Tag: Giavazzi

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Exam Questions M.I.T. Principles Suggested Reading Undergraduate

M.I.T. Principles of Macroeconomics. 1995-2006

 

An earlier post provided links to assorted course materials for Principles of Microeconomics (14.01) taught at M.I.T. from 1994 to 2005.

Perhaps my productivity as an internet archive scavenger has simply improved with practice, but I suspect that the instructors and their teaching assistants for Principles of Macroeconomics (14.02) from 1995 through 2006 at M.I.T. were simply better organized in keeping copies of their syllabi, problem sets, exams etc. available for later cohorts. Anyhow, today I provide the results of several days of trolling (in a good way) the Wayback Machine internet archive for a decade long window spanning the most recent turn of a century.

Below you will find syllabi, class schedules, problem sets and solutions, exams and solutions plus links to lecture slides and supplementary readings where found. 

Fall 1995
Professor Olivier Blanchard

Problem Sets

Problem Set 1  (Solutions)

Problem Set 2  (Solutions)

Problem Set 3  (Solutions)

Problem Set 4  (Solutions)

Problem Set 5  (Solutions)

Problem Set 6 (Solutions )

Problem Set 7 (Solutions )

Problem Set 8  (Solutions )

Problem Set 9 (Solutions)

Exams

Exam 1   (Solutions)

Exam 2 (Solutions)

Final Exam (Solutions not found)

Spring 1996
Professor Ricardo Cabellero

Exams

Exam 1 (Solutions)

Exam 2 (Solutions)

Final Exam (Solutions) [neither questions nor solutions found]

Fall 1996

Problem Sets

Problem Set 1 (Solutions)

Problem Set 2 (Solutions)

Problem Set 3 (Solutions)

Problem Set 4 (Solutions)

Problem Set 5 (Solutions)

Problem Set 6 (Solutions)

Problem Set 7 (Solutions)

Problem Set 8 (Solutions)

Problem Set 9 (Solutions)

Exams

Exam 1 (Solutions)

Exam 2 (Solutions)

Final Exam (Solutions) [neither questions nor solutions found]

Spring 1997
Professor Ricardo Caballero

Home page

Problem Sets

Problem Set 1 (Solutions)

Problem Set 2 (Solutions)

Problem Set 3 (Solutions)

Problem Set 4 (Solutions)

Problem Set 5 (Solutions)

Problem Set 6 (Solutions)

Problem Set 7 (Solutions)

Problem Set 8 (Solutions)

Problem Set 9 (Solutions)

Exams

Exam 1 (Solutions)

Exam 2 (Solutions)

Final Exam (Solutions) [neither questions nor solutions found]

Fall 1997
Professor Paul Krugman

Problem Sets

Problem Set 1 (Solutions) [questions not found]

Problem Set 2 (Solutions) [questions not found]

Problem Set 3 (Solutions) [questions not found]

Problem Set 4 (Solutions) [questions not found]

Problem Set 5 (Solutions) [questions not found]

Problem Set 6 (Solutions) [questions not found]

Problem Set 7 (Solutions) [questions not found]

Problem Set 8 (Solutions) [questions not found]

Problem Set 9 (Solutions) [neither questions nor solutions found]

Exams

Exam 1 (Solutions)

Exam 2 (Solutions)

Final Exam (Solutions)

Spring 1998
Professor Ricardo Caballero

Problem Sets

Problem Set 1 (Solutions)

Problem Set 2 (Solutions)

Problem Set 3 (Solutions)

Problem Set 4 (Solutions)

Problem Set 5 (Solutions)

Problem Set 6 (Solutions)

Problem Set 7 (Solutions)

Problem Set 8 (Solutions)

Problem Set 9 (Solutions)

Exams

Exam 1 with Solutions

Exam 2, Parts I and II with Solutions

Exam 2, Part III (Solutions)

Final Exam with Solutions

Fall 1998
Professor Paul Krugman

For this term we have a cornucopia of material that includes lecture slides and handouts along with syllabus, reading assignments, problem sets and examination questions with solutions. This material has been put together for an earlier post.

 

Spring 1999
Roger Brinner

Textbook: Olivier Blanchard, Macroeconomics

Syllabus and schedule

Problem Sets

Problem Set 1 (Solutions)

Problem Set 2 (Solutions)

Problem Set 3 (Solutions)

Problem Set 4  (Solutions)

Problem Set 5 (Solutions)

Problem Set 6 (Solutions)

Problem Set 7 (Solutions)

Exams

Exam 1 (Solutions)

Exam 2 (Solutions)

Final Exam [neither questions nor solutions found]

Fall 1999
Professor Ricardo Caballero

Textbook: Olivier Blanchard, Macroeconomics

Course home page

Syllabus

Schedule

Lecture Slides

September 8 — Chapter 1: Tour of the World

September 13 — Chapter 2: Economic Data

September 15 — Chapter 2 and 3: Economic Data and the Goods Market

September 20 — Chapter 3 and 4: The Goods Market and Dynamics

September 22 — Chapter 5: The Financial Market

September 27 — Chapter 5: The Financial Market and the Role of Banks

September 29 — Chapter 6: The Role of Banks and the IS-LM Model

October 4 — Chapter 6: The IS-LM Model

October 6 — Chapter 6 : Review of the IS-LM Model

October 13 — Chapter 11: Openness in Goods and Financial Markets

October 18 — Chapters 11 and 12: Openness in Goods and Financial Markets

October 20 — Chapter 12: Openness in the Goods Market

October 25 — Chapters 12 and 13: Open Economy IS-LM

October 27 — Chapter 13: Open Economy IS-LM

November 1 — Chapters 13, 14.4 and 14.5: Fixed Exchange Rates and Crises

November 3 — Review: a collection of old transparencies, not posted

November 8 — Chapter 15: The Labor Market

November 10 — Chapters 15 and 16: Aggregate Supply and Demand

November 15 — Chapter 16: Aggregate Supply and Demand

November 17 — Chapter 16: Shifting the AS-AD

November 22 — Chapter 17: The Phillips Curve

November 24 — Chapters 18 and 19: Disinflation and Real Interest Rates

November 29 — Chapter 19: Inflation, Real Interest Rates and Exchange Rates

December 1 — Chapters 19, 22 and 23: AS-AD with Fixed Exchange Rates; Growth

December 6 — Chapters 22 and 23: Growth; Review I

Problem Sets

Problem Set 1 (Solutions)

Problem Set 2 (Solutions)

Problem Set 3 (Solutions)

Problem Set 4 (Solutions)

Problem Set 5 (Solutions)

Problem Set 6 (Solutions)

Problem Set 7 (Solutions)

Problem Set 8 (Solutions)

Problem Set 9 (Solutions)

Exams

Exam 1 (Solutions)

Exam 2 with solutions

Final Exam  (Solutions)

Spring 2000
Professor Roger Brinner

Textbook: Olivier Blanchard, Macroeconomics(2nded).

