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Exam Questions Suggested Reading Syllabus Theory

Queens College. Reading assignments and exams for macroeconomics. Lerner 1973-1975

Economics has its share of Wunderkinder, “Primo Donnos”, and heterodoxic poseurs. It is also a fact that economists are overwhelmingly herd animals. From time to time we find a genuine maverick among us, Abba Ptachya Lerner could be designated the poster-child of maverick economists. 

In this post Economics in the Rear-view Mirror has assembled material over three consecutive years from his seminar in advanced macroeconomic theory offered at Queens College of the City University of New York from the 1970s. Class schedules, assigned readings, midterm and final exams are transcribed here from the Spring terms of 1973 through 1975.

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Course Description (1974)

Economics 710, 80:
Seminar in Advanced Macroeconomic Theory
Abba Lerner

An integration of the theories of employment, inflation, interest, capital, investment, and growth, and new lessons for the uses of monetary policy, fiscal policy, and price policy. The Keynesian revolution (interpretations and misinterpretations—general theory or special case?), pre-Keynesian, Keynesian, and post-Keynesian economics. International complications and the myth of international money.

Basic Reading
Ackley Macroeconomics
Keynes The General Theory of Employment, Interest and Money
Leijonhufvud On Keynesian Economics and the Economics of Keynes
Lerner “Money” (Encycl. Britt., 1946 ed.)
Everybody’s Business
Flation
Other Suggested Readings
Lekachman Keynes’ General Theory – Reports of Three Decades
Harrod Life of Keynes
Lerner The Economics of Employment

There will be one midterm test and a final Examination.

Source: Queens College of the City University of New York. Economics, Spring 1974 (Economicsdepartment brochure), p. 20. Copy in Papers of Abba P. Lerner, Box 17, Folder 6 “Queens College of the City University of New York: General”, U. S. Library of Congress, Manuscript Division.

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1973

QUEENS COLLEGE
DEPARTMENT OF ECONOMICS

Economics 710, 80: Advanced Macroeconomic Theory
Inflation, Employment and Growth
Seminar, Spring 1973

Prof. Abba Lerner
Th. 6:30-8:20 P.M.
SS 314

Reading
Branson Macroeconomics Theory and Policy
Harper & Row		 (B)
Lerner Flation
Quadrangle Books		 (F)
Lerner Everybody’s Business
Harper Torchbooks (paperback)		 (EB)
Lerner Money
(Encycl. Britt 1946 edition)		 (M)
Leijonhufvud On Keynesian Ecs & the Ecs of Keynes
Oxford U P		 (L)
Keynes The General Theory of Interest and Money (sic)
Harcourt Brace		 (K)
Tentative Outline
Week Date
1 Feb. 8 Introduction B:1-3 / M / EB:X.
2 15 The Classical Case B:4-6 / F:1-5 / K.
3 22 Static Equilibrium B:7-9 / F:6-7 / K.
4 Mar 1 Consumption and Investment B:10,11 / K.
5 8 Money B:12,13 / M / K.
6 15 Monetary & Fiscal Policy B:14 / K.
7 22 The Foreign Sector B:15 / F:16,17 / K.
8 29 International Money F:18-20 / K.
9 Apr 5 Inflation B:16 / EB:XI / F:8-15 / K.
10 12 Unemployment Disequilibrium L: I and II / K.
11 19 Macromodels L: III / K.
12 26 Liquidity Preferences L:IV / K.
13 May 3 Keynes and Post Keynes L:V and VI / I(sic).
14 10 Growth Models B:17-19.
15 17 Optimum Growth Models B:20-23.
Other Suggested Readings
Lerner Economics of Employment
Ackley Macroeconomics
Lekachman Keynes’ General Theory – Reports of Three Decades
Lekachman The Age of Keynes
Harrod Life of Keynes

Source: U. S. Library of Congress, Manuscript Division. Papers of Abba P. Lerner, Box 17, Folder 4 “Queens College of the City University of New York: Course outlines. 1971-77, n.d.”.

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QUEENS COLLEGE
DEPARTMENT OF ECONOMICS

Economics 710 and 80
Prof. A. Lerner
Midterm Examination
March 22, 1973

Answer two questions from each Part

PART ONE

  1. M = 300, V = 4, C(Y) = 5/6, I = 300 – 10i
    (I = Investment), (1 = rate of interest)
    What would be the equilibrium values of Y, i, I, and S?
    What would happen to those if

    1. there was an increase in liquidity preference?
    2. M was increased to 450?
    3. C(Y) increased to 7/8?
  1. What is the multiplier? Now is it similar to and how different from the velocity of circulation of money? the accelerator? the balanced budget multiplier?
    How would it be affected by

    1. a change in liquidity preference?
    2. a change in time preference
    3. a change in the elasticity of supply of money?
    4. a change in the propensity to consume?
    5. a fixed M and v?
  1. Describe carefully the mechanism by which an increase in M would increase S. How would this be affected if a lower i decreased the amount people wanted to save?

PART TWO

  1. Discuss these statements:
    “The main contribution of Keynes was to point out that full employment is not reached automatically because

    1. cannot become negative.
    2. workers have no way of reducing their real
    3. workers insist on a real wage greater than their marginal product.
    4. There is a liquidity trap.
  2. Describe carefully the meaning of the marginal efficiency of capital and the marginal efficiency of investment, and how they are related.
    1. in a growing economy
    2. in a declining economy
    3. in a stationary economy
    4. in a steady state of growth economy.
  3. “The rise and fall of the Phillips curve.”
    or
    “ The natural level of unemployment.”

Source: U. S. Library of Congress, Manuscript Division. Papers of Abba P. Lerner, Box 17, Folder 5 “Queens College of the City University of New York: Examinations”.

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QUEENS COLLEGE
DEPARTMENT OF ECONOMICS

Economics 710 and 80
Mr. Lerner
Final Examination
Spring 1973

Answer Question 1 and three others.

  1. Branson Page 24 “the saving investment identity…as a natural derivative from the GNP identity”
    Branson Page 26 “The basic GNP identity:—

C + I + G + (X -M) = GNP = C + S + T + Rf,”

[where]

C=616; I=135; G=219; (X-M)=4; GNP = 974;
S = 149; T=208; Rf=1

    1. Show how the S, I identity can be derived from the GNP identity, spelling out any definitional differences in S or I.
    2. Give (and explain) another definition of S or I, as used by economists that makes I necessarily equal to S only in equilibrium.
  1. Compare the “classical” with the “keynesian” explanations of the automatic establishment of full employment on the assumption of wage and price flexibility.
  1. Explain how an increase in thrift (the desire to save) could (or could not) have the effect of (a) increasing investment, (b) decreasing investment, (c) increasing total income, (d) decreasing total income.
  1. Permanent Income, Life-cycle Consumption Hypothesis, Time Preference, Ratchet Effect, Wealth Effect, Pigou Effect — How are these six items related to the consumption function and to each other?
  1. Explain Branson’s distinction between the “real wage model” and the “money wage model”, and the purpose of the distinction.
  1. What do you consider the most distinctive feature of Leijonhufvud’s approach?
  1. Discuss.
    1. “With perfect wage and price flexibility there can be no problem of involuntary unemployment.”
    2. “A little wage and price flexibility (such as might be achieved in practice) could be worse than none.”
    3. “Too much wage and price flexibility could also cause trouble and not provide stable full employment.”
  1. Why is a rise in the price of foreign currency considered more of a crisis than a rise in the price of coffee or Mutual Fund Shares or real estate?

Source: U. S. Library of Congress, Manuscript Division. Papers of Abba P. Lerner, Box 17, Folder 5 “Queens College of the City University of New York: Examinations”.

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1974

QUEENS COLLEGE
DEPARTMENT OF ECONOMICS

Economics 710, 80
Inflation, Employment and Growth
Seminar in Advanced Macroeconomic Theory
[1974]

Abba Lerner
Tues. 6:20-8:00 P.M.
Temp. 3, Room 2

An Integration of the theories of Employment, Inflation, Interest, Capital, Investment and Growth, and its lessons for the uses of Monetary Policy, Fiscal Policy and Price Policy. The Keynesian Revolution (Interpretations and Misinterpretations – General Theory or Special Case?) Pre-Keynesian, Keynesian and Post Keynesian Economics. International Complications and the Myth of International Money.

