Unpublished, 1975.

Foley, D.K. and M. Sidrauski, “Monetary and Fiscal Policy in a Growing Economy, MacMillan, 1971, Ch. 11.

Grandmont, J. and G. Laroque, “Money in the Pure Consumption Loans Model,” JET, August 1973, 382-395.

__________, and Y. Younes, “On the Efficiency of a Monetary Equilibrium,” REStud., April 1973, 149-166.

Modigliani, F., “Long-Run Implications of Alternative Fiscal Policies and the Burden of the National Debt,” Economic Journal, Dec. 1961, 730-755.

Samuelson, P.A., “An Exact Consumption-Loan Model of Interest With or Without the Social Contrivance of Money,” JPE, 1958 (reprinted in Collected Scientific Papers, 219-234.)

 

VII. INDEXATION AND THE LABOR CONTRACT

*Azariadis, C., “Implicit Contracts and Underemployment Equilibria,” JPE, August 1975.

__________, “Asymmetric Wage Behavior,” Unpublished, 1975.

*Baily, M.N., “Wages and Employment Under Uncertain Demand,” REStud., Jan. 1974, 37-50.

Fischer, S., “The Demand for Index Bonds,” JPE, June 1975.

__________, “Wage-Indexation and Macro-Economic Stability,” Unpublished, 1975.

__________, “Non-Indexation in the Capital Markets,” Unpublished, 1975.

Gray, J.A., “Economic Aspects of Indexing and Contract Length,” Unpublished, 1975.

Grossman, H., “The Nature of Optimal Labor Contracts,” Unpublished, 1975.

Shavell, S., “Sharing Risks of Deferred Payment,” Unpublished, 1975.

Tobin, J., “An Essay on the Principles of Debt Management,” in Tobin’s Essays in Economics.

 

VIII. MICRO FOUNDATIONS OF MONEY

(This material will not be discussed in class; it is on the reading list for those who are interested)

*means most worthwhile

Brunner, Karl, and Allan Meltzer, “The Uses of Money: Money in the Theory of Exchange,” AER, Dec. 1971, 784-805.

*Clower, Robert W., Monetary Theory, Clower (ed.), Penguin, 1970, pp. 7-16.

Fischer, S., “Money and the Production Function,” on reserve.

Hahn, Frank, “On Transaction Costs, Inessential Sequence Economics and Money,” REStud., Oct. 1973, 449-462.

*__________, “On the Foundations of Monetary Theory,” in Parkin and Mobay (eds.), Essays in Modern Economics, Langman, 1973.

Heller, Walter P., “The Holding of Money Balances in General Equilibrium,” JET, Jan. 1974, 93-108.

*Johnson, Harry G., “Is There an Optimal Money Supply?” in Frontiers of Quantitative Economics, M.O. Intriligator, ed., North-Holland, 1971.

Niehans, Jurg, “Money in a Static Theory of Optimal Payment Arrangements,” JMCB, Nov. 1969, 706-726.

Ostroy, Joesph, “The Informational Efficiency of Monetary Exchange,” AER, Sept. 1973, 597-610.

Patinkin, Don, Money, Interest and Prices, Harper and Row, 1965, Part I.

*Samuelson, Paul A., “What Classical and Neo-Classical Monetary Theory Really Was,” Canadian Journal of Economics, Feb. 1968, 1-15; also in Clower, Readings, 170-190.

*__________, Foundations of Economic Analysis, Harvard University Press, 1947, 117-122.

Starr, Ross, M., “The Structure of Exchange in Barter and Monetary Economics,” QJE, May 1972, 290-302.

Starrett, David, “Inefficiency and the Demand for ‘Money’ in a Sequence Economy,” REStud., Oct. 1973, 437-448.

 

Source: Copy of mimeographed course reading list from the files of Irwin L. Collier. Provided by Robert Dohner (our friendship goes back to our internships at the Nixon Council of Economic Advisers in the year of Watergate).

Image Source: Rudiger Dornbusch from FAZ, April 12, 2014

Categories
Funny Business M.I.T.

M.I.T. Faculty skit. Robert Solow as the 2000 year old economist.

Would Mel Brooks' famous 2,000-Year-Old Man have understood modern language? Researchers say there's a possibility.

 

 

A skit in economics typically involves a humor transplant of some sort. The following script from the faculty contribution to an annual M.I.T. economics skit party (ca.  1979-80 which is when Luis Tiant pitched for the Yankees) took its inspiration from  two greats in American comedy, Carl Reiner & Mel Brooks, who sometimes performed as interviewer and 2,000 year-old man, respectively.

While it is fairly clear that Robert Solow performed and probably wrote the entire skit, the identity of the interviewer still needs to be established. Hint: there is a comment box at the bottom of this post. 

The script comes from a file of such Solovian skits that Roger Backhouse has copied during his archival research and has shared with Economics in the Rear-View Mirror.

_________________

 

Q: You have probably all heard the interviews with the recently discovered 2000-year-old man. We are fortunate to have with us tonight another great find, the 2000-year-old economist, Robert M. Solow. By the way, Dr. Solow, just what does the M stand for?