Syllabus

Schedule

Problem Sets

Problem Set 1 (Solutions)

Problem Set 2 (Solutions)

Problem Set 3 (Solutions)

Problem Set 4 (Solutions)

Problem Set 5 (Solutions)

Problem Set 6 (Solutions)

Problem Set 7 (Solutions)

Problem Set 8 (Solutions)

Exams

Exam 1 (Solutions)

Exam 2 (Solutions)

Final Exam (Solutions not found)

Fall 2000
Professor Ricardo Caballero

Textbook: Olivier Blanchard, Macroeconomics

Course home page

Syllabus

Schedule

Problem Sets

Problem Set 1 (Solutions)

Problem Set 2 (Solutions)

Problem Set 3 (Solutions)

Problem Set 4 (Solutions)

Problem Set 5 (Solutions)

Problem Set 6 (Solutions)

Problem Set 7 (Solutions)

Problem Set 8 (Solutions) (Graphs)

Problem Set 9 (Solutions)

Exams

Exam 1 (Solutions)

Exam 2 (Solutions)

Exam 2, conflict (Solutions)

Exam 3 (Solutions)

Exam 3, conflict (Solutions)

Spring 2001
Professor Roger Brinner

Textbook: Olivier Blanchard, Macroeconomics(2nd edition)

Course home page

Syllabus

Schedule

Problem Sets

Problem Set 1 (Solutions)

Problem Set 2 (Solutions not found)

Problem Set 3 (Solutions not found)

Problem Set 4 (Solutions)

Problem Set 5 (Solutions)

Problem Set 6 (Solutions not found)

Problem Set 7 (Solutions)

Exams

Quiz #1 (Solutions)

Quiz #1 Conflict (Solutions)

Quiz #2 (Solutions, htm; Solutions, pdf)

Final Exam:  Book One (.doc); Book Two (.doc)

Fall 2001
Professor Ricardo Caballero

Textbook: Olivier Blanchard, Macroeconomics (2nded)

Syllabus

Schedule

Lecture slides

September 5 — Chapter 1: Tour of the World

September 10 — Chapter 2: Tour of the Book

September 12 — Chapter 3: The Goods Market

September 19 — Chapter 3: The Goods Market (continued)

September 24 — Chapter 4: Financial Markets

September 26 — Chapter 4: Financial Markets (continued)

October 1 — Chapter 5: The IS-LM Model

October 3 — Review Session

October 10 — Chapter 18: The Open Economy

October 15 — Chapter 19: The Goods Market in an Open Economy

October 17 — Chapter 20: Output, the Interest Rate and the Exchange Rate

October 22 — Chapter 20: Output, the Interest Rate and the Exchange Rate (continued)

October 24 — Chapter 21.2: Exchange Rate Crises

October 29 — Chapter 6.3-6.4: Building the Aggregate Supply: The Labor Market

October 31 — Chapter 6.5-7.1: Building the Aggregate Supply (continued)

November 5 — Chapter 7.1-7.3: Aggregate Demand and Aggregate Supply

November 7 — Review Session

November 14 — Chapter 7.4-7.7: AD-AS, Canonical Policy Shocks

November 19 — Chapter 8: The Phillips Curve

November 21 — Chapter 9: The Phillips Curve and the Natural Rate

November 26 — Chapter 14.1, 14.3-14.4: Nominal and Real Interest Rates
Chapter 21.1: Open Economy AS-AD

November 28 — Chapter 13.1-13.2: Productivity Growth in AD-AS.  Chapter 10: Growth – The Facts

December 3 — Chapter 11.1-11.2: Growth – Saving, Capital Accumulation and Output

December 5 — Review

Problem Sets (best seven of nine for 25% of grade)

Problem Set 1 (Solutions)

Problem Set 2 (Solutions)

Problem Set 3 (Solutions)

Problem Set 4 (Solutions) (Graphs)

Problem Set 5 (Solutions) (Graphs)

Problem Set 6 (Solutions)

Problem Set 7 (Solutions)

Problem Set 8 (Solutions)

Problem Set 9 (Solutions) (Graphs)

Exams (note no final exam, three quizzes for 75% of grade)

Quiz 1 (Solutions)

Quiz 2 (Solutions)

Quiz 3 (Solutions)

Spring 2002
Professor Roger Brinner

Lectures

February 06: Course Objectives and Introductions

February 11: The Policy Tradeoff: Unemployment vs. Changes in Inflation

February 13: The Fiscal Policy

February 19: National Income Accounts and the Government Budget

February 20: Core Growth Theory

February 25;&27: Basic Econometric Tools Used in Macroeconomics

March 1: Basic Econometric Tools Used in Macroeconomics- Handout

March 06: IS-LM Introduction

March 08: Aggregate Supply and Demand

March 11: Review

March 13: Review

March 18: Consumer Spending & House Demand

March 20: Business Investment

April 01: Foreign Trade & Exchange Rates

April 03: Inflation

April 08: Money Demand

April 10: Review by Prof. Brinner

April 17: Growth

April 22: Integrating IS-LM and the Modern Phillips

April 24: Fiscal Policy in the 1990s

April 29: International Growth & Crises

May 01: Stock & Bond Markets

May 06: Monetary Policy in the 1990s

May 08: Social Security and the National Debt

May 13: US Business Cycles: Experience vs. Theory

May 15: Review

Problem Sets

Problem Set 1 (Solutions)

Problem Set 2 (Solutions)

Problem Set 3 (Solutions)

Problem Set 4 (Solutions)

Problem Set 5 (Solutions)

Problem Set 6 (Solutions)

Exams

Quiz #1 (Solutions)

Quiz #2 (Solutions)

Quiz #3 (Solutions)

Fall 2002
Professor Huntley Schaller

Syllabus

Schedule

Readings

Recitations

Recitations by Samer HajYehia (PDF)
“Consumption and Housing” Recitation (PDF)
Class Notes Part 1 (PDF)
Class Notes Part 2 (PDF)

Problem Sets

Problem Set 1 (Solutions)

Problem Set 2 (Solutions)

Problem Set 3 (Solutions)

Problem Set 4 (Solutions)

Problem Set 5 (Solutions)

Problem Set 6 (Solutions)

Problem Set 7 (Solutions)

Problem Set 8 (Solutions)

Exams

Quiz #1 (Solutions)

Quiz #2 (Solutions)

Quiz #3 (Questions and Solutions)

Spring 2003
Professor Olivier Blanchard

Textbook: Olivier Blanchard’s Macroeconomics, 3rd ed.

Course Home Page

Syllabus

Schedule

 REQUIRED READINGS:

 REVIEW ARTICLES:

 ADDITIONAL READINGS:

Problem Sets

Problem Set 1 (Solutions)

Problem Set 2 (Solutions)

Problem Set 3 (Solutions)

Problem Set 4 (Solutions)

Problem Set 5 (Solutions)

Exams

Quiz #1 (Solutions)

Quiz #2 (Solutions)

Quiz #3 (Solutions)

Fall 2003
Professor Ricardo Cabllero

Textbook: Olivier Blanchard’s Macroeconomics.

