Month: March 2018

Today I am relieved to post the final batch (1930-1935) of enrollment data and examination questions for Frank W. Taussig’s core economic theory course. All in all nearly a half-century run for Harvard’s Grand Old Man.

Previous batches of transcribed exams are provided via the links below.

Examinations for 1887-90
Examinations for 1891-94
Examinations for 1897-1900
Examinations for 1904-09
Examinations for 1911-14
Examinations for 1915-17
Examinations for 1918-19 [Bullock and Carver]
Examinations for 1920-22
Examinations for 1923-25
Examinations for 1926-30

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1930-31

Course Enrollment: Economics 11
1930-31

[Economics] 11. Professor Taussig.—Economic Theory

Total 58: 50 Graduates, 1 Senior, 7 Radcliffe.

Source: Harvard University. Reports of the President and Treasurer of Harvard College, 1930-31, p. 77.

1930-31
HARVARD UNIVERSITY
ECONOMICS 11
Mid-year Examination

Arrange your answers in the order of the questions.
One question may be omitted.

1. In an examination paper set at Harvard College in 1876 the following question appears: “What is the error in the proposition that high wages make high prices?”
   What answer would have been expected from a student at that time? What answer would you give now?
2. “The latent influence by which the values of things are made to conform in the long run to the cost of production is the variation that would otherwise take place in the supply of the commodity. The supply would be increased if the thing continued to sell above the ratio of its cost of production, and would be diminished if it fell below that ratio. But we must not therefore suppose it to be necessary that the supply should actually be either diminished or increased. . . . There is no need that there should be any actual alteration of supply; and when there is, the alteration, if permanent, is not the cause, but the consequence of the alteration in value. If, indeed, the supply could not be increased, no diminution in the cost of production would lower the value: but there is by no means any necessity that it should. The mere possibility often suffices.”
   Is this in accord with Mill’s analysis of demand and supply? with Marshall’s? with business experience?
3. Can you distinguish between “supply price” and “expenses of production” in the following cases:
   1. the temporary equilibrium of supply and demand;
   2. accountants’ figures of cost for agricultural produce;
   3. accountants’ treatment of depreciation in the accounts of a manufacturing enterprise.
4. In an examination paper set at Cambridge University, England, in 1929, the following appears: “From the point of view of economic principle, analyze the return obtained to-day from fen land drained in the seventeenth century?”
   What answer would Ricardo or Mill have given? What answer would be expected now from a student in Cambridge, England? What from a student in Cambridge, Mass.?
5. (1) Marshall’s final conclusion as to the tenability of a distinction between interest and rent.
   (2) The following passages:

“The deepest and most important line of cleavage in economic theory” [is] “the distinction between the quasi-rents which do not, and the profits which do, directly enter into the normal supply prices of produce for periods of moderate length.”
“When the artisan or professional man has once obtained the skill required for his work, a part of his earnings are for the future really a quasi-rent of the capital and labour invested in fitting him for his work, in obtaining his start in life, his business connections, and generally his opportunity for turning his faculties to good account; and only the remainder of his income is true earnings of effort. But this remainder is generally a large part of the whole. And here lies the contrast. For when a similar analysis is made of the business man, the proportions are found to be different: in his case the greater part is quasi-rent.”

Is there inconsistency, apparent or real?

6.    a.  Adam Smith’s remark, that the division of labor is limited by the extent of the market, has been said to state the gist of all there is to be said about external economies.
   1. It has been said, again, that the only internal economies which signify as regards economic theory are those accruing from the growth of production on a large scale.
   2. “If a commodity obeys the law of increasing return, an increase of demand causes much more of it to be produced, — more than if the commodity obeyed the law of constant return, — and at the same time lowers its price. . . . This line of reasoning has been thought by some writers to lend support to the claim that a Protective duty on manufactured imports in general increases the home market for those manufactured goods; and, by calling into play the Law of Increasing Return, ultimately lowers their price to the home consumer.”
   3. Consider these, separately or as a whole.

