Examination questions spanning just over a half-century can be found in Frank Taussig’s personal scrapbook of cut-and-pasted semester examinations for his entire Harvard career. Until Schumpeter took over the core economic theory course from Taussig in 1935, Taussig’s course covering economic theory and its history was a part of almost every properly educated Harvard economist’s basic training. Taussig’s exam questions have been previously posted for the academic years 1886/87 through 1889/90 along with enrollment data for the course; material for this course (including semesters when taught with/by other instructors) from 1890/91 through 1893/94; 1897-1900 ; 1904-1909 ; 1911-14 ; 1915-1917; 1918-1919 have been posted as well.
This post provides the examination questions and enrollments for the academic years 1919/20 through 1921/22. There are two points worthy of note regarding the 1921-22 academic year. The first is that a complete set of student notes have been edited and published by Marianne Johnson and Warren J. Samuels and a link to the relevant webpage at Research in the History of Economic Thought and Methodology is provided below. The second point is that further archival material confirms that the course was indeed taught by Frank W. Taussig and Allyn A. Young in 1921/22.
________________________________
Student notes for Economics 11 from 1921-22 have been transcribed and published
“According to the Official Register of Harvard University, Vol. XVII, December 20, 1921, No. 51, Frank William Taussig was the only instructor of record for Economic Theory (EC 11). The initial notes seem to confirm that what is reproduced here is solely Taussig’s teaching, with frequent mention of his views recorded (e.g., “Taussig says”). However, in the ‘Supplementary Notes,’ attributed to both Taussig and Allyn A. Young, frequent mention is made of Young’s views. Whether these notes are from lecture, recitation, or are Hexter’s personal notes is unknown.”
Source: Marianne Johnson and Warren J. Samuels (eds.) Maurice Beck Hexter’s Notes from Harvard University, 1921-22. Economic Theory by Taussig, Young, and Carver at Harvard. Research in the History of Economic Thought and Methodology, Vol. 28-C, Part II. 2010.
Additional Information from the Archives.
In the third edition of Announcement of the Courses of Instruction Offfered by the Faculty of Arts and Sciences for the Academic Year, 1921-22 (p. 110), both Professors Taussig and Young were announced as the instructors for Economics 11.
Taussig’s scrapbook of his examination questions (the source for the other examinations except for the second semester of 1921/22) does not include the year-end final examination for Economics 11 that semester. The June 1922 examination questions are however available in the Harvard University Archive’s collection of final examination papers and match the content of Baxter’s Supplementary Notes for Young so it appears a reasonable presumption that Taussig was responsible for the first semester exam and Young was responsible for the second semester exam in 1921/22.
________________________________
Course Enrollment
1919-20
[Economics] 11. Professor Taussig.—Economic Theory
Total 47: 36 Graduates, 2 Graduate Business, 3 Seniors, 5 Radcliffe, 1 Other
Source: Harvard University. Reports of the President and Treasurer of Harvard College, 1919-20, p. 90.
1919-20
HARVARD UNIVERSITY
ECONOMICS 11
Mid-year. 1920.
Arrange your answers in the order of the questions.
- “On the ranches of Montana cattle are breeding, among the forests of Pennsylvania hides are tanning, in the mills of Brockton shoes are finishing; and, if the series of goods in all stages of advancement is only kept intact, the cowboy may have today the shoes that he virtually creates by his effort. . . With sheep in the pastures, wool in the mills, cloth in the tailoring shops, and ready-made garments on the retailers’ counters, the labor of the people can, as it were, instantaneously cloth the people.”
Do you agree? Whom do you believe to be the writer of the passage? - What element in distribution was regarded as “residual” by F. A. Walker? By Ricardo? By Mill?
- Can Mill’s conclusions regarding the effects of free trade in corn on wages and laborers’ welfare, be reconciled with Ricardo’s teachings?
- State the objections which have been made to the doctrine of consumer’s surplus on the score of
(a) inequalities in income;
(b) articles catering to the love of distinction;
(c) the latent assumption that, while the price of the given article changes, other articles remain the same in price.
