Category: Exam Questions

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Courses Exam Questions M.I.T. Suggested Reading Syllabus

M.I.T. Capital Theory, Uncertainty, Welfare Economics. Half-semester Core Microeconomics. Samuelson, 1975

From my files from graduate school I have transcribed the syllabus and final exam for the fourth of the four half-semester core microeconomic theory courses taught at M.I.T. during the academic year 1974-75. The topics of capital theory, uncertainty and welfare economics fell to Paul Samuelson. The preceding three half-semester microeconomics theory courses were taught by Robert Bishop, Martin Weitzman and Hal Varian.

 

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READING LIST FOR 14.124
P. A. Samuelson
SPRING 1975

MICROECONOMIC THEORY

I. CAPITAL THEORY

  1. I. Fisher

Theory of Interest
Part II, all; Part I, Chs. 1,3; Part III, Chs. 10,11.

  1. E. Böhm-Bawerk

Positive Theory of Capital
Book V, all; Book VI, Chs. 6,7,8.

  1. R. M. Solow

“A Contribution to the Theory of Economic Growth”
Quarterly Journal of Economics, February, 1956; pp. 65-94.

Capital Theory and the Rate of Return
(DeVries Lectures) North-Holland, Amsterdam, 1963.

  1. T. Koopmans

Three Essays, pp. 105-126.

  1. F. Ramsey

E.J., 1928

  1. N. Kaldor

“Alternative Theories of Distribution”
RES, 1955

  1. Sraffa

Production of Commodities by Means of Commodities
Chs. 1, 2, 3.

  1. Dorfman-Samuelson-Solow

Linear Programming and Economic Analysis
Chs. 11, 12.

  1. A. Samuelson

“A Summing Up”
QJE, 1966

II. ECONOMICS OF UNCERTAINTY

  1. K. Arrow

Theory of Risk Bearing
Chs. 3,1,2,4.

  1. J. Tobin

RES, 1958

  1. H. Markowitz

Portfolio Selection
sample

III. MODERN WELFARE ECONOMICS

  1. A. Bergson [A. Burk]

“A Reformulation of Certain Aspects of Welfare Economics”
QJE, 52 (February 1938)
pp. 310-334

  1. J. Hicks

“The Foundations of Welfare Economics”
EJ, 49 (December 1939)
pp. 696-712

  1. P. A. Samuelson

Foundations of Economic Analysis (Harvard University Press, Cambridge, Mass., 1947)
Chapter 8, “Welfare Economics”

  1. P. A. Samuelson

“The Pure Theory of Public Expenditure”
Review of Economics and Statistics, 36 (November 1954)
pp. 387-389

reproduced as
Chapter 92
The Collected Scientific Papers of Paul A. Samuelson, Vol. II
MIT Press, Cambridge, Mass., 1966; editor: J.E. Stiglitz

  1. K. Arrow

Social Choice and Individual Values, 1951
Cowles Foundation for Research in Economics, Monograph #12
Wiley, New York, second edition, 1963

  1. J. Rawls

A Theory of Justice
Harvard University Press, Cambridge, Mass., 1971

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Background Reading

  1. A. C. Pigou

The Economics of Welfare, 1920
Macmillan, London, 4th edition, 1932
reprinted in new appendices, 1952

  1. L. Robbins

An Essay of the Nature and Significance of Economic Science, 1932
Macmillan, London, 2nd edition, 1935

  1. van der Graaf

Theoretical Welfare Economics
Cambridge University Press, London, 1957, paperback

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FINAL EXAM
14.124
MAY 20, 1975

This is a 1 ½ hour exam. You may take up to an extra half hour, but only if you need it and not in order to establish extra credit for all you know.
Answer any 3 of the following four questions, thus allowing about one half hour for each.

 

  1. Society consists of 2N people [equal numbers of men (i=1) and women (i=2)] who will live and consume for two periods: t=1,2, or now and tomorrow. Also, society has a Solow neoclassical production function:

C(t) + K(t+1) = F[L(t),K(t)]

All 2N people have the same labor, namely Li(t) = 1/2N. The women or men possesss equal shares in the initial capital good, K(1) = k/2N, but it is an unknown of the problem to find out what will be K(2).

Intertemporal tastes of the representative man and woman involve the same concave u[C(t)] function, and with equal Böhm-Fisher subjective time preference factors, ρ1 and ρ2, in:

U1 = u[C1(1)] + u[(C1(2)]/(1+ρ1), U2 = u[C2(1)] + u[(C2(2)]/(1+ρ2), ρ1 = ρ2.

(You may set N=1 to simplify your expositions if you wish to do so.)
The equilibrium is now determinable.

(a)  Describe graphically, and/or mathematically, and/or literally, how Irving Fisher or any modern economist would determine the equilibrium for:

C1(1)*, C1(2)*, C2(1)*, C2(2)*, K(2)*; r*, the rate of interest between period 1 and 2. (Hint: Will women lend to men or borrow from them?)

(b)  Very briefly, modify your above answer to show what will happen when men are more “impatient” than women, so that ρ1 > ρ2.

  1. Prove that fair-game investing or gambling will (a) be avoided by what class of people?; (b) be embraced by what class of people? How do you reconcile under (a) the purchases of insurance at unfavorable-game premiums?
  1. Lerner, Lange, and others wish to utilize market pricing in achieving maximization of a social welfare function appropriate to a socialist state where (a) all non-labor inputs are owned by the State; (b) “people’s changing tastes are to count,” (c) where the bureaucrats responsible for the different industries do not necessarily in every case face constant returns to scale and classical returns.

Describe how goods and services should be priced, how people’s total spendable incomes are to be determined, and also any special problems that might arise for the Lerner-Lange-Smith VISIBLE HAND.

  1. Bentham says that people may differ in the heights of their marginal utility from the same number of chocolates (or real incomes). But he believes that this difference in intensities of enjoyments is distributed “in about the same way among the very rich and the very poor.” What kind of income tax formula would he then presumably want to legislate? What “incentive effects” would you want to keep in mind appraising this solution?

Source: Personal copies

Image Source: Left to right: Robert C. Merton, Jerome Bert Wiesner and Paul A. Samuelson with Vol. 3 of Samuelson’s Collected Scientific Papers (1972). MIT Webmuseum.

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Chicago Economists Exam Questions

Chicago. Price and Distribution Theory. Taught by Viner and attended by Samuelson, 1935.

The graduate economics course at the University of Chicago “Price and Distribution Theory” as taught by Jacob Viner was often referred to by Paul Samuelson. From the Paul A. Samuelson papers at Duke University we have a copy of the examination questions for that course together with a copy of Jacob Viner’s evaluation of his “with one possible exception, the most promising undergraduate I have ever encountered since I began teaching some twenty years ago”. Any clues as to who might have claimed the status of the “one possible exception”? Viner’s cover note to Samuelson and the latter’s gracious response are included for the sake of completeness.

I have already posted the reading list for the 1932 vintage of the course.

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Course Description

[Economics] 301. Price and Distribution Theory.—A study of the general body of economic thought which centers about the theory of value and distribution and is regarded as “orthodox theory,” including the critical examination of some modern systems of this character. Prerequisite: Economics 209 or its equivalent and the Bachelor’s degree. Summer, 9:00 Knight; Winter, 10:00, Viner.

 

Source: Announcements. The University of Chicago. The College and the Divisions for the Sessions of 1934-35, p. 286. (Note the 1936-37 course description Announcements is identical to that of 1934-35, so we can assume the course announcement in the 1935-36 Announcements would too.)

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[Samuelson’s handwritten note and the copy of the 1935 examination for Economics 301]

My Final Exam for Viner’s famous course. Only 3(a) caused me trouble (no wonder!)
PAS 6/30/72

Examination in Economics 301
Winter Quarter, 1935-

  1. Discuss the relationship of marginal cost to prices:
    1. under short-run competitive equilibrium;
    2. under long-run competitive equilibrium

when (1) the industry is subject to external diseconomies of large production; (2) the industry operates under conditions of constant cost.

  1. In order that an industry shall operate at constant costs as its output is varied, what conditions must hold as to:
    1. the definition of “industry”;
    2. the supply curves, general and partial, of the factors used by that industry;
    3. the mode of operation of the law of diminishing returns in that industry;
    4. the presence or absence of internal diseconomies of large-scale firms in that industry;
    5. the size of the changes in output?
  2. Comment briefly on the following statements:
    1. “If labor has effective occupational mobility, the prices of all commodities under competitive conditions will tend to equal their marginal labor costs.”
    2. “Labor is paid out of current product, and if advances are made, they are made by laborer to employer, rather than vice versa.”
    3. “Saving is necessary only in an expanding economy. No one need wait for the product of his labor or property in a stationary economy.”
    4. “Any increase in investment lengthens the production period, and the production period cannot be lengthened unless more investment takes place.”

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Jacob Viner’s Handwritten Note to Paul Samuelson, 1963

Jacob Viner
13 Newlin Road
Princeton, New Jersey

Aug. 7, 1963

Dear Paul,

I have just run across my carbon copy of a 1935 appraisal of you by me and am sending you a reproduction of it not to raise your ego but to raise mine. I recall your report at Pittsburg of a less perspicacious appraisal of about the same period by Paul Douglas. In this instance at least I showed skill apparently as a forecaster.

Cordially yours,
Jack

___________________________________

 

Jacob Viner’s Recommendation for Paul Samuelson to SSRC, 1935

The Social Science Research Council
230 Park Avenue
New York City

Mr. Paul A. Samuelson, although an undergraduate, did distinctly better work than any other member of my graduate course in Economic Theory during the past Quarter. He is a sober, careful and extremely able student, equipped with extensive mathematical technique, zealous, original and independent, without the belligerence and the arrogance that so often marks young men with keen minds and the knowledge that they are superior in mental capacity to their classmates. Mr. Samuelson shows all the signs of having it in him to become a very distinguished economic theorist, and is, with one possible exception, the most promising undergraduate I have ever encountered since I began teaching some twenty years ago. I have only known him for some four months, but I do not think that this is a too hasty judgment.

