Examination questions spanning just over a half-century can be found in Frank Taussig’s personal scrapbook of cut-and-pasted semester examinations for his entire Harvard career. Until Schumpeter took over the core economic theory course from Taussig in 1935, Taussig’s course covering economic theory and its history was a part of almost every properly educated Harvard economist’s basic training. Taussig’s exam questions were posted for the academic years 1886/87 through 1889/90 along with enrollment data for the course; material from 1890/91 through 1893/94 and also for 1897-1900 have been posted as well.
For the academic years 1900/01 through 1902/03 the course was taught by Thomas Nixon Carver. Taussig was on a leave of absence for the academic year 1902-03 [Source: Harvard University Catalogue 1902/1903, p. 297.] Taussig himself wrote that he was “compelled by ill health to withdraw from teaching” (1901-03). [Chapter IX Economics (1871-1929) by The Development of Harvard University since the Inauguration of President Eliot, 1869-1929 Cambridge: Harvard University Press, 1930. p. 191]. Schumpeter wrote “We speak of nervous breakdown in such cases, which indeed are more frequent in the academic profession than one would infer from the general conditions of a professor’s life. He took leave and went abroad for two years, relaxing completely and spending one winter at Meran in the Austrian Alps, another on the Italian Riviera, and the summer between (1902) in Switzerland. Catastrophe was thus avoided, and in the fall of 1903 he was able to resume his teaching and the editorship of the Quarterly Journal.” [ Joseph A. Schumpeter, Chapter 7 Frank William Taussig (1859-1940) in Ten Great Economists from Marx to Keynes. p. 206.]
During the first term of 1903/04 Taussig taught the core economic theory course and Carver taught the second term. Beginning 1904/05 Taussig taught the course by himself again.
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Enrollment Economics 2
1900-01
For Undergraduates and Graduates:—
[Economics] 2. Asst. Professor Carver.— Economic Theory in the Nineteenth Century.
Total 45: 6 Graduates, 15 Seniors, 16 Juniors, 5 Sophomores, 3 Other.
Source: Harvard University. Annual Reports of the President and Treasurer of Harvard College, 1900-01, p. 64.
Link to reading list for the course:
https://www.irwincollier.com/harvard-economics-economics-2-carver-1900-01/
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Enrollment Economics 2
1901-02
For Undergraduates and Graduates:—
[Economics] 2. Asst. Professor Carver.— Economic Theory.
Total 32: 5 Graduates, 6 Seniors, 17 Juniors, 2 Sophomores, 2 Other.
Source: Harvard University. Annual Reports of the President and Treasurer of Harvard College, 1901-02, p. 77.
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Course Description Economics 2
1902-03
[Carver and Taussig actually first shared the course during the following year]
For Undergraduates and Graduates
[Economics] 2. Economic Theory. Mon., Wed., Fri., at 2.30. Professors Taussig and Carver.
Course 2 is intended to acquaint the student with some of the later developments of economic thought, and at the same time to train him in the critical consideration of economic principles and the analysis of economic conditions. The exercises are accordingly conducted mainly by the discussion of selected passages from the leading writers; and in this discussion the students are expected to take an active part. Lectures are given at intervals outlining the present condition of economic theory and some of the problems which call for theoretical solution. Theories of value, diminishing returns, rent, wages, interest, profits, the incidence of taxation, the value of money, international trade, and monopoly price, will be discussed. Marshall’s Principles of Economics, Böhm-Bawerk’s Positive Theory of Capital, Taussig’s Wages and Capital, and Clark’s Distribution of Wealth will be read and criticised.
Course 2 is open to students who have passed satisfactorily in Course 1.
Source: Harvard University. The University Publications, New Series, No. 55. Faculty of Arts and Sciences, Division of History and Political Science comprising the Departments of History and Government and Economics, 1902-03. Cambridge, Mass. (June 14, 1902), pp. 40-41.
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Enrollment Economics 2
1902-03
For Undergraduates and Graduates:—
[Economics] 2. Asst. Professor Carver.— Economic Theory.
Total 25: 5 Graduates, 8 Seniors, 7 Juniors, 3 Sophomores, 2 Other.
Source: Harvard University. Annual Reports of the President and Treasurer of Harvard College, 1902-03, p. 67.
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Enrollment Economics 2
1903-04
For Undergraduates and Graduates:—
[Economics] 2. Professors Taussig and Carver.— Economic Theory.
Total 23: 9 Graduates, 4 Seniors, 7 Juniors, 1 Sophomores, 2 Other.
Source: Harvard University. Annual Reports of the President and Treasurer of Harvard College, 1903-04, p. 66.
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HARVARD UNIVERSITY
ECONOMICS 2
[Mid-Year. 1904]
Arrange your answers strictly in the order of the questions.
One question may be omitted.
- Do you conceive wages to be determined in amount by capital, or to be paid from capital, in these cases:—
- a railway which collects its receipts before pay-day comes around;
- a farmer who pays his laborers after the crop has been harvested and sold;
- a workingmen’s society for coöperative production which makes advances to members from week to week, and adds a final payment when the season’s or year’s operations have been concluded?