Can these objections be met in such way as to leave the doctrine still significant?
- Explain in what sense the term “increase of demand” is used when it is said that an increase of demand may cause increasing returns (diminishing cost); and in what sense when it is said that an increase of demand is a result of diminishing cost.
- “We might as reasonably dispute whether it is the upper or the under blade of a pair of scissors that cuts a piece of paper, as whether value is governed by utility or cost of production.”
Explain, illustrate, qualify. - Under what conditions, if under any, is the demand curve positively inclined?
Under what conditions, if under any, is the supply curve negatively inclined? - A factory building yields a net rental, over all expenses and taxes, of $10,000 a year. The land on which it stands, if let as a site not built on, would yield $5,000 a year. The cost of the building was $100,000; the rate of interest is 5%.
What is the nature of the return (rental), according to Marshall? In your own opinion?
Suppose the net rental to decline to $6,000 a year; would your answers be the same?
1919-20
HARVARD UNIVERSITY
ECONOMICS 11
Final. 1920.
- Explain briefly:
Joint Demand,
Derived Supply Price,
Law of Substitution.
- “The United States already possesses a much larger population than Great Britain, a population moreover, as a whole, on a somewhat higher level of comfort, and therefore furnishing a more intense ‘effectual demand.’ Even supposing the same amount of concentration of capital, relatively, to be brought about in Great Britain as in America, the average size of concerns would be less than in the United States, because the market to be divided is smaller. As a result the cost of production in America per unit would necessarily be less.” Do you agree?
- “When the artisan or professional man has once obtained the skill required for his work, a part of his earnings are for the future really a quasi-rent of the capital and labor invested in fitting him for his work, in obtaining his start in life, his business connections, and generally his opportunity for turning his faculties to good account; and only the remainder of his income is true earnings of effort. But this remainder is generally a large part of the whole. And here lies the contrast. For when a similar analysis is made of the profits of the business man, the proportions are found to be different: in his case the greater part is quasi-rent.”
Is this distinction tenable? And is quasi-rent not to be regarded as true earnings of effort? - “At the present day, in those parts of England where custom and sentiment count for least, and free competition and enterprise for most in the bargaining for the use of land, it is commonly understood that the landlord supplies, and in some measure maintains, those improvements which are slowly made and slowly worn out. That being done, he requires of his tenant the whole producer’s surplus which the land thus equipped is estimated to afford in a year of normal harvests and normal prices. . . . In other words, that part of the income derived from the land which the landlord obtains, is governed, for all periods of moderate length, mainly by the market for the produce, with but little reference to the cost of providing the various agents employed in raising it; and it therefore is of the nature of a rent. . . The more fully therefore the distinctively English features of land tenure are developed, the more nearly is it true that the line of division between the tenant’s and the landlord’s share coincides with the deepest and most important line of cleavage in economic theory.”
What is the line of cleavage here described by Marshall? And do you consider it the deepest and most important? - “The last three chapters examined the relation in which cost of production stands to the income derived from the ownership of the ‘original powers’ of land and other free gifts of nature, and also to that which is directly due to the investment of private capital. There is a third class holding an intermediate position between these two, which consists of those incomes, or rather those parts of incomes, which are the indirect result of the general progress of society, rather than the direct result of the investment of capital and labor by individuals for the sake of gain.”
Explain what is the third class; and what is the relation of cost of production to income in each of the three classes. - Do the earnings of great business ability represent a “cost” according to Walker? Marshall? Fetter?
- Explain what Hobson means by economic cost and by human cost; and which kind of cost he believes to be incurred in connection with (a) economic rent, (b) the savings of the working classes, (c) the earnings of exceptional ability.
