M.I.T. Readings and exam questions for fiscal and monetary policy. Domar, 1957

Evsey Domar’s first semester at M.I.T. was as a visiting professor according to the teaching records of the economics department. He taught one seminar on Russian Economics (14.292) and a graduate course with the nominal title “Fiscal Policy”. That course had been taught previously by E. Cary Brown (Spring 1954, 1955) and R. A. Musgrave, visiting Professor (Spring 1956).

Inspection of the ten-page course bibliography and the final examination questions along with two note-cards filed with these course materials, it appears that well over half the course was in all likelihood dedicated to fiscal policy topics with monetary policy for stabilization topics accouting for perhaps one-third of the course. Just as the length of the course bibliography (typical for Domar) is daunting, his use of asterisks to designate recommended reading was exceedingly liberal. An examination of the final examination questions leads me to conclude that it should be rather easy to reduce the course reading list (for examination purposes!) to less than two pages.

___________________________

Course Enrollment
(Second term, 1956-57

Instructor	Domar, E. D.
Rank	Prof. (Visit.)
Subj. No.	14.472
Subj. Title	Fiscal Policy
No. Class Hours/Week	3
No. Students	22

Source: M.I.T. Archives, Department of Economics Records 1947-, Box 3, Folder “Teaching Responsibility”.

___________________________

Typed notecards for an introduction to or a review of course.

The traditional arguments regarding the purposes of Monetary Policy:

1. Stabilization of general prices or of factor earnings—the Wicksell-Davidson controversy. The instrument was the relation between the natural and the market rates.
2. Stabilization of prices or of employment. Recent literature is full of this.
3. Stabilization of the general prices or of prices of Federal securities. See Douglas’s and other reports on this recent controversy.
4. Stabilization of employment or the achievement of growth. Any conflict?
5. Discretionary methods or automatic provisions? See Simons’ article in Readings in Monetary Theory.
6. To provide credit and currency, sound and in sufficient quantity.
7. To protect the international position of the country.
8. To have special effects, such as:

a. by region
b. by industry
c. by commodity consumed (such as tobacco) or housing
d. on population (by giving exemptions or subsidies for dependents)

1. Provide revenue [handwritten addition]
2. Distribution of income [handwritten addition]

*  *  *  *  *  *  *  *  *  *  *  *  *

The following limitations, some real, other imaginary, explain why Fiscal Policy is not as simple as Lerner makes it:

Income distribution
Size of the deficit
Size of the budget
Balance of payments
Special regional and industrial effects
Effects on incentives to work (in inflation)
Automaticity of the system (built-in-flexibility)
Monetary effects (on reserves, deposits)
Long-run effects (on growth and development)

Their presence complicates things and explains all the ingenious articles and tax devices frequently suggested. If not for them, fiscal policy would be very simple indeed: cut taxes or increase taxes, and the same with expenditures.

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READING LIST
14.472 Fiscal Policy
Spring Term 1956-57

Professor E. D. Domar

PART I—MONETARY POLICY

The purpose of this list is to suggest to the student the sources in which the more important topics in Monetary Policy are discussed from many points of view. His objective should be the understanding of these topics and not the memorization of who said what.

Most of the sources listed here, and particularly the Congressional materials, discuss a number of questions not only in Monetary but in Fiscal Policy as well. Hence it is difficult to classify them.

Items marked with an * are strongly recommended. (I don’t like to use the expression “required” in a graduate reading list.)

1. Factual Materials on Monetary Problems

Federal Reserve Bulletin.

Treasury Bulletin.

Annual Reports of the Secretary of the Treasury and of the Board of Governors of the Federal Reserve System.

Historical Statistics of the United States, 1789-1945, and the Continuation to 1952.

Congressional Hearings, Reports and other Materials listed below.

2. Introduction

Hart, Albert Gailord, Money, Debt and Economic Activity, New York 1948.

