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. Up to the time when 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 ; 1920-22 ; 1923-25 have been posted as well.  

This post begins with the printed course description from 1929-30 then adds the enrollment data and five years of semester final examinations for the years 1925-26 through 1929-30.

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 Course Description
1929-30

11. Economic Theory.

Mon. , Wed., Fri., at 2. Professor Taussig

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. A careful examination is made of the writings of Ricardo and J. S. Mill, and of representative modern economists.

Source:  Division of History, Government, and Economics, 1929-30. Official Register of Harvard University, Vol. XXVI, No. 36 (June 27, 1929), p. 71. Identical course description found in Official Register of Harvard University, Vol. XXV, No. 29 (May 26, 1928), p. 70.

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1925-26

Course Enrollment: Economics 11
1925-26

[Economics] 11. Professor Taussig.—Economic Theory

Total 50: 36 Graduates, 5 Graduate Business, 2 Seniors, 6 Radcliffe, 1 Other.

Source: Harvard University. Reports of the President and Treasurer of Harvard College, 1925-26, p. 77.

HARVARD UNIVERSITY
ECONOMICS 11
Mid-year Final Exam
1925-26

Arrange your answers in the order of the questions

1. “The ordinary bargain between labor and capital is that the wage-receiver gets command over commodities in a form ready for immediate consumption, and in exchange carries his employer’s goods a stage further towards being ready for immediate consumption. But while this is true of most employees, it is not true for those who finish the processes of production. For instance, those who put together and finish watches, give to their employers far more commodities in a form ready for immediate consumption, than they obtain as wages. And if we take one season of the year with another, so as to allow for seed and harvest time, we find that workmen as a whole hand over to their employers more finished commodities than they receive as wages.”
   Do you see anything to criticize in this?
2. (a) “In estimating the exchangeable value of stockings, for example, we shall find that their value, comparatively with other things, depends on the total quantity of labour necessary to manufacture them and bring them to market. First, there is the labour necessary to cultivate the land on which the raw cotton is grown; secondly, the labour of conveying the cotton to the country where the stockings are to be manufactured, which includes a portion of the labour bestowed in building the ship in which it is conveyed, and which is charged in the freight of the goods; thirdly, the labour of the spinner and the weaver; fourthly, a portion of the labour of the engineer, smith, and carpenter, who erected the buildings and the machinery. . . . The aggregate sum of these various kinds of labour determines the quantity of other things for which these stockings will exchange.”
   (b) “Suppose one man employs one hundred men for a year in the construction of a machine, and another man employs the same number of men in cultivating corn. . . .
   Suppose that for the labour of each workman £50 per annum were paid, or that £5000 capital were employed and profits were 10 per cent, the value of the machine as well as of the corn, at the end of the first year, would be £5500. The second year the manufacturer and farmer will again employ £5000 each in the support of labour, and will therefore again sell their goods for £5500; but the man using the machine, to be on a par with the farmer, must not only obtain £5500 for the equal capital of £5000 employed on labour, but must obtain a further sum of £550 for the profit on £5500, which he has invested in machinery, and consequently his goods must sell for £6050. Here, then, are capitalists employing precisely the same quantity of labour annually on the production of their commodities, and yet the goods they produce differ in value on account of the different quantities of fixed capital, or accumulated labour, employed by each respectively.”Is Ricardo’s reasoning tenable, on his own premises, in both cases? Are the premises the same in both?
3. “To popular apprehension it seems as if the profits of business depend on prices. A producer or dealer seems to obtain his profits by selling his commodity for more than it costs him. . . . Demand — customers — a market for the commodity, are the cause of the gain of the capitalist.” What would Mill say to this? Ricardo?
4. The effective desire of accumulation; the rate of profits as dependent on the cost of labor; the tendency of profits to a minimum, — are the doctrines of Mill on these topics consistent with each other? With what Ricardo laid down?
5. “The cost of production [of agricultural produce] on the margin of the profitable application of capital and labour is that to which the price of the whole produce tends, under the control of the general conditions of demand and supply; it does not govern price, but it focusses the causes which do govern price.” Explain what Marshall means. Does the doctrine differ from Mill’s on the same subject?
   Would Marshall’s conclusion be applicable to a manufactured commodity which is produced under the conditions usually indicated by cost-accountants’ data (a supply curve positively inclined)?
6. Suppose a decrease in the demand for a commodity produced with much fixed capital: what consequences would you expect on the equilibrium of supply and demand, price, quasi-rent, cost. Consider both the short period and the long period effects.
7. Wherein, if at all, is the conception of quasi-rent applicable to

“Capital sunk in the soil”;
Pullman, Saltaire, and the like cases;
The gains of pioneers settling in a new country.

8. What is meant by a law of increasing return? Do you believe there is one as regards “external economies”? internal economies?

HARVARD UNIVERSITY
ECONOMICS 11
Year-end Final Exam
1925-26

Arrange your answers in the order of the questions

1. Define, with the utmost brevity consistent with accuracy, producers’ surplus; consumers’ surplus; savers’ surplus. What writers do you associate with the concepts to which these terms refer?
2. “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 labour 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 the greater part of the earnings of business men to be regarded as quasi-rent? Is only the remainder to be regarded as true earnings of effort? Are these propositions in accord with Walker’s doctrine concerning business profits?
3. What sort of surplus, if any, arises from the operation of diminishing returns as regards (a) increasing output secured from land; (b) increasing output secured with the aid of additional instruments made by man?
4. The resemblance or difference between Clark’s doctrine that “abstinence is confined to the genesis of new capital,” and the reasoning of later writers concerning the significance of the surplus accounts of corporations.
5. “‘On the whole,’ says Marshall, ‘it happens that by far the greater number of the events with which economics deals affect in about equal proportions all the different classes of society; so that if the money measures of the happiness caused by two events are equal, there is not in general any very great difference between the amounts of the happiness in the two cases.’ This has been justly characterized as a cavalier dismissal of the effect of differences of wealth and differences in sensibility.”Why a cavalier dismissal? or why not? Consider whether the criticism holds good as regards Marshall’s reasoning on the effects of taxes and bounties.
6. (a) “As the inquiry to which I wish to draw the reader’s attention relates to the effect of the variations in the relative value of commodities, and not in their absolute value, it will be of little importance to examine into the comparative degree of estimation in which the different kinds of human labour are held. We may fairly conclude that whatever inequality there might originally have been in them, whatever the ingenuity, skill, or time necessary for the acquirement of one species of manual dexterity more than another, it continues nearly the same from one generation to another; or at least that the variation is very inconsiderable from year to year, and therefore can have little effect, for short periods, on the relative value of commodities.”
   Is this a cavalier dismissal of the relation between differing rates of wages and the value of goods?(b) “Although general wages, whether high or low, do not affect values, yet if wages are higher in one employment than another, or if they rise and fall permanently in one employment without doing so in others, these inequalities do really operate upon values. . . . When the wages of an employment permanently exceed the average rate, the value of the thing produced will, in the same degree, exceed the standard determined by mere quantity of labour. Things, for example, which are made by skilled labour, exchange for the produce of a much greater quantity of unskilled labour; for no reason but because the labour is more highly paid.” Mill.What would Marshall say to this? Böhm-Bawerk? What is your own view?
7. Is there essential difference between the doctrine that the general level of wages is determined by the discounted marginal product of labor, and Clark’s doctrine concerning the relation between wages and the product of labor?
8. “It is not true that the spinning of yarn in a factory, after allowance has been made for the wear-and-tear of the machinery, is the product of the labour of the operatives. It is the product of their labour, together with that of the employer and subordinate managers, and of the capital employed; and that capital itself is the product of labour and waiting: and therefore the spinning is the product of labour of many kinds, and of waiting. If we admit that it is the product of labour alone, and not of labour and waiting, we can no doubt be compelled by inexorable logic to admit that there is no justification for Interest, the reward of waiting; for the conclusion is implied in the premiss.”(a) What would Böhm-Bawerk say to this? What is your own view?
   (b) What is the premiss which is implied in the conclusion?

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1926-27

Course Enrollment: Economics 11
1926-27

[Economics] 11. Professor Taussig.—Economic Theory

Total 44: 38 Graduates, 3 Graduate Business, 2 Seniors, 1 Radcliffe.

Source: Harvard University. Reports of the President and Treasurer of Harvard College, 1926-27, p. 75.

HARVARD UNIVERSITY
ECONOMICS 11
Mid-year Examination
1926-27

[Arrange your questions in the order of the answers]

1. The merits and defects of Walker’s treatment of distribution.
2. The merits and defects of Ricardo’s treatment of value.
3. The merits and defects of Mill’s treatment of profits.
4. What is meant by “increase of demand” in the following passages: —
   (a) “The democratization of society and the aping of the ways of the well-to-do by the lower classes have greatly increased the demand for silk fabrics.”
   (b) “ The lower price of sugar after 1890, when sugar was admitted free of duty, at once caused an increase of demand.”
   (c) “The cheapening of a commodity may mean an increase of demand such that the total sum spent on it will be as great as before, even greater than before.”
5. Describe the supply curves indicated by accountants’ figures for the costs of agricultural and of manufactured products; and explain wherein they confirm or fail to confirm traditional “laws of value” applicable to the two classes of goods.
6. (a) “Were it not for this tendency [to diminishing returns] every farmer could save nearly the whole of his rent by giving up all but a small piece of his land, and bestowing all his labor and capital on that. If all the labor and capital which he would in that case apply to it gave as good a return in proportion as that he now applies to it, he would get from that plot as large a produce as he now gets from his whole farm; and he would make a net gain of all his rent save that of the little plot that he retained.”
   (b) “The return to additional labour and capital [applied to land] diminishes sooner or later; the return is here measured by the quantity of the produce, not by its value.”
   (c) “Ricardo, and the economists of his time generally were too hasty in deducing this inference [tendency to increased pressure] from the law of diminishing return; and they did not allow enough for the increase of strength that comes from organization. But in fact every farmer is aided by the presence of neighbours, whether agriculturists or townspeople. . . . If the neighbouring market town expands into a large industrial centre, all his produce is worth more; some things which he used to throw away fetch a good price. He finds new openings in dairy farming and market gardening, and with a larger range of produce he makes use of rotations that keep his land always active without denuding it of any one of the elements that are necessary for its fertility.”
   Have you any criticisms or qualifications to suggest on these passages from Marshall?
7. “For periods which are long in comparison with the time needed to make improvements of any kind, and bring them into full operation, the net incomes derived from them are but the price required to be paid for the efforts and sacrifices of those who make them; the expenses of making them thus directly enter into marginal expenses of production, and take a direct part in governing long-period supply price. But in short periods, that is, in periods short relatively to the time required to make and bring into full bearing improvements of the class in question, no such direct influence on supply price is exercised by the necessity that such improvements should in the long run yield net incomes sufficient to give normal profits on their cost. And therefore when we are dealing with such periods, these incomes may be regarded as quasi-rents which depend on the price of the produce.”
   Precisely what is meant by “these incomes”?