Basic Reading
Ackley Macroeconomics A
Breit & Ransom The Academic Scribblers B
Keynes The General Theory of Employment, etc. K
Leijonhufvud On Keynesian Economics, etc. L
Lerner Money (Encycl. Britt 1946 edition) M
Lerner Everybody’s Business EB
Lerner Flation F
Other Suggested Readings
Lekachman Keynes’ General Theory – Reports of Three Decades
Harrod Life of Keynes
Lerner The Economics of Employment

There will be one midterm test and a final Examination.

Week Date
1 Feb. 5 Outline — Classical to Keynes M, A 1-4, EB 10, F 1-5
2 12 Lincoln’s Birthday — no classes
3 19 Outline — Post Keynes A 5-8, EB 11, F 6-10
4 26 Say’s Law, Saving and Investment EB 13-14, F11-15
5 Mar 5 Monetary Policy A 9
6 12 Fiscal Policy, Consumption Function A10-12
7 19 The Complete Keynes Model A13-15
8 26 Inflation and Investment A16-17
9 Apr 2 Capital and Growth A18-19
10 9 No Class (Recess)
11 16 International Money F16-20
12 23 Keynesian Revolution? Dynamics L Parts I, II
13 30 Macromodels L Part III
14 May 7 Liquidity and Wealth L Part IV
15 14 Expectations, Illusions and Policies L Parts V, VI
16 21 Review M, A 20, EB, F

Source: U. S. Library of Congress, Manuscript Division. Papers of Abba P. Lerner, Box 17, Folder 4 “Queens College of the City University of New York: Course outlines. 1971-77, n.d.”.

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QUEENS COLLEGE
DEPARTMENT OF ECONOMICS

Econ. 80—710
MIDTERM
Mr. Lerner
April 16, 1974

Answer question 1 and 3 other — 4 altogether.

  1. Suppose there is a decrease in the propensity to consume. Show how would this affect Employment, Prices and Investment
    1. if the amount of money is held constant
    2. if the rate of interest is held constant
      with wages and prices (1) perfectly flexible; (2) sticky downward
  1. Explain the relationship between the marginal efficiency of capital and the marginal efficiency of investment.
    How are these affected by an increase in
    1. the rate of interest?
    2. the optimism of investors?
    3. the wealth of the economy?
    4. the rate of time preference?
  1. I-S, L-M. Explain the nature of these curves, their use, and the stability condition they demonstrate.
  1. Show how the multiplier would be affected by an increase in
    1. the propensity to consume
    2. the marginal propensity to consume
    3. the marginal propensity to save
    4. the quantity of money
    5. the velocity of circulation
    6. liquidity preference
    7. government spending
    8. tax collection
    9. (7) and (8) together
  1. Why must saving (S) always be equal to investment (I)? What could be meant by the statement that an excess of S over I is deflationary?
  1. What are the features which distinguish the Keynesian from the pre-Keynesian and from the Post-Keynesian theories of the equilibrium level of employment? 

Source: U. S. Library of Congress, Manuscript Division. Papers of Abba P. Lerner, Box 17, Folder 5 “Queens College of the City University of New York: Examinations”.

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QUEENS COLLEGE
DEPARTMENT OF ECONOMICS

Economics 80, 710
Inflation, Employment and Growth
Seminar in Advanced Macroeconomic Theory
Dr. A. Lerner

Final Examination
Spring 1974

Answer Question 1 and any three other questions — Four altogether

  1. Suppose there is an increase in thriftiness. Show the direct and the indirect effects on the Multiplier, Income, Employment, Prices and Investment
    1. with wages and prices perfectly flexible,
    2. with wages and prices sticky downward,
      in each case

      1. with the quantity of money held constant
      2. with the rate of interest held constant
  2. State and discuss the primary criticisms that Leijonhufvud makes of a) Keynes and b) the “Keynesians”.
  1. Compare the advantages and disadvantages of indexing
    1. when there is a steady rate of inflation and
    2. when there is a danger of inflation getting out of control.
  1. A well informed and intelligent observer remarks that “We are now suffering from an excess of saving over investment, which is deflationary”. He cannot really mean what he is saying because in the first place we are suffering from inflation rather than deflation and in the second place it is not possible for saving to be greater (or less) than investment. What could he be meaning to say?
  1. Marginal productivity of capital; Marginal productivity of investment; Marginal efficiency of capital; Marginal efficiency of investment.
    Under what conditions are any of these equal to the rate of interest? Explain carefully.
  1. How come America allowed the dollar to depreciate on the international money market? How is this different from national bankruptcy? Will this not result in the disorganization of international trade “beggar thy neighbor” competitive devaluations of freely floating currencies. How could it have been prevented and why was it not prevented?
  1. “The present very high interest rates show the determination of the government to stop the inflation. If this policy is persisted in it is bound to achieve this purpose since, as we all know, the fundamental cause of inflation is the increase in the quantity of money which the authorities have provided in the recent past in order to keep down interest rates”. Discuss the logic and the practicality of such a policy.
  1. How is the size of the multiplier likely to be affected by an increase in:
    1. the rate of interest?
    2. time preference?
    3. liquidity preference?
    4. government spending?
    5. the quantity of money?
    6. the population?
    7. the government budget?
    8. the use of charge accounts for consumer credit?

Source: U. S. Library of Congress, Manuscript Division. Papers of Abba P. Lerner, Box 17, Folder 5 “Queens College of the City University of New York: Examinations”.

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1975

QUEENS COLLEGE
DEPARTMENT OF ECONOMICS

Economics 710, 80
Inflation, Employment and Growth
Seminar in Advanced Macroeconomic Theory
Abba Lerner
Spring 1975
Temp. 3, Room 2

An Integration of the theories of Employment, Inflation, Interest, Capital, Investment and Growth, and its lessons for the uses of Monetary Policy, Fiscal Policy and Price Policy. The Keynesian Revolution (Interpretations and Misinterpretations – General Theory or Special Case?) Pre-Keynesian, Keynesian and Post Keynesian Economics. International Complications and the Myth of International Money.

Basic Reading
Ackley Macroeconomics A
Keynes The General Theory of Employment, etc. K
Lerner Money (Encycl. Britt 1946 edition) M
Lerner Everybody’s Business EB
Lerner Flation F
Other Suggested Readings
Lekachman Keynes’ General Theory – Reports of Three Decades
Lerner The Economics of Employment

There will be one midterm test and a final Examination.

Week Date
1 Feb. 6 Outline — Classical to Keynes M, A 1-4, EB 10, F 1-5
2 13 Outline — Post Keynes A 5-8, EB 11, F 6-10
3 20 Say’s Law, Saving and Investment EB 13-14
4 27 Monetary Policy A 9
5 Mar 6 Fiscal Policy, Consumption Function A10-12
6 13 The Complete Keynes Model A13-15
7 20 No Class (Recess)
8 27 Midterm test
9 Apr 3 Inflationary Depression, the Wage Unit A16
10 10 Capital and Growth A17-18
11 17 International Money F16-20
12 24 Keynesian Revolution? Dynamics Lerner JEL Mar 1974
13 May 1 Liquidity and Wealth A 19
14 8 Expectations, Illusions and Policies A 20, F 11-15
15 15 Review

Source: U. S. Library of Congress, Manuscript Division. Papers of Abba P. Lerner, Box 17, Folder 4 “Queens College of the City University of New York: Course outlines. 1971-77, n.d.”.

