The course materials transcribed for this post are found in a folder in Milton Friedman’s papers at the Hoover Institution with the label “University of Chicago. Econ 129”. The handwriting on the folder is that of an archivist (i.e. not Friedman) and the material in the folder is neither dated nor can the name of the university be found. The most recent publication included in the reading list is from February 1946 (“Recent Figures…”). Also there is an item in the reading list “Blakey et al., Analyses of Minnesota Incomes, Parts One and Two” that points to the state of Minnesota. Milton Friedman did teach economics and statistics at the University of Minnesota for the academic year 1945-46 and no graduate course at the University of Chicago had a course number in the 100’s. Further, the academic calendar in Minnesota, like Chicago, followed a quarter system. Thus it seems almost certain that we are dealing with a course that Milton Friedman taught at the University of Minnesota during the latter quarters of the 1945-46 academic year. I don’t have access to the course catalogue from Minnesota for that year, so this should be easy to verify conclusively down the road.
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O-M [typed in the upper left corner]
Description of proposed course in “Statistical Economics”
- Purpose: The course proposed is designed primarily to provide training in the quantitative analysis of economic problems. As a by-product it should also acquaint the student with some coherent body of quantitative data and some important empirical studies.
- Content: The emphasis in the course would be on research method: the utilization of statistical data, statistical method, and theoretical analysis to attack an economic problem. The approach to method would be via substantive empirical work in particular fields. The fields considered would shift from quarter to quarter.
For the first quarter, it is proposed to consider.
National Income and Wealth: concepts of income and wealth—problems of valuation, treatment of government contribution and of gifts, capital gains, and other borderline items; problems of measurement—techniques of measurement, sources of data, estimates for segments of the economy for which data are scanty, precision of estimates; distribution of income by industry, type of payment, final product, and region; distribution of income and wealth by size; uses and misuses of income and wealth data.
Basic text material: Simon Kuznets, National Income and its Composition; Studies in Income and Wealth; Consumer Incomes in the United States; Department of Commerce publications and British white papers on national income.
For subsequent quarters, possible topics are:
Secular movements: Statistical studies of long-run changes in economic activity in the United States; examination of evidence bearing on “mature economy” or “stagnation” thesis.
Economies of scale: Empirical work on the relation of the size of enterprises to their economic efficiency, including conceptual problems in measuring economic efficiency and in distinguishing private from social economics of scale, statistical derivation of cost curves, and studies of profits in relation to size of enterprise.
- Potential students: Seniors and graduate students, particularly those interested in economic research
- Prerequisites: B.A. 101-102; B.A. 112. Undergraduates with consent of instructor..
- Duration: One quarter.
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Syllabus and Readings for
Economics 129: Statistical Economics
Topic: National Income and Wealth
Note: Starred readings are required; others are recommended.
- Recent figures on National Income and National Products
*Survey of Current Business, February 1946, pp. 4 to 9.
- Concepts of National Income and Wealth
General:
*Hicks and Hart, pp. 125-232.
Kuznets, National Income and Capital Formation, pp. 1-7.
*Kuznets, National Income and its Composition, pp. 1-60.
*Hicks, Value and Capital, pp. 171-181.
Studies in Income and Wealth, Vol. II, pp. 1-82; *Vol. III, Preface (vii-xv).
J.E. Meade and R. Stone, “The Construction of Tables of National Income, Expenditure, Savings and Investment”, Economic Journal, June-Sept., 1941, pp. 216-33.
Capital gains:
Studies in Income and Wealth, Vol. I, pp. 97-101, 159-62.
Government Services:
Studies in Income and Wealth, Vol. Two, pp. 317-27; Vol. Six, pp. 1-44.
J.R. and U.K. Hicks, “Public Finance in the National Income”, Review of Economic Studies, Feb. 1939, pp. 147-55.
- Concept of Gross National Product
*Gilbert and Jaszi, “National Product and Income Statistics”, Dun’s Review, 1944
- Measurement
*Kuznets, National Income and its Composition I, pp. 96-132, Vol. II, pp. 475-537.