Hicks*, J. R., “A Suggestion for Simplifying the Theory of Money,” Economica, 1935; reprinted in Readings in Monetary Theory.

Lerner*; Abba P., “Functional Finance and the Federal Debt,” Social Research, 1943, and Readings in Fiscal Policy, p. 468, also Chapter 24 in his Economics of Control, New York, 1944.

Poole, Kenyon E., ed. Fiscal Policies and the American Economy.

Sproul* Allan, “Changing Concepts of Central Banking,” Money, Trade and Economic Growth in Honor of John Henry Williams, New York, 1951.

3. Monetary Theory and Growth

Gurley*, John G. and Shaw, E. S., “Financial Aspects of Economic Development,” American Economic Review, September 1955, pp. 515-538.

4. Effectiveness of the Interest Rate

Ebersole*, J. F., “The Influence of Interest Rates,” Harvard Business Review, XVII, i, 1938, pp. 35-39.

Henderson*, R. D., “The Significance of the Rate of Interest,” Oxford Economic Papers, October 1938, I, pp. 1-13.

*Meade, J. E. and Andrews, P. W. S., “Summary of Replies to Questions on Effects of Interest Rates,” Oxford Economic Papers, October 1938, I, pp. 14-31.

Sayers, R. S. “Business Men and the Terms of Borrowing,” Oxford Economic Papers, Feb. 1940, III, pp. 23-31.

Andrews, P. W. S., “A Further Inquiry into the Effects of Rates of Interest,” Oxford Economic Papers, Feb. 1940, III, pp. 32-73.

White*, William H., “Interest Inelasticity of Investment Demand—The Case from Business Attitude Survey Re-Examined,” American Economic Review, September 1956, pp. 565-87.

Lutz, Friedrich A., “The Interest Rate and Investment in a Dynamic Economy,” American Economic Review, Dec. 1945.

5. General Surveys of Monetary Policy

Federal Reserve Board*, Tenth Annual Report for 1923. See pp. 29-39 particularly.

Chandler*, Lester V., “Federal Reserve Policy and the Federal Debt,” American Economic Review, 1949, and Readings in Monetary Theory, p. 394.

Hardy, Charles O., “Fiscal Operations as Instruments of Economic Stabilization,” American Economic Review, Supplement, 1948, pp. 395-403 and Readings in Monetary Theory, p. 394.

Hart, Albert Gailord, “Monetary Policy for Income Stabilization,” Income Stabilization for a Developing Democracy, ed. by Max F. Millikan, New Haven, 1953.

Williams, John H., “The Implications of Fiscal Policy for Monetary Policy and the Banking System,” AER Proceedings, March 1942; Readings in Fiscal Policy, p. 185.

Smith*, Warren L., “On the Effectiveness of Monetary Policy,” American Economic Review, September 1956, pp. 588-606.

6. Suggested Objectives and Policies

Hammarskjold, Dag, “The Swedish Discussion on the Aims of Monetary Policy,” reprinted in International Monetary Papers, No. 5, pp. 145-154.

Simons*, Henry C., “Rule versus Authorities in Monetary Policy,” JPE, 1936, and Readings in Monetary Theory, p. 337.

Simons, Henry, “On Debt Policy,” JPE, Dec. 1944, and Readings in Fiscal Policy.

Mints*, Lloyd, W., “Monetary Policy,” Review of Econ. and Stat., 1946 and Readings in Fiscal Policy, p. 344.

Bach*, G. L., “Monetary-Fiscal Policy Reconsidered,” JPE, Oct. 1949, and Readings in Fiscal Policy.

Friedman*, Milton, “A Monetary and Fiscal Framework for Economic Stability,” American Economic Review, 1949, and Readings in Monetary Theory, p. 369.

*United Nations. National and International Measures for Full Employment. Report by a group of experts appointed by the Secretary-General (Lake Success, New York, December 1949).