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Economics 710-80
Midterm Exam

Abba P. Lerner
March 20, 1975

Answer Question 1 and any two other questions (three altogether)

  1. If the propensity to consume (average and marginal) increases from 50% to 60% what would be the effect on the level of income?
    In your answer consider the six (6) possible combinations of the following conditions:
    The mpI (marginal propensity to invest, i.e. the increase in investment due to an increase in income as a percentage of the increase in income) is (a) 40% (b) 30%
    The elasticity of supply of money plus the elasticity of demand for money is (i) infinite (ii) unitary (iii) zero
  1. Discuss your views and those of Keynes, Ackley, and Lerner on “Involuntary unemployment is basically due to the inability of workers to reduce their real wage”.
  1. Which (if any) of [the following] statements are true? Why do you think so? Indicate any connections between them.
    1. “The more steeply any average (A) is rising (falling) the more will the corresponding marginal (M) be above (below) it, i.e. the greater will be M minus A”.
    2. “The short run mpC (marginal propensity to consume) is less than the short run apC (average propensity to consume)”.
    3. “The long run mpC is equal to the long run apC”.
    4. “For a temporary increase in income mpC minus apC is less than for a permanent increase in income”.
  1. What is Say’s Law? Discuss its logical base, its empirical validity and its practical usefulness.
  1. Income can be defined more widely or more narrowly. Distinguish between the different definitions and indicate how the different definitions could better serve different purposes.

Source: U. S. Library of Congress, Manuscript Division. Papers of Abba P. Lerner, Box 17, Folder 5 “Queens College of the City University of New York: Examinations”.

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QUEENS COLLEGE
DEPARTMENT OF ECONOMICS

Economics 710/80
Dr. A. Lerner
FINAL EXAMINATION
May 22, 1975 (Thursday)

Temp 3 Room 2

Answer Questions 1 and any two others — 3 altogether

  1. Suppose consumption increases from 70% of GNP to 80% and the marginal propensity to consume increases from 50% to 75%. What could be the effect on the GNP if the elasticity of demand for money plus the elasticity of supply of money (with respect to changes in the rate of interest) is (a) infinite (b) zero (c) one, and the marginal propensity to invest (with respect to GNP) is (and remains) (i) 20% (ii) 25% (This makes six combinations).
  1. Is an increase in the national debt beneficial, harmful or neutral for the welfare of (a) the present generation (b) future generations? State and examine the arguments for the different views.
  1. “Involuntary unemployment is due to the inability of workers to reduce their real wage”. “Involuntary unemployment is due to an unsatisfied demand for a larger stock of money”. Discuss.
  1. “To succeed in winning the battle against stagflation we must (a) tighten our belts (b) use the tax rebate to buy more automobiles and (c) make more money available for mortgages for housing”. Discuss.
  1. “Say’s Law is invalid but useful while the Pigou Effect is valid but useless.” Does this make any sense?
  1. Does the rate of interest determine the marginal efficiency of capital? Or Vice versa? Or what?

Source: U. S. Library of Congress, Manuscript Division. Papers of Abba P. Lerner, Box 17, Folder 5 “Queens College of the City University of New York: Examinations”.

Image Source: National Academy of Sciences. 1994. Biographical Memoirs: Volume 64, p.208.  Washington, DC: The National Academies Press.

 

Categories
Chicago Exam Questions Theory

Chicago. First quarter price theory exams. Rees, 1960

Happy to add another round of first quarter price theory exams from the University of Chicago to the collection. Always nice to have a picture from the early professional years of the economists featured here. Distinguished old farts were once rising stars after all. (A general wisecrack made with the qualification, “present company excluded”.)

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Posted earlier

Reading list and exams from the Autumn quarter of 1962.

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Economics 300
Mr. Albert Rees

Midterm Examination
Autumn 1960

  1. (16 points) State whether each of the following statements about the U. S. economy is true, false, or uncertain, and explain your answers briefly.
    1. Consumers decide what will be produced.
    2. All consumers participate equally in determining what will be produced.
    3. The government influences the composition of output in the private consumer goods sector.
    4. The government determines the level of investment for the economy as a whole.
  1. (10 points) Comment briefly on the following statement:
    “When equilibrium prices in competitive markets are disturbed, they tend to be re-established. Thus the first effect of an increased supply of eggs is to lower the price. At this lower price, consumption is increased, and the increase in demand tends to drive the price back up again.”
  2. (16 points) Increased costs cause manufacturers to reduce the size of 5 cent chocolate bars from 2-1/2 ounces to 2 ounces. Because the bars are smaller, people eat more of them and consumption rises from 10, 000 bars a week to 11,000.
    1. Can these events be shown on an ordinary supply and demand diagram? If so, show them. If not, explain why.
    2. Can the elasticity of demand for chocolate be computed? If so, compute it. If not, explain.
  1. (24 Points) The following table gives hypothetical prices of pork and beef per pound in two years, and quantities consumed in a certain town.

 Price per pound Pounds consumed
1959 1960 1959

1960

Pork

 40 cents 50 cents 1000 800
Beef 60 cents 60 cents 1000

1200
    1. Compute the elasticity of demand for pork and the cross-elasticity of demand for beef in terms of the price of pork.
    2. Compute the Laspeyres price index for the price of meat from 1959 to 1960 (assuming that pork and beef are the only kinds of meat).
    3. Draw an indifference map for pork and beef for a typical consumer and illustrate the changes shown in the table on his indifference map. Derive two points on his demand curve for pork.
    4. Assume that the consumer’s money income is increased by an amount equal to his original income times the Laspeyres price index computed in (b). Demonstrate that he has been overcompensated for the price rise. Under what condition if any would this increase in income fail to overcompensate him?
  2. (16 points) Jones lives in a rented house for which he pays $150 a month. He has the opportunity of buying an identical house for $25,000, of which $15,000 will be paid in cash and $10,000 can be borrowed on a mortgage. He has figured that his monthly expenses would be $100 if he bought: $50 for interest on the mortgage, $20 for local taxes, and $30 for maintenance and depreciation. His income tax and expenses for fuel and utilities will not be affected by the purchase. He argues that it will cost him less to live if he buy the house; his wife argues that it will not.
    1. Under what conditions is Jones right? Under what conditions is Mrs. Jones right?
    2. Is there any divergence between the “right answer” to this problem from the private standpoint of the Jones family and from the standpoint of society? Explain.
  1. (18 points) The GJS corporation, manufacturers of gadgets, have determined that for every 10 per cent increase in the capacity of a gadget factory, minimum short-run average total cost falls by 1 per cent throughout the relevant range of capacities.
    1. What can you say about the production function for gadgets over the relevant range?
    2. Suppose that the company hires two factors of production, labor and capital, and pays each its marginal product. Will anything be left over for the owners of the company who contribute no services? Explain.
    3. Suppose that the company wants to build a plant to produce 10,000 gadget per week. What can you say about the size of the plant that will produce these most efficiently?

Economics 300
Mr. Rees
Fall. 1960

Final Examination
December 14, 1960

  1. (21 points) Show each of the following events on an indifference map:
    1. The change in the consumption of margarine following an increase in income (axes: butter and margarine. Assume that the income elasticity of demand is positive for butter and negative for margarine.)
    2. The change in the consumption of bread following a rise in its price. (axes: bread and all other commodities.) Identify the income and substitution effects of the price change.
    3. Do part (b) over using Friedman’s “Marshallian demand curve” concept and explain the difference between the diagrams for (b) and (c).
  2. (19 points) In the United States, about one-fifth to one-fourth of all income is property income. State briefly (a) the advantages of having private income from property in our economy (b) the costs or disadvantages. You may judge these according to any values you care to use, making the values as explicit as possible.
  3. (20 points) In a certain isolated area there are 50 farms of each of two types, A farms and B farms (100 farms in all). Within each type, all farms are identical. All farms are worked by identical workers. The marginal product schedules of one farm of each type are given below, in bushels of wheat per year.