- “We have in the theories of usance and of rent all that is essential and fundamental to theories of labor-value and of wages. Man’s services and wealth’s uses move in parallel lines and are of parallel nature in contributing to the securing of income. Human actions directed toward some desired end constitute a usance of human beings; they are valuable services just as the work of domestic animals, the uses of tools, and the motions of machinery are valuable uses of wealth. These valuable services, partly rendered directly to persons and partly embodied in goods, constitute labor-incomes, comparable to the usance of wealth, the wealth-incomes.”
What would Fisher say to this? Hobson? What is your own view? - Wherein is there resemblance, wherein difference, between the views of Fetter and of Clark as regards:
(a) Waiting and abstinence,
(b) The productivity of capital,
(c) Interest.
________________________________
Course Enrollment
1920-21
[Economics] 11. Professor Taussig.—Economic Theory
Total 39: 26 Graduates, 1 Graduate Business, 1 Senior, 10 Radcliffe, 1 Other.
Source: Harvard University. Reports of the President and Treasurer of Harvard College, 1920-21, p. 96.
1920-21
HARVARD UNIVERSITY
ECONOMICS 11
Mid-Year. 1921.
Arrange your answers in the order of the questions
- “Adam Smith says ‘that the difference between the real and the nominal price of commodities and labour is not a matter of mere speculation, but may sometimes be of considerable use in practice.’ I agree with him; but the real price of labour and commodities is no more to be ascertained by their price in goods, Adam Smith’s real measure, than by their price in gold and silver, his nominal measure. The labourer is only paid a really high price for his labour when”, —
Complete the closing sentence, as you conceive that Ricardo would have completed it. Explain also how Ricardo would ascertain the real price of commodities, and how Adam Smith would have done so. - “The fundamental truth, that in all economic reasoning must be firmly grasped and never let go, is that society in its most highly developed form is but an elaboration of society in its rudest beginnings, and that principles obvious in the simpler relations of men are merely disguised and not abrogated or reversed by the more intricate relations that result from the division of labor and the use of complex tools and methods.”
— H. George.
“The minor premise [in Ricardo’s reasoning on value and prices] is the assumption that it is natural that in a tribe of savages things should exchange in proportion to the labor required to produce them. The major premise is, that what is natural in the earliest must be natural in the most advanced states of society.” — Cliffe-Leslie.
Can it be said that Ricardo’s method of reasoning on value is substantially different from George’s on wages? If so, wherein? - Compare concisely the treatment by (a) Ricardo, (b) J. S. Mill, (c) Cairnes, of the differences of wages in different employments, and the relation between such differences and the values of commodities.
- “Mr. Longe puts the case of a capitalist who, by taking advantage of the necessities of his workmen, effects a reduction in their wages, and succeeds in withdrawing so much, call it £1000, from the Wages-fund; and ask how is the sum, thus withdrawn, to be restored to the fund? On Mr. Longe’s principles the answer is single, — ‘by being spent on commodities’; for it may be assumed that the sum so withdrawn will, in any case, not be hoarded. . . . The answer, therefore, to the case put by Mr. Longe is easy on his principles; and I am disposed to flatter myself that the reader who has gone with me in the foregoing discussion will not have much difficulty in replying to it upon mine.”
What is the answer on Cairnes’ principles? Would Mill have given the same answer? - Is Cairnes’ doctrine concerning the causes determining the rate of profits the same as Mill’s? as Ricardo’s?
- What does Mill mean by the equation of supply and demand; what does Marshall mean by the equilibrium of supply and demand?
Which method of analysis is preferable, if either, in case of (a) wheat after a very abundant harvest; (b) an increase in the demand for a commodity made with much fixed plant under competitive conditions; (c) a patented article. - (a) “In regard to production in general, a dominant difference between machines and land is that the supply of land is fixed (though in a new country, the supply of land utilized in man’s service may be increased); while the supply of machines may be increased without limit. For if no great invention renders his machines obsolete, while there is a steady demand for the things made by them, they will be constantly on sale at about their cost of production; and his machines will generally yield him normal profits on that cost of production, with deductions corresponding to their wear and tear.”
