Weitzman Archives - Page 2 of 2 - Economics in the Rear-View Mirror

The annual skit party was a huge social event in the economics department at MIT in the 1970s and presumably before and after. Each of the cohorts was expected to write and perform its own skit in which economics and economics professors were the principal targets. Faculty written skits were often a part of the festivities. Here in this posting for the historical record, a parody of Alice in Wonderland set in the Wonderland Institute of Technology in 1975 written by the first-year class of 1974-75. But first I provide a list of my classmates with links to some biographical information where I was able to find something…whatever happened to Paul Krugman? Not everybody participated in the preparation and performance so there remains a presumption of comic innocence for the majority of the following.

In 1978 many of this cohort were involved in Casablank, a parody of the movie Casablanca. That script has been transcribed and posted at the highlighted link.

__________________

First Year Economics Graduate Students, 1974-75
M.I.T. (Spring 1975)

Abel, Andrew B.
Aspe, Pedro A.
Begg, David K. H.
Beleza, Luis Miguel C. P.
Bookstaber, Richard M.
Collier, Irwin L., Jr.
Datcher, Linda P.
Daula, Thomas V.
Desormeaux, Jorge J.
Donnelly, John F.
Duarte, Virgulino
Klorza, Santiago C.
Feiger, Margaret C.
Frankel, Jeffrey A.
Geehan, Randall R.
Giavazzi, Francesco
Halpern, Janice D.[sic, H.?]
Helms, L. Jay
Hill, Raymond D.
Krasker, William S.
Krugman, Paul R.
Malveaux, Julianne M.
Mincy, Ronald B.
Mooney, Patricia D.
Mork, Knut A.
Nagatani, Hiroaki
Neuer, Margaret R.
Smith, David A. [Alton]
Startz, Richard
Winicker, Mary K.

Source: M.I.T. Archives. MIT Department of Economics Records, Box 1, Folder “Women & Minorities”.

__________________

While transcribing this skit from my own days as a graduate student, I discovered how much I had indeed forgotten. The mapping of many a character to the corresponding faculty member was no longer obvious to me. I have added a listing of Dramatis Personae with annotations based on the combined incomplete memories of myself, Jeff Frankel, Dick Startz, Andy Abel, Ray Hill and Jay Helms. Perhaps some long-lost member of the troupe will stumble across this page and help me fill in the blanks, especially with respect to casting (20 characters!).

______________________

ANALYSIS IN WONDERLAND

Composed and performed by the first-year economics graduate students at M.I.T.
Second term, 1974-75

DRAMATIS PERSONAE

Narrator: played by Richard Bookstaber
Alice (Representative Graduate Student): played by Margaret (née Agnew) Feiger
Advisor (presumably the actual first-year advisor, Peter Diamond): actor unknown
Cheshire Cat (Jagdish Bhagwati): actor unknown
Micro: (Hal Varian?): actor unknown
Macro: (Stanley Fischer?): actor unknown
Quick & Dirty (Martin Weitzman): actor unknown
Palmer (Palmer, an actual Sloan School graduate student): actor unknown
Dormouse (Evsey Domar?): actor unknown
Mad Hatter (Charles Kindleberger): played by Jeffrey Frankel
March Hare (Robert Engle?): actor unknown
Tweedledee (Jerry Hausman): possibly played by Jay Helms
Tweedledum (Robert Hall): possibly played by Bud Collier
Knave of Hearts (Franco Modigliani): actor unknown
Knave of Clubs (Arthur Burns): actor unknown
Knave of Spades (William McChesney Martin): actor unknown
Knave Alan (Allan Greenspan): actor unknown
King (President Gerald Ford): actor unknown
Joker (Paul Samuelson): possibly played by Ray Hill
White Rabbit (Robert Bishop?): actor unknown

