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Harvard. Economic Aspects of War Course Organised by Harris, 1940

 

Nine of the Harvard economics faculty pulled together to offer students a course on the Economic Aspects of War in the second semester of the 1939-40 academic year. According to the annual enrollment statistics, 25 students were registered for the course (perhaps there were auditors?). The enrollment jumped to 116 in 1940-41 and then dropped back down to 66 (1941-42) and fell to 34 (1942-43) as the number of concentrators (as well as instructional staff) fell during the course of WWII.

Addition: The final examination for Economics 18b from 1940.

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WAR’S ECONOMIC PHASES STUDIED IN NEW COURSE
Harvard Crimson
December 19, 1939

Will Analyze Changes in Economics Incurred by War, With Emphasis on Present Conflict

Plans for a course on “Economic Aspects of War” to be given in the second semester were revealed yesterday by Seymour E. Harris ’20, associate professor of Economics, following approval by the Faculty Committee on Instruction.

Harris said, “This course will analyze the rapid dislocation of economic variables that occur in war times, and during the transition to peace. War economics is a branch of economics like Industrial Organization or Money and Banking, giving the department a chance to use Economics in the treatment of problems that face the world today.”

Contents of the Course

The course will use the tools of economic analysis, applying them to the present problem. Economics of past wars; market organization, price control and rationing; money and banking in war times; the relation of money and public and private capital markets; and the relation of war to economic fluctuations will be dealt with in the lectures and reading.

Included in the discussion will be a study of the effects of war on international balance of payments, on the distribution of gold and on commercial policy; repercussions on agriculture; methods of finance in the war and post-war periods; effects of war upon the distribution of income and wealth; trade unionism, money and real wages and employment in war times; and, finally, transition to peace.

Harris will be in charge of the course. Professor Harold H. Burbank, Professor William L. Crum, Professor Alvin H. Hansen, Professor Edward S. Mason, Professor Joseph H. Schumpeter, Professor Sumner H. Slichter, Professor John H. Williams, and Paul M. Sweezy ’32, instructor in Economics, will share in the teaching.

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Course Enrollment

[Economics] 18b 2hf. Associate Professor Harris.–Economic Aspects of War.

Total 25: 16 Seniors, 6 Juniors, 2 Sophomores, 1 Other.

Source: Report of the President of Harvard College and Reports of the Departments, 1939-40Harvard University. , p. 99.

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Economics 18b
1939-40

In order to assure more continuity in the course it has seemed expedient to assign virtually all of the following books.

Bresciani-Turoni, The Economics of Inflation (G. Allen & Unwin).

Cannan, E., An Economist’s Protest.

(Not an assignment in any part but is suggested strongly.) The book deals with numerous problems chronologically and hence is not easily apportioned over the various sections of the course.

Clark, J. M., The Cost of the Great War to the American People.

Pigou, A. C., Political Economy of War.

Stamp, J., The Financial Aftermath of the War

 

E.J. = British Economic Journal.
J.R.S. = Journal of the Royal Statistical Society.

Q.J.E. = Quarterly Journal of Economics.

Proceedings = Proceedings of Academy of Political Science.

R.E.S. = Review of Economic Statistics.

 

Week 1 (Feb. 5-9)
INTRODUCTORY.
Professor Harris.

Plan, readings, bibliography; war economics in historical retrospect; peace versus war economics in broad outlines.

Assignment:

Pigou, A. C., Political Economy of War, pp. 1-71.

Important suggestions:

Slichter, S. H., “The Present Nature of the Recovery Problem,” Proceedings, 1940, pp. 2-15.

United States Government, Industrial Mobilization Plan (revision of 1939). Senate Document No. 134.

War Office, Statistics of Military Efforts of British Empire during the Great War 1914-20.

Wolf, F. B. “Economy in War Tim” in the volume War in the Twentieth Century, pp. 363-408.

Other suggestions:

Clapham, J. H., An Economic History of Modern Britain—An Epilogue, pp. 511-554.

Einzig, P., Economic Problems of the Next War (1939).

Higgins, B., “The Economic War since 1918” in the volume War in the Twentieth Century, pp. 135-90.

Manual of Emergency Legislation (G.B.) with four Supplements, 1914-17.

Noyes, A. D., The War Period of American Finance, Chs. I-III, pp. 1-162.

Possony, S. T., Tomorrow’s War, pp. 135-235.

Speier, H., and Kahler, A., War in Our Times, Chs. 4-7, pp. 78-171.

United States Council of National Defense, Reports 1917-8.

War Cabinet, Report of 1918, Cmd. 325 (1919).

Weeks 2-3 (Feb. 12-23)
INDUSTRIAL ORGANIZATION.
Professor Mason and Dr. Sweezy.

Industry in war time. Industrial planning for war. Priorities, rationing and price control. The War Industries Board. Techniques of price fixing with special reference to the iron and steel industries. Present prospects for raw materials, industrial capacity and prices.

Assignment:

Clark, J. M., Costs of the World War, Chs. 19-21, pp. 262-291.

Heckscher, E., Sweden in the World War, Part I, pp. 3-42.

Keynes, J. M., “Policy of Government Storage of Foodstuffs and Raw Materials,” E.J., 1938, pp. 449-460.

Mason, E. S., “the Impact of the War on American Commodity Prices,” R.E.S., November, 1939.

Pigou, A. C., Political Economy of War, pp. 112-160.

Taussig, F. W., “Price Fixing as Seen by a Price Fixer,” Q.J.E., Vol. 33, p. 205.

Important suggestions:

Baruch, B., American Industry in the War (1921).

Beveridge, W., British Food Control (1928).

Report of War Industries Board, American Industry in the War (1921).

Other suggestions:

Birkett, M. S., “Iron and Steel Trade during War,” R.S.J., 1920.

Clarkson, G.B., Industrial America in the World War.

Clynes, J. R., “Food Control in War and Peace,” E.J., 1920, pp. 147-155.

Cunningham, W. J., “Railroads under Governemnt Operation,” Q.J.E., Vol. 36, pp. 188 et seq. and Vol. 36, pp. 30 et seq.

Day, E. E., “The American Merchant Fleet,” Q.J.E., Vol. 34, pp. 567 et seq.

Emeny, B., The Strategy of Raw Materials.

Final Report of the Chairman of the United States War Industries Board. (Feb. 1919), pp. 1-111.

Fontaine, A., French Industry during the War.

Great Britain Select Committee on High Prices and Profits, Special Report and Evidence (1917).

Great Britain Departmental Committee on Prices, Interim Report on Committee Appointed to Investigate Prices, Cmd. 8358, Cmd. 8483 (1917-18).

Hines, W. D., War History of American Railroads.

Litman, S., Prices and Price Control in Great Britain during the Great War.

Lloyd, E. M. H., Experiments in State Control.

Mitchell, W. C., Prices and Reconstruction (1920).

Morse, L. K., “The Price Fixing of Copper,” Q.J.E., Vol. 33, pp. 71 et seq.

Nolde, Russia in the Economic War.

Noyes, A. D., The War Period of American Finance, Ch. V (Mobilisation of American Industry), pp. 215-78.

Staley, E., Raw Materials in Peace and War (Council on Foreign Relations 1937).

Surface, M., Grain Trade during War (1921).

Scott, W. R., and Cunnison, J., The Industries of the Clyde Valley during the War.

War Industries Board, History of Prices during the War, W. C. Mitchell.

War Industries Board, International Price Comparisons, W. C. Mitchell.

War Trade Board, Government Control over Prices, P. W. Garrett.

Zagorsky, State Control of Industry in Russia during the War.

Zimmern, D., “The Wool Trade in War Times,” E. J., 1918, pp. 7-29.

Weeks 4-5 (Feb. 26-Mar. 8)
MONEY AND BANKING IN WAR TIMES.
Professors Williams and Hansen.

Objectives of monetary policy; weapons (including rationing); inflationary tendencies; relations of money and private and public capital markets.

Assignment:

Bresciani-Turoni, Economics of Inflation, Chs. 2 and 4, pp. 41-120, 145-182; VI, pp. 224-252.

Important suggestions:

Final Report, Committee on Currency and Foreign Exchange, (Cunliffe), (1919).

Hawtrey, Monetary Reconstruction.

Heckscher, Sweden in the World War, Part III (Monetary History), pp. 129-266.

Other suggestions:

Cannan, E., The Paper Pound of 1797-1821.

Cassel, G., Money and Foreign Exchanges after 1914, pp. 1-62.

Dulles, E. L., The French Franc 1914-28.

Edie, L. D., “The Influence of War on Prices,” Proceedings, 1940, pp. 34-46.

Edgeworth, Currency and Finance in Times of War.

Foxwell, H. S., Papers on Current Finance (1919), pp. 34-68.

Graham, F., and Whittlesey, R., Golden Avalanche.

Indian Exchange and Currency Commission, Report, Evidence and Appendices, Cmd. 527-9 (1920).

Rogers, J. H., Process of Inflation in France 1914-27, Ch. 1-4, 6-8.

Week 6 (Mar. 11-15)
RELATION OF WAR TO ECONOMIC FLUCTUATIONS.
Professor Schumpeter

Effects on consumption and investment demand; innovations; costs; employment, etc.

Assignment:

Bresciani-Turoni, Economics of Inflation, Chs. V, pp. 183-223; VII, pp. 253-281.

Important suggestions:

Clay, H., The Post-War Unemployment Problem, Ch. 1, pp. 1-24.

Other suggestions:

Graham, F. D., Exchange Prices and Production in Hyper-Inflation Germany. Part IV (Effects on German Economy), pp. 241-328.

Mills, F., Economic Tendencies in the United States, Ch. V., pp. 186-241.

 

Week 7 (Mar. 18-22)
EFFECTS ON INTERNATIONAL TRADE.
Professor Harris

Balance of payments and gold; exchange policy; commercial policy.

Assignment:

Bresciani-Turoni, Economics of Inflation, Chs. 1, pp. 23-41; 3, pp. 120-145.

Bullock, Williams, and Tucker, “Balance of Trade during the War,” in Taussig, Readings in International Trade, pp. 198-206.

Harris, S. E., “Gold and the National Economy,” R.E.S., February, 1940.

Hawtrey, R.G., Monetary Reconstruction, pp. 12-22.

Pigou, A. C., Political Economy of War, pp. 161-89.

