Harvard. History of Economic Theory. Final exam questions, Taussig, 1887-90

 

Examination questions spanning just over a half-century can be found in Frank Taussig’s personal scrapbook of cut-and-pasted semester examinations for his entire Harvard career. Until Schumpeter took over the core economic theory course from Taussig in 1935, Taussig’s course covering economic theory and its history was a part of every properly educated Harvard economist’s basic training. Today I begin with a systematic, regular transcription of Taussig’s examinations for this course that began as Political Economy 2, but that is best known by its later course number, Economics 11.

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Course Description and Enrollment
1886-87

Instructor	Course number, name, and content	Hours per week	Enrollment by class	Total enroll-ment
Prof. Taussig	*2. Economic Theory; its history and present stage; —Lectures, preparation of papers, and discussion of selections from leading writers.	3	2 Graduates, 33 Seniors, 14 Juniors	49

Source:   Harvard University, Annual Reports of the President and Treasurer of Harvard College, 1886-87, p. 58.

 

1886-87.
POLITICAL ECONOMY 2.
[Mid-Year Examination. 1887.]

1. It has been said that the Mercantile writers built up the first system of political economy; again, that a system is first found in the writings of the Physiocrats; and again, that Ricardo created political economy as a science. What should you say as to these statements?
2. Say something as to the connection that may be traced between the personal history of Adam Smith and of Ricardo, and the characteristics of their writings.
3. Sketch the history of the doctrines as to the productiveness of different kinds of labor from the time of the Mercantile writers to that of J. S. Mill.
4. Comment on the following:—

“It remains a matter of some difficulty to discover what solid contribution Malthus has made to our knowledge, nor is it easy to ascertain precisely what practical precepts, not already familiar, he founded on his theoretic principles…. ‘Much,’ he thought, ‘remained to be done. The comparison between the increase of population and of food had not, perhaps, been stated with sufficient force and precision’ and ‘few inquiries had been made into the various modes by which the level’ between population and the means of subsistence ‘is effected.’ The first desideratum here mentioned — the want, namely, of an accurate statement of the relation between the population and the supply of food — Malthus doubtless supposed to have been supplied by the celebrated proposition that ‘population increases in a geometrical, food in an arithmetical, ratio.’ This proposition has been conclusively shown to be erroneous, there being no such difference of law between the increase of man and of the organic beings who form his food. When this formula is not used, other somewhat nebulous expressions are sometimes employed, as, for example, that ‘population has a tendency to increase faster than food’ a sentence in which both are treated as if they were spontaneous growths…. It must always have been perfectly well known that population will probably (though not necessarily) increase with every augmentation of the supply of subsistence, and may, in some instances, inconveniently press upon or even for a certain time exceed the number properly corresponding to that supply. Nor could it have ever been doubted that war, disease, poverty — the last two often the consequences of vice — are causes which keep population down. Again, it is surely plain enough that the apprehension by individuals of the evils of poverty, or a sense of duty to their possible offspring, may retard the increase of population, and has in all civilized communities operated to a certain extent in that way. It is only when such obvious truths are clothed in the technical terminology of ‘positive’ and ‘preventive’ checks that they appear novel and profound: and yet they appear to contain the whole message of Malthus to mankind.”
Whom do you judge to be the writer of this passage?

5. State carefully Cairnes’s theory of value, and show wherein it differs from Ricardo’s exposition of that subject.
6. Explain the conclusions which George draws as to wages from an analysis of the simplest stage of society, and those which Ricardo draws as to values from a similar analysis. State whether the reasoning in the two cases differs and if so, wherein; and give an opinion as to the soundness of the conclusions reached.
7. State carefully the wage-fund doctrine as expounded by Cairnes, and show wherein his exposition is an advance on the previous treatment of the subject.
8. In a collection of examination questions, the following was asked:—

“Cairnes argues that we cannot apply the law of supply and demand to labor, because the supply of labor is produced by biological forces and not as commodities are produced. — What is the fallacy of this argument?”