ACT I

Narrator:	The first year class presents… Analysis in Wonderland, a tragicomedy in four unnatural acts. Any resemblance to faculty members living or otherwise should be inferred from the initials worn by the characters. Act I, Alice enters Wonderland and meets the Cheshire cat.
(Alice is sitting at a table reading Samuelson’s Economics.)
Narrator:	One day Alice was reading a book, but she was getting very bored, for the book had no conversations or jokes in it.
Alice:	And what is the use of a book without conversations or jokes?
Narrator:	And so she began to drift off. And eventually she noticed that there was someone on the other side of the desk…
Advisor:	Hi! Welcome to the Wonderland Institute of Technology. You must be a first year graduate student. I’m your first year advisor, and it’s my job to talk to you and give you a feeling that someone cares about you personally. Now, let me see your schedule (grabs book). Well, uh, (looks at book then says with emphasis) Paul, this schedule looks fine to me (signs it) and remember to turn in your roll cards on the first day of each class. (Through all this Alice keeps going “uh” and “but”…but can’t manage to say anything) Remember that if you have any questions or problems, just come in and talk to me, I have plenty of time. Excuse me! (The advisor gets up and runs out. Alice runs after, then comes back)
Alice:	What a strange place! But where should I go from here? Why there’s a Cheshire Cat. (Enter Cheshire cat) Excuse me, sir, but can you tell me where I ought to go from here?
Cheshire Cat:	Why, I’m wery [sic] glad you asked me that. You should go to the optimal point, of course.
Alice:	But how long will that take me?
Cheshire Cat:	I can’t tell you that, listen to this. (Turns on radio, which produces static. Turns it off.) You see! Our economic theories are all static.
Alice:	I would like to see some faculty.
Cheshire Cat:	Well, you could go to Harward [sic], but it’s wery rare that anyone sees any faculty there. Or you could stay here, but everyone here has completely lost their faculties. They’re all mad, you know.
Alice:	But I don’t want to go among mad people.
Cheshire Cat:	Oh, you can’t help that; we’re all mad here. I’m mad. You’re mad.
Alice:	How do you know I’m mad?
Cheshire Cat:	Well, a physicist’s not mad, you grant that? Now, a physicist starts with facts and tries to find theories that fit them. I start with theories and don’t bother with facts. Therefore I’m mad. Yes?
Alice:	But what are your theories about?
Cheshire Cat:	Do they have to be about anything?
Alice:	Well, I’ve often seen a subject without a theory, but a theory without a subject? It’s the most curious thing I ever saw in all my life! (Alice suddenly starts)
Cheshire Cat:	Don’t worry, it’s just the inwisible hand.
(Enter two characters with paper hats (?) on which are cross diagrams. One has a potato chip taped to his shoulder.)
Cheshire Cat:	They’re Mike and Mac Ro
Micro:	Someone must stop him! It’s shameful! Look at that silly diagram he’s wearing! It’s a disgrace to the profession.
Macro:	It’s a perfectly good diagram. Not like that ridiculous diagram you’re wearing!
Alice:	But the diagrams look just the same.
Cheshire Cat:	Shhh! You’ll only get them more upset.
Alice:	Why don’t you try to talk your differences over?
Micro:	Well, we microeconomists believe in logic, so I’m willing to reason it out.
Macro:	You can’t expect me to be reasonable. Can’t you see I’ve got a chip on my shoulder?
Alice:	Why, yes—it’s a potato chip in fact.
Macro:	I wear it in honor of our founder, Cain’s. So prepare to defend yourself.
Micro:	I warn you, I’m a master of the Marshallian arts.
Macro:	But I’m armed with the most deadly tool of macroeconomics: (pulls out several pairs of pliers)…Multi-pliers!
Micro:	And I have the most dangerous concept of microeconomics. (pulls out a slingshot) Elasticity!
Alice:	Oh no, they’re going to have a duel and micro is a semi-strict under dog! (Mike and Mac turn back to back) (enter panting, the Quick and Dirty banker, carrying a money bag and a calculator)
Q&D:	Wait! You can’t have a duel without a primal.
Alice:	Who are you?
Q&D:	I’m duh quick and doity bankuh. And by my quick and doity bankuh’s calculation, I find dat what you need is more liquidity which I will now provide. (out of the moneybag he pulls a waterpistol, shoots everyone, then runs)
Macro:	Now we’re all wet. What are we going to do?
Alice:	It’s all right, I know just what to do. Here’s the driest thing I know. (begins reading from Bishop [notes])
Micro:	This isn’t getting me dry at all.
Macro:	Now there’s only one way to get dry, and this will prove to you that macroeconomics is good for something.
Alice:	What are you going to do?
Macro:	I’m going to do some hand-waving! Macroeconomists are always drying things out by waving their hands.
Alice:	They are?
Macro:	Of course! That’s why none of their theories will hold water. Now, watch this! (He begins to draw a diagram)
Alice:	What do those lines mean?
Macro:	Oh, I don’t know. But they’re pretty good lines, and Lord knows I have the right to a few good lines in this ridiculous skit.
Palmer:	Haven’t you got the A line drawn wrong?
Macro:	(Going very fast) Well, that line doesn’t really matter. (erases it)
Palmer:	But then shouldn’t you erase the k line, too?
Macro:	Well, all right (erases).
Palmer:	What do X and Y stand for?
Macro:	Oh, don’t worry about the axes (erases them). Actually, these are not quite like this anyway. (erases remaining lines) And, as you can see, equilibrium is at the intersection.
Alice:	Well, I’ve often seen lines without an intersection, but an intersection without lines? It’s the most curious thing I ever saw in my whole life.
Narrator:	You’re repeating yourself, Alice.
Alice:	What do you expect, Mel Brooks?
Micro:	You think that’s hand-waving! Why, I have seen hand-waving, compared with which that is no better than eternal bliss.
Alice:	But what is better than eternal bliss?
Micro:	Well, a ham sandwich, for instance.
Alice:	But nothing’s better than eternal bliss.
Micro:	And a ham sandwich is better than nothing. So, by transitivity, there you are!
Alice:	(ignoring Micro as she turns to the Cheshire Cat) Isn’t there anyone here who isn’t mad?
Cheshire Cat:	You might try an assistant professor.
Alice:	Which one should I try?
Cheshire Cat:	It doesn’t matter—pick one at random.
Alice:	How do I do that?
Cheshire Cat:	Just draw one from an assistant professor urn.
Alice:	What’s an assistant professor urn?
Micro, Macro, Cheshire Cat, Narrator (in unison)	About eleven thousand a year!
(pause)
Narrator:	…and a copy of Bishop’s notes.
Alice:	Curiouser and curiouser.
(exeunt all)

