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Economics Programs M.I.T.

M.I.T. Graduate Program in Economics Brochure, 1974-1975

It was fifty years ago this September that I entered the graduate program in economics at M.I.T. This is why the brochure outlining the graduate program as of the academic year 1974-75 is something I am particularly delighted to add as the newest digitized artifact to Economics in the Rear-view Mirror. 

In other news, I just realized that I am now older than everyone seen on the faculty portrait taken in 1976.

_______________________

Most of the faculty members of the MIT department of economics on the steps of the Sloan Building (E52) in 1976.

Names of the assembled have been provided in an earlier post.

_______________________

MIT’s 1961 graduate economics brochure has been transcribed and posted earlier.

_______________________

MASSACHUSETTS INSTITUTE OF TECHNOLOGY
The Graduate Program in Economics
1974 – 1975

TABLE OF CONTENTS
  1. General Information
    1. Program of Studies
      1. Ph.D. in Economics
      2. Interdepartmental Ph.D. Programs
      3. Master’s Program
    2. Admission to the Graduate School
    3. Fellowships, Scholarships, and Financial Assistance
    4. Foreign Students
    5. Living Arrangements
    6. Graduate Economics Associations
  2. The Ph.D. Program in Detail
    1. General Plan of the Program
    2. The Core of the Graduate Curriculum
      1. Economic Theory
      2. Mathematics
      3. Econometrics
      4. Economic History
    3. Special Fields

Schematic Schedule of Typical Entering Student

    1. Dissertation
  2. Graduate Subjects in Economics
    1. General Economics and Theory
    2. Industrial Economics
    3. Statistics and Econometrics
    4. National Income and Finance
    5. International, Interregional, and Urban Economics
    6. Labor Economics and Industrial Relations
    7. Economic History
    8. Economic Development
  3. The Faculty in Economics
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
The Graduate Program in Economics
1974–75

    1. General Information
      [Table of Contents]

                  Graduate study in economics began at M.I.T. in 1941 and has since developed to its present size of some 110 full-time students and 33 faculty members. Its major emphasis is on the training of doctoral candidates in a broad program of advanced study and research for professional careers in universities or colleges, in governmental and private research organizations, or in business or financial concerns. At the present time the demands on a professional economist are such that the depth and breadth of the doctoral program have become indispensable training for a successful career. The Department, therefore, ordinarily admits to full-time graduate study only candidates for the Ph.D. In order to maintain a close and continuing contact between students and faculty, the entering class is normally held to 30.

    1. Program of Studies
      [Table of Contents]

      1. Ph.D. in Economics
        [Table of Contents]

                  The doctorate normally requires the full-time concentration of the student for three or four years. Formal requirements are limited in number. The candidate must (1) demonstrate a mastery in five fields of study in economics, one of which is economic theory, both micro and macro; (2) achieve a specified level of competence in economic history, econometrics, and statistics; (3) submit and defend a dissertation that represents a contribution to knowledge; and (4) be in residence for a minimum of two years.

                  These requirements are met not merely by passing some appropriate set of subjects, but through an over-all preparation of subject matter and techniques that goes beyond course work. Candidates may differ in their rate of progress toward the satisfaction of these requirements, depending on their background, preparation, and interests. Normally, however, the satisfaction of requirements, other than the dissertation, is completed by the end of the second year.

                  The dissertation is a test of the candidate’s ability to conduct independent research — to formulate a significant topic and to bring to bear on it the analytic and quantitative tools of economics. The dissertation is prepared under the direction of departmental committee. Upon submission of the completed thesis, the candidate is examined orally by the thesis committee.

                  The Department has no general foreign language requirements. When a foreign language is essential for full access to the literature in the field of the student’s major interest (for example, European Economic History, Communist Economies) or to his thesis research, a language requirement will be imposed by the Department upon the recommendation of the Thesis Supervisor or the Graduate Registration Officer. Such a requirement will be administered by the Department of Foreign Literatures and Linguistics, and can be met by satisfactory course work at other schools, at M.I.T., or by examination.

      1. Interdepartmental Ph.D. Program
        [Table of Contents]

Occasionally students may desire a program that overlaps more than one department, but which in content and depth meets doctoral standards. At the initiative of the student, and with the approval of faculty members of each department, arrangements can be made to have the Dean of the Graduate School appoint a committee to guide the entire Ph.D. program. For details see the Graduate Student Manual. One such program, for instance, has been worked out with the Department of Urban Studies and Planning.

      1. Master’s Program
        [Table of Contents]

                  In very special and rare cases, students are admitted for study programs leading to the M.S. in Economics. This is awarded upon the satisfactory completion of a program, approved by the Graduate Registration Officer, of a year’s full-time study, including the presentation of a satisfactory thesis. The master’s program usually involves completion of the Department’s core requirements (see below), a semester of econometrics, and two semesters of a special field, in addition to the thesis.

    1. Admission to the Graduate School
      [Table of Contents]

                  To be admitted into the program, a student must hold a Bachelor’s degree or its equivalent from an accredited college or university. It is not essential that the undergraduate degree be in economics. Graduate students entering the Department have had a wide variety of major background preparation varying from literature to physics. Some preparation in undergraduate economics, especially in economic analysis, is almost a necessity. Candidates who, upon admission, are deficient in mathematics are strongly urged to take mathematics in the summer before entering the program or work on a recommended self-study program in calculus to prepare for 14.102 Mathematics for Economists.

                  Completed application forms for admission must be submitted to the Admissions Office at M.I.T. by January 15 of the calendar year in which the applicant wishes to enter. In addition to the Institute application forms, the Department expects each applicant to submit a statement (one or two pages) explaining his interest in economics. An informal questionnaire is provided for his general guidance. Entrance is normally in September. February entrance is granted only under exceptional circumstances, since many subjects given in the spring are continuations of work given in the fall.

                  All applicants are urged to take the Graduate Record Examinations no later than the January preceding the September in which they wish to enter. They should take the quantitative and verbal aptitude tests as well as the test in economics. (Information can be obtained by writing to Graduate Record Examinations, Educational Testing Service, Box 955, Princeton, New Jersey 08540. Students in western states or in eastern Asia or the Pacific should write to 1947 Center Street, Berkeley, California 94704.)

                  Decisions regarding admission are the responsibility of the Departmental Graduate Admissions Committee, which bases its judgment on the undergraduate academic record of the applicant, both in general and with respect to particular subjects, on the letters of recommendation, and on the Graduate Record Examinations. Further information may be secured by writing to the chairman of the committee. Notices of acceptance are sent out by April 1, and candidates have until April 15 to notify the Department of their choice.

    1. Fellowships, Scholarships, and Financial Assistance
      [Table of Contents]

                  While in the past virtually all graduate students received financial aid through scholarships, fellowships, or assistantships, the financial situation has changed to such an extent that complete support can no longer be assured. Moreover, the outlook is so uncertain that no definite statement is possible, even about minimum aid. Every effort will be made within the limits of our financial resources to support students who perform effectively. In view of this uncertainty, the Department is making efforts to expand the number of research assistantships, but students should expect to earn or borrow a larger proportion of their support than has been true in the past.

                  The sources of financial support are varied. (1) Many students are assisted by fellowships for which there is a national competition, such as those given by the National Science Foundation (NSF), the Ford Foundation, the Danforth Foundation, the Canada Council, and by foreign governmental agencies. Applications for such fellowships must be made directly to the appropriate foundation or agency, and an application for admission must also be made to M.I.T. (2) Awards of scholarships or fellowships are also made from M.I.T. funds or endowments. These include the Hicks Fellowship in Industrial Relations, the Graduate Economics Alumni Fellowships, endowed Institute fellowships, and a limited number of departmental awards. (3) A third group of students is supported by part time teaching and research assistantships and instructorships. In the past, research and teaching assistantships have been limited to candidates who have passed their general examination and are engaged in thesis research. However, in the light of the present financial stringency, these rules may be relaxed somewhat with respect to limited research assistantships for second year students. (4) Finally, students in good standing can avail themselves of loans through the Office of Financial Aid. U.S. citizens who are planning to be teachers may avail themselves of an NDEA loan, a substantial portion of which is forgiven upon entry into and continuance in teaching. They are also eligible for government-insured loans that are partially subsidized. Foreign students. however, may borrow only through the Graduate Loan Fund at the prime interest rate.