Viner*, Jacob, “Full Employment at Whatever Cost,” QJE, August 1950, pp. 385-407. Reproduced with omissions in Economic Policy, Readings in Political Economy, edited by William D. Grampp and Emanuel T. Weiler, Homewood, Ill., 1956, pp. 54-65.

Samuelson* Paul A., “Principles and Rules in Modern Fiscal Policy: A New-Classical Reformulation,” Money, Trade and Economic Growth in Honor of John Henry Williams, New York, 1951.

Seltzer* Lawrence H., “Is a Rise in Interest Rates Desirable or Inevitable,” American Economic Review, Dec. 1945; Readings in Fiscal Policy, p. 202.

Roosa, Robert V., “Interest Rates and the Central Bank,” Money, Trade and Economic Growth in Honor of John Henry Williams, 1951.

Roosa*, Robert V., “Integrating Debt Management and Open Market Operations,” American Economic Review, 1952, and Readings in Fiscal Policy, p. 265.

Hansen*, Alvin H., “Monetary Policy,” The Review of Economics and Statistics, May 1955, pp. 110-119.

7. Commodity Money

Graham, Benjamin, World Commodities and World Currency, New York 1944.

Graham*, Frank D., “Full Employment without Public Debt, Without Taxation, Without Public Works, and without Inflation,” Planning and Paying for Full Employment, edited by Abba P. Lerner and Frank D. Graham, 1946.

8. Congressional Materials

Joint Committee on the Economic Report. Money, Credit, and Fiscal Policies. Hearings before the Subcommittee on Monetary, Credit and Fiscal Policies of the Joint Committee on the Economic Report, 81^st Congress, First Session, September 23, November 16,17,18,22,23 and December 1,2,3,5,7, 1949.

Joint Committee on the Economic Report. Monetary, Credit, and Fiscal Policies. A Collection of Statements Submitted to the Subcommittee on Monetary, Credit and Fiscal Policies by Government Officials, Bankers, Economists, and Others. 1949.

Joint Committee on the Economic Report (The Douglas Subcommittee). A Compendium of Materials on Monetary, Credit, and Fiscal Policies. A Collection of Statements Submitted to the Subcommittee on Monetary, Credit, and Fiscal Policies by Government Officials, Bankers, Economists, and Others. 81^st Congress, 2^ndSession, Senate Document No. 132, 1950.

Joint Committee on the Economic Report*. Monetary, Credit, and Fiscal Policies. Report of the Subcommittee on Monetary, Credit, and Fiscal Policies of the Joint Committee on the Economic Report. 81^st Congress, 2^ndSession, Senate Document No. 129, 1950.

Joint Committee on the Economic Report. Monetary Policy and the Management of the Public Debt Hearings before the Subcommittee on General Credit Control and Debt Management of the Joint Committee on the Economic Report, 81^st Congress, 2^nd Session, March 1952.

Joint Committee on the Economic Report. Monetary Policy and the Management of the Public Debt. Their Role in Achieving Price Stability and High-Level Employment. Replies to questions and other material for the use of the subcommittee on general credit control and debt management. 82^nd Congress, 2^nd Session, Senate Document No. 123, 1952.

Joint Committee on the Economic Report. Monetary Policy and the Management of the Public Debt Report of the Subcommittee on General Credit Control and Debt Management of the Joint Committee on the Economic Report, 82^nd Congress, 2^nd Session, 1952.

Joint Committee on the Economic Report. United States Monetary Policy: Recent Thinking and Experience Hearings before the Subcommittee on Economic Stabilization of the Joint Committee on the Economic Report. 83^rd Congress, 2^nd Session, December 6 and 7, 1954.

Joint Committee on the Economic Report. January 1956 Economic Report of the President. Hearings before the Joint Committee on the Economic Report. 84^th Congress, 2nd Session, January 31, February 1,2,3,6,7,8,9,14,15,17 and 28, 1956.

Joint Committee on the Economic Report*. Conflicting Official Views on Monetary Policy; April 1956. Hearings before the Subcommittee on Economic Stabilization of the Joint Committee on Economic Report, 84^thCongress, 2^nd Session, June 12, 1956.

