Chicago. Milton Friedman nixes “Microeconomics” and “Macroeconomics”, 1965

 

From an August 9, 1965 memorandum to the faculty of the Chicago economics department we can see that there was actually a faculty meeting in which adoption of  new course titles, “Micro-Economic Theory” and “Macro-Economic Theory”, had been decided. However, Milton Friedman (presumably not at that meeting) protested this concession to the mainstream and ever since Chicago has faithfully remained home of “Price Theory” and “Income Theory” as seen below in the course titles from 2000-2001 and 2010-2011 (along with course descriptions). Incidentally the two sequences have grown a third quarter since the mid-sixties.

I don’t have a copy of the June 12, 1965 protest letter from Friedman to Lewis, but am reasonably confident that someone will eventually find a copy (most likely a carbon copy of the letter in Milton Friedman’s correspondence with Lewis).

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H. Gregg Lewis to Milton Friedman

THE UNIVERSITY OF CHICAGO
Chicago 37, Illinois
Department of Economics

June 18, 1965

Professor Milton Friedman
Orford,
New Hampshire

Dear Milton:

Thanks for your letter of June 12 regarding the labeling of 301, 302, 331, and 332.

I want to have the decision with respect to the labels reconsidered this summer. Until the decision is reconsidered, I am making no changes in the titles of the courses.

Meanwhile, I would appreciate it if you would suggest alternative titles for the courses that are acceptable to you.

With best wishes to you and Rose.

Sincerely,
[signed] Gregg
H. G. Lewis

HGL/agm

[Friedman’s handwritten notes at bottom of letter:]

301, 302 Price Theory[;] Relative Price Theory

331, 332 Money and Employment Theory[;] Money, Income, Employment[;] Theory of the Price Level and Aggregate Output, Money

Source: Hoover Institution Archives. Papers of Milton Friedman. Box 79, Folder 3 “University of Chicago Minutes. Economics Department, 1965-1966”.

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Memo from H. Gregg Lewis to the economics department

August 9, 1965

To: Members of the Department of Economics

From: H. Gregg Lewis

At the last meeting of the Department (June 4, 1965), the Department decided to change the name of Economics 301 and 302 to Micro-Economic Theory and Economics 331 and 332 to Macro-Economic theory. The purpose of this note is to request that the Department reconsider this action and adopt a different pair of names for these two sets of courses (and the corresponding parts of the Ph.D. Core Examination).

The term micro-economics commonly is used to denote the economics of the individual household and the individual firm. It is, therefore, a misleading title for 301 and 302. Furthermore, it is surely misleading to represent 331 and 332 as not involving consideration of the economics of individual households and firms.

For 301 and 302, I recommend that we keep the present title (Price Theory) or change it slightly to Relative Price Theory. For 331 and 332, I recommend that one of the following be adopted:

The Theory of Income, Employment, and Money
or         The Theory of Employment, Interest, and Money
or         The Theory of Income, Employment, Interest, and Money

Source: Hoover Institution Archives. Papers of Milton Friedman. Box 79, Folder 3 “University of Chicago Minutes. Economics Department, 1965-1966”.

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Course descriptions from the 2000-2001 Brochure

301 PRICE THEORY I (Becker/ Murphy)

Theory of consumer choice, including household production, indirect utility, and hedonic indices. Supply under competitive and monopolistic conditions. Static and dynamic cost curves, including learning by doing and temporary changes. Uncertainty applied to consumer and producer choices. Property rights and the effects of laws. Investment in human and physical capital. (=Law 436)

[Reading List from one year later: Autumn Quarter 2001]

302 PRICE THEORY II (Reny/ Chiappori)

Economics of uncertainty. Models with asymmetric information. Game theory. PQ: Econ 301 or consent of instructor.

303 PRICE THEORY III (Chiappori/ Rosen)

The theory of production, division of labor and organization of work. The economics of the firm and the theory of supply. Cost functions, product differentiation and spatial equilibrium. Investment theory, firm size, and incentive problems. Externalities and the role of markets and prices. PQ: Econ 301 and 302 or consent of instructor.

330 THE THEORY OF INCOME I (Townsend/ Alvarez)

This course begins the study of income and macroeconomics by embedding firms, households, and financial institutions into the standard general equilibrium model. The course thus studies Pareto optima, Walrasian equilibrium, and the core in economies with separation in space, uncertainty, and/or multiple time periods and incorporates private information, incomplete markets, and other impediments to trade. Various phenomena and applications are stressed: private monies and the potential role of the monetary authority; the evaluation of local, regional, and national level financial systems in their ability to reallocate risk; the determinants of economics growth; growth with increasing inequality and financial deepening; occupation choice under wealth constraints and its impact on growth and inequality; the existence of networks such as industrial conglomerates in economies with moral hazard; optimal fiscal policy; and the role of social security. Examples are drawn from Asia, Latin America, Europe, and Africa and well as the U.S.