Jacob Viner
Professor of Economics
Chicago, Illinois

April 15, 1935
University of Chicago

___________________________________

 

Paul Samuelson’s response to Jacob Viner, 1963
Carbon copy

August 23, 1963

Dear Jack:

I had to be flattered by your August 19 note and the enclosed carbon of your 1935 evaluation of me. I feel as proud of that young man as if he had been my son and prouder still after your early discernment of his “growth-stock” potential.

Your 1935 graduate course certainly stimulated me. It sent me to Harvard well-prepared—over-prepared some of my teachers may have thought!

Last June I basked in the reflected glory of your Harvard degree.

Our love to Frances,

___________________________________

 

Source: Duke University.   Rubenstein Library. Paul A. Samuelson Papers, Box 74, Folder “Viner, Jacob (corresp) 1935-1990”.

Image Source: University of Chicago Photographic Archive, apf1-08490, Special Collections Research Center, University of Chicago Library.

 

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Columbia Economists Exam Questions History of Economics

Columbia. Classical Economics Exam by J.M. Clark. 1951

John Maurice Clark

John Maurice Clark taught a history of economic theory sequence at Columbia University that had its origins in a similar course that had been taught earlier by Wesley Clair Mitchell. On the back of Clark’s examination questions for the first session of the 1950-51 academic year one finds a list of names and grades that we can strongly presume constitute the grade distribution for the course. 43 students were listed by John Maurice Clark in his handwritten grade sheet for the first semester of formative types of economic theory, of whom 26 received grades (3.12 average on a 4 point scale, median 3.17). Mark Blaug, whose magnum opus Economic Theory in Retrospect has served as a staple of the analytic narrative of the evolution of economics, received only a grade of B- (2.67) which put him tied with two other students at rank 21. A few years later Blaug was to find his mentor and dissertation adviser, George Stigler.

The later Congressional Research Service economist John P. Hardt (Columbia Ph.D., 1954) was  on the list but not awarded a grade for the course.

Oops it happens every so often, I have repeated myself. The original posting along with another year’s examination can be found here.

_____________________

Course Announcement

Economics 115-116 — Formative types of economic theory.
3 points each session. Professor Clark.
M. W. 12. 313 Fayerweather.

Readings and critical discussion of outstanding examples of the parent stock of classical economics with some regard to historical setting, and of subsequent outstanding contributions.

Source: Columbia University. Announcement of the Faculty of Political Science for the Winter and Spring Sessions 1950-51, p. 46.

_______________________________

Course Description

Economics 115-116—Formative types of economic theory. 3 points each session. Professor Clark.

M.W. 12.         313 Fayerweather.

Readings and critical discussion of outstanding examples of the parent stock of classical economics, with some regard to historical setting, and of subsequent outstanding contributions.

Source:   Columbia University. Announcement of the Faculty of Political Science for the Winter and Spring Sessions 1950-51, p. 46.

_______________________________

Take-Home Examination Questions

Economics 115
Final Examination
January, 1951

Answer any two questions, taking about the time for the actual writing that a regular examination would take. Those who do the work during Christmas holidays will please return papers January 8; others Friday, January 26, unless otherwise specified.

  1. Do the views of ancient writers (Hebrew, Greek or Roman) afford the same kind of evidence as the writings of modern economists as to economic conditions and practices of their time?
  2. Discuss extent of applicability of medieval doctrine on price; variations or relaxations; and how far the doctrine was effective in practice.
  3. Explain and appraise Quesnay’s “Tableau Économique”.
  4. State key doctrines of the Physiocrats and indicate how they could be regarded as adaptations to an historical situation.
  5. Compare views of Smith and Ricardo on the relation of labor to value.
  6. Compare treatment of rent in Smith, Malthus and Ricardo.
  7. On what grounds did Adam Smith sanction departures from laissez-faire?
  8. Topic: dominant conceptions of what economic activity is for. Compare the dominant conception (or at most a few dominant conceptions) of as many of the following as you feel you can reasonably cover: typical Mercantilists, Physiocrats, Ricardo, John Stuart Mill.
  9. What does Bentham’s theory contribute to the basic rationale of economics, aside from his ideas on economic matters themselves? (Book V of J. S. Mill’s “Principles of Political Economy” might contain hints.)
  10. State doctrines of Ricardo which had roots in historical conditions of the time, and indicate the connection.
  11. Compare Ricardo’s treatment of value with either Adam Smith’s or John Stuart Mill’s.
  12. What were the sources of J. S. Mill’s departure from strict Ricardianism?

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Probable Grade Distribution

Letter Grade

 Number of students
A

2

A to A-

 1
A-

5

B+

 5
B

6

B to B-

 1
B-

2

C+

 1
C

3

Note:  Mark Blaug received the B to B- grade.

Source: Columbia University Archives. John M. Clark Papers. Box 24 (Courses Misc.), Unlabeled Folder.

Image Source: Portrait of John Maurice Clark from the collection of portraits of economists presented in 1997 as a gift to the Department of Economics of Duke University by Professor Warren J. Samuels of Michigan State University. Free use of these portraits in Web documents, and for other educational purposes, is encouraged: users are requested to acknowledge that the images come from The Warren J. Samuels Portrait Collection at Duke University.

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Courses Exam Questions Toronto

Toronto. Honors Exam. Money, Credit and Prices. 1933

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The honors examination questions for Money, Credit and Prices from the University of Toronto transcribed below were filed away by A. G. Hart in a folder marked “Chi[cago] Qualifying”, perhaps not an ideal resting place for this particular archival artifact. At least now these exam questions are discoverable through a standard internet search and provide researchers going to the University of Toronto archives a tip should they search for economics course materials there.

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Course descriptions

3e. Money, Credit and Prices. A course dealing with monetary theory and related subjects, including the discussion of the role of money in economic theory; bimetallism; the gold standard; the gold exchange standard; the relation between money, credit, production and prices; the business cycle; central banks and the control of credit; stabilization of business; the foreign exchanges; the role of money in the theory of international trade; money and foreign exchange; problems in various countries, including reparations. For reference: Cassel, Theory of Social Economy, Vol. II, and Money and Foreign Exchange after 1914; Fisher, The Purchasing Power of Money; Keynes, A Treatise on Money; Marshall, Money, Credit and Commerce; Edie, Money, Bank Credit and Prices; Willis and Beckhart, Foreign Banking Systems; Burgess, Interpretations of the Federal Reserve Bank; Mitchell, Business Cycles, the Problem, and its Setting; Snyder, Business Cycles and Business Measurements; Hobson, Rationalization and Unemployment; Gregory, Foreign Exchange; Taussig, International Trade; Angell, International Prices; The Young Plan; Reports of Agent General for Reparations; Reports of League of Nations Gold Delegation; The Macmillan Report, 1931; Current Financial Literature. Three hours a week.

3h. Banking. A special course on the theory and practice of banking operations. One hour a week.

 

Source: University of Toronto Calendar, Faculty of Arts 1932-33. University of Toronto Press, pp. 112-113.

Image Source: Detail from photo of A. F. Wynne Plumptre (1972) from the University of Toronto Archives Image Bank.

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Card paper clipped to examination copy

I thought you might find this of interest.
A. F. Wynne Plumptre [B.A., Lecturer]
Kings College, Cambridge
Toronto, Canada

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UNIVERSITY OF TORONTO
FACULTY OF ARTS

ANNUAL EXAMINATIONS, 1933

THIRD YEAR—HONOUR

ECONOMICS 3e, 3h
MONEY, CREDIT AND PRICES

Examiners—The Staff in Economics

 

(Question ONE must be answered by all candidates, and THREE or FOUR other questions.)

  1. What do you mean by “inflation”? Under what circumstances, if any, is it desirable?
  2. The following figures appear in the monthly returns of the combined Canadian Chartered Banks:

(in millions of dollars)

Sept. 1929. Sept. 1932.
Current Commercial loans

1,404

1,003
Total Securities held

487

704
Demand Deposits

759

481
Notice Deposits

1,471

1,359
Bank Notes in circulation

197

132
Finance Act borrowings

79

23

Sketch the probable causes of these movements.

  1. It is said, often in criticism of French financial methods, that the power of finance is used in that country to further political ends. In England, on the other hand, efforts have usually been made to keep “politics” dissociated from “finance”; i.e., to keep politicians from dictating the country’s monetary and financial policies. How far, in your opinion, can or should the two be kept separate in Canada or any other country?
  2. “The establishment of the federal reserve bank system…is actually the reason why they have had the recent trouble in the United States banks.” (Sir John Aird, quoted in the Toronto Daily Star, March 22nd, 1933.) How far do you agree with this statement?
  3. In maintaining the gold standard, “world wide international co-operation becomes all but essential just at the moment when the particular local manifestations of the universal trouble occupy the whole attention of the Government in each country and make international action specially difficult.” (Sir Basil Blackett.) Is this a fair summary of the causes of the breakdown of the international gold standard? If so, does it necessarily follow that the restoration and subsequent maintenance of the gold standard is impracticable?
  4. Give an outline of what is meant by any two of the following policies:

Bimetallism,
Remonetization of silver,
Revaluation of gold,
Reduction of central bank reserve ratios.

  1. Outline very briefly the theory of “comparative costs” in international trade. How far do you think it is desirable that members of the newly appointed Canadian tariff board should be familiar with the principles of this theory?
  2. Do you believe that monetary policy is, or might be, a major factor in determining the level of prices and prosperity in either Canada or England or some other country? (Candidates should answer this question with respect to one country only.)
  3. “Booms and slumps are simply the expression of the results of an oscillation of the rate of interest about its equilibrium position.” (J. M. Keynes.) How far do you agree?
  4. Suppose that, at the forthcoming World Economic Conference, it were generally agreed that international exchange rates should be stabilized immediately. What factors would you then take into consideration in estimating at what rate the Canadian dollar should be stabilized? How far would the theory of “purchasing power parity” assist you?
  5. It appears to be customary for monetary theorists to make use of equations in explaining their theories. Why do you think they have used this method? Do you think that such an equation is likely to clarify or becloud the theory to which it refers?