HARVARD UNIVERSITY
ECONOMICS 11
Year-end Final Examination
1926-27

Arrange your answers in the order of the questions

1. What is the difference, if any, between

supply prices and expenses of production;
successive costs and contemporaneous costs;
demand curves and utility curves?

2. Would you reckon economic rent among the expenses of production of a commodity? business profits?
   Would you reckon them among the costs of production?
3. “‘Rent is not an element in price’ — such is the classical statement on the subject. . . . But if one defines rent as product imputable to a concrete agent, the impossibility of maintaining such a claim becomes apparent. Even if one were to restrict the term rent to the product created by land, the claim that it is not an element in adjusting market values would be absurd; for it would amount to saying that a certain part of the output of every kind of goods has no effect on their market value. The ‘price’ referred to in the formula is, of course, the market value expressed in units of currency.” What do you say?
4. “That capital is productive has often been questioned, but no one would deny that tools and other materials of production are useful; yet these two propositions mean exactly the same when correctly understood. Capital consists primarily of tools and other materials of production, and such things are useful only in so far as they add something to the product of the community. Find out how much can be produced without any particular tool or machine, and then how much can be produced with it, and in the difference you have the measure of its productiveness.”
   What would Böhm-Bawerk say to this? J. B. Clark? What is your own view?
5. Böhm-Bawerk remarks that the theory which he has put forward bears “a certain resemblance” to the wages fund theory of the older English School, but differs from it in various ways, one of which is “the most important.” What are the points of resemblance? and what is this “most important” difference?

Questions 6 and 7 may be treated as one, if you prefer; and questions 8 and 9 may also be so treated.

6. “It may well be asked whether a method [of measuring utility] that needs so much guarding and explaining is worth adopting at all. The answer is that the principle of the declining marginal significance is fundamental. The doctrine of surplus value in the thing bought, over and above the value of the price paid, is an inevitable deduction from it.” Do you agree?
7. Adventitious utility, conspicuous waste, consumer’s surplus, organic welfare. How are these related? or not related?
8. Ricardo’s theory of cost of production is so expressed as almost to invite misunderstanding. In consequence there is a widely spread belief that it has needed to be reconstructed by the present generation of economists. . . . On the contrary the foundations of the theory as they were left by Ricardo remain intact; much has been added to them and very much has been built upon them, but little has been taken from them. He knew that demand played an essential part in governing value, but he regarded its action as less obscure than that of cost of production, and therefore passed it lightly over in the notes which he made for the use of his friends, and himself; for he never essayed to write a formal treatise: he regarded cost of production as dependent — not, as Marx asserted him to have done, on the mere quantity of labor used up in production, but — on the quality as well as quantity of that labor; together with the amount of stored up capital needed to aid labor, and the length of time during which such aid was invoked.” Do you agree?
9. “The incomes which are being earned by all agents of production, human as well as material, and those which appear likely to be earned by them in the future, exercise a ceaseless influence on those persons by whose action the future supplies of these agents are determined. There is a constant tendency towards a position of normal equilibrium, in which the supply of each of these agents shall stand in such a relation to the demand for its services, as to give to those who have provided the supply a sufficient reward for their efforts and sacrifices. If the economic conditions of the country remained stationary sufficiently long, this tendency would realize itself in such an adjustment of supply to demand, that both machines and human beings would earn generally an amount that corresponded fairly with their cost of rearing and training, conventional necessaries as well as those things which are strictly necessary being reckoned for.”
   Is this in accord with Ricardo’s view? with Mill’s view? with Cairnes’s? What is your own opinion?

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1927-28

Course Enrollment: Economics 11
1927-28

[Economics] 11. Professor Taussig.—Economic Theory

Total 56: 43 Graduates, 2 Graduate Business, 6 Seniors, 1 Junior, 4 Radcliffe.

Source: Harvard University. Reports of the President and Treasurer of Harvard College, 1927-28, p. 75.

HARVARD UNIVERSITY
ECONOMICS 11
Mid-year Final Examination
1927-28

Arrange your answers strictly in the order of the questions

1. Wherein is there resemblance, wherein difference, between Walker’s long-run theory of wages and Cairnes’s?
2. “Ricardo’s theory of cost of production is so expressed as almost to invite misunderstanding. In consequence there is a widely spread belief that it has needed to be reconstructed by the present generation of economists….On the contrary the foundations of the theory as they were left by Ricardo remain intact; much has been added to them and very much has been built upon them, but little has been taken from them. He knew that demand played an essential part in governing value, but he regarded its action as less obscure than that of cost of production, and therefore passed it lightly over in the notes which he made for the use of his friends, and himself; for he never essayed to write a formal treatise: he regarded cost of production as dependent—not, as Marx asserted him to have done, on the mere quantity of labor used up in production, but—on the quality as well as quantity of that labor; together with the amount of stored up capital needed to aid labor, and the length of time during which such aid was invoked.”
   Do you agree?
3. What is the short period view, what the long period view (1) of Mill as regards the level of wages; (2) of Marshall as regards differences of wages in different occupations?
4. Does Marshall conclude that money costs of production measure real costs of production? that value is ultimately determined by a constant supply price?
5. “An increase in the aggregate volume of production will generally increase the size, and therefore the internal economies possessed by a representative firm; it will always increase the external economies to which the firm has access; and then will enable it to manufacture at a less proportionate cost of labour and sacrifice than before.”
   Why? or why not?
6. Explain the criticisms or objections to the notion of consumer’s surplus which have been urged on the ground of (a) inequalities of income, (b) “esteem value” or “adventitious value,” (c) identity in the yield of satisfaction from each constituent of a given stock. Which among these objections if any, tell strongly against Marshall’s suggestion regarding the use of taxes and bounties?
7. “The extra income derived from rare natural abilities bears a closer analogy to the surplus produce from the holding of a settler who has made an exceptionally lucky selection, than to the rent of land in an old country.”
   Why? or why not?
8. (a) “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.” Marshall.
   (b) A critic has remarked: “In that which is most characteristic, original and positive in his work, Professor Marshall has left the old concept of rent far behind. The logical consequence of his treatment is that all the division fences between the different sorts of material wealth have been leveled; and that rent is the income of an material agent….”
   What have you to say?

HARVARD UNIVERSITY
ECONOMICS 11
Year-end Final Examination
1927-28

1. Explain in the briefest terms

Expenses of Production.
Opportunity Cost.
“Cost” as used by Cairnes.
“Cost” as used by Marshall.
“Cost” as used by Böhm-Bawerk.

2. What do you conceive to be meant by “pure profits”? and what is the place of pure profits in the theory of cost and value?
3. “‘Rent is not an element in price’ — such is the classical statement on the subject. It even expresses a view that is now prevalent. The expression itself however, is vague. It seems to mean that the fact of rent plays no part in the adjustment of values, and that things would exchange for one another in exactly the ratios in which they now do, if there were no such thing as rent. But if one defines rent as product imputable to a concrete agent, the impossibility of maintaining such a claim becomes apparent. Even if one were to restrict the term rent to the product created by land, the claim that it is not an element in adjusting market values would be absurd; for it would amount to saying that a certain part of the output of every kind of goods has no effect on their market value. The ‘price’ referred to in the formula is, of course, the market value expressed in units of currency.”
   What do you say?
4. Resemblances and differences between the “discounted marginal product” theory of wages and the specific product theory.
5. “Interest under Socialism” as discussed by Böhm-Bawerk.
6. What are “fair wages,” in Marshall’s view? Clark’s? Böhm-Bawerk’s? Your own?

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1928-29

Course Enrollment: Economics 11
1928-29

[Economics] 11. Professor Taussig.—Economic Theory

Total 39: 28 Graduates, 1 Graduate Business, 1 Senior, 1 Junior, 8 Radcliffe.

Source: Harvard University. Reports of the President and Treasurer of Harvard College, 1928-29, p. 72.

HARVARD UNIVERSITY
ECONOMICS 11
Mid-year Final Examination
1928-29

Answer the questions in the order in which they are put; and answer them all, distributing your time accordingly.

1. It had been maintained by Adam Smith and others that:
   (1) profits are lowered by the mutual competition of merchants;
   (2) taxes on necessaries cause money wages to rise;
   (3) a rise in money wages means a rise in all prices;
   (4) taxes on wages lessen farmer’s profits, and thus lower rent.
   What would Ricardo say under each head?
2. It has been said by German writers that there is a certain degree of truth in the wages fund doctrine, in that the capital of employers is the immediate source from which wages come; but the ultimate source is in the incomes of consumers. What would Ricardo say to this? Walker? your own view?
3. In the familiar diagram representing conditions of increasing costs for an agricultural commodity, does the supply curve indicate expenses of production or “real costs” of production?
   In a similar diagram for a manufactured commodity, based on accountants’ figures of costs, does the supply curve indicate expenses or “real costs”?
   Are the two curves different in meaning, or do they indicate essentially the same situation?
4. “We have next to study the conditions of business management; and in so doing we must have in view a problem that will occupy our attention as we go on. It arises from the fact that, though in manufacturing at least every individual business, so long as it is well managed, tends to become stronger the larger it has grown; and though prima facie we might therefore expect to see large firms driving their smaller rivals completely out of many branches of industry, yet they do not in fact do so.”
   What is Marshall’s solution of the problem thus stated by him?
5. “That part of a man’s income which he owes to the possession of extraordinary natural abilities is a free boon to him; and from an abstract point of view bears some resemblance to the rent of other free gifts of nature, such as the inherent properties in land. But in reference to normal prices, it is to be classed rather with the profits derived by free settlers from the cultivation of new land, or again with the find of the pearl-fisher.”
   On what grounds does Marshall rest this conclusion? What would Walker say to it?
6. How, if at all, did Mill modify Adam Smith’s conclusions on the causes of the differences of wages in different employments? Cairnes modify Mill’s? Marshall modify Cairnes’s?
7. “It might be supposed at first thought that . . . the area above the horizontal line (in the usual diagram) represents consumers’ surplus. This is not exactly true, however, and that for two reasons. In the first place, the satisfaction of additional wants which a lower price makes possible may make the more important wants less intense. A man might be willing to give ten dollars for a cord of wood in order that at least one room in his house could be heated during the winter. He might also be willing to give seven dollars a cord for two cords, so as to heat two rooms, but the heating of the second room might render the heating of the first room less important to him. He might not be willing, for example, to give ten dollars plus seven dollars in order to have the two rooms heated. In the second place, utility itself is to a large extent affected by price. So far as our purchases satisfy what has been called the desire for distinction, or represent what Thorstein Veblen has termed ‘conspicuous consumption,’ a lowering of the price of a commodity would lessen its utility to us.”
   Give your opinion on these objections; and consider which of them, if either, would necessarily tell against Marshall’s suggestion concerning bounties and taxes.

HARVARD UNIVERSITY
ECONOMICS 11
Year-end Final Examination
1928-29

Arrange your answers in the order of the questions.
Two questions may be omitted.