(b) “The deepest and most important line of cleavage in economic theory . . . is the distinction between the quasi-rents which do not, and the profits which do, directly enter into the normal supply prices of produce for periods of moderate length.”
Are these two statements consistent with each other? - Explain:
internal economies,
external economies,
law of increasing return,
successive costs curve.
- It has been argued that a protective duty is advantageous in that, by causing the domestic output to be greater, it brings into operation the tendency to increasing returns and thus causes prices to become lower. Is the argument sound?
1920-21
HARVARD UNIVERSITY
ECONOMICS 11
Final. 1921
Arrange your answers in the order of the questions. One question may be omitted.
- It has been maintained that Walker’s analysis of the relation between business profits and wages involves reasoning in a circle. In answer it has been said that in speaking of “wages” as the residual constituent, wages at large are had in mind; whereas when defining the no-profits men, the wages of a particular limited class are referred to. Do you believe that, with this explanation, there is circular reasoning? without it?
- “The simplest and clearest mode of stating the theory of general wages is, in my judgment, to say that wages are determined by the discounted marginal product of labor. Let attention be given to the two elements in this somewhat cumbrous formula: ‘margin’ and ‘discount.’. . .
“It has been assumed [in intervening passages, here omitted] that the discounting takes place at the current rate of interest. Here we must be on our guard against reasoning in a circle. In previous chapters, interest has been accounted for, in part at least, by the fact that there is a ‘productivity’ of capital; it results from the application of labor in more productive ways. If this were the whole of the theory of interest, we should reason in a circle in saying that wages are determined by a process of discount.”
Would the reasoning appear to be open to the charge? and if so, how can it be met? - “In the classical political economy, the relation of the rate of interest to distribution was entirely misconceived. Distribution was erroneously regarded as a separation of the income of society into ‘interest, rent, wages, and profits.’ By ‘interest’ of course was meant, not the rate of interest, but the rate of interest multiplied by the value of the capital ‘yielding interest.’ But we have seen that the value of the capital is found by taking the income which it yields and capitalizing it by means of the rate of interest. To reverse this process, and obtain the income by multiplying the capital by the rate of interest, is proceeding in a circle.”
Was there such a circle in the classical reasoning, e.g., as you find it in Mill? Whom do you suppose to be the writer of this passage? - “Each capital good, before it is sold or worn out, produces a sum of value that enables the owner of the good to purchase or make another good of the same character, which in its turn possesses the power of replacing itself by a successor of equal value. The capital goods of this year are, therefore, not merely the successors in time of those of last year, now mostly destroyed; they are, economically, the offspring of the capital goods of the earlier period, and they have the same power of replacing themselves with other goods having the power of self-replacement.
“It is, of course, to be understood that this self-replacement is neither automatic nor inevitable. We may say that under certain conditions a particular capital good will add something to the total product of an industry, but not enough to keep itself in repair and replace itself when worn out. Under other conditions a capital good will just do this; under still other conditions a capital good will add to the product of an establishment not only enough for its own repair and replacement, but a surplus besides. . . . Intelligent action on the part of the owner of such goods is essential to the truth of this proposition; but such action may generally be taken for granted.”
What do you say? Whom do you suppose to be the author of the passage? [Hand-written note: A. S. Johnson] - State the reasoning by which Clark supports the proposition that interest is the specific product of capital; and the grounds on which Böhm-Bawerk dissents from that proposition.
- Would Marshall admit that “there is an element of true rent in the composite product that is commonly called wages, an element of true earnings in what is commonly called rent”? Your own view?
- “The ‘law of distribution’ which emerges is that every owner of any factor of production ‘tends to receive as remuneration’ exactly what it is ‘worth.’ Now this ‘law’ is doubly defective. Its first defect arises from the fact that economic science assigns no other meaning to the ‘worth’ or ‘value’ of anything than what it actually gets in the market. To say, therefore, that anybody ‘gets what he is worth,’ is merely an identical proposition, and conveys no knowledge.”