Important suggestions:

Einzig, P., “The Unofficial Market in Sterling,” E.J., 1939, pp. 670-77.

Keynes, J. M., Tract on Monetary Reform, Chs. III, IV, pp. 81-192.

Other suggestions:

Bergendal, Sweden in the World War: Trade and Shipping Policy, pp. 43-128.

Cassel, G., Money and Foreign Exchanges, pp. 63-100, 137-186.

Dulles, E. L., The French Franc, 1914-28, Ch. 8, pp. 322-361.

Ellix, H., German Monetary Theory, Part III.

Graham, F., Exchanges, Prices, etc. in Germany, Parts II-III, pp. 97-241.

Holden, G., “Rationing and Exchange Control in British War Finance,” Q.J.E., February, 1940.

Loans to Foreign Governments, Senate Document No. 86 (1921).

Reparations and Inter-Allied Debt. Cmd. 1812 (1923).

 

EFFECTS ON AGRICULTURE.
Professor Harris.

Supply, demand, prices, etc.

Assignment:

Clark, J. M., The Costs of the War, Ch. 15, pp. 227-35.

Important suggestions:

Black, J. D., “The Effect of the War on Agriculture,” Proceedings, 1940, pp. 54-60.

Other suggestions:

Bernhardt, J., “Government Control of Sugar during the War,” Q.J.E., Vol. 33, pp. 672 et seq; “Transition of Control of Sugar to Competitive Conditions,” ibid., Vol. 34, pp. 720 et seq.

Eldred, W., “the Wheat and Flour Trade under Food Administration,” Q.J.E., Vol. 33, pp. 1 et seq.

Hibbard, B. H., Effects of the Great War upon Agriculture in the United States and Great Britain.

Reconstruction Committee, Agricultural Policy, Cmd. 9079, (1918).

Royal Commission on Wheat Supplies, First Report, Cmd. 1544 (1921).

 

Weeks 8-9 (Mar. 25-29)
PUBLIC FINANCE.
Professor Burbank.

Methods of Financing a war: Borrowing vs. taxes; tax policies, distribution of burden; management of public debt.

Assignment:

Bullock, C. J., “Financing the War,” Q.J.E., Vol. 31, pp. 357 et seq.

Clark, J. M., The Costs of the World War to the American People, Chs. 5-8, pp. 69-118.

Keynes, J. M., “The Income and Fiscal Potential of Great Britain,” E.J., 1939, pp. 626-35.

Pigou, A. C., Political Economy of War, pp. 71-112.

Important suggestions:

Clapham, J. H., “Loans and Subsidies in Times of War, 1793-1914,” E.J., 1917, pp. 493-501.

Edgeworth, Currency and Finance in Time of War.

Foxwell, H. S., Papers on Current Finance, pp. 1-33.

Great Britain Select Committee on National Expenditures, Reports 1917-22, Present and Pre-War Expenditures, Cmd. 802 (1920).

Keynes, J. M., Monetary Reform, Ch. II, pp. 46-81.

Keynes, J. M., Essays in Persuasion, Part I, pp. 3-76.

“Report of Committee on War Finance of the American Economic Association, A.E.R., Supplement, 1919, pp. 1-128.

Other suggestions:

Bogart, E. L., Direct and Indirect Costs of the Great World War (1919).

Fraser, Sir D., “The Maturing Debt,” R.S.J., 1921.

Jeze, G., and Truchy, H., The War Finance of France.

Mallet and George, British Budgets 1913-21.

May, G. O., “Economic Effects of Tax Policy in Peace and War,” Proceedings, 1940, pp. 61-68.

Moulton and Pasvolsky, World War Debt Settlements, pp. 1-425.

Noyes, A.D., The War Period of American Finance, Ch. IV, pp. 162-214.

Rogers, J. H., The Process of Inflation in France, Ch. V., pp. 48-88.

Silberling, N. J., “Financial and Monetary Policy of Great Britain during Napoleonic Wars,” Q.J.E., Vol. 38, pp. 214 et seq., 397 et seq.

Speier, H., and Kahler, A., War in Our Times, Chs. 8-11, pp. 171-245.

Sprague, O. M. W., “Conscription of Income,” E.J., 1917, pp. 1-25.

Stamp, J., Taxation during the War.

Warren, R., “War Financing and Its Economic Effects,” Proceedings, 1940, pp. 69-76.

 

EFFECTS OF WAR ON DISTRIBUTION OF INCOME AND WEALTH
Professor Crum

Assignment: Read two of the following:

Allen, J. E., “Some Changes in Distribution of National Income during War,” R.S.J., 1920.

Clark, J. M., The Costs of the Great War to the American People, Chs. 10-12, pp. 150-80.

Ezekiel, M., “An Annual Estimate of Savings by Individuals,” R.E.S., 1937, pp. 178-191.

Keynes, J. M., Tract on Monetary Reform, Chs. 1 (Consequences to Society of Changes in Value of Money), pp. 3-45.

Samuel, H., “Taxation of Various Classes of People,” R.S.J., 1919.

Select Committee on Increase of Wealth, Proceedings, Evidence, Appendices, H.C. 102 (1920).

Important suggestions:

Mitchell, W., C., Income in the United States (1921).

Other suggestions:

Bowley, A. L., “Measurement of Changes in Cost of Living,” R.S.J., 1919.

Leven, M., Moulton, and Warburton, America’s Capacity to Consume (1934), Chs. I-IX.

Stamp, J., Wealth and Taxable Capacity, pp. 1-191.

 

Week 10 (April 15-18)
EFFECTS ON LABOR.
Professor Slichter.

Trade unionism; money and real wages and employment.

Assignment:

International Labour Review, November 1939: Articles on “Labour in War Times,” pp. 589-615, 654-687.

Monthly Labour Review, October, 1939: “American Labour in World War,” pp. 785-95.

Slichter, S. H., Economic Factors Affecting Industrial Relations Policy in War Period (Industrial Relations Counselors), 32 pp.

Robinson, E. A. G., “Wage Policy in War Time,” E.J., 1939, pp. 640-55.

Important suggestions:

Cannan, E., “Industrial Unreset,” E.J., 1917, pp. 453-70.

Makower, H., and Robinson, H. W., “Labour Potential in War-Time,” E. J., 1939, pp. 656-662.

Other suggestions:

Bowley, Arthur L., Prices and Wages in the United Kingdom (Oxford, 1921).

Cole, G. D. H., Trade Unionism and Munitions.

Cole, G. D. H., Self-Government in Industry (1918).

Douglas, P., Real Wages in the United States (selected parts).

Gompers, Samuel, American Labor and the War (1919).

Hammond, M. B., British Labor Conditions and Legislation during the War (1919).

Hanna, Hugh S., and Lauck, W. Jett, Wages and the War (1918).

Industrial Unrese, Cmd. 8696 (1917-18).

Kirkaldy, A. N., ed., British Association for Advancement of Science: Labour, Finance and War (1917).

Lescohier, Don D. The Labor Market (1919), Part II.

Lorwin, Lewis L., The American Federation of Labor, Part III.

National Industrial Conference Board, Changes in Wages, September, 1914 to March, 1920.

National Industrial Conference Board, Problems of Labor and Industry in Great Britain, France and Italy (1919).

Proceedings, 1918-1920, “War Labor Policies and Reconstruction,” pp. 139-358.

Speier, H., and Kahler, A., War in Our Times, Ch. 12, pp. 245-269.

United States Council of National Defense, An Analysis of the High Cost of Living Problem.

United States Council of National Defense, Shortage of Skilled Mechanics (1918).

United States Department of Labor, Bulletins No. 244 and 257. Labor Legislation of 1917 and 1918.

United States Department of Labor, History of the Shipbuilding Labor Adjustment Board, 1917 to 1919.

United States Department of Labor, Reports 1918-1921.

United States Department of Labor, The New Position of Women in American Industry (1920).

United States Department of Labor, Industrial Efficiency and Fatigue in British Munition Factories.

United States Railroad Administration, Report of the Railroad Wage Commission.

Watkins, Gordon S., Labor Problems and Labor Administration in the United States during the World War (1919).

Webb, Sidney, The Restoration of Trade Union Conditions (B. W. Huebsch, 1917).

Wolman, L., Ebb and Flow of Trade Unionism, Chs. 2-3, pp. 15-32.

Wolman, L., Growth of American Trade Unions 1880-1923, Chs. 3-4, pp. 67-97.

 

Weeks 11-12 (April 22-)
TRANSITION TO PEACE (an attempt at integration).
Professor Harris.

Problems of costs, prices, money, international trade, public debt and taxation, wages, employment and output, agriculture and the distribution of the burden.

Assignment:

Bresciani-Turoni, The Economics of Inflation, Ch. X (Stabilization Crisis), pp. 359-98.

Clapham, J. H., “Europe after the Great Wars, 1816-1920”, E. J., 1920, pp. 423-36.

Pigou, A. C., Political Economy of War, pp. 161-182, 189-238.

Stamp, J., Financial Aftermath of War, Chs. I-III, V, pp. 9-88, 117-37.

Important suggestions:

Committee on National Debt and Taxation (Colwyn) Report.

Hawtrey, R. G., Monetary Reconstruction, pp. 55-91, 122-175.

Keynes, J. M., Economic Consequences of Peace.

Report of Committee on National Debt and Taxation, pp. 233-246 (Burden of Debt), 246-297 (Capital Levy), 297-351 (Taxes and Debt Redemption)

Scott, W. R., Economic Problems of Peace after War. Second Series.

Other suggestions:

Bonn, M. J., Stabilisation of Mark (1922).

League of Nations, Austria Financial Reconstruction, Summary Report 1926.

Macrosty, H. W., “Inflation and Deflation in the United States and United Kingdom 1919-23,” R. S. J., 1927.

Moulton and Pasovolvsky, World War Debt Settlements (Brookings).

Snowden, P., Labour and national Finance.

Stamp, J., Current Problems I Finance and Government, Ch. XI (The Capital Levy), pp. 227-71.

 

READING PERIOD.
Read one of the following:

Committee on National Debt and Taxation (Colwyn) Report.

Graham, F., Exchanges, Prices, etc. in Germany.

Hawtrey, Monetary Reconstruction.

Keynes, Economic Consequences of Peace.

Mitchell, W., Income in the United States (1921).

