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Economics at the Massachusetts Institute of Technology (MIT)

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The Massachusetts Institute of Technology (M.I.T.) in Cambridge, Massachusetts, is one of the best-known independent technical universities in the United States.  Although its economics department is of relatively recent vintage (established really only in 1933), MIT would ascend rapidly after WWII to become one of the leading economics programs in the United States, and arguably the most influential in shaping postwar economics.

The origins of MIT are traced much earlier.  In 1862, Congress passed the Morrill Act providing federal subsidies for the establishment of "Colleges for the benefit of Agriculture and Mechanical Arts."  Technical colleges of this kind sprouted up, but mostly as appendages to existing universities (e.g. Sheffield Scientific School at Yale, the College of Agriculture at Wisconsin, etc.)  So when the geologist William Barton Rogers began floating the idea of the Massachusetts Institute of Technology (M.I.T.) among New England industrialists, the response was noticeably lukewarm.  Many believed that M.I.T. might be better served if it were merely a technical "division" of an existing school (Harvard was the usual suggestion).  However, Rogers insisted that M.I.T. ought to be "self-contained" school, that even though it might specialize in modern technical subjects, it would provide a "complete" education (with basic science, liberal arts, humanities, etc.)  At the outset, MIT's objective was not the advancement of scientific research per se (like Hopkins and other new research-oriented schools), but rather more practical:  "a polytechnic school of the useful arts"  to provide trained engineers and technicians for private industry.  To that end, a wider "cultural" component, which included a familiarity with economics, was seen as necessary for the complete education of an engineer.

M.I.T. was incorporated in 1861, and, after some difficulty in raising funds and hiring ten full professors, finally opened its doors to students in 1865.   The State of Massachusetts chipped in by dividing its federal appropriations from the Morrill Act - 70% went towards the Agricultural College in Amherst (future University of Massachusetts-Amherst), and 30% towards the Massachusetts Institute of Technology (MIT).

The course offerings at MIT, from the outset, consisted entirely of "modern" subjects:  geology,  physics, chemistry, metallurgy, mathematics, engineering, literature, modern languages, philosophy, history, political science and economics.  All students were expected to get a little bit of everything before specializing in any technical subjects.  For those wishing to specialize in the social sciences or humanities, rather than the technical subjects, there was a tailored program for them known as "Course IX".  The economics  portion of Course IX - which, by the early 1870s, consisted of classes in political economy, economic history, industrial geography and business law - were primarily in the hands of the all-around humanities lecturer, William Parsons Atkinson.  The overburdened Atkinson pleaded for assistance, so in 1873,  the "Course of Philosophy" was separated from Course IX and created into its own, second non-technical concentration, and philosopher George H. Howison hired to teach it.  Howison was also given the responsibility of assisting with the economics classes of Course IX, taking some of the burden off Atkinson.  

Financial difficulties continued for a while and President Rogers faced an enormous challenge in keeping M.I.T. going.   In 1869, Harvard poached Charles W. Eliot, M.I.T's professor of chemistry and made him their president.  Inspired by his experience at M.I.T., Eliot sought to transform Harvard into a "modern" research university.  Eliot also envisaged that Harvard would eventually "absorb" M.I.T. and began making overtures to this end.  But MIT president Rogers and his successor after 1870, John D. Runkle, were adamant in their resistance. Still, MIT fortunes suffered heavily during the 1870s depression, and by 1878, they had to put an end to the Philosophy course, folding everything back into Atkinson's lap. In 1874, the economics classes in Course IX, previously obligatory, were made optional for technical students.

In 1881, the forty-one-year-old Yale economist Francis Amasa Walker was elected by the trustees as the third president of M.I.T.  Upon his ascension, Walker immediately took over the responsibility for the economics courses himself, releasing Atkinson to concentrate on literature and history.  Walker made economics classes a requirement again for all technical students.  Walker's inclination to empirical work led him to hire Davis Rich Dewey, a Hopkins-trained "new generation" historicist (and older brother of John Dewey), in 1886 for Course IX (now renamed the "Course of General Studies").  As Walker's administrative responsibilities increased, Dewey gradually took over the economics courses.  In 1888, another Hopkins-trained historicist Charles H. Levermore, was hired to replace the retiring Atkinson in history.. Levermore left in 1893 to take up the presidency of Adelphi, so the German-trained historian Charles F.A. Currier was brought in to replace him.  Later that same year, 1893, William Z. Ripley, a former MIT and Columbia-trained engineer-economist was brought in to teach political science.  William Niles was hired to take over geography.

[For the record, under Walker's tenure, the MIT courses of 1890-91 were: I. civil and topographic engineering, II. mechanical engineering, III. mining engineering and metallurgy, IV. architecture, V. chemistry, VI. electrical engineering, VII. biology, VIII. physics, IX. general studies, X. chemical engineering, XI. sanitary engineering, XII. geology.]