ACT II

Narrator:

Act II. The Mad Boston Tea Party

(Dormouse sleeps throughout. Mad Hatter stuttering throughout; price keeps going up on hat.)

Mad Hatter:

What’s your liquidity preference my dear?

Alice:

It looks like you have nothing but tea.

Mad Hatter:

That is all we have.

Alice:

Then why did you ask?

Mad Hatter:

Consumer sovereignty. (gives Alice tea) I would like to suggest to you that that will be eight pence (takes shilling from Alice.)

Alice:

No cover charge?

Mad Hatter:

A gentleman never takes cover, as we say in the old country.

Alice:

Hey, I gave you a shilling and you only gave me two pence change back!

Mad Hatter:

A gentleman never counts his change.

Hare:

Gentleperson!

Alice:

This sounds like a liquidity trap to me.

Mad Hatter:

Alright, I’ll put it down on the T-account…(gets book)

Alice:

There is something floating in my tea.

March Hare:

(looking) Exchange rates.

Mad Hatter:

… two pence… (fiddling with T-accounts)

Alice:

No it’s ice.

Mad Hatter:

…under frozen assets.

Hare:

Gary Becker! (general laughter)

Mad Hatter:

Why is the Poisson distribution like a temperature of 102?

Alice:

Well, let’s see… I suppose you would have to integrate e to the…

Mad Hatter:

Integration! They only do that in South Boston.

March Hare:

No, that’s disintegration.

Alice:

I suppose you have to differentiate between…

Mad Hatter:

Differentiate? The first derivative is the last refuge of a scoundrel.