Moulton and Pasvolvsky. World War Debt Settlements.

Rogers, Process of Inflation in France, 1914-27.

Scott, W. R., Economic Problems of Peace after War, Second Series.

Speier, H., and Kahler, A., War in Our Times.

Stamp, J., Wealth and Taxable Capacity.

 

Source: Harvard University Archives. Syllabi, course outlines and reading lists in Economics, 1895-2003. HUC 8522.2.1 Box 2, Folder “Economics, 1939-40 (1 of 2)”.

Image Source: Seymour E. Harris from Harvard Class Album 1942.

Categories
Chicago Courses Problem Sets Suggested Reading Syllabus

Chicago. Intermediate Economic Theory for Non-Majors, ca. 1933

Element from Social Science Research Bldg at U of Chicago

 

 

Today’s post is provides an undated reading list, a partial course outline and the preliminary motivating statement for an intermediate level undergraduate course in economic theory targeted to non-majors in the University of Chicago’s Division of Social Sciences. This material was found in a folder in George Stigler’s papers. He was a student at the University of Chicago from 1933-1936, but it is unlikely that he took this course. One presumes he acquired a copy on his own account then. As far as the authorship, I have not had time to compare this material with that of Henry C. Simons cited in the following bibliographic tip. However the style does appear to have Simons’ handwriting all over it. Kyrk and Mints also regularly taught this course during these years.

Bibliographic Tip:  Notes to Henry Calvert Simons’ Course Economics 201 (1933-34) taken by F. Taylor Ostrander and Helen Hiett were published in Research in the History of Economic Thought and Methodology. Volume 23, Part 2. Documents from F. Taylor Ostrander, Warren J. Samuels (ed.). Emerald, 2005.

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Course Description

201. The Divisional Course in Economics.—A survey of price and distribution, monetary, and cycle theory, developed chiefly through the use of a series of problems. The course is designed primarily to meet the needs of students who are majoring in departments other than Economics and who expect to take the Divsional Comprehensive Examination in Social Science. Prerequisite: Social Science I and II or equivalent, or consent of instructor.

Source: University of Chicago. Announcements, Arts, Literature and Science (for the sessions 1933-34), vol. XXXIII, March 25, 1933, No. 8, p. 265.

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ECONOMICS 201
MATERIALS AND PROBLEMS FOR CLASS DISCUSSION

ASSIGNMENTS

Indispensable Reading, first five weeks:

Henderson, H. D., Supply and Demand (New York: Harcourt, Brace and Co., 1922. $1.25).

This short treatise should provide a good review of previous work (it is among the materials for Social Science I). It should be read promptly, to renew acquaintance with the terminology and central propositions of economic theory; and the relevant chapters should be re-read later on, in connection with the class discussion of special topics.

Knight, F. H., in Syllabus and Selected Readings for Social Science II, pages 125-250.

This is also a review assignment; but no other material is likely to prove more valuable in connection with the first part of this course.

The first section (pages 125-137), on “Social Economic Organization and Its Five Primary Functions,” should be read promptly, in connection with the class discussion of the first week.

Ely, R. T. et al., Outlines of Economics, 5th ed. (New York, 1930), Chapters IX, X, XI, XX, and Appendix A. (The corresponding chapters in the 4th edition will serve equally well for this course.)

The first three of these chapters should be read as one assignment. The first part of Chapter XI deals with what are, from the point of view of this course, highly controversial questions. Chapter XX merits very careful study.

Gray, Alexander, The Development of Economic Doctrine (New York, 1931), Chapters III, V, and VI.

The chapters should acquaint students with the main ideas of the mercantilists, and of Hume, Adam Smith, Malthus, and Ricardo. Appendix A of the Ely book should be read in connection with this assignment.

Indispensable Reading, last five weeks:

Roberson, D. H., Money, new edition revised (new York: Harcourt, Brace and Co., 1929. $1.25).

This is an excellent, concise treatise by a leading English (Cambridge) economist. It should be studied with care, preferably in advance of class discussion of money and banking.

Ely, R. T. et al., Outlines of Economics, 5th ed., Chapters XIII to XVIII inclusive.

These chapters also merit careful, deliberate study.

Gregory, T. E., The Gold Standard and its Future, 2nd (or 1st) ed., London (and New York), 1932.

An unusually fine treatise, excellent for its fundamental analysis, and closely relevant to currently interesting and urgent problems.

Optional Reading:

Ely, R. T. et al., Outlines of Economics.

Gray, Alexander, The Development of Economic Doctrine.

Cassel, Gustav, Fundamental Thoughts on Economics.

Cassel, Gustav, The Theory of Social Economy (Barron translation), Book I and Book II.

Marshall, Alfred, Principles of Economics, 8th edition, especially Book V.

Hardy, Charles O., Credit Policies of the Federal Reserve System.

 

Preliminary

Economics 201: Its Place in the Curriculum:

This course is intended primarily for students preparing for the Divisional Examinations, and not for students majoring in the Department of Economics. It is designed for students who have had Social Science I and Social Science II in the College, and for those students transferring to the Social Science Division from other colleges who have had some previous work in economics. In general, the course will presuppose some familiarity with the terminology of economics and some ability to follow careful analysis.

General Description of Content of the Course:

The course falls, as to subject matter, into two main parts. The first six weeks will be devoted to study of “price theory”—to study of the forces governing, in an exchange economy, the determination of relative prices and the allocation of resources among different, alternative uses (assuming a money economy but disregarding, or abstracting from, monetary disturbances and cyclical fluctuations). This part of the course is designed to give students a critical understanding, first and above all, of how a competitive system works and, second, of how the introduction of monopoly in particular areas will affect relative prices and relative production. The latter part of the course will be devoted to study of money, banking, and business cycles—to study of factors governing the general level of prices and, more especially, to analysis of forces underlying the cumulative, self-aggravating maladjustments of booms and depressions.

The total quantity of required reading is intended to be moderate; and it is to be hoped that students will do this relatively small amount of reading with considerable care — with serious effort to comprehend thoroughly and to understand, rather than with the intention of accumulating information or memorizing propositions. If a student must choose between doing all the reading but doing it hastily, and doing a smaller amount with care, the latter procedure will prove decidedly more profitable. The assignments are designed, however, to eliminate the necessity of such a choice.

Most of the class hours will be devoted to discussion of specific problem-exercises designed to bring out, and to give precision to, the central concepts and propositions of price theory and monetary theory. Little effort will be made to relate the class discussions from day to day to particular parts of the assignments; but familiarity with the required readings will always be helpful, and sometimes indispensable, to understanding of problems dealt with in class.

A considerable part of the student’s outside work should be devoted to assimilating and organizing in his own mind the content of discussions in class. Students should make a special effort to acquire facility with the language of more rigorous economics — with the main terms and concepts —, to understand clearly the assumptions under which particular analytical arguments proceed, to digest the analysis of particular problems as it proceeds in class, and to prepare themselves to carry on the discussion from day to day. Above all, they should try to discover at what points the content of class discussions has been unclear; and they should feel not only free, but actually obligated, to raise questions in class to clear up any confusion. If any individual feels hesitant about asking questions, let him remember that one can hardly raise a question about systematic economic argument which is so simple that most other students will not profit from its discussion.

Students are certain to find this course a more profitable and stimulating intellectual experience if they do their work, at least occasionally, with other students. This is especially true with reference to study of the various problem-exercises. Students can gain a great deal, by way of understanding, if they try to explain things to each other, if they criticize other people’s explanations, and if they attempt to argue out of differences of opinion. It is hard to develop real facility with definitions, concepts, and propositions merely by reading — or by talking to one’s self.

 

Headings from Course Outline
(63 pages)

INTRODUCTION

Definition of Economics and of Its Point of View

Basic Functions or Tasks in an Economic System or Organization

GENERAL PRICE THEORY

[Introduction]

General View of the Pricing Process

The Phenomenon of Industrial Fluctuations and Unemployment, digression

Circularity of the Pricing Process

The Pricing Process: EQUILIBRIUM

The Pricing Process for a Short Period

Conditions of Equilibrium

The Pricing Process over Long Periods

Some Conditions of Long-run Equilibrium

Some Interpretations of the Equilibrium Arrangements

Complexity and Intricacy of the Inter-relations

Some Supplementary Remarks

DEMAND, DEMAND FUNCTIONS, AND ELASTICITY OF DEMAND

Confusion as to Usage of the Word “Demand”

Utility, Utility Functions, and Demand Functions

Elasticity of Demand

COST OF PRODUTION AND PRICE UNDER COMPETITIVE CONDITIONS

Problem Exercise I

Preliminary Exercises
Conditions of Equilibrium in the Industry
Conditions of Demand

[missing pages 40-53]

MONOPOLY AND MONOPOLY PRICE

Contrasts between Complete Monopoly and Perfect Competition

Production and Prices under a special case of Partial Monopoly, “The Economics of Cartels”

An Arithmetic Exercise

 

Source:  University of Chicago Archives. George Stigler Papers,  Addenda, Box 24, Folder “Economics 201”.

Image Source:  Architectural element of the Social Science Research Building (1929). University of Chicago Photographic Archive, apf2-07449, Special Collections Research Center, University of Chicago Library.

Categories
Courses Harvard Suggested Reading Syllabus

Harvard. Programs of Social and Economic Reconstruction, Leontief and Taylor. 1942-43

This course on socio-economic reform and revolution was team taught the previous year by Wassily Leontief, Paul Sweezy and Overton Taylor. Sweezy took leave from Harvard to join the War effort so he was unavailable for the 1942-43 version of this course that has been in the Harvard economics course catalogue almost as long as courses in public finance and labor problems.

____________________________

Course Enrollment

[Economics] 115. Associate Professor Leontief and Dr. O. H. Taylor.—Programs of Social and Economic Reconstruction.

Total 10: 3 Graduates, 1 Junior, 1 School of Public Administration, 4 Radcliffe.

 

Source: Harvard University. Report of the President of Harvard College and Reports of the Departments for 1942-43, p. 47.

____________________________

 

Course Assignments

Reading for the Monday Oct. 19 Meeting of Ec 115

Bastiat Frédéric. Harmonies of Political Economy, pp. 1-46, 196-217.