By the time Walker died in 1897, Course IX was flourishing under the triumvirate of Dewey, Ripley and Niles.  But the new president James Mason Craft, a chemist, took little interest in it.  Things changed dramatically when president Henry Smith Pritchett took the throne in 1900.  Unlike his predecessors, Pritchett was receptive to Eliot's overtures for a merger of MIT with Harvard, but could not persuade the faculty to go along with it (eventually it would take a Massachusetts court decision in 1905 to put an end to the plan).  Pritchett also saw little value in Course IX, and decided to reorganize it.  By 1903, the softer, literary and humanistic portions were quashed, while the social sciences were reorganized to focus more intently on applied economics and empiricism that might be useful the engineers in private industry.  Anticipating this state of affairs, Ripley decamped for Harvard in 1902, leaving Dewey saddled as the solitary teacher of economics, statistics and political science, with Currier shunted off to a separate department of history.  Carroll W. Doten was brought in 1903 to replace Ripley.  The introductory course in political economy remained obligatory, but by 1906, elective course offerings were reduced from fourteen to six - three by Dewey (banking & finance, industrial organization, economics of corporations) and three by Doten (railroad economics, labor problems, economic history).  In 1907, it was reorganized again, and political science moved to history under Currier, leaving Dewey and Doten as the denizens of a department of economics and statistics..

Pritchett resigned in 1908 and the new MIT president Richard C. Maclaurin revived the value of the "cultural component" and gave Dewey some more rope.  In a notable development, in 1914, at the urging of Harold Pender, head of electrical engineering, Maclaurin authorized Dewey to expand his "Economics of Corporations" class into a new concentration, the "Course of Engineering Administration" (Course XV), effectively a course in business administration for engineering students entering the private sector that would likely ascend to the role of business managers later in their careers.  Course XV would add a master's program in 1925, and be separated from Economics and Statistics in 1930 into its own department ("Business and Engineering Administration")  Course XV would eventually evolve into MIT's Sloan School of Management by 1950. In 1918, Currier became ill and retired, and the department of history and political science was wound up and folded into English and Humanities.

MIT's rise to prominence began with the appointment of president Karl Compton in 1930.  Compton, in conjunction with provost Vannevar Provost, were determined to change the character of MIT from a technical engineering school to a science and research powerhouse.  They modified the structure of the curriculum to place more emphasis on basic science and academics. 

The long-time economics chief  Davis Dewey retired in 1933, and was replaced by Ralph Evans Freeman as head of Economics and Social Science and Erwin Schell as head of Business Administration.  They would both preside for similarly long stretches.   Freeman's ambitions dovetaled into the Compton-Bush vision, and the beginning of the "Department of Economics and Social Science" at MIT is normally dated to Freeman's ascension in 1933.

MIT was transformed by World War II.  But the groundwork was laid even before then.  In 1938, provost Vannevar Bush took up the position as head of the Carnegie Institution in Washington. After the outbreak of war in Europe, Bush persuaded president Franklin Delano Roosevelt to establish the National Defence Research Committee (NRDC) in June 1940, with himself as chair, and including MIT president Karl Compton and Harvard president James B. Conant.  Anticipating US involvement in the war, and remembering the discoordinated efforts during WWI,  the objective was to put civilian science at the disposal of the US military in the development of new weapons.  Rather than the military having to hire scientists and set up their own labs, the NDRC was to serve as the interface between the US military and scattered civilian scientists working at their home institutions. The NDRC was initially endowed with small amount of funds from the president's emergency budget (thus making it independent of Congress and the Departments of War or Navy).  The NDRC would distribute funds on the basis of "project contracts" - this was seen as a compromise between having the scientists be under direct military supervision (as the military wanted) and just handing over money to the institutions (as the academics wanted).. Picking project contracts at its discretion gave the NRDC a substantial amount of influence in directing the overall research efforts of scientists across the country.

The NDRC helped set up the famous Radiation Laboratory ("Rad Lab") at MIT in November 1940, to research the development of radar.  A year later, in July 1941, the NDRC was superseded by the Office of Scientific Research and Development (OSRD), a government agency directed by Vannevar Bush, with a much larger budget and mandate . MIT's Rad Lab would be the beneficiary of over a third of the OSDR's research funding during WWII.  This allowed the great expansion and deepening of research at MIT, enabling it to emerge from the war as one of the premier universities in the United States.

MIT's rise to prominence began with the hiring of Paul Samuelson in 1940, the wunderkind, then serving as a lowly instructor at Harvard..

The Ph.D. program in economics was established in 1941 and Lawrence Klein became the first student to earn a Ph.D. in economics from MIT in 1944.  Samuelson's Economics textbook came out in 1948 (same year as Claude Shannon's groundbreaking "Mathematical Theory of Communication").  The Sloan School of Management was formally launched in 1950.

(to be completed)



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Resources on M.I.T. Economics


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All rights reserved, Gonšalo L. Fonseca