9. Readings for Amusement

Outside Readings in Economics, second edition. Selected by Hess, Arleigh P. Jr., Gallman, Robert E., Rice, John P., and Stern, Carl, New York, 1956. The “Dialogue on Money,” by D. H. Robertson; “The Island of Stone Money,” by William H. Furness III; “The Paper Money of Kubla Khan,” by Marco Polo; and “The Edict of Diocletian,” by Humphrey Mitchell, pp. 314-335 are very amusing and instructive.

 

PART II—FISCAL POLICY

See the remarks in Part I.

1. Factual Materials of General Character

Joint Committee on the Economic Report.* The Federal Revenue System: Facts and Problems, 1956

Treasury Bulletin

Annual Reports of the Secretary of the Treasury and of the Commissioner of Internal Revenue

Statistical Abstract of the United States

Historical Statistics of the United States, 1789-1945 (published by the U. S. Bureau of the Census)

U. S. Treasury Department, Internal Revenue Service, Statistics of Income (an annual publication in two volumes)

U. S. Bureau of the Census, Summary of Governmental Finances (annual series)

The Budget of the U. S. Government

Commerce Clearing House, Inc., Tax Systems

West Publishing Co., Federal Tax Regulations, 1956

Congressional Hearings and Reports, listed in Part I and below

Textbooks on Public Finance and Fiscal Policy

2. Historical Studies

Ratner, S., American Taxation: Its History as a Social Force in a Democracy, New York, 1942

Fabricant*, S., The Trend of Government Activity in the United States since 1900, New York, 1952, Chapters 1, 6, 7

Studenski, P. and H. E. Kroos, Financial History of the United States, New York, 1952

Musgrave*, R. A. and J. M. Culbertson, “The Growth of Public Expenditures in the United States,” National Tax Journal, June, 1953, pp. 97-115

Paul, R. E., Taxation in the United States, Boston, 1954

3. Fundamental Assumptions

Hansen*, A. H., “The Stagnation Thesis,” Fiscal Policy and the Business Cycle, New York, 1941, pp. 38-46, and Readings in Fiscal Policy

Schumpeter*, J. A., “Economic Possibilities in the United States,” Capitalism, Socialism, and Democracy, 1947, and Readings in Fiscal Policy

Domar*, E. D., “The Problem of Capital Accumulation,” The American Economic Review, December, 1948

Fellner*, W., “Relative Emphasis in Tax Policy on Encouragement of Consumption or Investment,” Federal Tax Policy for Economic Growth and Stability, Joint Committee on the Economic Report, Washington, D.C., November 9, 1955, p. 210

Hansen*, A. H., “Economic Stability and Growth,” Federal Tax Policy for Economic Growth and Stability, Joint Committee on the Economic Report, Washington, D. C., November 9, 1955, p. 14

Smithies*, A., “Economic Growth as a Policy Objective,” Federal Tax Policy for Economic Growth and Stability, Joint Committee on the Economic Report, Washington, D. C., November 9, 1955, p. 32.

4. General Objectives and Policies

Keynes* J. M., “An Open Letter,” The New York Times, 1933, and Readings in Fiscal Policy

Lerner*, A. P., “Functional Finance and the Federal Debt,” Social Research, 1943, and Readings in Fiscal Policy. Also Chapter 24 in his Economics of Control, New York, 1944

Hart, A. G., “’Model-Building’ and Fiscal Policy,” American Economic Review, 1945, and Readings in Fiscal Policy

Committee for Economic Development, “Taxes and the Budget: A Program for Prosperity in a Free Economy,” Readings in Fiscal Policy, 1947

Colm* G., “The Government Budget and the Nation’s Economic Budget,” Public Finance, 1948, and Readings

Friedman*, M., “A Monetary and Fiscal Framework for Economic Stability,” American Economic Review, 1948, and Readings

