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According to the Presidential Report of Harvard University, in 1941-42 nine graduate students were enrolled in Joseph Schumpeter’s full-year course, Economics 103, Advanced Economic Theory. Reading lists and exam questions are provided here for both semesters.

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[Course Announcements 1941-42]

For Undergraduates and Graduates

The Courses for Undergraduates and Graduates, unless otherwise stated, are open only to students who have passed in Course A [Principles of Economics]

[…]

*Economics 1. Economic Theory

Mon., Wed., and (at the pleasure of the instructors) Fri., at 11. Professor Chamberlin, Dr. O. H. Taylor, and Associate Professor Leontief.

This course will be conducted mainly by discussion. It is open only to candidates for the degree with honors.

[…]

*Economics 103. Advanced Economic Theory

Tu., Th., and (at the pleasure of the instructor) Sat., at 10. Professor Schumpeter.

Economics 1, or an equivalent training, is a prerequisite for this course. It may be taken as a half-course in either half-year.

Source: Official Register of Harvard University, Vol. 38, No. 11 (March 19, 1941). Provisional Announcement of the the Courses of Instruction offered by the Faculty of Arts and Sciences during 1941-42, pp. 56-59.

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ECONOMICS 103

Program of Course and Reading List

1941-42

This course is to serve the two purposes, first, of a critical survey of “traditional” (Marshall-Wicksell) theory as improved by later work on the same lines; second, of an introduction into modern “dynamics” and into the problems arising out of the necessity of fitting theory to time-series material. The first purpose will be dominating in the work of the first, the second in the work of the second semester.

First Semester

I. Preliminaries . The nature of economic variables and equilibria. Various meanings of Stability. Structural and confluent relations. Statics and Dynamics vs. stationary and evolutionary states. Comparative Statics. One to two weeks.

No reading assignments.

II. Monetary and “real” processes. Aggregative Models. One to two weeks.

Keynes, General Theory.

Lange, “The rate of interest and the optimum propensity to consume,” Economica , February 1938.

III. The (traditional) theory of the individual household and the individual firm.

Rest of semester.

The background of this theory is Marshallian. Marshall’s Principles and Wicksell’s Lectures , Vol. I, should be thoroughly familiar to, and frequently referred to, by every student. No specific references will hence be made to them in what follows. In addition, general reference is here made to:

J. R. Hicks, Value and Capital.

E. H. Chamberlin, The Theory of Monopolistic Competition.

A. Walras’ static equilibrium relations. One week.

No additional reading (but refer to Wicksell and Hicks).

B. Statics of the family budget. Indifference maps. Engels curves. Two weeks.

Hicks, first part.

Frisch, New Methods of Measuring Marginal Utility (1932).

Suggestion: Allen and Bowley, Family Expenditure , 1935.

C. Statics of the individual firm. Production functions and isoquants. Cost calculation. Depreciation. The Marshallian supply curves. Two weeks.

Kaldor, “The Equilibrium of the Firm,” Economic Journal, 1934.

Machlup, “The Common Sense of the Elasticity of Substitution,” Review of Economic Studies , 1935.

Sraffa, “The Laws of Return under Competitive Conditions,” Economic Journal , 1926.

Robinson, “Imperfect Competition and Falling Supply Price,” Economic Journal , 1932.

Robinson, “What Is Perfect Competition?,” Quarterly Journal of Economics , 1934.

Viner, “Cost and Supply Curves,” Zeitschrift für Nationalökonomie , 1931.

Kahn, “Some Notes on Ideal Output,” Economic Journal , 1935.

D. Problems of monopolistic and oligopolistic price policy. Oligopoly and bilateral monopoly. Discrimination. Two weeks.

Hicks, “The Theory of Monopoly,” Econometrica , 1935.

Lerner, “The Concept and Measurement of Monopoly Power,” Review of Economic Studies , 1934.

Robinson, Economics of Imperfect Competition , Books II, IV, V.

Leontief, “The Theory of Limited and Unlimited Discrimination,” Quarterly Journal of Economics , 1934.

E. Locational Problems. One week.

Hotelling, “Stability in Competition,” Economic Journal , 1929.

Hoover, Location Theory and the Shoe and Leather Industries , Harvard Economic Studies, No. LV.

Reading Period Suggestion :

A. C. Pigou, Employment and Equilibrium , 1941.

Source: Harvard University Archives. HUG(FP)—4.62. Joseph Schumpeter Papers, Box 12, Folder: “Ec 103, Fall 1942”

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1941-42

Harvard University

Economics 103

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

Define the nature of economic equilibria. Give examples of the various types of them. Distinguish between equilibrium, determinateness, and stability. Explain the difference between Dynamics and Comparative Statics. In what respects do you consider the first approach to be superior to the second? Keynes’ General Theory, as thrown into a system of equations by Oscar Lange, purports to give a model of the economic process. So does the system of equations written by Walras. What are the principal differences between the two and what do you think of their relative merits a) in general, b) with respect to particular set of problems? We have replaced the old concept of marginal utility by the concept of marginal rate of substitution. What were the reasons for this and what have we gained thereby? Define the surface of consumption and discuss the three curves which are traced out by the sections of that surface by planes perpendicular to the three axes. What is meant by elasticity of substitution? And what are the principal uses for this concept? Explain the nature of a linear production function that is homogeneous of the first degree and state the reasons why many economists are so partial to it. Should we, or should we not, make that particular assumption about the form of our production functions? In what sense is it time to say that, in framing a rational price policy, firms should take no account of overhead but only of marginal cost?