Comment on the question, and answer it; and refer briefly to the history of the line of argument that draws an analogy between the value of labor and of commodities.

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1886-87
POLITICAL ECONOMY 2.
[Final Examination, 1887.]

1. Comment, separately or in a connected essay, on the following extracts:—

(a) “The first of these theories is known as the wage-fund theory of the books on Political Economy. It represents the rate of wages as depending on the amount of capital which employers think proper to disburse as wages. The wages rate was regarded as the dividend, found by dividing the wages-fund by the number of labourers. But though this division doubtless takes place, there is nothing in the theory to determine either the whole amount which is to be divided, or the proportional share which any particular labourer may obtain. Nobody can possibly suppose that workmen in different branches of production, or in different ranks in the same branch, receive the same wages. Nor can anybody imagine that the capitalist distributes his capital simply because it is capital, irrespective of the produce which he expects from the labour bought.”
— W. S. Jevons.

(b) “Ricardo held that profits and wages are the leavings of each other. Later economists have generally rejected this doctrine; but even those of them who maintain that wages are paid out of capital, fall back on arguments which imply its truth. For instance, Cairnes, who earnestly maintained that capital is divided into wages, rent, material, and wage-fund, argued that trades-unions could not increase the rate of wages because, if they did so, they would reduce profits below the rate which would make investment worth while. On his own doctrine, increased wages could not trench on profits…. We shall see further on that wages and profits are not the leavings of each other, because they are not parts of the same whole.”

(c) “If we assume that upon a cultivated island are tools and carts and animals for draught, and other forms of capital, adequate for a thousand laborers, the production will vary within a very wide range according to the industrial quality of the laborers using that capital. If we suppose them to be East Indians, we shall have a certain annual product; if we suppose Russian peasants to be substituted for East Indians, we shall have twice or three times that product; if we suppose Englishmen to be substituted for Russians, we shall have the product again multiplied two or three fold. By the wage-fund theory, the rate of wages would remain the same through these changes, inasmuch as the aggregate capital of the island would remain the same through these changes and the number of laborers in the market would be unchanged, the only difference being found in the substitution of more efficient for less efficient laborers. According to the view here advanced, on the contrary, the amount to be paid in wages should and would rise with the increased production due to the higher industrial quality of the laboring population.”

(d) “The capital of the employer is by no means the real source of the wages even of the workmen employed by him. It is only the immediate reservoir through which wages are paid out, until the purchasers of the commodities produced by that labor make good the advance and thereby encourage the undertaker to purchase additional labor.”—W. Roscher.

Whom do you judge to be the writers of the extracts (b) and (c)?

2. State carefully Walker’s theory of business profits. Give an opinion as to its value (1) in explaining differences between the returns of different managers, and (2) in eliminating such returns, like rent, from the problem of distribution.
3. Compare Carey and Bastiat, and say something as to the manner and extent of their influence on the course of economic speculation.
4. Explain wherein the attitude of Wagner to economic study differs from that of Mill and Cairnes.
5. “Mr. Cairnes asks, ‘how far should religious and moral considerations be admitted as coming within the province of political economy?’ His answer is that ‘they are to be taken account of precisely in so far as they are found to affect the conduct of men in the pursuit of wealth;’ and one needs only to allude to the influence of mediaeval religion both on the forms and the distribution of the wealth of the community, the changes in both with the change in religion after the Reformation, in proof of the impotence of the a priori method in relation to this class of agencies. Yet a few pages after recognizing their title to investigation, Mr. Cairnes argues that induction, though indispensable in physical, is needless in economic science, on the ground that the economist starts with a knowledge of ultimate causes’ and ‘is already at the outset of his enterprise in the position which the physicist only attains after ages of laborious research.’ The followers of the deductian [sic] method are in fact on the horns of a dilemma. They must either follow Mr. Lowe’s narrow path, and reason strictly from the assumption that men are actuated by no motive save the desire of pecuniary gain, or they must contend that they have an intuitive knowledge of all the moral, religious, political, and other motives influencing human conduct, and of the changes they undergo in different countries and periods.”
   Was Cairnes inconsistent in the manner here stated? Does his reasoning lead to the alleged dilemma?
6. Should you agree with the following:—