1. Resemblances and differences between Ricardo and Boehm-Bawerk.
2. The following have been suggested, by one writer or another, as the grounds on which the distinction between interest and rent turns:
   (1) Land is fixed in amount, instruments made by man are not.
   (2) Competition equalizes the return on instruments made by man but not that on land.
   (3) The returns on land and instruments alike depend on marginal productivity.
   Examine critically but briefly each statement; and give your own view.
3. Would interest necessarily persist in a socialist state? The rent of land?
4. “Quasi-rents are the net profits made in years of exceptionally good trade, or by business men of exceptional natural ability.”
   “Business profits are the net return secured in years of exceptionally good trade, or by business men of exceptional natural ability.”
   Do you agree in either case?
5. (a) “The output of the least efficient producers forms part of the total output whose magnitude helps to determine price. But to argue from this that there is some special relation between price and the costs of the least efficient producers is a complete non sequitur.”
   (b) “‘ Rent is not an element in price’ — such is the classical statement on the subject. It even expresses a view that is now prevalent. The expression itself, however, is vague. It seems to mean that the fact of rent plays no part in the adjustment of values, and that things would exchange for one another in exactly the ratios in which they now do, if there were no such thing as rent. But if one defines rent as product imputable to a concrete agent, the impossibility of maintaining such a claim becomes apparent. Even if one were to restrict the term rent to the product created by land, the claim that it is not an element in adjusting market values would be absurd; for it would amount to saying that a certain part of the output of every kind of goods has no effect on their market value. The ‘price’ referred to in the formula is, of course, the market value expressed in units of currency.”
   What is your opinion?
6. Are there important distinctions between these propositions:
   (a) Wages are determined by the specific product of labor;
   (b) Wages are determined by the imputed product of labor;
   (c) Wages are determined by the discounted marginal product of labor.
7. “It is evident that, if the supply [of labor] is increased, whether the increase comes about through an addition to the number of workpeople or through an addition to their average capacity, the national dividend must be increased. Our problem is to ascertain the effect that will be produced upon the aggregate real income of labour. The analysis set out in the preceding section shows that the marginal net product of labour, in terms of things in general, and, therefore, its real earnings per unit, must be diminished. Whether its aggregate earnings will be increased depends, therefore, on whether the elasticity of the demand for labour in general is greater or less than unity. If this elasticity is greater than unity, labour in the aggregate will receive a larger absolute quantity of dividend than before; whereas, if the elasticity is less than unity, it will receive a smaller absolute quantity. It is, therefore, necessary to determine whether in fact the elasticity of demand is greater or less than unity.” Do you agree? and what is your conclusion on the elasticity of demand for labor?
8. Compare Hobson’s analysis of “costless” savings with that of other recent writers.

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1929-30

Course Enrollment: Economics 11
1929-30

[Economics] 11. Professor Taussig.—Economic Theory

Total 53: 44 Graduates, 3 Seniors, 5 Radcliffe, 1 Other.

Source: Harvard University. Reports of the President and Treasurer of Harvard College, 1929-30, p. 78.

HARVARD UNIVERSITY
ECONOMICS 11
Mid-year Final Examination
1929-30

Arrange your answers in the order of the questions. Answer ALL the questions.

1. “The ordinary bargain between labour and capital is that the wage-receiver gets command over commodities in a form ready for immediate consumption, and in exchange carries his employer’s goods a stage further towards being ready for immediate consumption. But while this is true of most employees, it is not true for those who finish the process of production. For instance, those who put together and finish watches, give to their employers far more commodities in a form ready for immediate consumption, than they obtain as wages. And if we take one season of the year with another, so as to allow for seed and harvest time, we find that workmen as a whole hand over to their employers more finished commodities than they receive as wages.”
   What do you say to this? and what is its bearing on the questions raised by George and Walker?
2. “This principle of the division of the produce of labour and capital between wages and profits, which I have attempted to establish, appears to me so certain, that excepting in the immediate effects, I should think it of little importance whether the profits of stock or the wages of labour, were taxed. . . . A tax on wages does not fall on the landlord, but it falls on the profits of stock: it does not ‘entitle and oblige the master manufacturer to charge it with a profit on the prices of his goods,’ for he will be unable to increase their price, and therefore he must himself wholly and without compensation pay such a tax.”
   What led Ricardo to the conclusions stated in this passage?
3. (a) “As the inquiry to which I wish to draw the reader’s attention relates to the effect of the variations in the relative value of commodities, and not in their absolute value, it will be of little importance to examine into the comparative degree of estimation in which the different kinds of human labour are held. We may fairly conclude that whatever inequality there might originally have been in them, whatever the ingenuity, skill, or time necessary for the acquirement of one species of manual dexterity more than another, it continues nearly the same from one generation to another; or at least that the variation is very inconsiderable from year to year, and therefore can have little effect, for short periods, on the relative value of commodities.”
   (b) “Although general wages, whether high or low, do not affect values, yet if wages are higher in one employment than another, or if they rise and fall permanently in one employment without doing so in others, these inequalities do really operate upon values. . . . When the wages of an employment permanently exceed the average rate, the value of the thing produced will, in the same degree, exceed the standard determined by mere quantity of labour. Things, for example, which are made by skilled labour, exchange for the produce of a much greater quantity of unskilled labour; for no reason but because the labour is more highly paid.” Mill.
   What would Cairnes say about the proposition here laid down? What would Marshall say? What are your own opinions?
4. Consider whether marginal cost determines price, or price determines marginal cost, in the following cases:
   (a) the short-period price of a manufactured commodity;
   (b) the short-period (seasonal) price of an agricultural commodity;
   (c) the long-period price of a manufactured commodity;
   (d) the long-period price of an agricultural commodity;
   (e) the long-period value of gold.
5. Describe the supply curves (particular costs curves) which we have for agricultural products; indicate what they signify; and indicate also in what principles and in what manner such curves should be constructed in order to make them fit into the “orthodox” reasoning about the rent of land, or to serve as test or verification for that reasoning.
6. (a) “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.”
   (b) A critic has remarked: “In that which is most characteristic, original and positive in his work, Professor Marshall has left the old concept of rent far behind. The logical consequence of his treatment is that all the division fences between the different sorts of material wealth have been levelled; and that rent is the income of any material agent. . . .”
   Why should Marshall consider the line of cleavage explained in (a) to be the most important? If he does, must he admit the “logical consequence” stated in (b)?
7. “Curves of total satisfaction are purely abstract; that is to say, they represent the subjective value attached by a consumer to each increment of the commodity, or the amount he would purchase at any given price, apart from any consideration of the causes that might be supposed in actual experience to limit his supply or raise the price of the commodity, and apart from all reactions upon the price or other commodities. They are also isolated; that is to say, we cannot conceive of a system of such curves being so constructed as to be valid simultaneously. Nor can we sum their areas, taken successively, without omitting some values and counting others more than once. Nor can we read on them the effect of a rise or fall in the consumer’s income. Nevertheless their general form has a high theoretical significance. . . .
   It may well be asked whether a method that needs so much guarding and explaining is worth adopting at all. The answer is that the principle of declining marginal significances is absolutely fundamental. The doctrine of surplus value in the thing bought over and above the value of the price paid, is an inevitable deduction from it.”Explain, and give your own views.

HARVARD UNIVERSITY
ECONOMICS 11
[Year-end Final Examination]
1929-30

Arrange your answers in the order of the questions.

1. Explain briefly,

Simple Competition
Monopolistic Competition
Bilateral Monopoly
Simple Monopoly
Discriminating Monopoly

2. What is the elasticity of demand for labor, on the reasoning of the Wages Fund doctrine? on that of Böhm-Bawerk? on that of Pigou? What is your own view?
3. What are “pure profits”? and what would be “impure” profits? Can you distinguish? If so, how and why?
4. “That able but wrongheaded man, David Ricardo, shunted the car of Economic Science on to a wrong line, on which it was further urged toward confusion by his equally able and wrongheaded admirer John Stuart Mill.”
   “Ricardo’s theory of cost of production is so expressed as almost to invite misunderstanding. In consequence, there is a widely spread belief that it has needed to be reconstructed by the present generation of economists. . . . On the contrary the foundations of the theory as they were left by Ricardo remain intact; much has been added to them and very much has been built upon them, but little has been taken from them.” Marshall.
   What ground for either view?
5. Give the rest of your time — at least one hour — to a discussion of The Universal Law of Diminishing Returns.

Source for examination questions: Harvard University Archives. Prof. F. W. Taussig, Examination Papers in Economics 1882-1935 (Scrapbook).

Image Source:  Harvard Class Album, 1934.

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. Up to the time when 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 ; 1920-22 have been posted as well.  

This post begins with the printed course description from 1924 and a link to a list of reading assignments from 1923-24 taken from a student’s notes of the lectures and then addes the enrollment data and three years of semester final examinations for the years 1922-23 through 1924-25.

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Course Description: Economics 11
1924-25

ECONOMIC THEORY AND METHOD

Economic Theory. Mon., Wed., Fri., at 2. Professor Taussig.

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. A careful examination is made of the writings of Ricardo and J. S. Mill, and of representative modern economists, such as Marshall, Böhm-Bawerk, Clark.

Source: Division of History, Government, and Government. Official Register of Harvard University, Vol. XXI, No. 22 (April 30, 1924), p. 71.

The course reading assignments for Economics 11 according to Frank W. Fetter’s student notes from 1923-24 was posted earlier.

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1922-23

Course Enrollment: Economics 11, 1922-23

[Economics] 11. Professor Taussig.—Economic Theory

Total 42: 36 Graduates, 3 Graduate Business, 2 Seniors, 1 Junior

Source: Harvard University. Reports of the President and Treasurer of Harvard College, 1922-23, p. 92.

1922-23
HARVARD UNIVERSITY
ECONOMICS 11
Midyear-Exam

Arrange your answers in the order of the questions

1. (a) “Given machinery, raw materials, and a year’s subsistence for 1000 laborers, does it make no difference with the annual product whether those laborers are Englishmen or East-Indians?”
   (b) “In some exceptional industries it happens that the employer realizes on his product in a shorter time than this (a week), so that the laborer is not only paid out of the product of his industry, but actually advances to the employer a portion of the capital on which he operates.”
   (c) “On American whaling ships the custom is not to pay fixed wages, but a “lay,” or a portion of the catch, which varies from a sixteenth to a twelfth to the captain down to a three-hundredth to the cabin-boy. Thus, when a whaleship comes into New Bedford or San Francisco after a successful cruise, she carries in her hold the wages of her crew, as well as the profits of her owners, and an equivalent which will reimburse them for all the stores used up during the voyage. Can anything be clearer than that these wages — this oil and bone which the crew of the whaler have taken — have not been drawn from capital, but are really a part of the produce of their labor”?
   Are these three situations essentially similar? And what is the bearing of each of them on the question under debate?
2. “The extra gains which any producer or dealer obtains through superior talents for business, or superior business arrangements, are very much of a similar kind (analogous to rent). If all his competitors had the same advantages, and used them, the benefit would be transferred to their customers, through the diminished value of the article; he only retains it for himself because he is able to bring his commodity to market at a lower cost, while its value is determined by a higher. All advantages, in fact, which one competitor has over another, whether natural or acquired, whether personal or the result of social arrangements, bring the commodity, so far, into the Third Class, and assimilate the possessor of the advantage to a receiver or of rent.” Did Walker add anything of essential significance to this statement of Mill’s?
   Mill, Principles of Pol. Econ., pp. 476-77.
3. (a) “It is not to be understood that the natural price of labour, estimated even in food and necessaries, is absolutely fixed and constant. It varies at different times in the same country, and very materially differs in different countries. It essentially depends on the habits and customs of the people.”
   (b) “A tax on raw produce, and on the necessaries of the labourer, would have another effect — it would raise wages. From the effect of the principle of population on the increase of mankind, wages of the lowest kind never continue much above that rate which nature and habit demand for the support of the labourers. This class is never able to bear any considerable proportion of taxation; and, consequently, if they had to pay 8s. per quarter in addition for wheat, and in some smaller proportion for other necessaries, they would not be able to subsist on the same wages as before, and to keep up the race of labourers. Wages would inevitably and necessarily rise.”
   (c) “If I have to hire a labourer for a week, and instead of ten shillings I pay him eight, no variation having taken place in the value of money, the labourer can probably obtain more food and necessaries with his eight shillings than he before obtained for ten.”
   Are these several statements of Ricardo’s consistent?
4. In which of the following passages is the tendency to diminishing returns treated as referring to the amount of the produce, in which as referring to the value of the produce? Which method of treatment seems to you the proper one?