                  Entering students should apply for financial aid not later than January 15 of the calendar year in which they plan to enter. First-year awards are made on April 1, and applicants are given until April 15 to accept. Departmental awards for second and subsequent years are made in June. It is entirely appropriate for students to apply both for national awards and to M.I.T., since the outcome of national competitions is known before our awards are announced. Fellowships normally will include some cash payment toward living expenses, up to $2,000 for a single or married person without dependents, made in two equal installments at the beginning of each term. In offering scholarships and fellowships, the Department takes into account need as well as professional promise.

                  Remuneration for research assistantships varies, but in 1974-75 is normally at the rate of $6,585 per academic year for half-time work, out of which tuition of $3,350 must be paid. A half-time teaching assistantship in 1974-75 covers the tuition and pays $3,510 for the academic year — a total of $6,860. A very few half-time instructorships, for students who have demonstrated conspicuously effective teaching as an assistant, cover tuition plus $4,345 for living expenses — a total of $7,695 for the academic year.

                  As a supplement to academic-year appointments, both interdepartmental and departmental research groups are possible sources of full-time summer employment.

                  The academic performance of the student body is periodically reviewed to determine whether or not normal academic progress is being made. Failure to maintain normal progress may result in reduction or withdrawal of financial support. Students are invited at all times to discuss academic problems with their graduate registration officer, and the Department makes every effort to accommodate the needs of individual students.

    1. Foreign Students
      [Table of Contents]

                  The Department has always welcomed foreign graduate students. They have typically constituted a significant portion of the student body. Some M.I.T. fellowships are available to entering foreign students, though the number is limited and the competition severe. Foreign students have an additional burden of transportation expense to cover and for this reason it is highly desirable to try to obtain at least partial support from other sources as well.

                  General information on scholarships, grants and travel can be obtained from the Institute of International Education, 809 United Nations Plaza, New York, New York, 10017, or from the Cultural Affairs Officer or the United States Information Service Office nearest the student’s place of residence.

                  Foreign applicants are required to submit evidence of their ability to carry on studies in English. Applicants whose native language is not English are required to take the test of English as a Foreign Language (TOEFL). Students whose schooling has been in English may request a waiver from the Advisor to Foreign Students at M.I.T. TOEFL is administered by the Educational Testing Service, Princeton, New Jersey, 08540; registration material and information about the test may be obtained by writing to the above address.

    1. Living Arrangements
      [Table of Contents]

                  The Department is located in the Sloan Building, which, along with the adjoining Hermann Building, contains contiguous faculty offices, classrooms and seminar rooms, and student and faculty lounges. This complex also houses the Sloan School of Management, the Department of Political Science, and the Center for International Studies. The Dewey Library occupies two floors of the Hermann Building and contains the social science collection at M.I.T., reading rooms, and carrels to which thesis writers are assigned individually.

                  On-campus housing for graduate students is limited. Applications should be sent to the On Campus Housing Office, Room E18-307, M.I.T. Help in securing off-campus housing is given by the Community Housing Service, E18-306, M.I.T. Students should be alerted to the fact that Cambridge rental units are limited and in heavy demand. Transportation is convenient; the Sloan Building is located one block from the Kendall Square subway station.

    1. Graduate Economics Associations
      [Table of Contents]

                  The Graduate Economics Association, composed of all graduate students, is a lively organization that sponsors monthly seminars and social events, and is one of the channels through which mutual student-faculty problems are discussed. The seminars permit discussions of current research by distinguished economists and occasional dialogues between faculty members. They are often followed by small dinners to which graduate students and faculty are invited, permitting more discussion among visitors, students and faculty. The Association annually elects nine student representatives to participate as voting members in Department meetings and other Department committees. Student representatives are full participants in all matters except those involving specific, identifiable individuals, or undergraduate matters. This policy at present excludes the discussion of details, but not the general policy, of tenure decisions, review of non-tenure faculty, new appointments, review of student performance, admissions and financial support.

                  The Black Graduate Economics Association provides a forum for the development and utilization of economic tools for solving the problems faced by Black people, encourages policies and programs which help increase the supply of highly qualified Black economists, opens lines of communication with other Black graduate students, Black economists, and the Black community, stimulates academic excellence, and provides outlets for various social activities. The BGEA has helped develop audio-visual aids now in use in many Black colleges’ economics departments, engaged in Institute recruiting projects, and participated in conferences of Black economists and administrators of Black colleges and universities. An econometric model of income and expenditures in Black communities is in its initial stage of development as a research project.

  1. The Ph.D. Program in Detail
    [Table of Contents]

    1. General Plan of the Program
      [Table of Contents]

Students who complete the Ph.D. program should have a thorough understanding of the existing principles of economic theory and of the economic structure; an ability to think systematically about, and apply quantitative methods to, economic problems. The program gives roughly equal emphasis to these two goals, with formal courses and examinations to meet the first, and seminars, workshops, papers and the dissertation to meet the second. The student spends most of his first two years attempting to understand the existing ideas of economics. A basic principle of the program is that these ideas are sufficiently worthwhile so that their study is a necessary prelude to their use or criticism.

                  Throughout the program, there are formal provisions for students to engage in original work. During the first two years, term papers are often required. During the second year each student prepares a research paper as part of the requirement in econometrics. Second-year students are also encouraged to take part in workshops in their fields of primary interest. After passing the general examination, at the end of the second year or earlier, students spend full time in their own independent, original work. Their only formal obligation is to participate actively in the weekly meetings of the workshops in their fields of research.

    1. The Core of the Graduate Curriculum
      [Table of Contents]

                  The Department offers an integrated set of subjects in economic theory, mathematics, econometrics and economic history.

      1. Economic Theory
        [Table of Contents]

                  The core in economic theory consists of two subject-years equally divided between microeconomics (14.121-14.124) and macroeconomics (14.451-14.454). These subjects are described in Section III of this report. The material is divided into half-semester subjects. The microtheory sequence starts in the fall term and runs through the first year, while the macrotheory sequence starts in the spring term and continues through the fall term of the second year. A qualifying examination on these subjects is offered three times a year — in September, December-January, and May — that must be passed in order to satisfy this part of the core requirement. The examination will cover each of the eight portions of the theory core, and a syllabus is available for each.

                  When a student feels sufficiently well qualified in the subject matter of any of the theory core subjects, he may take the qualifying examination, either before or after a particular set of lectures is offered. Only a passing grade is recorded when the examination is taken in advance of the lectures. If he fails to pass, he can then enroll for that particular section of theory and take the examination again at the end of that term. Should he pass some portion of theory by the preliminary examination, he could substitute a subject in advanced economic theory in the half-term in which he would have taken the basic theory subject. In principle, it is possible to pass all eight units of the theory core in this way and to proceed directly to more advanced work.

                  The Schedule for the Qualifying Examination in Theory is as follows:

Subject matter covered in: Preliminary Regular Make-up
14.121-122 Sept.-Year I Dec.-Year I Sept.-Year II
14.123-124, 14.451-452 Jan.-Year I May-Year I Jan. Year II
14.453-454 Sept.-Year II Dec.-Year II Sept.-Year III

      1. Mathematics
        [Table of Contents]

                  The minimal core requirement in mathematics is calculus and linear algebra. Calculus is required for Statistics (14.381). While not stated as a formal prerequisite for the core theory subjects, it is virtually a necessity for mastering them.

                  If a student’s preparation in calculus were inadequate to satisfy the prerequisite for 14.102 Mathematics for Economists, the completion of the statistics and economics core requirements would be postponed a year. Econometrics (14.382 and 14.383 and most advanced theory subjects (14.141-14.149) require linear algebra. Students who have had a year of calculus and who want more mathematical training normally would take Mathematics for Economists (14.102) in the first term.

      1. Econometrics
        [Table of Contents]

                  The econometrics and statistics core requirement can be satisfied by (1) Statistics (14.381); (2) either Econometrics (14.382 and 14.383) or Applied Econometrics (14.388); and the completion of a piece of empirical research the equivalent of a term paper. This paper is due by the end of the fall term of the second year.