7.     a. “Let us suppose that every one owns whatever capital he uses . . . and is not only of equal capacity, but of equal willingness to work, and does in fact work equally hard; also that all work is unskilled, — or rather, unspecialized in this sense, that if any two people were to change occupations, each would do as much and as good work as the other one had done.”
   2. “Let us suppose that labor is not of one industrial grade, but of several; that parents always bring up their children to an occupation of their own grade; that they have a free choice within that grade, but not outside it. Let us suppose, further, that the increase of population in each grade is governed by other than economic causes; it may be fixed, or may be influenced by changes in custom, in moral opinion, etc.”
   3. What would govern relative wages under each of these suppositions? What would govern the value of goods? Which supposition underlies Marshall’s conclusions on the relation between wages and value?

1930-31
HARVARD UNIVERSITY
ECONOMICS 11
Final Examination

Answers questions 1, 2, 3 briefly; 4 and 5 more at length.

1. Jevons remarked: “Capital, as I regard it, consists merely in the aggregate of those commodities which are required for sustaining laborers of any kind or class engaged in work. . . . The single and all-important function of capital is to enable the laborer to await the result of any long-lasting work, — to put an interval between the beginning and the end of an enterprise.”
   Wherein does this resemble, wherein differ from, the view of Ricardo? Böhm-Bawerk? Marshall? Clark?
2. Public encouragement or discouragement for industries of increasing, constant, or decreasing returns, — wherein the analysis of Pigou resembles that of Marshall, wherein differs.
3. The bearing on the national dividend and its maximization, of the price structure obtaining under —

Simple competition,
Simple monopoly,
Joint supply,
Discriminating monopoly.

4. Are there grounds for considering “profits” as an element in distribution different from wages, interest, rent?
5. The doctrine that wages are determined by the marginal productivity of labor; the grounds on which it rests; and the aid it may give on such questions as the (1) basis of fair wages in the arbitration of industrial disputes, and the (2) effect on contractual wages of a compulsory system of social insurance (accident, sickness, old age, unemployment).

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1931-32

Course Enrollment: Economics 11
1931-32

[Economics] 11. Professor Taussig.—Economic Theory

Total 48: 38 Graduates, 4 Seniors, 1 Business School, 5 Radcliffe.

Source: Harvard University. Reports of the President and Treasurer of Harvard College, 1931-32, p. 72.

HARVARD UNIVERSITY
1931-32
ECONOMICS 11
Mid-year Examination

Arrange your answers in the order of the questions.
One of the first six questions may be omitted.

1. “The Classical Economists appreciated the necessity of a fund to support labour during the period of production; but they overlooked the continuous character of production and output, and confused the working capital, which is provided by continuously feeding the flow of available income back into the machine of process, with the liquid capital (goods in stock) at the commencement of any period of process. [Liquid capital is elsewhere defined as “goods yielding nothing, but capable of being used or consumed at any time”; it does not include goods in the hands of merchants.] They did not clearly perceive that the capital to keep labour in employment is found, not in the stocks of goods already available, nor by the abstention from the consumption of available income, but by decisions which have the effect (a) of determining what proportions of the goods emerging from the machine of process are in fixed and in liquid form respectively, and (b) of applying the flow of available income in one way instead of in another, namely, by supporting productive consumers instead of unproductive consumers.” M. Keynes.
   Does the error here described appear in the Classical Economists? and is the criticism of their treatment of abstention valid?
2. “Marshall’s treatment [of supply] is highly elliptical. A striking illustration of his tendency to telescope his argument is his common practice in his graphs of labelling cost curves and supply curves alike with the symbols s-s’, conventionally used for supply curves, and thus diverting the attention of his readers , and perhaps also occasionally his own attention, from the necessity of selecting from the many possible types of cost curve that one which in the given circumstances alone has claims to being considered as also a supply curve.” Is Marshall open to this criticism? Illustrate and comment.
3. The bearing (if any) of the concept of a representative firm on the theory of value, of rent, of business profits.
4. Explain the method by which one can derive the supply price of a commodity produced under conditions of joint supply; that by which one can derive the demand price of a commodity demanded under the conditions of joint demand.
   What bearing, if any, have these methods of analysis on the phenomena of value and distribution in a society which is economically stratified?
5. “When the artisan or professional man has once obtained the skill required for his work, a part of his earnings are for the future really a quasi-rent of the capital and labour invested in fitting him for his work, in obtaining his start in life, his business connections, and generally his opportunity for turning his faculties to good account; and only the remainder of his income is true earnings of effort. But this remainder is generally a large part of the whole. And here lies the contrast. For when a similar analysis is made of the profits of the business man, the proportions are found to be different: in his case the greater part is quasi-rent.”
   Is the greater part of the earnings of business men to be regarded as quasi-rent? Is the remainder only to be regarded as true earnings of effort?
6. “The extra income derived from rare natural abilities bears a closer analogy to the surplus produce from the holding of a settler who has made an exceptionally lucky selection, than to the rent of land in an old country.” Is this extra income in the nature of a quasi-rent, in either case?