- State carefully how you conceive Walker to define the “no-profits” line; how he distinguishes between business profits and wages; and whether there is a vicious circle in his reasoning as to the residual element in distribution.
- Suppose a tax to be levied on a commodity subject to the law of diminishing returns, and the proceeds to be used for a bounty on a commodity produced under conditions of increasing return, — how would the welfare of the community presumably be affected?
Assume now that the first commodity is an article of comfort, the second an article of luxury, — would your conclusion be different?
Reverse the assumption, and suppose the first commodity to be one of luxury, the second one of comfort, — would your conclusion be still different?
- “We might as reasonably dispute whether it is the upper blade of a pair of scissors or the lower that cuts a piece of paper, as whether value is governed by utility or cost of production. It is true that when one blade is held still, and the cutting is effected by moving the other, we may say with careless brevity that the cutting is done by the second; but the statement is not strictly accurate, and is to be excused only so long as it claims to be merely a popular and not a strictly scientific account of what actually happens.”
Explain, with reference to commodities produced under the conditions of
monopoly;
constant returns;
increasing returns.
- Explain prime cost, total cost, supplementary cost; and consider their relation to quasi-rent.
- Would Marshall say that there was true rent in the case of, —
a very profitable silver mine;
a valuable site in a town like Pullman;
a successful business man.
Why or why not in each case?
- Suppose it were provided by law that the rent of premises used for wholesale or retail trading should not exceed interest on the cost of the buildings (with due allowance for depreciation and the like), what would be the effects on landlords and tenants, and on the prices of the articles sold?
- “A rich man abstains from the consumption of his superfluous wealth, and is scarcely conscious, perhaps quite unconscious, of having suffered any deprivation whatever. On the other hand, the same or a much smaller amount of wealth reserved from personal consumption by an artisan or a small tradesman will frequently demand the most rigorous self-denial….And it is similar with labor. The laborious effort fitted to produce a given result does not represent the same sacrifice for different people: it is one thing for the strong, another for the weak; one for the trained workman, another for the raw beginner. This being so, the questions arises — How are such differences to be dealt with in computing cost of production? The answer must be that the sacrifices to be taken account of, and which govern exchange value, are not those undergone by A, B, or C, but the average sacrifices undergone by the class of laborers or capitalists to which the producers of the commodity belong.”— Cairnes. Would you accede to this conclusion as to capitalists? as to laborers?
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Enrollment Economics 2
1904-05
For Undergraduates and Graduates:—
[Economics] 2. Professor Taussig.— Economic Theory.
Total 22: 6 Graduates, 2 Seniors, 11 Juniors, 1 Sophomores, 2 Other.
Source: Harvard University. Annual Reports of the President and Treasurer of Harvard College, 1904-05, p. 74.
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Course Description Economics 2
1904-05
[Economics] 2. Economic Theory. Mon., Wed., Fri., at 2.30. Professor Taussig.
Course 2 is intended to acquaint the student with some of the later developments of economic thought, and at the same time to train him in the critical consideration of economic principles and the analysis of economic conditions. The exercises are accordingly conducted mainly by the discussion of selected passages from the leading writers; and in this discussion the students are expected to take an active part. Lectures are given at intervals outlining the present condition of economic theory and some of the problems which call for theoretical solution. Theories of value, diminishing returns, rent, wages, interest, profits, the incidence of taxation, and monopoly price, will be discussed. Marshall’s Principles of Economics, Clark’s Distribution of Wealth, and selections from the writings of Walker, Cairnes, and others, will be read and discussed.
Course 2 is open to students who have passed satisfactorily in Course 1.
Source: Harvard University. Faculty of Arts and Sciences. Division of History and Political Science Comprising the Departments of History and Government and Economics, 1904-05 (May 16, 1904), pp. 38-39.
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ECONOMICS 2.
[Mid-Year 1905]
Arrange your answers strictly in the order of the questions.
- “The United States government collects its postal revenues day by day, yet postpones the payment of its clerks and carriers to the end of the month. To descend to the other end of the scale of dignity, hotel keepers and, in a less degree, boarding-house keepers, collect their bills before they pay their cooks, chambermaids, and scullions. Nearly all the receipts of theatre, opera, and concert companies are obtained day by day, although their staffs and troupes are borne on monthly or weekly pay-rolls.”
“I have before me a considerable collection of accounts from the books of farmers as late as 1851. These show the hands charged with advances of the most miscellaneous character. . . . In general, the amount of such advances does not exceed one-third, and it rarely reaches one-half of the stipulated wages of the year. It is idle to speak of wages thus paid as coming out of capital.”
In your view, is there a payment of wages out of capital, partial or whole, in these cases?
- “On the relation between the money funds or proceeds held by the immediate employer, and the food, clothes and enjoyments, constituting the community’s real circulating capital, he [J. S. Mill] gave ambiguous and unsatisfactory statements, from which only a sympathetic interpreter could patch up a consistent and tenable doctrine.”