                  Entering students who lack calculus, and cannot take 14.102 in the first term, have two choices: either to postpone the three-term sequence: 14.381, 14.382, and 14.383 — to their third through fifth terms, or to take the two-term sequence, 14.381 and 14.388, in their third and fifth terms.

      1. Economic History
        [Table of Contents]

                  The core requirement in economic history is the satisfactory completion of one subject in American Economic History (14.731), European Economic History (14.733), or Russian Economic History (14.781).

    1. Special Fields
      [Table of Contents]

                  In addition to the satisfactory completion of the core requirements, competence in four special fields must be demonstrated, two by passing a general examination and two by either satisfactory course work or a general examination. Preparation for a field examination normally consists of a year’s course work. Satisfaction of a field by course work alone requires the achievement of a grade of B or better in each of the two terms of subject matter. (The econometrics and history requirements can be satisfied with a grade of B-.) The areas in which the Department offers specialization are: advanced economic theory, international economics, labor economics, economic development, urban economics, monetary economics, fiscal economics, statistics and econometrics, economic history, industrial organization, comparative economic systems, Russian economics, human resources and income distribution, and, outside the Department, finance, production, transportation, and operations research. It is possible to use econometrics as a field without preparation beyond the core requirements. Economic history can be offered as a field by adding a second subject to the one satisfying the core requirement.

                  Students normally demonstrate competence in all four fields by the end of their second year. That is, they normally finish their required course work and general examinations by that time. In the event that scheduling or other difficulties interfere with this timing, one field other than theory or econometrics (including the paper — see II.B.3 above), or one subject in a field and in history, may be postponed until the third year. Before making such a deferment, students should consult with their Graduate Registration Officer.

                  Students planning to take the general examination before the end of the second year — the usual time — should consult in advance with their Graduate Registration Officer. In any case, such students would still be held to the above schedule.

Schematic Schedule of Typical Entering Student
[Table of Contents]

[First year] [Second year]
1st [term] 2nd [term] 3rd [term] 4th [term]
Theory: Micro 14.121-2 14:123-4
Theory: Macro 14.451-2 14-453-4
Statistics and Econometrics 14.381

or 14.381

 14.382 14.383

14.388
Mathematics 14.102
Special Fields and History 1 subject 1-2 subjects 2 subjects 4 subjects
Total Number of Subjects 4 4 4 4

*The minimal number of subjects to satisfy the special field and history requirements depends on whether history or econometrics is offered as a special field. If neither are offered, 9 subjects are required; if history, 8 subjects; if econometrics, 7 subjects; if both, 6 subjects.

    1. Dissertation
      [Table of Contents]

                  Upon satisfaction of the core and field requirements, the Ph.D. candidate embarks on original research culminating in a completed dissertation that is defended orally. Thesis writers are required to participate in the workshop most germane to the subject of their thesis over the period of time they are working on it. Upon agreement on a topic with a primary thesis supervisor, a secondary thesis supervisor will be chosen by the student, subject to the approval of the Graduate Committee. A third faculty reader will be appointed by the Graduate Committee in consultation with the candidate when a final draft of the thesis will reasonably be expected to be completed within six months. The third faculty reader will have as his main function the unitary reading of the complete final draft of the thesis. These three faculty members will be the candidate’s thesis committee and are responsible for its acceptance and final defense.

                  In order to give adequate time for the final thesis review and revision, the completed draft must be submitted for final review a month before the Institute dates for submission of the dissertation. In 1975 the formal Institute dates are January 5, May 2, and August 11.

  1. Graduate Subject in Economics
    [Table of Contents]

    1. General Economics and Theory
      [Table of Contents]
14.101 Mathematics for Economists
Prereq.:—————		 Units
Year: G(1) 3-0-6
Elementary calculus. Applications in economics.
(Not offered 1974-75)

 

14.102 Mathematics for Economists
Prereq.: 14.101		 Units
Year: G(1) 3-0-6
Vector spaces and matrices; multivariate calculus and maximization with equality constraints; elementary differential equations. H. A. Freeman

 

14.121 Microeconomic Theory I (A)
Prereq.: 14.04		 Units
Year: G(1) (1st half of term) 2-0-4
Monopoly, oligopoly, product differentiation, monopsony. Comparison with pure competition. Comparative statics. Partial equilibrium welfare analysis. R. L. Bishop

 

14.122 Microeconomic Theory II (A)
Prereq.: 14.121		 Units
Year: G(1) (2nd half of term) 2-0-4
Introduction to the theory of resource allocation and the price system. Emphasis on the use of efficiency prices as a guide to decentralized decision making. M. L. Weitzman

 

14.123 Microeconomic Theory III (A)
Prereq.: 14.122		 Units
Year: G(2) (1st half of term) 2-0-4
Theory of the producer and consumer. Cost functions, expenditure functions. Theory of distribution. Introduction to general equilibrium. H. R. Varian

 

14.124 Microeconomic Theory IV (A)
Prereq.: 14.123		 Units
Year: G(2) (2nd half of term) 2-0-4
Capital theory and welfare economics. P. A. Samuelson

 

14.132 Schools of Economic Thought (A)
Prereq.:14.122		 Units
Year: G(2) 3-0-6
Economic ideas developed by different groups of economists in recent times. R. L. Bishop,
P. A. Samuelson

 

14.141 General Equilibrium Theory
Prereq.:14.124		 Units
Year: G(1) (2nd half of term) 2-0-4
General equilibrium. Existence and stability of competitive equilibrium. The core of an economy. (Not offered in 1974-75) F. M. Fisher

 

14.142 Mathematical Programming and Economic Theory (A)
Prereq.:14.122		 Units
Year: G(2) (1st half of term) 2-0-4
A rigorous treatment of linear and non-linear programming with applications to economic model building, including activity analysis and input-output. M. L. Weitzman

 

14.143 Advanced Theory of the Market III (A)
Prereq.: 14.122		 Units
Year: G(2) (2nd half of term) 2-0-4
Oligopoly and product differentiation, advertising, equilibria with seasonal or cyclical demand shifts. R. L. Bishop

 

14.144 Applied Price Theory
Prereq.:14.122		 Units
Year: G(1) (1st half of term) 2-0-4
Applications of price theory treated topically. Selected topics in price theory, with focus changing from year to year. Current emphasis is on the economics of exhaustible and renewable natural resources. R. M. Solow

 

14.145 Economics of Uncertainty
Prereq.:14.124		 Units
Year: G(2) 3-0-9
Individual behavior under uncertainty. Equilibrium and welfare under uncertainty. Search and information. J. A. Hausman,
P. A. Diamond

 

14.148 Advanced Topics in Microeconomic Theory (A)
Prereq.:14.124		 Units
Year: G(2) Arr.
14.149 Advanced Topics in Microeconomic Theory (A)
Prereq.:14.124
Year: G(2) Arr.
Advanced topics in microeconomic theory of current interest. Staff

 

14.151 Mathematical Approach to Economics (A)
Prereq.:14.122		 Units
Year: G(2) 3-0-6
The use of mathematical methods in all the fields of economics. P. A. Samuelson

 

14.191 Economics Seminar (A)
Prereq.:14.121, 14.122		 Units
Year: G(1) 3-0-6
14.192 Economics Seminar (A)
Prereq.:14.121, 14.122
Year: G(2) 3-0-6
Special economic problems. In 1974-75, 14.192 — Economics of Public Sector. J. Rothenberg

 

14.193 Seminar: Topics in Economics (A)
Prereq.:14.121, 14.451		 Units
Year: G(1) 3-0-6
14.194 Seminar: Topics in Economics (A)
Prereq.:14.122, 14.452
Year: G(2) 3-0-6
Topics in economics of current interest. Staff

 

14.195 Reading Seminar in Economics (A)
Prereq.:14.122		 Units
Year: G(1) Arr.
14.196 Reading Seminar in Economics (A)
Prereq.:14.122
Year: G(2) Arr.
Reading and discussion of special topics in economics. (Open to advanced graduate students by arrangement with individual numbers of the staff.) Staff

 