(a) “Whatever rise may take place in the price of corn, in consequence of the necessity of employing more labor and capital to obtain a given additional quantity of produce, such rise will always be equalled by the additional rent or additional labor employed. . . . Whether the produce belonging to the farmer be 180, 170, 160, or 150 quarters, he always obtains the same sum of £720 for it; the price increasing in an inverse proportion to the quantity.” — Ricardo.
(b) The Channel Islands obtain agricultural produce to the value of £50 to each acre of the aggregate surface of the island. Fifty pounds’ worth of agricultural produce from each acre of the land is sufficiently good. But the more we study the modern achievements of agriculture the more we see that the limits of productivity of the soil are not attained. . . . I can confirm Mr. Bear’s estimate to the effect that under proper management even a cool greenhouse, which covers 4050 square feet, can give a gross return of £180.” — Kropotkin.
(c) “Ricardo, and the economists of his time generally were too hasty in deducing this inference [tendency to increased pressure] from the law of diminishing return; and they did not allow enough for the increase of strength that comes from organization. But in fact every farmer is aided by the presence of neighbours, whether agriculturists or townspeople. . . . If the neighbouring market town expands into a large industrial centre, all his produce is worth more; some things which he used to throw away fetch a good price. He finds new openings in dairy farming and market gardening, and with a larger range of produce he makes use of rotations that keep his land always active without denuding it of any one of the elements that are necessary for its fertility.” — Marshall.

5. “Ricardo expresses himself as if the quantity of labour which it costs to produce a commodity and bring it to the market, were the only thing on which its value depended. But since the cost of production to the capitalist is not labour but wages, and since wages may be either greater or less, the quantity of labour being the same; it would seem that the value of the product cannot be determined solely by the quantity of labour, but by the quantity together with the remuneration; and that values must partly depend on wages.” — J. S. Mill.
   What would Ricardo say to this? and in what way, according to Mill, do wages affect value?
6. Explain briefly external economies; internal economies.
   It has been said that internal economies cause an increase of demand, external economies result from an increase of demand. Do you agree?
   Suppose internal economies to become greater indefinitely, as output enlarges; what consequences would ensue? Suppose the same for external economies, what consequences?
7. “There is one general law of demand: the greater the amount to be sold, the smaller must be the price at which it is offered in order that it may find purchasers. . . . The one universal rule to which the demand curve conforms is that it is inclined negatively throughout the whole of its length.”
   “The demand curve over short periods — which may be a matter of weeks or months — is not necessarily inclined throughout in the same direction. It may be inclined positively. And similarly the supply curve does not necessarily have that constant positive inclination which is usually assumed. In the course of the higgling of the market this in its turn may have a negative inclination.”
   Whom do you believe to be the writers of these passages? Can they be harmonized? If so, how? If not, why not?
8. The series of hypotheses made by Marshall concerning “meteoric showers of stones harder than diamonds”; the nature of the incomes derived by those finding them in the several cases; and the general principle which is thus illustrated.

1922-23
HARVARD UNIVERSITY
ECONOMICS 11
Year-end Final Exam

Arrange your answers in the order of the questions.

1. “Labour of different kinds differently rewarded. This no cause of variation in the relative value of commodities.” On what grounds did Ricardo reach the conclusion summarized by him in these sentences? Is it consistent with the general trend of his theory of value?
2. “This doctrine [about non-competing groups] was given its name by J. E. Cairnes. . . . He supposed it to be a rare and remarkable exception to what he believed was the general rule, that the cost-of-production regulated the price of goods — essentially a “labor-theory of value.” We regard it merely as a helpful way of presenting a particular case of the general rule that the value of agents is derived from their products when the market is viewed as a whole.”
   What would Cairnes say to this? What is your own view on the “general rule” stated in the concluding sentence?
3. “Suppose that society is divided into a number of horizontal grades, each of which is recruited from the children of its own members; and each of which has its own standard of comfort, and increases in numbers rapidly when the earnings to be got in it rise above, and shrinks rapidly when they fall below that standard. Suppose, then, that parents can bring up their children to any trade in their own grade, but cannot easily raise them above it and will not consent to sink them below it. . . .
   On these suppositions, would Cairnes say that value was determined by cost? What would Marshall say?
4. (a) “We have next to study the conditions of Business Management; and in so doing we must have in view a problem that will occupy our attention as we go on. It arises from the fact that, though in manufacturing at least nearly every individual business, so long as it is well managed, tends to become stronger the larger it has grown; and though prima facie we might therefore expect to see large firms driving their smaller rivals completely out of many branches of industry, yet they do not in fact do so.”
   (b) “Since then business ability in command of capital moves with great ease horizontally from a trade which is overcrowded to one which offers good openings for it; and since it moves with great ease vertically, the abler men rising to the higher posts in their own trade, we see, even at this early state of our inquiry, some good reasons for believing that in modern England the supply of business ability in command of capital accommodates itself, as a general rule, to the demand for it; and thus has a fairly defined supply price.”
   What is Marshall’s solution of the problem stated in the first of these passages? What sort of supply schedule do you suppose him to have in mind in the second? What would Walker say on both passages?
5. “If the production of any, even the smallest, portion of the supply, requires as a necessary condition a certain price, that price will be obtained for all the rest. . . . The value, therefore, of an article (meaning its natural, which is the same with its average value) is determined by the cost of that portion of the supply which is produced and brought to market at the greatest expense. This is the Law of Value of the third of the three classes into which all commodities are divided. . . . Rent, therefore, forms no part of the cost of production which determines the value of agricultural produce.”
   By whom do you suppose this passage to have been written? What would Marshall say to it?
6. “‘Rent is not an element in price’ — such is the classical statement on the subject. . . . But, if one defines rent as product imputable to a concrete agent, the impossibility of maintaining such a claim becomes apparent. Even if one were to restrict the term rent to the product created by land, the claim that it is not an element in adjusting market values would be absurd; for it would amount to saying that a certain part of the output of every kind of goods has no effect on their market value. The ‘price’ referred to in the formula is, of course, the market value expressed in units of currency.” What do you say?
7. “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 labour 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.” Why? or why not?
8. (a) “Capital-goods imply waiting for the fruits of labor. Capital, on the contrary, implies the direct opposite of this: it is the means of avoiding all waiting. It is the remover of time intervals, — the absolute synchronizer of labor and its fruits. It is the means of putting civilized man in a position which, so far as time is concerned, is akin to that in which the rude forester stood, when he broke off limbs of dead trees and laid them on his fire. The very appliances which, in their extent and complexity, seem in one view to mean endless waiting, in another view mean no waiting at all but the instantaneous appearance of the final fruits of every bit of labor that is put forth.”
   (b) “Tools are productive, but time is the condition of getting tools — this is the simple and literal fact. The roundabout or time-consuming mode of using labor insures efficient capital-goods. . . . When the hatchet has worn itself completely out, and the fruits of using it are before the man in the large dwelling, he may look backward to the beginning of the process, when he faced nature empty-handed, and say: ‘Labor has done it all. Work and waiting have given me my goods.’ The working and the waiting have, indeed, insured the hatchet, as an incidental result of this way of working. Production that plans to put its fruits into the future will create capital-goods as an immediate effect, but labor and time are enough to make the ultimate effect certain. Let the man work intelligently through an interval of time, and the production of consumers’ wealth is sure.”
   (c) “The effort of postponement, or the preference of uncertain future for certain present consumables, necessary for supplying capital, if it is an effort, is a continuous one lasting all the time the capital is in use. The critic who asks, why a single ‘act of abstinence’ which is past and done with should be rewarded by a perpetual payment of annual interest, fails to realise that, so far as saving involves a serviceable action of the saver, it goes on all the time that the saver lies out of the full present enjoyment of his property, i.e. as long as his savings continue to function as productive instruments.”
   What would Clark say to the three propositions here stated? What are your own views?
   By whom do you suppose the passages to have been written?

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 1923-24

Course Enrollment: Economics 11, 1923-24

[Economics] 11. Professor Taussig.—Economic Theory

Total 51: 37 Graduates, 5 Graduate Business, 3 Seniors, 6 Radcliffe

Source: Harvard University. Reports of the President and Treasurer of Harvard College, 1923-24, p. 107.

1923-24
HARVARD UNIVERSITY
ECONOMICS 11
Mid-year Exam

Arrange your answers in the order of the questions

1. What bearing has the turn-over of retail shops on the question whether the reward of labor is derived from the contemporaneous product of labor?
2. “Suppose I employ twenty men at an expense of £1000 for a year in the production of a commodity, and at the end of the year I employ twenty men again for another year, at a further expense of £1000 in finishing or perfecting the same commodity, and that I bring it to market at the end of two years, if profits be 10 per cent, my commodity must sell for [?]. Another man employs precisely the same quantity of labour, but he employs it all in the first year; he employs forty men at an expense of £2000, and at the end of the first year he sells it with 10 per cent profit, or for [?].
   Give the figures which Ricardo put into the bracketed spaces, and explain in what way he reached his figures.
   What principle does he mean to illustrate by examples of this kind?
3. “Thus, in a charitable institution, where the poor are set to work with the funds of benefactors, the general prices of the commodities, which are the produce of such work, will not be governed by the peculiar facilities afforded to these workmen, but by the common, usual, and natural difficulties which every other manufacturer will have to encounter. The manufacturer enjoying none of these facilities might indeed be driven altogether from the market if the supply afforded by these favoured workmen were equal to all the wants of the community; but if he continued the trade, it would be only on condition that he should derive from it the usual and general rate of profits on stock; and that could only happen when his commodity sold for a price proportioned to the quantity of labour bestowed on its production.”
   What principle was Ricardo trying to elucidate in this passage? Is his reasoning sound?
4. “The amount of produce raised, and therefore the position of the margin of cultivation (i. e., the margin of the profitable application of capital and labour to good and bad land alike) are both governed by the general conditions of demand and supply. They are governed on the one hand by demand; that is, by the numbers of the population who consume the produce, the intensity of their need for it, and their means of paying for it: and on the other hand by supply; that is, by the extent and fertility of the available land, and the numbers and resources of those ready to cultivate it. Thus cost of production, eagerness of demand, margin of production, and price of the produce mutually govern one another: and no circular reasoning is involved in speaking of any one as in part governed by the others.”
   Is this different from Ricardo’s doctrine on the relation between cost of production, value, rent? Is it inconsistent with Ricardo’s doctrine?
5. “In short periods, that is, in periods short relatively to the time required to make and bring into full bearing improvements . . . no such direct influence on supply price is exercised by the necessity that such improvements should in the long run yield net incomes sufficient to give normal profits on their cost. And therefore when we are dealing with such periods, these incomes may be regarded as quasi-rents which depend on the price of the produce.”
   Would you regard “these incomes” as quasi-rents, in Marshall’s sense? Would you consider this a good definition of quasi-rents?
6. Indicate summarily Mill’s doctrines regarding

the law of the accumulation of capital;
the factors on which the rate of profits depends;
the tendency of profits to a minimum.

