For this post I have transcribed Evsey Domar’s graduate core macroeconomics course outline/reading list along with the questions for the final examination from the first term of the 1960-61 academic year at M.I.T. Students from both course XIV (economics) and XV (management) took this course.
Note: Evsey Domar distributed a questionnaire to the students to obtain feedback on his course. The next post provides the results from that survey. It is fairly apparent that Domar did not cover the last topic on the course reading list (economic growth).
Final exam grade distribution (50 exams)
A 16%
A- 12%
B+ 10%
B 20%
B- 14%
C 18%
D 8%
F 2%
Fun Fact. Among the students enrolled in the course and who took the final examination: Michael D. Intriligator, Peter A. Diamond, Ann Fetter Friedlaender, and Stephen Goldfeld.
The much expanded course reading list/bibliography and both the midterm and final examinations from the 1965-66 academic year have been posted earlier.
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MASSACHUSETTS INSTITUTE OF TECHNOLOGY
THEORY OF NATIONAL INCOME AND EMPLOYMENT
14.451 Reading List
E. D. Domar Fall Term 1960-61
The purpose of this list is to suggest to the student the sources in which the more important topics of the course are discussed from several points of view. His objectives should be the understanding of these topics and not the memorization of opinions and details.
Items marked with an * are strongly recommended. (I don’t like to use the expression “required” in a graduate reading list.)
No term paper will be required, but each student is expected, in addition to his general reading, to choose one of the eight major divisions of the course (except that Part VIII should not be taken without prior consultation with the instructor) as a field of concentration. A part of the final examination will be designed to test his broader knowledge of the chosen field.
I. NATIONAL INCOME AND RELATED ITEMS
*Kuznets, S., National Income and Its Composition, (New York, 1941), particularly Vol. 1, Chapter 1
*Jaszi, G., “The Statistical Foundations of the GNP,” Review of Economics and Statistics, Vol. 38, 1956)
Ruggles, R. and N., National Income Accounts and Income Analysis (New York, 1956)
*U.S. Department of Commerce, U. S. Income and Output, A Supplement to the Survey of Current Business, 1958
*National Bureau of Economic Research, The National Economic Accounts of the United States, Review, Appraisal and Recommendations, General Series 64, Washington, 1958
Ruggles, “The U.S. National Accounts,” American Economic Review, March, 1959
Organization for European Economic Co-operation, A Standardised System of National Accounts, Paris, 1952
Gilbert, M. and I. B. Kravis, An International Comparison of National Products and the Purchasing Power of Currencies, A Study of the United States, the United Kingdom, France, Germany and Italy, Organization for European Economic Cooperation, Paris, 1954
Nove, A., “The United States National Income A La Russe,” Economica, Vol. 23, 1956
Gilbert, M., Comparative National Products and Price Levels, A Study of Western Europe and the United States, Organization of European Economic Cooperation, Paris, 1958
*Leontief, W. W., “Output, Employment, Consumption and Investment,” Quarterly Journal of Economics, Feb., 1944
Leontief, W. W. The Structure of American Economy (New York, 1951)
*Dorfman, R., “The Nature and Significance of Input-Output,” Review of Economics and Statistics, Vol. 36, 1954
Stewart, I. G., “The Practical Uses of Input-Output Analysis,” Scottish Journal of Political Economy, Vol. 5, (Feb. 1958)
Dosser, D. and A. T. Peacock, “Input-Output Analysis in an Under-Developed Country: A Case Study,” Review of Economic Studies, Vol. 25, Oct. 1957
*Sigel, S. J., “A Comparison of the Structures of Three Social Accounting Systems,” National Bureau of Economic Research, Input-Output Analysis: An Appraisal, The Conference on Research in Income and Wealth, Studies in Income and Wealth, Vol. 18, pp. 253-89
Board of Governors of the Federal Reserve System, Flow of Funds in the United States 1939-53 (Washington, D. C., 1955)
II. GENERAL AGGREGATIVE SYSTEM
Students without prior training in this field are advised to study D. Dillard, The Economics of John Maynard Keynes (New York, 1948), A. H. Hansen, A Guide to Keynes (New York, 1953), or K. Kurihara, Introduction to Keynesian Dynamics (New York, 1956).
*Keynes, J. M., The General Theory of Employment, Interest and Money (New York, 1936)
*American Economic Association, Readings in Business Cycle Theory (Philadelphia, 1944), Essays 5, 7
Harris, S. E., The New Economics (New York, 1947), essays 8-19, 31-33, 38-46.