Course Home Page

Syllabus

Schedule

Ha Yan Notes (zip)

Lectures

Lecture 1. Introduction

Lecture 2. Basic Definitions

Lecture 3. Basic Aggregate Demand Model

Lecture 4. Goods/Financial Markets

Lecture 5. Financial Markets (Cont.)

Lecture 6. IS-LM

Lecture 7. IS-LM (Cont.)

Lecture 8 (review)

Lecture 9. Open Economy

Lecture 10. Goods Market in the Open Economy

Lecture 11. Goods Market and the Exchange Rate

Lecture 12. The Open Economy IS-LM (II)

Lecture 13. Exchange Rate Systems

Lecture 14. Building Aggregate Supply

Lecture 15. Aggregate Supply–Aggregate Demand

Lecture 16. Aggregate Supply, Aggregate Demand (cont.)

Lecture 17. AD-AS + The Phillips Curve

Lecture 18. Inflation and Unemployment

Lecture 19. Devaluations in an AD-AS framework (.ppt)

Lecture 20. Productivity growth (.ppt)

Lecture 21. Growth (.ppt)

Problem Sets

Problem Set 1 (Solutions)

Problem Set 2 (Solutions)

Problem Set 3 (Solutions)

Problem Set 4 (Solutions)

Problem Set 5 (Solutions)

Problem Set 6 (Solutions)

Exams

Quiz #1 (Questions and Solutions)

Quiz #2 (Questions and Solutions)

Quiz #3 (Questions and Solutions)

Spring 2004
Professor Olivier Blanchard

Textbook: Olivier Blanchard’s Macroeconomics, 3rd edition.

Syllabus

Schedule

Readings

Week of 2/9:

Article 1:  “Easy Money”  (The Fed and inflation)

Article 2: “Competitive Sport in Boca Raton”  (Questions about the strength of the dollar)

Week of 2/16:

Article 3: “Irrational Exuberance”

Article 4:  Insanity in the Japanese stock market?

Article 5:  The Unemployment Rate and Economic Health

Article 6: Soaring stocks in Southeast Asia

Article 7:  Are the tech stocks back?

Week of 2/23:

Article 8: Macroeconomic performance in Germany

Week of 3/15:

Article 9: Unemployment rates in Spain and Portugal

Week of 4/5:

Article 10:  Economic Recovery in the U.S.

Week of 4/19:

Article 11:  Chinese economic outlook

Article 12:  U.S. economic outlook

Article 13:  Interest rates in the US

International Monetary Fund’s semi-annual report

Week of 5/3:

Reading (not required): Overview of Argentina

Problem Sets

Problem Set 1 (Solutions)

Problem Set 2 (Solutions)

Problem Set 3 (Solutions) [note: dated 3/17/03, but not same as problem 3 of Spring 2003]

Problem Set 4 (Solutions)

Problem Set 5 (Solutions)

Problem Set 6 (Solutions)

Exams

Quiz #1 (Solutions)

Quiz #2 (Solutions) (Graphs)

Quiz #3 (Solutions)

Fall 2004
Professor Richard Caballero

Textbook: Olivier Blanchard’s Macroeconomics, 3rd edition.

Course home page

Syllabus

Schedule

All course materials as zip file

Lectures

Lecture 1. Introduction

Lecture 2. Definitions and First Model

Lecture 3. Basic Aggregate Demand Model

Lecture 4. Financial Markets

Lecture 5. IS-LM (1)

Lecture 6. IS-LM (2)

Lecture 7. Open Economy

Lecture 8. Goods Market and Exchange Rate

Lecture 9. Review

Lecture 10. Open Economy IS-LM

Lecture 11. Mundell-Fleming

Lecture 12. Aggregate Supply

Lecture 13. Aggregate Supply and Aggregate Demand

Lecture 14. AD-AS and the Phillips Curve

Lecture 15. Phillips Curve

Lecture 16. Review

Lecture 17. Real Interest Rates/Open economy AD-AS framework

Lecture 18. Growth

Lectures 19 and 20. Solow model (apparently available in zipped files above)

Lecture 21. Technological Progress and Unemployment

Lecture 22. Expected Present Discounted Values

Lecture 23. Bond Prices and Yields

Problem Sets

Problem Set 1 (Solutions)

Problem Set 2 (Solutions)

Problem Set 3 (Solutions)

Problem Set 4 (Solutions)

Problem Set 5 (Solutions)

Problem Set 6 (Solutions)

Exams

Quiz #1 (Solutions)

Quiz #2 (Solutions)

Quiz #3 (Solutions)

Spring 2005
Professor Olivier Blanchard

Textbook:  Olivier Blanchard, Macroeconomics, 3rd edition.

Course Home Page

Syllabus

Schedule

Lectures (only seven found)

Lecture 1 (Feb 2): Introduction and a Tour of the World (Ch 1)

Lecture 6 (Feb 22): The 2001 Recession

Lecture 20 (Apr 20): Open Economy (Ch 18)

Lecture 21 (Apr 25): Open Economy–The Goods Market (Ch 19)

Lecture 22 (Apr 27): Open Economy–The Goods Market (Ch 19)

Lecture 23/24 (May 2/4): Output, Interest Rate, and the Exchange Rate (Ch 20)

Lecture 25/26 (May 9/11): Exchange Rate Regimes (Ch 21)

Problem Sets

Problem Set 1 (Solutions)

Problem Set 2 (Solutions)

Problem Set 3 (Solutions)

Problem Set 4 (Solutions)

Problem Set 5 (Solutions)

Problem Set 6 (Solutions)

Problem Set 7 (Solutions)

Exams

Quiz #1 (Questions and Solutions)

Quiz #2 (Solutions)

Quiz #3 (Questions and Solutions)

Fall 2005
Professor Francesco Giavazzi

Textbook:  Olivier Blanchard. Macroeconomics, 4th ed.

Course Material Folder

Syllabus

Schedule

Lectures. (Only last lecture found)

December 14. Using the book to understand the state of the U.S. economy

Problem Sets

Problem Set 1 (Solutions)

Problem Set 2 (Solutions)

Problem Set 3 (Solutions)

Problem Set 4 (Solutions)

Problem Set 5 (Solutions)

Problem Set 6 (Solutions)

Exams

Quiz #1 (Solutions)

Quiz #2 (Solutions)

Quiz #3 (Solutions)

Spring 2006
Olivier Blanchard

Textbook: Olivier Blanchard. Macroeconomics 4/E (2006)

Course home page

Syllabus

Schedule

Problem Sets with Solutions

Problem set 1

Problem set 2

Report of the President (B4)

Report of the President (B5)

Fed. Funds Rates

Japan (OECD)

Problem set 3

Problem set 4

Spreadsheet for SQ.1

Problem set 5

Problem set 6

ps6sq3.xls

Practice exercise for Chapter 20

Exams

Quiz #1 (Solutions)

Quiz #2 (Solutions)

Quiz #3 (Solutions)

 

Image:  Mr. Peabody (dog) and Sherman (boy) activating the original WABAC Machine.

 

 

Categories
Economists M.I.T.