National Planning Association, “Federal Expenditure and Revenue Policy for Economic Stability,” 1949, Readings

Bach*, G. L., “Monetary-Fiscal Policy Reconsidered,” Journal of Political Economy, October, 1949, and Readings

United Nations*, National and International Measures for Full Employment (report by a group of experts appointed by the Secretary-General), Lake Success, New York, December, 1949

Simons*, H. C., Federal Tax Reform, Chicago, 1950

Viner*, J., “Full Employment at Whatever Cost,” The Quarterly Journal of Economics, August, 1950

Samuelson*, P. A., “Principles and Rules in Modern Fiscal Policy; A Neoclassical Reformulation,” Money, Trade, and Economic Growth: in Honor of John H. Williams, New York, 1951

Millikan, M., ed., Income Stabilization for a Developing Democracy, Yale, 1953

Rolph, E.R., The Theory of Fiscal Economics, Berkeley and Los Angeles, 1954

U. S. Congress, Joint Committee on the Economic Report, Federal Tax Policy for Economic Growth and Stability, December, 1955, Hearings

American Economic Association* Readings in Fiscal Policy, Homewood, Illinois, 1955

National Bureau of Economic Research, Policies to Combat Depression, a conference of the Universities-National Bureau Committee for Economic Research, 1956

Council of Economic Advisers*, the latest Annual Report

5. Institutional Factors

Bailey, S. K., Congress Makes a Law: the Story behind the Employment Act of 1946, New York, 1950

Bailey, S. K. and H. D. Samuel, Congress at Work, New York, 1952

Blough, R., The Federal Taxing Process, New York, 1952

Smithies*, A., The Budgetary Process in the United States, Committee for Economic Development, New York, 1955

6. Tax Incidence

Musgrave*, R. A., et al, “Distribution of Tax Payments by Income Groups,” National Tax Journal, March, 1951

Little, I. M. D., “Direct versus Indirect Taxes, Economic Journal, September, 1951

Musgrave*, R. A., “On Incidence,” Journal of Political Economy, August, 1953

Bach*, G. L., “The Impact of Moderate Inflation on Income and Assets of Economic Groups,” Federal Tax Policy for Economic Growth and Stability, Joint Committee on the Economic Report, Washington, D. C., November 9, 1955, p. 71

Musgrave*, R.A., “Incidence of the Tax Structure and its Effects on Consumption,” Federal Tax Policy for Economic Growth and Stability, Joint Committee on the Economic Report, Washington, D. C., November 9, 1955, p. 96

7. Cyclical Aspects

Slichter*, S. H., “The Economics of Public Works,” American Economics Review, 1934, and Readings in Fiscal Policy

Lutz, H. L., “Federal Depression Financing and its Consequences,” Harvard Business Review, 1938, and Readings

Myrdal* G., “Fiscal Policy in the Business Trade,” American Economic Review Supplement, 1939, and Readings

Hagen, E. E., “Timing and Administering Fiscal Policy,” American Economic Review, May, 1948

Committee on Public Issues of the American Economic Association*, “The Problem of Economic Instability,” American Economic Review, 1950, and Readings

Smithies*, A., “The American Economic Association Committee Report on Economic Instability,” American Economic Review, 1951, and Readings

Phillips, A. W., “Stabilization Policy in a Closed Economy,” The Economic Journal, June, 1954, pp. 290-323

Committee for Economic Development*, Problems in Anti-Recession Policy, September 1954

8. Alternative Budgets for Full Employment

Kaldor*, N., Appendix C in W. H. Beveridge, Full Employment in a Free Society, 1945

Musgrave*, R. A., “Alternative Budget Policies for Full Employment,” American Economic Review, 1945, and Readings

Musgrave*, R. A. and M. H. Miller, “Built-In Flexibility,” American Economic Review, 1948 and Readings

Bishop*, R. L., “Alternative Expansionist Policies,” Income, Employment and Public Policy: Essays in Honor of Alvin H. Hansen, New York, 1948