 A Farm

B Farm

No. of workers
1 100

95

2

 90 84
3 80

73

4

 70 62
5 60

51
  1. If there are 260 workers in the area, how many will be employed on each kind of farm? What is the total product of each kind of farm? The rent of each kind of farm? The wages of workers on each type of farm in bushels per year? (Assume that farmers compete freely for labor, and labor can move within the area.)
  2. By means of an irrigation project, the owners of twenty B farms transform them into A farms. Recompute the answers to (a), counting the transformed farms as A farms. Who gained and who lost from the project, and why?
    1. (20 points) By means of appropriate diagrams and/or explanations, show the short-run effect of each of the following taxes on the output and profits of a monopolist.
    2. An excise tax of 10 cents per unit of product.
    3. An excise tax of 10 percent of the price of the product.
    4. A corporate profit tax equal to 50 percent of net profits.
  1. (20 points) The Edgeworth Box Company is the only employer in the town of Yarmouth. Its supply schedule of labor is given by W = 40 + 1/4 q, where W is the wage in cents per hour and q is the number of manhours supplied per week. The company sells boxes in a competitive market. The value of the marginal product of labor is given by
    V = 100 – 1/2 q for values of q greater than zero.
  2. How many man-hours of labor will the company employ, and at what wage?
  3. Show diagramatically for part (a) first, the wage bill and second, the sum of monopoly profits and the return to factors of production other than labor.
  4. What will be the effect on employment of a legal minimum wage of 60 cents an hour? of 80 cents an hour?

This problem may be solved algebraically or graphically. The following table gives numerically some points on the schedules whose equations are given above:

Supply

Marginal Product

q (Man-hours)

 W (cents) q (man-hours) W (cents)
1 40.25 1

99.5

2

 40.50 2 99.0
3 40.75 3

98.5

4

 41.00 4 98.0
etc.

etc.

Source: Duke University. David M. Rubenstein Rare Book & Manuscript Library. Economists’ Papers Archive. Albert Rees Papers, Box 1, Folder “Economics 300”.

Image Source: University of Chicago Photographic Archive, apf1-07002, Hanna Holborn Gray Special Collections Research Center, University of Chicago Library. Colorized by Economics in the Rear-View Mirror.

Categories
Business Cycles Distribution Economic History Exam Questions History of Economics Industrial Organization International Economics Johns Hopkins Labor Money and Banking Public Finance Public Utilities Statistics Theory

Johns Hopkins. General Written Exam for Economics PhD. 1956

 

One is struck by the relative weight of the history of economics in this four part (12 hours total) general examination for the PhD degree at Johns Hopkins in 1956. Also interesting to note just how many different areas are touched upon. Plenty of choice, but no place to hide.

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Other General Exams from Johns Hopkins

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GENERAL WRITTEN EXAMINATION FOR THE PH.D DEGREE
DEPARTMENT OF POLITICAL ECONOMY

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PART I
June 4, 1956, 9-12 a.m.

Answer two questions, one from each group.

Group I.
  1. Write an essay on the theory of capital. It should include a discussion of the place of capital theory in economic analysis: for what purposes, if any, we need such a theory, Do not omit theories or issues which were important in the history of doctrines, even if you should regard them as irrelevant for modern analysis.
  2. Discuss and compare the capital theories of Böhm-Bawerk, Wicksell, and Hayek.
  3. Write an essay on the theory of income distribution. Organize it carefully, as if it were designed for an article in the Encyclopedia of the Social Sciences. Include discussions of alternative theories such as imputation theories, residual theories, surplus value theories, etc.
Group II.
  1. The following statements attempt to show that marginal productivity theory is inconsistent with factual observation. Accepting the stated facts as given, discuss whether they call for the rejection or major modification of the theory. If so, how? If not, why not?
    1. “In the most important industries in the United States wage rates are set by collective bargaining and are largely determined by the bargaining strength of the parties. Marginal productivity of labor is neither calculated nor mentioned in the process.”
    2. “In many industries competition among employers for workers is so limited that most firms are able to pay less than the marginal productivity of labor.”
    3. “Workers in some trades — say, carpenters or bricklayers — work essentially the same way as their predecessors did fifty years ago; yet their real wages have increased greatly, probably not less than in occupations where productivity has improved considerably over the years.”
  2. The determination of first-class and second-class passenger fares for transatlantic ocean transportation involves problems of (a) joint or related cost, (b) related demand, and (c) discriminatory pricing. Discuss first in what ways these three phenomena are involved here; then formulate a research project to obtain the factual information required for an evaluation of the cost relationships and demand relationships prevailing in the case of two-class passenger ships; and finally state the criteria for judging whether the actual rate differential implies conscious discrimination in favor of first-class passengers, conscious discrimination against first-class passengers, wrong calculation and faulty reasoning on the part of the shipping lines, or any other reason which you may propose.

*  *  *  *  *  *  *  *  *  *  *  *  *  *  *

PART II
June 4, 1956, 2-5 p.m.

Answer three questions, at least one from each group.

Group I.
  1. There is a running debate on the question whether trade unions are labor monopolies. This debate obviously turns on the meaning of monopoly and on what effects union have had on their members’ wages, output, and conditions of work. Give both sides of the argument.
  2. Write an essay on the demand for labor.
  3. Write down everything you know about the incidence of unemployment among various classes of workers and about the fluctuations of unemployment over time. Discuss some of the problems of developing a workable concept of unemployment. Indicate whether the statistical behavior of unemployment throws any light on its causation.
Group II.
  1. What is a “public utility”? According to accepted regulatory principles, how are the “proper” net earnings of a utility company determined? And, finally, what factors are considered in setting an “appropriate” rate structure?
  2. What is the major purpose of the Sherman Anti-Trust Act of 1890? What are some of the more significant problems in determining what constitutes “restraint of trade”? What tests would you apply? Why?
  3. Analyze the economic effects of a corporate income tax. Be as comprehensive as you can.
  4. What are flexible agricultural price supports? Explain how they are determined and applied. Evaluate their use in the light of reasonable alternatives.

*  *  *  *  *  *  *  *  *  *  *  *  *  *  *

PART III
June 5, 1956, 9-12 a.m.

Answer three questions, one from each group.

Group I.
  1. Describe briefly Schumpeter’s theory of economic development, and comment upon the possibility of testing it empirically.
  2. Describe briefly Keynes’ general theory of employment, interest and money; state its assumptions, structure, and conclusions; and evaluate it critically in the light of more recent theoretical and empirical findings.
Group II.
  1. What characteristics of economic cycles would you consider important in a statistical study of business cycles?
  2. In the study of long-term trends, what criteria would you use in constructing index numbers of production?
  3. What measures of economic growth of nations would you us? Consider carefully the various characteristics that you would deem indispensable in measurements of this sort.
Group III.
  1. Give a brief definition, explanation and illustration for each of the following:
    1. variance;
    2. confidence interval;
    3. coefficient of regression;
    4. coefficient of correlation;
    5. coefficient of determination;
    6. regression line.

[Note: Indicate where you have confined yourself to simple, linear correlation.]

  1. Write an essay on statistical inference by means of the following three techniques:
    1. chi square;
    2. analysis of variance;
    3. multiple regression.

Indicate the types of problem in which they are used, and how each type of problem is handled.

*  *  *  *  *  *  *  *  *  *  *  *  *  *  *

PART IV
June 5, 1956, 2-5 p.m.

Answer four questions, one from each group.

Group I.
  1. Political arithmetic is a term that is applied to certain writings that appeared from roughly 1675 to 1800. What gave rise to such writings? What were the contributions of the different members of the “group”? Why should Political Arithmetic be given a terminal date?
  2. Discuss Quesnay’s Tableau Économique, Do you see in it anything of significance for the subsequent development of economic theory?
  3. Present arguments for the contention that J. B. Say was far more than “a mere disciple of Adam Smith”.
Group II.
  1. Discuss the relations between the English economic literature of the first half of the 19th century and the events, conditions, and general ideas of that time.
  2. Select three episodes in American economic history, and use your knowledge of economic theory to explain them.
Group III.
  1. Analyze the economic effects of a large Federal debt. Be as comprehensive as you can.
  2. At one time or another each of the following has been proposed as the proper objective or goal of monetary policy: (1) The stabilization of the quantity of money; (2) The maintenance of a constant level of prices; (3) The maintenance of full employment.
    Explain for each policy objective (a) what it means, that is, exactly what in “operational” terms might be maintained or stabilized; (b) how the objective could be achieved, that is, what techniques could be used to achieve it; and (a) the difficulties with or objections to the proposal.
  3. Irving Fisher and others have proposed that all bank be required to hold 100% reserves against their deposits. This was designed to prevent bank failures and, more important, to eliminate the perverse tendency of money to contract in recessions and expand in booms.
    Explain whether the proposal would have the effects claimed for it, and if so, why, and discuss what other effects it might have.
Group IV.
  1. Discuss the “law of comparative advantage” in international trade.
  2. Discuss “currency convertibility”.
  3. Discuss the “transfer problem”.
  4. Discuss the “optimum tariff”.
  5. Discuss the “foreign-trade multiplier”.
  6. Discuss alternative concepts of the “terms of trade”.
  7. Discuss the “effects of devaluation upon the balance of trade”.