Not to be omitted.

7. The following have been suggested, by one writer or another, as the grounds on which the distinction between interest and rent turns:
   1. Land is fixed in amount, instruments made by man are not.
   2. Land is an instrument made by man in essentially the same sense as is any other kind of capital-good; its industrial serviceability and its availability are the result of man’s action.
   3. Competition equalizes the returns on instruments but not those on land.
   4. The returns on land and instruments alike depend on marginal productivity.

Give your own views (briefly) on each point; and sum up with a statement of your conclusion on the tenability of the distinction.

HARVARD UNIVERSITY
1931-32
ECONOMICS 11
Final Examination

Arrange your answers in order of the questions.

1. “With regard to utility, two views are commonly held. The older and more naïve is that an increment of supply (which should always be a continuous stream and not a stock) makes its specific addition to the utility of the total, without affecting the utility of the earlier increments. This is the basis for the familiar utility curve with the implication of consumer’s surplus. On the other hand, it may be held that the utility of all increments is always alike, the addition of each increment to the total bringing down the utility of the earlier ones to the level of its own. Both these views lead to nonsensical results: the first to fantastic magnitudes for total utilities, and the second to the conclusions that the utility of a larger supply may be less than that of a smaller and consequently that people often choose and pay for a reduction in utility.”
   Do these nonsensical results necessarily follow?
2. “Pure profits are at once necessary and probably non-existent.” What is meant by “pure profits” in this statement? Given the meaning, what do you say to it?
3. What is the influence of technological improvements on the rate of interest? what the influence of the rate of interest on technological improvements?
4. “It is obvious that an increase in the supply of capital instruments will make for an increase in the national dividend as a whole. Can it at the same time make for a decrease in the real income of labour? The analysis relevant to this question has been developed by Marshall…. This analysis shows, first, that every factor of production, including entrepreneurs’ work, tends to be remunerated at a rate equivalent to its marginal net product of commodities in general. It shows, secondly, that, other things being equal, the marginal net product, in this sense, of every factor diminishes as the supply of the factor increases beyond a fairly low minimum. This proposition expresses what may be called the law of diminishing returns to individual factors of production. This law must not be confused with the law of diminishing returns to resources in general invested in a given occupation….”
   How far was this analysis developed by Marshall? Are the two laws not to be confused?
5. Does an elastic demand for one commodity necessarily imply that the demand for some other commodity is inelastic?
6. What grounds are there for the statement that in Great Britain the elasticity of the aggregate demand for labor is immensely greater than unity?

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 1932-33

Course Enrollment: Economics 11
1932-33

[Economics] 11. Professor Taussig.—Economic Theory

Total 42: 33 Graduates, 1 Junior, 6 Radcliffe, 2 Others.

Source: Harvard University. Reports of the President and Treasurer of Harvard College, 1932-33, p. 66.