Alice:

I give up, why is the Poisson distribution like a temperature of 102?

Mad Hatter:

I haven’t the slightest idea.

Alice:

That’s not very funny.

Mad Hatter:

Funny?

March Hare:

She wants to hear a joke.

Mad Hatter:

A joke, a joke!

March Hare:

…Fogel and Engerman! (general laughter)

Alice:

I’m afraid I don’t get it.

Mad Hatter:

Well, you see, certain names are standing jokes around here, like…Walt Whitman Rostow! (laughter)

Alice:

Can I try one?

Mad Hatter:

Go right ahead.

Alice:

Milton Friedman! (silence among the actors who look sour a moment after the audience’s laughter dies down.)

Mad Hatter:

Try another one.

Alice:

Jay Forrester….(more silence).

Alice:

I don’t understand. What’s wrong?

Mad Hatter:

Well, some people just can’t tell a joke.

March Hare:

Perhaps you’d like to see a proof?

Mad Hatter:

A proof! A proof!

March Hare:

This is a proof I recited before the Queen of Hearts. (goes to board)

Twiddle Twiddle lambda star
Alpha hat, beta hat times X bar.
Alpha hat, beta hat sigma X_i

One over n, equals mean of Y.

[writes on board:]:
$\begin{array}{l}\mathop{{\tilde{\tilde{\lambda }}}}^{*}=\hat{\alpha }+\hat{\beta }\cdot \bar{X}\\=\hat{\alpha }+\hat{\beta }\cdot \sum{{{X}_{i}}}\left( \frac{1}{n} \right)=\bar{Y}\end{array}$

Mad Hatter:

Time to move on to the next place.
(everybody gets up to move)

Alice:

What?! You mean you just move on to the next place without erasing?

March Hare:

We don’t have to erase; we just relabel the axes.

Mad Hatter:

I always erase twice, once before the period and once afterward. (erases)

(everyone moves down one, and relabels axes and curve)

Alice:

And I suppose when you use up all the places you just start again at the beginning of the circle?

Mad Hatter:

Yes. It’s called recycling.

March Hare:

You better wake up the Dormouse.

(Mad Hatter and March Hare exit)

Alice:

(To Dormouse) Wake up, wake up. (shakes him)

Dormouse:

(waking) Whaaaaat?

Alice:

Wake up. It’s over.

Dormouse:

(Pause…) Can I Xerox your notes?

Alice:

(starts to leave. turns and says) Why is a Poisson distribution like a temperature of 102? (Pause. Alice exits)

Dormouse:

(alone) Because it’s not normal.

ACT III

Narrator:	Act III. Alice meets Tweedledum and Tweedledee, who have a battle.
(Alice enters and sits down. Dum and Dee enter, arm-in-arm, prancing. Dee sits down; Dum goes to the board and begins. Throughout, Dee is frantic, pacing, and talking very fast. Dum is red-faced, slow-talking, constantly looking at the floor; arms folded, with noticeably short pants and a turtleneck.)
Dum:	So, to conclude yesterday’s talk, we can see that it’s entirely possible that for the two sub-groups, say, men and women, you could have different parameters in the regression…
Dee:	(jumping up to interrupt) I think I can draw a picture that will make that all clear. Wish I had my colored chalk… [draws pictures].

	…so you see that while the slope in the pooled regression is zero, contrariwise; it’s actually negative for men and positive for women.
Dum:	…Sort of, different slopes for different folks, which tells us…
Dee:	[interrupting] …and contrariwise, I can clear this up by drawing a picture that would show…[draws picture]

Dum:	[interrupting]…that there could be kinky behavior in some subgroups….
Dee:	Right. (sits down)
Dum:	But, as I was going to say, this illustrates the 287^th “Iron Law” of econometrics, which states that….
Dee:	(again jumping up to interrupt)…Contrariwise,…I think I can make that clear with a picture in four dimensions. Damn, I just wish I had my colored chalk…(draws pictures)