*Lerner, A. P., Economics of Control (New York, 1944), chapters 21-23, 25
*Kurihara, K. K., Post Keynesian Economics (New Brunswick, N. J., 1954), essays 1, 11*
*American Economic Association, Readings in the Theory of Income Distribution (Philadelphia, 1946), essay 24
Klein, L. R., The Keynesian Revolution, (New York, 1947), chapters 3-5.
Ellis, H. S., A Survey of Contemporary Economics (Philadelphia, 1948), Vol. 1, chapter 2
*Income, Employment and Public Policy, Essays in Honor of Alvin H. Hansen (New York, 1948), essay I
*Burns, A. F., “Economic Research and the Keynesian Thinking of Our Times,” in his The Frontiers of Economic Knowledge, (Princeton, 1954), or in the Twenty-Sixth Annual Report of the National Bureau of Economic Research, Inc. (New York, 1946). See also the discussion by Hansen and Burns in the Review of Economic Statistics, November, 1947
Dillard, D., “The Influence of Keynesian Economics on Contemporary Thought,” American Economic Review, Papers and Proceedings, 1957
Patinkin, D., Money, Interest, and Prices (Evanston, Ill., 1956).
III. THEORY OF INTEREST
Readings in the Theory of Income Distribution, essays 22, 23, 26
*Hicks, J. R., Value and Capital (Oxford, 1957), Chapters 11-12
Readings in Monetary Theory, essays 6, 11, 15
*Gurley, J. G., and E. S. Shaw, “Financial Aspects of Economic Development,” American Economic Review, September, 1955)
Hart, A. G., Money, Debt and Economic Activity, Second Ed., (New York, 1953)
Patinkin, D., “Liquidity Preference and Loanable Funds: Stock and Flow Analysis,” Economica, Vol. 25, November, 1958
Patinkin, D., Money, Interest, and Prices (Evanston, Ill., 1956).
*Lydall, H., “Income, Assets, and the Demand for Money,” Review of Economics and Statistics, Vol. 40, Feb. 1958
Lutz, F. A., “The Interest Rate and Investment in a Dynamic Economy,” American Economic Review, Dec. 1945
See also Section VI — INVESTMENT DECISIONS
IV. CONSUMPTION FUNCTION
*Duesenberry, J. S., Income, Saving, and the Theory of Consumer Behavior (Cambridge, Massachusetts, 1949)
Haley, B. F., A Survey of Contemporary Economics (Homewood, Illinois, 1952), Vol. II, essay 2
Davis, T. E., “The Consumption Function as a Tool of Prediction,” The Review of Economics and Statistics, August 1952
Heller, W. W., Boddy, F. M., and C. L. Nelson, Savings in the Modern Economy, a Symposium (Minneapolis, 1953)
*Friend, I., and S. Schor, “Who Saves?,” The Review of Economics and Statistics, Vol. 41, May, 1959, Part 2
*Friend, I., and I. B. Kravis, “Entrepreneurial Income, Saving and Investment,”American Economic Review, June, 1957, pp. 269-301
Zellner, Arnold, “The Short-Run Consumption Function,” Econometrica, (Oct. 1957
*Ferber, R., “The Accuracy of Aggregate Savings Functions in the Post-War Years,” Review of Economics and Statistics, Vol. 37, May, 1955
*Tobin, J., “On the Predictive Value of Consumer Intentions and Attitudes,” The Review of Economics and Statistics, Vol. 41, Feb., 1959
Dennison, E. F., “A Note on Private Saving,” Review of Economics and Statistics, August, 1958
Post-Keynesian Economics, essay 15
Friedman, M., A Theory of the Consumption Function (Princeton, N. J., 1957)
Friedman, M., and G. Becker, “A Statistical Illusion in Judging Keynesian Models,” Journal of Political Economy, Vol. 65, Feb., 1957
Klein, L. R., “The Friedman-Becker Illusion,” Journal of Political Economy, Vol. 66, Dec., 1958
Morgan, J. N., Consumer Economics (New York, 1955)
Katona, G., and E. Mueller, Consumer Expectations 1953-56 (Ann Arbor, Michigan, 1956)