Stein, H., “Budget Policy to Maintain Stability,” Problems in Anti-Recession Policy, Committee for Economic Development, September, 1954

Hagen*, E. E., “Federal Taxation and Economic Stabilization,” Federal Tax Policy for Economic Growth and Stability, Joint Committee on the Economic Report, November 9, 1955, pp. 58-70

Lusher, D. W., “The Stabilizing Effectiveness of Budget Flexibility,” Policies to Combat Depression, a conference of the Universities-National Bureau Committee for Economic Research, Princeton, 1956

9. Balanced Budget Multiplier

Wallich*, H. C., “Income-Generating Effects of a Balanced Budget,” Quarterly Journal of Economics, November, 1944

Haavelmo*, T., “Multiplier Effects of a Balanced Budget,” Econometrica, 1945, and Readings

Haberler, G., “Multiplier Effects of a Balanced Budget,” Econometrica, April, 1946

Baumol, W. J. and M. H. Preston, “More on the Multiplier Effects of a Balanced Budget under Full Employment,” American Economic Review, March, 1955

10. The National Debt

Studenski, P., “The Limits of Possible Debt Burdens—Federal, State, and Local,” American Economic Review, Supplement, 1937

Haley*, R. F., “The Federal Budget: Economic Consequences of Deficit Financing,” American Economic Review, 1941, and Readings

Williams*, H. H., “Deficit Spending,” American Economic Review, February, 1941 and Postwar Monetary Plans and other Essays, 1944

Ratchford, B. U., “The Burden of a Domestic Debt,” American Economic Review, 1942, and Readings

Williams, J. H., “The Implications of Fiscal Policy for Monetary Policy and the Banking System,” Proceedings of the American Economic Association, 1942, and Readings

Domar*, E. D., “The ‘Burden of the Debt’ and the National Income,” American Economic Review, 1944, and Readings

Simons*, H., “On Debt Policy,” Journal of Political Economy, 1944, and Readings

Seltzer, L. H., “Is a Rise in Interest Rates Desirable or Inevitable?” American Economic Review, 1945, and Readings

Wallich, H. C., “Debt Management as an Instrument of Economic Policy,” American Economic Review, June, 1946

Roosa, R. V., “Integrating Debt Management and Open Market Operations,” American Economic Review, 1952, and Readings

Burkhead*, J., “The Balanced Budget,” Quarterly Journal of Economic, 1954, and Readings

11. Inflation and War Finance

Sprague, O. M. W., “Loans and Taxes in War Finance,” American Economic Review, Proceedings, 1917, and Readings

Keynes*, J. M., How to Pay for the War, London, 1940

Smithies*, A., “The Behavior of Money National Income under Inflationary Conditions,” Quarterly Journal of Economics, 1942, and Readings

Fellner*, W. J., “Postscript on War Inflation: A Lesson from World War II,” American Economic Review, 1947, and Readings

Fetter*, F., “The Economic Reports of the President and the Problem of Inflation,” Quarterly Journal of Economics, 1949, and Readings

Wald, H. P., “Fiscal Policy, Military Preparedness, and Postwar Inflation,” National Tax Journal, 1949, and Readings

Hart, A. G., Defense Without Inflation, New York, 1951

12. Effect on Incentives: Incentive Taxation

Domar*, E. D., and R. A. Musgrave, “Proportional Income Taxation and Risk Taking,” Quarterly Journal of Economic, May, 1954

Butters, J. K., and J. Lintner, Effect of Federal Taxes on Growing Enterprises, Boston, 1945

Groves*, H. M., Postwar Taxation and Economic Progress, New York, 1946, Chapter 11

Shelton, J. P., and G. Ohlin, “A Swedish Tax Provision for Stabilizing Business Investment,” American Economic Review, June, 1952

Brown*, R. S., “Techniques for Influencing Private Investment,” Income Stabilization in a Developing Democracy, M. Millikan, ed., 1953, pp. 416-432