Italy. Terror victim, economics professor Ezio Tarantelli (1941-1985)

 

While skimming the oral history interview of Berkeley economist Lloyd Ulman (Harvard PhD, 1950), I learned that he was in Rome the day that his Italian colleague, Professor Ezio Tarantelli, was assassinated by two members of the Red Brigades in a parking lot outside of the building where he had just lectured. 

I met Ezio during my first year of graduate school at M.I.T. in 1974-75 through my classmate Francesco Giavazzi. While I probably had discussed economics and politics with him only a few times and probably less than for a couple of hours, he impressed me with a combination of intelligence, warmth, and humility that I was to discover to be relatively rare, and not just in a university setting. 

When I read the news that this mild-mannered professor of political economy in Rome had been murdered by political terrorists, I was utterly dumbfounded. Clearly having a name and a face for the victim of an act of senseless political violence made all the difference. Today I decided to add this post, a minor tribute to the memory of a most decent man and fellow economist.

___________________

About Ezio Tarantelli

Red Brigades Kill Rome Economics Professor,  by Sari Gilbert. Washington Post, March 28, 1985.

Chapter 2, “Ezio Tarantelli: Sketches of an Intellectual Biography” in Giovanni Michelangoli, Ezio Tarantelli—Economic Theory and Industrial Relations. Springer, 2012.

Italian Documentary by Monica Repetto:  Ezio Tarantelli, La forza delle idee.

___________________

Excerpt from Oral History Interview with Lloyd Ullman

Uhlman: …I became heavily involved with Bob Flanagan and David Soskice, whom I had met in Oxford, on a Brookings project which ultimately materialized in Wage Restraint: A Study of Incomes Policies in Western Europe (1983). While working on this project, David Soskice and I were invited to give back-to-back talks to Ezio Tarantelli’s class in labor economics in Rome. My topic was the role played by collective bargaining as a second-best choice when employers were confronted by an existential threat to the capitalist order. It just so happened that Italy was experiencing considerable unrest and inflation at the time. Furthermore, Tarantelli, our host, was attracting a good deal of attention as an advocate of moderating the Scala Mobile, the national system of wage escalation which was regarded at the time by many as an important generator of inflation. Which made him a prime target of the Red Brigade on the far left.

Koya: Was the Scala Mobile between the laborers or employers or was the state also involved?

Uhlman: Laborers and employers.

Koya: No state intervention here in Italy?

Uhlman: More of a neo-corporatist arrangement.
Ezio Tarantelli was a very accomplished and very intelligent, imaginative fellow. So he invited David and me to give twin seminars in a single meeting of his class one day. I spoke about the threat of radicalism as an employer inducement to bargain collectively. He regarded it as very provocative, as he put it. That evening he took Lassie and me out to dinner. David had something else to do. And so in the usual Italian style, we ate at about ten o’clock. The restaurant was quite empty. There was a couple across the room and Lassie noticed they were looking at us all the time. Later, Tarantelli said, “Look,” he said, “when I was a student, I was a guide, a tour guide, and I’m now going to drive you through Rome in the moonlight.” It was an enchanted, lovely ride. We said goodnight and spoke about getting together soon again.
The next morning I had a meeting with the head of the non-communist labor federation at the time, the CISL [Confederazione Italiana Sindacati Lavoratori or Italian Confederation of Workers’ Trade Unions]. Someone broke into our discussion and then left. The CISL head said, “Excuse me, but a friend of mine has just died and I have to see some television people.” Then we learned that Tarantelli had been killed by members of the Red Brigade[s]. That morning when he came to class, somebody shouted, “Professor Tarantelli!” He turned around, and they shot him. That was the most horrendous episode in my life, I can say.

Koya: So the provocation?

Uhlman: What? The provocation was that he was on the wrong side. That’s the provocation. That evening a small group of us had a meeting. David’s friends in the academic community met at the home of Ida Regalia, a well-known labor economist. We all brought over some bottles of wine and we sat around talking all evening and that was that.
Everything has a comic side to it, I guess. The next morning I had to get a haircut. My previous barber was an Oxford product, of course. The Italian barber took a look at me, walked all around me, my head, and said, “Atsa a bad haircut.” Later I walked back and Lassie and I met with David. I said, “David, sit down. I must tell you something.” I told him the story. It was just a horrible thing.

 

Source: Lloyd Ulman: An Oral History. Riyad Koya interviewer (Audio File 16, Interview October 20, 2011) pp. 233-234. University of California, Berkeley. Regional Oral History Office, The Bancroft Library.

Image Source: Screen shot from Monica Repetto’s  Ezio Tarantelli, La forza delle idee.

 

Categories
Economists Funny Business M.I.T.

M.I.T. Analysis in Wonderland. Graduate Student Skit, 1975

 

The annual skit party was a huge social event in the economics department at MIT in the 1970s and presumably before and after.  Each of the cohorts was expected to write and perform its own skit in which economics and economics professors were the principal targets. Faculty written skits were often a part of the festivities. Here in this posting for the historical record, a parody of Alice in Wonderland set in the Wonderland Institute of Technology in 1975 written by the first-year class of 1974-75. But first I provide a list of my classmates with links to some biographical information where I was able to find something…whatever happened to Paul Krugman? Not everybody participated in the preparation and performance so there remains a presumption of comic innocence for the majority of the following.

In 1978 many of this cohort were involved in Casablank, a parody of the movie Casablanca. That script has been transcribed and posted at the highlighted link.

__________________

First Year Economics Graduate Students, 1974-75
M.I.T. (Spring 1975)

Abel, Andrew B.
Aspe, Pedro A.
Begg, David K. H.
Beleza, Luis Miguel C. P.
Bookstaber, Richard M.
Collier, Irwin L., Jr.
Datcher, Linda P.
Daula, Thomas V.
Desormeaux, Jorge J.
Donnelly, John F.
Duarte, Virgulino
Klorza, Santiago C.
Feiger, Margaret C.
Frankel, Jeffrey A.
Geehan, Randall R.
Giavazzi, Francesco
Halpern, Janice D.[sic, H.?]
Helms, L. Jay
Hill, Raymond D.
Krasker, William S.
Krugman, Paul R.
Malveaux, Julianne M.
Mincy, Ronald B.
Mooney, Patricia D.
Mork, Knut A.
Nagatani, Hiroaki
Neuer, Margaret R.
Smith, David A. [Alton]
Startz, Richard
Winicker, Mary K.

Source:  M.I.T. Archives. MIT Department of Economics Records, Box 1, Folder “Women & Minorities”.

__________________

While transcribing this skit from my own days as a graduate student, I discovered how much I had indeed forgotten. The mapping of many a character to the corresponding faculty member was no longer obvious to me. I have added a listing of  Dramatis Personae with annotations based on the combined incomplete memories of myself,  Jeff Frankel, Dick Startz, Andy Abel, Ray Hill and Jay Helms. Perhaps some long-lost member of the troupe will stumble across this page and help me fill in the blanks, especially with respect to casting (20 characters!). 