Klein, L. R., ed., Contributions of Survey Methods to Economics (New York, 1954)
V. MULTIPLIER AND ACCELERATOR
*Kahn, R. F., “The Relation of Home Investment to Unemployment,” Economic Journal, 1931. Republished in Hansen and Clemence, Readings in Business Cycles and National Income (New York, 1953), essay 15
*Readings in Business Cycle Theory, essays 11-12
*Haavelmo, T., “Multiplier Effects of a Balanced Budget,” Econometrica, 1945; reprinted in Readings in Fiscal Policy, pp. 335-343
*Salant, William A., “Taxes, Income Determination, and the Balanced Budget Theorem,” The Review of Economics and Statistics, May, 1957
Peston, M. H., “Generalizing the Balanced Budget Multiplier,” and “Comment” by W. A. Salant, The Review of Economics and Statistics, August, 1958
Bowen, W. G., “The Balanced-Budget Multiplier: A Suggestion for a More General Formulation,” The Review of Economics and Statistics, May, 1957
*Kuznets, S., “Relation Between Capital Goods and Finished Products in the Business Cycle,” in Economic Essays in Honor of Wesley Clair Mitchell, (New York, 1935)
*Knox, A. D. “The Acceleration Principle and the Theory of Investment: A Survey,” Economica, Vol. 19, 1952
*Tsiang, S. C., “Accelerator, Theory of the Firm, and the Business Cycle,” Quarterly Journal of Economics, Vol. 65, 1951
*Tinbergen, “Statistical Evidence on the Acceleration Principle,” Economica, Vol. 5, 1938
Harrod, R. F., Towards a Dynamic Economics (London, 1948)
Hicks, J. R., A Contribution to the Theory of the Trade Cycle (Oxford, 1950)
Goodwin, R. M., “Problems of Trend and Cycle,” Yorkshire Bulletin, Vol. 5, August, 1953
Ott, A. E., “The Relation Between the Accelerator and the Capital Output Ratio,” Review of Economic Studies, Vol. 25, June, 1958
Minsky, H., “Monetary Systems and Accelerator Models,” American Economic Review, Vol. 47, 1957
See also VI — INVESTMENT DECISIONS.
VI. INVESTMENT DECISIONS
Lutz, F. A., and V., The Theory of Investment of the Firm (Princeton, 1951)
*Heller, W. W., “The Anatomy of Investment Decisions,” Harvard Business Review, March, 1951, pp. 95-103
*Pitchford, J. D. and A. J. Hagger, “A Note on the Marginal Efficiency of Capital,” The Economic Journal, Vol. 48, 1958
*Meade, J. E., and P. W. S. Andrews, “Summary of Replies to Questions on Effects of Interest Rates,” and “Further Inquiry into the Effects of Rates of Interest,” Oxford Economic Papers, No. 1, 1938 and No. 3, 1940
*Ebersole, J. F., “The Influence of Interest Rates,” Harvard Business Review, Vol. 17, 1938, pp. 35-39
*Henderson, H. D., “The Significance of the Rate of Interest,” Oxford Economic Papers, October, 1938, pp. 1-13
Andrews, P. W. S., “Further Inquiry into the Effects of Rates of Interest,” Oxford Economic Papers, Feb., 1940, pp. 32-73
Sayers, R. S., “Business Men and the Terms of Borrowing,” Oxford Economic Papers, Feb., 1940, pp. 23-31
*White, W. H., “Interest Inelasticity of Investment Demand—The Case from Business Attitude Surveys Re-examined,” American Economic Review, Sept. 1956, pp. 565-587
Brockie, M. D., and A. L. Gray, “The Marginal Efficiency of Capital and Investment Programming,” Economic Journal, Vol. 46, December, 1956
White, W. H., “The Rate of Interest, the Marginal Efficiency of Capital, and Investment Programming,” Economic Journal, Vol. 48, March, 1958
Grey, A. L., and M. D. Brockie, “The Rate of Interest, Marginal Efficiency of Capital and Net Investment Programming: A Rejoinder,” Economic Journal, June, 1959
Spiro, A., “Empirical Research and the Rate of Interest,” Review of Economics and Statistics, Vol. 40 (February, 1958).