Explain the grounds on which this judgment of Mill rests; and consider whether your judgment on F. A. Walker, on the same point, would be more favorable or less.
“Under the conditions which prevail so preponderantly in the modern industrial world, the true residual sharer, certainly in the first instance, is the active capitalist, the business man. . . . The hired laborer gets his fixed wages, the investor his stipulated income; the managing business man takes the rest.”
Does this view seem to you sound? and, whether sound or not, does it seem to you necessarily inconsistent with Walker’s view as to the place of business profits in the theory of distribution?
- Consider in what manner the doctrine of consumer’s rent is affected by (1) differences in the incomes of individuals and of classes; (2) the satisfactions derived from articles of necessity; (3) those derived from articles of luxury and display.
- Mill’s statement of the equation of supply and demand, and Marshall’s analysis of the temporary equilibrium of supply and demand, — wherein different, how reconcilable?
- Explain briefly: producer’s surplus, rent, monopoly rent, quasi rent, prime cost, supplementary cost.
- “The so-called rent of buildings, exclusive of ground-rent, is not governed at all by the economic law of rent, but by the principles which regulate the interest of capital.” F. A. Walker.
Would Marshall accede to this view? If so, why? If not, why not? Your own view?
- “Independently of any change in the suitability of the prevailing crops and methods of cultivation for special soils, there is a constant tendency towards equality in the value of different soils. In the absence of any special cause to the contrary, the growth of population and the wealth will make the poorer soils gain on the richer.”
Explain (1) why there is this tendency towards equality; (2) whether it is inconsistent with the doctrine of difference in the “original and indestructible powers” of the soil; (3) what is its bearing on the proposal to appropriate through taxation the rent of agricultural land.
- Suppose that in a given industry, with an increase of output, there was continuing gain in the way of internal economics; what result would ensue in the organization and scale of production? Suppose there was continuing gain, but solely in external economies, what result would ensue? Suppose that a gradual increase in demand [and output] were to “increase gradually the size and efficiency of the representative firm; and to increase the economies, both internal and external, which are at its disposal,” — what then?
Consider (1) the short-period and the long-period effects of an increase of demand for a commodity subject to the law of diminishing returns; (2) the short-period and the long-period effects of a decrease in demand for a commodity subject to the law of increasing returns.
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Harvard University
ECONOMICS 2
[Final 1905]
- Suppose ordinary manual laborers to become very few, other workers and other factors in production remaining the same; what consequences would ensue as to the production of wealth, and as to the earnings of such laborers and of other workers?
- Suppose persons having in high degree the qualities needed for business management to become very numerous, other things still remaining the same; what consequences would ensue as to the production of wealth, and as to the earnings of such managers and of other workers?
- Suppose the quantity of capital to be very greatly increased, the other factors of production remaining the same; what consequences would ensue as to the production of wealth, as to the returns to capital, and as to the earnings of the other factors?
- (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 had done.”
(b) “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.”
State what causes would govern relative wages under each of these suppositions.
- State which of the suppositions just described is believed to be in accord with the actual conditions of modern societies by Cairnes, by Marshall, by Seager; and give your own view.
- Compare Marshall’s conclusions as to the causes which govern earnings of management with Walker’s and with Seager’s; and give your own conclusion.
- The advantages and disadvantages of the English system of land tenure; and the qualifications which must be remembered when applying to it the Ricardian analysis.
- Set forth briefly what questions of principle should receive most attention in an exposition for elementary students of (a) foreign trade; (b) money; (c) labor problems; (d) railway problems.
[Discuss two only of these topics]
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Enrollment Economics 2
1905-06
For Undergraduates and Graduates:—
[Economics] 2. Professor Taussig.— Principles of Economics (second course).
Total 34: 13 Graduates, 7 Seniors, 5 Juniors, 8 Sophomores, 1 Other.
Source: Harvard University. Annual Reports of the President and Treasurer of Harvard College, 1905-06, p. 72.
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ECONOMICS 2
[Midyear 1906]
Answer nine questions.
Arrange your answers strictly in the order of the questions.
- “(a) The draughtsman, who, shut up in some dingy office on the banks of the Thames, is drawing the plans for a great marine engine, is in reality devoting his labor to the production of bread and meat as truly as though he were garnering the grain in California or swinging a lariat on a La Plata pampa; (b) he is as truly making his own clothing as though he were shearing sheep in Australia or weaving cloth in Paisley, and just as effectually producing the claret he drinks at dinner as though he gathered the grapes on the banks of the Garonne.” Consider whether there is any difference between the two statements here quoted, and to which, if to either, you could accede.
- “(a) The ordinary bargain between labor and capital is that the wage-receiver gets command over commodities in a form ready for immediate consumption, and in exchange carries his employer’s goods a stage further toward being ready for immediate consumption. (b) But while this is true of most employees, it is not true of those who finish the processes of production. For instance, those who put together and finish watches, give to their employers far more commodities in a form ready for immediate consumption, than they obtain as wages. (c) And if we take one season with another, so as to allow for seed and harvest time, we find that workmen as a whole hand over to their employers more finished commodities than they receive as wages.”