14.197 First-Year Graduate Seminar (A)
Prereq.: 14.04		 Units
Year: G(1) 2-0-6
Seminar limited to first-year graduate students. Discussion of projects of students, professional literature, methodology, economic policy, extending beyond regular curriculum. J. N. Bhagwati

    1. Industrial Economics
      [Table of Contents]
14.271 Problems in Industrial Economics (A)
Prereq.: 14.04		 Units
Year: G(1) 3-0-6
Small and large enterprises in the American economy; market structures; degrees of monopoly and competition; requisites of public policy. M. A. Adelman

 

14.272 Government Regulation of Industry (A)
Prereq.: 14.271		 Units
Year: G(2) 3-0-6
Follows 14.271. Development of anti-trust policy, generally and in specific cases. “Public utility” price fixing, government ownership as alternative. P. L. Joskow

 

14.291 Industrial Economics Seminar (A)
Prereq.:14.271		 Units
Year: G(1) 3-0-6
14.292 Industrial Economics Seminar (A)
Prereq.:14.271
Year: G(2) 3-0-6
Readings, discussions, reports on such topics as industrial price policies, government regulation of industry, competitive practices, and similar problems in industrial economics. Staff

    1. Statistics and Econometrics
      [Table of Contents]
14.371 Statistical Inference (A)
Prereq.: 18.02		 Units
Year: G(1) 3-0-9
A compact one-term course in elementary probability and statistical Inference. Axiomatic probability, random variables, distribution functions, mathematical expectation, generating functions, transformations of random variables, simple correlation and regression models, the normal distribution, sampling theory, point and interval estimation, maximum likelihood, least squares, testing statistical hypotheses. The exposition is somewhat more mathematical than

14.381.

 H. A. Freeman

 

14.373 Time-Dependent Probability (A)
Prereq.: 14.371 or 18.303		 Units
Year: G(2) 3-0-6
Markov chains and Markov processes, the relevant ergodic theorem, Kolmogorov equations, time series theory; spectral density functions, harmonic representation, autoregressive models. H. A. Freeman

 

14.374 Design and Analysis of Scientific Experiments (A)
Prereq.: 14.381		 Units
Year: G(2) 3-0-6
Application of statistical theory to the design and analysis of scientific experiments. Factorial and fractional factorial designs. Applications to experimentation in the physical, chemical, biological, medical, and social sciences. H. A. Freeman

 

14.381 Statistical Method in Economics (A)
Prereq.: 14.101 or 18.02		 Units
Year: G(1) 4-0-8
Self-contained introduction to probability and statistics which serves as a background for advanced econometrics. Elements of probability theory, sampling theory, asymptotic approximations, decision theory approach to statistical estimation focusing on regression, hypothesis testing and maximum likelihood methods. Illustrations from economics and application of these concepts to economic problems. J. A. Hausman

 

14.382 Econometrics I (A)
Prereq.:14.102, 14.381		 Units
Year: G(2) 4-0-8
14.383 Econometrics II (A)
Prereq.:14.382
Year: G(1) 4-0-8
Theory and economic application of the linear multiple regression model. Identification and structural estimation in simultaneous models. Analysis of economic policy and forecasting in macroeconomic models. A term paper involving substantive original empirical research is required in 14.383. R. F. Engle, R. E. Hall, J. A. Hausman

 

14.386 Advanced Topics in Econometrics (A)
Prereq.: 14.383		 Units
Year: G(2) 3-0-6
Selected topics including specification error, non-linear estimation, simulation, aggregation, and the derivation of economic policy models. (Not offered in 1974-5) R. F. Engle, R. E. Hall, J. A. Hausman

 

14.388 Applied Econometrics (A)
Prereq.: 14.102, 14.381		 Units
Year: G(1) 3-0-9
Theory and practice of econometrics. The linear regression model, tests of hypotheses, generalized least squares, distributed lags, and simultaneous equations. Emphasis on applications. A term paper required. R. F. Engle

 

14.391 Workshop in Economic Research (A)
Prereq.:14.124, 14.454		 Units
Year: G(1) 2-0-10
14.392 Workshop in Economic Research (A)
Prereq.:14.124, 14.454
Year: G(2) 2-0-10
Designed to develop research ability of students through intensive discussion of dissertation research as it proceeds, carrying out of individual or group. research projects, and critical appraisal of current reported research. Workshops divided into various fields, depending on interest and size. Staff

    1. National Income and Finance
      [Table of Contents]
14.451 Macroeconomic Theory I (A)
Prereq.: 14.06		 Units
Year: G(1) (1st half of term) 2-0-4
Macroeconomic analysis of general equilibrium. Financial markets and investment. Intertemporal equilibrium and growth models. S. Fischer

 

14.452 Macroeconomic Theory II (A)
Prereq.: 14.451		 Units
Year: G(2) (2nd half of term) 2-0-4
Determination of aggregate output, employment, and prices under static conditions. Keynes and alternate theories. The Phillips Curve. Inflation in the short and long run. R. E. Hall

 

14.453 Macroeconomic Theory III (A)
Prereq.: 14.452		 Units
Year: G(1) (1st half of term) 2-0-4
Quantitative macroeconomics. Consumption, investment, and other components of aggregate demand. Structure of complete econometric models of the U.S. economy R. E. Hall

 

14.454 Macroeconomic Theory IV (A)
Prereq.: 14.453		 Units
Year: G(1) (2nd half of term) 2-0-4
Growth models. Capital theory. R. M. Solow

 

14.458 Advanced Topics in Macroeconomic Theory (A)
Prereq.: 14.454		 Units
Year: G(1) Arr.
14.459 Advanced Topics in Macroeconomic Theory (A)
Prereq.: 14.454
Year: G(2) Arr.
Advanced topics in macroeconomic theory of current interest. Staff

 

14.462 Monetary Economics I (A)
Prereq.: 14.122, 14.452		 Units
Year: G(2) 3-0-6
Examination of sources and determinants of supply of money with special attention to roles of commercial banks, Federal Reserve System, and Treasury. Discussion of nature of demand for money. Role of monetary policy in determination of level of economic activity. (Not offered in 1974-5; substitute 15.432 Capital Markets and Financial Institutions) F. Modigliani

 

14.463 Monetary Economics II (A)
Prereq.: 14.122, 14.452		 Units
Year: G(1) 3-0-6
General equilibrium theory of money, interest, prices, and output; portfolio problems, cost of capital, and the effects of monetary phenomena on investment and accumulation of wealth with special reference to problems arising from uncertainty. S. Fischer

 

14.471 Fiscal Economics I (A)
Prereq.:14.122, 14.452		 Units
Year: G(1) 3-0-6
14.472 Fiscal Economics II (A)
Prereq.:14.122, 14.452
Year: G(2) 3-0-6
Examination, both theoretic and quantitative, of governmental fiscal institutions and behavior: the budget process, taxation, expenditure, pricing, and debt activities. P. A. Diamond, A. F. Friedlaender

 

14.482 Income Distribution Economics (A)
Prereq.: 14.124		 Units
Year: G(1) 3-0-9
Modern theories and empirical studies of the determinants of the distribution of income and wealth. L. C. Thurow

    1. International, Interregional, and Urban Economics
      [Table of Contents]
14.572J Regional Economic Analysis (A)
Prereq.: 14.03 or 14.05		 Units
Year: G(2) 3-0-6
Analysis of regional economies with emphasis on the sources, characteristics, and implications of spatial concentrations of economic activities. Urban development in its regional setting is examined and the special problems of lagging areas in both developing and developed countries. Methods of integrating national and regional planning. J. R. Harris

 

14.573J Urban Economic Analysis I (A)
Prereq.: 14.03 or 14.05		 Units
Year: G(1) 3-0-6
Patterns and processes of growth and structural change within metropolitan areas. The land use market and the spatial structure of the metropolitan community. The housing market: demand and supply, growth, aging, and renewal. The urban transportation system and its problems. Models of the metropolis. In each of these topics, emphasis on the resource allocation process, its efficiency and implications for income distribution. W. C. Wheaton

 