 

Source: Columbia University Archives. Albert Gailord Hart Papers, Box 60, Folder “Exams: Chi[ago] Qualifying”

 

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Economists Exam Questions M.I.T. Suggested Reading Syllabus

MIT. Robert Solow’s Advanced Economic Theory Course, 1962

Robert Solow taught the course Advanced Economic Theory at MIT in the Spring of the 1961/62 academic year. Of the dozen graduate students who took the course for credit were a future Nobel prize winner (Peter Diamond), a future Princeton professor and later member of Jimmy Carter’s Council of Economic Advisers (Stephen Goldfeld), a future professor at University of Pennsylvania/Washington University (Robert Pollak), a future professor and later chairman of Hebrew University (David Levhari), and a professor of economics and the first woman to head an MIT academic department, economics! 1984-1990 and MIT’s first female academic dean, School of Humanities and Social Science (Ann Friedlaender).

The three A’s awarded in the course went to Diamond, Levhari and Goldfeld.

The comprehensive exam questions for advanced economic theory from May 1962 were transcribed in the previous post.

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14.123—Advanced Economic Theory
Spring 1962—Professor Solow

FIRST READING LIST: LINEAR PROGRAMMING AND RELATED SUBJECTS

This should occupy 6-9 weeks. Most of the reading is in Gale: The Theory of Linear Economic Models and Dorfman, Samuelson, Solow: Linear Programming and Econmic Analysis, referred to below as G and D respectively.

  1. Mathematical background: I hope to avoid spending any time on this. Mainly elements of matrix algebra—14.102 should be enough. For review, see D (Appendix B) and G (Ch. 2, more difficult).
  2. Elements of Linear Programming; D (Ch. 2,3), G (Ch. 1,3).
  3. Algebra and Geometry of Linear Programming, Simplex Method; D (Ch. 4, Sec. 1-11), G (Ch. 4).
  4. Applications; D (Ch. 5-7), Manne: Economic Analysis for Business Decisions (Ch. 4,5).
  5. Two-person zero-sum games; D (Ch. 15), G (Ch. 6,7).
  6. Leontief and similar systems; G (Ch. 8, 9 Sec. 1-3), D (Ch. 9, 10).
  7. Activity analysis; G (Ch. 9, Sec. 4), Koopmans: Three Essays on the State of Economic Science (pp. 66-104).
  8. Von Neumann’s model; D (Ch. 13, Sec. 6), G (Ch. 9, Sec. 5-7).
  9. Sraffa: Production of Commodities by Means of Commodities.
    Robinson: “Prelude to a Critique of Economic Theory”, Oxford Economic Papers, February 1961, 53-58.
  10. If time permits, the turnpike theorem; D (Ch. 12), Hicks: “Prices and the Turnpike”, Review of Economic Studies, February 1961, 77-88.
    Radner: “Paths of Economic Growth that are Optimal, etc.”, Review of Economic Studies, February 1961, 98-104.

(Further references may follow.)

 

SECOND READING LIST: PUBLIC INVESTMENT CRITERIA

  1. Hirshleifer: “On the Theory of Optimal Investment Decision”, Journal of Political Economy, August 1958, pp. 329-352.
  2. Graaff: Theoretical Welfare Economics, Chs. 6-8.
  3. Eckstein: “A Survey of the Theory of Public Expenditure Criteria”, in Public Finances: Needs, Sources and Utilization, with “Comments” by Hirshleifer.
  4. Margolis: “The Economic Evaluation of Federal Water Resource Development”, AER, March 1959, pp. 96-111.
  5. Steiner: “Choosing Among Alternative Public Investments”, AER, Dec. 1959, pp. 898-916.
  6. Maass, al.: Design of Water-Resource Systems, Chs. 2, 13 (and passim).
  7. Eckstein: Water Resource Development, Ch. 1-4.

_____________________________________

April 11, 1962

14.123—Exam

Answer all questions.

  1. A function f of vectors x,y,… is called subadditive if f(x+y) ≤ f(x) + f(y) for all vectors x, y, and called superadditive if the inequality is reversed.
    Consider the LP problem of maximizing C′x subject to Ax ≤ b. The value of the maximum is a function of C, b, and A. Show that it is a subadditive function of C and a superadditive function of b.
  2. A firm can produce n commodities with a linear technology involving one activity for each commodity. Production involves only fixed factors, m in number, m<n, of which specified amounts are available. The output is sold at market prices p, and the firm chooses non-negative vector x of outputs to maximize p′x subject to the fixed-factor limitations.
    (a) Prove that the supply curve is not negatively sloped; that is, prove that if p1 increases, other prices constant, the optimal x1 must increase or remain unchanged, but cannot decrease. (Hint: a straightforward procedure is to consider closely the final simplex tableau, the signs of various elements, and what can happen to require further iteration if p1 There is a much simpler proof, comparing the before-and-after optima.)
    (b) State and interpret the dual to the theorem just proved.
  3. Consider a simple linear model of production, with 2 goods, and with 2 fixed factors, land and labor, available in specified amounts.
    (a) Sketch possible shapes for the set of feasible net outputs, or net production-possibility curve.
    (b) Suppose demand conditions are such that consumption expenditures on the two commodities are always equal. Give a complete analysis of the determination of the prices of the two goods and also the rent of land and the wage of labor. Graphical methods will help. (Hint: at one key point the construction of an isosceles triangle is very useful.)

 

Source: Duke University. Rosenstein Library. Robert M. Solow Papers, Box 67, Folder “14.123 Final Exam Fall-1969[sic|”.

Image Source: Robert Merton Solow at the M.I.T. Museum website.

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Exam Questions M.I.T.

MIT. Advanced Economic Theory Exam, 1962

Coming up will be the reading list(s) and exam for the course Economics 14.123 (Advanced Economic Theory) taught by Robert Solow in the Spring semester of the 1961-62 academic year at M.I.T. 

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May, 1962

GENERAL EXAMINATION—ADVANCED THEORY

Answer question 1 and 3 others.

  1. Make a catalog of the kinds of situations in which resource allocation through the price system is likely to give non-optimal results. Indicate the nature of the non-optimality, and for at least some of the situations describe the analytic reason why non-optimality results.

 

  1. A consumer can buy n goods, x1 … xn, at prices p1, … pn. For each unit of xi he purchases (for cash), he receives ai trading stamps. He may then purchase further commodities for trading stamps at fixed trading-stamp prices w1 … wn.

Analyze his equilibrium in each of the following cases, interpreting your results in words and explaining how the equilibrium differs (if at all) from the no-trading-stamp equilibrium where all ai = 0.

(a) ai = k pi; wi = c pi

(b) ai = k pi; wi ≠ c pi

(c) ai ≠ k pi; wi = c pi

(d) ai ≠ k pi; wi ≠ c pi

 

  1. Let A be a non-singular, indecomposable constant Leontief matrix. If this period’s outputs are immediately and exactly plowed back as inputs for next period and there is no capital or consumption:

(a) Set up the implied difference equation system.

(b) Is that system capable of balanced growth?

(c) Under what conditions will it be balanced growth rather than balanced decay?

(d) Is the balanced growth ray unique?

(e) What optimality properties, if any, does balanced growth have?

(f) Is the balanced growth ray stable?

 

  1. There are k countries, each with a fixed supply of a single scarce primary factor of production. In country i, it takes ai units of the factor to produce a unit of wine and bi units to product a unit of cloth.

(a) Formulate this k-country Ricardian comparative advantage setup as a linear programming problem for world efficiency, and show how the Ricardian results emerge.

(b) State and interpret the dual of the world-efficiency problem.

 

  1. An investor has open to him all two-period investment options with net cash flows N0 and N1 such that  N02 + N12 =1. He can lend unlimited amounts at an interest rate of 4 percent per period and borrow unlimited amounts at a rate of 6 percent per period. His preference for consumption in the two periods C0 and C1 are described by the utility function U = C0 +(C1)½. Find the investor’s best plan of action.

 

  1. A system uses primary labor and produced capital good(s) to produce consumption output and gross capital formation(s). Labor grows exponentially at the rate of g per annum. Suppose everything else matches that rate of growth. Show that consumption per capita is maximized where the interest rate, r, equals the growth rate, g. (Use any specific model, however simple or complex, to give your proof.)

 

Source: Duke University. Rubenstein Library. Edwin Burmeister Papers. Box 23.

Image Source: MIT beaver from the cover of the 1949 yearbook Technique.

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Courses Exam Questions Suggested Reading

Harvard. European Central Banking. Schumpeter, 1945

Course offerings in money and monetary policy at Harvard in the late 1930s and most of the 1940s  were dominated by John H. Williams and Alvin Hansen. An exception was the course, “The Theory and Policy of Central Banking: European Experience,” that was offered just once (Fall term 1945-46) by Joseph Schumpeter. I was only able to find what appears to be a hastily assembled, provisional list of suggested readings provided at the start of the semester with a promise that “References to material and literature will be given currently”. The list of final examination questions for the course that I found in Schumpeter’s papers at the Harvard Archives at least gives us some indication of the broad themes of the course.

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Course Enrollment

[Economics] 142a. (fall term) Professor Schumpeter.—The Theory and Policy of Central Banking: European Experience.

4 Graduates, 1 Junior, 5 Public Administration, 1 Radcliffe:   Total 11

 

Source: Harvard University, Report of the President of Harvard College and Reports of Departments for 1945-46, p. 60.

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HARVARD UNIVERSITY
1945-6
Economics 142a

This course aims at working out the role of central banks both in the capitalist and in the planned economy, and at reviewing a number of theoretical and historical problems in the field of money and credit, relevant tot he main theme. References to material and literature will be given currently. The following list is confined to general suggestions.