Is this criticism of “marginalism” valid? - “If the peers and millionaires who are now preaching the duty of production to miners and dock laborers desire that more wealth, not more waste, should be produced, the simplest way in which they can achieve their aim is to transfer to the public their whole incomes over (say) $5000 a year, in order that it may be spent in setting to work, not gardeners, chauffeurs, domestic servants, and shopkeepers in the West End of London, but builders, mechanics, and teachers.”
Explain what you conceive to be meant by “waste” and “wealth” in this passage; what Hobson might be expected to say to it; and what is your own view.
________________________________
Course Enrollment 1921-22 not published
The Annual Report of the President and the Treasurer of Harvard College 1921-22 does not include enrollment statistics by course for some reason.
Source: http://pds.lib.harvard.edu/pds/view/427018645?n=1&s=4&printThumbnails=no&oldpds
Course Description
1921-22
[Economics] 11. Economic Theory. Mon., Wed., Fri., at 2.30. Professors TAUSSIG and YOUNG.
Course 11 is intended to acquaint the student with the development of economic thought since the beginning of the nineteenth century, and at the same time to train him in the critical consideration of economic principles. The exercises are conducted mainly by the discussion of selected passages from the leading writers; and in this discussion the students are expected to take an active part. Attention will be given to the writings of Ricardo and J. S. Mill, and to representative modern economists.
Source: Division of History, Government, and Economics, 1921-22. Official Register of Harvard University, Vol. XVIII, No. 20 (April 21, 1921), p. 68.
1921-22
HARVARD UNIVERSITY
ECONOMICS 11
Mid-Year. 1922.
Arrange your answers strictly in the order of the questions.
- Does Walker’s analysis of the relation between wages and business profits involve reasoning in a circle?
Suppose that the “no profits” business man were defined by Walker in the same terms as those used by Marshall in describing the representative firm; would your answer be different?
- “We might find, for example, that though the absolute quantity of commodities had been doubled, they were the produce of precisely the former quantity of labor. Of every hundred hats, coats, and quarters of corn produced, if
| The labourers had before |
25 |
| The landlords |
25 |
| And the capitalists |
50 |
|
100 |
|
|
And if, after these commodities were double the quantity, |
|
| The labourers had only |
22 |
| The landlords |
22 |
| And the capitalists |
56 |
|
100 |
|
In that case I should say that wages and rent had fallen and profits risen; though, in consequence of the abundance of commodities, the quantity paid to the labourer and landlord would have increased in the proportion of 25 to 44.”
What is the precise ground on which Ricardo would say that under these conditions wages and rent had fallen, profits risen?
- (a) “The cause of profit is that labor produces more than is required for its support.”
(b) “The capitalist may be assumed to make all the advances and receive all the produce. His profit consists in the excess of the produce above the advances.”
(c) “We thus arrive at the conclusion of Ricardo and others, that the rate of profits depends on wages; rising as wages fall, and falling as wages rise. In adopting, however, this doctrine, I must insist upon a most necessary alteration in its wording. Instead of saying that profits depend on wages, let us say (what Ricardo really meant) that they depend on the cost of labour.”
Consider which of these statements of Mill’s, if any, is in strict accord with Ricardo’s doctrines. - It has been said, —
(a) that rent is due to the niggardliness of nature, not to her bounty;
(b) that the law of diminishing returns refers to the quantity of produce obtained from land, not to its value;
(c) that intensive cultivation is profitable only when the prices of agricultural products are high;
(d) that if all land were equally advantageous and all were occupied, the income derived from it would partake of the nature of a monopoly return.
Which of these statements would you accept, which reject?
- “The latent influence by which the values of things are made to conform in the long run to the cost of production is the variation that would otherwise take place in the supply of the commodity. The supply would be increased if the thing continued to sell above the ratio of its cost of production, and would be diminished if it fell below that ratio. But we must not therefore suppose it to be necessary that the supply should actually be either diminished or increased. . . . Many persons suppose that . . . the value cannot fall through a diminution of the cost of production, unless the supply is permanently increased; nor rise, unless the supply is permanently diminished. But this is not the fact; there is no need that there should be any actual alteration of supply; and when there is, the alteration, if permanent, is not the cause, but the consequence of the alteration in value.”