	…which shows that…
Dum:	(getting very irritated, interrupting) Nohow! The time has come, the Walras said to talk of many things, of matrices and error terms of cabbages and kings, and keeping out your pictures that keep complicating things.
Dee:	Contrariwise! In my way of showing things I’m better far than you, Your talk is like an old dead horse– It’s slow, not unlike glue.
Dum:	Now wait a second…
(Dum and Dee break into a general dispute, yelling at one another.)
Dum:	….you’re not consistent…
Dee:	…you’re almost surely driving me to the p-limit…
Dum:	…you’re a homoscedastic deviate…
(While Tweeledum and Tweedledee continue arguing, the Narrator breaks in…)
Narrator:	So Tweedledum and Tweedledee Agreed to have a fight For Tweedledum said Tweedledee Couldn’t prove Gauss-Markov right.
Dum:	Of course we must have a fight. What time is it?
Dee:	10:40—We’re late getting started, so we better hurry up.
Dum:	Let’s fight ‘till noon, then have lunch.
Narrator:	So they agreed to fight and, as Alice watched, they began to see who could prove the theorem better.
(Dum and Dee give lectures simultaneously, beginning and ending at the same time with the same words.)
Dee:	[simultaneously with Dum] I CLAIM THAT OLS IS BLUE. Basically, we want to prove that ${{\sum{\left( \mathbf{{X}'Y} \right)}}^{-1}}\mathbf{{Z}'}\beta \le {{\sum{\left( \mathbf{{X}'\tilde{Y}} \right)}}^{-1}}\mathbf{{Z}'}\gamma$ Now just take the inverse of the antilog of the Jacobian and delete the fourth row. Let little x be the square root of big X, and let medium-sized x be measured from its mean; substitute back in and we have ${{\sum{\left( \mathbf{{X}'}\left[ \begin{matrix} \mathbf{Y} \\ \mathbf{Z} \\ \end{matrix} \right] \right)}}^{-1}}{\left\| J \right\|\cdot \Pi \cdot {{R}^{2}}}/{\text{hat size}}\;$ which you will recall from 14.381. Then, as I promised, you can use this by transposing Z and x, deleting R and reversing the inequality…..OH SHIT…I’ve screwed up…Well, just change every medium-sized x in your notes to big X, delete all sigmas, and reverse the third and fourth steps of the proof I gave last week which was right here on the board. Or look in Tahl’s [Theil with an West Virginian accent] book. Everyone should understand this perfectly—and of course the notation is clear. Then, adding the obvious steps we learned in 14.381 to this proof completes the argument. SO OLS IS BLUE, as promised.
Dum:	[simultaneously with Dum] I CLAIM THAT OLS IS BLUE. Well….a lot of people go around proving the Gauss-Markov….Theorem….but the literature is full of cases….where what’s done is wrong….Take matrix addition for example….Some people just add element-by-element….while often the more interesting thing to do…..is to use the Choleski factorization of one of the matrices….And recalling that Tweedledum and I are the final arbiters of econometrics at W.I.T. (at least until Fisher gets back off leave) you’d better do it this way, or consider dropping the course. SO OLS IS BLUE, as promised.
Palmer:	Shouldn’t you invert that Jacobian before proceeding to expansion in Lambert spaces….
Dee:	[interrupting] If it was so, it might be; If it WERE so, it could be; But as it isn’t, it ain’t. That’s logic.
Narrator:	Alice couldn’t figure out just who had won the fight, although Tweedledee HAD used a lot more words….
[exeunt]