*  *  *  *  *  *  *  *  *  *  *  *  *  *  *

Source: Johns Hopkins University. Eisenhower Library. Ferdinand Hamburger, Jr. Archives. Department of Political Economy Series 5/6.  Box No. 6/1. Folder: “Comprehensive Exams for Ph.D. in Political Economy, 1947-1965”.

Image Source: Fritz Machlup in an economics seminar. Evsey Domar visible sitting third from the speaker on his right hand side. Johns Hopkins University Yearbook, Hullabaloo 1956, p. 15.

Categories
Exam Questions Harvard Theory

Harvard. Second year economic theory. Readings and exams. Leontief, 1960-1961

 

 

The following Harvard course outline with reading assignments and semester final exams are from the year 1960-61. Wassily Leontief taught the second graduate course in economic theory.

I have highlighted in blue boldface additions to the reading assignments in the 1960-61 course when compared to the 1956-57 version of the same course. Items omitted are listed at the end of the post.

Comparing the structure of the mid-year and year-end exams, I would conjecture that one or more of Koopmans’ Three Essays on the State of Economic Science was assigned for the first term’s reading period, though the title does not appear on the printed reading list for the course.

__________________________

Wassily Leontief

HARVARD UNIVERSITY
Ec. 202a
ECONOMIC THEORY
Fall Term 1960-61

The following outline covers the first semester of the two semester course.

I.     Analysis of Production and the Theory of a Firm:

  1. Costs; total, average, marginal.
    Theory of the multiple plant firm.
    Revenue; total, average, marginal.
    Long and short run analysis
    Supply under competitive and monopolistic conditions.
  2. Production function, marginal productivity, increasing and decreasing returns.
    Stocks and flows.
    Joint products.
    Demand for factors of production.
    Discontinuous relationships and non-marginal analysis (Linear Programming).
    Internal and external economies.

Reading assignments:

Oscar Lange, “The Scope and Method of Economics,” Review of Economic Studies, Vol. XIII, (1), 1945-46, pp. 19-32.

H. Simon, “Theories of Decision Making in Economics,” American Economic Review, June 1959.

E. A. G. Robinson, Structure of Competitive Industry, Chs. II, VII, VIII, pp. 14-35, 107-133.

R. C. Heimer, Management for Engineers, Chs. 3-17.

K. E. Boulding, Economic Analysis, (revised edition, 1948) Chapters 20-26, 31, and 32; or (3rded., 1955) Chapters 23-29, 34, and 35.

E. H. Chamberlin, “Proportionality, Divisibility, and Economies of Scale,”Quarterly Journal of Economics, February, 1948, pp. 229-262.

K. E. Boulding, “The Theory of the Firm in the Last Ten Years,” The American Economic Review, Vol. XXXII, No. 4, December 1942, pp. 791-802.

A. Lerner, Economics of Control, Chs. 15, 16, 17, pp. 174-211.

W. W. Cooper, “A Proposal for Extending the Theory of the Firm,” Quarterly Journal of Economics, February 1951, pp. 87-109.

R. Solow, “Technical Change and the Aggregate Production Function,” Review of Economics and Statistics, August 1957.

Robert Dorfman, “Mathematical or ‘Linear’ Programming,” American Economic Review, December 1953, pp. 797-825.

Dorfman, Samuelson and Solow, Linear Programming and Economic Analysis, Ch. 2.

H. M. Wagner, “The Simplex Method for Beginners,” Operations Research, March-April 1958.

R. Dorfman, “Operations Research,” American Economic Review, September 1960, pp. 575-623.

G. Katona, “Business Expectations in the Framework of Psychological Economics,” in M. J. Bowman, ed., Expectations, Uncertainty and Business Behavior.

II.    Theory of the Household:

  1. Theory of utility and indifference lines analysis.
    Individual demand, prices and income.
    Dependent and independent, competing and complementary, superior and inferior goods.
  2. Measurability of utility.
    “Marginal utility of money,” Consumer surplus.
    Interpersonal interdependence in consumers’ behavior.
    Economic theory of index numbers.
    Choices involving risk.

Reading assignments:

J. Hicks, Value and Capital, Part I, Chs. I-III, pp. 1-54.

K. E. Boulding, Economic Analysis, (Revised edition, 1948) Chapters 33, 34; or (3rd ed., 1955), Chapter 36 and 37.

Duesenberry, Income, Saving and the Theory of Consumer Behavior, Chapters I-III, pp. 1-46.

Modigliania and Brumberg, “Utility analysis and the Consumption Function,” in Kurihara, Post Keynesian Economics.

S. S. Stevens, “Measurement, Psychophysics and Utility,” in Churchman and Ratoosh (ed.) Measurement: Definitions and Theories, pp. 18-63.

A. A. Alchian, “The Meaning of Utility Measurement,” American Economic Review, March 1953, pp. 26-50.

D. Ellsberg, “Classic and Current Notions of ‘Measurable Utility’,” Economic Journal, September 1954.

H. Simon, Models of Man, Part IV, pp. 196-206.

III. Theory of Market Relationships:

  1. Pure competition; individual and market supply and demand curves.
    Stability of market equilibrium, statics and dynamics.
    Monopoly and price discrimination.
  2. Monopolistic competition.
    Duopoly, oligopoly, bilateral monopoly, etc.
    “Theory of games.”

Reading assignments:

A. Marshall, Principles of Economics, Book V, Chs. III, V.

E. H. Chamberlin, The Theory of Monopolistic Competition, Chs. II, III, IV, and V.

Joan Robinson, The Economics of Imperfect Competition, Chs. 15 and 16.

Robert Triffin, Monopolistic Competition and the General Equilibrium Theory, Chs. I and II.

William Fellner, Competition Among the Few, Chs. II-V.

W. H. Nicholls, Imperfect Competition within Agricultural Industries, Ch. 18.

F. Modigliani, “New Developments on the Oligopoly Front,” JPE,  June 1958.

Leonid Hurwicz, “The Theory of Economic Behavior,” American Economic Review, December, 1945, pp. 909-925.

D. Ellsberg, “The Theory of the Reluctant Duelist,” American Economic Review, December 1956.

T. C. Schelling, “An Essay on Bargaining,” American Economic Review, June 1956.

IV.  General equilibrium theory:

  1. Basic Concepts of a General Equilibrium Theory.
    Data and variables. Price system and general interdependence. Linear model of a general equilibrium system.
  2. Theory of Rent and Factor Prices

Reading assignments:

O. Lange, The Economic Theory of Socialism, pp. 65-72.

Cassel, The Theory of Social Economy, Vol. I, Ch. IV, pp. 134-155.

R. G. D. Allen, Mathematical Economics, pp. 314-325.

E. H. Phelps Brown, Framework of the Pricing System, in particular chapters dealing with general equilibrium theory.

T. W. Schultz, Agriculture in an Unstable Economy, Ch. I, pp. 60-70; Ch. IV, pp. 128-137.

R. S. Eckaus, “The Factor Proportion Problem in Underdeveloped Areas,” The American Economic Review, September 1955, pp. 539-565.