Are they consistent with each other? Which of them, if any, is in accord with Ricardo’s doctrine on profits?

7. “An increase in the aggregate volume of production of anything will generally increase the size, and therefore the internal economics possessed by a representative firm; it will always increase the external economies to which the firm has access; and thus it will enable it to manufacture at a less proportionate cost of labour and sacrifice than before.”
   Why “generally” in the first case? Why “always” in the second? or why not in either case?
8. Explain

cost of production,
expenses of production,
supply price,
contemporaneous costs curve,
successive costs curve.

9. “Among 1317 farms in one county in New York, 13 farms yielded labor incomes of over $2000. . . . Part of this difference was due to the soils being better than the average, and part was due to better management.” In the book from which this passage is taken, “labor income” is ascertained by deducting from the farm receipts (a) expenses incurred in operating the farm, (b) the interest which the farmer would have got if, instead of investing in the farm, he had lent his money at the current rate. Would you accept this definition of labor income?
   Does “economic rent” appear in the analysis? If so, where and how?

1923-24
HARVARD UNIVERSITY
ECONOMICS 11
Year-end Final Exam

Arrange your answers strictly in the order of the questions

1. What is left, in the present stage of economic theory, of Ricardo’s doctrine of value? of wages? of profits?
2. “When considering costs from the social point of view, when inquiring whether the cost of attaining a given result is increasing or diminishing with changing economic conditions, then we are concerned with the real costs of efforts of various qualities, and with the real cost of waiting. If the purchasing power of money in terms of effort has remained about constant, and if the rate of remuneration for waiting has remained about constant, then the money measure of costs corresponds to the real costs; but such a correspondence is never to be assumed lightly.” — Marshall.
   Consider separately the two propositions stated in these sentences, and give your opinion on them.
3. “Let us now drop the supposition that labour is so mobile as to ensure equal remuneration for equal efforts, throughout the whole of society, and let us approach much nearer to the actual conditions of life by supposing that labour is not all of one industrial grade, but of several. Let us suppose that parents always bring up their children to an occupation in their own grade; that they have a free choice within that grade, but not outside it. Lastly, let us suppose that the increase of numbers in each grade is governed by other than economic causes: as before it may be fixed, or it may be influenced by changes in custom, in moral opinion, etc.” — Marshall.
   On these suppositions, is value determined by “real costs.”? Wherein, if at all, do the suppositions differ from those made by Marshall in earlier editions?
4. “While we [the Austrians] say that the value of means of production, that is of cost-goods, is determined by the value of their products, the usual way of interpreting the law is to say that the value of their products, the usual way of interpreting the law is to say that the value of the products is determined by the amount of their costs, — by the value of the means of production out of which they are made.” — Böhm-Bawerk.
   What are grounds of this conclusion? What is your own view?
5. “The difference between land and other durable agents is mainly one of degree; and a great part of the interest of the study of the rent of land arises from the illustration it affords of a great principle that permeates every part of economics.” — Marshall.
   Why is the difference mainly one of degree? and what is the great permeating principle?
6. State the precise point on which Böhm-Bawerk rests his contention that there is no specific productivity of capital.
7. Böhm-Bawerk remarks that the theory put forth by him bears a certain resemblance to the wage fund doctrine of the older English school, but differs from it in essentials. Explain the resemblance; point out the difference which Böhm-Bawerk believes to be essential; and give you instructor’s comment on that point of difference.
8. Under the regulation for administering the Excess Profits Tax, while it was levied in the United States, an individual business man liable for this tax was allowed, when declaring his profits, to deduct from his receipts not only all outlays incurred but also (a) eight per cent on his invested capital, (b) a reasonable salary for his own labor of management.
   Were these two allowances in accord with the theoretic treatment of business profits by Clark? by Marshall? by your instructor?

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Course Enrollment: Economics 11, 1924-25

[Economics] 11. Professor Taussig.—Economic Theory

Total 59: 43 Graduates, 2 Seniors, 8 Graduate Business, 6 Radcliffe

Source: Harvard University. Reports of the President and Treasurer of Harvard College, 1924-25, p. 75.

1924-25
HARVARD UNIVERSITY
ECONOMICS 11
Mid-Year Exam

1. “When the labourer maintains himself by funds of his own, as when a peasant-farmer or proprietor lives on the produce of his land, or an artisan works on his own account, they are still supported by capital, that is, by funds provided in advance. The peasant does not subsist this year on the produce of this year’s harvest, but on that of the last. The artisan is not living on the proceeds of the work he has in hand, but on those of work previously executed and disposed of. Each is supported by a small capital of his own, which he periodically replaces from the produce of his labour.” J. S. Mill.
   Are the two situations here described essentially similar? and what general proposition or propositions do they illustrate?
2. “In a charitable institution, where the poor are set to work with the funds of benefactors, the general prices of the commodities, which are the produce of such work, will not be governed by the peculiar facilities afforded to these workmen, but by the common, usual, and natural difficulties which every other manufacturer will have to encounter. The manufacturer enjoying none of these facilities might indeed be driven altogether from the market if the supply afforded by these favoured workmen were equal to all the wants of the community; but if he continued the trade, it would be only on condition that he should derive from it the usual and general rate of profits on stock; and that could only happen when his commodity sold for a price proportioned to the quantity of labour bestowed on its production.”

(a) What principle was Ricardo trying to elucidate in this passage?
(b) It has been argued that labor in a “charitable institution” is usually inefficient, and that nothing of the sort described by Ricardo happens. What would you say? What would Ricardo say?
(c) Trade-unions are opposed to the employment of convict labor, on the ground that it takes work from their members and tends to lower wages. Is their attitude inconsistent with the sort of reasoning Ricardo applies?

3. It has been said:

(a) that the law of diminishing returns refers to the physical quantity of the produce obtained from land, not to the value of the produce;
(b) that the law of diminishing returns refers to the yield from each several piece of land, not to the yield from land at large;
(c) that if all land were equally endowed by nature, and if all were used, the income of the land-owners would be in the nature of a monopoly gain.

Which of these statements would you accept, which reject?

4. “In estimating the exchangeable value of stockings, for example, we shall find that their value, comparatively with other things, depends on the total quantity of labour necessary to manufacture them and bring them to market. First, there is the labour necessary to cultivate the land on which the raw cotton is grown; secondly, the labour of conveying the cotton to the country where the stockings are to be manufactured, which includes a portion of the labour bestowed in building the ship in which it is conveyed, and which is charged in the freight on the goods; thirdly, the labour of the spinner and weaver; fourthly, a portion of the labour of the engineer, smith, and carpenter, who erected the buildings and machinery, by the help of which they are made; fifthly, the labour of the retail dealer, and of many others, whom it is unnecessary further to particularise.”
   What is the bearing of this enumeration on Ricardo’s theory of value? on his theory of profits?
5. “The cause of profit is that labour produces more than is required for its support.”
   “The capitalist may be assumed to make all the advances and receive all the profit. His profit consists of the excess of the produce above the advances.”
   Are these two statements inconsistent with each other?
   Which, if either, was Ricardo’s doctrine? Which Mill’s? Which, if either, comes near the truth?
6. What is the short-period point of view, what the long-period point of view, in the discussion of value at the hands of Mill? of Marshall?
7. Under what circumstances, if under any, would you expect to find

(a) a demand curve positively inclined;
(b) a successive costs curve negatively inclined;
(c) a contemporaneous costs curve negatively inclined?

8. Wherein is the incidence of a tax on dwellings significant as regards the doctrine of quasi-rent? That of a tax on printing-presses?
9. Would you expect an increase of demand for an article to lead to external economies in its production? to internal economies?

1924-25
HARVARD UNIVERSITY
ECONOMICS 11
Year-end Final Exam

Arrange your answers in the order of the questions
Questions 1, 2, 3 may be answered as one, if you prefer

1. Explain summarily

“real” costs of production,
money costs of production,
expenses of production,
supply price,
derived supply price.

2. Would you reckon “economic rent” among the expenses of production of a commodity? Quasi-rent?
3. (a) When a supply curve is laid out for the purpose of representing conditions of diminishing returns, is it supposed to indicate gradations in real costs or in money costs?
   (b) When a supply curve is constructed for a manufactured commodity, on the basis of data furnished by cost accountants, does it indicate gradations in real costs or in money costs?
4. (a) “The ordinary bargain between labour and capital is that the wage-receiver gets command over commodities in a form ready for immediate consumption, and in exchange carries his employer’s goods a stage further towards being ready for immediate consumption. But while this is true of most employees, it is not true of those who finish the process of production. For instance, those who put together and finish watches, give to their employers far more commodities in a form ready for immediate consumption, than they obtain as wages. And if we take one season of the year with another, so as to allow for seed and harvest time, we find that workmen as a whole hand over to their employers more finished commodities than they receive as wages.”
   (b) There is, however, a rather forced sense in which we may perhaps be justified in saying that the earnings of labour depend upon advances made to labour by capital. For — not to take account of machinery and factories, of ships and railroads — the houses loaned to workmen, and even the raw materials in various stages which will be worked up into commodities consumed by them, represent a far greater provision of capital for their use than the equivalent of the advances which they make to the capitalist, even when they work for a month for him.”
   (c) “The whole question, whether goods are advanced by one class of persons to another, in order to tide that other class over an interval of waiting, clearly has reference, not to the relation of capitalists in general to laborers in general, but to the relation of certain sub-groups to other sub-groups in the producing series. It is the sub-group A´´´ [those making finished goods] that must advance the stock of the article A´´´ to all the sub-groups that are below it in the series, if any advances at all are needed; but does it actually make any advances? . . . Nothing of this kind, however, takes place. The stocks of A´´´, B´´´ and C´´´ are drawn upon and replenished simultaneously, like water in a full pipe, with an inflow at one end and an outflow at the other.”