HARVARD UNIVERSITY
1932-33
ECONOMICS 11
Mid-year Examination

1. The original and indestructible powers of the soil; what part they play in Ricardo’s treatment of rent, what in Marshall’s.
2. “If, for simplicity of exposition, we leave out of account raw materials, the stream of floating capital is constituted almost entirely of wage-goods — goods that are paid over (through money) as wages. Thus, the larger the addition to the normal stream of floating capital that business men can secure in response to a given rise in their interest offer, due to a given improvement in their expectations, the larger proportionately will be the addition made to the real demand for labour. . . .
   “When a boom comes, a large part of the impact is always likely to be upon industries engaged in instrumental trades: and, plainly, extra work there will not lead to an addition to the flow of wage goods — floating capital — for a considerable time. Some part of the primary effect will, however, touch the industries that make these goods and, so far as it does this, we shall have an extra flow of them available to pay for extra labour. This was the important point that the doctrine of the Wages Fund ignored. It must be noticed, however, that this source of additions to floating capital (i.e. extra work) is only available, roughly speaking, so long as unemployed workers are available to be called into industry. If expectations and the desire to employ workpeople go on expanding after this point has been passed, the source is no longer available, and, consequently, the element of elasticity which it accords to the supply of floating capital no longer exists.”
   Was “the important point” here noted in conflict with the Wages Fund doctrine? and is the statement otherwise in conflict with that doctrine?
3. The tendency of profits to a minimum; how treated by Ricardo, by Mill, by Cairnes?
4. Explain, with the utmost brevity and precision,

“real cost” of production,
expenses of production,
supply price,
marginal cost,
bulk line cost.

5. “It may be conceded that if a certain class of people were marked out from their birth as having special gifts for some particular occupation, and for no other, so that they would be sure to seek out that occupation in any case, then the earnings which such men would get might be left out of account as exceptional, when we are considering the chances of success or failure for ordinary persons.”
   Consider whether, given the premise, the conclusion here stated would follow; what is the bearing of the reasoning on Walker’s theory of business profits; what Marshall would say of premise and conclusion.
6. What bearing, if any, on the concept of non-competing groups do you find on a consideration of, —
   1. universal education, general and technical;
   2. the influence of conventional necessaries;
   3. the representative firm;
   4. the law of derived demand for a commodity demanded jointly with other commodities.

HARVARD UNIVERSITY
1932-33
ECONOMICS 11
Final Examination

1. “Ricardo appears to have seen distinctly almost everything of primary importance in the scientific doctrine of capital, very much as it is known now.” Marshall.
   If so, wherein? If not, wherein not?
2. — The price of wheat raised on good land is the same as that of wheat raised on the marginal zone, and it affords a surplus above wages and interest paid by farmers for labor and capital used in the tilling of the good land.
   — The existence of this surplus in its original form, that of wheat, affects the supply and the price of that product.
   — The price of cloth woven on good looms is the same as that of equally good cloth woven on marginal ones, and it affords a net surplus above the cost of maintaining the stock of looms and the wages and interest paid by manufacturers for further capital used in connection with the good looms.
   — The existence of this surplus in its original form, that of cloth, affects the supply and the price of this product.
   Discuss (1) the bearing of these statements on the older distinction between capital and land, and (2) the connection between these surpluses and price.
3. “The diminishing return which arises from an ill proportioned application of the various agents of production into a particular task has little in common with the broad tendency to the pressure of a crowded and growing population on the means of subsistence. . . . It has no very close connection with the tendency of agriculture in an old country to yield a diminishing return to a general increase of resources well applied in cultivation: and indeed exactly parallel cases can be found of a diminishing return to particular resources when applied in undue proportion, even in industries which yield an increasing return to increased applications of capital and labour when appropriately distributed.”
   Is this statement in accord with the general current of economic theory at the present time? Do you agree with it?
4. “An increase in the supply of capital . . . will make for an increase in the national dividend as a whole. Can it at the same time make for a decrease in the real income of labour? The analysis relevant to this question has been developed by Marshall. Subject to certain important qualifications, which do not affect the present argument, this analysis shows, first, that every factor of production, including entrepreneurs’ work, tends to be remunerated at a rate equivalent to its marginal net product of commodities in general. It shows, secondly, that, other things being equal, the marginal net product, in this sense, of every factor diminishes as the supply of the factor increases beyond a fairly low minimum. . . . This proposition expresses what may be called the law of diminishing returns to individual factors of production. This law must not be confused with the law of diminishing returns to resources in general invested in a given occupation.”
   Wherein does this distinction differ from that contained in the preceding extract? Do you agree with it?
5. Consider whether it is (1) justifiable, (2) practicable to “charge what the traffic will bear”
   1. when there is a large element of overhead costs;
   2. when there is a large element of joint cost;
   3. when there is simply monopoly;
   4. when there is discriminating monopoly.