Domar*, E. D., “The Case for Accelerated Depreciation,” Quarterly Journal of Economics, February, 1953

Butters*, J. K., “Taxation, Incentives, and Financial Capacity,” American Economic Review, Supplement, 1954, and Readings

Brown, E. C., “The New Depreciation Policy under the Income Tax: An Economic Analysis,” National Tax Journal, March, 1955

Goode*, R., “Accelerated Depreciation Allowances as a Stimulus to Investment,” Quarterly Journal of Economics, May, 1955

Break*, G. F., “Effects of Taxation on Work Incentives,” Federal Tax Policy for Economic Growth and Stability, Joint Committee on the Economic Report, Washington, D. C., November 9, 1955, p. 192

Brown*, E. C., “Weaknesses of Accelerated Depreciation as an Investment Stimulus,” Federal Tax Policy for Economic Growth and Stability, Joint Committee on the Economic Report, Washington, D. C., November 9, 1955, p. 495

Butters*, J. K., “Effects of Taxation on the Investment Capacities and Policies of Individuals,” Federal Tax Policy for Economic Growth and Stability, Joint Committee on the Economic Report, Washington, D. C., November 9, 1955, p. 126

Greenewalt*, C. H., “Effect of High Tax Rates on Executive Incentive,” Federal Tax Policy for Economic Growth and Stability, Joint Committee on the Economic Report, Washington, D. C., November 9, 1955, p. 185

Long*, C. D., “Impact of Federal Income Tax on Labor Force Participation,” Federal Tax Policy for Economic Growth and Stability, Joint Committee on the Economic Report, Washington, D. C., November 9, 1955, p. 153

Kaldor*, N., “An Expenditure Tax,” London, 1955

13. Particular Taxes

Simons, H., Personal Income Taxation, Chicago, 1938

Brown*, E. C., “Analysis of Consumption Taxes in Terms of the Theory of Income Determination,” American Economic Review, March, 1950

Goode*, R., Corporation Income Tax, New York, 1951

Royal Commission on the Taxation of Profits and Income, First Report, February, 1953; Second Report, April, 1954; Final Report, June, 1955

Due, J. F., “Economics of Commodity Taxation and the Present Excise Tax System,” Federal Tax Policy for Economic Growth and Stability, Joint Committee on the Economic Report, Washington, D. C., November 9, 1955, p. 547

Keith*, G., “Economic Impact of the Corporation Income Tax,” Federal Tax Policy for Economic Growth and Stability, Joint Committee on the Economic Report, Washington, D. C., November 9, 1955, p. 658

Goode, R., “The Corporate Income Tax in a Depression,” Policies to Combat Depression, a conference of the Universities-National Bureau Committee for Economic Research, 1956

Merriam, I. C., “Social Security Programs and Economic Stability,” Policies to Combat Depression

Pechman, J. A., “Yield of the Individual Income Tax During A Recession,” Policies to Combat Depression

14. Inter-Governmental Fiscal Relations

Maxwell*, J. A., “Intergovernmental Fiscal Devices for Economic Stabilization,” Federal Tax Policy for Economic Growth and Stability, Joint Committee on the Economic Report, Washington, D. C., November 9, 1955, p. 807

Heer*, C., “Stabilizing State and Local Finance,” Policies to Combat Depression, 1956

U. S. Treasury Department, Committee on Inter-Governmental Fiscal Relations, Federal, State, and Local Government Fiscal Relations, 78^th Congress, 1^st Session, Senate Document No. 69, 1943

U. S. Bureau of the Census, Compendium of State Government Finances (an annual series)

Same source, Compendium of City Government Finances (an annual series)

Tax Institute, Federal-State-Local Tax Correlation (A Symposium), December, 1953

The Council of State Governments, Federal Grants-in-Aid, 1949

15. Growth and Economic Development

Bernstein*, E. M. and I. G. Patel, “Inflation in Relation to Economic Development,” International Monetary Fund, Staff papers, II, 1951-52