ACT IV

Tweedledee:	Act Four, “The trahl”.
Narrator:	Within a few moments Alice will witness the trial of the Knave of Hearts who is in deep trouble now because the King of Hearts is flying all the way from the Capital of Wonderland to preside at the trial. You are undoubtedly familiar with the Knave of Hearts most important contribution to economic analysis, “A Life-Cycle Built for Two”. But now he has been accused of starting the latest Wonderland inflation and depression—or as they say in the seminar rooms down by the River Chuck—“inflession”. The economic experts of the King—Knave Arthur of Clubs, Knave William of Spades, and Knave Alan of Diamonds—have all convinced him that economic voodoo has been practiced on models on the Wonderland economy in the hallowed halls of W.I.T. Since the King of Hearts has never played with a full-deck in his life, he was easily deceived by these rascals. Fortunately for the Knave of Hearts the Queen was unable to come to the trial due to a prior speaking engagement before the Veterans of Foreign Business Cycles.
	(Enter Knaves of C.S. &D. They play “Hail to the Chief” on kazoos for a few bars and end with “Pop goes the weasel.” Then the King enters wearing a helmet and carrying a football. A WIN button is conspicuous. King bends over, hikes the ball to Knave of Clubs. King sits down on throne in middle of stage.)
Knave of Clubs.	Where’s the jury?
King of Hearts.	(points at the Knaves) You. (Knaves turn around but no one is behind them. King continues…) Yes, you. You are his peers. And for a proper trial before we cut off his grant, we must have a jury of his peers.
Knight of Diamonds.	(tossing a coin à la [George] Rath) We know what to do.
	(Enter all the other characters from Wonderland, except Joker and reporters)
King:	What are the charges?
Knave of Clubs:	Eleven dollars a barrel.
White Rabbit:	The King of Hearts, he has no smartz But Unemployment yes. The Knave of Hearts has played his part To make inflation worse.
Knaves in the jury-box:	Boo, Hiss, Boo!
King:	It is a pretty despicable offense isn’t it?
Knave of Spades:	Are you kidding? The charges don’t even rhyme.
King:	Will the defendant rise?
Knave of Hearts:	If I had known you were going to ask me that question I would have built it into my model.
King:	I’ll hold you in contempt!
Knave of Hearts:	I don’t suppose I’ll become overly fond of you either.
King:	Let the jury note the defendant’s behavior.
Knave of Hearts:	Which reminds me of my 1944 paper, but that is of course a secondary issue given the gravity of the problems which we now face. While I can’t formally defend the following equation to my own satisfaction, I think that it does make some economic sense. But first I should say that things will be getting much worse before they will get better, I can give you the latest predictions…..
King:	(fuming through all of the above) Bind the bearer of bad tidings or he’ll talk us to death…
Knave of Clubs:	But what shall we bind him with?
King:	Bearer bonds, naturally!
	(The Knaves come out of the jury box and use first-aid gauze to tie the knave of Hearts by body and legs & gag him—leaving only one arm free. Knave of Hearts has been talking with his hands throughout his testimony, and he continues gesturing with his free hand while occasional grunts can be heard under his gag.)
King:	May it be noted that in the tradition of Wonderland jurisprudence we have left the defendant with one degree of freedom in spite of his lack of respect for this court. Are there any witnesses?
Mad Hatter:	I am.
King:	Take the stand.
Knave of Clubs (to Mad Hatter):	Did the defendant do it?
Mad Hatter:	Certainly not.
Knave of Spades:	And you witnessed this with your own eyes?
Mad Hatter:	And I didn’t hear or smell him do it either.
Knave of Diamonds:	But how strong was your prior?