A: Methuselah, dummy.

Q: Dr. Solow has seen so many skit parties in his life, that he was not very happy about appearing at this one. Do you remember the first skit party you ever went to?

A: No. Skit parties are like hangovers – best thing to do is forget ’em and swear never to do it again. I do have a hazy recollection of an early skit party, I think it was what the one where I first heard the joke about bordered determinants…

Q: What is the joke about border determinants?

A: I don’t know, but they sure laugh[ed] their fool heads off.

Q: Any other recollections about that skit party?

A: Well, you could hear them building pyramids in the background, I remember, and there was this Sphinx-like object, looked a lot like Dick Eckaus… You don’t suppose that, even then???? Nah, forget it.

Q: Turning to more serious issues, what is the biggest change in economics since the old days?

A: Mechanization, by cracky. First the electric typewriter, then the computer, then the Xerox machine [handwritten insert: but not fast enough for (3 or 4 illegible words)]. Nowadays people write papers at the rate they used to wipe their… glasses. I believe Feldstein has solved the problem of hooking the typewriter directly to the Xerox machine, and the whole paper is reproduced without being touched by human hands. There is even a rumor that he has a secret way of getting the paper written without human intervention…

Q: Come come, Dr. Solow, you don’t believe that.

A: Well, have you looked at any of Feldstein’s recent papers? Now in the good old days, stand-up roll-top desks, quill pens, the main-frame abacus, a man thought twice before he wrote a paper. At least he thought once. If only old Tom were here.

Q: Tom who?

A: Tom Gresham. You know: bad working papers drive out good. Not to mention Dave Hume, the inventor of the quantity theory of working papers. As Milton used to say: any way you slice it, it’s still baloney.

Q: Is that Milton Friedman?

A: No, Milton Horowitz, the inventor of the pastrami sandwich. I believe he appears in a footnote in Joskow’s classic mustard-stained work on the subject.

Q: Let’s come to your recent impressions. What do you see as the most important recent development in economics?

A: That’s easy – the increase in the mandatory retirement age to 70. Of course it’s got a long way to go before it does me any good, but I underestimate the DRI Mandatory Retirement Age Monitor estimates the retirement age to be rising at 1.73 years per year, so time is on my side.

Q: Apart from its effects on you personally, why do you think this is an important development?

A: It saves a lot of time at department meetings never to have to make a tenure appointment again. And you know what department meetings are like – even worse than skit parties.

Q: How do you think the change will affect students?

A: They’ll love it. Courses will be the same year after year. Reading lists will never change. Textbooks will go on and on and on. Can you imagine the 200th edition of Dornbusch and Fischer? I hope it’s printed on better paper than the low-grade papyrus of the first edition… I do wonder about Eckaus and that Sphinx…… Exams will be the same year after year. Students hate change. Look at what happened when you fellows tried to change 14.121 this year.

Q: Turning to economic theory, what has been the most important development you have witnessed in the last 2000 years?

A: The two-dimensional diagram.

Q: Be serious.

A: I am serious. Can you imagine Bhagwati, the Picasso of the Production Possibility Locus, trying to fit all those curves in a one-dimensional diagram, which was all we had in the old days? There wasn’t hardly room for anything besides the axis.

Q: Come, come. Bhagwati would find a solution for that little difficulty. Who needs an axis?

A: Maybe so, but can you imagine four-color one-dimensional diagrams? How could we have expensive textbooks without four-color diagrams? How could we have expensive professors without expensive textbooks? How could……

Q: OK, OK. What is the second most important development in economic theory in your lifetime?

A: The subscript.

Q: Don’t you know the difference between trivia and serious economic theory?

A: Sure. Trivia are worth remembering, but serious economics is OK to forget.

Q: Maybe we better stick to trivia…

A: I was just kidding. I really know the answer. There is no difference between trivia and serious economic theory.

Q: Tell us about the most interesting experience you ever heard of an economist having?

A: Easy. Happened to an agricultural economist I knew, feller named Samuelson, farm boy from Gary, Indiana. He was digging on the farm one day, checking out the law of diminishing returns, and he found a potato growing with a nickel in it. Marvelous thing. Folks came from miles away to see a potato with a nickel in it. Old Samuelson frittered away the rest of his life looking for another potato with the nickel in it. Never could find one. He did find a couple with three cents in them, but somehow it wasn’t the same. Never accomplished another thing, old Samuelson. Wonder whatever became of him? He’d be 2009, I reckon. By the way, whatever became of that other farmer, Weitzman?

Q: You mean Chaim Weitzman, the founding father of Israel? His last words were: you don’t have to convince me, Professor [Frank] Fisher, I’m Jewish too.

A: No, I mean Marty Weitzman, old quick and dirty, the lion of Levittown.

Q: Why do you ask?

A: Reminds me of the fellow I used to know, a Secretary of the Treasury named Hamilton……

Q: Reminds you of who? Oh, I get it, they both got killed in the dual.

A: Watch out, Buster – the agreement was that I tell the jokes and you prove the theorems.