What do you say of the several statements in this passage?
- Walker’s reasoning as to the relation of wages to profits, and of profits to wages: is there a vicious circle?
- Are high wages in a particular employment (or group of employments) to be regarded as effects or causes of the value of the commodities made by the laborers who receive the high wages? What is Cairnes’s view? Your own?
- “Mill allows that when land capable of yielding rent in agriculture is applied to some other purpose, the rent which would have been yielded in agriculture is an element in the cost of production of other commodities. But wherefore this distinction between agriculture and other branches of industry? Why does not the same principle apply between two different modes of agricultural employment?” What would be your answer?
- Consider in what way, if at all, the principle of quasi-rent is applicable to the operations of (1) a bank; (2) a railway; (3) a building erected for business purposes on an urban site.
- Suppose it were provided by law that the rental paid by tenants in buildings erected on urban sites should not exceed interest at current rates on the capital invested in the buildings (allowance being made depreciation, insurance, taxes, and the like); what would be the result for the owners of land and buildings, for tenants, and for the purchasers of things made or sold in the buildings?
- Explain (briefly) total utility; marginal utility; consumer’s surplus; the application of the principle of consumer’s surplus to the utilities derived from commodities produced with increasing and with diminishing returns.
- A recent writer discussing the principle of marginal utility with reference to a wayfarer supposed to possess a stock of apples, remarks that, — “if in the case of five apples, the marginal utility of each is five units of satisfaction, that of the stock will be five times five, or twenty-five; but if in the case of eight apples, the marginal utility of each falls to three, that of the stock will be eight times three, or twenty-four. Yet the total utility of eight apples is certainly more than that of five.” What do you say?
- How serviceable do you consider Marshall’s device of a “representative firm” for the study of the effect of changes in supply and demand?
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ECONOMICS 2
[Final 1906]
Arrange your answers strictly in the order of the questions.
I
Answer three questions.
- “There is a constant tendency towards a position of normal equilibrium, in which the supply of each of the agents of production shall stand in such a relation to the demand for its services, as to give to those who have provided the supply a sufficient reward for their efforts and sacrifices. If the economic conditions of the country remained stationary sufficiently long, this tendency would realize itself in such an adjustment of supply to demand, that both machines and human beings would earn generally an amount that corresponded fairly with their cost of rearing and training, conventional necessaries as well as those things which are strictly necessary being reckoned for.”
Whom do you believe to be the writer of this passage? and what do you think his conclusion as to non-competing groups?
- “A rich man abstains from the consumption of his superfluous wealth, and is scarcely conscious, perhaps quite unconscious, of having suffered any deprivation whatever. On the other hand, the same or a much smaller amount of wealth reserved from personal consumption by an artisan or a small tradesman will frequently demand the most rigorous self-denial. . . . And it is similar with labor. The laborious effort fitted to produce a given result does not represent the same sacrifice for different people: it is one thing for the strong, another for the weak; one for the trained workman, another for the raw beginner. This being so, the question arises: How are such differences to be dealt with in computing cost of production? The answer must be that the sacrifices to be taken account of, and which govern exchange value, are not those undergone by A, B, or C, but the average sacrifices undergone by the class of laborers or capitalists to which the producers of the commodity belong.” — Cairnes.
Would you accede to this conclusion as to capitalists? as to laborers?
- It is true that “the rent of rare natural ability may be regarded as a specially important element in the incomes of business men . . . and of exceptionally successful barristers, and writers, and painters, and singers, and jockeys”?
What is Walker’s view? Marshall’s? your own?
- “The sudden appropriation by the State of any incomes from property, the private ownership of which had once been recognized by would destroy security and shock the foundations of society. But if from the first the State had retained these rents in its hands, the vigour of industry and accumulation need not have been impaired; and nothing at all like this can be said of the incomes derived from property made by man (quasi-rents).”
Explain and consider how far, if at all, the principles stated are applicable to the rent or royalty of mines.
II
Answer two questions.
- “Abstinence is confined to the genesis of true capital; none of it is involved in maintaining an endless series of capital goods, and there is no abstinence in a static state.”
What are the grounds on which this doctrine rests? and what is your own view?
- “The whole question whether goods are advanced by one class of persons to another, in order to tide over an interval of waiting, clearly has reference, not to the relations of capitalists in general to laborers in general, but to the relations of certain sub-groups to other sub-groups in the producing series.”
Explain; and give your own opinion.
- “In the same sense in which the interest on artificial capital and the rent of land are not elements in price, wages have no effect on price. If good workers were to relinquish their claims against employers and work for nothing, the price of goods would still conform to their marginal utility. . . . In the same inaccurate sense in which it may be said that the rent of land is not an element in price, the rents of tools, etc., and those of men themselves, or interest and wages, are not elements in price. It makes no difference who gets them.”
Explain what is the doctrine here summarily stated, and the grounds on which you accept it or reject it.
III
Answer both questions.