14.574J Urban Economic Analysis II (A)
Prereq.: 14.573J		 Units
Year: G(2) 3-0-6
Continuation of 14.573J. The nature and problems of government decision-making in metropolitan areas. The economies of segregation, congestion, and pollution in the metropolitan area. Urban-suburban relations; market and government. Welfare economics and the normative theory of local public policy. Applied normative analysis: criteria for public expenditures; cost benefit analysis. Examination of public policy issues in current urban problems; poverty, race, the spatial form of the city, optimal land use patterns, growth and renewal, development and new communities. J. Rothenberg

 

14.581 International Economics I (A)
Prereq.: 14.04, 14.06		 Units
Year: G(1) 4-0-8
Theory of international trade and applications in commercial policy. J. N. Bhagwati

 

14.582 International Economics II (A)
Prereq.: 14.581		 Units
Year: G(2) 4-0-8
Adjustment in international economic relations with attention to foreign exchange markets, balance of payments, and the international monetary system. C. P. Kindleberger

    1. Labor Economics and Industrial Relations
      [Table of Contents]
14.671J Labor Economics (A)
Prereq.: 14.64 or 15.663		 Units
Year: G(1) 3-0-6
Primary emphasis on the structure of labor markets and the determinants of wage levels, unemployment, the distribution of income and employment opportunity. Special attention will also be given to the impact of unions on both wage and non-wage elements of collective bargaining in the light of the characteristics and objectives of particular unions. Other special topics growing out of recent research in labor economics. M. J. Piore,
C. A. Myers

 

14.672J Public Policy on Labor Relations (A)
Prereq.: 14.64, 15.663		 Units
Year: G(1) 3-0-6
Major trends in legislation and other government activities affecting the work place. Topics include wage and price controls, equal opportunity employment, and government regulation of union organization, collective bargaining, industrial disputes, wages and hours of work, and work-place health and safety. The broad economic and social questions raised by these trends also explored. M. J. Piore
D. Q. Mills

 

14.674J Comparative Systems of Industrial Relations and Human Resource Development (A)
Prereq.: 14.64, 15.663		 Units
Year: G(2) 3-0-6
International and comparative analysis of industrial relations systems and systems of human resource development. Concentration on an examination of selected issues involving interest groups and the strategies of economic development, including discussion of the nature and functions of labor and management organization in different contexts; the role of the state in establishing procedures and in shaping the substance of industrial relations; the participation of interest groups in the formulation of economic and social policy: manpower and economic growth in the context of comparative systems of human resource development; worker participation in management, and other topics. C. A. Myers
E. Tarantelli

 

14.691J Research Seminar in Industrial Relations (A)
Prereq.:14.671J or 14.672J		 Units
Year: G(1) 3-0-6
14.692J Research Seminar in Industrial Relations (A)
Prereq.:14.14.691J
Year: G(2) 3-0-6
Discussion of important areas for research in industrial relations, frameworks for research, research techniques, and methodological problems. Centered mainly on staff research and the thesis research of advanced graduate students C. A. Myers

 

14.672J Public Policy on Labor Relations (A)
Prereq.: 14.64, 15.663		 Units
Year: G(1) 3-0-6
Major trends in legislation and other government activities affecting the work place. Topics include wage and price controls, equal opportunity employment, and government regulation of union organization, collective bargaining, industrial disputes, wages and hours of work, and work-place health and safety. The broad economic and social questions raised by these trends also explored. M. J. Piore
D. Q. Mills

 

    1. Economic History
      [Table of Contents]
14.731 American Economic History (A)
Prereq.: 14.121		 Units
Year: G(1) 3-0-6
Survey of the beginnings of American industrialization, emphasizing a quantitative approach and the nineteenth century. Topics include effects of government economic policies, such as land distribution and tariffs, the importance of railroads, profitability of slavery. P. Temin

 

14.732 Russian Economic History (A)
Prereq.: 14.122		 Units
Year: G(2) 3-0-9
A comparative study of the major problems in Russian economic history prior to 1917 both for their own sake and as a background for understanding of the events of 1917 and of the Soviet policies since. The topics covered vary yearly depending on the interests of the participants, but the land and peasant problems and industrialization methods emphasized. E. D. Domar

 

14.733 European Economic History (A)
Prereq.: 14.121		 Units
Year: G(1) 3-0-6
Development of the European economy since 1750 and, especially since 1850, with emphasis on growth and slowdown, the transition from local to national and European-wide institutions, and extra-European relations. C. P. Kindleberger

 

14.734 Problems in Economic History (A)
Prereq.: 14.731, 14.732, or 14.733		 Units
Year: G(2) 3-0-6
Analysis of problems of industrial society, concentrating on the century after 1860 and on the American experience. Topics vary yearly and include effects of wars on welfare and growth, the nature of the long deflation of the late nineteenth century, the contrast in international relations before and after 1914, the depression of the 1930’s. P. Temin

    1. Economic Development
      [Table of Contents]
14.771 Problems of Economic Development (A)
Prereq.: 14.122, 14.452		 Units
Year: G(1) 3-0-6
Analysis of problems of the rural sector in developing countries, urban-rural migration, unemployment, sectoral balance and efficiency of private resource allocation. R. S. Eckaus

 

14.772 Theory of Economic Development (A)
Prereq.: 14.122, 14.452		 Units
Year: G(2) 3-0-6
Analysis of problems of international trade and development; study of structure and use of planning models for development policy and use of cost benefit analysis. J. N. Bhagwati

 

14.773 Optimal Growth Theory (A)
Prereq.: 14.124, 14.454		 Units
Year: G(2) 3-0-9
The optimal growth problem, duality theory, development and application of the maximum principle. The behavior of optimal trajectories for a variety of situations. (Alternate years. Offered 1974-75.) M. L. Weitzman

 

14.774J Transfer and Adaptation of Technology in Developing Countries (A)
Prereq.: Permission of Instructor		 Units
Year: G(2) 3-0-6
Consideration of the problems of transferring and adapting technologies originating and used in the richer countries of the world to the developing nations. Specific topics include: political, institutional, economic, and engineering issues involved in the transfer of technology. R. S. Eckaus, F. Moavenzadeh, N. Choucri

 

14.782 Capitalism, Socialism and Growth (A)
Prereq.: 14.122, 14.452		 Units
Year: G(1) 3-0-6
A comparative study of capitalist and socialist economies mainly from the point of view of development and growth, and with major emphasis on the economy of the Soviet Union. E. D. Domar

 

14.783 Theory of Central Planning (A)
Prereq.: 14.124		 Units
Year: G(2) 3-0-9
Multilevel planning. Decomposition principles and their application. Planning with prices and with quantities. Materials balancing and input-output. Applications of inventory theory. The problems posed by non-convexities. (Alternate years. Not offered 1974-75.) M. L. Weitzman

  1. The Faculty in Economics
    [Table of Contents]

Morris A. Adelman, Ph.D., Harvard; Professor of Economics.

Sidney S. Alexander, Ph.D., Harvard; Professor of Economics.

Jagdish N. Bhagwati, Ph.D., M.I.T.; Professor of Economics.

Robert L. Bishop, Ph.D., Harvard; Professor of Economics; Chairman, Graduate Admissions Committee.

E. Cary Brown, Ph.D., Harvard; Professor of Economics; Head of Department.

Peter A. Diamond, Ph.D., M.I.T.; Professor of Economics; Graduate Registration Officer; Chairman, Department Graduate Committee.

Evsey D. Domar, Ph.D., Harvard; Professor of Economics; Graduate Placement Officer.

Richard S. Eckaus, Ph.D., M.I.T.; Professor of Economics; Graduate Registration Officer; Chairman, Committee on Economic Research.

Robert F. Engle, III, Ph.D., Cornell; Associate Professor of Economics.

Stanley Fischer, Ph.D., M.I.T.; Associate Professor of Economics.

Franklin M. Fisher, Ph.D., Harvard; Professor of Economics (on leave).

Harold A. Freeman, S.B., M.I.T.; Professor of Statistics.

Ann F. Friedlaender, Ph.D., M.I.T.; Professor of Economics.

Robert E. Hall, Ph.D., M.I.T.; Professor of Economics; Graduate Registration Officer.

John R. Harris, Ph.D., Northwestern; Associate Professor of Economics.

