SummersL Archives

The following reading list and final exam were found in the Peter Diamond papers at Duke University’s Economists’ Papers Archive. No instructor is named on either the reading list or the exam. While transcribing for this post, I thought I had better base the small detail of the course instructor on some evidence. Checking the published course catalogue for the 1980-81 academic year at M.I.T., I was able to confirm my suspicion that Peter Diamond was indeed a course instructor. Not surprising in hindsight was that the course was co-taught with Lawrence H. Summers (a.k.a. “Larry” Summers) of most recent infamy.

On Summers’ Jeffrey Epstein connection: see the series of articles in the Harvard Crimson by Dhruv T. Patel and Cam N. Srivastava, Exhibit #1, Exhibit #2, Exhibit #3 (with Elise A. Spenner).

Once I go to the trouble of preparing an artifact for posting, I cannot resist the compulsion to share it. I ask my visitors to accept this post as a tribute to Peter Diamond’s contribution to graduate economics education à la M.I.T. rather than a rehabilitative look at the young Larry Summers in the Rear-view Mirror.

The evil that men do lives after them; The good is oft interred with the archival records.

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14.476 Social Insurance

Prereq.: 14.121, 14.122
Year: G (2)

Theory of social insurance and examination of some of existing and proposed US programs including some subset of Social Security, Unemployment Compensation, Worker’s Compensation, National Health Insurance.

P. A. Diamond, L. H. Summers

Source: Massachusetts Institute of Technology. Bulletin 1980-81. Courses and Degree Programs Issue 1980-81, p. 513.

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14.476 Social Insurance
Spring 1981