______________________

ANALYSIS IN WONDERLAND

Composed and performed by the first-year economics graduate students at M.I.T.
Second term, 1974-75

 

DRAMATIS PERSONAE

Narrator: played by Richard Bookstaber
Alice (Representative Graduate Student): played by Margaret (née Agnew) Feiger
Advisor (presumably the actual first-year advisor, Peter Diamond): actor unknown
Cheshire Cat (Jagdish Bhagwati): actor unknown
Micro: (Hal Varian?): actor unknown
Macro: (Stanley Fischer?): actor unknown
Quick & Dirty (Martin Weitzman): actor unknown
Palmer (Palmer, an actual Sloan School graduate student): actor unknown
Dormouse (Evsey Domar?): actor unknown
Mad Hatter (Charles Kindleberger): played by Jeffrey Frankel
March Hare (Robert Engle?): actor unknown
Tweedledee (Jerry Hausman):  possibly played by Jay Helms
Tweedledum (Robert Hall): possibly played by Bud Collier
Knave of Hearts (Franco Modigliani): actor unknown
Knave of Clubs (Arthur Burns): actor unknown
Knave of Spades (William McChesney Martin): actor unknown
Knave Alan (Allan Greenspan): actor unknown
King (President Gerald Ford): actor unknown
Joker (Paul Samuelson): possibly played by Ray Hill
White Rabbit (Robert Bishop?): actor unknown

ACT I

Narrator: The first year class presents…

Analysis in Wonderland, a tragicomedy in four unnatural acts. Any resemblance to faculty members living or otherwise should be inferred from the initials worn by the characters.

Act I, Alice enters Wonderland and meets the Cheshire cat.
(Alice is sitting at a table reading Samuelson’s Economics.)
Narrator: One day Alice was reading a book, but she was getting very bored, for the book had no conversations or jokes in it.
Alice: And what is the use of a book without conversations or jokes?
Narrator: And so she began to drift off. And eventually she noticed that there was someone on the other side of the desk…
Advisor: Hi! Welcome to the Wonderland Institute of Technology. You must be a first year graduate student. I’m your first year advisor, and it’s my job to talk to you and give you a feeling that someone cares about you personally.

Now, let me see your schedule (grabs book). Well, uh, (looks at book then says with emphasis) Paul, this schedule looks fine to me (signs it) and remember to turn in your roll cards on the first day of each class.

(Through all this Alice keeps going “uh” and “but”…but can’t manage to say anything)

Remember that if you have any questions or problems, just come in and talk to me, I have plenty of time. Excuse me!

(The advisor gets up and runs out. Alice runs after, then comes back)
Alice: What a strange place! But where should I go from here? Why there’s a Cheshire Cat. (Enter Cheshire cat) Excuse me, sir, but can you tell me where I ought to go from here?
Cheshire Cat: Why, I’m wery [sic] glad you asked me that. You should go to the optimal point, of course.
Alice: But how long will that take me?
Cheshire Cat: I can’t tell you that, listen to this. (Turns on radio, which produces static. Turns it off.) You see! Our economic theories are all static.
Alice: I would like to see some faculty.
Cheshire Cat: Well, you could go to Harward [sic], but it’s wery rare that anyone sees any faculty there. Or you could stay here, but everyone here has completely lost their faculties. They’re all mad, you know.
Alice: But I don’t want to go among mad people.
Cheshire Cat: Oh, you can’t help that; we’re all mad here. I’m mad. You’re mad.
Alice: How do you know I’m mad?
Cheshire Cat: Well, a physicist’s not mad, you grant that? Now, a physicist starts with facts and tries to find theories that fit them. I start with theories and don’t bother with facts. Therefore I’m mad. Yes?
Alice: But what are your theories about?
Cheshire Cat: Do they have to be about anything?
Alice: Well, I’ve often seen a subject without a theory, but a theory without a subject? It’s the most curious thing I ever saw in all my life!

(Alice suddenly starts)
Cheshire Cat: Don’t worry, it’s just the inwisible hand.
(Enter two characters with paper hats (?) on which are cross diagrams. One has a potato chip taped to his shoulder.)
Cheshire Cat: They’re Mike and Mac Ro
Micro: Someone must stop him! It’s shameful! Look at that silly diagram he’s wearing! It’s a disgrace to the profession.
Macro: It’s a perfectly good diagram. Not like that ridiculous diagram you’re wearing!
Alice: But the diagrams look just the same.
Cheshire Cat: Shhh! You’ll only get them more upset.
Alice: Why don’t you try to talk your differences over?
Micro: Well, we microeconomists believe in logic, so I’m willing to reason it out.
Macro: You can’t expect me to be reasonable. Can’t you see I’ve got a chip on my shoulder?
Alice: Why, yes—it’s a potato chip in fact.
Macro: I wear it in honor of our founder, Cain’s. So prepare to defend yourself.
Micro: I warn you, I’m a master of the Marshallian arts.
Macro: But I’m armed with the most deadly tool of macroeconomics: (pulls out several pairs of pliers)…Multi-pliers!
Micro: And I have the most dangerous concept of microeconomics. (pulls out a slingshot) Elasticity!
Alice: Oh no, they’re going to have a duel and micro is a semi-strict under dog!

(Mike and Mac turn back to back)
(enter panting, the Quick and Dirty banker, carrying a money bag and a calculator)
Q&D: Wait! You can’t have a duel without a primal.
Alice: Who are you?
Q&D: I’m duh quick and doity bankuh. And by my quick and doity bankuh’s calculation, I find dat what you need is more liquidity which I will now provide.

(out of the moneybag he pulls a waterpistol, shoots everyone, then runs)
Macro: Now we’re all wet. What are we going to do?
Alice: It’s all right, I know just what to do. Here’s the driest thing I know.

(begins reading from Bishop [notes])
Micro: This isn’t getting me dry at all.
Macro: Now there’s only one way to get dry, and this will prove to you that macroeconomics is good for something.
Alice: What are you going to do?
Macro: I’m going to do some hand-waving! Macroeconomists are always drying things out by waving their hands.
Alice: They are?
Macro: Of course! That’s why none of their theories will hold water. Now, watch this! (He begins to draw a diagram)
Alice: What do those lines mean?
Macro: Oh, I don’t know. But they’re pretty good lines, and Lord knows I have the right to a few good lines in this ridiculous skit.
Palmer: Haven’t you got the A line drawn wrong?
Macro: (Going very fast) Well, that line doesn’t really matter. (erases it)
Palmer: But then shouldn’t you erase the k line, too?
Macro: Well, all right (erases).
Palmer: What do X and Y stand for?
Macro: Oh, don’t worry about the axes (erases them). Actually, these are not quite like this anyway. (erases remaining lines) And, as you can see, equilibrium is at the intersection.
Alice: Well, I’ve often seen lines without an intersection, but an intersection without lines? It’s the most curious thing I ever saw in my whole life.
Narrator: You’re repeating yourself, Alice.
Alice: What do you expect, Mel Brooks?
Micro: You think that’s hand-waving! Why, I have seen hand-waving, compared with which that is no better than eternal bliss.
Alice: But what is better than eternal bliss?
Micro: Well, a ham sandwich, for instance.
Alice: But nothing’s better than eternal bliss.
Micro: And a ham sandwich is better than nothing. So, by transitivity, there you are!
Alice: (ignoring Micro as she turns to the Cheshire Cat) Isn’t there anyone here who isn’t mad?
Cheshire Cat: You might try an assistant professor.
Alice: Which one should I try?
Cheshire Cat: It doesn’t matter—pick one at random.
Alice: How do I do that?
Cheshire Cat: Just draw one from an assistant professor urn.
Alice: What’s an assistant professor urn?
Micro, Macro, Cheshire Cat, Narrator (in unison) About eleven thousand a year!
(pause)
Narrator: …and a copy of Bishop’s notes.
Alice: Curiouser and curiouser.
(exeunt all)

