In 1943 Jacob Marschak led the Cowles Commission in Chicago and assembled a team that specialized in statistics, economics, philosophy, mathematics and strategy. The list of members and their diversity is impressive, but too long to list here. (They can all be found on page 127.) The commission was in Chicago from 1942 to 1954.
To say that the commission used mathematics and produced some very important and far-reaching developments is an understatement. The commission became famous for their macroeconometric model building, but there were four significant developments in total. The first was this idea of the mathematical model and the recruitment to Keynesian macroeconomics. Model is the key word as they replaced “hypothesis” that had been long used.
The second was in econometrics and the idea of marrying statistics to economics. The third was mathematical economics, specifically the new technique of linear programming. The author states that linear programming was as “significant as the discovery of double-entry bookkeeping in the Middle Ages.” Linear programming had a wide range of applications and moved so quickly in these applications that Samuelson, Robert Solow and Robert Dorfman wrote Linear Programming and Economic Analysis.
The fourth development was in game theory, the thought that one could mathematically anticipate the strategic moves of another, based on choices that have already been made. Or as the books simplifies the concept as strategic thinking.
A for Tom - perhaps the best post so far.
ReplyDeleteThe idea of a "model" that came out of the Cowles Commission is so important that Barro discusses it towards the end of Chapter 1.
The idea of using regressions to get insight — not just into economics — but into which direction the theory should go is so important that I introduced (what was a Ph.D. level technique 20 years ago) to you last week to get at the idea of how long the propagation mechanism is.
The idea of linear programming is so important that it is used more in management than economics these days. We cover it here in ECON 2500 because some professors wanted students to know it walking in the door. And, I don't use the word "polytope" in ECON 2500, but I do talk about them: how in linear programming, the constraints form a feasible set with edges the meet at corners where the optimums must be. Of course, I spend a lot of time talking about the algebra and geometry of lines, planes and hyperplanes too, but as explained on pp. 129-30, that's what a polytope really is.
The fourth Cowles contribution, game theory, is one we use more in managerial economics at the undergraduate level. But we do brush the surface of it in macroeconomics when we talk about how policies can be counteracted by an uncooperative public.
Trivia: Jon was in my office the other day talking about topics for research projects. My first real "econometrics project" as a senior in 1985 was figuring out the details of "Haavelmo's problem". Haavelmo eventually won a Nobel Prize, but on pg. 128 he's important because he's one of the people that Marschak brought to the Cowles Commission when it was based in Chicago.
More Trivia: later in the chapter it talks about how the moderns at the Cowles Commission went in different directions in the 1950s. I also mention in a comment how I (and you) are intellectually related to that group. Anyway, in 1987, I was stuck in a long-distance relationship, and considering transferring to the University of Minnesota. My advisor sent me off to talk to Leo Hurwicz (who is mentioned on pg. 127 as another one of the people recruited by Marschak), because he had landed there and made it part of my extended network.
Extra Credit to the first person who can comment back about what a Menshevik was, why one might flee Russia.
I may have a leg up because I am reading a comment on my post, but here you go.
ReplyDeleteThe Mensheviks came about at the beginning of the 20th century when a dispute started between Vladimir Lenin and Julius Martov. Both were members of the Russian Social Democratic Labour Party.
Martov's supporters were Mensheviks and Lenins were Bolsheviks. Between 1903 and World War I the two parties positioned for power, but during the 1917 revolution as Lenin returned from exile the Bolshevik party came into power and basically crushed the Menshviks.