United Nations*: Fiscal Division, “Taxation and Economic Development in Asian Countries,” Economic Bulletin for Asia and the Far East, Vol. IV, November, 1953

Gurley, J. A., “Fiscal Policy in a Growing Economy,” Journal of Political Economy, December, 1953

Papers and Proceedings of the Conference on Agricultural Taxation and Economic Development, H. P. Wald, and J. N. Froomkin, eds., Cambridge, Massachusetts, 1954 (Harvard University Law School, International Program in Taxation)

16. Special Problems

Clark*, C., “Public Finance and Changes in the Value of Money,” The Economic Journal, December, 1945

Clark*, C., “The Danger Point in Taxes,” Harper’s Magazine, December, 1950

Goode*, R., “An Economic Limit on Taxes: Some Recent Discussion,” National Tax Journal, September, 1952

Caplan, B., “A Case Study: The 1948-1949 Recession,” Policies to Combat Depression, 1956

Fox, K. A., “The Contribution of Farm Price Support Programs to General Economic Stability,” Policies to Combat Depression, 1956

Gordon, R. A., “Types of Depressions and Programs to Combat Them,” Policies to Combat Depression

Grebler, L., “Housing Policies to Comat Depression,” Policies to Combat Depression

Johnson, D. G., “Stabilization of International Commodity Prices,” Policies to Combat Depression

Owen, W., “Self-Liquidating Public Works to Combat Depression,” Policies to Combat Depression

Source: Duke University, David M. Rubenstein Rare Book and Manuscript Library. Economists’ Papers Archive. Box 17, Folder “Fiscal and Monetary Policy”.

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FINAL EXAMINATION
14.472 Fiscal Policy
Monday, May 20, 1957

E. D. Domar

ANSWER ALL QUESTIONS. THE QUALITY OF YOUR REASONING IS THE MOST IMPORTANT PART OF YOUR ANSWERS.

1. [35%] Compare and contrast monetary and fiscal policies as methods of achieving a steadily expanding economy (without inflation or depression). Include, but don’t limit yourself to, the following points:
   1. 1. The theoretical foundation of each.
      2. Methods used.
      3. Effects on distribution of income and wealth.
      4. Social and political repercussions of each.
      5. The effectiveness and limitations of each.

Do they overlap? Can you work out a synthesis?

2. [20%] “Government spending tends to be like a drug, in that it takes larger and larger doses to get results, and all the time debt and taxes get higher and higher.”
   Analyze this statement and comment as fully as you can. Compare the effect of government expenditures with that of private.
3. [15%] “The best cure against inflation is increased production.”
   Analyze this statement and comment on it. Include in your comments the monetary and fiscal implications of this statement.
4. [15%] What are the so-called “Built-in-Stabilizers?” Discuss fully and indicate how they operate in (a) depression and (b) inflation.
5. [15%] “The purpose of taxation is never to raise money but to leave less in the hands of the taxpayer.”
   Comment fully and indicate the limitations of this statement. Can you identify the author? (No great penalty if you cannot.)

Source: Duke University, David M. Rubenstein Rare Book and Manuscript Library. Economists’ Papers Archive. Box 16, Folder “Examination. Public Finance and Fiscal Policy”.

Notes on Final Exam:

Question II comes from a review of Stuart Chase, Where’s the Money Coming From? Published in the Monthly Bulletin of the National City Bank of New York that I was fortunate to find inserted into the Congressional Record Volume 93—Part 4 (May 8, 1947, p. 4827);

Question III. Domar liked this question enough to have used it at least twice. See January 23, 1958 Exam at Johns Hopkins; January 26, 1966 at M.I.T.;

Question V. The sentence quoted comes from Abba Lerner’s The Economics of Control, p. 307.

___________________________

Image Source: Evsey D. Domar at the MIT Museum legacy website.