Explain whom you believe to be the writers of these passages; what Böhm-Bawerk would say on the general propositions here laid down; what your own views on them are.

5. “When an artisan or a professional man has exceptional natural abilities, which are not made by human effort, and are not the result of sacrifices undergone for a future gain, they enable him to obtain a surplus income over what ordinary persons could expect from similar exertions following on similar investments of capital and labour in their education and start in life; a surplus which is of the nature of rent.” Would Marshall agree to this as regards (a) the incomes of professional men; (b) business profits? Would you?
6. Explain briefly whether anything in the nature either of a producer’s surplus or of a consumer’s surplus appears as regards (a) instruments made by man and the return secured by their owners; (b) unskilled labor and the wages paid for it.
7. Is interest “earned”? Are business profits “earned”?
8. Are there grounds for maintaining that Clark’s doctrine of the “zone of indifference” is inconsistent with his doctrine of the specific productivity of labor and capital?
9. “Suppose a poor man receives every day two pieces of bread, while one is enough to allay the pangs of positive hunger, what value will one of the two pieces of bread have for him? The answer is easy enough. If he gives away the piece of bread, he will lose, and if he keeps it he will secure, provision for that degree of want which makes itself felt whenever positive hunger has been allayed. We may call this the second degree of utility. One of two entirely similar goods is, therefore, equal in value to the second degree in the scale of utility of that particular class of goods. . . . Not only has one of two goods the value of the second degree of utility, but either of them has it, whichever one may choose. And three pieces have together three times the value of the third degree of utility, and four pieces have four times the value of the fourth degree. In a word, the value of a supply of similar goods is equal to the sum of the items multiplied by the marginal utility.” — Wieser.
   What is meant by “value” in this passage? Do you think the analysis tenable? and do you think it inconsistent with the doctrine of total utility and consumer’s surplus?

Source for examination questions: Harvard University Archives. Prof. F. W. Taussig, Examination Papers in Economics 1882-1935 (Scrapbook).

Image Source: Frank W. Taussig, Harvard Class Album, 1925.

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 were posted for the academic years 1886/87 through 1889/90 along with enrollment data for the course;  material from 1890/91 through 1893/94; 1897-1900 ; and 1904-1909 have been posted as well.  

Sad backstory: The year gap in teaching that immediately preceeeded the years covered below was because Frank Taussig took a leave of absence in 1909-10 that he spent with his wife (Edith Thomas Guild, born 1861) in Saranac Lake, New York where she died on April 15, 1910.
Source: J. A. Schumpeter, A. H. Cole, and E. S. Mason “Frank William Taussig” in Quarterly Journal of Economics, vol. 44, No. 3 (May, 1941), p. 352.

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Enrollment Economics 2
1910-11

For Undergraduates and Graduates:—

[Economics] 2. Professor Taussig.— Economic Theory

Total 42: 16 Graduates, 15 Seniors, 5 Juniors, 2 Sophomores, 4 Others.

Source: Harvard University. Annual Reports of the President and Treasurer of Harvard College, 1910-11, p. 49.

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ECONOMICS 2
Mid-year Examination

Arrange your answers strictly in the order of the questions.

1. Is there a vicious circle in F. A. Walker’s reasoning on the relation between wages and business profits?
2. (a) “The railroads of the United States receive annually hundreds of millions for transporting passengers. These receipts come in day by day, yet the railroad company habitually pays its employees at the close of the week or the close of the month. Here we have a class of services where the employer receives the price of his product before he pays for the labor concerned in its production. . . . Hotel-keepers and, in less degree, boarding-house keepers collect their bills before they pay their cooks, chambermaids, and scullions. Nearly all the receipts of theatre, opera, and concert companies are obtained day by day, although their staff and troupes are borne on monthly or weekly pay-rolls.”
   (b) “In very primitive life the work spent on capital goods and that spent on consumers’ goods are not always synchronous, but organization and the acquirement of a permanent fund of capital make them so. Work to-day, and you eat to-day food that is the consequence of the working. In point of time the canoe-makers are fed as promptly as the fishermen, and this fact is duplicated in every part of the industrial system. . . . The synchronization of labor and its reward does not appear in the industry of primitive beginnings, but is the fruit of organization.”
   Explain what doctrine is attacked by these extracts; whether the reasoning is essentially the same in the two; whether you would accept it in either case; what authors you suppose to have written the passages.
3. (a) “Most commodities render several different kinds of service at the same time. A thing of this kind is to be regarded as a bundle of distinct utilities, tied together by being embodied in a common material object.”
   (b) “A bundle, as a whole, is never a final unit of any one’s consumers wealth; but each element in it is a final utility to some class, and it is that class only whose mental estimate of it fixes its price. . . . There are, then, five prices in the canoe. Expressing the values of the five different services which the canoe renders, they are, respectively, twenty-five, twenty, fifteen, ten, and five dollars. The entire canoe, then, brings seventy-five dollars in the market.”
   (c) “In every such commodity there is a marginal utility, and this is the only that counts in fixing the price of it. Every commodity, except the poorest and cheapest that can be made, is, in effect, such a bundle of service-rendering elements as we have just described. The marginal element in the bundle has a direct influence on prices, but the other elements have none.”
   (d) “If the principle of final utility be applied to entire articles, it will give values that are, in most cases, many fold greater than are the actual values that the dealings of the market establish. . . . Goods of fine quality would then be, as a rule, many times dearer than they are.”
   Consider which of these statements, if any, you would accede to; and whether they are consistent with each other.
4. A limited edition of Roosevelt’s “African Travels,” bound in pigskin, each copy inscribed by the author, is published at $20 a copy. What economic principles are illustrated?
5. Explain the equilibrium of demand and supply, for short periods and for long, in case of a sharp decline in the demand for a commodity made with much fixed capital, under conditions of constant return.
6. Is there quasi-rent, and if so, how do you measure it, in the following cases: —
   (a) A manufacturing plant, whose gross earnings more than cover prime costs, but do not suffice to cover supplementary costs.
   (b) A deep-water harbor site, provided with piers and docks, and let on a long lease at a rental bringing a liberal return on the expense for improvements.
   (c) A handsome dwelling, in a neighborhood deserted by fashion, whose rental is less than interest on the cost of the dwelling.
7. (a) Suppose a tax to be levied at four per cent on the capital value (i.e. on the selling price as it was before the tax) of urban sites used for business purposes. What would be the effect on the rentals of the buildings on the sites, on the prices of things made or sold in the buildings, on the profits of tenants?
   (b) Suppose owners of urban real estate to be prohibited by law from collecting in rentals more than four per cent (net) on the cost of buildings alone; what would be the effect on the prices of things made or sold in the buildings, on the tenants, on the effective utilization of the property?

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ECONOMICS 2
Final Examination
1910-1911

Arrange your nswers in the order of the questions

1. Explain concisely the theories of wages (general wages) set forth by

A. Walker,
J. B. Clark,
A. Marshall,
E. Böhm-Bawerk,
Your instructor, —

and indicate what you consider the weakest point in each.

2. Wherein is there similarity, wherein dissimilarity, between the views of Böhm-Bawerk and Clark on the productivity of Capital?
3. Quasi-rent;
   derived utility;
   the incidence of taxes on building sites and on buildings, —
   among the trains of reasoning suggested by these phrases, which tend to support the doctrine that rent is a return essentially different from interest, which run counter to that doctrine?
4. “That part of a man’s income which he owes to the possession of extraordinary natural abilities is a free boon to him; and from an abstract point of view bears some resemblance to the rent of other free gifts of nature, such as the inherent properties of land. But in reference to normal prices, it is to be classed rather with the profits derived by free settlers from the cultivation of new land, or again with the find of a pearl-fisher.” Why? or why not? Whose doctrine do you suppose this to be?
5. “There is a constant tendency towards a position of normal equilibrium, in which the supply of each of these agents [of production] shall stand in such a relation to the demand for its services, as to give those who have provided the supply a sufficient reward for their efforts and services. If the economic conditions of the country remained stationary sufficiently long, this tendency would realize itself in such an adjustment of supply to demand, that both machines and human beings would earn generally an amount that corresponded fairly with their cost of rearing and training, conventional necessaries as well as those things which are strictly necessary being reckoned for.”
   Whom do you believe to be the writer of this passage? and do you infer that he holds value to be determined in the end by utility or by cost?
6. Under what circumstances, if under any. —
   (1) Will the imposition of an import duty cause the domestic price of the taxed commodity to rise permanently by the amount of the duty.
   (2) Will it cause the price to rise permanently, but by an amount less than the duty;
   (3) Will it cause the price to fall;
   (4) Will it cause the prices of other commodities to fall?
7. After the passage of the tariff act of 1890, a Bohemian firm of pearl button makers transferred their business to the United States, sending over the working people and erecting a factory in the U. S. Was this to the advantage of the people of the U. S.? If so, wherein? If not, why not?

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Enrollment Economics 2
1911-12

For Undergraduates and Graduates:—

[Economics] 2. Professor Taussig.— Economic Theory

Total 54: 23 Graduates, 11 Seniors, 16 Juniors, 2 Sophomores, 2 Others.

Source: Harvard University. Annual Reports of the President and Treasurer of Harvard College, 1911-12, p. 63.

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ECONOMICS 2
Mid-year Examination
1911-12

1. Define concisely: —

(1) Consumer’s surplus,
(2) Producer’s surplus,
(3) Saver’s surplus.

Is Saver’s surplus analogous to the first or to the second?

2. Suppose all persons to have the same income; would it be easier or more difficult to measure consumer’s surplus?
3. (a) “It has sometimes been suggested that if all land were equally advantageous and all were occupied, the income derived from it would partake of the nature of a monopoly rent; but this seems to be an error.” Do you think it an error?
   (b) “Suppose, for instance, that all the meteoric stones in existence were equally hard and imperishable; and that they were all in the hands of a single authority; further, that this authority decided, not to make use of its monopolistic power to restrict production so as to raise the price of its services artificially, but to work each of the stones to the full extent it could be profitably worked (that is up to the margin of pressure so intensive that the resulting product could barely be marketed at a price which covered, with profits, its expenses without allowing anything for the use of the stone),” — would there be “rent”? would there be “monopoly rent”?
4. “There are many infra-marginal savers. As to these, the appropriation of part of their income by the state would not lessen accumulation. The same principle is applicable as in the case of rent proper. A tax on rent falls definitely on the owner, and has no further effect on the supply or the utilization of the source of rent. From this point of view there may be ground for progressive taxation of large funded incomes.” Do you think this well-reasoned?
5. Draw diagrams illustrating (1) the effects of a bounty on a commodity produced under conditions of increasing returns; (2) the effects of a tax on a commodity produced under the same conditions; and consider whether, taking account of consumer’s surplus, there is likely to be a net gain or loss in either case.
6. Explain the distinction between external and internal economies; and consider wherein a tendency to increasing returns has different consequences according as it is due to external or to internal economies.
7. Explain what is meant by “two-sided competition,” and the determination of price by the subjective valuations of marginal pairs; and consider the significance of the following passage: “In the present conditions of industry, most sales are made by men who are producers and merchants by profession. . . . For them, the subjective use-values of their own wares is for the most part nearly nil. . . . In sales by them, the limiting effect which, according to our theoretical formula, would be exercised by the valuation of the last seller, practically does not come into play.”
8. Wherein is there resemblance, wherein difference, between Böhm-Bawerk’s analysis of “two-sided competition” and Marshall’s reasoning concerning the equilibrium of demand and supply?
9. An eminent German economist has written: “As against Thornton, George, and the apostles of trade-unions, I believe that the wages-fund doctrine, rightly stated and rightly understood, is at bottom true; but I should add the qualification, to which Hermann called attention, that the payments by those who demand the finished goods from the source from which, in the long run, the capitalists are enabled to employ labor, or to maintain a demand for labor, from their wages-fund.”
   What do you say of the mode of dealing with the wages-fund doctrine involved in this qualification?

