Harvard in 1935
The Harvard to which Samuelson came that fall was in the throes of change. Its recently appointed president, James Bryant Conant, formerly a successful academic chemist, sought to reform the curriculum and to raise the academic standing of the university.
Under his predecessors, Harvard had changed from a college primarily catering to the New England elite into a full-fledged university taking scholarship seriously. Conant wanted to take that further to create a meritocratic university, based on the assumption that talent was spread uniformly across the socioeconomic spectrum.9 The faculty should be aiming to advance learning, not merely to preserve it. To achieve his goal of a university in which liberal education was linked to research, he sought to get rid of unpromising junior faculty and to appoint high-profile senior faculty, often from outside Harvard. This brought him into repeated conflict with faculty members and alumni who questioned his prioritizing of research over teaching. The Economics Department was one part of the university where such conflicts erupted.ed. Mason (1982, p. 412) wrote of Williams: “He was an excellent lecturer... the best the Department had to offer and his courses in money and banking and international trade were heavily attended.”
e. See chapter 15 this volume.
In the years immediately before Samuelson’s arrival, Harvard's Economics Department had changed significantly, with the departure of several senior faculty members. The most significant among these departures was that of Frank Taussig, a professor since 1892 and author of a leading textbook, Principles of Economics (1911, third edition 1921), who retired in 1935 at age seventy-five, having taught the compulsory theory course for forty years.f Prominent among the replacements were recruits from Europe, notably Joseph Schumpeter, easily Harvard’s most eminent economist in the 1930s, and Wassily Leontief and Gottfried Haberler, all of whom, along with Edwin Bidwell Wilson in the Institute for Public Health but attached to the Economics Department, were to be very important for Samuelson.10
Harvard’s main research activity during the 1920s had been for the Committee on Economic Research and the Harvard Economic Service, an organization that under Warren Persons had been responsible for producing economic forecasts—the Harvard barometer of business conditions.
This committee acquired a solid reputation in the 1920s, selling its advice to businessmen. In 1929, their graphs of economic indicators (famously known as the A, B, and C curves) gave a clear warning of a downturn, but those writing the forecast could not believe what they were seeing and failed to warn their subscribers.g The Economic Service was discontinued in 1933, but it left a legacy. It established the Review of Economic Statistics (later the Review of Economics and Statistics}, an academic journal focused on quantitative research initially bundled with subscriptions to the weekly Economic Service. It was taken over by the Economics Department as a second journal along with the long-established Quarterly Journal of Economics. Also, though Charles Bullock, the driving force behind the committee, had retired and, though Persons had left in 1928, two people recruited to work on the project stayed on as faculty members.Edwin Frickey, appointed in 1917, focused on the problem, crucial to Persons’s methods, of decomposing an economic series into trend and cycle. He was a regular contributor to the Review of Economic Statistics, with articles
f. Other notable retirements included Thomas Nixon Carver and Charles Bullock, all three having been appointed before 1914. For an account of Harvard during this period, see Mason 1982.
g. The A curve was believed to be a measure of speculation, including variables that changed early in the business cycle. The B curve was calculated from measures of physical production and commodity prices, and the C curve covered financial markets. These correspond to what are nowadays called leading, coincident, and lagging indicators. See Mason 1982, p. 417; Friedman 2014; Morgan 1990. on stock prices and bank clearings, as well as on general fluctuations in economic activity. This work was characterized by meticulous analysis of statistical data and a determination to follow an inductive approach, driven only by the data, not by economic theory.
One of Frickey’s innovations was to argue that, in decomposing a series into trend and fluctuation, the investigator should make use of information about other data series—something that was possible because of the high correlation between them; that is, in estimating the trend for one price, account should be taken of developments in the economy as a whole. It was an approach very much in the spirit of the work that Wesley Mitchell was doing at the National Bureau of Economic Research: painstaking accumulation and analysis of economic statistics. When Frickey later assembled his articles into a single volume, it was favorably reviewed by Mitchell’s collaborator, Arthur Burns, who praised it for innovations in statistical technique, for documenting the rhythmic fluctuations in economic activity, and for constructing important new series (for manufacturing output and employment, and of output in transport and communications).11In 1925, Frickey had been joined on the Harvard Economic Service project by Leonard Crum, a Yale-trained mathematician. There was considerable overlap between their work, for Crum also investigated finance and the business cycle, and he worked on methods for calculating trends and analyzing seasonality, publishing analyses of business conditions in the Review of Economic Statistics. Crum was a co-author, with Bullock and Persons, of a review of the Harvard Economic Service’s experience with its index of business conditions, explaining what they were trying to achieve and defending it against critics.12 Five years later, he and Bullock—Persons having left Harvard—evaluated the performance of their forecasting methods in the light of the Depression by then approaching its lowest point. “If followed mechanically,” they pointed out, “the chart would have given a satisfactory forecast even of the extraordinary developments late in 1929.”13 However, they had not interpreted the index mechanically and had supplemented it with “economic analysis.”14 Their overall conclusion was a defense of their performance.15
Even more prolific in his output, Crum’s interests ranged more widely than Frickey’s.