 

  1. General works on central banking.

A. C. Conant, History of Modern Banks of Issue, 6th ed., 1927.
C. H. Kisch and W. A. Elkins, Central Banks*, 1928.
E. Victor Morgan, Theory and Practice of Central Banking, 1797-1913, 1942.
V. C. Smith, The Rationale of Central Banking, 1936.
R. G. Hawtrey, The Art of Central Banking*, 1932.
M. H. de Kock, Central Banking, 1939.

  1. Works on the History of Banking Theory.

W. T. C. King, History of the English Discount Market*, 1936.
H. E. Miller, Banking Theories in the U. S. before 1860, 1927.
E. Wood, English Theories of Central Banking Control, 1819-1858, 1939.

  1. For Prewar Figures on Central Banks, see

League of Nations, Money and Banking 1938-9, Vol. I, 1939.

  1. Miscellaneous Suggestions.

J. W. Angell, The Behavior of Money, 1936.
P. Einzig, The Theory of Forward Exchange, 1937.
C. R. Whittlesey, Bank Liquidity and the War, (National Bureau of Economic Research, Our Economy in War, Occasional Paper 22).
A. Youngman, The Federal Reserve System in wartime, (the same, Occasional paper 21).

* These are especially recommended.

 

Source: Harvard University Archives. Syllabi, course outlines and reading lists in Economics, 1895-2003, Box 4, Folder “Economics, 1945-46 (2 of 2)”.

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Final Examination Questions

 

1945-46

HARVARD UNIVERSITY
ECONOMICS 142A

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

  1. Discuss the issue: “Control of Money” or “Control of Credit.”
  2. If you were to frame the plan for a Central Bank, for instance in one of the South-American states, would you give it the right to do business with customers other than banks?
  3. In 1910, the Governor of the Bank of England declared that the following types of finance bills were “legitimate”: (a) bills that represent exchange transactions; (b) bills created in order to finance the carrying of stocks of commodities or securities; (c) bills drawn in anticipation of public loans. Comment.
  4. Suppose that a country which has been using paper money, adopts an unrestricted gold standard. Disregarding the period of transition, would you expect Bank Rate to keep on a higher level after the gold standard has been established than it did under the paper standard? Assume that the rest of the world is on the gold standard.
  5. State the main points of difference between the constitutions and policies of the Bank of England, the Bank of France and the Bank of Germany in the last quarters of the 19th century and explain briefly their significance and causes.
  6. Explain the reasons for the decline in importance of the Domestic Bill during the half-century before 1914. Had this decline anything to do with the legislation about central banks? And had it, in turn, any influence upon their policy?

Final. January, 1946.

Source: Harvard University Archives. Joseph Schumpeter Papers. Lecture Notes, Box 3, Folder “misc. notes”.

 

Image Source: Selection from “Joseph A. Schumpeter and other at dinner table, ca. 1945”, Harvard University Archives HUGBS 276.90p (4).

 

Categories
Courses Exam Questions Harvard Suggested Reading Syllabus Uncategorized

Harvard. Labor Organization and Collective Bargaining. Dunlop, 1947.

 

 

John T. Dunlop’s course reading lists go on for pages. He mediated, arbitrated and advised besides teaching courses in labor relations including this post of material for his undergraduate course on unions and collective bargaining. His New York Times’ obituary closes with a nice 1973 quote published in Fortune Magazine: “Unless you can work out a consensus on a problem, it’s not a very good solution.” I guess we just now live in an age of diminished solutions. Material for next semester’s course 81b “Labor and Public Policy” has been posted as well.

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Course Enrollment for Economics 81a, Fall Term 1947

[Economics] 81a. Associate Professor Dunlop.–Trade Unionism and Collective Bargaining (F).

3 Graduates, 80 Seniors, 64 Juniors, 25 Sophomores, 15 Radcliffe: Total 187.

Source: Harvard University. Report of the President of Harvard College and Reports of Departments for 1947-48, p. 90.

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OUTLINE
Economics 81a
Fall, 1947

LABOR ORGANIZATION AND COLLECTIVE BARGAINING

I.  Labor and Management Organization

    1. The Institutional Setting
      1. The Beginnings of Organization
      2. The Relation of Labor Organization to “Capitalist” Society
      3. The Characteristics of the Labor Market
    2. Development of the American Labor Movement
      1. Comparisons with other Countries
      2. Theories of Labor Organization Development
      3. Relation to the Growth of the American Economy
      4. Role of Community Values, Ideas, Legal Concepts, and Politics
    3. Structure and Government of Labor Organizations
      1. Constitutional Government of the AFL and CIO
      2. Relations of Locals to International Bodies
      3. Labor Leadership
      4. Administrative Aspects of Labor Organizations
    4. Management Organization in Industrial Relations
      1. The Locus of Policy Making Affecting Industrial Relations
      2. Management Organization for Bargaining
      3. Management Leadership

II.  Operation and Results of Collective Bargaining

  1. The Bargaining Process: Mechanics
    1. The Collective Bargaining Agreement
    2. The Scope and Area of Bargaining
    3. Techniques of Bargaining
  2. The Results on the Social Structure of a Work Community
  3. The Results on the Conditions of Employment
    1. Status of Union Members
    2. Division of Work Opportunities
    3. Procedures for Settling Disputes
  4. The effects on Wages, Prices and Employment
    1. Wage Determination under Collective Bargaining vs. the “Free Market”
    2. Effects on the Shares of Real Income
    3. Effects on Income and Employment Over Time
  5. The Problem of Wage and Price Policies at Full Employment
  6. The Impact on the Social Structure and the Political “Balance of Power” in the Nation

III.  Public Policy Issues Raised by Labor and Management Organization and Collective Bargaining

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Economics 81 a
Questions

  1. How do you account for the emergence of labor organizations? What are the distinctive features of the American labor movement?
  2. To what extent is the American labor movement devoted to changing or preserving “capitalist” institutions?
  3. What standards would you establish to appraise the extent to which a particular labor organization was “democratic”?
  4. What are the possibilities of “peace” within the labor movement? What are the principal obstacles to effective unity?
  5. What are the principal changes introduced into a work community by a labor organization? What changes typically take place in the management of the company?
  6. What is collective bargaining? What is its scope? What problems and rights question, if any, are exclusively “prerogatives” of a union or a management?
  7. What are the effects of collective bargaining on wages, prices, national income and the share of income going to various groups?
  8. To what extent can the opposition of interest between employees and unions be relied upon to protect the public interest?
  9. What scope would you give to the principle of seniority in layoff? In promotion?
  10. Can union support be elicited to improve methods of production and to reduce costs? If so, how?
  11. The area of bargaining has been growing. What are the consequences of industry-wide bargaining?
  12. How would you appraise the following as principles of wage determination: the cost of living, ability to pay, productivity, wage rates in “comparable” firms and operations?
  13. What should a “theory of wages” attempt to do? What do you understand by marginal productivity?
  14. Is collective bargaining compatible with economic stability? May wages and prices be pushed up, of necessity, so rapidly as to result in instability in output and employment?
  15. In view of long-term tendencies at work in our society, what kind of economic institutions and labor relations to you foresee 50 years from now?
  16. The influence of labor organizations in the American social or political life has increased very materially in recent years. Why?

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Required and Recommended Reading

I.  LABOR AND MANAGEMENT ORGANIZATION

  1. The Institutional Setting

Required Reading:

Bakke, E. Wight, Mutual Survival, The Goal of Unions and Management, pp. 1-82

Golden, C., and Ruttenberg, H., the Dynamics of Industrial Democracy, pp. 1-47

Leiserson, W. L., “The Role of Government in Industrial Relations,” Industrial Disputes and the Public Interest, pp. 35-51, (Institute of Industrial Relations, University of California)

Simons, Henry C., “Some Reflections on Syndicalism,” Journal of Political Economy, March, 1944, pp. 1-25

Slichter, Sumner H., The Challenge of Industrial Relations, pp. 1-28

Recommended Reading:

Brooks, R. R., As Steel Goes, pp. 1-20

Halevy, Elie, The Growth of Philosophical Radicalism

Hammond, J. L., and B., The Town Labourer, 1780-1832, Chap. 2, 10-15

Hobson, John A., The Evolution of Modern Capitalism

Hovell, Mark, The Chartist Movement, pp. 1-98

Lenin, V. I., What Is To Be Done?, pp. 31-93

Lester, R. A., Economics of Labor, pp. 3-49

Perlman, Selig, A Theory of the Labor Movement

Pound, Roscoe, Social Control Through Law

Schumpeter, Joseph A., Capitalism, Socialism, and Democracy

Shaw, George B., An Intelligent Woman’s Guide to Socialism

Veblen, Theory of the Business Enterprise, Chapter 8

Wadsworth, A. P., and Mann, Julia, The Cotton Trade and Industrial Lancashire, 1600-1780, pp. 311-408

Webb, Sidney and Beatrice, Industrial Democracy

Webb, Sidney and Beatrice, The History of Trade Unionism, pp. 1-112

Whitehead, A. N., Adventures in Ideas

  1. The Development of the American Labor Movement

Required Reading:

Harris, Herbert, American Labor, pp. 1-95

Commons, John R., and Associates, History of Labor in the United States, Vol. II, pp. 332-429

Millis, H. A., and Montgomery, R. E., Organized Labor, pp. 76-242

The United Steelworkers of America, The First Ten Years

Recommended Reading:

Bimba, A., The Molly Maguires

Brissenen, Paul, The I.W.W.