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ECONOMICS 2
Final Examination
1911-12

Arrange your answers strictly in the order of the questions.

1. “Suppose that society is divided into a number of horizontal grades, each of which is recruited from the children of its own members, and each of which has its own standard of comfort, and increases in number rapidly when the earnings to be got in it rise above, and shrinks rapidly when they fall below that standard. Suppose, then, that parents can bring up their children to any trade in their own grade, but cannot easily raise them above it and will not consent to sink them below it. . . . On these suppositions the normal wage in any trade is that which is sufficient to enable a laborer, who has normal regularity of employment, to support himself and a family of normal size according to the standard of comfort that is normal in the grade to which his trade belongs; it is not dependent on demand except to this extent, that if there were no demand for the labor of the trade at that wage, the trade would not exist. In other words the normal wage represents the expenses of production of the labor according to the ruling standard of comfort.”
   Does Cairnes reason on these suppositions? Does Marshall? Granting them, would you conclude that value in the end was determined by utility or by cost?
2. Explain briefly (50 words under each head), in which of the following cases, if in any, you think there is reasoning in a circle:

(a) The residual theory of wages, as stated by Walker;
(b) The proposition that the value of commodities produced by a particular grade (non-competing group) of laborers depends on the rate of wages paid in that grade;
(c) The proposition that general wages depend on the marginal product of labor discounted at the current rate of interest.

3. Does “quasi-rent” form a constituent part of supply-price? Does “supplementary cost” form a constituent part of supply-price?
4. “‘Rent is not an element in price’ — such is the classical statement on the subject. It even expresses a view that is now prevalent. The expression itself, however, is vague. It seems to mean that the fact of rent plays no part in the adjustment of values, and that things would exchange for one another in exactly the ratios in which they now do, if there were no such thing as rent. But, if one defines rent as product imputable to a concrete agent, the impossibility of maintaining such a claim becomes apparent. Even if one were to restrict the term rent to the product created by the land, the claim that it is not an element in adjusting market values would be absurd; for it would amount to saying that a certain part of the output of every kind of goods has no effect on their market value. The ‘price’ referred to in the formula is, of course, the market value expressed in units of currency.”
   What do you think?
5. “Goodwill taken in its wider meaning comprises such things as established customary business relations, reputation for upright dealing, franchises and privileges, trademarks, brands, patent rights, copyrights, exclusive use of special processes guarded by law or by secrecy, exclusive control of particular sources of materials. All these items give a differential advantage to their owners, but they are of no aggregate advantage to the community. They are wealth to the individual concerned, — differential wealth; but they make no part of the wealth of nations.” Why? Or why not?
6. “The workmen have a natural right to the value which their work, of itself and aside from the aid furnished by others, imparts to the material that is put into their hands, and when they sell their labor, they are really selling their part of the product of the mill. In like manner, paying interest is buying the share which capital contributes to the product. The owners of the capital have an original right to what the machines, the tools, the buildings, the land, and the raw materials, of themselves and apart from other contributions, put into the joint product.”
   Whom do you believe to be the writer of the passage? What would Böhm-Bawerk say to it? Veblen?
7. “It is not true that the spinning of yarn in a factory, after allowance has been made for the wear-and-tear of the machinery, is the product of the labor of the operatives. It is the product of their labor, together with that of the employer and subordinate managers, and of the capital employed; and that capital itself is the product of labor and waiting: and therefore the spinning is the product of labor of many kinds, and of waiting. If we admit that it is the product of labor alone, and not of labor and waiting, we can no doubt be compelled by inexorable logic to admit that there is no justification for interest, the reward of waiting; for the conclusion is implied in the premises.”
   Whom do you think the writer of this passage? What would be said of the conclusions by Clark? By Böhm-Bawerk? What is your own view?
8. “The English theory has it that the rate of wages is simply got by dividing the wage fund by the number of existing workers. This is entirely wrong. In any event the laborers get the wage fund wholly and entirely as wage: but that does not say wage for what time; for one year, or two years, or three years, or more. . . . The English Wage Fund theory has thus a core of truth, but it is wrapped up in a quite overpowering mass of error.”
   Explain what Böhm-Bawerk means; and give your opinion on the question involved.

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Enrollment Economics 11
1912-13

For Undergraduates and Graduates:—

[Economics] 11 (formerly 2). Professor Taussig.— Economic Theory

Total 31: 20 Graduates, 4 Seniors, 5 Juniors, 2 Others.

Source: Harvard University. Annual Reports of the President and Treasurer of Harvard College, 1912-13, p. 57.

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ECONOMICS 11
Mid-year Examination
1912-13

1. “If there really were a national fund, the whole of which must necessarily be applied to the payment of wages, that fund could be no other than an aggregate of smaller similar funds possessed by the several individuals who compose the employing part of the nation. Does, then, any individual employer possess any such fund? Is there any specific portion of any individual’s capital which the owner must necessarily expend upon labor? . . . May he not spend more or less on his family and himself, according to his fancy — in the one case having more, in the other less, left for the conduct of his business? And of what is left, does he or can he determine beforehand how much shall be laid out on buildings, how much on materials, how much on labor? . . . It sounds like mockery or childishness to ask these questions, so obvious are the only answers that can possibly be given to them; yet it is only on the assumption that directly opposite answers must be given that the Wages-fund can for one moment stand.”
   What answers would Mill have given to such questions? What would be your own answer?
2. “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 off goods in all stages of advancement is only kept intact, the cow-boy may have today the shoes that he virtually creates by his efforts. . . . 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 clothe the people.”
   “It is not necessary to the production of things that cannot be used as subsistence, or cannot be immediately utilized, that there should have been a previous production of the wealth required for the maintenance of the laborers while the production is going on. It is only necessary that there should be, somewhere within the circle of exchange, a contemporaneous production of sufficient subsistence for the laborers, and a willingness to exchange this subsistence for the thing on which the labor is being bestowed. . . . The subsistence of the laborers engaged in production which does not directly yield subsistence comes from the production of subsistence in which others are simultaneously engaged.”

Do you see any difference between the propositions stated in these extracts?
By whom do you think they were written?
Do you accept the conclusions?

3. “Though there are few commodities which are at all times and for ever unsusceptible of increase of supply, any commodity whatever may be temporarily so; and with some commodities this is habitually the case. Agricultural produce, for example, cannot be increased in quantity before the next harvest; the quantity of corn already existing in the world is all that can be had for sometimes a year to come. During that interval corn is practically assimilated to things of which the quantity cannot be increased. In the case of most commodities, it requires a certain time to increase their quantity; and if the demand increases, then, until a corresponding supply can be brought forward, that is, until the supply can accommodate itself to the demand, the value will so rise as to accommodate the demand to the supply.”
   Wherein, if at all, is this way of dealing with the temporary equilibrium of demand and supply different from Marshall’s?
4. Is it true that the first effect of increased demand for a commodity is to raise its supply price, and that the ultimate effect is to lower its supply price? If so, under what conditions in either case?
5. Explain briefly: —

(a) internal economies,
(b) external economies,
(c) increased returns.

It has been said that the tendency to increase of effectiveness because of large-scale production should be distinguished from the tendency to increasing returns. Why, or why not?

6. “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 investment of capital and labour by individuals for the sake of gain.”
   What is the third class? and why does it hold an intermediate position?
7. Explain what Clark means by the “extensive margin of indifference” and the “intensive margin of indifference”; and give your opinion on the significance of the conception in both aspects.
8. “That part of a man’s income which he owes to the possession of extraordinary natural abilities is a free boon to him; and from an abstract point of view bears some resemblance to the rent of other free gifts of nature, such as the inherent properties of land. But in reference to normal prices, it is to be classed rather with the profits derived by free settlers from the cultivation of new land, or again with the find of the pearl-fisher.”
   Why? or why not?

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ECONOMICS 11
Final Examination
1912-1913

[Arrange your answers strictly in the order of the questions]

1. Explain the connection between

(a) the rent of mines;
(b) Carey’s doctrine that the total rent received by landowners is less than interest on the total investment for improving land;
(c) the earnings of barristers or opera-singers;
(d) the earnings of “successful” business men.

2. “Men are not equal. . . . Those capable of organizing and leading industrial enterprise are in a minority, and are indeed few; hence they can put a price on their services which would be impossible if there were many. Their services are not worth more on this account, but they can get more for them. Because the community needs their services, and cannot perhaps get along without them, they can, if they like, put “famine prices” on the commodity (organizing and directing talent) which they have to sell; while, on the other hand, those who have only labor or physical skill, though they are just as necessary, are many, and hence can about as readily be taken advantage of as the others can take advantage.”
   What have you to say? Can the “famine prices” be justified?
3. (a) “There are, in fact, few no-rent men in actual employment; and the reason for this is clear, since work involves a sacrifice, and it does not pay to incur the sacrifice unless the earnings be a positive quantity. In those times and places in which child labor has been employed, with little regard for the welfare of the victims, labor that was not at the no-rent point, but very near it, has been pressed into service. But, where the sacrifice entailed by labor is, in some way, neutralized by a benefit that work confers, labor which created literally nothing may sometimes be employed. Lunatics and prisoners may be kept at work, in order that they may secure fresh air and exercise, even though the amount of capital that they use, if it were withdrawn from their hands and turned into marginal capital, would produce as much as it does when it is used by them. In such a case the product imputable to their labor is nil.
   The existence of any no-rent labor enables us to make the rent formula general and to apply it to every concrete agent of production.”
   (b) “The productivity of any capital, whether human or external, will differ with the capital. Men differ in quality, i.e., in productive power, as truly as lands or other instruments differ. Some men have a high degree of earning power and some have not. Some men can work twice as fast as others. Some men can do higher grades of work than others. The result is that we find men classified as common manual laborers, skilled manual laborers, common mental workers, superintending workers, and enterprisers. Just as we can measure the rent of any land by the difference in productivity between that and the low-rent, or no-rent, land, in exactly the same way we can measure the difference in productivity between men. There is no grade of workmen called the “no-wages men,” but there would be such a grade if it were customary for their employer to pay for their cost of support (as the employer of land pays for its cost), so that only the excess above this cost were to be called wages.”
   Compare the two trains of reasoning; give your opinion; and state by what authors the passages were written.
4. “If the proprietor of superior land were to say, ‘I will take no rent for it,’ this would not make wheat cheaper. The supply would not be changed; for the same quantity would be raised, the marginal amount raised on the no-rent land would be needed and would be bought at the former price, and all other parts of the supply would command the same rate. . . . It is a striking fact — but one hitherto much neglected — that similar conclusions apply to the product of every other agent” [capital and labor].
   Do similar conclusions apply? Who do you think is the author of this passage?
5. What three grounds explain, according to Böhm-Bawerk, the preference for present goods over future? Which of them does he conclude to be the most important? State Fisher’s criticism; and give your own opinion on the controverted question.
6. “In the present condition of industry, most sales are made by men who are producers and merchants by profession. . . . For them, the subjective use value of their own wares is, for the most part, very nearly nil. . . . In sales by them the limiting effect which, according to our theoretical formula, would be exerted by the valuation of the last seller, practically does not come into play.” — BÖHM-BAWERK.
   What is the “theoretical formula”? and what is the importance of the qualification here stated?
7. In what sense are the terms “demand” and “increase of demand” used in the following passages: —

(a) “The democratization of society and the aping of the ways of the well-to-do by the lower classes have greatly increased the demand for silk fabrics.”
(b) “The lower price of sugar after 1890, when sugar was admitted free of duty, at once caused an increase of demand.”
(c) “The cheapening of a commodity may mean an increased demand such that the total sum spent on it will be as great as before, even greater than before.”