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1933-34

Course Enrollment: Economics 11
1933-34

[Economics] 11. Professor Taussig.—Economic Theory

Total 20: 11 Graduates, 2 Seniors, 5 Radcliffe, 2 Business School.

Source: Harvard University. Reports of the President and Treasurer of Harvard College, 1933-34, p. 85.

HARVARD UNIVERSITY
1933-34
ECONOMICS 11
Mid-year Examination

One question may be omitted.

1. “The foundations of the theory [of cost of production and value] as they were left by Ricardo remain intact.” Does Marshall’s treatment of the relation of “general wages” to value bear out this statement? of differences of wages?
2. Explain
   1. Internal economies of large-scale production.
   2. External economies of large output.
   3. External dis-economies of large output.
3. “Ricardo, and the economists of his time generally were too hasty in deducing this inference [tendency to increased pressure] from the law of diminishing return; and they did not allow enough for the increase of strength that comes from organization. But in fact every farmer is aided by the presence of neighbours, whether agriculturists or townspeople. . . If the neighbouring market town expands into a large industrial centre, all his produce is worth more; some things which he used to throw away fetch a good price. He finds new openings in dairy farming and market gardening, and with a larger range of produce he makes use of rotations that keep his land always active without denuding it of any of the elements that are necessary for its fertility.” Do you agree?
4. “The flow of investment of resources for future needs consists of two streams. The smaller consists of new additions to the accumulated stock: the larger merely replaces that which is destroyed; . . . The annual flow of this second stream is probably not less than a quarter of the total stock of capital, even in a country in which the prevailing forms of capital are as durable as in England. It is therefore not unreasonable to assume for the present that the owners of capital in general have been able in the main to adapt its forms to the normal conditions of the time, so as to derive as good a net income from their investments in one way or another.” Has this any bearing on the doctrine of quasi-rent?
5. If the values of goods were proportional to their real costs, would the utility curve and the demand curve be the same, for persons receiving labor incomes?
6. What is to be said
   1. of the necessaries of life, as regards elasticity of demand, consumer’s surplus, value and differences of wages;
   2. of conventional necessaries, in the same particulars?
7. — “The price of wheat raised on good land is the same as that of wheat raised on the marginal zone, and it affords a surplus above wages and interest paid by farmers for labor and capital used in the tilling of the good land.
   — “The fact that farmers pay landlords for this surplus has no effect on the price of wheat.”
   — “The price of cloth woven on good looms is the same as that of equally good cloth woven on marginal ones, and it affords a net surplus above the cost of maintaining the stock of looms and the wages and interest paid by manufacturers for further capital used in connection with the good looms.
   — “The fact that entrepreneurs pay capitalists for this surplus has no effect on the price of cloth.”

What bearing have these passages on the theory of rent? of business profits?

HARVARD UNIVERSITY
1933-34
ECONOMICS 11
Final Examination

Arrange your answers in the order of the questions.

1. Is interest treated as a derivative from “profits”

by Ricardo,
by Marshall,
by Böhm-Bawerk,
by those writers who regard profits as appearing only in a “dynamic” state?

Your own view?

