Economic Theory

Even if it had been Director who had introduced Samuelson to economics, and Douglas who had provided the more systematic coverage of economic theory that economics majors were required to encounter, it was Viner whose Economic Theory course he was to remember most clearly.

With about thirty-five other aspirants, who I recall included Martin Bronfenbrenner and Warren Scoville, we lined up around a huge semi­nar table in the basement of the then new Social Sciences Research building. Viner appeared, holding our names on index cards; and after a speedy inquisition, five of us were found wanting in previous prepa­ration or motivation. But that was only the beginning.

My impression of Viner never changed from that first glimpse. He was short and intense, like a bantam cock. His upper lip, usually bedewed by a bead of moisture, curled in what seemed half a smile. In my imperfect memory his hair was then red, and his complexion matched. His suit coats were on the short side and his posture was not ^{[4] [5] that of a West Point cadet. How I remember anything about his per­son I do not know, since every eye in the room was fastened upon the diabolical deck of index cards in his hands through which he shuffled nervelessly.}

Viner was a student, the prize student of Frank Taussig, that master of the Socratic method. Taussig played on his classes as Pablo Casals plays on his ‘cello. He knew which idiot would botch up Ricardo's trade-off between profit and the real wage; he knew which cantanker­ous student had to be kept out of the classroom verbal interaction lest he short-circuit the dialogue. Viner added one new ingredient: terror. Members of the seminar sat tensely around the table, and when the name of the victim was read off the cards, you could almost hear the sighs of relief and the slumping back into chairs of those who had won temporary respite. Indeed, the stakes were high. Three strikes and you were out, with no appeal possible to any higher court. And this was no joke. I remember an able graduate student who, having failed to give an acceptable answer on two previous occasions, was told by Viner: “Mr.----------------------------, I am afraid you are not equal to yourself

or this class.” This man barely managed to retrieve his position at the final moment. If a graduate student was refused admittance to 301, the basic course in theory, he had no choice but to drop out or to transfer to the slums of political science or sociology. (Years later when I discussed with Jack Viner the legend of his ferocity, he said that the department had given him the function of screening the candidates for higher degrees. It was not work for which he was ill-equipped.²¹

Samuelson survived “Viner's ferocious manhandling of students, in which he not only reduced women to tears but on his good days drove returned paratroopers into hysteria and paralysis,” so he recalled, because of his innocence.

I, nineteen-year-old innocent, walked unscathed through the inferno and naively pointed out errors in his blackboard diagramming. These acts of Christian kindness endeared me to the boys in the backroom of the graduate school: George Stigler, Allan Wallis, Albert Gaylord Hart, Milton Friedman, and the rest of the Knight Swiss guards.²²

Five years earlier, a student had taken what Viner considered to be skimpy notes on the course and circulated them, something of which Viner did not approve.²³

Samuelson remembered the course he took as being very different, in scope and coverage, from the one recorded in these notes. Samuelson remembered the first lecture as using the analogy of a well-balanced aquarium to explain the nature of a continuing equilibrium. “Before and since,” he wrote, “I have heard much of the circular flow of Quesnay and Schumpeter and Walras, but I cannot recollect a similar treatment of this issue.” Franςois Quesnay, the eighteenth-century author of the Tableau economique, and Leon Walras, the nineteenth-century developer of general equilibrium theory, were pioneers in analyzing formally the interdependence of different sectors of the economy.²⁴’’ If “well balanced” referred to the equalization of water levels in different tanks, this was an analogy drawn from Irving Fisher, but if he had in mind balance between populations of different species of fish, then it was a much more Marshallian analogy.^k

As in Studies in the Theory of International Trade (1937), published shortly afterward, Viner emphasized the historical development of the subject. The content was up to date, but it did not cover all the latest literature.

Viner made clear at the beginning that he would not be covering the latest wrinkles in the theory of imperfect or monopolistic competi­tion. However, since Viner himself, along with his student Theodore Yntema, had independently discovered the marginal cost—marginal revenue conditions for maximization of an imperfect competitor's profits, much of what was contained in the Chamberlin and Robinson treatises was adequately covered.²⁵

Samuelson noted that Viner's course was the only place in his own curricu­lum where the latest analytical techniques, such as indifference curves and production possibility frontiers, were used.

j. The general equilibrium system of Cassel, to which Director had introduced Samuelson, was a simplification of Walras's system. Walras was receiving increasing attention from economists in the 1930s. See Backhouse and Medema 2014.

k. Marshall famously favored biological analogies, such as likening the firms in an industry to the trees in a forest.

represented by a utility function, then indifference curves are simply a way to represent that function. “Well-behaved” indifference curves are illustrated in figure 9.2 later in this volume, along with a production possibility frontier (the solid curve) showing the maximum quantities of two goods that can be produced.

The use of indifference curves became fashionable in the 1930s, when two British economists, Roy Allen and John Hicks, realized that it was possible to use indifference curves to dispense with the concept of utility. To analyze behavior, it was necessary to know only the shape of individuals’ indiffer­ence curves. It was not necessary to assign numbers to them; all that was necessary was to know whether one indifference curve represented a higher level of well-being than another, without any need to measure well-being. However, Samuelson’s remark is hardly an indictment of the curriculum, since it was natural that novel techniques would appear first in the graduate theory course.

Viner’s approach to economic theory involved a mixture of verbal and graphical analysis. It was his use of graphical analysis that earned Samuelson his legendary reputation for correcting Viner.

After I left Chicago I learned that I was something of a legend myself in Viner’s course of that year.

The reason these incidents became magnified into legend was a previous inci­dent concerning the drawing of one of the diagrams in an article on cost curves.²⁷ This involved drawing a series of U-shaped curves together with the “envelope” (a larger U-shaped curve) that contained them all. The draftsman explained that it was impossible to draw the envelope touching each of the other curves at their lowest points, as Viner had asked him to do: it was a mathematical impossibility. Samuelson wrote that Viner reported to the class that he had been wrong, mathematically and economically:

“But,” he said to me privately just as the class bell had rung, “although there seems to be some esoteric mathematical reason why the enve­lope cannot be drawn so that it passes smoothly through the declining bottoms of the U-shaped cost curves, nevertheless I can do it!” “Yes,” I replied impishly, “with a good thick pencil, you can do it.”²⁸

One reason for Samuelson’s situation in relation to Viner was that, although he had not progressed far in his mathematical education, he had already taken three mathematics courses and was currently taking the first of two calculus courses. Thus, when Viner told the class that the prerequisite for the course should be knowledge of calculus, but that as he lacked the quali­fication he would waive it for the students, he was telling Samuelson some­thing he already knew. Samuelson’s knowledge of mathematics will already have contributed to his already substantial confidence in his engagements with Viner.