Mad Hatter:	Well, I don’t like to boast but when I was a young man working for the OSS during the War, I once spent a week in bed with a….
Knave of Clubs:	No, no, no. How much could new data affect your prior beliefs, and if considerably, what was your posterior judgment?
Mad Hatter:	I don’t now, that’s a good one. But I’ve got one for you. What weighs 12,000 pounds and has a twice differentiable indifference map over hay and peanuts?
King:	That’s irrelevant!
Mad Hatter:	That’s right.
King:	Give your evidence, or I’ll cut your grant off on the spot!
Mad Hatter:	(stutters) I’m a poor man your majesty.
King:	You’re a very poor speaker. (knaves laugh) I thought that was a pretty good one too. I’m in the mood for a few laughs (to White Rabbit) Call in the Joker.
White Rabbit:	The Joker.
(Enter Joker, attended by secretary, fans seeking autographs, and reporters taking pictures)
Joker:	It’s great to be back in Wonderland folks. A funny thing happened on my way…
King:	(interrupting) You have been called here to testify. What is the Keynesian viewpoint?
Joker:	As Uncle Miltie Friedman would say, only blindmen use Keynes. Hey, that’s a pretty good one. (To secretary) Write that down for my textbook—Better yet, put out a new edition. But, seriously folks just the other day I was leafing through a volume of Ricardo’s letters in the Sraffa collection when I came across a letter from Ricardo to James Mill describing the following encounter between Thomas Malthus and David Ricardo. Ricardo was walking down the street one day when he ran into the good Reverend who was, much to Ricardo’s surprise, sporting a banana in his left ear. Ricardo was surprised because Malthus was always the last of the political economists to adopt a new fashion. Finally Ricardo’s curiosity got the better of him and he asked, “I say Tom, why is that banana in your ear?” Malthus didn’t seem to understand—but that was hardly unusual as Malthus, more often than not, couldn’t understand what his friend was saying. In fact, old Malthus personally thought that Ricardo couldn’t optimize his way out of a paper sack, much less a Lambert space. Finally Malthus said, “I’m sorry Dave, but I can’t hear you, you see, I have this banana in my ear.” (everyone in the courtroom is sleeping) And now….ahem…ahem (everyone wakes up). A few of your favorite impressions: Francois Quesnay! (He covers his face with his hands; removes hands; expression unchanged) Böhm-Bawerk! (same routine)
King:	Enough!
Joker:	Nassau Senior! (same routine)
King:	Take him away. (White rabbit and knaves carry Joker off, still doing impressions. e.g. Stanley Jevons, Joseph Schumpeter, Vilfredo Pareto….)
King:	Who is the next witness?
Rabbit:	Alice!
Alice:	Here! (she goes to the witness stand)
King:	What do you know about this business?
Alice:	Nothing.
King:	If you say anything, I’ll give you part credit. Otherwise….
Alice:	But I don’t need part credit!
King:	Young lady, I’m growing impatient. Either tell us something about this business or I’ll cut off your grant.
Alice:	(crying) But I don’t have a grant.
King:	Then why are you so upset, indeed.
Alice:	What sort of….(alarm clock goes off in the jury box and the knaves wake up).
Knaves:	(in unison) Verdict time!!
Knave of Spades:	(To Knave of Diamonds) Do you have the coin?
Knave of Diamonds:	Yes I do. (to Spades). You’re innocence, (to Clubs) you’re guilt. Call it innocence. (he tosses the coin high in air)
Alice:	What kind of trial is this?
King:	Don’t be a stupid child. It’s a Bernoulli trial.
Knave of Spades:	Tails.
Knave of Diamonds:	Sorry it’s heads. He’s guilty!
Alice:	May I see the coin? (it’s tossed to her) This coin has two heads.
King:	Did anyone say p equaled one half?
	(Lights out. Everyone leaves but Alice. Lights on she has book and wakes up.)
Alice:	I’m glad I woke up before I had to take generals. (She leaves)
Audience:	(Deafening applause) Bravo. Cheers. Whoopee.