 

ACT II

Narrator: Act II. The Mad Boston Tea Party
(Dormouse sleeps throughout. Mad Hatter stuttering throughout; price keeps going up on hat.)
Mad Hatter: What’s your liquidity preference my dear?
Alice: It looks like you have nothing but tea.
Mad Hatter: That is all we have.
Alice: Then why did you ask?
Mad Hatter: Consumer sovereignty. (gives Alice tea) I would like to suggest to you that that will be eight pence (takes shilling from Alice.)
Alice: No cover charge?
Mad Hatter: A gentleman never takes cover, as we say in the old country.
Alice: Hey, I gave you a shilling and you only gave me two pence change back!
Mad Hatter: A gentleman never counts his change.
Hare: Gentleperson!
Alice: This sounds like a liquidity trap to me.
Mad Hatter: Alright, I’ll put it down on the T-account…(gets book)
Alice: There is something floating in my tea.
March Hare: (looking) Exchange rates.
Mad Hatter: … two pence… (fiddling with T-accounts)
Alice: No it’s ice.
Mad Hatter: …under frozen assets.
Hare: Gary Becker! (general laughter)
Mad Hatter: Why is the Poisson distribution like a temperature of 102?
Alice: Well, let’s see… I suppose you would have to integrate e to the…
Mad Hatter: Integration! They only do that in South Boston.
March Hare: No, that’s disintegration.
Alice: I suppose you have to differentiate between…
Mad Hatter: Differentiate? The first derivative is the last refuge of a scoundrel.
Alice: I give up, why is the Poisson distribution like a temperature of 102?
Mad Hatter: I haven’t the slightest idea.
Alice: That’s not very funny.
Mad Hatter: Funny?
March Hare: She wants to hear a joke.
Mad Hatter: A joke, a joke!
March Hare: …Fogel and Engerman! (general laughter)
Alice: I’m afraid I don’t get it.
Mad Hatter: Well, you see, certain names are standing jokes around here, like…Walt Whitman Rostow! (laughter)
Alice: Can I try one?
Mad Hatter: Go right ahead.
Alice: Milton Friedman! (silence among the actors who look sour a moment after the audience’s laughter dies down.)
Mad Hatter: Try another one.
Alice: Jay Forrester….(more silence).
Alice: I don’t understand. What’s wrong?
Mad Hatter: Well, some people just can’t tell a joke.
March Hare: Perhaps you’d like to see a proof?
Mad Hatter: A proof! A proof!
March Hare: This is a proof I recited before the Queen of Hearts. (goes to board)

Twiddle Twiddle lambda star
Alpha hat, beta hat times X bar.
Alpha hat, beta hat sigma Xi

One over n, equals mean of Y.
[writes on board:]:
\begin{array}{l}\mathop{{\tilde{\tilde{\lambda }}}}^{*}=\hat{\alpha }+\hat{\beta }\cdot \bar{X}\\=\hat{\alpha }+\hat{\beta }\cdot \sum{{{X}_{i}}}\left( \frac{1}{n} \right)=\bar{Y}\end{array}
Mad Hatter: Time to move on to the next place.
(everybody gets up to move)
Alice: What?! You mean you just move on to the next place without erasing?
March Hare: We don’t have to erase; we just relabel the axes.
Mad Hatter: I always erase twice, once before the period and once afterward. (erases)

(everyone moves down one, and relabels axes and curve)
     
Alice: And I suppose when you use up all the places you just start again at the beginning of the circle?
Mad Hatter: Yes. It’s called recycling.
March Hare: You better wake up the Dormouse.

(Mad Hatter and March Hare exit)
Alice: (To Dormouse) Wake up, wake up. (shakes him)
Dormouse: (waking) Whaaaaat?
Alice: Wake up. It’s over.
Dormouse: (Pause…) Can I Xerox your notes?
Alice: (starts to leave. turns and says) Why is a Poisson distribution like a temperature of 102? (Pause. Alice exits)
Dormouse: (alone) Because it’s not normal.

 

ACT III

Narrator: Act III. Alice meets Tweedledum and Tweedledee, who have a battle.
(Alice enters and sits down. Dum and Dee enter, arm-in-arm, prancing. Dee sits down; Dum goes to the board and begins. Throughout, Dee is frantic, pacing, and talking very fast. Dum is red-faced, slow-talking, constantly looking at the floor; arms folded, with noticeably short pants and a turtleneck.)
Dum: So, to conclude yesterday’s talk, we can see that it’s entirely possible that for the two sub-groups, say, men and women, you could have different parameters in the regression…
Dee: (jumping up to interrupt) I think I can draw a picture that will make that all clear. Wish I had my colored chalk… [draws pictures].
     
…so you see that while the slope in the pooled regression is zero, contrariwise; it’s actually negative for men and positive for women.
Dum: …Sort of, different slopes for different folks, which tells us…
Dee: [interrupting] …and contrariwise, I can clear this up by drawing a picture that would show…[draws picture]
 
Dum: [interrupting]…that there could be kinky behavior in some subgroups….
Dee: Right. (sits down)
Dum: But, as I was going to say, this illustrates the 287th “Iron Law” of econometrics, which states that….
Dee: (again jumping up to interrupt)…Contrariwise,…I think I can make that clear with a picture in four dimensions. Damn, I just wish I had my colored chalk…(draws pictures)
…which shows that…
Dum: (getting very irritated, interrupting) Nohow!

The time has come, the Walras said
to talk of many things,
of matrices and error terms
of cabbages and kings,
and keeping out your pictures
that keep complicating things.
Dee: Contrariwise!

In my way of showing things
I’m better far than you,
Your talk is like an old dead horse–
It’s slow, not unlike glue.
Dum: Now wait a second…
(Dum and Dee break into a general dispute, yelling at one another.)
Dum: ….you’re not consistent…
Dee: …you’re almost surely driving me to the p-limit…
Dum: …you’re a homoscedastic deviate…
(While Tweeledum and Tweedledee continue arguing, the Narrator breaks in…)
Narrator: So Tweedledum and Tweedledee
Agreed to have a fight
For Tweedledum said Tweedledee
Couldn’t prove Gauss-Markov right.
Dum: Of course we must have a fight. What time is it?
Dee: 10:40—We’re late getting started, so we better hurry up.
Dum: Let’s fight ‘till noon, then have lunch.
Narrator: So they agreed to fight and, as Alice watched, they began to see who could prove the theorem better.
(Dum and Dee give lectures simultaneously, beginning and ending at the same time with the same words.)
Dee:

[simultaneously with Dum]

I CLAIM THAT OLS IS BLUE.