- (a) Is a high rate of money wages and advantage to a country? If so, wherein? if not, why not?
(b) Is a high rate of money wages an obstacle to the successful conduct of industry in competition with countries where money wages are low?
- What do say to the plan of so adjusting duties on imports as to equalize the “labor cost” of imported and domestic commodities, through the levy of duties which will just offset the higher wages paid by the American employer?
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Enrollment Economics 2
1906-07
For Undergraduates and Graduates:—
[Economics] 2. Professor Taussig.— Principles of Economics (second course).
Total 33: 12 Graduates, 6 Seniors, 9 Juniors, 2 Sophomores, 4 Other.
Source: Harvard University. Annual Reports of the President and Treasurer of Harvard College, 1906-07, p. 70.
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ECONOMICS 2
[Mid-Year 1907]
Arrange your answers strictly in the order of the questions.
- “On the ranches of Montana cattle are breeding, among the forests of Pennsylvania hides are tanning, in the mills of Brockton shoes are finishing; and, if the series of goods in all stages of advancement is only kept intact, the cow-boy may have to-day the shoes that he virtually creates by his efforts . . . With sheep in the pastures, wool in the mills, cloth in the tailoring shops, and ready-made garments on the retailers’ counters, the labor of the people can, as it were, instantaneously clothe the people.”
What would be said as to this by Walker? by Marshall? by the instructor in the course? What is your own view?
- Explain what Cairnes means by “cost of production,” and what his conclusion is as to the relation between cost of production and value.
- Explain what Marshall means by (1) prime cost, (2) supplementary cost, (3) total cost; what his general conclusion is as to the relation between cost and value; and wherein, if at all, his conclusion differs from Cairnes’s.
- Is there quasi-rent, in Marshall’s view, in times of activity, when profits are above the normal range? If so, how would he measure it?
Is there quasi-rent, in Marshall’s view, in times of depression? If so, how would he measure it?
- “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 that occupation in any case, then the earnings which such men would get might be left out of account as exceptional, when we were considering the chances of success or failure for ordinary persons.”
Does Marshall concede this much? and what is the bearing of his conclusion (affirmative or negative) on his reasoning as to business profits?
- Suppose it were provided by law that the rental paid by tenants in buildings used for business on urban sites should not exceed interest on the amount invested in the buildings alone (allowance being made for repairs, depreciation, insurance, taxes, and the like); what would be the result for the owners of land and buildings, for tenants, and for the purchasers of things made and sold in the buildings?
- “A rich man abstains from the consumption of his superfluous wealth, and is scarcely conscious, perhaps quite unconscious, of having suffered any deprivation whatever. On the other hand, the same or a much smaller amount of wealth reserved from personal consumption by an artisan or a small tradesman will frequently demand the most rigorous self-denial. . . . And it is similar with labor. The laborious effort fitted to produce a given result does not represent the same sacrifice for different people: it is one thing for the strong, another for the weak; one for the trained workman, another for the raw beginner. This being so, the question arises: How are such differences to be dealt with in computing cost of production? The answer must be that the sacrifices to be taken account of, and which govern exchange value, are not those undergone by A, B, or C, but the average sacrifices undergone by the class of laborers or capitalists to which the producers of the commodity belong.” — Cairnes.
Would you accede to this conclusion as to capitalists? as to laborers?
- There is prima facie reason for believing that the aggregate satisfaction, so far from being already a maximum, could be much increased by collective action in promoting the production and consumption of things in regard to which the law of increasing return acts with especial force.”
Why and how?
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ECONOMICS 2
[Final 1907]
Arrange your answers strictly in the order of the questions.
One question may be omitted.
- “The rate of interest is limited and determined by the productiveness of the last extension of process economically permissible, and of the further extension not permissible. . . . Assuming that these two marginal limits are very near each other, one of them may be left out of account without any serious inaccuracy, and the law may be simply formulated thus: the rate of interest is determined by the surplus return of the last permissible extension of production.” — Böhm-Bawerk.
“The addition to the product caused by the last unit of capital fixes the rate of interest. Every unit of capital can secure for its owner what the last unit produces, and it can secure no more.” — Clark.
In what essential do these two doctrines differ?
- The conclusions of (1) Clark (2) Böhm-Bawerk (3) Marshall, as to the relation between “abstinence” and the accumulation of capital.
- “In pure theory one might even measure wages in the concrete way in which we are measuring the product of instruments; for he might apply the rent formula to men of different personal qualities…. The existence of any no-rent labor enables us to make the rent formula general and to apply it to every concrete agent of production.” Explain what Clark here means; and wherein his doctrine differs from or resembles Walker’s doctrine as to the no-profits business man, and Marshall’s “quasi-rent of labor.”
- “Is there any capital that is simply ‘a fund for the maintenance of labor’? Is it true, as Adam Smith said, and as a hundred others have repeated, that the natural way to originate capital is to heap up food enough to live on for a long period, and then, during that period, to make something useful, like a boat, a hut, or a tool? Is stored food the original capital?” How would this question be answered by Böhm-Bawerk? By Clark? What is your own view?