8. Explain the essentials of Veblen’s theory of crises, and state wherein you think it most tenable, wherein least so.

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Course Announcement: Economics 11
1913-14

Primarily for Graduates
I
ECONOMIC THEORY AND METHOD

[Economics] 11. Economic Theory. Mon., Wed., Fri., at 2.30. Professor Taussig.

Course 11 is intended to acquaint the studeent with some of the later developments of economic thought, and at the same time to train him in the critical consideration of economic principles and the analysis of economic conditions. The exercises are accordingly conducted mainly by the discussion of selected passages from the leading writers; and in the discussion of selected passages from the leading writers; and in this discussion the students are expected to take an active part. The writings of J. S. Mill, Cairnes, F. A. Walker, Clark, Marshall, Böhm-Bawerk, and other recent authors, will be taken up. Attention will be given chiefly to the theory of exchange and distribution.

Source: Division of History, Government, and Economics 1913-14 in Official Register of Harvard University, Vol. X, No. 1, Part X (May 19, 1913), p. 65..

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Enrollment Economics 11
1913-14

For Undergraduates and Graduates:—

[Economics] 11. Professor Taussig.— Economic Theory

Total 39: 23 Graduates, 11 Seniors, 2 Juniors, 2 Others, 1 Radcliffe.

Source: Harvard University. Annual Reports of the President and Treasurer of Harvard College, 1913-14, p. 55.

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ECONOMICS 11
Mid-year Examination
1913-14

Arrange your answers in the order of the questions. One question may be omitted.

1. “The distinction, then, between Capital and Not-capital, does not lie in the kind of commodities, but in the mind of the capitalist — in his will to employ them for one purpose rather than other; and all property, however ill adapted in itself for the use of labourers, is a part of capital, so soon as it, or the value to be received from it, is set apart for productive reinvestment. The sum of all the values so destined by their respective possessors composes the capital of the country.”
   What is to be said for this doctrine, what against it? By whom was it maintained?
2. “Prices of commodities in great measure are fixed by supply and demand, but, except temporarily, they cannot be less than all costs, including wages and taxes, entering directly or indirectly into their production and distribution, together with some profit for the use of the capital employed. Hence an increase of the wages or cost of labor usually must be paid by consumers. A general increase of the wages of all labor would cause an equivalent increase of the price of nearly every product of labor and a general increase of the cost of living. The increased wages of the laborers then would not buy more than did their former wages and they would be no better off than before the increase. For this reason the economic welfare of the masses in the aggregate cannot be materially improved by the simple expedient of raising generally the wages of labor.”
   What would Ricardo say to this? J. S. Mill? Your own view?
3. Marx’s doctrine, that value is embodied labor, has been said to be essentially the same as Ricardo’s doctrine that value rests on the labor given to producing an article. Why or why not?
4. Suppose an increase in the demand for a commodity, in the schedule sense: —

(a) For short periods, under what conditions, if under any, would you expect supply price to rise? to fall?
(b) For long periods, under what conditions, if under any, would you expect supply price to rise? to fall?

Note whether your answer differs in any particular from that to be expected from Marshall.

5. “The part played by the net product at the margin of production in the modern doctrine of distribution is apt to be misunderstood. In particular many able writers have supposed that it represents the marginal use of a thing as governing the value of the whole. It is not so; the doctrine says we must go to the margin to study the action of those forces which govern the value of the whole; and that is a very different affair.”
   Explain.
6. “It has sometimes been argued that if all land were equally advantageous and all were occupied, the income derived from it would not be a true rent, but a monopoly rent.”
   Under what conditions, if under any, would there be true rent in such a case? Under what conditions, if under any, would there be a monopoly rent?
7. “The derived supply price [of one of a group of things having a joint supply price] is found by a rule that it must equal the excess of the supply price for the whole process of production over the sum of the demand prices of all the other joint products.”
   Explain, illustrating by diagram.
   State the corresponding rule for the derived demand price of one of a group of commodities for which there is a joint demand.
8. (a) “In hundreds and thousands of suburban homes the question is asked every day, “How much milk shall we take in today, ma’am?” or “How much bread?” and the housewife knows without consideration that if she ordered one loaf of bread and one pint of milk, the marginal significance of bread and milk would be higher than their price, and if she said six loaves and five quarts of milk, the marginal loaf and pint would not be worth their price. Such orders, therefore, never enter into her head. But she deliberates, perhaps, whether she will want three loaves of bread or four, or three loaves and a twist, or three white loaves and a half-loaf of brown, and whether she shall take three quarts of milk or a pint more or less. Thus, whatever the terms on which alternatives are offered to us may be, we detect in conscious action at the margin of consideration the principles which are unconsciously at work in the whole distribution of our resources.”
   Do you find anything to criticize in this?
   (b) “When the supply (of a given commodity) is limited, the diminishing utility of each increment will be arrested at a point below which the consumer will prefer to abandon the use of an increment for something else. The margin here is a margin of indifference between an increment of one commodity and an increment of another commodity. Since these increments are not necessarily the same, the margin of indifference may be reached at a point where the tenth increment of one commodity balances the twentieth of another, where, in other words, the marginal utility of the first commodity is twice that of the second.”
   Explain what you think is meant; and give your opinion on the conclusion stated in the last clause of the final sentence.
9. “An English ruler who looks upon himself as the minister of the race he rules (say in India) is bound to take care that he impresses their energies in no work that is not worth the labor that is spent on it; or, to translate the sentiment into plainer language, that he engages in nothing that will not produce an income sufficient to defray the interest on its cost.”
   Would Marshall question this principle? On what grounds, if at all? Would you?

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ECONOMICS 11
Final Examination
1913-14

Arrange your answers in the order of the questions.
Answer all questions.

1. “What about the ‘supply curve’ that usually figures as a determinant of price, coördinate with the demand curve? I say it boldly and baldly: there is no such thing. When we are speaking of a marketable commodity, what is usually called the supply curve is in reality the demand curve of those who possess the commodity; for it shows the exact place which every successive unit of the commodity holds in their relative scale of estimate.”
   Is this criticism just if directed to (1) the temporary equilibrium of supply and demand, as analyzed by Marshall for a grain market; (2) the “price zone determined by marginal pairs,” as analyzed by Böhm-Bawerk; (3) the long period equilibrium of supply and demand, as analyzed by Marshall.
2. “The rent of land is no unique fact, but simply the chief species of a large genus of economic phenomena; and the theory of rent is no isolated economic doctrine, but merely one of the chief applications of a particular corollary from the general theory of demand and supply.”
   Explain this statement of Marshall’s; mention other species which he assigns to the large genus; and consider wherein, if at all, the general doctrine differs from that of Clark, and from that of Böhm-Bawerk.
3. “As is true of good will and credit extensions generally, so with respect to the good will and credit strength of these greater business men: it affords a differential advantage and gives a differential gain. In the traffic of corporation finance this differential gain is thrown immediately into the form of capital and so added to the nominal capitalized wealth of the community. . . . This capitalization of the gains arising from a differential advantage results in a large ‘saving’ and increase of capital.”
   Does this resemble in essentials Walker’s doctrine? If so, wherein? If not, why not?
   In what sense, if in any, is it true that the differential gains lead to an increase of capital?
4. “It may be conceded that if a certain class of people were marked out from their birth as having special gifts for some particular occupation, and for no other, so that they would be sure to seek out that occupation in any case, then the earnings which such men would get might be left out of account as exceptional, when we are considering the chances of success or failure for ordinary persons.”
   Consider whether, given the premise, the conclusion here stated would follow; what the bearing of the reasoning is on Walker’s theory of business profit; what Marshall would say of premise and conclusion.
5. In what sense, if in any, is a “productivity” theory of wages put forth by Walker? by Clark? by your instructor?
6. “All apital goods — tools, machines, and the like — were explained [by the economists of the British School] as merely so much stored-up labor, or as the stored-up wages paid for it; the capitalist, as a laborer gone to seed; and thereby the product of capital as indirectly the product of the earlier wage-paid labor; interest being thus mere indirect wages. It was implied in this that the interest payments are for mere wear-out of the principal invested, and that the sum of all the interest payments upon a given investment can normally or regularly equal only the original capital sum invested in wages; and that sometime a given capital investment must cease its career of earning interest.”
   Consider whether this was the doctrine of the British economists; whether it is the doctrine of Böhm-Bawerk; of your instructor; and give your own opinion.
7. “In the main, the way in which the increase of savings can find escape from its difficulties is through the parallel advance in the arts, calling for more and more elaborate forms of capital. . . . Given continued improvements calling for more and more elaborate plant, — more of time-consuming and roundabout applications of labor, — than savings can heap up, and a return will be secured by the owner of capital.”
   What are the “difficulties” here referred to? What should be said of this way of escape by Böhm-Bawerk? by your instructor? by Veblen?

Sources:

Harvard University Examinations, Papers Set for Final Examinations in History, History of Science, Government, Economics, Philosophy, Psychology, Social Ethics, Education, Fine Arts, Music in Harvard College, June 1913, pp. 50-53.
Harvard University Examinations, Papers Set for Final Examinations in History, History of Science, Government, Economics, Philosophy, Psychology, Social Ethics, Education, Fine Arts, Music in Harvard College, June 1914, pp. 51-52.
Harvard University Archives. Prof. F. W. Taussig, Examination Papers in Economics 1882-1935 (Scrapbook).

Image Source:  Frank W. Taussig in Harvard Class Album, 1915.