(x) – optional

Introduction
1. (x) H. Kunreuther et al, Disaster Insurance Protection, Chapters 1, 10.
2. (x) P. Diamond, “A Framework for Social Security Analysis,” Journal of Public Economics, 1977, 275-98.
3. (x) Debreu, G., Theory of Value, Chapter 7. Also in P. Diamond and M. Rothschild, Uncertainty in Economics.
4. (x) Feldstein, M., “The Theory of Social Insurance,” Public Policy, 1977.
5. (x) FTC Staff Report, “Life Insurance Cost Disclosure.”
Moral Hazard
1. (x) M. Pauly, “Overinsurance and Public Provision of Insurance,” Quarterly Journal of Economics, 1974, 44-54. Also in Diamond and Rothschild.
2. Shavell, “On Moral Hazard and Insurance,” Quarterly Journal of Economics, November 1979.
Adverse Selection
1. Diamond and Rothschild, Uncertainty in Economics, Chapters 14, 16.
2. Akerlof, “The Market for Lemons,” Quarterly Journal of Economics, 1970, 488-500. Also in Diamond and Rothschild.
3. Rothschild and J. Stiglitz, “Equilibrium in Competitive Insurance Markets,” Quarterly Journal of Economics, 1976, 269-650. Also in Diamond and Rothschild.
Property Insurance
1. Joskow, “Cartels, Competition and Regulation in the Property-Liability Insurance Industry,” Bell Journal, 1973, 375-427.
2. (x) Stone, J., “Opinion, Findings and Decision on 1978 Automobile Insurance Rates, Part II.” Also in Division of Insurance, Commonwealth of Massachusetts, Automobile Insurance Risk Classification: Equity and Accuracy.
3. Smallwood, D., “Competition, Regulation, and Product Quality in the Automobile Insurance Industry,” in A. Phillips, ed., Promoting Competition in Regulated Markets.
4. Shavell, “On Moral Hazard and Insurance,” mimeo version, Section 6, Experience Rating.
5. State Farm Insurance Company, Research Department, “The Effect of a Suburban Driving Population on Urban Auto Insurance Premiums.”
6. DuMouchel, “Computing Territorial Relativities which Include the Effects of Travel Between Territories on Claims Costs.”
Pension and Social Security
1. (x) Munnell, A., The Future of Social Security, Brookings.
2. (x) Boskin, M., ed., The Crisis in Social Security, 1977.
3. (x) Myers, R.J., Social Insurance.
4. Pellechio, A., “Social Security Financing and Retirement Behavior,” AER, May 1979.
5. Boskin, M., “Social Security and Retirement Decision,” Economic Inquiry, 1977.
6. Quinn, J., “The Early Retirement Decision,” Journal of Human Resources, Summer 1977.
7. Bulow, J., “Analysis of Pension Findings under ERISA,” mimeo, 1979, National Bureau of Economic Research working paper.
8. Hagens, J., “Social Security as Retirement Insurance,” mimeo.
9. Crawford and Lilien, “Social Security and the Retirement Decision,” mimeo.
10. Mirrlees, J., “Intended Labour Supply.”
11. Mirrlees J. and Diamond, P., “A Model of Social Insurance with Variable Retirement,” Journal of Public Economics, 1979, 295-336.
12. __________ and __________, “Payroll Tax Financed Social Insurance with Variable Retirement.”
13. __________ and __________, “Social Insurance where the Value of Retirement Varies.”
14. __________ and __________, “Social Insurance with Variable Retirement and Private Savings.”
15. HEW Task Force on the Treatment of Women Under Social Security, Report.
16. HEW, “Social Security and Changing Roles of Men and Women.
17. (x) 1979 Advisory Council on Social Security, Report.
18. (x) National Commission on Social Security, Report.
19. (x) President’s Commission Pension Policy, Interim Report.
Unemployment
1. (x) Unemployment Compensation: A Background Report, Background Paper 15, Congressional Budget Office, 1976.
2. (x) “The Economics of Unemployment Insurance: A Symposium,” Industrial & Labor Relations Review, 30:4, July 1977.
3. (x) Baily, M.N., “Unemployment Insurance as Insurance for Workers,” in J. Hight, ed., Symposium on the Economics of Unemployment Insurance.
4. (x) Shavell, S., and L. Weiss, “The Optimal Payment of Unemployment Insurance Benefits over Time,” Journal of Political Economy, December 1979.
5. (x) Hall, R., and D. Lilien, “Efficient Wage Bargains under Uncertain Supply and Demand,” AER, December 1979.
6. Feldstein, M., “Private and Social Costs of Unemployment,” American Economic Review, May 1978, 155-8.
7. Feldstein, M., “The Impact of Unemployment Insurance on Temporary Layoff Unemployment,” AER, March 1979.
8. Clark, K., and L. Summers, “Labor Market Dynamics and Unemployment: A Reconsideration,” BPEA, 1979:1.
9. Clark, K., and L. Summers, “Unemployment Insurance and Labor Market Transitions,” mimeo.
10. (x) Baily, M., “On the Theory of Layoffs and Unemployment,” Econometrica, 1977, 1043-64.
11. (x) Flemming, S., “Aspects of Optimal Unemployment Insurance, Journal of Public Economics, 1978, 403-425.
12. (x) Jovanovic, B., “Job Matching and the Theory of Turnover,” Journal of Political Economy, 1979, 972-990.
13. (x) “Firm-Specific Capital and Turnover,” Journal of Political Economy, 1979, 1246-1260.
14. (x) Burdett, K. and Mortensen, D., “Search, Layoffs, and Labor Market Equilibrium.”
15. (x) Holmstrom, B., “Equilibrium Long-Term Labor Contracts.”
16. (x) Akerlof, G. and Main, B., “Pitfalls in Markov Modeling of Labor Market Stocks and Flows.”
17. (x) __________, “Unemployment Spells and Job Tenures.”
18. (x) National Commission on Unemployment Compensation, Report.
19. Gustman, National Bureau of Economic Research working paper.
20. Nickell, S., “The Effect of Unemployment and Related Benefits on the Duration of Unemployment,” Economic Journal, 89, 1979.
21. Atkinson, A., “Unemployment Benefits and Incentives,” unpublished.

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14.476
Spring 1981
Final Exam

Answer four questions. They all count equally.

“Unlike the case of adverse selection, with moral hazard but no adverse selection, competitive equilibrium is efficient.” Comment.
Using a two period model of labor supply with uncertain incidence of (unobserved) disability, explain the effect of private savings opportunities on the ability of the government to provide disability insurance.
Discuss the cases for and against cross-subsidization of different risk classes for automobile insurance (assuming that auto insurance as a whole breaks even).
Discuss the advantages and disadvantages of annual sharing of husband’s and wife’s earnings for Social Security purposes.
Discuss the determinants of the optimal waiting period for unemployment benefits. Be clear about the criteria you are using and the separate moral hazard problems affected by the waiting period.

Source: Duke University. David M. Rubenstein Rare Book & Manuscript Library. Economists’ Papers Archive. Peter Diamond papers, Box 4. Folder “Teaching Material”.

Image Sources: Portrait of Peter Diamond (2003) by Donna Coveny/MIT in “An Interview with Peter Diamond”, Macroeconomic Dynamics, 11, 2007, 543-565. Portrait of Lawrence H. Summers (1982) from MIT Museum.

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.

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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.

14.476 Social Insurance

14.476 Social Insurance Spring 1981

14.476 Spring 1981 Final Exam

1986 FACULTY SKIT

14.476 Social Insurance
Spring 1981

14.476
Spring 1981
Final Exam