Jerry A. Hausman, Ph.D., Oxford; Assistant Professor of Economics.

Karl G. Jugenfeldt, Ph.D., Visiting Professor of Economics (Spring Term).

Paul L. Joskow, Ph.D., Yale; Assistant Professor of Economics.

Charles P. Kindleberger, Ph.D., Columbia; Professor of Economics.

Edwin Kuh, Ph.D., Harvard; Professor of Economics.

Franco Modigliani, D.Jur., Rome, and D.Soc.Sci., New School of Social Research; Institute Professor; Professor of Economics.

Charles A. Myers, Ph.D., Chicago; Professor of Industrial Relations.

Michael J. Piore, Ph.D., Harvard; Associate Professor of Economics (on leave, Spring Term).

Jerome Rothenberg, Ph.D., Columbia; Professor of Economics.

Paul A. Samuelson, Ph.D., Harvard; Institute Professor; Professor of Economics.

Abraham J. Siegel, Ph.D., California (Berkeley); Professor of Industrial Relations; Associate Dean of Management.

Robert M. Solow, Ph.D., Harvard; Institute Professor; Professor of Economics.

Lance J. Taylor, Ph.D., Harvard; Professor of Nutritional Economics.

Peter Temin, Ph.D., M.I.T.; Professor of Economics.

Lester C. Thurow, Ph.D., Harvard; Professor of Economics (on leave, Spring Term).

Hal R. Varian, Ph.D., California (Berkeley); Assistant Professor of Economics.

Martin L. Weitzman, Ph.D., M.I.T.; Professor of Economics.

William C. Wheaton, Ph.D., Penn.; Assistant Professor of Economics.

Source: M.I.T., Institute Archives. MIT Department of Economics Records, Box 2, Folder “Department Brochures”.

Categories
Economics Programs Economists M.I.T.

M.I.T. Department of Economics Annual Report by E. Cary Brown, 1975-1976

The following annual report of the M.I.T. department of economics was most likely written for the care and feeding of administrators and the members of the department’s visiting committee. This report covers what was my second year of graduate school, so for folks from that time it reads like an annual Holiday newsletter to the family.

_______________________

Department of Economics
1975 – 76

Undergraduate Program

The long-run impact of the past year’s changes in the Institute Requirement in the Humanities, Arts, and Social Sciences is not yet clear. Unquestionably they have increased the Department’s enrollment, but the precise amount is uncertain because simultaneously a major revision was made in the two introductory economics subjects. In the past year enrollments were larger than previously, but smaller than in the transition of the previous year. Nearly 200 of the Class of 1976 concentrated in economics for their Humanities, Arts, and Social Sciences Requirement. Of all students presently enrolled, 327 (primarily juniors and seniors) have elected to concentrate in economics.

Undergraduate majors remain steady in numbers. As in 1974-75, 20 degrees were awarded. In the spring term the Undergraduate Economics Association was reactivated. Its weekly meetings with faculty led to several proposals for revision of the undergraduate program, and several student-faculty socials were organized.

Graduate Program

Enrollment has been remarkably steady in the graduate program. The number of applications for admission was virtually identical to the average of the previous six years. Next year’s entering class of 32 will be slightly larger than average, and will have fewer foreign students and more women, reflecting a shift in the percentage of applications from these groups. Four students from minority groups are expected to be in this class.

Financial support for the graduate student has changed very little over the last several years. We are still fortunate in having from one-third to one-half of the entering students on National Science Foundation Fellowships. For the whole student body, there has been an increase in the support by US foundations (other than NSF) and a decrease in support provided by M.I.T.

The number receiving the Doctor of Philosophy increased somewhat in the past year to 21. For the first time, two American blacks received degrees.* The class fared well in placement, their median salary offer totaling 24 percent above that of 1971. Like the past average, 86 percent went into teaching and 14 percent into non-teaching positions.

*Samuel Myers, Jr. Ph.D. thesis: “A Portfolio Model of Illegal Transfers”, supervised by Robert Solow.
Glenn Loury. Ph.D. thesis: “Essays in the Theory of the Distribution of Income”, supervised by Robert Solow.
See: William Darity Jr. and Arden Kreeger, “The Desegregation of an Elite Economics Department’s PhD Program: Black Americans at MIT“, History of Political Economy 46 (annual suppl.)

The Graduate Economics Association awarded the outstanding teacher in the Department prize to Professor Stanley Fischer.

PUBLIC SERVICE ACTIVITIES

The faculty has always been involved in public service activities tying research to the public interest. In connection with M.I.T.’s participation in the Bicentennial Celebration, Professor Jagdish N. Bhagwati set up a recent conference on the New International Economic Order: Professor Ann F. Friedlaender is planning one for this fall on Air Pollution and Administrative Control. Through the German Marshall Fund, Professor Richard S. Eckaus is organizing a fall conference on economic problems of Portugal. Professor Franco Modigliani arranged a conference through the Bank of Finland on International Monetary Mechanisms.

Various Congressional committees and government agencies have been advised. Professor Peter A. Diamond served on the Consultant Panel on Social Security for the Congressional Research Service. Professors Rudiger Dornbusch and Fischer and Institute Professor Paul A. Samuelson prepared a report for the US Department of Commerce on international financial arrangements. Professor Robert E. Hall was a member of the Advisory Committee on Population Statistics, Bureau of the Census. Professor Jerry A. Hausman served on the Econometrics Advisory Committee to the Federal Energy Administration. Institute Professor Modigliani was a consultant and member of the Committee on Monetary Statistics, Board of Governors of the Federal Reserve System. Institute Professor Samuelson consulted with the Board of Governors of the Federal Reserve System, the US Treasury, and the Congressional Budget Office. Professor Charles A. Myers was a member of the National Manpower Policy Task Force. Institute Professor Robert M. Solow served as Deputy Chairman, Federal Reserve Bank of Boston.

Several faculty members have been involved with the National Academy of Sciences and its related organizations. Professor Eckaus prepared a report, Appropriate Technology for Developing Countries, for the Board on Science and Technology for Developing Countries of the National Academies of Science and Engineering. Professor Franklin M. Fisher served on a National Academy panel on the Effects of Deterrence and Incapacitation; Professor Friedlaender was on the Executive Committee, Assembly of Behavioral and Social Sciences, National Research Council; Institute Professor Modigliani was on the Finance Committee; Institute Professor Samuelson served on the Editorial Board of the Proceedings; and Institute Professor Solow chaired the Steering Committee on Environmental Studies.

Professor Eckaus led an OECD Mission to Portugal that included Professors Lance Taylor and Dornbusch.* Professor Paul L. Joskow was a consultant to OECD in energy. Professor Evsey D. Domar was a member of a delegation of economists sent by the American Economic Association to the Soviet Union. Institute Professor Modigliani, who gave much time to the problems of stabilization in Italy, was a member of the Board of Directors of the Italian Council for Social Sciences.

*Along with several graduate students among whom were Paul Krugman, Andrew Abel and Jeffrey Frankel. Paul Krugman has written a short note about this experience with a picture!

The Brookings Institution Panel for Economic Activity included Professors Dornbusch and Hall, with Institute Professors Modigliani, Samuelson, and Solow as senior advisors to it. Professor Friedlaender served on the examining committee, Graduate Records Examination, Educational Testing Service. Institute Professor Modigliani served on the Committee on Economic Stabilization, Social Science Research Council. Professor Fisher is a member of the Board of Governors of Tel Aviv University. Institute Professor Solow continues as Trustee for the Institute of Advanced Study.

RESEARCH

International topics seem to dominate the research interests of the faculty. Professor Bhagwati, in addition to his work in developing countries and international trade theory, has given attention to a proposal for applying taxation to the brain drain. Professor Eckaus studied the role of financial markets and their regulation and the behavior of income distribution in economic development. Professor Taylor had three major areas of research: the development of nutrition planning models in Pakistan, international food aid and reserve policies, and growth and income distribution in Brazil.

Professor Morris A. Adelman’s continuing research on the world oil market, Professor Joskow’s analysis of the international nuclear energy industry, and Professor Martin L. Weitzman’s examination of OPEC and oil pricing involve applied microeconomics with international implications.