David, Henry, The History of the Haymarket Affair

Dunlop, John T., “The Changing Status of Labor,” The Growth of the American Economy, Edited by H. F. Williamson, pp. 607-31

Fine, Nathan, Labor and Farmer Parties in the United States, 1828-1928

Foner, P. S. History of the Labor Movement in the United States

Foster, William Z., From Bryan to Stalin

Frey, S. P., Craft Unions of Ancient and Modern Times

Galenson, Walter, Rival Unionism in the United States

Gluck, Elsie, John Mitchell, Miner

Gompers, Samuel, Seventy Years of Life and Labor

Grossman, Jonathan, William Sylvis, Pioneer of American Labor

Hollander, J. H., and Barnett, G. E., Studies in American Trade Unionism

Hoxie, Robert F., Trade Unionism in the United States

Jamison, Stuart, Labor Unionism in American Agriculture, Bulletin 836, Bureau of Labor Statistics

Lorwin, L. L., The American Federation of Labor

McCabe, D. A., National Collective Bargaining in the Pottery Industry

Morris, Richard B., Government and Labor in Early America

Perlman, S. and Taft, P., History of Labor in the United States, 1896-1932

Powderly, T. V., The Path I Trod

Roberts, Bryn, The American Labour Split and Allied Unity

Stolberg, Benjamin, Tailor’s Progress

Ware, Norman, Labor in Modern Economic Society

White, Kenneth, Labour and Democracy in the United States

Wolman, Leo, Ebb and Flow of Trade Unionism

Suggested Reading on Foreign Labor Movements

Cole, G. D. H., A Short History of the British Working Class Movement

Foenander, O. R, Towards Industrial Peace in Australia

Marquand, H. A., Laborer on Four Continents

Norgren, Paul, The Swedish Collective Bargaining System

Robbins, J. J., The Government of Labor Relations in Sweden

Webb, Sidney and Beatrice, Industrial Democracy

Webb, Sidney and Beatrice, Soviet Communism: A New Civilization?

Webb, Sidney and Beatrice, The History of Trade Unionism

Ehrmann, H. W., French Labor From Popular Front To Liberation

Wunderlich, F., German Labor Courts

Cole, G. H. and Postgate, R. W., British People, 1746-1947

Wunderlich, Frieda, Labor Under German Democracy, Arbitration 1918-33

Gualtieri, H. L., Labor Movement in Italy

Fitzpatrick, B. C., Short History of the Australian Labor Movement

Snow, H. F., Chinese Labor Movement

Hubbard, L. M., Soviet Labor and Industry

  1. Structure and Government of Labor Organizations

Required Reading:

Herberg, Will, “Bureaucracy and Democracy in Labor Unions,” Antioch Review, Fall 1943, pp. 405-17

Millis, H. A., and Montgomery, R. E., Organized labor, pp. 243-320

Mills, C. Wright, “The Trade Union Leader: A Collective Portrait,” Public Opinion Quarterly, Summer, 1945, pp. 158-75

The Constitutions of the American Federation of Labor and the Congress of Industrial Organizations

Slichter, Sumner H., The Challenge of Industrial Relations, pp. 99-123

Taft, Philip, “Opposition to Union Officers in Elections,” Quarterly Journal of Economics, February, 1944, pp. 256-64; “Judicial Procedure in Labor Unions,” Quarterly Journal of Economics, May, 1945, pp. 370-85; “Dues and Initiation Fees in Labor Unions,” Quarterly Journal of Economics, February 1946, pp. 219-32

Boyer, Richard O., “Profiles, Union President” in The New Yorker, July 6, 1946, pp.22-30; July 13, 1946, pp. 30-42; July 20, 1946, pp. 26-35

Recommended Reading:

Brazeal, B. R., The Brotherhood of Sleeping Car Porters

Brown, L. C., Union Policies in the Leather Industry

Carsel, Wilfred, A History of the Chicago Ladies’ Garment Workers’ Union

Chicago Joint Board, The Clothing Workers of Chicago, 1910-1912

Christenson, Collective Bargaining in Chicago; 1929-30

Green, Charles H., The Headwear Workers

Henig, Harry, The Brotherhood of Railway Clerks

Hill, Samuel E., Teamsters and Transportation

Hoxie, Robert F., Trade Unionism in the United States, pp. 177-87

Jensen, Vernon H., Lumber and Labor

LaMar, Elden, Philadelphia Clothing Workers

Levine, Louis, The Women’s Garment Workers

McCaleb, Walter F., Brotherhood of Railroad Trainmen

Minton, Bruce and Stuart, John, Men Who Lead Labor

Mulcaire, Michael A., International Brotherhood of Electrical Workers

Northrup, Herbert, Organized Labor and the Negro

Northrup, H. R., Unionization of Professional Engineers and Chemists

Northrup, H. R., “The Tobacco Workers International Union,” Quarterly Journal of Economics, August 1942

Painter, Leonard, Through Fifty Years with the Brotherhood Railway Carmen of America

Powell, Isona M., The History of the United Typothetae of America

Rubin, Jay and Obermeier, M. J., The Life and Times of Edward Floro

Ryan, Frederick L., Industrial Relations in the San Francisco Building Trades

Seidman, Joel, Labor Czars

Seidman, Joel, The Needle Trades

Soule, George, Sidney Hillman

Stolbert, Benjamin, Tailor’s Progress

Strong, Earl D., Amalgamated Clothing Workers

Wechsler, J. A., Labor Baron, Portrait of John L. Lewis

  1. Management Organization in Industrial Relations

Required Reading:

Roethlisberger, F. S., Management and Morale, pp. 88-134

Twentieth Century Fund, Trends in Collective Bargaining, pp. 22-33

Hill, L. H. and Hook, C. R., Jr., Management at the Bargaining Table, pp. 56-138

Pigors, Paul and Meyers, Charles A., Personnel Administration, (pages to be assigned)

Recommended Reading:

Baker, Helen, The Determination and Administration of Industrial Policies

Barnard, Chester I., The Functions of the Executive

Gardiner, Glenn, When Foremen and Stewards Bargain

Gordon, R. A., Business Leadership in the Large Corporation

National Research Council, Fatigue of Workers, Its Relation to Industrial Production

Riegel, John W., Management, Labor and Technological Change

Scott, Walter D., Clothier, Mathewson, Spriegel, Personnel Management, Principles, Practices, and Points of View

Yoder, Dale, Personnel Management and Industrial Relations

II. OPERATIONS AND RESULTS OF COLLECTIVE BARGAINING

  1. The Bargaining Process: Mechanics

Required Reading:

Peterson, Florence, American Labor Unions, pp. 187-210

Selected Agreements

Settling Plant Grievances, Bulletin 60, Division of Labor Standards

Recommended Reading:

Block, Louis, Labor Agreements in Coal Mines, pp. 71-124.

Hamburger, L., “The Extension of Collective Agreements to Cover Entire Trades and Industries,” International Labour Review, August, 1939, pp. 166-94

Lieberman, Elias, The Collective Labor Agreement, pp. 3-34

National Foremen’s Institute, How To Handle Collective Bargaining Negotiations

National Labor Relations Board, Written Trade Agreements, Bulletin No. 4

Pipin, Marshall, “Enforcement of Rights under Collective Bargaining Agreements,” University of Chicago Law Review, June, 1939

Updegraff, C. M., and McCoy, W. P., Arbitration of Labor Disputes

  1. The Results on the Social Structure of a Work Community

Required Reading:

Mayo, Elton, The Social Problems of an Industrial Civilization, pp. 59-112

Selekman, Benjamin M., “When the Union Enters,” Harvard Business Review, Winter, 1945, pp. 129-43

Selekman, Benjamin M., Labor Relations and Human Relations, (pages to be assigned)

Golden, Clinton S., and Ruttenberg, H. J., The Dynamics of Industrial Democracy, pp. 190-291

Recommended Reading:

Mayo, Elton, Human Problems of an Industrial Civilization

Moore, W. E., Industrial Relations and the Social Order

Robinson, G. Canby, “The Patient as a Person, The Social Aspects of Illness,” in Modern Attitudes in Psychiatry, pp. 43-60

Roethlesberger, F. J. and Dickson, W. J., Management and the Worker

Warner, W. Lloyd and Low, J. O., The Social System of the Modern Factory The Strike: A Social Analysis

Whitehead, T. N., Leadership in a New Society

  1. The Results on the Conditions of Employment

Required Reading:

Slichter, Sumner H., Union Policies and Industrial Management, pp. 1-8, 53-136, 164-200, 241-81, 282-310, 572-79

Kennedy, Van Dusen, Union Policy and Incentive Wage Methods, pp. 50-104

National Industrial Conference Board, Job Evaluation, Formal Plans for Determining Basic Pay Differentials, pp. 1-12, 21-24

Twentieth Century Fund, How Collective Bargaining Works, pp. 227-79, 450-507

Recommended Reading:

Barnett, G. C., Chapters on Machinery and Labor

Drake, Leonard A., Trends in the New York Printing Industry

Haber, William, Industrial Relations in the Building Industry

Hill, Samuel E., Teamsters and Transportation

Jensen, Vernon H., Lumber and Labor

Lahne, Herbert J., The Cotton Mill Worker

Lytle, Charles W., Wage Incentive Methods, pp. 67-135

Morton, Thomas L., Trade Union Policies in the Massachusetts Shoe Industry

Ober, Harry, Trade Union Policy and Technological Change, (W.P.A., National Research Project)

Palmer, Gladys, Union Tactics and Economic Change

Patterson, W. F. and Hodges, M. H., Educating for Industry, Policies and Procedures for a National Apprenticeship System

Randall, Roger, Labor Relations in the Pulp and Paper Industry of the Pacific Northwest

Roberts, Harold S., The Rubber Workers

Ross, Murray, Stars and Strikes, Unionization of Hollywood

Seidman, Joel, The Needle Trades

  1. The Effects on Wages, Prices and Employment

Required Readings:

Boulding, Kenneth, Economic Analysis, pp. 485-511

Slichter, Sumner H., Basic Criteria Used in Wage Negotiation

Federal Reserve Board, Federal Reserve Bulletin, July 1947 “Consumer Incomes and Liquid Asset Holdings”

Slichter, Sumner H., “The Responsibility of Organized Labor for Employment,” American Economic Review, May 1945, pp. 193-208

Dunlop, J. T., Wage Determination Under Trade Unions, pp. 8-27, 45-73, 95-121 “American Wage Deterination: The Trend And Its Significance”

Clark, J. M., “The Relation of Wages to Progress” in The Conditions of Industrial Progress (Wharton School of Finance and Commerce), pp. 22-39

Recommended Reading:

    1. Wage and Employment Relations

Bissell, R. M., “Price and Wage Policies and the Theory of Employment,” Econometrica, June 1940, pp. 199-239

Cannan, Edwin, “The Demand for Labor,” Economic Journal, 1932

Carlson, Sune, A Study on the Pure Theory of Production

Douglas, Paul H., The Theory of Wages, pp. 113-58

Douglas, Paul H., “Wage Theory and Wage Policy,” International Labour Review, March 1939

Fellner, William and Haley, B. F., Editors, Readings in the Theory of Distribution

Hansen, Alvin H., Economic Policy and Full Employment

Hicks, J. R., Theory of Wages, pp. 1-38, 58-110

Keynes, J. M., The General Theory of Employment, Interest, and Money (especially Chapter 19)

Lederer, Emil, “Industrial Fluctuations and Wage Policy: Some Unsettled Points,” International Labour Review, January, 1939.