- Explain the three grounds on which Böhm-Bawerk bases the superiority of present goods over future, and give your opinion as to their relative importance.
- “In the present condition of industry, most sales are made by men who are producers and merchants by profession. . . . For them, the subjective use-values of their own wares, is for the most part nearly nil. . . . In sales by them, the limiting effect which, according to our theoretical formula, would be exerted by the valuation of the last seller, practically does not come into play.” — Böhm-Bawerk. Explain; and consider the consequences as to the formula that price is determined by the valuations of marginal pairs.
- “In every case the difference between the price at which the similar foreign article might have been previously purchased and that at which the domestic manufacture can be sold with a reasonable profit, is to the whole extent of that manufacture a loss to the community. That difference is equal, or nearly equal, on each yard of cloth, to the duty laid on a yard of the similar foreign article, whenever that duty is not too high to prevent partial foreign importations: it is less per yard than the duty, when this is higher than is necessary for the encouragement of the domestic manufacture, and becomes prohibitory; but in this case, the whole amount consumed being of domestic manufacture, the aggregate public loss is greater than when the duty admitted is of foreign competition.” Explain; and give your grounds for accepting or rejecting these conclusions.
- State concisely what you consider to be the strongest argument which can now be advanced in favor of restrictive duties in (1) Great Britain, (2) Germany, (3) the United States.
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Enrollment Economics 2
1907-08
For Undergraduates and Graduates:—
[Economics] 2. Professor Taussig.— Principles of Economics (advanced course).
Total 32: 12 Graduates, 3 Seniors, 13 Juniors, 3 Sophomores, 1 Other.
Source: Harvard University. Annual Reports of the President and Treasurer of Harvard College, 1907-08, p. 66.
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ECONOMICS 2
[Mid-Year 1908]
Arrange your answers strictly in the order of the questions.
- “It is not necessary to the production of things that cannot be used as subsistence, or cannot be immediately utilized, that there should have been a previous production of the wealth required for the maintenance of the laborers while the production is going on. It is only necessary that there should be, somewhere within the circle of exchange, a contemporaneous production of sufficient subsistence for the laborers and a willingness to exchange this subsistence for the thing on which the labor is being bestowed. The subsistence of the laborers engaged in production which does not directly yield subsistence, comes from the production of subsistence in which others are simultaneously engaged.”
Whom do you believe to be the author of this passage? and what is your opinion of the doctrine stated in it?
- Walker’s reasoning as to the relation of wages to business profits and of business profits to wages; is there a vicious circle?
- “If we are accurately to express what takes place in simple types of industry, we shall say, not that ‘the whole produce of industry goes to the laborer,’ but that the whole produce of industry goes to the independent man who is both laborer and capitalist.”
“The absurdity of making the occasional squatter dictate the amount of every laborer’s pay is patent on the face of the illustration.”
What doctrines are here alluded to? and what is their relation to Clark’s doctrine of the “Zone of indifference.”
- In what way, if at all, does Marshall modify the theory of rent as to (a) agricultural land in a new country; (b) agricultural land which has been long used in an old country; (c) urban sites in towns like Pullman; (d) buildings of permanent character in old towns? (Answer concisely.)
- Suppose a tax at the rate of 4% on the capital value to be imposed on all urban real property (both land and buildings used for business purposes); what would be the effect on the prices of goods made or sold on the premises? On the rentals of the premises when leased? Would your answers be different if the tax were imposed on the sites alone?
- “The middle and especially the professional classes have always denied themselves much in order to invest capital in the education of their children; while a great part of the wages of the working classes is invested in the physical health and strength of their children. The older economists took too little account of the fact that human faculties are as important a means of production as any other kind of capital; and we may conclude, in opposition to them, that any change in the distribution of wealth which gives more to the wage receivers and less to the capitalists is likely, other things being equal, to hasten the increase of material production, and that it will not perceptibly retard the storing-up of material wealth.”
“There are many kinds of work which can be done as efficiently by an uneducated as by an educated workman: and the higher branches of education are of little direct use except to employers and foremen and a comparatively small number of artisans. . . . . We must look in another direction for a part, perhaps the greater part, of the immediate economic gain which the nation may derive from an improvement in the general and technical education of the mass of the people.”
Explain what is meant; and consider whether there is any inconsistency between the two passages.
- “A ratio between demand and supply is only intelligible if by demand we mean the quantity demanded, and if the ratio intended is that between the quantity demanded and the quantity supplied. But again, the quantity demanded is not a fixed quantity, even at the same time and place; it varies according to the value; if the thing is cheap, there is usually a demand for more of it than when it is dear. The demand, therefore, partly depends on the value. But it was before laid down that the value depends on the demand. From this contradiction how shall we extricate ourselves? How solve the paradox, of two things, each depending upon the other?”
Who is the writer of this passage? What is the solution of the paradox (a) in your own opinion, (b) in Marshall’s treatment of the subject?
- What do you understand Marshall’s conclusion to be as to the doctrine of non-competing groups?