Research in various applied microeconomics areas was responsible for the second largest fraction of faculty effort. Institute Professor Solow continued to research the economics of exhaustible resources, and Professor Weitzman completed his analysis of the optimal development of resource pools. Professor Joskow has explored the future of the electric utility industry and its financing, the future of the US atomic energy industry, and the pattern of energy consumption in the US. He is developing a simulation model of the energy industry, and is reviewing the regulatory activities of government agencies in general and the health care sector in particular. Professor Hausman examined the Project Independence Report and is analyzing the choice of new technologies in energy research.

In the transporation field, Professor Friedlaender surveyed the issues in regulatory policy for railroads and alternative scenarios in federal transporation policy. Professor Jerome Rothenberg examined such problems in urban transportation as pricing policies, demand sensitivity to price, and modeling locational effects. Professor William C. Wheaton considered an optimal pricing and investment policy in highways under a gasoline tax.

Inextricably intertwined with urban transportation are questions of urban location and housing. Professor Rothenberg carried out research in such aspects of this problem as microeconomics of internal migration, supply-demand for housing in multizoned areas, the impact of energy costs on urban location, and the development of a model of housing markets and of metropolitan development and location that can be applied to general policy questions. Professor Wheaton developed an equilibrium model of housing and locational choice based on Boston experience.

Institute Professor Modigliani also conducted research on the housing market, but his interest comes primarily from the side of stabilization policies and similar macroeconomic problems. He also participated in a review after 20 years of his life cycle hypothesis of saving, made monetary policy prescriptions for both the US and Italy, reflected on the description of financial sectors in econometric models, and explored more deeply the application of optimal control to the design of optimal stabilization policies in economic models. Institute Professor Samuelson reviewed the art and science of macromodels over the 50 years of their development. Professor Friedlaender completed a quarterly macromodel of the Massachusetts economy. Professor Hall developed a model to deal with income tax changes and consumption.

Public economics has both macro and micro aspects, both of which are represented in the Department’s research. With Visiting Professor James A. Mirrlees, Professor Diamond theorized about public shadow prices with constant returns to scale, and about the assignment of liability. He also has generalized the Ramsey tax rule and continued his research into an optimal Social Security system. Professor Hausman is reexamining the cost of a negative income tax; Professor Rothenberg analyzed the distributional impact of public service provision; and Professor Wheaton explored intertemporal effects of land taxes, fiscal federalism in practice, and the financial plight of American cities.

Besides such theoretical research, there was significant research of an entirely pure nature. Professor Robert L. Bishop reexamined the measurement of consumer surplus. Professor Fisher extended his exploration of the stability of general equilibrium and of aggregate production functions. Professor Weitzman investigated the welfare significance of national product in a dynamic economy. Professor Hal R. Varian further explored the theory of fairness, non-Walrasian equilibria, and macromodels of unemployment and disequilibrium. Professor Hausman examined the econometric implications of truncated distributions and samples, of probit models, and of simultaneous equation models. In historical research, Professor Domar was concerned with serfdom, while Professor Charles Kindleberger investigated the role of the merchant in nineteenth-century technologic transfer.

Publications

Professor Bhagwati edited Taxing the Brain Drain: A Proposal and Brain Drain and Taxation: Theory and Empirical Analysis, and coauthored Foreign Trade Regimes and Economic Development: India. Professors Dornbusch and Kindleberger published numerous papers on implications of the new international monetary exchange structure for exchange rates, price stability, international trade, and international capital movements. Professor Weitzman continued his study of the Russian economy with a paper on the new Soviet incentive model.

With Visiting Professor of Management Ezio Tarantelli*, Institute Professor Modigliani published Labor Market, Income Distribution and Private Consumption (in Italian) and various papers on stabilization policy in Italy. He also wrote papers on inflation and the housing market and edited New Mortgage Designs for Stable Housing in an Inflationary Environment. Professor Hall’s labor market research resulted in papers on persistence of unemployment, occupational mobility, and taxation of earnings under public assistance. Professor Michael Piore wrote on labor market stratification and the effect on industrial growth of immigration from Puerto Rico to Boston. Professor Fisher had several publications on indexation and adjustment of mortgages to inflationary episodes. In the realm of economic history, Professor Temin published Reckoning with Slavery and Did Monetary Force Cause the Great Depression?

*Ezio Tarantelli was the victim of a Red Brigades’ assassination in 1985.

Institute Professor Samuelson published theoretical papers on factor price equalization and trade pattern reversal. In the realm of pure research, he put out papers on nonlinear and stochastic population analysis, optimal population growth, and the optimal Social Security system implied in a lifecycle growth model. He also brought out the tenth edition of his famous text, Economics: An Introduction Analysis.

FACULTY

Visiting Professor John R. Moroney was here from Tulane University; Visiting Professor Mirrlees came in the spring term from Nuffield College, Oxford University. Regular faculty on leave were Professors Fisher and Joskow in the fall and Professor Weitzman in the spring.

It is a pleasure to report the promotion to Associate Professor of Jerry A. Hausman. A new appointee, Professor Jeffrey E. Harris, with the unusual background of an M.D. and a Ph.D. in economics, will provide long-sought coverage in health economics.

Professor Kindleberger will retire as Ford Professor and become a Senior Lecturer on a half-time basis. Since 1948, when he came as an Associate Professor, Professor Kindleberger has been an effective teacher, scholar, participant in faculty governance, and counselor to governments and the public. He has trained the leading international economists of the next generation; he has produced a dozen books and more than a hundred articles in international trade and finance and in economic history. He epitomizes the highest kind of academician.

Several honors were bestowed on members of the Department. Institute Professor Modigliani will complete his year as President of the American Economic Association. Professor Myers received a Distinguished Alumni award from Pennsylvania State University. Professor Fisher was F.W. Paish Lecturer to the Association of (English) University Teachers of Economics. Institute Professor Solow received a D. Litt. from Warwick University, and Institute Professor Samuelson, a D.Sc. from the University of Rochester.

EDGAR CARY BROWN

Source: MIT Libraries, Institute Archives and Special Collections. MIT Department of Economics Records, Box 1, Folder “Annual Report 1975-6”.

Image Source: Building E52, Alfred P. Sloan Jr. Building, later Morris and Sophie Chang Building

 

https://mitmuseum.mit.edu/collections/subject/building-e52-alfred-p.-sloan-jr.-building-later-morris-and-sophie-chang-building-52

Categories
Courses Exam Questions Problem Sets Syllabus

MIT. Core Microeconomic theory III. Hal Varian, 1975

Hal R. Varian, chief economist at Google since 2007, was a 28 year old assistant professor at M.I.T. in 1975 when he taught my cohort the third in a sequence of four half-term courses that constituted MIT’s required core of graduate microeconomic theory. He assigned draft chapters from his graduate textbook Microeconomic Analysis (published in 1977). For this post I have transcribed the course outline, five problem sets and the final examination for the course.

Core microeconomic theory at MIT in 1974-75:

14.121 (linear models and production) was taught by Martin Weitzman,
14.122 (competitive and noncompetitive market structures) taught by Robert L. Bishop,
14.123 (theory of the consumer and resource allocation) was taught by Hal Varian,
14.124 (capital theory, uncertainty and welfare economics) was taught by Paul Samuelson.

_______________________

14.123—Microeconomic Theory III
Theory of the Consumer and Resource Allocation

Professor Hal R. Varian, E52-353, 3-2662
Spring, 1975

Feb. 5 advanced placement exam
Feb. 10 utility; demand; expenditure
Feb. 12 indirect utility; Slutsky equation
Feb. 17 no class
Feb. 19 no class
Feb. 24 demand functions; duality
Feb. 26 expected utility; properties
Feb. 28 general equilibrium; existence
Mar. 3 welfare theory
Mar. 5 the core of an exchange economy
Mar. 10 general equilibrium and production
Mar. 12 dynamics and general equilibrium
Mar. 17 malfunctions of the market mechanism
Mar. 19 final exam

Course text will be lecture notes available from me. Malinvaud and Arrow and Hahn are highly recommended secondary reading. There will be four or five problem sets and a problem session on Fridays, 9-10:30.