Source: Transcribed by Irwin Collier from personal copy.

The theory core at MIT in the mid-1970s consisted of four half-semester courses in microeconomics and four half-semester courses in macroeconomics. For reasons unknown to me, Microeconomic Theory I (A) taught by Martin Weitzman was scheduled to follow Microeconomic Theory II (A) taught by Robert Bishop for the First Term of 1974-75. I guess I should really say, there was no good reason not to simply reverse the numbering of the courses since Weitzman’s course was in most respects the more advanced of the two. The course featured the economic intuition behind some “quick and dirty bankers’ calculations”, an introduction to linear models, and the first essay of Koopmans’ Three Essays on the State of Economic Science.

_______________________

Microeconomic Theory I (A)

14.121 December 1974 Final Exam M. Weitzman

Instructions:

Be sure you have picked a number and identify yourself by that number only on each blue book you use.
Try to answer any three out of the following six questions.
Complete answers on all three questions are not required for passing. Two well answered questions would easily be enough to pass, for example.
Total time: one and a half hours.
Answer each question in a separate blue book.
Try to be concise and to the point. Wordiness is not going to help anyone.

Explain carefully why the following three features of the American economy lead to productive inefficiency. Say what might be done to rectify the inefficiency.
1. water pollution
2. existence of “free” fishing grounds.
3. the fact that the price of certain raw materials (Like natural gas) is artificially suppressed.

Suppose there are a total of I tasks to be accomplished. A limited number of labor saving machines are available to help out. Task i can be performed by using a_i units of labor alone, or b_i (< a_i) units of labor along with e_i machines, or the appropriate combination. There are a total of M machines available.
1. Formulate the problem of using the available machines to minimize the amount of labor required to perform the tasks.
2. Describe the optimal solution.
3. What is the value or shadow price of an extra machine? Show directly that minimizing shadow costs at shadow prices yields the right answer.

A particular “two-armed” model of a drill-press can be worked by either one or two operators. With one operator it produces U units of output per unit time; with two operators it produces V units per unit time.
1. With L laborers and M machines available, describe precisely how to calculate how many machines should be operated by one worker and how many by two in order to maximize output. What is the marginal rate of substitution between machines and laborers? (Hint: Try to get an answer using “common sense.” If that doesn’t work, draw isoquants.)
2. Suppose total output is fixed in the long run. As many machines can be rented and workers hired as desired at the going rates. How do you decide whether it is better to operate machines with one or with two laborers?
3. In the short run the number of machines is fixed but as many workers as desired can be hired at the going wage rate. The output is variable. How is the short run supply of output schedule determined?

There are two farm plots, A and B. Both have identical production functions. If x units of labor is applied to A (or to B) it results in f(x) units of output. A total of L units of labor is available for application to both farm plots.
1. Formulate the planning problem of allocating labor to A and to B so as to maximize total output from both farms when a total of L units of labor are available.
2. Assuming f’(x) > 0, f”(x) < 0, characterize exactly the solution to problem (a) above and show why it is optimal.
3. Show directly that there is an efficiency price of labor relative to output which supports the optimal solution of (b).
4. Assuming f’(x) > 0, f” > 0, characterize exactly the solution to problem (a) above. Does (c) hold now? Why or why not?

A firm or economy consists of a number of divisions or subsectors. There are no externalities. From first principles, prove rigorously the following result: If each subsector is maximizing profits at the same positive prices, the firm’s overall mixture of inputs and outputs is being efficiently produced.

Suppose modern low-cost shell housing is made according to the following production formula:

H = (A + T)^αL^1-^α

A,T,L ≥ 0

Where H is housing, A is aluminum, T is tin, and L is labor. Tin is produced by a perfect competitor, so there is free entry into the tin industry. One unit of labor produces a unit of tin. Aluminum, on the other hand, is a monopolistic industry which can charge any price it wants to, and can restrict entry. One unit of labor produces b > 1 units of aluminum. The aluminum, tin, and housebuilding industries have competitive labor supplies. For simplicity, suppose that the total budget of all the housebuilders is fixed and aluminum has no other uses.

a. What will be the competitive price of tin? The monopoly price of aluminum? Why?

b. What input mix will the home builders select and why?

c. Referring to question (b), are houses being produced efficiently? Why or why not? Give as precise an answer as you can. If you find that houses are produced inefficiently, give the efficient way to produce them.

Source: Personal copy of Irwin Collier.

Image Source: Detail from 1976 MIT economics department group picture.

First Year Economics Graduate Students, 1974-75 M.I.T. (Spring 1975)

ANALYSIS IN WONDERLAND

Composed and performed by the first-year economics graduate students at M.I.T. Second term, 1974-75

DRAMATIS PERSONAE

ACT I

ACT II

ACT III

ACT IV

Microeconomic Theory I (A)

14.121 December 1974 Final Exam M. Weitzman

First Year Economics Graduate Students, 1974-75
M.I.T. (Spring 1975)

Composed and performed by the first-year economics graduate students at M.I.T.
Second term, 1974-75