Basically, we want to prove that

{{\sum{\left( \mathbf{{X}'Y} \right)}}^{-1}}\mathbf{{Z}'}\beta \le {{\sum{\left( \mathbf{{X}'\tilde{Y}} \right)}}^{-1}}\mathbf{{Z}'}\gamma

Now just take the inverse of the antilog of the Jacobian and delete the fourth row. Let little x be the square root of big X, and let medium-sized x be measured from its mean; substitute back in and we have

{{\sum{\left( \mathbf{{X}'}\left[ \begin{matrix} \mathbf{Y} \\ \mathbf{Z} \\ \end{matrix} \right] \right)}}^{-1}}{\left| J \right|\cdot \Pi \cdot {{R}^{2}}}/{\text{hat size}}\;

which you will recall from 14.381.

Then, as I promised, you can use this by transposing Z and x, deleting R and reversing the inequality…..OH SHIT…I’ve screwed up…Well, just change every medium-sized x in your notes to big X, delete all sigmas, and reverse the third and fourth steps of the proof I gave last week which was right here on the board. Or look in Tahl’s [Theil with an West Virginian accent] book. Everyone should understand this perfectly—and of course the notation is clear. Then, adding the obvious steps we learned in 14.381 to this proof completes the argument. SO OLS IS BLUE, as promised.
Dum:

[simultaneously with Dum]

I CLAIM THAT OLS IS BLUE.

Well….a lot of people go around proving the Gauss-Markov….Theorem….but the literature is full of cases….where what’s done is wrong….Take matrix addition for example….Some people just add element-by-element….while often the more interesting thing to do…..is to use the Choleski factorization of one of the matrices….And recalling that Tweedledum and I are the final arbiters of econometrics at W.I.T. (at least until Fisher gets back off leave) you’d better do it this way, or consider dropping the course. SO OLS IS BLUE, as promised.
Palmer: Shouldn’t you invert that Jacobian before proceeding to expansion in Lambert spaces….
Dee: [interrupting] If it was so, it might be; If it WERE so, it could be; But as it isn’t, it ain’t. That’s logic.
Narrator: Alice couldn’t figure out just who had won the fight, although Tweedledee HAD used a lot more words….
[exeunt]

 

ACT IV

Tweedledee: Act Four, “The trahl”.
Narrator: Within a few moments Alice will witness the trial of the Knave of Hearts who is in deep trouble now because the King of Hearts is flying all the way from the Capital of Wonderland to preside at the trial. You are undoubtedly familiar with the Knave of Hearts most important contribution to economic analysis, “A Life-Cycle Built for Two”. But now he has been accused of starting the latest Wonderland inflation and depression—or as they say in the seminar rooms down by the River Chuck—“inflession”. The economic experts of the King—Knave Arthur of Clubs, Knave William of Spades, and Knave Alan of Diamonds—have all convinced him that economic voodoo has been practiced on models on the Wonderland economy in the hallowed halls of W.I.T. Since the King of Hearts has never played with a full-deck in his life, he was easily deceived by these rascals. Fortunately for the Knave of Hearts the Queen was unable to come to the trial due to a prior speaking engagement before the Veterans of Foreign Business Cycles.
(Enter Knaves of C.S. &D. They play “Hail to the Chief” on kazoos for a few bars and end with “Pop goes the weasel.” Then the King enters wearing a helmet and carrying a football. A WIN button is conspicuous. King bends over, hikes the ball to Knave of Clubs. King sits down on throne in middle of stage.)
Knave of Clubs. Where’s the jury?
King of Hearts. (points at the Knaves) You. (Knaves turn around but no one is behind them. King continues…) Yes, you. You are his peers. And for a proper trial before we cut off his grant, we must have a jury of his peers.
Knight of Diamonds. (tossing a coin à la [George] Rath) We know what to do.
(Enter all the other characters from Wonderland, except Joker and reporters)
King: What are the charges?
Knave of Clubs: Eleven dollars a barrel.
White Rabbit: The King of Hearts, he has no smartz
But Unemployment yes.
The Knave of Hearts has played his part
To make inflation worse.
Knaves in the jury-box: Boo, Hiss, Boo!
King: It is a pretty despicable offense isn’t it?
Knave of Spades: Are you kidding? The charges don’t even rhyme.
King: Will the defendant rise?
Knave of Hearts: If I had known you were going to ask me that question I would have built it into my model.
King: I’ll hold you in contempt!
Knave of Hearts: I don’t suppose I’ll become overly fond of you either.
King: Let the jury note the defendant’s behavior.
Knave of Hearts: Which reminds me of my 1944 paper, but that is of course a secondary issue given the gravity of the problems which we now face. While I can’t formally defend the following equation to my own satisfaction, I think that it does make some economic sense. But first I should say that things will be getting much worse before they will get better, I can give you the latest predictions…..
King: (fuming through all of the above) Bind the bearer of bad tidings or he’ll talk us to death…
Knave of Clubs: But what shall we bind him with?
King: Bearer bonds, naturally!
(The Knaves come out of the jury box and use first-aid gauze to tie the knave of Hearts by body and legs & gag him—leaving only one arm free. Knave of Hearts has been talking with his hands throughout his testimony, and he continues gesturing with his free hand while occasional grunts can be heard under his gag.)
King: May it be noted that in the tradition of Wonderland jurisprudence we have left the defendant with one degree of freedom in spite of his lack of respect for this court. Are there any witnesses?
Mad Hatter: I am.
King: Take the stand.
Knave of Clubs (to Mad Hatter): Did the defendant do it?
Mad Hatter: Certainly not.
Knave of Spades: And you witnessed this with your own eyes?
Mad Hatter: And I didn’t hear or smell him do it either.
Knave of Diamonds: But how strong was your prior?
Mad Hatter: Well, I don’t like to boast but when I was a young man working for the OSS during the War, I once spent a week in bed with a….
Knave of Clubs: No, no, no. How much could new data affect your prior beliefs, and if considerably, what was your posterior judgment?
Mad Hatter: I don’t now, that’s a good one. But I’ve got one for you. What weighs 12,000 pounds and has a twice differentiable indifference map over hay and peanuts?
King: That’s irrelevant!
Mad Hatter: That’s right.
King: Give your evidence, or I’ll cut your grant off on the spot!
Mad Hatter: (stutters) I’m a poor man your majesty.
King: You’re a very poor speaker. (knaves laugh) I thought that was a pretty good one too. I’m in the mood for a few laughs (to White Rabbit) Call in the Joker.
White Rabbit: The Joker.
(Enter Joker, attended by secretary, fans seeking autographs, and reporters taking pictures)
Joker: It’s great to be back in Wonderland folks. A funny thing happened on my way…
King: (interrupting) You have been called here to testify. What is the Keynesian viewpoint?
Joker: As Uncle Miltie Friedman would say, only blindmen use Keynes. Hey, that’s a pretty good one. (To secretary) Write that down for my textbook—Better yet, put out a new edition. But, seriously folks just the other day I was leafing through a volume of Ricardo’s letters in the Sraffa collection when I came across a letter from Ricardo to James Mill describing the following encounter between Thomas Malthus and David Ricardo. Ricardo was walking down the street one day when he ran into the good Reverend who was, much to Ricardo’s surprise, sporting a banana in his left ear. Ricardo was surprised because Malthus was always the last of the political economists to adopt a new fashion. Finally Ricardo’s curiosity got the better of him and he asked, “I say Tom, why is that banana in your ear?” Malthus didn’t seem to understand—but that was hardly unusual as Malthus, more often than not, couldn’t understand what his friend was saying. In fact, old Malthus personally thought that Ricardo couldn’t optimize his way out of a paper sack, much less a Lambert space. Finally Malthus said, “I’m sorry Dave, but I can’t hear you, you see, I have this banana in my ear.” (everyone in the courtroom is sleeping) And now….ahem…ahem (everyone wakes up). A few of your favorite impressions: Francois Quesnay! (He covers his face with his hands; removes hands; expression unchanged) Böhm-Bawerk! (same routine)
King: Enough!
Joker: Nassau Senior! (same routine)
King: Take him away. (White rabbit and knaves carry Joker off, still doing impressions. e.g. Stanley Jevons, Joseph Schumpeter, Vilfredo Pareto….)
King: Who is the next witness?
Rabbit: Alice!
Alice: Here! (she goes to the witness stand)
King: What do you know about this business?
Alice: Nothing.
King: If you say anything, I’ll give you part credit. Otherwise….
Alice: But I don’t need part credit!
King: Young lady, I’m growing impatient. Either tell us something about this business or I’ll cut off your grant.
Alice: (crying) But I don’t have a grant.
King: Then why are you so upset, indeed.
Alice: What sort of….(alarm clock goes off in the jury box and the knaves wake up).
Knaves: (in unison) Verdict time!!
Knave of Spades: (To Knave of Diamonds) Do you have the coin?
Knave of Diamonds: Yes I do. (to Spades). You’re innocence, (to Clubs) you’re guilt. Call it innocence. (he tosses the coin high in air)
Alice: What kind of trial is this?
King: Don’t be a stupid child. It’s a Bernoulli trial.
Knave of Spades: Tails.
Knave of Diamonds: Sorry it’s heads. He’s guilty!
Alice: May I see the coin? (it’s tossed to her) This coin has two heads.
King: Did anyone say p equaled one half?
(Lights out. Everyone leaves but Alice. Lights on she has book and wakes up.)
Alice: I’m glad I woke up before I had to take generals. (She leaves)
Audience: (Deafening applause) Bravo. Cheers. Whoopee.