Sismondi, Simond de. Essays on Political Economy, pp. 113-122, 224-244. (Nouveaux Principes d’Economie Politique, Vol. I and II[,] to browse For those who read French)

Gray, John. A Lecture on Human Happiness, pp. 1-72.

Clark, J. B. Distribution of Wealth, pp. 36-76.

Carver. Essays in Social Justice, pp. 232-263.

Keynes, J. M.  The General Theory of Interest and Employment, pp. 372-384.

 

Economics 115
Assignment for October 26

  1. Handbook of Marxism, pp. 313-38.
  2. Capital, Vol. I, Ch. X, Sections 1, 2, 5, 6.
  3. Marx-Engels Selected Correspondence, Letter no. 214.
  4. Lenin, State and Revolution.
  5. J. Laski, The State in Theory and Practice, Ch. 2.

 

Economics 115
November 2, 1942
Social and Economic Theories of the New Deal

  1. Immediate Background
  2. New Deal Movement as a Dynamic Organism of Diverse Potentialities
  3. Specific Analysis of the Program Adopted
  4. Significance of the New Deal
  5. Where did the New Deal Fail?

Assignment

Background for those who need it:

A. M. Schlesinger, New Deal in Action
or
R. H. Jackson, The Struggle for Judicial Supremacy

For everyone:

Golden and Ruttenberg, The Dynamics of Industrial Democracy, pp. 317-42.
Robert and Helen Lynd, Middletown in Transition, Chs. IV, XII.
C. A. Beard, Economic Interpretation of the Constitution, pp. 149-188.
F. D. Roosevelt, Papers and Addresses, Vol. I, nos. 139, 141; Vol. II, nos. 1, 50, 101; Vol. III, nos. 1, 102; Vol. V, nos. 1, 53, 176.

Also recommended:

Thurman Arnold, Folklore of Capitalism
Thorstein Veblen, Absentee Ownership

 

Economics 115
November 9, 1942
The Revisionist Movement in German Socialism

  1. The beginnings of reformist socialism in Germany
  2. Bernstein and the Revisionist offensive
  3. The counterattack and the split on the Left
  4. The social roots of reformism
  5. German Social-Democracy vs. socialism: 1914, 1919, 1933

Assignment

Eduard Bernstein, Evolutionary Socialism, pp. ix-xviii, 1-94, 165-199
Rosa Luxemburg, Reform or Revolution
M. Philips Price, Germany in Transition, pp. 18-47

 

Economics 115
Assignment for Nov. 16, 1942

CLASSICAL LIBERALISM AND NEO-LIBERALISM
–A Comparison and a Critique—

  1. The historical development of Liberalism.
  2. Common elements in both types of Liberalism.
  3. Political implications of the divergence.
  4. Neo-Liberalism — Will it work?

Assignment:-

J. S. Mill, Principles of Political Economy, Bk. V, ch. 11.
Herbert Spencer, Social Statics (Abridged Edition, D. Appleton & Co., 1892) pp. 55-61, 121-140.
Walter Lippman, The Good Society, chs. 10 and 11.
Henry Simon, Positive Program for Laissez-Faire.
Max Lerner, It is Later Than You Think, Chs. 1 and 6.
J. M. Keynes, The End of Laissez-Faire, pp. 39-54.

Suggestions for those who may wish to go further into the problem:-

John Dewey, Liberalism and Social Action.
Articles “The Rise of Liberalism” and “Individualism and Capitalism” in the Introduction to The Encyclopedia of the Social Sciences.
Thorstein Veblen, “Preconceptions of Economic Science,” in The Place of Science in Modern Civilization.

 

Economics 115
Assignment for November 23, 1942
The Economic Doctrines of the Bolsheviks

  1. The relationship between Marxism and Bolshevism—Marxism restored and militant.
  2. The Bolshevik elaboration of the Marxian theory of capitalist development; its application to the analysis of the period of monopoly capitalism or imperialism.
    1. The transition from free competition to monopoly as a result of the concentration and centralization of capital.
    2. Finance capital and the role of the banks.
    3. The struggle for markets, for raw materials and for outlets for capital export and the resulting tariff and colonial policy of imperialism
    4. The growth of international cartels and the ‘theory’ of ultra-imperialism.
    5. The progressive intensification of the contradictions of capitalism — crises, wars and catastrophe.
    6. The proletarian revolution as the only way out.
  3. The political implications of the Bolshevik analysis of imperialism — the working class must gird itself for a struggle à outrance for the overthrow of world capitalism and the establishment of a socialist order.

Assigned Reading

Lenin: Imperialism.
P. M. Sweezy: The Theory of Capitalist Development, Part IV.

Suggested Reading

Marx-Engels: The Communist Manifesto.
Marx: Value, Price and Profit, Chapter VI to the end.
Lenin: The Proletarian Revolution.

 

Economics 115
The Theory of Marx and Engels Concerning the Transition From Capitalism to Socialism
November 30, 1942

  1. Sources and Constituent Parts of Marxism
  2. Class-Domination Theory of the State
  3. The Overthrow of the Bourgeois State by Revolution
  4. Establishment of Proletarian Dictatorship — First Phase of the Communistic Society
  5. Withering Away of Proletarian State and the Higher Phase of the Communistic Society

Assignment:

Marx, Contribution to the Critique of Political Economy, pp. 9-15.
Burns, A Handbook of Marxism, pp. 537-570.
Engels, The Origin of the Family, Chap. 9.
Lenin, The State and Revolution, Chaps. 1 and 5.
Engels, Socialism, Utopian and Scientific, Chap. 3.
Engels, Landmarks of Scientific Socialism, Chap. 9.
Marx, Critique of the Gotha Program.

Suggested:

Chang, Sherman, The Marxian Theory of the State.

 

Economics 115
January 3, 1943
Socialism In The British Labour Party

  1. A definition of the term Socialism
  2. Necessary reforms arising from frictions of the Industrial Revolution
  3. Socialist gains acquired through self-interest of pressure groups
  4. Growth of the Labour Party
  5. Socialism as a policy of the Labour Party
  6. Socialist administrations
  7. Future of Socialism in England

Assignment

Clifford Allen, Labour’s Future At Stake.
G. D. H. Cole, British Working Class Politics, Epilogue.
Arthur Greenwood, M. P., The Labour Outlook.
J. Ramsy McDonald, A Policy for the Labour Party.

Optional

Arthur Henderson, The Aims of Labour.

 

Source: Harvard University Archives. Syllabi, course outlines and reading lists in Economics, 1895-2003, Box 3, Folder “Economics, 1942-43 (2 of 2)”.

Image Source: Leontief and Taylor from Harvard Class Album 1939.

 

 

 

 

Categories
Chicago Courses Economists Gender Home Economics

Chicago. Remedial Economics Course for Entering Graduate Students, Hazel Kyrk. 1926

 

Today’s artifact documents a working link between the educational programs of the Chicago Department of Political Economy and the Department of Home Economics and Household Administration in the person of Hazel Kyrk, a pioneer in the fields of consumer and family economics. From the brief memo written by the chair of the department of political economy, L. C. Marshall, we see that Kyrk was tasked with teaching a course that would be open to seniors in the College and to entering graduate students for either home economics or economics “who have not had work in this field”. By “advanced” one presumes an accelerated introductory course perhaps covering the material of a couple of freshman level courses. Still it is interesting to see that a graduate student in 1926, completely innocent of all formal economic training, could start the graduate program of economics with (or after) only a quarter of remedial education.

I have added to this post the course listings for the year before the creation of the new course Economics 202 (The Economic Order, Advanced Course) and the following year.

For more about Hazel Kyrk: Andrea H. Beller and D. Elizabeth Kiss. “On the Contribution of Hazel Kyrk to Family Economics” (June 2008). 

A chronology of her career is included on my page of Chicago economics Ph.D.’s 1894-1926. 

_______________________________________

 

Carbon Copy of Memo from L.C. Marshall

May 22, [19]26

[To:] J. M. Clark, P. H. Douglas, J. A. Field, Hazel Kyrk, L. W. Mints, H. A. Millis, W. H. Spencer, C. W. Wright, Jacob Viner

[From:] L. C. Marshall

I have arranged with Miss Blunt to have Home Economics 141 dropped and to substitute for this course Economics 202, The Economic Order, Advanced Course, prerequisite 18 majors, given by Miss Hazel Kyrk.

As will be apparent from this statement Miss Kyrk’s work will serve as a one major survey of the economic order for senior college and graduate students who have had no previous work in economics. There is a considerable constituency of such persons who need this work as a preliminary to their work in Home Economics. Then, too, as time goes on we shall probably be under the necessity of offering this course once each quarter for our own senior college and first year graduate students who have not had work in this field. This latter matter, however, is one for later adjustment.

LCM:MLN

Source: University of Chicago Archives. Department of Economics. Records. Box 22, Folder 7.

_______________________________________

 

General and (Some) Intermediate Course Listings

1925-26

UNDERGRADUATE COURSES

A. General Survey Course

101*. Industrial Society.—Mj. Summer, Autumn, Winter, and Spring, Professor Marshall and Others.

[*Limited-credit course: After a student has credit for 18 majors but less than 27, this course will be credited at one-half major; after he has credit for 27 majors, it will not be credited at all.]

See also Home Economics 141. The Household in Modern Industrial Society.

 

B. Intermediate Courses

201. Principles of Economics.—Mj. Spring, —

[…]

Source: University of Chicago. Annual Register covering the Academic Year Ending June 30, 1925, with Announcements for the Year 1925-1926. P. 146.

1926-27

UNDERGRADUATE COURSES

A. General Survey Course

101. Industrial Society.—Mj. Summer, 8:00, Dr. Montgomery.

102*, 103, 104. The Economic Order I, II, III.—Mj. Autumn, Winter, and Spring, Professor Marshall and Others.

[*Limited-credit course: After a student has credit for 18 majors but less than 27, this course will be credited at one-half major; after he has credit for 27 majors, it will not be credited at all.]

 

B. Intermediate Courses

201. Principles of Economics.—Mj. Winter, 10:00, Mr. Palyi; Spring, —

202. Economic Order, Advanced Course.—Mj. Autumn, 1:30, Associate Professor Kyrk and Assistant Professor Mints.

[…]

 

Source: University of Chicago. Annual Register covering the Academic Year Ending June 30, 1926, with Announcements for the Year 1926-1927. P. 138.