N. Georgescu-Roegen, “Economic Theory and Agrarian Economics,” Oxford Economic Papers, February 1960, pp. 1-40.

___________________________

Mid-year Examination
1960-1961 (Jan. 1961)

HARVARD UNIVERSITY
1960-1961
ECONOMICS 202

PLEASE WRITE LEGIBLY

Answer one question from each group, four questions in all.

GROUP I

  1. Demonstrate that the assumption that the marginal utility of one of the goods purchased by a consumer is constant is more restrictive than the assumption that its utility is independent of the quantity of any other good.
    How could the knowledge of the constancy of its marginal utility help to assess the effect of an income tax on the demand for the good in question?

GROUP II

  		1.  Amount Needed Per Unit of Activity Factor Supply
    Activity 1 Activity 2 Activity 3

    Factor 1

    		 6 1 2 12
    Factor 2 2 2 1

    10

    Factor 3

    		 1 5 20

    200

    Market Value Per Unit of Output

    		 15 3 8

    A firm with a fixed supply of three factors has three possible activities, each of which produces a different product selling for a different price. The factor requirements, factor supplies and the product prices are given in the table above. Find the level of activities, including disposal activities, which maximize the firm’s revenue.
    Supplemental information which can be used to shorten computation: In the solution of the “dual”, only factor 1 turns out to have a positive imputed price.

  2. A farmer has fixed amounts of two different kinds of land. He can grow two kinds of product, the prices of which are given. The only other input is labor. Its total available amount is also fixed. The amount of land and of labor required per bushel of each one of the two crops on each type of land is known.
    Set up the linear programming problem which the farmer would have to solve to maximize the value of his output.

GROUP III

4. (a) Discuss the differences and similarities of the following types of analysis:

      1. The derivation of a household’s demand curve for a commodity.
      2. The derivation of a firm’s demand curve for a factor of production.

4. (b) Demonstrate that,

        1. A household can have a positively sloping demand curve for the commodities it buys.
        2. A firm cannot have a positively sloping demand curve for any of the factors of production it buys, if it sells its product in a perfectly competitive market.
  1. A self-sufficient farmer lives on produce that he grows himself under conditions of decreasing average returns. The length of his working time can be explained in terms of a utility maximizing choice between agricultural produce and leisure.
    Among the (real) wage rates which could induce him to quit farming and become a hired worker, one necessarily must be lower than any other. If this minimum wage rate were actually offered to him, and he became a hired worker would the length of his working time a) remain the same b) become shorter or c) become longer than it was when he gained his livelihood as a self-sufficient farmer?

GROUP IV

  1. What is the principal contribution of the theoretical approach described in Koopman’s State of Economic Science?
    Write a critical essay on methodology, rather than substance, except where a discussion of the latter is necessary to a discussion of the former.

Source: Harvard University Archives. Social Sciences. Final Examinations, January 1961. (HUC 7000.28), Vol. 131 of 284.

___________________________

Wassily Leontief

ECONOMICS 202b
ECONOMIC THEORY
Spring Term, 1960-61

V.  Economics of Welfare

  1. Individual maximum and social welfare.
  2. Efficiency and distributive justice.
  3. Efficiency of the purely competitive system.
    Monopoly and economic welfare.
    External economies.
  4. Pricing and allocation for public enterprise.

READING ASSIGNMENTS:

J. Hicks, “The Foundation of Welfare Economics,” Economic Journal, December 1939, pp. 696-712.

Meade and Hitch, An Introduction to Economic Analysis and Policy, Part II, Chs. VI-VII, pp. 159-220.

Francis Bator, “The Anatomy of Market Failure,” Quarterly Journal of Economics, Vol. LXXII, August, 1958, pp. 351-379.

T. Scitovsky, “The State of Welfare Economics,” The American Economic Review, Vol. XLI, June 1951, pp. 303-315.

J. De Graaf, Theoretical Welfare Economics.

Mishan, E. J., “A Survey of Welfare Economics, 1939-1959,” The Economic Journal, Vol. LXX, No. 278, June, 1960, pp. 197-265.

VI. Capital and Interest

  1. Stock and Flow Concepts.
    Productivity of Capital.
    Period of production and “turnover” of capital.
  2. Theory of saving.
    Risk and uncertainty.
  3. Partial equilibrium theory of interest.

READING ASSIGNMENTS:

Robert Eisner, “Interview and Other Survey Techniques and the Study of Investment,” in Problems of Capital Formation, Studies in Income and Wealth, Vol. 19, National Bureau of Economic Research 1957, pp. 513-583. 

Irving Fisher, The Theory of Interest, Chs. VII, VIII, IX, X, XI, XVI, XVII, and XVIII. 1930.

Hirschleifer, “On the Theory of Optimal Investment Decision,” Journal of Political Economy, August, 1958.

Readings in the Theory of Income Distribution (Blakiston, 1946)

F. Knight, “Capital and Interest,” pp. 384-417.
Keynes, “The Theory of the Rate of Interest,” pp. 418-424.
D. H. Robertson, “Mr. Keynes and the Rate of Interest,” pp. 425-460.

Friedrich & Vera Lutz, The Theory of Investment of the Firm, 1951.

Joel Dean, Capital Budgeting, 1951, Chs. VI, VII.

Eckstein, “Investment Criteria for Economic development and Intertemporal Welfare Economics,” Quarterly Journal of Economics, Feb., 1957.

VII: Principles of Dynamics

  1. Change over time.
    Period analysis.
    Continuous change
  2. Dynamic stability and instability.

READING ASSIGNMENTS:

W. Baumol, Economic Dynamics, Chs. I-VII, pp. 1-136.

P. Samuelson, “Dynamics, Statics and Stationary State,” The Review of Economics and Statistics, February 1943, pp. 58-68 (also reprinted in Readings in Economic Analysis, Vol. 1, edited by N. V. Clemens).

K. J. Arrow, “Toward a Theory of Price Adjustment,” in The Allocation of Economic Resources, pp. 41-51, Stanford, California, 1959.

Erik Lindahl, Introduction to the Study of Dynamic Theory, pp. 21-73 in Studies in the Theory of Money and Capital.

Dorfman, Samuelson, Solow, Linear Programming and Economic Analysis, pp. 265-281.

VIII: Economic Development and Accumulation of Capital

  1. Dynamic interrelation of income, investment and the rate of interest.
  2. Linear theory of economic development.
    Non-linear theory of economic development.

READING ASSIGNMENTS:

Bresciani-Turoni, “The Theory of Saving,” Economica; Part I, Feb. 1936, pp. 1-23; Part II, May 1936, pp. 162-181.

Schelling, “Capital Growth and Equilibrium,” American Economic Review, Dec. 1947, pp. 864-876.

Harrod, “An Essay in Dynamic Theory,” Economic Journal, March 1939, pp. 14-33.

Stern, “Capital Requirements in Progressive Economies,” Economica, August 1945, pp. 163-171.

Robert M. Solow, “A Contribution to the Theory of Economic Growth,” Quarterly Journal of Economics, Vol. LXX, February, 1956, pp. 65-94.

Arthur Smithies, “Productivity, Real Wages and Economic Growth,” Quarterly Journal of Economics, May, 1960, pp. 189-205.

Also, Baumol, see above under VII.

IX: Keynesian Theory and Problems

  1. Over-all outlines of the General Theory.
    Wage and price “stickiness.”
    Demand for money.
  2. Saving and “oversaving.”
    Multiplier principle.

READING ASSIGNMENTS:

A. P. Lerner, The Economics of Control, Chs. 21, 22, and 25.

A. P. Lerner, “The Essential Properties of Interest and Money,” Quarterly Journal of Economics, May 1952, pp. 172-93.

J. M. Keynes, General Theory of Employment, Interest and Money, Chs. 1, 2, 8, and 18.

G. Haberler, Prosperity and Depression, Ch. 8.

Modigliani, “Liquidity Preference and the Theory of Interest and Money,” Readings in Monetary Theory.

Hicks, “A Rehabilitation of ‘Classical’ Economics?” Economic Journal, June, 1957.