In addition to his work on forecasting the cycle, he tackled other problems such as the relationship between business size and profitability, the validity of opinion polls, the reliability of examination results, and the apportioning of joint costs between activities within a business. He took issue with the claims made by Adolf Berle and Gardner Means (1932) about the concentration of economic power in the United States.16 However, what is most notable is that, as would be expected of someone trained as a mathematician, his work exhibited a greater concern with statistical theory. He explored ways to measure the dispersion of an ordered series (such as time series, in which the order in which the observations appear is significant), the statistical implications of using the median rather than the mean in measuring seasonal variations in a series, and the relation between correlation and measures of the periodicity of a series. It is thus not surprising that he published a number of papers arguing for the importance of mathematics to students of business and economics. He later published, as a supplement to Harvard's Quarterly Journal of Economics, an elementary primer on the mathematics that economists and statisticians needed to do their work effectively, starting with graphs and moving through simple algebra to limits and differential equations.17 He was most famous, Samuelson recalled, for his predictions that Roosevelt would lose the elections in both 1936 and 1940.18The remaining “old guard” included Eli Monroe, appointed in 1914, a historian of economic thought, who was managing editor of the Quarterly Journal of Economics during Samuelson's time at Harvard; the economic historian Edwin Francis Gay, appointed in 1902; and Harold Burbank, the faculty member who, in his role as Head of Department, had interviewed Samuelson on his arrival. Appointed an instructor in 1912, Burbank had a significant influence on the department, frequently serving as its chairman, usually because no one else was anxious to take on the task.
A specialist in public finance who published little, he was instrumental in recruiting Schumpeter. Mason remembered Burbank in the following words:My memories of “Burbie,” as he was called by young and old alike, are of two quite different people. In the 1920s he was a fat, jolly, friendly man enthusiastically engaged in building up the tutorial system and immersed in undergraduate instruction. He offered a helping hand to young instructors who were not too frequently noticed by older members of the Department, and was always accessible to students. In his later years, he was a disappointed, disgruntled, reactionary figure who had influence in the Department mainly because of his willingness, even alacrity, in taking over the chairmanship, a job shunned by almost everyone else.19
During the 1920s, the Harvard department had developed the practice of allowing a number of its own students to stay on to join the faculty when they obtained their PhDs. These included John Williams (1921), Seymour Harris (1922), Edward Mason (1923), Edward Chamberlin (1927), and Overton Taylor (1928). Abbott Payson Usher, an economic historian who had studied with Gay, joined in 1922, after spending a dozen years elsewhere. Williams was a specialist in international finance, one of a remarkable series of PhD students supervised by Taussig, which also included Samuelson’s Chicago teacher, Jacob Viner, who undertook studies of balance-of-payments adjustments in different countries. Williams combined being a successful teacher at Harvard with a career advising the Federal Reserve Bank of New York, becoming a vice president in 1936. Harris, who did not achieve tenure at Harvard until 1948, perhaps because he was Jewish,20 spent many years editing the Review of Economic Statistics, and was to prove more receptive to Keynes than were many of his colleagues. Mason specialized in industrial organization and relationships between government and industry.
Samuelson dismissed Harvard’s old guard as “sterile” and “lack[ing] enthusiasm for foreign high- falutin theorist newcomers not trained at Harvard.”21 It was, he claimed, the European emigres (Schumpeter, Leontief, and Haberler) along with E.
B. Wilson (whose many works lay outside the Economics Department) who were important for him. However, as this account shows, though Samuelson might not be enthusiastic about their work, the “old guard” was far from sterile, for it included people who were doing important applied work.22 It would be impossible to guess from Samuelson’s remarks that Wilson, whom Samuelson admired, respected the work of Frickey and Crum, and collaborated with them.h The explanation must be that although Samuelson would later engage in applied statistical work, as a twenty-year- old student taking courses in the Economics Department he was interested only in mathematical economic theory, an activity in which they simply did not engage, and this caused him to dismiss them out of hand.