Economics at Stanford


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Stanford University was created by Leland Stanford, a California railroad tycoon, controversial founding executive of Central Pacific and president of Southern Pacific. It was named after his son, Leland Stanford Jr., who had died of typhoid fever in 1884. Long-interested in technical education, Stanford had originally thought about expanding the endowment of the University of California at Berkeley.  However, the dismissal  (for political reasons) of his candidacy as regent of the California board, prompted him to decide to set up his own private university. After some investigation, Stanford decided on adopting a mixture of a technical school for vocational studies and a German-style research university model, then exemplified at The Johns Hopkins University.  He tried to lure Francis A. Walker from MIT, but to no avail, so Stanford appointed David Starr Jordan (then the energetic young president of Indiana University) as president of his new university.  With a substantial endowment (estimated at around $20 million), construction of Stanford began in 1887 and classes opened in 1891.  Leland Stanford himself was involved in teaching, conducting extension lectures for local California farmers.  Originally regarded as an ostentatious vanity project of an eccentric tycoon, the project was mocked in the California press, who predicted empty lecture halls in the middle of the rural fields of Palo Alto.  But Stanford's university was was well-launched - the absence of tuition fees helped it gain a critical mass of students almost immediately and frighten neighboring Berkeley with competition for enrollments. 

Economics courses were offered from the start, as part of the social sciences (which included political science and sociology).  But unable to lure scholars from the east, instruction was initially undertaken by administrator Orrin Leslie Elliot.  The economics and social sciences department was soon bolstered by the arrival of Amos G. Warner in 1892 and Edwin A. Ross in 1893, both of them Ely students from Hopkins.    

Leland Stanford's death in 1893 provoked a little crisis.  The US government froze all of Leland Stanford's property and funds pending the court inquiry into his debts.  As the transfer to the university's endowment was still not finalized, that left the university with zero income.  The economic lurch was solved by Stanford's widow, Jane Stanford (the only trustee), who quickly hired all the faculty professors as her "private servants", allowing them to be paid out of the allowance released for her maintenance.  It was a temporary solution, and kept the university on a constrained budget, until the injection of funds raised from sale of Central Pacific stock in 1898.  But even then, at Mrs. Stanford's insistence, much of it was dedicated to construction of new buildings, thus keeping faculty on an austerity diet for a little while longer. 

The economics department faced severe growing pains.  By the late 1890s,  Warner had fallen ill and Ross gravitated to sociology, prompting Jordan to hire Frank Fetter and Dana Durand in 1898 and assistant Morris Aldrich in 1899 to fill the gaps in the economics courses.  But things were made more difficult by Mrs. Stanford's distaste for Ross. The outspoken E.A. Ross had made controversial pronouncements in the public press - promoting bimetallism, endorsing W.J. Bryan's presidential candidacy, lambasting Chinese immigrants, calling for immigration restrictions, municipal ownership of transportation, etc..  The angered Mrs. Stanford demoted Ross and soon began pressing for his dismissal.  Given the precarious state of economics, Jordan resisted, but eventually relented and forced Ross to resign in 1901.  The "Ross affair" became a celebrated case of academic freedom.  Seven faculty members - including Fetter and Aldrich - promptly resigned. The action drew protests from other academics and the press, and Stanford quickly became tainted.  Jordan found recruitment of teachers and even students difficult, as its reputation of intolerance for freedom of speech had spread across the country.. 

For the next few years, Stanford limped along with temporary instructors.  The 1906 San Francisco earthquake, which leveled many of the newly-built Stanford buildings, were another blow. Nonetheless, Jordan set about rebuilding the university - and the economics department. In 1906-07, Jordan finally secured the appointment of two permanent professors, both of them future stars - Allyn Young and, at Young's recommendation, Thorstein Veblen (who had just lost his job at Chicago) - overcoming their skepticism and reservations with guarantees. But things did not go well - Young felt overworked and underpaid, while Veblen's private affairs (and his notorious distaste for teaching) proved problematic.  Veblen was forced to resign in 1909, and Allyn Young departed in 1911 (for Washington University in St. Louis), soon followed by assistants Harry Millis (moved on to Chicago in 1912) and Ira Cross (who moved to Berkeley in 1914).  Alvin Johnson, who had been appointed to replace Young in 1911, stayed for only a year before moving on.  Jordan resigned as president in 1913, having failed to build an economics department as he had hoped from the start.  

The reconstruction of the Stanford economics program had to wait for the interwar years, under the triumvirate of Bernard F. Haley, Edward S. Shaw and Moses Abramovitz.  Hotelling joined in 1924, but left by 1931.  Tarshis joined 1943, Kenneth J. Arrow in 1949, Hollis Chenery in 1952 (until 1961),  Hendrik Houthakker joined in 1954, Hirofumi Uzawa in 1956 (until 1964), Herbert Scarf in 1956 (until 1963).  Inter-disciplinary mathematicians Patrick Suppes and Samuel Karlin also contributed to the attraction of Stanford.  (Arrow, Karlin, Scarf, had been together at Rand before).  Arrow et al. presided over a famous mathematical economics seminar at Stanford from the late 1950s, ancestral to the current SITE.  Alain Enthoven (another ex-Randian, who had worked with Shaw and Gurley) joined in 1973.

The Stanford Graduate School of Business (GSB) traces its roots to 1925, when a group of businessmen, led by form Sanford graduate Herbert Hoover, proposed setting up a school on the west coast..



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