Mid-Year, 1942.

Source: Harvard University Archives, HUG(FP)-4.62. Joseph Schumpeter Papers, Box 4, Folder “Ec 103, Sp & Fall 41-42”.

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Economics 103

Program of Course and Reading List

1941-42

Second Semester

I

The work of this semester is, first, to complete the critical survey of “traditional” (Marshall-Wicksell) theory begun in the first semester; and to deal with modern “dynamics” and some of the problems arising out of the fact that economic theory is under the necessity of using time-series material. The general background will be supplied, as it has been in the first semester, by the following treatises to which no further reference will be made in this Reading List:

Alfred Marshall, Principles .

Knut Wicksell, Lectures , Vol. I.

Edward H. Chamberlin, Theory of Monopolistic Competition.

J. R. Hicks, Value and Capital.

J. M. Keynes, General Theory of Employment, Interest and Money.

II

Not assigned, nor necessary in order to fulfill course requirements, but suggested are the following works (this suggestion also covering the usual Reading Period assignments):

A. C. Pigou, Employment and Equilibrium, 1941.

Erik Lundberg, Studies in the Theory of Economic expansion, Stockholm Economic Studies, 1936).

J. Tinbergen, Statistic Testing of Business-Cycle Theories , II, Business Cycles in the United States of America: 1919-1932, League of Nations, Geneva, 1939. (This work, which may seem to be far removed from the field of pure theory, nevertheless constitutes a most important contributions to it.)

III

(1) Distinction between Dynamics and the Theory of Economic Development. Disturbances, Transitional States, and the Long-Run Normal. Economic Hysteresis and Walras Reaction. Microdynamic and Macrodynamic Models.

No reading assignments .

(2) Lagged Reaction. The Hog-Cycle Case. (Cobweb). Buyers reacting to current price, sellers reacting to a previous price. The case of durable goods; the shipbuilding cycle.

(Tinbergen: Ein Schiffbauzyklus ? Weltwirtschaftliches Archiv, July, 1931, not assigned.)

(3) Other “dynamising” factors: reaction to current rate of change of price; reaction to weighted average of past prices. Friction. The Theory of Expectations.

N. Kaldor, “Speculation and Economic Stability,” Review of Economic Studies , October, 1939.

L. M. Lachmann, “Uncertainty and Liquidity Preference, “ Economica , August, 1937.

F. A. von Hayek, “Economics and Knowledge,” Economica , February, 1937.

F. Lavington, “An Approach to the Theory of Business Risks,” Economic Journal , June, 1925.

(4) Statistical Demand and Cost Curves.

Henry Schultz, Statistical Laws of Demand and Supply , 1928. (This will stand instead of the much more significant, but also much more difficult work of the same author: Theory and Measurement of Demand , 1940.

Joel Dean, The Relations of Cost to Output (National Bureau of Economic Research, Technical Paper No. 2, 19).

(5) Problems of Price Policy.

(See First-Semester Reading List, III/D.)

(6) Some Aspects of the Theory of Capital and interest.

G. Mackenroth, “Period of Production, Durability and the Rate of Interest,” Journal of Political Economy , December, 1930.

F. H. Knight, “Capital, Time, and the Interest Rate,” Economica , August, 1934.

F. Machlup, “Professor Knight and the Period of Production,” Journal of Political Economy , October, 1935.

John B. Canning, The Economics of Accountancy , 1929. (Chapter on Depreciation.)

Irving Fisher, The Theory of Interest , 1916.

(7) Some Macrodynamic Models

F. R. Harrod, “An Essay in Dynamic Theory,” Economic Journal , March, 1939.

N. Kaldor, “A Model of the Trade Cycle,” Economic Journal , March 1940.

M. Kalecki, “A Theory of the Business Cycle,” Review of Economic Studies , February, 1937. (Reprinted in Essays on the Theory of Economic Fluctuations .)

(R. Frisch, “Impulses and Propagation Waves,” Essays in Honor of Gustaf Cassel ; technically difficult.)

Source: Harvard University Archives. HUG(FP)—4.62. Joseph Schumpeter Papers, Box 12, Folder: “Ec 103, Fall 1942”

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1941-42

Harvard University

Economics 103

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

Consider the micro-dynamic model which is usually referred to as the “cobweb” pattern. Explain the commonsense of the underlying theory. Discuss its value in interpreting reality. A dynamic model may yield damped, stationary or anti-damped (explosive) solutions. Should we exclude the anti-damped ones on the ground that they are unrealistic because as a matter of fact economic patterns do not explode? In what sense can it be said that increasing returns are incompatible with perfect (pure) competition? Assume that the only purpose of the Practice of Depreciation is to allocate the costs of durable instruments of production among the periods of account (“years”) covered by the service life of those instruments. Given that purpose, what is the correct principle of figuring out the amount of depreciation? State the classical (Marshallian) theory of the influence of commodity speculation (trade in futures) on the time-shape of values (fluctuations in prices and in quantities sold). How does modern theory differ from that picture? What is your own opinion about the influence of speculation? Let a statistical demand curve be derived by plotting the prices of a commodity, divided by a wholesale price index, against the corresponding amounts of its per capita consumption. What do you think of such a procedure and how would you judge such a demand curve? If a firm owns several plants, how will it distribute a given amount of output among them? Show that, in the absence of further information, price is indeterminate in the case of Bilateral Monopoly.

Final, 1942.

Source: Harvard University Archives, HUG(FP)-4.62. Joseph Schumpeter Papers, Box 4, Folder “Ec 103, sp & Fall 41-42”.