       “If economic phenomena were the results of a single force or combination of forces, standing alone, then only would the assumption hold good that there is an identity of effects on the appearance of the same causes. But economic facts are so closely connected with the whole of life, the element of personal freedom comes in so constantly, that a causal connection like that of a law of nature cannot be shown. This is at bottom the sound point in the criticisms of Ricardo’s keen logic. Ricardo often begins with facts, carefully and nicely observed in real life, and makes them the first premises of his reasoning. Then he uses a method of reasoning which is common in philosophy, but inadmissible in political economy. By logical sequence of thought he leads the reader, who can see no flaw in the chain of conclusions, to a result which, notwithstanding the solidity of the premises and the steadfast reasoning, is yet by no means unquestionable. For in the end we are not concerned with the elaboration of a truthful train of thought, but with a truth of real life; hence the test of truth lies in the connection of cause and effect that exists in real life; and as to that, with its manifold and varied possibilities, no human insight can make the true combinations in advance by abstract reasoning. There may be an artistic truth, which yet, when compared with reality, is not a truth. Even if one sees no inconsistency with the facts of experience up to the very last step in the reasoning, yet that reasoning gets its final stamp of truth only from experience. Our thoughts on the facts of the world are often true only so long as we shape them according to those facts that we know; a new experience comes in to better this approximate truth.”—Knies, Die Politische Oekonomie vom Historischen Standpunkte.

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Course Description and Enrollment
1887-88

Instructor	Course number, name, and content	Hours per week	Enrollment by class	Total enroll-ment
Prof. Taussig	*2. History of Economic Theory. — Distribution. — The Scope and Method of Political Economy. — Socialism. —Lectures, preparation of theses, and discussion of selections from leading writers.	3	4 Graduates, 14 Seniors, 8 Juniors, 1 Sophomore, 2 Others	29

Source:   Harvard University, Annual Reports of the President and Treasurer of Harvard College, 1887-88, p. 62.

 

1887-88.
POLITICAL ECONOMY 2.
[Mid-Year Examination. 1888.]

1. Compare the treatment of the theory of money by Boisguillebert, Law, and Hume.
2. What was Adam Smith’s doctrine as to rent, and wherein does it differ from that of the Physiocrats, and from that of Ricardo?
3. Make a brief comparison between the general characteristics of the economic writings of Adam Smith and of J. S. Mill.
4. Explain how Malthus illustrated and applied his general principles in his discussion of the movement of population in (a) Sweden and Norway, (b) Switzerland, (c) France during the Revolutionary wars. [Take one of these three.)
5. “Mr. Malthus thinks that a low money price of corn would not be favourable to the lower classes of society, because the real exchangeable value of labour, that is, its power of commanding the necessaries, conveniencies, and luxuries of life, would not be augmented, but diminished, by a low money price. Some of his observations on this subject are certainly of great weight, but he does not sufficiently allow for the effect of a better distribution of the national capital on the situation of the lower classes. It would be beneficial to them, because the same capital would employ more hands; besides, the greater profits would lead to more accumulation; and thus a stimulus would be given to population by really high wages, which could not fail for a long time to ameliorate the condition of the laboring classes.”— Ricardo, Essay on the Influence of a Low Price of Corn.
   Explain (a) whether this states fairly Malthus’s opinion as to the effect of cheap food; (b) what Ricardo meant by “a better distribution of the national capital”; (c) what light the concluding sentence throws on Ricardo’s view of the effect on wages and profits of cheap food.
6. “The notion that any portion of the wealth of the country should be ‘determined’ to the payment of wages seems to shock Mr. Longe’s sense of economic propriety; which is strange, seeing that his own doctrine — that it is ‘the demand for commodities which determines the quantity of wealth spent in the payment of wages’ — plainly involves this consequence. He puts the case of a capitalist who, taking advantage of the necessities of his workmen, effects a reduction of wages and succeeds in withdrawing so much, say £1000, from the Wages-Fund; and asks how is the sum thus withdrawn to be restored to the fund? On Mr. Longe’s principles the answer is simple,—‘by being spent in commodities’; for it may be assumed that the sum so withdrawn will, in any case, not be hoarded. * * * The answer, therefore, to the case put by Mr. Longe is easy on his own principles; and I am disposed to flatter myself that the reader who has gone with me in the foregoing discussion will not have much difficulty in replying to it on my own.”— Cairnes, Leading Principles.
   What is the answer on Cairnes’s principles?
7. Would the explanation which the Wages-Fund theory gives of the causes regulating the rate of wages apply to a society in which a system of profit-sharing had been universally adopted?
8. Wherein does Ricardo’s treatment of the manner in which profits affect value differ from Cairnes’s treatment of the same subject?