Reading Period Assignment (spring):

Trygve Haavelmo, A Study in the Theory of Investment, Chicago, 1960.

OR

F. and V. Lutz, The Theory of Investment of the Firm, Princeton, 1951.

Source:  Harvard University Archives, Syllabi, course outlines and reading lists in Economics, 1895-2003. Box 8, Folder “Economics, 1960-1961 (2 of 2).

___________________________

Year-end Examination
1960-1961 (June 1961)

HARVARD UNIVERSITY
1960-1961
ECONOMICS 202

PLEASE WRITE LEGIBLY

Answer one question from each of the four groups, four questions all together.

GROUP I

  1. Consider a two commodity, two consumer group economy run along socialist principles. The government fixes the quantities of A and B produced in any one year, fixes ruble incomes going to consumer groups I and II and also fixes ruble prices so that the total income distributed can exactly buy the amounts produced.
    Assume that the collective behavior of a consumer group can be described as one of reaching the highest of a set of group indifference curves under collective income and market constraints.
    (a) Using the box diagram technique, show what additional
    conditions prices must satisfy if the market is to be cleared.
    (b) assume that equilibrium is not established at official prices and that the State decides to ration the available amount of the short commodity between the two groups.The rationing is done in such a way that both groups get less than they wish to buy at official prices.  Show how one can explain the resulting equilibrium.
    (c) Starting from this equilibrium, will the two groups necessarily find some advantage in exchanging commodities on the black market? Will the black market equilibrium be better or worse (in terms of conventional welfare criteria) than that obtained when prices fixed by the government are chosen so as to clear the market?
  2. It has been established that the annual cost of distributing electricity in an Indian city would be 100,000 rupees in capital charges plus one rupee per kilowatt consumed. The following proposal is put to a vote in a city referendum: “To build the system, charge a price of one rupee per kilowatt and tax the public 100,000 rupees to cover capital charges. The proposal is unanimously rejected. The city fathers then undertake a market survey and find that the tax could be reduced to 50,000 rupees, the price increased to 1.5 rupee and all costs still be exactly covered. They adopt this second proposal without further consultation.
    Assuming a homogeneous population and equal taxation, can you derive from the above information a preferential ordering of the following alternatives in terms of social welfare:

(a) Charging 1 rupee and raising 100,000 in taxes.
(b) Charging 1.5 rupee and raising 50,000 in taxes.
(c) Not building the system at all.

GROUP II

  1. A profit maximizing enterprise possesses a fixed plant and uses as its variable inputs a raw material (fixed amount per unit of output) and labor. Its finished product is sold and the raw material is purchased on perfectly competitive markets. On the labor market, however, the enterprise is the only employer; the workers are not organized and thus compete with each other.
    What factual information would you require and what theoretical construction would you use to explain the level of that enterprise’s output if,

(a) labor is hired on the basis of straight hourly wages.
(b) labor is hired at a flat hourly wage for the first eight, and a 50% higher overtime hourly rate for two additional hours, the workers being free to choose whether they want to work eight or ten daily hours.
(c) labor is paid flat piecework rates.

To simplify the problem, you are permitted to assume that the preference functions (real income vs. leisure) of all workers are identical.

  1. The growth of a certain kind of tree requires λ man-hours for planting and entails no other costs. The volume of wood represented by a tree increases at a constant growth rate:
    V = EXP(rt). Two alternative assumptions are made with respect to the tree market:

(A) Trees are sold by volume at a price p per volumetric unit.
(B) Trees are sold by volume at a price p’ now depending on the length of the tree. Observing that length is related to age, traders use the formula
p’= α SQRT(t), where α is a constant and t the age of the tree.

(a) Given the amount L of man-hours available per year, describe a “full employment” production process that guarantees constant profits, year after year.
(b) Under each market assumption, discuss the empirical possibility and operational usefulness of measuring the capital stock and its marginal productivity.
(c) Money can be lent and borrowed without limits at an interest rate i, which is larger than r. At what age should the trees be cut under assumption (B) if the grower wishes to establish a stationary production process that maximizes his utility over time?

GROUP III

  1. A conventional partial equilibrium theory explains the prices and the quantities — produced and consumed — of all goods on the assumption that a supply and a demand curve is given for each market.
    In what sense can it be said that, from the point of view of a general equilibrium theory, at least some of such given demand and supply curves must be either incompatible with each other or redundant? In answering this question, please use equations, graphs, or both.

GROUP IV

  1. To what extent does Haavelmo or the Lutz’s — whomever you have chosen to read — rely on purely technological specifications and considerations in describing and analyzing the role of capital in the operations of an individual enterprise and of the economy as a whole? And to what extent do they use definitions and measurements which “engineers” would not employ in their professional work?
    Illustrate your answer by specific examples.

Source: Harvard University Archives. Social Sciences, Final Examinations, June 1961 (HUC 7000.28, Vol. 134 of 284).

___________________________

Reading assignments in the 1956-57 reading list that were dropped from the 1960-61 reading list:

I.     Analysis of Production and the Theory of a Firm:

E. H. MacNiece, Production, Forecasting, Planning and Control, 292 pp.

R. Frisch, “Alfred Marshall’s Theory of Value,” Quarterly Journal of Economics, Vol. LXIV, No. 4, November 1950, pp. 495-524.

National Bureau of Economic Research, Cost Behavior and Price Policy, Ch. VII, pp. 142-169; Appendix C, pp. 321-329.

A. G. Hart, Anticipations, Uncertainty and Dynamic Planning, reprinted 1951, 98 pp.

II.     Theory of the Household:

J. R. Hicks, A Revision of Demand Theory, Parts I and II, also the summary and conclusion.

G. Katona, Psychological Analysis of Economic Behavior, Part II, #1-7, pp. 63-149.

III. Theory of Market Relationships:

No titles dropped.

IV. General Equilibrium Theory:

No titles dropped.

V.  Economics of Welfare

Coase, “Note on Price and Output Policy,” Economic Journal, Vol. LV, April 1945, pp. 112-113.

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

VI. Capital and Interest

Edward F. Denison, “Theoretical Aspects of Quality Change, Capital Consumption, and Net Capital Formation,” in Problems of Capital Formation, Studies in Income and Wealth, Vol. 19, National Bureau of Economic Research 1957, pp. 215-260.

John Rae, John, New Principles of Political Economy, 1834, Chs. I-V.

Irving Fisher, Nature of Capital and Income, Chs. I, IV, V, XIV, XVII, Macmillan, 1906.

VII: Principles of Dynamics

K. E. Boulding, A Reconstruction of Economics, Ch. I, pp. 3-26.

VIII: Economic Development and Accumulation of Capital

Pigou, Economic Progress in a Stable Economy,” Economica, August 1947, pp. 180-188.

A. Sweezy, “Secular Stagnation?” in Harris, Postwar Economic Problems, McGraw-Hill, New York, 1943, pp. 67-82.

Hansen, “Economic Progress and Declining Population Growth,” American Economic Review, March 1939, pp. 1-15.

IX: Keynesian Theory and Problems

No titles dropped.

cf. The earlier post for Economics 202 in 1956-57.

___________________________

Image Source:  Wassily Leontief in Radcliffe Yearbook 1964, p. 98. Colorized by Economics in the Rear-view Mirror.

Categories
Funny Business Theory

Funny business. Emily Dickinson explains the 2nd theorem of welfare economics. 2023

Roll over Emily!

I just asked ChatGPT

« Explain the second theorem of welfare economics in the style of an Emily Dickinson death poem. »

[Spoiler alert: her death poems can be sung to the tune of The Yellow Rose of Texas]

The response:

The Second Theorem lies in wait,
Its logic cold and clear,
It whispers to the market’s fate,
And marks the end so near.

With mathematics sharp as a knife,
It cuts through trade and choice,
Revealing truths about our life,
In market’s still, small voice.

It states that perfect competition,
Is what leads to best result,
For welfare of each citizen,
And market’s every pulse.

Yet still the Theorem’s voice is kind,
For it is but a guide,
To lead us to a better mind,
And market where all thrive.