 

 

1927-28

UNDERGRADUATE COURSES

A. General Survey Course

102*, 103, 104. The Economic Order I, II, III.—Mj. Summer, Autumn, Winter, and Spring, 8:00, 11:00 and 1:30, Professor Marshall and Others.

[*Limited-credit course: After a student has credit for 18 majors but less than 27, this course will be credited at one-half major; after he has credit for 27 majors, it will not be credited at all.]

See also Home Economics 141. The Household in Modern Industrial Society.

 

B. Intermediate Courses

201. Intermediate Economic Theory.—Mj. Autumn, Winter, Spring, 8:00, Professor Douglas, Associate Professor Sorrell, and Assistant Professor Cox

202. Economic Order.—Mj. Autumn, Winter, and Spring, 9:00, Associate Professor Kyrk and Assistant Professor Mints.

[…]

Source: University of Chicago. Annual Register covering the Academic Year Ending June 30, 1927, with Announcements for the Year 1927-1928. P. 162.

_______________________________________

 

Image Source: Photo of Hazel Kyrk from her 1918 U. S. Passport Application. National Archives. Roll 0504, 20 April 1918.

 

 

 

Categories
Chicago Courses Exam Questions Suggested Reading Syllabus

Chicago. International Trade and Finance. Jacob Viner, 1933.

 

The first four pages of written notes taken by Milton Friedman for Jacob Viner’s course, International Trade and Finance, provide something of a course syllabus and list of suggested reading assignments. The notes are undated but in his civil service job applications, Friedman provided a list of courses by university, semester or quarter and course instructor. Milton Friedman took Jacob Viner’s course during the Winter quarter (January to mid-March) of 1933. Generally Friedman’s handwriting is easy to read, knowing the context, though some checking of authors’ names was required. I provide one sample from a particulary difficult five or six lines and welcome any alternative readings. Otherwise I am extremely confident in my transcription.

Elsewhere in his files, Milton Friedman had what appears to be a later photocopy of an exam for this course. The folder is labelled “Biographical: Class Exams circa 1932-1938”. “University of Chicago” and “Milton Friedman” are handwritten on the photocopy of the original typed copy of the exam.

Don Patinkin took the same course that was still taught by Viner in 1944: the course outline, readings and some exam questions are available in an earlier post.

_____________________________

International Economic Relations: Course Description

[Economics] 370. International Trade and Finance.—This course deals with the theory of international values, the mechanism of adjustment of international balances, foreign-exchange theory, the international aspects of monetary and banking theory, and tariff theory. Prerequisite: Economics 301 or its equivalent. Winter, Viner.

 

Source: University of Chicago. Announcements. Arts, Literature and Science, vol. XXXII, no. 12 (for the sessions of 1932-33), p. 361.

_____________________________

From Milton Friedman’s Course Notes

✓Mun England’s Treasure Ch. 2, 3, 4, 5, 20, 21

✓Hume Essays Moral & Political. Vol I—Essays (of Commerce/of the Balance of Trade)

✓Viner   Early English Theories. J.P.E. June & Aug, 1930. All of June article. pp. 418-431, 442-448 in Aug. article.

 

Bullionist Controversy

✓Silbering, Fin[ancial] & Mon[etary] Policy [of Great Britain During the Napoleonic Wars] Qu. Jour of Ec 1924

✓Angell ch III & Appendix A

✓Ricardo High Price of Bullion in works also in Gonner. Ricardo’s Essays

✓Viner Canada’s Balance, pp. 191-20[last digit smeared, might be “4”]

J.P.E. Oct 1926 pp. 600-608

✓J.S. Mill Principles Bk III Ch XXIV

✓Walker Money. Ch XIX & XX

Mill Principles Book III, Ch XIX, XX, XXI, XXII

Taussig, International Trade. Ch XVII, XVIII

 

1) Canada’s Balance pp. 202-212, 145-190

Angell pp. 170-174, 505-510

2) Ohlin. Is the Young Plan Feasible? Index Feb 1930

3) Angell-Q.J.E. May 1928

Rogers in Recent Ec. Changes Vol. II, Ch. II
Taussig, Int. Trade 325-332

4) Moulton on War Debts in Schanz Festgabe [Festgabe für Georg von Schanz zum 75 Geburtstag. Tübingen: J. C. B. Mohr. 1928. 2 vols. Papers by Beckerath, Lotz, Jèze, Einaudi, Stamp, Moulton, and others.]

____________________

with respect to 1) find answer:

  1. to what factor does Viner assign & to what factor does Angell says Viner assigns the immediate responsibility for the rise in prices. Also to what fact[or] he assigns it.
  2. What role does Viner assign & what role does Angell say Viner assigns & what role does Angell assign to the expansion of Canadian Bank loans.
  3. What is order of priority acc[ording] to Viner & acc[ording] to Ang[ell] of fluctuation in Canada bank demand liabilites & outside reserves.
  4. (cf. th[eory] by Mill or Tau[ssig]) If outside reserves was held as gold in Canada what role in the mechanism would the classical theory assign to them

 

Comparative Costs

Ricardo-Principles ch 7

Viner Welt-Archiv Oct, 1932

____________________

Manoïslesco Theory of Protection [Reviewed by Viner in JPE, Feb. 1932, pp. 121-125]

Grunzel Joseph. Handbuch der internationalen Handelspolitik (probably)]

Cherbuliez [, Antoine] Précis de la Science E., pp. 375-391

Walras “Théorie du Libre Échange. Revue d’Économique Politique XI (1897) pp. 651-664

or ‘Études d’Éc. Pol. Applique, pp. 286-304 [1898 reprint of previous article].

Pareto-Cours

Angell

Taussig. Int. Trade

Weber, Alfred. “Die Standortslehre und die Handelspolitik Archiv für Sozial. XXXII (1911) 667-688
____________________
Choose one & in about 10 days give appraisal thereof.

J.S. Mill Principles Bk III Ch XVII XVIII

Marshall. Money Credit & Commerce Bk III Ch VI, VII, VIII Appendix J[?] pp. 330-342

Terms of Trade

Taussig: Int. Trade see Index under Barter Terms of Trade.

Yntema Ch. 5.

Wilson Capital Imports, Ch 4.

Depreciated Paper

Taussig, Int. Trade 336-408

Graham Exchange Prices & Prod. in Germany. 97-99; 117-149

Cassel Money & Foreign Exchange after 1914, pp. 137-186

Cassel The Treatment of Price Problems. Ec J. Dec 1928

Ohlin International Trade Relations. Index Aug 1930

Bastable. Theory of Int’l Trade Ch 6.

League of Nations. [Financial Committee] Report of Gold Delegation, 1932 [Official no.: C.502.M.243.1932.II.A]

____________________

Read letter in last issue of Economica of a letter on the true something or other.

 

Source: Hoover Institution. Milton Friedman Papers, Box 120, Bound notes (Economics 370/J. Viner/10 a.m. S.S.B. 107).

_____________________________

Final Exam Questions Winter Quarter 1932-33

Economics 370

  1. Write notes on the following:
    1. “Increasing Returns” and the Comparative Cost Doctrine
    2. The “Law of Reciprocal Demand” and the “Equation of International Exchange.”
    3. The possibilities of partial specialization under free trade.
  1.       a.  Discuss the part played by international shifts in money incomes in adjusting balances of payments to international capital movements.
    b.  Explain briefly the part played in the lending country in connection with the same process by bank deposits and by bank loans.
  2. “The principles governing the rate of exchange may be illustrated by the following mechanical example. Represent two countries by two cisterns, and their stock of legal tender money by water, so that the depth of the water in either cistern may be taken to be the general level of prices in the corresponding country. If water cannot pass from either cistern to the other any divergence of depth may be produced at will by adjusting the respective quantities of water in them. This corresponds to the case of countries with independent currencies. If, however, the water can flow through a pipe leading from the base of one cistern to the base of the other, the depths in the two cisterns will always be identical.”
    Hawtrey, Good and Bad Trade, 1913, pp. 109-110.
    Comment briefly.

 

Source: Hoover Institution. Milton Friedman Papers, Box 115, Folder 13. “Biographical: Class Exams circa 1932-1938”.

Categories
Chicago Courses Syllabus

Chicago. Graduate Price Theory. Economics 300A. Harberger, 1955

_______________________

Thus far Economics in the Rear-View Mirror has been able to provide syllabi for the following four professors who had taught the first core price theory course at the University of Chicago spanning nearly a quarter of a decade during the middle third of the 20th century:

Today I add the syllabus for Arnold Harberger (a.k.a.”Triangle Man”, see the photo credit below). Note: chapters from Samuelson’s Foundations are only recommended readings, not yet required.

_______________________

 

Economics 300A
Mr. Harberger
Autumn 1955

 

Texts:

  1. Alfred Marshall, Principles of Economics, 8th
  2. George Stigler, Theory of Price, revised ed.
  3. H. Knight, The Economic Organization

 

Supplementary material (Purchase not required):

  1. American Economic Association, Readings in Price Theory
  2. Milton Friedman, Essays in Positive Economics
  3. Milton Friedman, Notes on Lectures in Price Theory (mimeographed)

Students are expected to be familiar with the materials in Stigler’s Theory of Price before entering the course. Readings marked with an asterisk (*) are recommended, not required.

 

Reading List

 

  1. Introduction:

Knight, The Economic Organization, pp. 1-37
Stigler, Theory of Price, Chs. 1-3
Friedman, “The Methodology of Positive Economics” in Essays in Positive Economics

  1. Demand:

Stigler, Theory of Price, Chs. 4-5
Marshall, Book III, Chs. 2-4, Book V, Chs. 1-2
Knight, Risk, Uncertainty and Profit, Ch. 3
Hicks, Value and Capital, pp. 11-52
Working, “What do Statistical Demand Curves Show?” Quarterly Journal of Economics
*Samuelson, Foundations of Economic Analysis, Ch. 5

  1. Supply:

Stigler, Theory of Price, Chs. 6-8
Marshall, Book V, Chs. 3-5, 12, Appendix H
Robinson, Joan, Economics of Imperfect Competition, Ch. 2
Clark, J.M., Economics of Overhead Costs, Ch. 9
Viner, “Cost Curves and Supply Curves”, Zeitschrift fuer Nationaloekonomie, Book III (Sept 1931) pp. 23-46, reprinted in Readings in Price Theory, pp. 198-232
*Samuelson, Foundations of Economic Analysis, Ch. 4

  1. Market Organization:

Stigler, Theory of Price, Chs. 9-13
Stigler, “Monopolistic Competition in Retrospect” in Five Lectures on Economic Problems
Harrod, “Doctrines of Imperfect Competition”, Quarterly Journal of Economics, May 1934, pp. 442-461
Chamberlin, The Theory of Monopolistic Competition, Chs. 3, 5
*Robinson, E.A.G., The Structure of Competitive Industry
*Robinson, E.A.G., Monopoly.