Q: All right. Let’s get away from personalities. What do you think of recent macro theories?

A: Not much.

Q: What about rational expectations?

A: If there were any truth in that, it would have been thought up long ago.

Q: Not necessarily. The old-timers could have thought that someone would think of it, without thinking of it themselves.

A: That’s true, but the old-timers were too sensible to think that anyone would think a thought like that.

Q: How about the quantity theory?

A: Ingenious.

Q: Really?

A: Imagine saying that velocity is so stable that only money matters, and so unstable that no use can be made of the theory, and imagine getting away with both statements.

Q: But what is macroeconomics left with then?

A: Well, the old Ioto-Sigma Lamba-Mu [Greek for “IS-LM”] curves were good enough for Aristotle, it’s good enough for me.

Q: Would you care to comment on the theory of built-in stabilizers?

A: If you’re not going to be serious, we might as well go watch a ballgame. I understand Louis Tiant, the 2000-year-old pitcher is going for the Yankees.

Q: Use your 2000-year-old imagination. I’ll give you an example of built-in stabilization – Social Security.

A: How so?

Q: The less likely it is that anyone will ever be able to collect benefits, the likelier it becomes that they make even more money consulting on Social Security. Take [Peter] Diamond, for example.

A: You take Diamond.

Q: No thanks. Imagine a man leaving a perfectly good career in public finance to go into law and economics and make a hash out of both fields.

A: Stick to the straight-man lines, please.

[Handwritten insert begins here]

Q: What do you think of the proliferation of journals?

A: I think it is terrific. Of course it has been going on for a long time – ever since BJEA, the Babylonian Journal of Economic Analysis was challenged by the SEJ, the Sumerian Economic Journal.
What I particularly like is the increased specialization. Like JHR, the Journal of Human Regressions and JME, the Journal of Mathematical Existence.

Q: The Journal of Mathematical Existence – isn’t that the one that started with the famous 2-line proof: I count, therefore I am?

A: Yes and was followed by a 47 page proof that without continuity existence was still generic.
I also like this trend toward paired journals.

Q: Paired journals?

A: Yes, like the two Harvard journals – one publishes theory without measurement and the other measurement without theory.
And then there’s the 2 JPE’s – the Journal of Public Economics and the Journal of Private Enterprise.

[handwritten insert ends]

Q: What do you see as the greatest danger facing the economics profession?

A: The threatened extension of truth-in-lending legislation to truth-in-teaching. We could have the biggest rash of malpractice suits since Nicky Kaldor retired.

Q: I think you’re onto something there. How foresighted of this department to have hired an expert on malpractice like Marilyn Simon [joined faculty 1977-78 academic year], the world-famous author of Unnecessary Surgery – The View from the Inside.

A: Simon only writes about malpractice – [Jeffrey E.] Harris actually does it, I understand.

Q: You seem to have discovered a lot since you turned up around here. Anything else new on the malpractice front?

A: There’s a rumor that the University of Chicago has had to recall all the degrees issued during the last five model years.

Q: You mean…

A: Right. Defective transmission mechanisms.

Q: Gad. Are there any good defenses against malpractice suits in your long and varied experience?

A: You can hire a mathematician for the faculty.

Q: What good does that do?

A: How the hell would I know? All I can say is that every department seems to be hiring mathematicians these days. It’s got to be for something.

Q: I’m looking for some more tried and true defense.

A: There’s always the Long-and-Variable Lags defense. See the Supreme Court decision in Tobin versus Friedman, in which Friedman successfully argued that first it’s true, second he never said it, and third wait till next year.

Q-: How about the Roy Lopez Defense?

A: You mean P–K4, P-K4; N-KB3, N-QB3; B-QN5, P-QR3?

Q: No, I mean Roy Lopez, the middle line-backer for the Princeton Economics Department – anyone sues for malpractice, he breaks their legs.

A: Sounds good. There’s also the classic defense due to Stanley Fischer, that truth should be indexed. Today’s malpractice is tomorrow’s conventional wisdom.

Q: Speaking of conventional wisdom, have you spoken with Professor Galbraith since your return?

A: No, but I have been reading his latest book: Why Are People Poor?

Q: I’ll bite; why are people poor?

A: Not enough income, according to Galbraith.

Q: Does he have a remedy?

A: Move to Switzerland.

Q: I see.

A: I can’t wait until the news reaches Calcutta.

Q: One last question, to return to the subject with which we started. Do you see any trends in student skits?

A: Longer.

Q: Longer and funnier?

A: Longer.

Q: Any final comment?

A: Let me ask you a question. What do you consider the most remarkable thing in this interview?

Q: That’s easy. We never mentioned IBM.

 

Source:  Duke University. David M. Rubenstein Rare Book & Manuscript Library. Economists’ Papers Archives. Papers of Robert M. Solow. Box 83.

Image Source:  Carl Reiner and Mel Brooks performing the 2000 year old man from NPR KNAU, Arizona public radio article “Could You Talk To a Caveman?” (May 9, 2013) .