Lester, Richard A., “Shortcomings of Marginal Analysis for Wage Employment Problems,” American Economic Review, March 1946, pp. 63-82

Mendershausen, H., “On the Significance of Professor Douglas’ Production Function,” Econometrica, October 1939

Machlup, Fritz, “Marginal Analysis and Empirical Research,” American Economic Review, September 1946, pp. 519-54

Pigou, A. C., The Economics of Welfare, 4th edition, pp. 451-61, 531-71, 647-55

Pigou, A. C., The Theory of Unemployment, pp. 1-108

Pigou, A. C., Lapses from Full Employment

Pool, A. G., Wage Policy in Relation to Industrial Fluctuations

Reynolds, Lloyd G., “Relations between Wage Rates, Costs, and Prices,” American Economic Review, Supplement, March 1942, pp. 275-89

Robertson, D. H., “Wage Grumbles,” in Economic Fragments

Robinson, Joan, Essays in the Theory of Employment, pp. 1-104

Stigler, George J., Production and Distribution Theories, The Formative Period

Walker, E. R., “Wage Policy and Business Cycles,” International Labour Review, December 1938

Wermel, Michael T., The Evolution of the Classical Wage Theory

    1. Wage Movements and Productivity

Ahearn, Daniel J., The Wages of Farm and Factory Laborers, 1914-1944

Bell, Spurgeon, Productivity: Wages and National Income

Bowden, Witt, “Wages, Hours and Productivity of Industrial Labor, 1909 to 1939” Monthly Labor Review, September 1940, pp. 517-44

Douglas, Paul H., Real Wages in the United States, 1890-1926

Ducoff, Louis J., Wages of Agricultural Labor in the United States, Technical Bulletin 895, Department of Agriculture

Fabricant, Solomon, Labor Savings in American industry 1899-1939

Lederer, Emil, Technical Progress and Unemployment

Lester, Richard A. and Robie, Edward A., Wages Under National and Regional Collective Bargaining

    1. Share in National Income

Dunlop, J. T., Wage Determination Under Trade Unions, pp. 141-91

Kalecki, Michael, Essays in the Theory of Economic Fluctuations

Kuznets, Simon, National Income and Its Composition, 1919-38, Vol. I, pp. 215-65

Pigou, A. C., Economics of Welfare, pp. 619-41

Survey of Current Business, June 1947 (Supplement)

    1. Size Distribution of Income

Bowman, Mary Jean, “A Graphical Analysis of Personal Income Distribution in the United States,” American Economic Review, September 1945, pp. 607-28

Clark, Colin, The Conditions of Economic Progress, Chapter 12

Mendershausen, Horst, Changes in Income Distribution During the Great Depression

National Resources Committee, Consumer Incomes in the United States

Staehle, Hans, “Short Period Variations in the Distribution of Incomes,” Review of Economic Statistics, 1937

    1. The Annual Wage

Latimer, Murray W., Guaranteed Wages, Report to the President by the Advisory Board, OWMR (See Appendix F for economic analysis by Hansen and Samuelson)

Snider, Joseph, Guarantee of Work and Wages

Leontief, Wassily, “The Pure Theory of the Guaranteed Annual Wage Contract,” Journal of Political Economy, February 1946.

  1. The Problem of Wage and Price Policies at Full Employment

Recommended Reading:

Leontief, W., “Wages, Profit and Prices,” Quarterly Journal of Economics, November, 1946, pp. 26-39

Fellner, W. J., Monetary Policies and Full Employment

Lange, Oscar, Price Flexibility and Full Employment

Dunlop, John T., “Wage-Price Relations at High Level Employment,” American Economic Review, Proceedings, May, 1947, pp. 243-53

  1. The Impact on the Social Structure and the Political “Balance of Power” in the Nation

 

Source: Harvard University Archives. Syllabi, course outlines and reading lists in Economics, 1895-2003. (HUC 8522.2.1) Box 4, Folder “Economics, 1947-48 (2 of 2)”.

 

Image Source: Cigar box label from the collections of the Museum of the City of New York.

Categories
Curriculum Exam Questions Harvard Suggested Reading Syllabus

Harvard. Advanced Economic Theory. Franco Modigliani, 1957-8

During the academic year 1957-58 Wassily Leontief was on academic leave from Harvard and Franco Modigliani of the Carnegie Institute of Technology took a leave of absence to accept a visiting professorship filling in for Leontief. From Modigliani’s papers in the Rosenstein Library of Duke University I have been able to piece together outlines and readings for the two semesters of advanced economic theory that he taught.

For the Summer session and Fall semester of 1957 it is possible to construct a topical outline for the first semester of Harvard’s Economics 202 from Modigliani’s own handwritten notes. We see that the outline matches that of the corresponding course “Advanced Economics I” that Modigliani taught in the spring semesters of 1957 and 1959 at his home university, i.e. before and after his year at Harvard. We note some additions and deletions in the readings for Modigliani’s Carnegie Tech courses, but since the outline was not significantly changed, it is reasonable to assume that his Fall Semester reading list at Harvard was some “average” of these two Carnegie Tech courses. A copy of Modigliani’s exam questions for the first semester of Advanced Economic Theory (January 25, 1958) completes the material for the first semester.

For the Spring semester of 1958 we have a cover page to his lecture notes indicating four broad topics to be covered. For three of the topics I found short mimeographed reading lists in another folder in a different box of Modigliani’s papers. For the topic “Money and Keynesian Economics” there is a two page handwritten outline that precedes his lecture notes. I cannot explain why the first semester covers parts I-IV and the second semester apparently begins with part VI.

 

____________________________________

 

Course Enrollment

[Economics] 202. Advanced Economic Theory. Professor Modigliani (Carnegie Institute of Technology). Full Course.

(F)      1 Junior, 1 Senior, 29 Graduates, 4 Radcliffe, 3 Other: Total 38
(S)      1 Junior, 1 Senior, 27 Graduates, 3 Radcliffe, 4 Other: Total 36

 

Source: Harvard University. Report of the President of Harvard College and Reports of Departments, 1957-58, p. 82.

 

____________________________________

Modigliani Outline for Fall Semester, 1957 (Handwritten)

Ec. Analysis I
Summer & Fall 1957 Harvard

Outline

Part I. Methodology.

(A) Subject matter and the areas

(B) The methodology of positive economics and of Welfare economics

(C) Discussion of types of model and sequence of presentation

Part II. Theory of Demand and application

II(a) Partial Equilibrium Analysis-Demand function and application

(A) The law of demand and the description of demand functions

(1) The law of demand
(2) Cournot formulation. The notion of functions and some mathematics
(3) The slope of demand functions and responsiveness
(4) Criticism of slope as measure of responsiveness
(5) The notion of demand elasticity and its computation
(6) The behavior of total outlays and its relation to η

(B) Application to problem of random supply. Price and income variation and stabilization.

(C) Application to the elementary theory of Monopoly.

(1) Nature of the model
(2) The case of no costs. Total curves
(3) Graphical computation of MR
(4) η and MR
(5) Fixed costs. Comp. Statics
(6) Effect of Taxes
(7) Introduction of costs. Equilibrium Analysis
(8) Comparative Statics and Taxation

II (b) Utility Analysis

(A) Introduction

(1) Utility and M.U. The Marshallian approach
(2) Shortcoming. The alternative approach.

(B) Indifference Approach

(1) The fundamental postulates
(2) Graphical Representation of tastes
(3) Indifference map and utility function
(4) Slope of I.C.—m.r. of s. and expression in terms of m.u.
(5) Generalizations and the role of two commodities
(6) Types of indifference maps.
(7) The opportunity set. The case of perfect markets
(8) Pathological cases and the law of d.m.r. of s.
(9) Effect of variation in income. Engel curves
(10) Effect of variations in prices. The demand curve
(11) The case of two commodities; income derived from the commodities. Demand and supply.
(12) Generalization to n commodities; complementarity and substitution

(C) Applications of utility analysis

(1) Consumers surplus
(2) Elements of Index number theory

II (c) General Equilibrium of Exchange.

(A) Nature of Problem and approach.

(1) What we wish to explain
(2) Nature of model’s assumptions.

(B) The two person, two commodity case.

(1) The Edgeworth Box.
(2) The offer curves
(3) The behavior of excess demand as function of p and competitive equilibrium (normal case) [illegible] market
(4) The relation between Ex and Ey. Walras law.
(5) Multiple intersection of offer curves. Stable and unstable equilbria. The correspondence Principle.
(6) The pure monopoly solutions.
(7) Comparison of competitive and monopoly solution. Welfare maximization.
(8) The Pareto locus and the Weak Welfare ordering.
(9) Necessary and sufficient condition for max. welfare under individualistic welfare function. The [illegible word] feasibility function. Every point on Pareto locus achievable by perfect market, lump sum taxes and subsidies.
(10) Comparative statics.
(11) Uses of Edgeworth Diagram in the study of barter and bilateral monopoly

(C) General Equilibrium of Exchange

III. Theory of supply and production

(A) Introduction

(1) Nature of production and relation to consumption and exchange model.
(2) The organization of production and the nature of the firm in the model.
(3) Factors of production; general notions and the classical dichotomy[?]
(4) Profit maximization and the definition of profit.