  1. Utility and Welfare Economics:

Alchian, “The Meaning of Utility Measurement”, American Economic Review, March 1953, pp. 26-50
Friedman and Savage, “The Utility Analysis of Choices Involving Risk”, Journal of Political Economy, August 1948, pp. 279-304. Reprinted in Readings in Price Theory, pp. 57-96
Scitovsky, “The State of Welfare Economics”, American Economic Review, June 1951, pp. 303-315
Hicks, “The Four Consumers’ Surpluses”, Review of Economic Studies, XI (1943-44), pp. 31-40
*Hotelling, “The General Welfare in Relation to Problems of Taxation and of Railway and Utility Rates,” Econometrica (VI) (1938), pp. 242-269
*Samuelson, Foundations of Economic Analysis, Chs. 5-7

 

Source: Hoover Institution Archives. Papers of Milton Friedman, Box 77, Folder “77.1 University of Chicago Econ 300 A & B”.

Image Source: “[Arnold] Harberger strips down to reveal himself as “Triangleman” at the University of Chicago Economics Christmas Party, probably December 1970”. Robert J. Gordon’s website.

Categories
Chicago Courses Curriculum Economic History

Chicago. Proposal for interdisciplinary MA courses on Capitalism and Democracy. Hoselitz, 1947

With the election of Donald J. Trump to the U.S. Presidency, it is perhaps time well-spent to yet again reflect upon the relation between capitalism and democracy. Today I post a 1947 proposal for the creation of a complementary pair of interdisciplinary seminars on problems of capitalism and democracy to be taught in the University of Chicago’s Divisional Social Science M.A. program. The proposal was written by a 34 year old Austrian, Berthold Franz Hoselitz ( the future founding editor of the journal Economic Development and Cultural Change), and presumably circulated among the respective departments of the Division of Social Science for approval. The copy transcribed here comes from Milton Friedman’s papers at the Hoover Institution together with the agenda for the faculty meeting when the proposal was scheduled to be discussed. We see from the course announcements that the proposal was accepted.

The poor image of Hoselitz from 1940 is partially compensated for by the fact that it is (up to now) the only image I have been able to find of him at all.

_____________________________

Fun Fact: Hoselitz taught John Nash

Q. …Did you have any teacher through your period at university which was particularly a role model to you?…

John Nash: I certainly had some good teachers who were very helpful to me and influential. For example, in economics I only took one economics course and I was an undergraduate study in Pittsburgh at what is now called Carnegie Mellon, but by coincidence the person who taught the course, it was a course in international economics, and by coincidence this was someone who came from Austria. So there’s actually to consider Austrian economics is like a different school than typical American or British. So I was by coincidence influenced by an Austrian economist [Bert F. Hoselitz, Associate Professor of Economics appointed October 1, 1947, resigned September 1948, Carnegie Institute of Technology.] which may have been a very good influence.

Source: Interview with Dr. John Nash at the 1st Meeting of Laureates in Economic Sciences in Lindau, Germany, September 1-4, 2004.    Interviewer: Marika Griehsel.

_____________________________

Biographical Note

Bert F. Hoselitz was born Berthold Frank Hoselitz in Vienna, Austria in 1913. He received his doctor of law degree in 1936 from the University of Vienna. He left Austria in 1938, traveling first to England, then to the U.S., where he taught briefly at Manchester College in North Manchester, Indiana. He enrolled in the University of Chicago , receiving an M.A. in Economics in 1945. Hoselitz joined faculty at Chicago as an instructor in 1945, and became emeritus in 1978.

Hoselitz advocated interdisciplinary scholarship and his work pushed the common wisdom within economics at the time by considering the role of cultural and sociological factors on economic development. In pursing this line of inquiry, he developed professional relationships with scholars around the globe, though particularly in Asia, and participated in both a research and advisory capacity for a broad spectrum of academic research projects that spanned traditionally distinct social science disciplines. In 1962, Hoselitz supervised a pair of National Science Foundation sponsored studies examining the social and economic entailments of developments in science and technology within Asia, primarily India. At a broader level, he was also active in efforts to bring diverse social science disciplines into conversation with one another. In 1958 began participating in an editorial and authorial capacity for the International Encyclopedia of the Social Sciences.

Hoselitz’s scholarly activities were not confined to academic research and teaching. He was also active and engaged in policy discussions concerning development and the developing world. In the early phase of his career Hoselitz participated in an array of applied research projects, advising work and professional associations related to economic development and development policy more broadly. For example, he wrote for the United Nations on issues related to economic development, beginning with a 1952 technical-assistance mission to El Salvador, and in the late fifties he served on a team of advisors to the government of India concerning the plan for the national capital region.

In addition to his global professional engagements, Hoselitz also remained an active participant and organizer in the scholarly community of his home institution at Chicago. In 1952 Hoselitz founded the Research Center in Economic Development and Cultural Change at Chicago as well as the affiliated interdisciplinary journal Economic Development and Cultural Change, published through the University of Chicago Press. Hoselitz served as editor from the journal’s inception until 1985. He also served on the committee of the Norman Wait Harris Memorial Foundation based at the University of Chicago which focuses on issues of international interest and works to facilitate the exchange of knowledge about the diverse peoples of the world. In this capacity, Hoselitz organized visits by lecturers, funded conferences and facilitated the foundation’s publishing efforts.

Considered an interdisciplinary pioneer and an expert on the social and cultural dimensions of economic development, Professor Emeritus Bert Hoselitz died in Chicago on February 14, 1995.

 

Source: University of Chicago Library. Guide to the Bert F. Hoselitz papers, 1923-1987.

_____________________________

 

DEPARTMENT OF ECONOMICS

A G E N D A
Tuesday, June 3, 1947, at 1. p.m. in Room SS 424

 

  1. Students’ Business:
    1. Tom, Chiu-Faat Joseph: Petition to take Chinese as second language.
    2. Berkman, Herman G.: Petition to take Planning as major field of specialization; to take intensive examination in French only.
    3. Murphy, J. Carter: Petition to substitute Mathematics for second language.
    4. Schwitzer, Selma: Petition for Mathematics to be one of secondary fields of specialization for A.M. (alternative). Other fields statistics and theory.
    5. Weil, R.A.: Petition to waive residence requirement.
      Recommendation to Candidacy. Tentative approval of thesis topic: “Federal Aid to Achieve State-Local Co-operation in a Counter-Cyclical Fiscal Policy.”
  2. Weil, R.A.: Petition to waive residence requirement.
    Recommendation to Candidacy.
    Tentative approval of thesis topic: “Federal Aid to Achieve State-Local Co-operation in a Counter-Cyclical Fiscal Policy.”
  3. Seminar, course and staff for “Problems of Capitalism and Democracy”
  4. Plans for counseling students during summer and next fall.
  5. New business.

_____________________________

 

OUTLINE FOR A PROGRAM ON THE “PROBLEM OF CAPITALISM AND DEMOCRACY”

I. Background

Some two years ago the History Department of the University of Chicago discussed the possibility of instituting in their Department so-called “problem-courses”. Instead of subdividing the subject matter of history on the basis of time periods and countries or regions, they felt that major problems, notably those of capitalism and democracy, should be studied in their historical perspective. These plans were thought over for some time but were not put into effect during the war, chiefly because of lack of suitable personnel who could be charged with the preparation and execution of these courses.

When, a few months ago, the Divisional Masters Committee met, and when it was decided that the Divisional Master’s program should provide for a more generalized program than that provided by departmental courses, the suggestion was made that the courses on the history of capitalism and the history of democracy might be worked out in a manner in which not only the historical sweep of the two institutions would be under consideration, but where also the problems arising in the two areas would be studied. The courses were thus conceived by the Divisional Masters Committee as comprising an analysis of historical background as well as the “nature” and problems of capitalism and of democracy.

When these courses were discussed it was the feeling of some members of the Divisional Masters Committee that what was needed to be stressed more and made more explicit than could be done by giving two apparently unrelated courses in isolation, was the problem of the interrelations of capitalism and democracy, or (in different words) the relationship of economic organization and the realization of political values of liberty, equality, and justice. This dilemma was met by the Masters committee by declaring the courses to be long into one “field” of study and by suggesting that the students be asked to take the courses simultaneously, by providing for parallel planning and teaching of the courses, as much as possible, and by providing an examination over the two courses (the field) in which the interrelations between economic organization and political values was stressed.

This plan was submitted to the Executive Committee of the Division of the Social Sciences and accepted as part of a program for the Divisional Masters Degree. At a later meeting between representatives of the Divisional Masters Committee and members of the Department of Economics, Political Science, and History, the problem was discussed again, and reasons for combination of the two courses, as well as reasons against brought forward. In addition the proposal was made and accepted that a faculty seminar be established which concern itself with the whole problem raised by the relationship of economic and political organization, notably the interrelations of capitalist, free enterprise, economic organization and political democracy.

 

II. Some Thoughts on a Program for Studying the Problem of Capitalism and Democracy.

A seminar or a combined course on the problems of capitalism and democracy seem to me to involve two sub-problems which ought to be separated from each other. One is the examination of the relationship of given economic institutions in the particular political framework and the processes which would be set in motion both in the political and economic field by attempts to realize certain aims of human welfare, or other chiefly political values, such as justice, freedom, etc.

The other problem would involve a study of actual processes of the interaction of political and economic institutions, their mutual interrelations in the past under different conditions in their dependence upon it given set of values in the particular hierarchies in which these values were accepted in certain countries and at certain times.