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ECONOMICS 2
[Final 1908]
Arrange your answers strictly in the order of the questions.
- “Economists have learned to recognize diversity of nature in those composite things to which the names of rent, profits, wages, etc., are given in popular language; they have learnt that there is an element of true rent in the composite product that is commonly called wages, an element of true earnings in what is commonly called rent, and so on.” Is this true, in your opinion, as to wages? as to rent? What would be Marshall’s opinion?
- What reasoning does Clark apply on the suppositions (1) that landlords forego rent, (2) that capitalists forego interest, (3) that laborers forego wages? How far do you accept the reasoning, how far not?
- “Most commodities render several different kinds of service at the same time. A thing of this kind is to be regarded as a bundle of distinct utilities. . . . If the principle of final utility be applied to entire articles [i.e. that is, to such bundles of utilities], it will give values that are, in most cases, many fold greater than are the actual values that the dealings of the market establish.”
What do you say as to these propositions?
- Explain the grounds in which Böhm-Bawerk arranges tabulations like the following, and indicate the conclusions which he draws from them.
A Month’s labor Available in 1888 Yields:
| For the Period. |
Units of Product. |
True Mar-ginal Utility of Unit. |
MarginalUtility Reduced in Perspective. |
Value of Entire Product. |
| 1888 |
100 |
5. |
5. |
500 |
| 1889 |
200 |
4. |
3.8 |
760 |
| 1890 |
280 |
3.3 |
3. |
840 |
| 1891 |
350 |
2.5 |
2.2 |
770 |
- “The doctrine of the invariable gain from using present goods as a means of spreading labor advantageously over time, has a clear resemblance to the doctrine of a ‘productivity’ of capital.” What two doctrines are here referred to? Is there such resemblance between them, or substantial difference?
- “Workmen and capital goods not only coöperate, but compete. Lifting may be done by capital goods in the form of elevators, cranes, etc., requiring only human guidance, or by workmen laboriously climbing ladders with loads on their backs.”
“The increased competition of capital in general for employment is of a different character from the competition of machinery for employment in a given trade. The latter may push a particular kind of labor out of employment altogether; the former cannot displace labor in general, for it must cause an increased employment of the makers of those things which are used as capital. And in fact, the substitution of capital for labor is really the substitution of labor combined with much waiting, in the place of labor combined with little waiting.”
Are the statements in these passages consistent? Whom do you guess to be their authors? Which, if either, would Böhm-Bawerk accept?
- What grounds are there for saying that duties on imports are borne in part or in whole by the producers in the foreign country? Would you distinguish in this regard between revenue duties and protective duties?
What grounds are there for saying that duties on imports are borne in part or in whole by consumers in the foreign country? Would you distinguish in this regard between revenue duties and protective duties?
- Suppose Country A (say Japan) to be able to bring all commodities to market at lower expenses of production than Country B (say the United States); what consequences would ensue from unfettered trade between the two?
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Enrollment Economics 2
1908-09
For Undergraduates and Graduates:—
[Economics] 2. Professor Taussig.— Economic Theory
Total 34: 5 Graduates, 13 Seniors, 7 Juniors, 7 Sophomores, 2 Other.
Source: Harvard University. Annual Reports of the President and Treasurer of Harvard College, 1908-09, p. 67.
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ECONOMICS 2
[Mid-Year 1909]
Arrange your answers strictly in the order of the questions
- “Given machinery, raw materials, and a year’s subsistence for 1000 laborers, does it make no difference with the annual product whether those laborers are Englishmen or East Indians? Certainly if one quarter of what has been adduced under the head of the efficiency of labor be valid, the differences in the product of industry arising out of differences in the industrial qualities of distinct communities of laborers are so great as to prohibit us from making use of capital to determine the amount that can be expended in any year or series of years in the purchase of labor.” Explain the conclusions which Walker draws from this illustrative case; and give your own.
- “No business man would admit that his capital was consumed by the wear and tear of machinery, and was periodically replaced by saving. The wearing away of particular material embodiments of capital is automatically repaired by a process which is not saving, in the industrial or economic sense.” Do you agree? and whom do you believe to be the author of the passage?
- “We must distinguish between the total utility and the marginal utility of the stock. the total utility of a stock is obtained by adding the utility of each additional apple to that of its predecessor. It will accordingly grow until the point of satiety has been reached. Ten apples possess more total utility than five. The marginal utility of the stock, however, is always equal to the marginal utility of the final unit multiplied by the number of units. . . . If in the case of five apples the marginal utility of each is five units of satisfaction, that of the stock will be five times five, or twenty-five; but if in the case of eight apples the marginal utility of each falls to three, that of the stock will be eight times three, or twenty-four. Yet the total utility of eight apples is certainly more than that of five.” What do you say to this way of dealing with marginal utility and total utility?