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1887-88
POLITICAL ECONOMY 2.
[Final Examination. 1888.]

1. “Cairnes, who earnestly maintained that capital is divided into wages, raw material, and fixed capital, argued that trades-unions could not increase wages in the several trades, because, if they did so, they would reduce profits below the rate which would make investment worth while. On his own doctrine, increased wages could not trench on profits. He should have argued that wages, if increased by a trades-union, could only be increased at the expense of raw material and fixed capital, which would be far more difficult than to increase them at the expense of profits. Indeed, if the trades-union movement did not coincide with a new distribution of capital into its three parts (a new distribution which would produce a rise in wages), the trades-union could not possibly force an advance at the expense of raw materials or fixed capital.” — W. G. Sumner, Collected Essays.
   Can you reconcile Cairnes’s reasoning on trades-unions with his doctrine as to the wages fund?
2. “The railroads of the United States receive annually two hundred and ten millions of dollars for transporting passengers. Those receipts came in day by day, yet the railroad company habitually pays its employees at the close of the week or at the close of the month. Here we have a very large class of services where the employer receives the price of his product before he pays for the labor concerned in its production. The railroads of the United States also receive annually for freights five hundred and fifty millions. The greater portion of this amount is collected before the track hands and the station hands have received the remuneration for their share of the service. . . . To descend to the other end of the scale of dignity, hotel keepers and, in less degrees, boarding-house keepers collect their bills before they pay their cooks, chambermaids, and scullions. Nearly all receipts of theatre, opera, and concert companies are obtained day by day, although their staffs and troupes are borne on monthly or weekly pay-rolls.” — F. A. Walker, in the Journal of Economics, April, 1888.
   Are these facts inconsistent with the proposition that wages are paid out of capital?
3. What should you say to the doctrine that the real source of wages is in the incomes of the consumers of the articles made by the laborers?
4. It has been said that “Mr. Walker’s theory is, in reality, not a theory of manager’s earnings at all, but a theory of difference in manager’s earnings.” Do you think this is a sound criticism?
5. Explain what was Bastiat’s doctrine as to value; point out wherein it was like or unlike Carey’s doctrine on the same subject; and state briefly Cairnes’s criticism on Bastiat.
6. “There are two kinds of sociological inquiry. In the first kind, the question proposed is, what effect will follow from a given cause, a certain general condition of social circumstances being presupposed. As, for example, what would be the effect of abolishing or repealing corn laws in the present conditions of society or civilization in any European country, or under any other given supposition with regard to the circumstances of society in general; without reference to the changes which might take place, or which may be already in progress, in those circumstances. But there is also a second inquiry, namely, what are the laws which determine those general circumstances themselves. In this last the question is, not what will be the effect of a given cause in a certain state of society, but what are the causes which produce, and the phenomena which characterize, states of society generally.” — Mill’s Logic.
   What reasons are there for saying that different methods should be applied to these two kinds of inquiry? and what are the differences in method?
7. Can the legislation of Germany on workmen’s insurance be said to be socialistic in a sense in which (a) the Christian socialist movement in England, and (b) the regulation or ownership by the state, are not socialistic?
8. Suppose production coöperation were universally adopted; wherein would the organization of society differ from that which socialism proposes?