331 THE THEORY OF INCOME II (Lucas)

This course will deal with modern capital and monetary theory, and with applications of the theory to issues in fiscal, monetary, and banking policy.

332 THE THEORY OF INCOME III (Mulligan)

The course shares with the other two Theory of Income courses the objectives of (1) explaining human behavior as evidenced by aggregate variables and (2) predicting the aggregate effects of certain government policies. The focus of Economics 332 is to assess the empirical success of prevailing theories. Some hypotheses to be considered are consumption smoothing, intertemporal substitution, the q-theory, the neoclassical approach to fiscal policy, and the intergenerational transfer view of Social Security. The course confronts several empirical issues that are also encountered outside the field of macroeconomics such as the construction of aggregate data, choice of data set, and the measurement of expectations.

 

Source:  University of Chicago, Department of Economics Graduate Program. Brochure 2000-2001. Webpage: Courses.

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Course descriptions from the 2010–11 Brochure

30100     PRICE THEORY I  (Murphy / Becker)

Theory of consumer choice, including household production, indirect utility, and hedonic indices. Models of the firm.  Analysis of factor demand and product supply under competitive and monopolistic conditions.  Static and dynamic cost curves, including learning by doing and temporary changes.  Uncertainty applied to consumer and producer choices.  Property rights and the effects of laws.  Investment in human and physical capital.  (=LAWS 43611)

30200     PRICE THEORY II  (Becker / Murphy / Sonnenschein)

The first five weeks of this course are a continuation of ECON 30100, Price Theory I.

The second half of the course will be devoted to the Walrasian model of general competitive equilibrium as developed by Arrow and Debreu.  This will begin with a brief development of the consumer and producer theories, followed by the welfare theorems connecting equilibria and optima and a treatment of the classical existence of equilibrium theorem.  The core of an economy, a limit theorem relating the core to the set of competitive equilibria, and models in which agents are small relative to the market will also be considered.  Finally we will study general equilibrium under some alternative assumptions; such as, informational asymmetries and rational expectations equilibrium, public goods and Lindahl equilibrium, financial general equilibrium and asset pricing.  (=LAWS 43621)

30300    PRICE THEORY III  (Reny / Myerson)

The course begins with expected utility theory, and then introduces the fundamental ideas of game theory: strategic-form games, Nash equilibrium, games with incomplete information, extensive-form games, and sequential equilibrium.   Then the course will focus on the effects of informational asymmetries in markets and the problems of moral hazard and adverse selection. Topics include: optimal risk sharing, signaling and screening in competitive markets, principal-agent problems, strategic and informational incentive constraints, incentive efficiency, and mechanism design for auctions and bilateral trading.

33000     THE THEORY OF INCOME I  (Alvarez)

This course formulates and analyzes aggregate general equilibrium models to study classical questions in macroeconomics. The course starts with the formulation and analysis of competitive equilibrium in the general equilibrium models, including the 1st and 2nd welfare theorem. The first applications of this model are: social security (using an OLEG model), optimal risk sharing, and asset pricing (using a one period model with uncertainty). Most of the remaining applications focus on dynamic models without uncertainty. To do so we study tools to characterize optimal solutions of control problems: Hamiltonian, calculus of variations and dynamic programming. The main application of these tools is the neoclassical growth model in many variations: determinants of steady state and balanced growth path, endogenous growth, effect of variable labor supply, TFP changes and of investment specific technical progress, habit formation, the q-model of investment, taxation of capital and labor, optimal taxation a la Ramsey, among others.

33100     THE THEORY OF INCOME II  (Stokey)

This course will focus on the use of recursive general equilibrium models to study various macroeconomic questions.  On the substantive side, particular topics include models with idiosyncratic (insurable) and aggregate (uninsurable) risk; issues in dynamic fiscal policy (Ricardian equivalence, tax smoothing, capital taxation); models of asset pricing; issues in monetary policy (money demand, the welfare cost of inflation); time consistency; and aggregate models with price setting. On the methodological side, the course will focus on dynamic programming and other recursive modeling techniques.

33200     THE THEORY OF INCOME III  (Mulligan)

The course shares with the other two Theory of Income courses the objectives of (1) explaining human behavior as evidenced by aggregate variables and (2) predicting the aggregate effects of certain government policies.  Economics 33200 considers some of the prevailing business cycle theories, and their application to the recession of 2008-9.  Some hypotheses to be considered are the q-theory of housing investment, the neoclassical approach to fiscal policy, and whether government spending has a “multiplier.”  The course confronts several empirical issues that are also encountered outside the field of macroeconomics such as the construction of aggregate data, choice of data set, and the measurement of expectations.

Source: University of Chicago, Department of Economics Graduate Program 2010-11, Introduction. Webpage: Graduate Course Descriptions, 2010-11.

Image: Irwin Collier (right) taking a break during an earlier archival expedition to the Hoover Institution Archives…Milton Friedman (left).