*Duesenberry, J., Business Cycles and Economic Growth (New York, 1958), Chapters 1-8
Meyer, John R., and Edwin Kuh, The Investment Decision (Cambridge, Mass., 1957)
Cunningham, N. J., “Business Investment and the Marginal Cost of Funds,” Metroeconomica, Vol. 10, August, 1958
Cunningham, N. J., “Business Investment and the Marginal Cost of Funds,” Part II, Metroeconomica, Dec., 1958
Wilson, T., “Cyclical and Autonomous Inducements to Invest,” Oxford Economic Papers, Vol. 5, 1953
Hirschleifer, J., “On the Theory of Optimal Investment Decision,” The Journal of Political Economy, Vol. 66, Aug., 1958
Lydall, H. F., “The Impact of the Credit Squeeze on Small and Medium Sized Manufacturing Firms,” Economic Journal, Vol. 47, Sept., 1957
*Penrose, E., “Limits to the Growth and Size of Firms,” American Economic Review Papers and Proceedings, May 1955, pp. 531-43
Friend, I., and J. Bronfenbrenner, “Business Investment Programs and Their Realization,” Survey of Current Business, December, 1950
*Foss, M. F., and V. Natrella, “Ten Years’ Experience with Business Investment Anticipations,” Survey of Current Business, January, 1957
*Foss, M. F., and V. Natrella, “Investment Plans and Realizations—Reasons for Differences in Individual Cases,” Survey of Current Business, June, 1957
See also III—THEORY OF INTEREST and V—MULTIPLIER AND ACCELERATOR
VII. PRICE FLEXIBILITY AND EMPLOYMENT
*Pigou, A. C., “The Classical Stationary State,” Economic Journal, Dec., 1943
*Lange, O., Price Flexibility and Employment (Bloomington, Indiana, 1944)
*Friedman, M., “Lange on Price Flexibility and Employment,” American Economic Review, Sept., 1946
Readings in Monetary Theory, Essay 13
Schelling, T. C., “The Dynamics of Price Flexibility,” American Economic Review, Sept. 1949
Patinkin, D., Money, Interest, and Prices (Evanston, Illinois, 1956)
Hicks, J. R., “A Rehabilitation of ‘Classical Economics’,” Economic Journal, Vol. 47, June, 1957
*Power, J. H., “Price Expectations, Money Illusion and the Real Balance Effect,” Journal of Political Economy, Vol. 67, April, 1959
*Mayer, T., “The Empirical Significance of the Real Balance Effect,” Quarterly Journal of Economics, Vol. 73, May, 1959
VIII. THEORY OF GROWTH
*Domar, E. D., Essays in the Theory of Economic Growth (New York, 1957), Foreword, Essays I, III-V
Fellner, W., Trends and Cycles I Economic Activity, (New York,1956)
Hansen, A. H., Fiscal Policy and Business Cycles (New York, 1941)
*Harrod, R. F., Towards a Dynamic Economics (London, 1948), Part III
Leontief, W. W., Studies in the Structure of the American Economy, (New York, 1953)
Robinson, J., The Accumulation of Capital, (London, 1956)
*Kuznets, Simon, “Towards a Theory of Economic Growth,” R. Leckachman, ed., National Policy for Economic Welfare at Home and Abroad, (New York, 1955)
*Solow, R. M., “A Contribution to the Theory of Economic Growth,” Quarterly Journal of Economics, Feb. 1956, pp. 65-94
*Solow, R. M., “Technical Change and the Aggregate Production Function,” Review of Economics and Statistics, August, 1957, pp. 312-320
Source: Duke University, David M. Rubenstein Library. Economists’ Papers Archives. Papers of Evsey D. Domar, Box 15, Folder “Macroeconomics, Old Reading Lists”.
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Economics 14-451
E. D. Domar
FINAL EXAMINATION—Three Hours
January 24, 1961
Please use a separate book for each question.
Part I—One Hour
Write an essay in the field of your concentration as instructed in class. Please be specific.
Part II—Two Hours
Answer the THREE questions which are furthest removed from the topic discussed in Part I. They carry equal weights.
- “Thus the rate of interest is what it is because it is expected to become other than it is: if it is not expected to become other than it is, there is nothing left to tell us what it is…”
- Can you identify the author of this famous statement?
- Can you recognize whose interest theory he referred to?
- Explain and evaluate that theory critically.
- Present your own (original or otherwise) theory of interest.
- Write an essay on the subject of “The treatment of intermediate products in:
- National Income and Product Accounting
- Input-output method
- Flow-of Funds system
- Federal reserve Index of Industrial Production.” (Don’t panic if you can’t do (d), but if you can you’ll get a premium.
Hint: there is more in this question, and particularly in part (a) than meets the eye. Consider the whole rationale of the methods.
- Write a comprehensive essay on the subject of “The Rationale of Investment Decisions.” Consider as many cases as you can, but in each case specify clearly the assumptions made. (Don’t forget to include an undeveloped country case.) Can you generalize?
- Write a comprehensive and critical essay on the subject of “Price Flexibility and Employment.” Survey the relevant literature beginning with Keynes’ General Theory, and indicate clearly the nature of the assumptions, the definition of the concepts (hint: money), and the essence of the conclusions. What practical recommendations follow from your discussion?
Source: Duke University, David M. Rubenstein Library. Economists’ Papers Archives. Papers of Evsey D. Domar, Box 16, Folder “Macroeconomics, Final Exams”.
Image Source: Evsey D. Domar photo at the M.I.T. Museum website.