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Course Description and Enrollment
1888-89

Instructor	Course number, name, and content	Hours per week	Enrollment by class	Total enrollment
Prof. Taussig	*2. History of Economic Theory. Examination of selections from leading writers.—Lectures and discussion: one extended thesis from each student.	3	13 Seniors, 9 Juniors, 2 Sophomores	24

Source:   Harvard University, Annual Reports of the President and Treasurer of Harvard College, 1888-89, p. 72.

 

1888-89.
POLITICAL ECONOMY 2.
[Mid-Year Examination. 1889.]

1. Point out wherein the teachings of the mercantile writers on population and on the balance of trade were connected with the political and economic history of their time.
2. Under what conditions did Adam Smith believe that wages could long remain high? What reasoning led him to this conclusion? Do you think the reasoning sound?
3. Wherein did Adam Smith’s doctrines as to foreign trade differ from those of Hume and of the Physiocrats?
4. Ricardo’s chapter on value has been criticized on the following grounds: —

(1) Ricardo asserts, but in no way proves, that value depends on quantity of labor.
(2) He does not state whether he means labor expended on the production of goods, or labor needed for their reproduction.
(3) His principle holds good only of goods of which the production can be increased indefinitely, and as to which competition is free.
(4) The principle is at once modified by the statement that the general rate of profits affects values.

Discuss briefly each objection.

6. Malthus laid it down that (1) marriages and deaths bear a constant proportion in an old country; (2) with a rise in the standard of living, marriages become less in proportion to population; (3) births, like marriages, bear a constant proportion to deaths, in an old country.
   What led Malthus to these conclusions? Does experience bear him out?
7. By what mode of proof did Malthus show that the wars of the French Revolution had not diminished the population of France? Point out wherein his discussion of this subject is characteristic of the Essay on Population.
8. Malthus, Ricardo, J. S. Mill, Cairnes, — note briefly how they are related in the history of economic theory.
9. What would be the movement of wages and prices in case of a general improvement in industrial processes?
10. What does Cairnes conclude as to the results which Trade Unions can permanently bring about (1) in England; (2) in the United States?

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 1888-89.
POLITICAL ECONOMY 2.
[Final Examination. 1889.]

1. On what grounds can you reason that the stock of consumable commodities is likely to be sufficient, or more than sufficient, to last, at the present rate of consumption, till a new stock can be produced? What bearing has the answer on the wages-fund controversy?
2. Discuss President F. A Walker’s explanation of business profits in its bearing on the general theory of distribution.
3. By what reasoning does Cairnes reach the conclusion that, in the present state of society, “the rich will be growing richer, and the poor, at least relatively, poorer.”
4. Could Cairnes, consistently with his conclusions as to coöperation, oppose measures such as were urged by Lasalle?
5. Point out wherein Sidgwick’s exposition of the causes determining the rate of interest differs from Mill’s.
6. What was the attitude toward laissez-faire of Adam Smith? of Ricardo? of Cairnes?
7. What reasons are there why the term “socialist” should or should not be applied to (1) the Christian socialists; (2) advocates of German legislation on workmen’s insurance; (3) followers of Mr. Henry George.
8. Point out wherein Marx’s discussion of wages is similar to that of Rodbertus.
9. “From the history of the double standard we reach Gresham’s law, that where two currencies exist side by side the baser will drive the good out; from the prosperity of England we can reason to the principle of free trade, at least for industrially developed nations.” — R. M. Smith. What would Cairnes say to this mode of investigation for the specific questions mentioned?
10. Comment on the following extracts, separately or in connection with each other: —

