Mises at Harvard

 In 1940, soon after Mises arrived in the United States, he was invited by the Economics Department at Harvard University to give a lecture to their graduate students. E. H. Chamberlin wrote the letter inviting him to speak. 

Dear Dr. von Mises:

            The Department of Economics at Harvard would like to offer their graduate students the privilege of meeting you and hearing you while you are in this country. Would it be possible for you to speak at Harvard on the evening of either December 5 or December 12? If so, I should be glad to receive from you suggestions as to possible subjects. We should hope, too, that you would be able to remain in Cambridge for a day or so in order to give students and others a chance to talk with you informally. An honorarium of $100 will be paid (from which you would be expected to meet your own travelling expenses).

            I very much hope you will be able to accept this invitation.

Sincerely yours,

 

E. H. Chamberlin

 You can read Mises' reply by clicking here.

Bohm-Bawerk at Harvard

In past graduate course exams that is. Following are two questions from the final exam for Harvard's graduate level Economic Theory course from 1912 posted at the fascinating blog Economics in the Rear-View Mirror currated by Irwin Collier.

5. What three grounds explain, according to Böhm-Bawerk, the preference for present goods over future? Which of them does he conclude to be the most important? State Fisher’s criticism; and give your own opinion on the controverted question.

6. “In the present condition of industry, most sales are made by men who are producers and merchants by profession. . . .For them, the subjective use value of their own wares is, for the most part, very nearly nil. … In sales by them the limiting effect which, according to our theoretical formula, would be exerted by the valuation of the last seller, practically does not come into play.” — Böhm-Bawerk.
   What is the ” theoretical formula “? and what is the importance of the qualification here stated?

They are important reminders that in his day Bohm-Bawerk was recognized as in important and distinct economic theorist. In fact, there is much at Economics in the Rear-View Mirror that reveals Austrian economics had a significant place at the economics table before World-War II.

Less Keynesian, More Austrian

In the same week that J. Brad DeLong irresponsibly accuses Ludwig von Mises of a "monetary mental disorder," Amity Shlaes does just the opposite. In a column in the San Francisco Chronicle, Amity Shlaes gives her suggestions for how introductory macroeconomics can be improved at Harvard. She is writing in response to the "dozens of students Harvard University undergrads who walked out of the school's famous introductory economics course this month." Part of the students' complaint is that in the current class there is a lack of diversity of economic opinion and that conventional economic opinion helped contribute to the economic mess of 2008-11.

Shlaes acknowledges that the students had a right to be dissatisfied with economists and their models that together failed to predict the financial meltdown and Great Recession and still cannot explain why it happened. She rightly recommends including more Austrian economics in formal macroeconomics courses. After citing Joseph Schumpeter's observations about the cyclical nature of the economy and the importance of entrepreneurship, she gets to the heart of the matter.

Schumpeter's fellow Austrian Ludwig von Mises noted that credit expansions and booms lead to misallocations of cash. The Austrian School of economics, of which Mises is the modern father, called such misallocations "malinvestment and overconsumption." Malinvestment, in turn, ensures that the boom is doomed. No better example has existed than the money that poured into obscure mortgage securities in 2006 and 2007. But there was no Schumpeter and no famous Austrian School philosopher at Harvard at the time.

Shlaes also notes the crony capitalist aspect of the economic crisis in the form of Fannie Mae among others.That leads her to commend insights from public choice economics as well. She concludes by recommending, "Add in more Schumpeter, Austrian economics and public-choice theory in Ec 10, and at Harvard generally, and you'll be offering next year's freshmen diversity worthy of America's leading university."