- “Though there are few commodities which are at all times and for ever unsusceptible of increase of supply, any commodity whatever may be temporarily so; and with some commodities this is habitually the case. Agricultural produce, for example, cannot be increased in quantity before the next harvest; the quantity of corn already existing in the world is all that can be had for sometimes a year to come. During the interval, corn is practically assimilated to things of which the quantity cannot be increased. In the case of most commodities, it requires a certain time to increase their quantity; and if the demand increases, then until a corresponding supply can be brought forward, that is, until the supply can accommodate itself to the demand, the value will so rise as to accommodate the demand to the supply.” What would Marshall say to this reasoning? Mill? What is your own view?
- “If the principle of final utility be applied to certain articles, it will give values that are, in most cases, many fold greater than are the actual values that the dealings of the market establish. . . . Goods of fine quality would then be, as a rule, many times dearer than they are.” What doctrine is here referred to? and do you think that the conclusion as to goods of fine quality follows?
- Do you believe that there is, —
No-rent land used for agricultural purposes;
No-rent land used as an urban site;
A zone of indifference as to “capital goods”;
A no-profits zone as to business management?
- Suppose a tax of 50 per cent. to be imposed on the rental value of urban sites (buildings and improvements being disregarded); what would be the effect on the rentals of the sites when leased, what on the prices of goods made or sold in them?
Suppose a tax of 50 per cent. to be imposed on the rental values of buildings placed on urban sites (the sites being disregarded); what would be the effect on the rentals of the buildings when leased, what on the prices of goods made or sold in them?
- “If the proprietor of superior land were to say, ‘I will take no rent for it,’ this would not make wheat cheaper. The supply would not be changed; for the same quantity would be raised, the marginal amount raised on the no-rent land would be needed and would be bought at the former price, and all other parts of the supply would command the same rate. . . . It is a striking fact — but one hitherto much neglected — that similar conclusions apply to the product of every other agent. . . . If the capitalist says, ‘I will take none of this interest,’ the earnings of the instruments simply remain in the hands of the entrepreneur. . . . The entrepreneur will now keep the rent that the capitalist makes over to him, but the value of the goods produced will not be changed. . . . Exactly this can, however, be shown to be true of wages. In the same sense in which the interest on artificial capital and the rent of land are not elements in price, wages have no effect on price. If good workers were to relinquish their claims against their employers and work for nothing, the price of the goods would still conform to their marginal utility.” Do you think the analogy between the three cases — as to land, instruments, labor — holds good? If so, why? If not, why not?
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ECONOMICS 2
[Final 1909]
Arrange your answers strictly in the order of the questions.
- “Natura non facit saltum.” How is this motto, which appears on the title-page of Marshall’s Principles of Economics, applicable to his treatment of the temporary and the normal equilibrium of demand and supply; of business profits and wages; of non-competing groups?
- What contribution of permanent value did Cairnes make to the theory of value?
- “Wages are determined by the residual product of labor.”
“Wages are determined by the specific product of labor.” “Wages are determined by the discounted marginal product of labor.” Explain what doctrines are described by these phrases; what writers hold the doctrines; and how far, if at all, they differ in essentials.
- Is there “quasi-rent” in such cases as these: —
(a) The population of a town is declining; dwellings in it command a rental which is less than interest at current rates on what it would cost to replace the dwellings.
(b) The earnings of an artisan or professional man who has once obtained the skill required for his work.
(c) The profits of business men.
- “Net rent is, then, nothing more than interest regarded from another point of view: it is an aggregate of lump sums, each of which represents the net earnings of some instrument. It is identical in amount with interest, and it becomes interest the moment that we reduce it to a fraction of the value of the instruments that earn it.” What writer maintains this doctrine? What would Marshall say of it? What is your own opinion?
- Explain what is meant by the “technical superiority of present goods.”
- “Wasteful expenditure on a scale adequate to offset the surplus productivity of modern industry is nearly out of the question. Private initiative cannot carry the waste of goods and services so nearly to the point required by the business situation. . . . Something more to the point can be done, and indeed is being done, by the civilized governments in the way of effectual waste, through armaments, public edifices, courtly and diplomatic establishments, and the like. . . . . But however extraordinary this public waste of substance latterly has been, it is altogether inadequate to offset the surplus productivity of the machine industry.”
“Barring accidents and untoward cultural agencies from outside of politics, business, or religion, there is nothing in the logic of the modern situation that should stop the cumulative war expenditures short of industrial collapse and universal bankruptcy.”
Explain the doctrines referred to in these extracts, give your opinion as to whether they are sound, or consistent with each other.
- “Duties on importation may, then, be divided into two classes: those which have the effect of encouraging some particular branch of domestic industry and those which have not. The former are purely mischievous, both to the country imposing them, and to those with whom it trades. . . . . A protection duty can never be a source of gain, but always and necessarily of loss, to the country imposing it, just so far as it is efficacious to its end. A non-protecting duty, on the contrary, would in most cases be a source of gain to the country imposing it.”
Would you admit that a non-protecting duty is commonly a source of gain, and that this gain is never secured by a protecting duty?
Source: Harvard University Archives. Prof. F. W. Taussig, Examination Papers in Economics 1882-1935 (Scrapbook).
Image Source: Frank W. Taussig, Harvard Album 1906.