- Correction for Price Change
*Keynes, Treatise on Money, Vol. I, pp. 95-120.
Studies in Income and Wealth, Volume II, pp. 85-135.
- Temporal changes in National income in the United States
*Kuznets, National Income and its Composition, pp. 135-160.
Kuznets, National Income and Capital Formation, pp. 8-11.
- British estimates
*British White Paper Cmd. 6623. (Reprinted in Federal Reserve Bulletin, August, 1945).
- Distributions of income
1. By Industry
Kuznets, National Income and Capital Formation, pp. 12-22.
*Kuznets, National Income and its Composition, pp. 161-214.
2. By type of payment
Kuznets, National Income and Capital Formation, pp. 23-28.
*Kuznets, National Income and its Composition, pp. 215-265.
3. By Final Product
Kuznets, National Income and Capital Formation, pp. 34-57.
*Kuznets, National Income and its Composition, pp. 266-291.
4. By region
F. Schwartz, “State Income Payments in 1944”, Survey of Current Business, August 1945.
5. By size
*National Resources Committee, Consumer Incomes in the United States.
Studies in Income and Wealth, Volume V, Income Size Distributions, Part I, pp. 1-98.
Blakey et al., Analyses of Minnesota Incomes, Parts One and Two.
Economics 129: Statistical Economics
Books on Reserve
Main Library
R.G. Blakey, Wm. Weinfeld, J.E. Dugan, A.L. Hart, Analyses of Minnesota Incomes, 1938-39.
Clark, Colin, The Conditions of Economic Progress.
Clark, Colin, National Income and Outlay.
Fabricant, Solomon, Capital Consumption and Adjustment.
Hicks, J.R., Value and Capital.
Keynes, J.M., A Treatise on Money.
Kuznets, Simon, National Income and Capital Formations.
Kuznets, Simon, National Income and its Composition (2 Volumes).
W.C. Mitchell, W.I. Kerg, F.R. Macauley, and O.W. Knauth, Income in the United States (2 volumes).
Conference on Research in Income and Wealth, Studies in Income and Wealth, Volumes I, II, III, V, VI.
National Resources Committee, Consumer Incomes in the United States.
Materials Room
Barger, Harold, Outlay and Income in the United States, 1921-38.
J.R. Hicks and A.G. Hart, The Social Framework of the American Economy.
Kuznets, Simon. National Income and its Composition.
Martin, R.F., National Income in the United States, 1799-1938.
Conference on Research in Income and wealth, Studies in Income and Wealth, Vol. V, Part I.
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Final Examination
Economics 129—Statistical Economics
The Income payments concept differs from national income in part…
- T or F…because the former excludes and the latter includes undistributed corporate profits;
- T or F …because relief benefits are included in the former and excluded from the latter;
- T or F …because food consumed on the farm is excluded from the former and included in the latter;
- T or F …because imputed rents are excluded from the former and included in the latter;
- T or F …and because social security taxes are excluded from the former and included in the latter.
- T or F Imputed rents are not included in the Department of Commerce estimates of national income but are include in Kuznets.
- T or F In a self-contained economy without government national income would equal gross national product.
- T or F In Commerce Department estimates the value of government product is measured by taxes except for education.
- T or F “Transfer payments” are gifts from one individual to another.
- T or F A major difference between national income and gross national product is dividend payments to foreigners.
- T or F The growth of Victory gardens was in part responsible for the rise of national product from 1940 to 1943.
- T or F Undistributed corporate profits plus individual savings equals net capital formation plus government deficit.
- T or F Product of non-profit institutions is valued at cost in national product.
- T or F Government savings in Kuznets’ estimates is measured by excess of receipts over expenditures.
- T or F Business taxes includes all taxes paid by business except excess profits taxes.
- T or F Capital outlays charged to current expense are items of fixed capital that become obsolete within the year.
- T or F Business savings are equal to undistributed profits plus expenditures on plant and equipment.
- T or F The adjustment for inventory revaluation is designed to eliminate changes in value due to spoilage, change of style, and fire losses.