“The value of most of the theorems of the classic economists is a good deal attenuated by the habitual assumption . . . that there is a definite universal rate of profits and wages in a community; this last postulate implying (1) that the capital embarked in any undertaking will pass at once to another in which larger profits are for the time to be made; (2) that a laborer, whatever his ties and feelings, family, habit, or other engagements, will transfer himself immediately to any place where, or employment in which, larger wages are to be earned; (3) that both capitalists and laborers have a perfect knowledge of the condition and prospects of industry throughout the country, both in their own and in other occupations.” — J. K. Ingram.
“In proof of the equalization of profits, Mr. Cairnes urges that capital deserts or avoids occupations which are known to be comparatively unremunerative; while if large profits are known to be realized in any investment there is a flow of capital toward it. Hence it is inferred that capital finds its level like water. But surely the movement of capital from losing to highly profitable trades proves only a great inequality of profits.” — Cliffe Leslie.

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Course Description and Enrollment
1889-90

Instructors	Course number, name, and content	Hours per week	Enrollment by class	Total enrollment
Prof. Taussig and Mr. Brooks [see next posting for information about Brooks]	*2. History of Economic Theory. First half-year: Lectures on the History of Economic Theory.—Discussion of selections from Adam Smith and Ricardo.—Topics in distribution, with special reference to wages and managers’ returns.—Second half-year: Modern Socialism in France, Germany, and England.—An extended thesis from each student.	3	7 Seniors, 12 Juniors, 1 Sophomore, 4 Others	24

Source:   Harvard University, Annual Reports of the President and Treasurer of Harvard College, 1889-90, p. 80.

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1889-90
POLITICAL ECONOMY 2.
[Mid-Year Examination. 1890.]

1. Sidgwick supposes that, in a country where the ratio of auxiliary to remuneratory capital is 5 to 1, 120 millions are saved and added to the existing capital, and asks, “in what proportion are we to suppose this to be divided?” Answer the question.
2. On the same supposition Cairnes’s answer is expected to be that the whole of the 120 millions would be added to the wages fund. “But then, unless the laborers became personally more efficient in consequence — which Cairnes does not assume — there would be no increase in the annual produce, and therefore the whole increase in the wages fund would be taken out of the profits within the year after the rise. Now, though I do not consider saving to depend so entirely on the prospect of profit as Mill and other economists, still I cannot doubt that a reduction in profits by an amount equivalent to the whole amount saved would very soon bring accumulation to a stop; hence the conclusion from Cairnes’s assumptions would seem to be that under no circumstances can capital increase to any considerable extent unless the number of laborers increases also.”
   What would Cairnes say to this?
3. Explain what is Sidgwick’s conclusion as to the effect of profits on accumulation; and point out wherein his treatment of this topic differs from Cairnes’s and from Ricardo’s.
4. In what sense does George use the term “wages”? Ricardo? Mill? Cairnes?
5. Explain wherein Sidgwick’s general theory of distribution differs from Walker’s.
6. Compare the treatment of rent by the Physiocratic writers and by Adam Smith.
7. What was Adam Smith’s doctrine as to labor as a means of value? What was Ricardo’s criticism on that doctrine?
8. What did Adam Smith say to the argument that taxes on the necessaries of life raise the price of labor, and therefore give good ground for import duties on the commodities produced at home by the high-priced labor? What would Ricardo have said to the same argument?
9. How does Ricardo show that the application of labor and capital to worse soil brings a decline of profits not only in agriculture, but in all industries?

 Source:  Harvard University Archives. Examination papers in economics 1882-1935 of Professor F. W. Taussig (HUC 7882). Scrapbook.