Both approaches may be dynamic but the first would primarily be analytical in that it would study the probable consequences of economic and political policies upon each other and therefore would in part deal with the study of how the existing institutions would be shaped by policies designed to meet social objectives in a more adequate way then is being done at present. In this analysis existing institutions such as constitutional arrangements, legal rules, the whole economic structure and possibly the international power structure as they affect the various countries, would be the starting point of the examination. This analysis would deal with problems which are of the utmost importance in the light of the discussion going on currently. It would have to take up those problems which presently are generally assumed under the heading of the relationship of freedom and planning. I think that it might be well for the Department to arrange the questions of a general and wide character affecting the whole social structure be included as well as more limited problems dealing with very specific economic or political policies in particular fields and their repercussions on the whole social structure.

The historical part could be used, it appears to me, for the following purposes.

(1) It could throw light on the coexistence of particular economic and political institutions especially on the historical coexistence of capitalism and democracy.

(2) It could provide evidence to show how and to what extent changes which either of the two institutions undergo undergoes in industrial civilization, have affected the other, and therefore could provide a basis for making certain analogies which present policies actually in operation or proposed.

(3) It would have to be supplemented by an analysis of the influence of the institutions of industrial capitalism and democratic political organization upon the formation of human personality, and vice versa the influence of human motivations and psychological factors upon the social, economic and political organization of the time.

(4) I am not certain whether an analysis of the origins of capitalism would be fruitful in this connection, but I think that it would be useful in the historical part to provide for a comparison between the social structure of the 19th century in the economic organization which it manifested in political values which it claimed to realize, and other societies, their economic and technological equipment and their political organization. If this can be supplemented by a comparison of the “basic personalities” in the two cultures, this might throw additional light on the question whether industrial capitalism and political democracy are bound up with each other, whether the ties exist in the social field exclusively, what ties are provided by the personality structure of the individuals composing the society and what evidence is provided by the historical incidence of attempts simultaneously to realize certain economic and political aims.

It seems to me, therefore, a defect that in the original planning of the program social psychologists and social anthropologists did not participate and I would think that both of these have important contributions to make.

Although it would be difficult clearly to separate the analytical approach which is concerned with examination of concrete presently existing problems confronting us in America and European countries as well as some of the “backward” countries, from the historical problems, I don’t think that such a separation would be necessary as long as it is logically plain that in the one area we are dealing with the application of generalizations drawn from history and other social sciences on practical policies, whereas in the other field we deal with an attempt to give a comprehensive examination of why particular processes occur, when and where they occurred and what factors were responsible for their occurrence. In other words, the two approaches would complement each other and would give opportunity to representatives of all the social science disciplines to make a contribution.

We frequently talk about the problem of modern society and I think we mean primarily by this the set of problems outlined above. Although as individuals we feel inclined that we must provide answers of what will be the probable effects of concrete policies, all of us attempt to build those answers into a logical framework which comprises the totality of social arrangements in which, therefore, is colored by our conception of political and cultural processes as well as economic ones. Any clarification of the relationships of these processes in present-day society which can be deduced by analytical study or by an examination of historical periods from which analogies for present-day action can be provided might therefore give at least a partial answer. I would like to see both the seminar and a course or combination of courses be carried on on the basis of these thoughts. If a more complete outline is desirable I shall gladly provide one.

Respectfully submitted
Bert Hoselitz

May 22, 1947

Source: Hoover Institution Archives, Milton Friedman Papers, Box 79, Folder “79.1 University of Chicago, Minutes, Economics Department 1946-1949”.

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DIVISIONAL COURSES

[…]

Social Science 300A,B,C. The Nature and Problems of Capitalism. A study of the economic institutions of capitalist society in the more critical phases of their development up to the present, with particular emphasis on the social and political context in which economic change occurs. Closely correlated with Social Science 301A, B,C, which is taken concurrently. Enrolment limited to students under the Divisional Master’s Program. Aut, Win, Spr: MWF 10:30; Staff.

Social Science 301A,B,C. The Nature and Problems of Democracy (identical with Political Science 300A,B,C). Examination of the political institutions of Western society, especially in their relation to the development of democratic ideals and practices. Major concern is with American institutions as they operate in the context of both democratic ideals and political reality. Taken concurrently with Social Science 300 A, B, C. Enrolment limited to students under the Divisional Master’s Program. Aut, Win, Spr: MWF 10:30; Staff.

 

Source: University of Chicago, Announcements Vol. XLIX, No. 9 (July 1, 1949). The Division of the Social Sciences, Sessions of 1949-1950. p. 10.

Image Source: Declaration of Intention to apply for U.S. citizenship by Bertold Franz Hoselitz (alias Hazlitt), August 8, 1940.

Categories
Courses Curriculum Harvard Undergraduate

Harvard. Major Expansion of Economics Course Offerings. 1883

Harvard’s decision to significantly increase its course offerings in political economy in 1883 received some national press coverage (that story posted earlier in Economics in the Rear-View Mirror). Today we have the announcement published in the Harvard Crimson. The trio Charles F. Dunbar, J. Laurence Laughlin and Frank W. Taussig were on their way to launch the take-off into a full academic program of economic study.

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POLITICAL ECONOMY.
Courses of Study for 1883-84.

Harvard Crimson
May 24, 1883

Arrangements recently completed have enabled the college to offer a more extended course of study in Political Economy than that which has been announced. A full statements to be substituted for that given on page 14 of the Elective Pamphlet, will be found below.

On page 15 of the pamphlet, line 13, for Course 6 read Course 7.

  1. Mill’s Principles of Political Economy. – Lectures on Banking and the Financial Legislation of the United States. Mon., Wed., Fri., at 9. Prof. Dunbar and Asst. Prof. Laughlin.
  1. History of Economic Theory and a Critical Examination of Leading Writers. – Lectures. Mon., Wed. at 2 and (at the pleasure of the instructor) Fri. at 2. Prof. Dunbar.
  1. Discussion of Practical Economic Questions. – Theses, Tu., Th., at 3, and a third hour to be appointed by the instructor. Assistant Professor Laughlin.
  1. Economic History of Europe and America since the Seven Years’ War. – Lectures. Mon., Wed., Fri., at 11. Professor Dunbar.
    Course 4 requires no previous study of Political Economy.
  1. Economic Effects of Land Tenures in England, Ireland, France and Germany. – Theses. Once a week, counting as a half course. Asst. Professor Laughlin.
  1. History of Tariff Legislation in the United States. – Once a week, counting as a half course. Mr. Taussig.
  1. Comparison of the Financial Systems of France, England, Germany and the United States. – Tu., at 2, counting as a half course. Professor Dunbar.

As a preparation for Courses 2, 3, 5, 6 and 7 it is necessary to have passed satisfactorily in Course 1.

Course 1 is in Examination Group I.; Course 2, in Group V.; Course 3, in Group XII.; Course 4, in Group III.; Course 7, in Group XI.

The first two courses are intended to present the principles of the science, while the remaining five treat the subject in its historical and practical aspects. No. 2 will take up the principal writers of the present day, as Cairns, Carey and George, together with the current literature of the science. No times of recitation have been assigned to courses 5 and 6, as this will be arranged between the instructors and the students choosing the course. The department intend issuing a full descriptive pamphlet describing the different courses, which can be had at the office in a few days.

Image Source:  Charles F. Dunbar (left) and Frank W. Taussig (right) from E. H. Jackson and R. W. Hunter, Portraits of the Harvard Faculty (1892); J. Laurence Laughlin (middle) from Marion Talbot. More Than Lore: Reminiscences of Marion Talbot, Dean of Women, The University of Chicago, 1892-1925. Chicago: University of Chicago (1936).

Categories
Courses Harvard Undergraduate

Harvard. Principles of Economics. Taussig, Andrew and Bullock. 1906-07

The popularity of the introductory course in economics at Harvard led Frank Taussig to establish a structure of two one-hour lectures per week with ca. 15 sections (of about 25 students) taught by four teaching assistants who administered (and presumably then graded) a 20 minute quiz on a week’s reading assignment that would be followed up with a 35-40 minute class discussion. 

Apparently Taussig’s Columbia University colleague, E.R.A. Seligman, asked Taussig how Harvard ran its principles of economics course. Maybe he was just curious to hear whether Harvard was about to adopt his Principles of Economics With Special Reference to American Conditions. In his answer, Taussig clearly stakes his claim to have invented the large lecture with small recitation sections format. 

 

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[Copy of letter from Frank W. Taussig (Harvard)
to E.R.A. Seligman (Columbia)]

Cotuit, Mass.
Aug. 8, 1906

Dear Seligman:-

Our present system in Economics 1, is as follows. There are three exercises a week, of which two are lectures, and the third is for section work, something like what you call a quiz. The lectures are given to all the men in a large lecture hall. During the first half year I give all the lectures; during the second half year it will be given (1906-7) by Andrew and Bullock. For the section work the men are divided into sections of about 30 men each, and meet weekly in separate rooms, and at various hours, in the charge of younger instructors. Each instructor has three to four sections, there are four or five instructors. The first thing at the section meetings is a sort of examination. The question is put on the board and answered in writing during the first twenty minutes; these papers are read and a record kept of the results. The rest of the hour, thirty-five or forty minutes, is given to oral discussion.

Last year we used three text-books, Mill, Walker, and Seager. Specific assignments of reading are made for each week. The lectures cover the same topics as the reading, and the question of the week is on both reading and lectures.

To ensure consistency, the lecturer in charge (for instance myself) meets the younger instructors weekly at a stated hour. Then the questions to be asked by the instructors are submitted for approval, and the work of the week talked over.

This system is of my devising, and has worked better than anything we have tried. It has now been adopted into other large courses, History 1, and Government 1. Any other information I can give you are very welcome to.

I was extremely sorry to hear of your bereavement, and sympathize with you very fully [Seligman’s daughter, Mabel Henrietta died October 30, 1905 at age eleven]. Ripley has returned from Europe. His present address is New London, N. H. I have written a review of your book for our Journal, in which I have said some things that may not please you. But I take it you agree with me that the only object of reviews is to elicit frank statement of opinion. [Taussig’s review of Seligman’s Principles of Economics, Seligman’s Reply and Taussig’s Rejoinder]

Sincerely yours,
F. W. Taussig.

Prof. E.R.A. Seligman,
Lake Placid, N.Y.

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Course Announcement 1906 (no description)

ECONOMICS
Primarily for Undergraduates

  1. Principles of Economics. Tu., Th., Sat. at 11. Professor Taussig, Asst. Professors Bullock and Andrew, assisted by Messrs. Howland, Lewis, Huse, and Mason.