- _____ Which of the following was not an important factor in our economic mobilization for war? [choose “a”, “b”, “c”, or “d”]
(a) Curtailment of gross capital formation
(b) Curtailment of consumers non-durable goods expenditures
(c) Increase in average hours worked per week
(d) Heavy government expenditures for plant and equipment - T or F The basic source of profits estimates in the national income is Statistics of Income.
- T or F The method used to derive estimates of wages in manufacturing is number of employed multiplied by average wages.
- T or F Advertising is treated as investment in the national product.
- T or F In estimating wages allowance is made for expenses involved for transportation to and from work.
- T or F Gross capital formation includes all automobiles produced but no other consumers durable goods.
- T or F Capital gains and losses are not allowed for in the national income except in the case of security and commodity brokers.
- T or F Subsistence of the armed forces is included in the national income because war expenditures are in essence a type of capital formation.
- T or F National debt interest is included in the national income because of Hamilton’s theory that the debt would strengthen the union.
- T or F The British include interest on the national debt as a measure of the services of government property.
- T or F Income payments to individuals could be derived entirely by adding up income reported for tax purposes if everyone were required to file a return.
- T or F Size distribution of income must be based upon income payments rather than national income.
- T or F Intermediate government products are products on the borderline between current services and capital goods.
- T or F Income from illegal activities is excluded from the national income.
Given the following items:
| Wages and salaries | 100 |
| Supplements to wages and salaries | 3 |
| Transfer payments (net) | 4 |
| Lend-lease shipments | 10 |
| Profits before dividends | 8 |
| Dividends | 4 |
| Interest on the national debt | 2 |
| Interest and rent | 7 |
| Business taxes | 25 |
| Income of proprietors | 24 |
| Imputed return on govt. property 1 | 1 |
| Personal taxes | 18 |
| Depreciation | 8 |
| Consumers expenditures | 90 |
| Net capital formation | 3 |
| Savings bond sales | 12 |
| Subsistence to armed forces | 10 |
33, 34, 35. _________ State amount of National Income.
36, 37, 38. _________ State amount of income payments
39, 40, 41. _________ State amount of gross national product
42, 43, 44. _________ State amount of individual savings
45, 46, 47. _________ State amount of Govt. expenditure for goods and services
48, 49, 50. _________ State amount of total government expenditures.
51, 52, 53. _________ State amount of government deficit.
- T or F Wealth is measured as a stock at a point in time while income is measured as a flow over a period of time.
- T or F Capital formation consists of all business purchases of producers goods except additions to inventory of finished consumption goods.
- _____ The gross national product for any year will consist of all the following items except [list all the items that are not included]—
(a) sales of single use consumer goods
(b) sales of single use producers goods
(c) change in business inventories
(d) sales of durable use consumers goods
(e) sales of durable use producers goods
(f) sales of consumers services
(g) sales of producers services
- T or F Omitting imputed rents from the national income results in too high an estimate of savings.
- T or F A gun purchased by a gangster is not included in the national product because it is for use in illegal activities.
- T or F Capital formation tends to fluctuate more widely over the business cycle than consumers expenditures.
- T or F In Kuznets’ estimates national income equals net national product.
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Answer Key
- True;
- True;
- False;
- False;
- True;
- True;
- False;
- False;
- False;
- False;
- False;
- True;
- True;
- False;
- False;
- False;
- False;
- False;
- (b);
- True;
- False;
- False;
- False;
- False;
- True;
- False;
- False;
- False;
- False;
- True;
- False;
- True;
33/34/35. = 100+3+8+24+7=142;
36/37/38. = 142+4–4=142;
39/40/41. = 142+8+25=175;
42/43/44. = 142 – 18 – 90 = 34;
45/46/47. = 175–90–(3+8) = 74;
48/49/50. =175–90–(3+8) +4 =78;
51/52/53. = 78 – 25 – 18 =35
- True;
- False;
- (b),(g);
- False;
- False;
- True;
- True.
Source: Hoover Institution Archives. Papers of Milton Friedman, Box 76, Folder 5 “University of Chicago [sic], Econ 129”.
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