(B) Production functions and cost functions.

B(I). One output and two inputs.

(1) Three dimensional representation.
(2) A single variable factor. Product curve.
(3) The cost curve

B(II). Two variable inputs

(1) Determination of equilibrium can be broken up into two parts. Cost minimization, and choice of best output along the minimized cost function.
(2) Cost minimization.

[(C) Supply function]

(1) Long run cost functions and returns to scale
(2) The long run supply curve
(3) Short run costs and supply curves

IV. Market Structures.

(A) Classification of Markets

(B) Monopolistic competition.

(1) Equilibrium for the firm
(2) Simultaneous equilibrium of the group.
(3) Essential characteristics of equilibrium in relation to monopoly and perfect competition, welfare aspects.
(4) Relaxation of the pure model.
(5) Forces making for [illegible] higher prices

(C) Oligopoly with homogeneous selling and no free entry

(1) Duopoly, Cournot solution
(2) Oligopoly and the limit solution as n goes to infinity

 

Source: Duke University, Rubenstein Library. Franco Modigliani Papers. Box T6. Folder “Economics 1956-57”

 

____________________________________

Mimeographed Course Outline,
Carnegie Institute of Technology 1957

February, 1957

GI-581—Advanced Economics I
Course Outline and Major References (Provisional)

I. Methodological issues:

(1) Kaufman — Methodology of the Social Sciences
(2) Friedman — Essays in Positive Economics — Part I
(3) Robbins — The Nature and Significance of Economic Science

II. Theory of Demand and Applications

(A) Partial equilibrium approach — Marshallian Demand functions and applications to simple monopoly.

(B) General equilibrium approach — Utility analysis and indifference curves

(C) General equilibrium of exchange: (i) the two person, two commodity case; (ii) the general case

(1) Marshall — Principles of Economics, Book III, Ch. III and IV; Mathematical Appendix, Notes II and III
(2) Cournot — The Mathematical Principles of the Theory of Wealth, Ch. IV, V, VI
(3) Bowley — The Mathematical Groundwork of Economics, Ch. I
(4) Hicks — Value and Capital, Part I (pages 12-52) and Part II, ch. IV and V.
(5) Mosak — General Equilibrium Theory in International Trade, Ch. 1 and 2
(6) Samuelson — Foundations of Economic Analysis, Ch. 1, 5, 6, 7
(7) Slutsky — On the Theory for the Budget of the Consumer, Readings in Price Theory
(8) Hicks — Revision of Demand Theory

III. Theory of supply and costs under competitive conditions

(A) Partial equilibrium approach — theory of Rent

(B) General equilibrium approach — production functions and marginal productivity

(C) General equilibrium of production and exchange

(D) Some welfare implications

(1) Viner — Cost Curves and Supply Curves, Readings in Price Theory
(2) Stigler — The Theory of Prices
(3) Hicks — Value and Capital, Ch. VI and VII
(4) Mosak — Ch. V
(5) Lerner — The Economics of Control

IV. Imperfect Competition Theories and Market Structures

(A) Theory of monopoly

(B) Small numbers and imperfect competition

(1) Cournot — Ch. 7
(2) Chamberlin — Theory of Monopolistic Competition
(3) Robinson — Economics of Imperfect Competition
(4) Readings in Price Theory, Part V, Imperfect Competition
(5) Hall and Hitch — Price Theory and Business Behavior, Oxford Economic Papers, 1939
(6) Stigler — Notes on the Theory of Duopoly, JPE, 1947, page 521
(7) Fellner — Competition among the Few
(8) Bain — A Note on Pricing in Monopoly and Oligopoly, AER, 1949, page 448
(9) Hurwicz — The Theory of Economic Behavior, Readings in Price Theory
(10) Henderson — The Theory of Duopoly, QJE, December, 1954
(11) Harrod — Economic Essays, The Theory of Imperfect Competition revised
(12) Hicks — The Process of Imperfect Competition, Oxford Economic Papers, 1954
(13) Paul — Notes on Excess Capacity, Oxford Economic Papers, 1954
(14) Hahn — Excess Capacity and Imperfect Competition, Oxford Economic Papers, 1955

Source: Duke University, Rubenstein Library. Franco Modigliani Papers. Box T8. Folder “(Notes on Advanced Monetary Theory III , 1953-1960”.

 

____________________________________

 

Mimeographed Course Outline, Carnegie Institute of Technology 1959

February, 1959

GI-581—Advanced Economics I
Course Outline and Major References

I. Methodological issues:

(1) Kaufman — Methodology of the Social Sciences
(2) Friedman — Essays in Positive Economics — Part I
(3) Robbins — The Nature and Significance of Economic Science

II. Theory of Demand and Applications

(A) Partial equilibrium approach — Marshallian Demand functions and applications to simple monopoly.

(B) General equilibrium approach — Utility analysis and indifference curves.

(C) General equilibrium of exchange: (i) the two person, two commodity case; (ii) the general case

(D) Basic concepts of Welfare Economics. Index number theory.

(1) Marshall — Principles of Economics, Book III, Ch. III and IV; Mathematical Appendix, Notes II and III
(2) Cournot — The Mathematical Principles of the Theory of Wealth, Ch. IV, V, VI
(3) Samuelson — Foundations of Economic Analysis, Ch. 1, 2, 3, 5, 6
(4) Hicks — Value and Capital, Part I (pages 12-52) and Part II, ch. IV and V.
(5) Slutsky — On the Theory for the Budget of the Consumer, Readings in Price Theory
(6) Hicks — Revision of Demand Theory Parts I and II
(7) Bowley — The Mathematical Groundwork of Economics, Ch. I
(8) Mosak — General Equilibrium Theory in International Trade, Ch. 1 and 2
(9) Boulding — Welfare Economics in Survey of Contemporary Economics, vol. II.

III. Theory of supply and costs under competitive conditions

(A) Partial equilibrium approach — theory of Rent

(B) General equilibrium approach — production functions and marginal productivity

(C) General equilibrium of production and exchange under competitive conditions

(D) Some welfare implications

(E) Stability of equilibrium — comparative statics and dynamics.

(1) Viner — Cost Curves and Supply Curves, Readings in Price Theory
(2) Stigler — The Theory of Prices
(3) Samuelson — Foundations chs. 4, 9
(4) Lerner — The Economics of Control chs. 15, 16, 17
(5) Hicks — Value and Capital, Ch. VI and VII
(6) Mosak — Ch. V
(7) Cassel — The Theory of Social Economy Vol I. ch. 4, pp. 134-155

IV. Imperfect Competition Theories and Market Structures

(A) Classification of market structures

(B) Theory of monopoly

(C) Monopolistic competition, large group

(D) Oligopolistic competition

(E) The role of the conditions of entry.

(1) Cournot — Ch. 7
(2) Chamberlin — Theory of Monopolistic Competition
(3) Robinson — Economics of Imperfect Competition, Book V.
(4) Readings in Price Theory, Part V, Imperfect Competition
(5) Hall and Hitch — Price Theory and Business Behavior, Oxford Economic Papers, 1939
(6) Stigler — Notes on the Theory of Duopoly, JPE, 1947, page 521
(7) Fellner — Competition among the Few
(8) Hurwicz — The Theory of Economic Behavior, Readings in Price Theory
(9) Henderson — The Theory of Duopoly, QJE, December, 1954
(10) Bain — Barriers to New Competition. Esp. ch. 1, 3, 4, 6.
(11) Modigliani — New Developments on the Oligopoly Front. JPE June 1958, pp. 215-232.
(12) Cyert and March — Organizational Structure and Pricing Behavior in an Oligopolistic Market. AER March 1955, pp. 129-139
(13) Cyert and March — Organizational Factors in the Theory of Oligopoly. QJE Feb. 1956, pp. 44-64

Source: Duke University, Rubenstein Library. Franco Modigliani Papers. Box T8. Folder “(Notes on Advanced Monetary Theory III , 1953-1960”.

Final Examination for GI 581 in 1959 and 1960 has been posted!

 

____________________________________

Final Examination Economics 202, Fall Semester (1957-58)

HARVARD UNIVERSITY
Department of Economics
ECONOMICS 202

Answer questions 1, 2, and two of the remaining three. Question 1 will be given double weight.

  1. Assume that the government fixes by law the price of a commodity and hands out to the public ration coupons equal in number to the number of units of the commodity produced. Assume throughout that the supply is perfectly inelastic.

a) Show graphically the opportunity locus of an individual consumer, in terms of the usual indifference diagram, with one of the axes representing money. Under what condition would a consumer not use all of his coupons?

b) Show that consumers would be better off if they were free to buy or sell their ration coupons in a free market.

c) Supposing now that coupons could be bought and sold in a free market, explain how one could derive an individual consumer’s demand curve for coupons. (Hint: the situation is analogous to the consumer being forced to buy his ration of the good at the legal price and then being allowed to sell it or buy more of it on a free market.)

d) Explain the formation of the equilibrium market price of coupons.

e) What can be said as to the relation between the legal price, the price of coupons, and the price which would prevail in the absence of price control and rationing? Under what condition would the sum of the first two be equal to the third?

  1. Wicksell states two alternative conditions under which entrepreneurial profits would be zero:

“…either that large-scale and small-scale operations are equally productive, so that, when all the factors of production are increased in the same proportion, the total product also increases exactly proportionately; or at least that all productive enterprises have already reached the limit beyond which a further increase in the scale of production will no longer yield any advantage.”

Explain the reasoning behind Wicksell’s statement of these conditions. Is either of them sufficient, or must other conditions be added?