_______________________

 

14.123 Spring, 1975
Professor Hal R. Varian

Consumer Theory I

  1. Consider a consumer with a Cobb-Douglas utility function:
    u(x,y) = a ln x + (1-a) ln y.
    Calculate:

    1. demand functions for x and y
    2. the indirect utility function
    3. the expenditure function
    4. the Hicksian demand functions.
  2. In a general equilibrium analysis, we cannot take income as an exogenous variable in the demand function since income, y = p.w, depends on the vector of relative prices. Derive the Slutsky equation for Dpm(p, p.w) in this case.
  3. At a general equilibrium price vector p*, we have aggregate supply equal aggregate demand:
    Σ mi(p*, p*.w) = Σ wi. Show that if all agents have identical marginal propensities to consume each good (Dymi(p*, p*.w) = Dymj(p*, p*.w) for all i and j) then all aggregate demand curves must be downward sloping at equilibrium. More generally, show that Dp(Σ mi(p*, p*.wi)) is negative semi-definite.
  4. Define eij = (-pj/xi) Dpjmi(p,y) be the cross price elasticity of good i with respect to price j, and ri = pi mi(p, y)/y, the income share of commodity i.
    Show that r1e11 + r2e21 +r3e31  = r1.

_______________________

14.123 Spring, 1975
Professor Hal R. Varian

Consumer Theory II

  1. A consumer is found to have a utility function of the form
    u = -1/x1 – 1/x2.

    1. Starting from the utility function, compute the market demand functions for the consumer when he has income y and faces prices p1 and p2.
    2. Use the market demand functions to show that the indirect utility function is
      u = -( √(p1) + √(p2))2/m.
    3. Compute the expenditure function from the indirect utility function.
    4. Compute the consumer’s compensated and market demand curves from the expenditure function.
  2. Suppose at prices (p1, p2) = (5,10) and income y = $100, a rational consumer consumes the bundle (6,7). Assume that we have measured the following derivatives:

∂H1/∂p1 (p1, p2, ū) = -2
∂H1/∂p2 (p1, p2, ū) = +1
∂M1/∂y (p1, p2, y) = 2/7

where H1 and H2 are the Hicksian demand functions for goods 1 and 2 and M1 is the Marshallian demand function for good 1. Find an estimate of the consumption bundle of the consumer at (p1, p2) = 5,11).

  1. Suppose a consumer has an expenditure function of the form e(p, u) = u.g(p). Show that his utility function is homogenous of degree one. Suppose e(p,u) is of the form e(p,u) = h(u)g(p). How does the consumer’s behavior differ?
  2. Suppose a consumer has a differentiable expected utility function for income with Dyu(y) strictly positive. Show that he will always take a small enough bet as long as it has positive expected value.

_______________________

 

14.123 Spring, 1975
Professor Hal R. Varian

General Equilibrium III

  1. Show that Walras law holds for a production economy with fully distributed profits.
  2. Prove the theorem that a general equilibrium is pareto efficient for an economy with production.
  3. Suppose we have a productive economy with two agents. The producer has a production function x = q1/2 where x is output and q is labor.
    The consumer has a utility function u(x,q) = x1/2(1-q)1/2. Calculate the general equilibrium real wage and equilibrium level of profits.

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14.123 Spring, 1975
Professor Hal R. Varian

General Equilibrium Theory and Welfare Economics I

  1. Show that any solution to

max Σ ai ui(xi), ai>0
s.t. Σ xi ≤ w

is necessarily pareto efficient.

  1. Suppose we have two agents with indirect utility functions

v1(p1, p2, y) = ln y –a ln p1 – (1-a) ln p2
v2(p1, p2, y) = ln y –b ln p1 – (1-b) ln p2

and initial endowments

w1 = (1,1)
w2 = (1,1)

Calculate the market clearing price.

  1. We have two agents with utility functions

u1(x1, y1) = a ln x1 +(1-a) ln y1
u2(x2, y2) = b ln x2 + (1-b) ln y2

and initial endowments

w1 = (1,0)
w2 = (0,1)

Calculate the market equilibrium prices in terms of the parameters a and b.

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14.123 Spring, 1975
Professor Hal R. Varian

General Equilibrium Theory and Welfare Economics II

  1. Two agents with strictly convex preferences have equal initial endowments
    w1 = w2. They trade to an arbitrary allocation in the Core (w1,w2), (x1,x2). Prove that this allocation is necessarily fair:

    1. Draw an Edgeworth box and give a geometric argument;
    2. give an algebraic argument in the general case (there is a one-line proof.)
    3. Show in a three person economy there are allocations in the equal division core that are not fair.
  2. Suppose we have n agents with identical, strictly convex preferences and we have some initial bundle of k goods to be divided among them. Let x be a fair allocation; show that x must give the same bundle to each agent. (Recall that a fair allocation is one that is strongly pareto efficient and such that no agent prefers any other agent’s bundle to his own.)
  3. Show that under appropriate assumptions of convexity, every pareto efficient allocation is necessarily a solution to a problem of maximizing a weighted sum of utilities. What is the economic interpretation of the weights?
  4. Suppose we are at a market allocation that is considered good. Since it is a market equilibrium it is pareto efficient and therefore maximizes a certain weighted sum of utilities Σ ai* ui(x). Accordingly, we will use Σ ai* ui(x) to evaluate small projects. Suppose we are considering a small project that will change x = (x1,…, xn) to x´= (x1´,…, xn´). Show that it should be undertaken if and only if it increases national income; that is, iff Σ p.(xi´-xi) >0.

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14.123 FINAL EXAMINATION
March 19, 1975

Professor H. Varian

Answer any 2 out of 4. All questions have equal weight. Good luck!

  1. A consumer has a utility function of the form u(x1, x2) = ln x1 + x2. He faces prices p1 and p2 and has income y. Calculate:
    1. his Marshallian demand functions for each good
    2. his indirect utility function
    3. his Hicksian demand functions
    4. his expenditure function.
  2. There are two consumers A and B with the following utility functions and endowments:

UA(XA1, XA2) = a ln XA1 + (1-a) ln XA2 , WA = (0,1)
UB(XB1, XB2) = min (XB1, XB2) , WB =(1,0)

Calculate the market clearing prices and the equilibrium allocation.

  1. We have n agents with identical strictly concave utility functions, u1(x1),…,un(xn). There is some initial bundle of goods w. Show that equal division is a pareto efficient allocation.
  2. A consumer has a differentiable expected utility function u(y) with u´(y) > 0. (There are no conditions on u´´(y)). His initial level of wealth is w and he is contemplating a bet which gives him $e with probability p > ½ and he loses $e with probability 1-p. (Notice the bet has positive expected value.) Show that he will always take the bet if e is small enough. (Hint: try Taylor series.)

 

Source: Personal copies.

Image Source: Detail from 1976 departmental group photo.

Categories
Economists M.I.T.

MIT. Department of Economics Group Photo, 1976

Back Row:  Harold FREEMAN, Hal VARIAN, Jerome ROTHENBERG, Peter DIAMOND, Jerry HAUSMAN

4th Row: Paul JOSKOW, Anne FRIEDLAENDER, JOHN R. MORONEY (VISITOR TO DEPARTMENT)

3rd Row: Stanley FISCHER, Jagdish BHAGWATI, Rudiger DORNBUSCH, Robert SOLOW, Robert HALL

2nd Row: Edward KUH, Morris ADELMAN, Abraham J. SIEGEL, Richard ECKAUS, Martin WEITZMAN

1st Row: Evsey DOMAR, Paul SAMUELSON, Charles KINDLEBERGER, E. Cary BROWN, Franco MODIGLIANI, Sydney ALEXANDER, Robert BISHOP

1976_MITEcon_blogCopy

Apparently didn’t get the memo and/or not pictured: Michael PIORE, Frank FISHER, Peter TEMIN.

Thanks to Robert Solow, the photo-bomber standing to Solow’s left in the picture has been identified as a guest from Tulane University, John Moroney. It is possible that I forgot some other person not included in this faculty picture.

I note that the entire front row has gone to that great Department of Economics in the Cloud.

Source: A graduate student buddy of mine who entered the MIT Ph.D. program in 1975/76.

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