So heed the Second Theorem’s call,
And let its wisdom lead,
For perfect competition’s all,
That our market needs.

Image Source: Wikipedia.de. Daguerreotype of Emily Dickinson, c. early 1847. It is presently located in Amherst College Archives & Special Collections. Colorized by Economics in the Rear-view Mirror.

 

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Exam Questions Harvard Suggested Reading Syllabus Theory

Harvard. Economic Theory. Enrollment, Readings, Exams. Carver, 1901-1902.

 

Professor Frank W. Taussig began what was to turn into a two year leave of absence starting with the academic year 1901-02. The previous year, assistant professor Thomas Nixon Carver apparently took over Taussig’s “advanced” theory course sometime late in the academic year and continued to teach it in the latter’s absence.

This post continues our series of Harvard’s economic courses for 1901-02, providing a linked reading list for Carver’s economic theory course along with the semester exams for the year-long course.

Carver’s 1949 autobiography is available at the hathitrust.org web archive. He writes there (p. 132):

At the end of the year, 1900-1901, Professor Taussig’s health failed, probably as the result of some very hard and discouraging work he had done on the State Tax Commission. He therefore took a year’s leave of absence which was lengthened to two years. This necessitated a change in my program.

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Course Announcement

For Undergraduates and Graduates
  1. Economic Theory. Mon., Wed., Fri., at 2.30. Asst. Professor [Thomas Nixon] 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 important 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 Archives. Annual Announcement of the Faculty of Arts and Sciences, Division of History and Political Science comprising the Departments of History and Government and Economics (June 21, 1901).  Official Register of Harvard University 1901-1902. Box 1. Bound volume: Univ. Pub. N.S. 16. History, etc. pp. 36-37.

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Course Enrollment

For Undergraduates and Graduates:—

[Economics] 2. Asst. Professor Carver. — Economic Theory.

Total 32: 5 Graduates, 6 Seniors, 17 Juniors, 2 Sophomores, 2 Others.

Source: Harvard University. Report of the President of Harvard College, 1901-1902, p. 77.

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Course Readings

ECONOMICS 2.
1901-1902

General Reading. Prescribed.

Marshall. Principles of Economics.
Taussig. Wages and Capital.
Böhm-Bawerk. Positive Theory of Capital.
Clark. The Distribution of Wealth.

References for Collateral Reading. Starred references are prescribed.

I. VALUE.

  1. Adam Smith. Wealth of Nations. Book I. Chs. 5, 6, and 7.
  2. Ricardo. Pol. Econ. Chs. 1 and 4.
  3. Mill.    “        “     Book III. Chs. 1-6.
  4. Cairnes.     “        “     Part I.
  5. *Jevons. Theory of Pol. Econ. Chs. 2-4.
  6. Sidgwick. Pol. Econ. Book II. Ch. 2.
  7. Wieser. Natural Value.
  8. *Clark. Philosophy of Wealth. Ch. 5

II. DIMINISHING RETURNS.

  1. Senior. Pol. Econ. Pp. 81-86.
  2. *Commons. The Distribution of Wealth. Ch. 3. 

III. RENT.

  1. Adam Smith. Wealth of Nation. Book I. Ch. 2. Pts. 1-3.
  2. *Ricardo. Pol. Econ. Chs. 2 and 3.
  3. Sidgwick. “   “       Book II. Ch. 7.
  4. Walker. “     “       Pt. IV. Ch. 2.
  5. Walker. Land and its Rent.
  6. Hyde. The Concept of Price Determining Rent. Jour. Pol. Econ. V.6. p. 368.
  7. Fetter. The Passing of the Old Rent Concept. Q.J.E. Vol. XV. P. 416.

IV. CAPITAL

  1. Adam Smith. Wealth of Nations. Book II.
  2. Senior. Pol. Econ. P. 58-81.
  3. Mill.      “       “       Book I. Ch. 4-6.
  4. Roscher. “      “       Book I. Ch. 1. Secs. 42-45.
  5. Cannan. Production and Distribution. Ch. 4.
  6. Jevons. Theory of Political Economy Ch. 7.
  7. Fisher. What is Capital? Economic Journal. Vol. VI. P. 509.
  8. Fetter. Recent Discussion of the Capital Concept. Q.J.E. Vol. XV. P. 1.
  9. *Carver. Clark’s Distribution of Wealth. Q.J.E., Aug. 1901. 

V. INTEREST.

  1. Adam Smith. Wealth of Nations. Book I. Ch. 9.
  2. Ricardo. Pol. Econ. Ch. 6.
  3. Sidgwick. “     “        Book II. Ch. 6.
  4. *Carver. Abstinence and the Theory of Interest. Q.J.E, Vol. VIII. P. 40.
  5. Mixter. Theory of Saver’s Rent. Q.J.E. Vol. XIII. P. 345.

VI. WAGES.

  1. Adam Smith. Wealth of Nations. Book I. Ch. 8.
  2. *Ricardo. Pol. Econ. Ch. 5.
  3. Senior.   “       “      Pp. 141-180 and 200-216.
  4. Senior. Lectures. Pp. 1-62.
  5. Mill. Pol. Econ. Book II. Chs. 11, 12, 13, and 14.
  6. Cairnes. Pol. Econ. Part II. Chs. 1 and 2.
  7. Sidgwick. “       “      Book II. Ch. 8.
  8. Walker. “       “      Part IV. Ch. 5.
  9. Hadley. Economics. Ch. 10.
  10. *Carver. Wages and the Theory of Value. Q.J.E. Vol. VIII, P. 377.

VII. PROFITS.

  1. Walker. Pol. Econ. Part IV. Ch. 4.
  2. Hobson. The Law of the Three Rents. Quar. Jour. Econ. Vol. V. P. 263.
  3. Clark. Insurance and Business Profits. Quar. Jour. Econ. Vol. VII. P. 40.
  4. *Hawley, F. B. in Quar. Jour. Econ. Vol. VII. P. 459; Vol. XV. Pp. 75 and 603.
  5. MacVane, in in Quar. Jour. Econ.,  Vol. II. P. 1.
  6. Haynes, in               “     “       “     Vol. IX, P. 409.

Source: Harvard University Archives. HUC 8522.2.1, Box 1 of 10 (Syllabi, course outlines and reading lists in Economics, 1895-2003). Folder: 1901-1902.

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Mid-year examination, 1902
ECONOMICS 2

Discuss the following topics.

  1. The relation of utility to value.
  2. The price of commodities and the price of services.
  3. Various uses of the term “diminishing returns.”
  4. The law of diminishing returns as applied to each of the factors of production.
  5. Prime and supplementary cost: illustrate.
  6. Joint and composite demand and join and composite supply.
  7. Quasi rent.
  8. Real and nominal rent.
  9. Consumer’s rent.
  10. The equilibrium of demand and supply

Source: Harvard University Archives. Harvard University Mid-year Examinations, 1852-1943. Box 6, Bound volume: Examination Papers, Mid-Years, 1901-02.

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Final examination, June 1902
ECONOMICS 2

  1. State some of the different meanings which have been given to the law of diminishing returns, and define the law as you think it ought to be.
  2. Can you apply the law of joint demand to the wages fund questions?
  3. What is meant by an elastic demand and how does it affect monopoly price.
  4. Discuss Clark’s distinction between capital and capital goods.
  5. Under what conditions would there be no rent, and how would these conditions affect the value of products?
  6. Explain Clark’s theory of Economic Causation.
  7. What is the source of interest?
  8. What is the relation of the standard of living to wages?

Source: Harvard University Archives. Harvard University, Examination Papers, 1873-1915. Box 6, Bound volume: Examination Papers, 1902-03. Papers Set for Final Examinations in History, Government, Economics, Philosophy, Education, Fine Arts, Architecture, Landscape Architecture, Music in Harvard College (June, 1902), p. 21.

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Collection of Carver’s economic theory readings and exams,
1900/01 through 1902/03

Harvard. Core economic theory. Readings and Exams. Carver, 1900/01-1902/03