  1. Discuss the significance of free entry to the relation of the long-run equilibrium size of the firm to its optimum size.
  1. A profit maximizing monopolist buys factors of production in a perfect market.

a) Discuss the long-run effect on his demand for each of the factors he uses and on his selling price of a tax on one of the factors. (Give a graphic treatment for the case of two factors.)

b) Suppose that one of the two factors is fixed in the short run. Contrast the change in the long-run and short-run demand for both factors when a tax is placed on either.

  1. Evaluate the methodological positions of Friedman and Koopmans. Would an agreement with one as against the other make any difference as to the direction of economic research?

January 25, 1958

 

Source: Duke University, Rubenstein Library. Franco Modigliani Papers. Box T8. Folder “(Notes on Advanced Monetary Theory III , 1953-1960”.

 

____________________________________

 

[Handwritten cover page to course lecture notes]

 

ECONOMIC ANALYSIS II
Harvard—Spring 1958
Outline

I. Welfare Economics and Critique of Laisser faire

II. Dynamics with Certainty

III. Theory of Choice Under Uncertainty

IV. Money and Keynesian Economics

 

Source: Duke University, Rubenstein Library. Franco Modigliani Papers. Box T6. Folder “Economics 1956-57”.

 

____________________________________

 

[Two mimeographed sheets of course outline and readings]

HARVARD UNIVERSITY
Department of Economics
Economics 202

Spring, 1958

VI. Economics of Welfare

Readings:

Lerner, A. P., The Economics of Control, Chap. 1-14 (as a review)

Hicks, J. R., “The Foundations of Welfare Economics,” Economic Journal, Dec. 1939.

Scitovsky, T., “A Reconsideration of the Theory of Tariffs,” Review of Economic Studies, Volume 9, 1941

Samuelson, P., “Evaluation of Real National Income,” Oxford Economic Papers, Jan. 1950

J. de V. Graaf, Theoretical Welfare Economics

Baumol, William J., Welfare Economics and the Theory of the State (omit Ch. 8)

Ruggles, N., “The Welfare Basis of Marginal Cost Pricing,” Review of Economic Studies, Vol. XVII, 1949-50.

Vickrey, W., “Some Objections to Marginal Cost Pricing,” JPE, June 1948

*Burk (Bergson) A., “A Reformulation of Certain Aspects of Welfare Economics,” Quarterly Journal of Economics, Vol. 52, 1938

*Samuelson, P., Foundations of Economic Analysis, Chapter 8

*Koopmans, T. C., Three Essays on the State of Economic Science, I—Allocation of Resources and the Price System.

VII. Dynamics under Certainty

Temporal theory of consumer choice — the notion of interest — inter-temporal equilibrium without production — temporal theory of production and capital — growth

Readings:

Fisher, The Theory of Interest, Chapters II, X, XI, XVI, XVIII.

Hicks, Value and Capital, Chapters IX, X, XI, XV, XVI, XVII, XVIII.

Lutz and Lutz, The Theory of Investment of the Firm, Chapters I-X, XII, XV, XX.

Lindahl, Studies in the Theory of Money and Capital, Part III, Ch. 2, 3.

Samuelson, “Dynamics, Statics and the Stationary State,” in Clemence, Readings in Economic Analysis, Vol. I

Modigliani and Brumberg, “Utility Analysis and the Consumption Function,” in Kurihara, Post-Keynesian Economics.

*Mosak, General Equilibrium Theory, Ch. VI, VII.

*Koopmans, Three Essays on the State of Economic Science, Essay I, part 4, (Pp. 105-126).

VIII. Some Approaches to the Theory of Choice under Uncertainty.

Readings:

Arrow, “Alternative Approaches to the Theory of Choice under Uncertainty in Risk-taking Situations,” Econo metrica, 1951.

Modigliani, “Liquidity and Uncertainty,” (Discussion paper) AER, May 1949

Hart, Anticipations, Uncertainty and Dynamic Planning

Marschak, “Probability in the Social Sciences,” in Lazarsfeld, Mathematics 1 Thinking in the Social Sciences.

Friedman and Savage, “The Utility Analysis of Choice Involving Risk,” in Readings in Price Theory.

Strotz, “Cardinal Utility,” AER, May 1953.

Hart, “Risk, Uncertainty, and the Unprofitability of Compounding Probabilities,” in Readings in the Theory of Income Distribution.

*Herstein and Miller, “An Axiomatic Approach to Measurable Utility,” Econometrica, April 1953.

 

Source: Duke University, Rubenstein Library. Franco Modigliani Papers. Box T6. Folder “Economics 1956-57”.

 

____________________________________

 

[Handwritten outline preceding notes for fourth part of second semester]

Money and Keynesian Economics
Outline

I. Introduction of uncertainty and money in dynamic general equilibrium framework

II. The supply and demand for money

(A) Supply side. The banking system and bank balance equation

(B) The demand side

(1) The transaction demand. Cambridge and Fisher equations.
(2) The formal closing of system with dichotomy and neutrality. Criticism. No connection between demand for money and demand for anything else. No [illegible] formal money market
(3) The role of interest rate on transaction demand
(4) Liquidity preference and the connection of Money and Bond market. The formal model of these markets in which funds are acquired or disposed of against bonds.
(5) Preservation of dichotomy under certain assumptions: the role of money in real system. Its disappearance with pure bank money and η =1.
(6) Sources of non-transaction or asset demand for money:

(a) Transaction costs on short funds.
(b) The so called speculative demand.

The case of a single short rate [for the supply of money to equal the demand for money] provided r01 >0.
Liquidity trap. No carrying cost, r cannot be negative.
The case of multiple rates. Speculative demand.

(7) The breakdown of the system. The Pigou effect. its implications on extreme fluctuations of price level.
(8) The consequence of price rigidity.

III. The Economics of rigid prices (rigid wages)

(A) Description of labor market and the [illegible]of rigidity.
(B) The emergence [consequence?] of the notion of Income. Capitalism. Property and non-property income
(C) Nature of demand and supply. Consumption and Investment.
(D) Why wage rigidity [illegible]a solution even when r of full employment is negative. Supply falls faster than demand
(E) The four quadrant analysis and its interpretation.

 

Source: Duke University, Rubenstein Library. Franco Modigliani Papers. Box T6. Folder “Economics 1956-57”.

Image Source: Franco Modigliani page at the History of Economic Thought Website.

Categories
Chicago Exam Questions Fields

Chicago. Ph.D. Exam for Money, Banking and Monetary Policy, 1946

This transcribed Ph.D. examination for Money, Banking and Monetary Policy comes from a copy of the exam in the papers of Norman Kaplan at the University of Chicago archives. According to the Course Announcements, this field was covered by four quarter courses: both Money (330) and Banking Theory and Monetary Policy (331), and either The Theory of Income and Employment (335) or Business-Cycle Theory (432). In 1945-46 the first two courses were taught by Lloyd Mints. Jacob Marschak and Oscar Lange were scheduled to teach Economics 335 and 432, respectively, but I believe Lange was away that year in Washington, D.C. In any event the questions reveal emphasis on the material covered by Mints.

_________________________

 

MONEY, BANKING AND MONETARY POLICY
Written examination for the Ph.D.

Autumn Quarter, 1946

 

Time: 4 hours. Answer all questions.

 

  1. Discuss the effect of tax reduction on employment.
  2. Discuss the comparative advantages of fixed and flexible foreign exchange rates.
  3. A newspaper story of Jan. 21, 1946, on President Truman’s budget message, had the following headlines and first two paragraphs:

“TRUMAN MAPS FIRST DEBT CUT SINCE 1930
CASH ON HAND TO OFFSET ’47 DEFICIT.

“Washington—President Truman’s first budget proposes to spend $4,300,000,000 more that the government will collect, but for the first time since 1930, it won’t increase the national debt.
“Mr. Truman proposes to withdraw from the Treasury sufficient funds no only to offset this deficit but also to reduce the debt by $7,000,000,000.”

Discuss the monetary effect of this budget proposal. Would one expect the proposed debt cut to be deflationary or inflationary? Why? How would the effect compare with such alternatives as refunding the debt? Borrowing more to add to cash balances?

  1. The average amount of money (deposits plus hand-to-hand currency) in circulation in 1929 was $55 billion. At present (1946) the stock of money is $170 billion, or approximately three times the $55 billion of 1929. If we assume that the volume of transactions would normally (with a continued high level of employment) increase at the rate of 4% per annum, the volume of transactions in 1947, with a high level of employment, would then be approximately twice that of 1929 (1 compounded annually at the rate of 4% for 18 years amounts to 2.03). If we then assume that velocity will be the same in 1947 as it was in 1929, and that the stock of money will be the same in 1947 as in late 1946, we have approximately the following index numbers for 1947, using 1929 as a base:

M = 3.0
V = 1.0
T = 2.0

Therefore      P = 1.5

Discuss the reasonableness of the various assumptions made in this analysis and of 1.5 as the possible index of the price level in 1947. Is there any good reason for using 1929 as the base year rather than, say, 1940?

  1. The following statement, made in a recent CED [Committee for Economic Development] monograph, refers to the high post-war level of holdings of cash and government bonds by the public as compared with pre-war holdings:

“It is sometimes implied that the liquid assets will disappear as they are used. But money is not extinguished by use; it simply passes from the hand of the buyer to the hand of the seller. The use of liquid assets by some members of the public to buy goods, services, or securities from other members of the public will not reduce total liquid-asset holdings but only transfer their ownership.”

Suppose the liquid assets were used to such an extent as to bring on a substantial rise in the price level. Does the fact that they are not extinguished by use imply that the danger, from this source, of a further rise in prices would be unchanged?

 

Source: University of Chicago Archives. Norman M. Kaplan Papers, Box 3, Folder 5.

Image Source: 1936 Social Science Research Building. University of Chicago Photographic Archive, apf2-07476, Special Collections Research Center, University of Chicago Library.