 

Source: “Announcement of the Course of Instruction offered by the Faculty of Arts and Sciences 1906-07, 2nd edition”. Official Register of Harvard University, Vol. III, No. 15, Aug. 1, 1906. P. 47.

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Course Announcement 1910-11 with Description

INTRODUCTORY COURSES
Primarily for Undergraduates

  1. Principles of Economics. Tu., Th., Sat., at 11. Professor Taussig, assisted by Drs. Huse, Day, and Foerster, and Messrs. Sharfman and Balcom.

Course 1 gives a general introduction to economic study, and a general view of Economics for those who have not further time to give to the subject. It undertakes a consideration of the principles of production, distribution, exchange, money, banking, international trade, and taxation. The relations of labor and capital, the present organization of industry, and the recent currency legislation of the United States will be treated in outline.

The course will be conducted partly by lectures, partly by oral discussion in sections. A course of reading will be laid down, and weekly written exercises will test the work of students in following systematically and continuously the lectures and the prescribed reading.

 

Source: History and Political Science, Comprising the Departments of History and Government and Economics, 1910-11. Official Register of Harvard University, Vol. VII, No. 23, June 21, 1910, p. 52.

Note: The course description is almost a verbatim copy of that for 1902-03, so we can presume the same description for 1906-07.

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Course Enrollment 1906-07

  1. Professor Taussig and Asst. Professors Bullock and Andrew, assisted by Messrs. Martin, Mason, G.R. Lewis, Huse, and Holcombe,–Principles of Economics.

Total 392: 1 Graduate, 15 Seniors, 43 Juniors, 252 Sophomores, 50 Freshmen, 31 Other.

 

Source: Harvard University. Reports of the President and the Treasurer of Harvard College, 1906-07, p. 70.

Image Source: Harvard Class Album, 1906.

 

Categories
Courses Exam Questions Problem Sets Syllabus

MIT. Core Microeconomic theory III. Hal Varian, 1975

Hal R. Varian, chief economist at Google since 2007, was a 28 year old assistant professor at M.I.T. in 1975 when he taught my cohort the third in a sequence of four half-term courses that constituted MIT’s required core of graduate microeconomic theory. He assigned draft chapters from his graduate textbook Microeconomic Analysis (published in 1977). For this post I have transcribed the course outline, five problem sets and the final examination for the course.

Core microeconomic theory at MIT in 1974-75:

14.121 (linear models and production) was taught by Martin Weitzman,
14.122 (competitive and noncompetitive market structures) taught by Robert L. Bishop,
14.123 (theory of the consumer and resource allocation) was taught by Hal Varian,
14.124 (capital theory, uncertainty and welfare economics) was taught by Paul Samuelson.

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14.123—Microeconomic Theory III
Theory of the Consumer and Resource Allocation

Professor Hal R. Varian, E52-353, 3-2662
Spring, 1975

Feb. 5 advanced placement exam
Feb. 10 utility; demand; expenditure
Feb. 12 indirect utility; Slutsky equation
Feb. 17 no class
Feb. 19 no class
Feb. 24 demand functions; duality
Feb. 26 expected utility; properties
Feb. 28 general equilibrium; existence
Mar. 3 welfare theory
Mar. 5 the core of an exchange economy
Mar. 10 general equilibrium and production
Mar. 12 dynamics and general equilibrium
Mar. 17 malfunctions of the market mechanism
Mar. 19 final exam

Course text will be lecture notes available from me. Malinvaud and Arrow and Hahn are highly recommended secondary reading. There will be four or five problem sets and a problem session on Fridays, 9-10:30.

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14.123 Spring, 1975
Professor Hal R. Varian

Consumer Theory I

  1. Consider a consumer with a Cobb-Douglas utility function:
    u(x,y) = a ln x + (1-a) ln y.
    Calculate:

    1. demand functions for x and y
    2. the indirect utility function
    3. the expenditure function
    4. the Hicksian demand functions.
  2. In a general equilibrium analysis, we cannot take income as an exogenous variable in the demand function since income, y = p.w, depends on the vector of relative prices. Derive the Slutsky equation for Dpm(p, p.w) in this case.
  3. At a general equilibrium price vector p*, we have aggregate supply equal aggregate demand:
    Σ mi(p*, p*.w) = Σ wi. Show that if all agents have identical marginal propensities to consume each good (Dymi(p*, p*.w) = Dymj(p*, p*.w) for all i and j) then all aggregate demand curves must be downward sloping at equilibrium. More generally, show that Dp(Σ mi(p*, p*.wi)) is negative semi-definite.
  4. Define eij = (-pj/xi) Dpjmi(p,y) be the cross price elasticity of good i with respect to price j, and ri = pi mi(p, y)/y, the income share of commodity i.
    Show that r1e11 + r2e21 +r3e31  = r1.

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14.123 Spring, 1975
Professor Hal R. Varian

Consumer Theory II

  1. A consumer is found to have a utility function of the form
    u = -1/x1 – 1/x2.

    1. Starting from the utility function, compute the market demand functions for the consumer when he has income y and faces prices p1 and p2.
    2. Use the market demand functions to show that the indirect utility function is
      u = -( √(p1) + √(p2))2/m.
    3. Compute the expenditure function from the indirect utility function.
    4. Compute the consumer’s compensated and market demand curves from the expenditure function.
  2. Suppose at prices (p1, p2) = (5,10) and income y = $100, a rational consumer consumes the bundle (6,7). Assume that we have measured the following derivatives:

∂H1/∂p1 (p1, p2, ū) = -2
∂H1/∂p2 (p1, p2, ū) = +1
∂M1/∂y (p1, p2, y) = 2/7

where H1 and H2 are the Hicksian demand functions for goods 1 and 2 and M1 is the Marshallian demand function for good 1. Find an estimate of the consumption bundle of the consumer at (p1, p2) = 5,11).

  1. Suppose a consumer has an expenditure function of the form e(p, u) = u.g(p). Show that his utility function is homogenous of degree one. Suppose e(p,u) is of the form e(p,u) = h(u)g(p). How does the consumer’s behavior differ?
  2. Suppose a consumer has a differentiable expected utility function for income with Dyu(y) strictly positive. Show that he will always take a small enough bet as long as it has positive expected value.

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14.123 Spring, 1975
Professor Hal R. Varian

General Equilibrium III

  1. Show that Walras law holds for a production economy with fully distributed profits.
  2. Prove the theorem that a general equilibrium is pareto efficient for an economy with production.
  3. Suppose we have a productive economy with two agents. The producer has a production function x = q1/2 where x is output and q is labor.
    The consumer has a utility function u(x,q) = x1/2(1-q)1/2. Calculate the general equilibrium real wage and equilibrium level of profits.

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14.123 Spring, 1975
Professor Hal R. Varian

General Equilibrium Theory and Welfare Economics I

  1. Show that any solution to

max Σ ai ui(xi), ai>0
s.t. Σ xi ≤ w

is necessarily pareto efficient.

  1. Suppose we have two agents with indirect utility functions

v1(p1, p2, y) = ln y –a ln p1 – (1-a) ln p2
v2(p1, p2, y) = ln y –b ln p1 – (1-b) ln p2

and initial endowments

w1 = (1,1)
w2 = (1,1)

Calculate the market clearing price.

  1. We have two agents with utility functions

u1(x1, y1) = a ln x1 +(1-a) ln y1
u2(x2, y2) = b ln x2 + (1-b) ln y2

and initial endowments

w1 = (1,0)
w2 = (0,1)

Calculate the market equilibrium prices in terms of the parameters a and b.

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14.123 Spring, 1975
Professor Hal R. Varian

General Equilibrium Theory and Welfare Economics II

  1. Two agents with strictly convex preferences have equal initial endowments
    w1 = w2. They trade to an arbitrary allocation in the Core (w1,w2), (x1,x2). Prove that this allocation is necessarily fair:

    1. Draw an Edgeworth box and give a geometric argument;
    2. give an algebraic argument in the general case (there is a one-line proof.)
    3. Show in a three person economy there are allocations in the equal division core that are not fair.
  2. Suppose we have n agents with identical, strictly convex preferences and we have some initial bundle of k goods to be divided among them. Let x be a fair allocation; show that x must give the same bundle to each agent. (Recall that a fair allocation is one that is strongly pareto efficient and such that no agent prefers any other agent’s bundle to his own.)
  3. Show that under appropriate assumptions of convexity, every pareto efficient allocation is necessarily a solution to a problem of maximizing a weighted sum of utilities. What is the economic interpretation of the weights?
  4. Suppose we are at a market allocation that is considered good. Since it is a market equilibrium it is pareto efficient and therefore maximizes a certain weighted sum of utilities Σ ai* ui(x). Accordingly, we will use Σ ai* ui(x) to evaluate small projects. Suppose we are considering a small project that will change x = (x1,…, xn) to x´= (x1´,…, xn´). Show that it should be undertaken if and only if it increases national income; that is, iff Σ p.(xi´-xi) >0.

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14.123 FINAL EXAMINATION
March 19, 1975

Professor H. Varian

Answer any 2 out of 4. All questions have equal weight. Good luck!

  1. A consumer has a utility function of the form u(x1, x2) = ln x1 + x2. He faces prices p1 and p2 and has income y. Calculate:
    1. his Marshallian demand functions for each good
    2. his indirect utility function
    3. his Hicksian demand functions
    4. his expenditure function.
  2. There are two consumers A and B with the following utility functions and endowments:

UA(XA1, XA2) = a ln XA1 + (1-a) ln XA2 , WA = (0,1)
UB(XB1, XB2) = min (XB1, XB2) , WB =(1,0)

Calculate the market clearing prices and the equilibrium allocation.

  1. We have n agents with identical strictly concave utility functions, u1(x1),…,un(xn). There is some initial bundle of goods w. Show that equal division is a pareto efficient allocation.
  2. A consumer has a differentiable expected utility function u(y) with u´(y) > 0. (There are no conditions on u´´(y)). His initial level of wealth is w and he is contemplating a bet which gives him $e with probability p > ½ and he loses $e with probability 1-p. (Notice the bet has positive expected value.) Show that he will always take the bet if e is small enough. (Hint: try Taylor series.)

 

Source: Personal copies.

Image Source: Detail from 1976 departmental group photo.