What would you expect J. S. Mill to say to this? Marshall? your instructor? - (a) England’s agriculture in case of a war not expected to last long;
(b) the gradual accretion in the value of land settled by pioneers;
(c) the earning power of farm-buildings;
(d) the incidence of a tax on printing presses.
What link of connection do you find in Marshall’s discussion of these several topics? - Explain, with the utmost brevity and precision of which you are capable:
diminishing returns,
increasing returns,
increase of demand,
standard of living.
- It is suggested that a protective duty, by enlarging the total output of a given product within a country, brings into play increasing returns and thereby leads to prices of the product lower than would have been in effect but for the duty. Do you agree?
Canadian manufacturers maintain that the larger total output of the competing manufacturers in the United States enables the Americans to conduct on a larger scale the operation of their plants and thereby enables them to produce at lower cost than the Canadians. Are there good grounds for the contention?
ECONOMICS 11
Final. 1922.
[Questions presumably by A. A. Young and not F. W. Taussig]
- “In all countries, and all times, profits depend on the quantity of labor requisite to provide necessaries for the laborers, on that land or with that capital which yields no rent. The effects then of accumulation will be different in different countries, and will depend chiefly on the fertility of the land.”
What other of Ricardo’s doctrines are implied in the foregoing statement? - “Let us consider whether, and in what cases, the property of those who live on the interest of what they possess, without being personally engaged in production, can be regarded as capital. It is not so called in common language, and, with reference to the individual, not improperly. All funds from which the possessor derives an income, which income he can use without sinking and dissipating the fund itself, are to him equivalent to capital. But to transfer hastily and inconsiderately to the general point of view propositions which are true of the individual has been a source of innumerable errors in political economy. In the present instance, that which is virtually capital to the individual, is or is not capital to the nation, according as the fund which by the supposition he has not dissipated, has or has not been dissipated by somebody else.”—J.S. Mill
- In what way, according to Taussig, are nations and non-competing groups of laborers analogous? According to Cairnes?
- Are business profits wages or a return on capital, or neither? What would Ricardo say? Marshall? Walker? Taussig? Knight? Your opinion?
- Define concisely consumers’ surplus, increasing returns, quasi-rent, uncertainty (as distinguished from risk).
- Marshall holds that “a business man working with borrowed capital is at a disadvantage in some trades.” In what sort, and why?
- “In the statements that are current, it is said that the final increments of different commodities purchased for consumption at the same cost are, with certain allowances, of the same utility to the purchaser. With the last hundred dollars of the year’s income, the man in the illustration will buy some particular things that he did not have before, and he will add quantitatively to his supply of things of which he has already had a certain amount. If each distinct article on the list costs a dollar, they are all supposed to be of equal utility; but their degrees of utility are, in fact, very unequal. If the modern theory of value, as it is commonly stated, were literally true, most articles of high quality would sell for three times as much as they actually bring. It is well, at this point in the discussion, to make the needed correction of the law of value, inasmuch as group incomes depend on that law, and inasmuch as the distinction on which the correction rests is of cardinal importance in connection with wages and interest.”
To whom do you attribute the foregoing opinion? What is the “needed correction in the law of value”? - On what grounds does Davenport include land with capital and on what grounds does Marshall exclude it?
Sources:
Harvard University Archives. Prof. F. W. Taussig, Examination Papers in Economics 1882-1935(Scrapbook).
Harvard University Archives. Examination Papers, 1922 (HUC 7000.28, 64 of 284), Papers Set for Examinations: History, Church History,…,Government, Economics, Philosophy,…, Social Ethics, Education (June 1922).
Image Source: Harvard Class Album: Taussig (1915), Young (1925).