2. “There is always an interval between the setting to work of a man and the emergence, in consequence of his work, of any finished product, whether for consumption or as a productive instrument for the machine of industry. . . . What is essential is the time interval between the centre of gravity of the labour employed and the output (or, more strictly, the sale) of the finished product. I shall call this interval the period of production.”
   Wherein is the period of production here considered like, and wherein unlike, that discussed by F. A. Walker? by Böhm-Bawerk? For what purposes of economic analysis is the period described in the extract appropriate?
3. “Autonomous” and “induced” inventions: their bearing on “increasing returns” and on the marginal productivity theorem.
4. Reflections suggested by a Rembrandt, as regards
   1. market price;
   2. total utility and consumers’ surplus;
   3. the distinction between “wealth” and “capital.”
5. The problems and distinctions implied in the terms

Economic Welfare,
National Dividend,
Marginal Social Net Product.

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 1934-35

Course Enrollment: Economics 11
1934-35

[Economics] 11. Professors Taussig and Schumpeter.—Economic Theory

Total 27: 21 Graduates, 1 Senior, 5 Radcliffe.

Source: Harvard University. Reports of the President and Treasurer of Harvard College, 1934-35, p. 81.

Reading List for Economics 11, Fall Semester 1934

Posted from Wolfgang Stolper’s course notes.

HARVARD UNIVERSITY
1934-35
ECONOMICS 11
Mid-year Examination

One question may be omitted. Arrange your answers in the order of the questions.

1. “Suppose that society is divided into a number of horizontal grades, each of which is recruited from the children of its own members; and each of which has its own standard of comfort, and increases in numbers rapidly when the earnings to be got in it rise above, and shrinks rapidly when they fall below that standard. Suppose, then, that parents can bring up their children to any trade in their own grade, but cannot easily raise them above it and will not consent to sink them below it. . . .”
   Suppose also that there is free competition as regards the earnings of capital.
   On these suppositions what would be the relation between
   1. the values of commodities and their “real cost”;
   2. the values of commodities and their money costs;
   3. the values of commodities and their supply prices?
2. “Internal economies of large-scale production are primarily a long-run phenomenon, dependent upon appropriate adjustment of scale of plant to each successive output. They should not be confused with the economies resulting from ‘spreading of overhead.’” Why or why not to be thus confused?
   “Internal economies of large-scale production are independent of the size of output of the industry as a whole, and may be accruing to a particular concern whose output is increasing at the same time that the output of the industry as a whole is undergoing a decline.” Why or why not?
3. Does quasi-rent have the same meaning in the following passages?
   1. “The quasi-rent of farm buildings.”
   2. “When the artisan or professional man has once obtained the skill required for his work, a part of his earnings are for the future really a quasi-rent of the capital and labour invested in fitting him for his work, in obtaining his start in life, his business connections, and generally his opportunity for turning his faculties to good account; and only the remainder of his income is true earnings of effort. But this remainder is generally a large part of the whole. And here lies the contrast. For when a similar analysis is made of the profits of the business man, the proportions are found to be different: in his case the greater part is quasi-rent.”
   3. “In relation to normal value the earnings of high ability are to be regarded as a quasi-rent rather than as a rent proper.”
4. It is fatal to the conception of consumers’ surplus to admit:
   1. that differences in income make it impossible to measure satisfactions;
   2. that each unit of a homogeneous supply yields ipso facto the same satisfaction as every other unit;
   3. that the satisfaction indicated by the high price paid for an article having “prestige value” will disappear when the article becomes cheap.
5. Does “capital,” as distinguished from “capital goods,” serve to synchronize the effort of labor with the reward for labor? If so, how? If not, why not?
6. Explain the distinctions
   1. between the intensive and the extensive margins of cultivation for land;
   2. the intensive and the extensive zones of indifference in the application of labor;
   3. the marginal product of labor and the product of marginal labor.

State summarily your opinion of the usefulness of the distinctions as tools of analysis.

Course outline and final exam for Economics 11, Spring Semester 1935

Transcribed from Joseph Schumpeter’s papers and posted earlier.

Source for examination questions: Harvard University Archives. Prof. F. W. Taussig, Examination Papers in Economics 1882-1935 (Scrapbook).

Image Source: Frank W. Taussig in Harvard Class Album, 1934.