 

Source: Transcribed by Irwin Collier from personal copy.

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Economists Exam Questions M.I.T.

MIT. Final Exam in Graduate Macro I. Stanley Fischer, 1975

Welcome to my blog, Economics in the Rear-View Mirror. If you find this posting interesting, here is the list of “artifacts” from the history of economics I have already assembled for you to sample or click on the search icon in the upper right to explore by name, university, or category. You can subscribe to my blog below.  There is also an opportunity to comment below….

______________________

Today another posting from the more recent history of economics for that professor who succeeded where others had failed before him, namely in first teaching me the economic intuition behind macroeconomic models, Stanley Fischer. While James Tobin had succeeded in convincing the undergraduate me of the utter importance of getting macroeconomic policy right, I was still much too immature to “receive wisdom” as a sophomore…but enough about me.

I thought of Stan Fisher this morning as I read his marvelous summary of his own 55 years of experience with macroeconomics.

I earlier posted Fischer’s reading list for his undergraduate course at the University of Chicago in 1973. Below is the exam from the first half-semester course in the required four quarter sequence in macroeconomics for the cohort that entered MIT in the Fall of 1974, the cohort that included Paul Krugman, Jeffrey Frankel, Francesco Giavazzi, Andrew Abel, Dick Startz, to name only a few, sandwiched between Olivier Blanchard’s and Ben Bernanke’s respective cohorts.

_________________________________

 

Spring 1975

Final Exam 14.451

Stanley Fischer

Time available is two hours. Answer all questions. You have a choice on question 2.

  1. (50 points) it is sometimes asserted that the key to the effectiveness of monetary policy is the fixed nominal return on money. Suppose that means were devised of paying interest on money and that the nominal bond interest rate were fixed in an arbitrary level.
    1. Using any convenient variant of a three asset (money, bonds, capital) model, explain the determination of asset market equilibrium and then of the overall equilibrium of the economy, under the assumption of a fixed bond interest and a rate market-determined money interest rate. (Maintain this assumption here after.)
    2. Analyze the consequences of an open market purchase for the interest rate on money and other endogenous variables. What are the differences between your results and those in the more usual model in which the bond interest rate varies?
    3. Suppose a helicopter dropped bonds on the populace. What happens to the interest rate on money and other endogenous variables?
    4. What do you make of the assertion mentioned in the first sentence of this question in the light of your answers to (ii) and (iii) and/or in the light of any other relevant considerations?
    5. Extra credit (5 points max). Can you envision any type of institutional arrangements which make the premise of this question — fixed bond interest rate and market determined interest rate on money — empirically reasonable?

 

  1. Answer A or B (30 points each)

A.

  1. What theoretical reasons are there to assume the demand for money is a function of the interest rate?
  2. Why does it matter?
  3. Review relevant empirical evidence.
  4. Discuss any econometric difficulties of the empirical work.

 

B.

A household has the utility of wealth function

U(W) = W (b/2)W2.

Its initial wealth is W0.
It can hold in its portfolio a safe asset paying a safe rate of return of our rB in the risky asset paying rE+g, where rE is the expected return and sg2 is the variance of return.

    1. Derive demand functions as a function of rB, rE, sg2, and W0.
    2. Suppose that a tax on next period’s wealth is announced, at rate t, i.e. t% of wealth at the beginning of next period will be paid to the government. What effect does this have on the asset demands? Can you give an intuitive explanation?
    3. Suppose instead that positive returns on the risky assets are taxed at a rate t, but not negative returns. Thus if A2 is the holding of the risky asset, the tax is tA2(rE + g) if rE +g > 0 and zero otherwise. The return on the safe asset is not taxed. What effect does this have on asset demands?

 

  1. (20 points)
      1. Define free reserves.
      2. Define excess reserves.
      3. What effect would Federal Reserve System payment of interest on reserves held at FR banks have on the demand for reserves? (Use any appropriate model, and assumed the rate on reserves as fixed below the rate on short-term government securities and the discount rate.)
      4. What effect would these interest payments have on the money multiplier? (For simplicity, assume there is only one type of deposit in existence.)
      5. It is sometimes said that payment of interest on reserves would strengthen Fed control over the money stock. Can you justify or refute this view?

 

Source: Irwin Collier.

Image Source: MIT Museum.