DEPARTMENT OF ECONOMICS
The past forty years of Economics Department history have reflected much of the change taking place in the society at large, as well as in the discipline. World War II opened the period, and its immediate impact on the department was a drastic reduction in size. Students and potential students went off to military duty, while a number of senior faculty members, on extended leaves, rendered their service to management of the war effort in Washington. From the last prewar figure of 2,176 enrollment had dropped by the fall of 1944 to 1,106, and the professorial staff was reduced to eleven. Nevertheless, these eleven people strove to offer a full curriculum to the remaining civilian students and members of the campus military units who joined them in class. For Chairman Leo Sharfman it was a challenge to hold things together for the duration of the long, four-year crisis.
When the conflict ended at last the revolutionary Servicemen's Readjustment Act of 1944, as amended in 1945 by what came to be known as the G.I. Bill of Rights, catapulted the department the other way. Although it took a little time for the effects to show up, by the fall of 1947 enrollment peaked at 4,694 and faculty strength was back up to 14 on regular appointment.
During the immediate postwar period economics was headed for some important changes. The Keynesian revolution was now an integral part of the discipline, its tenets institutionalized in the Full Employment Act of 1946. National income accounting had emerged as a corollary, and from these two developments macro-economics arose as a special field. Gardner Ackley returned from government service in Washington, and Richard Musgrave was hired, to teach macro-economics and stabilization policy, respectively.
Page 145At about the same time the Survey Research Center moved from its original Washington connection to the University of Michigan, initiating another new thrust in economic research and teaching. The Economic Behavior Section, directed by George Katona, featured the collection and analysis of empirical data on consumer attitudes and behavior, and the teaching of survey methods and consumer economics entered the department's curriculum. During these years statistics was elevated to a course requirement for concentrators.
Among the economists who joined the Survey Research Center, Lawrence Klein was moving off in yet another direction of quantitative analysis, econometric model building. Klein was brought into the department as a lecturer and he conducted a seminar which undertook to build a model of the U.S. economy. Known as the Klein-Goldberger model it opened a new field of economic scholarship at Michigan and became a prototype for other models around the nation. After Klein's departure in 1955 the Research Seminar in Quantitative Economics continued to flourish under the direction of Daniel Suits from 1955 to 1970, and under codirectors Saul Hymans and Harold Shapiro since 1970. It is both a teaching seminar and a construction laboratory for the continually refined and elaborated forecasting model.
In order to bring an understanding of the model to the business and government officials who make use of its results, the annual Conference on the Economic Outlook was initiated in 1953. Here, each November, the forecast is dramatically revealed, often — in the early days — having emerged in final form from the computer only hours before. A model for the Michigan economy was added to the program in 1972. Now that econometric model building is part of the mainstream and familiar to attendees of the conference, additional topics have been introduced to the Conference program in recent years.
I. Leo Sharfman joined the staff in 1911, became chairman in 1926, and reigned for 28 years with superlative skill in his own style of autocratic democracy. He retired in 1954.
Following Sharfman's retirement the department was a Page 146victim of the virus loosed by Joseph McCarthy. Although it was badly shaken by the impact, its response upheld its honor. Two doctoral students and one staff member were the intended victims. In the student cases, the department sustained its right to judge them on the scholarly merit of their dissertations, not their possible political inclinations. But the valued staff member was lost to the department through voluntary resignation, despite a valiant effort on the part of the new chairman, Gardner Ackley.
With the Ackley chairmanship, the department entered into a new form of organization. The chairmanship became a rotating office, for a five-year term at first, later three. As the burdens of the chairmanship grew with the department, the post of associate chairman was created in 1963, with William Palmer the first to serve in that capacity.
Administratively the department was more or less prepared for the explosive growth of the 1960s, but in terms of staffing these were difficult years. Enrollment, which had receded after the G.I. bulge to 2,235 in the fall of 1952, grew steadily to 5,688 by fall 1969, and 119 Ph.D.s were awarded from 1961-70. Several members went on leave during that decade to serve in high government posts — Gardner Ackley to be a member, then Chairman, of the Council of Economic Advisors and later Ambassador to Italy; Warren Smith to be a member of the Council; Harvey Brazer as Deputy Assistant Secretary of the Treasury. The chairmen of the 1960s, Harold Levinson, 1961-62, William Haber, 1962-63, Warren Smith, 1963-67 and 1970-71, Harvey Brazer, 1967-70, were impelled to a pace of hiring which saw 39 additions to the professorial ranks in the decade 1961-71.
The most conspicuous new research and curriculum developments during this period related to international affairs. Economic Development emerged as a field during the 1950s, when the industrial nations adopted a new stance of economic and technical assistance to the undeveloped nations and former colonial territories. In 1960 a full-fledged Ph.D. field was authorized with seven National Defense Education Act fellowships, and Samuel P. Hayes, Jr., launched the Center for Research in Economic Development in 1961. Wolf-gang Stolper succeeded him as Director in 1963. The Center's twin program of research and advisory missions to developing countries grew steadily through the period. Its senior Page 147staff, including Richard Porter and successive directors Elliott Berg and Robin Barlow have regular appointments in the Economics Department.
The Economics Department's connection to the Far East goes well back into its history. Leo Sharfman spent 1910-11 teaching in Tientsin, and Carl Remer, who joined the faculty in 1928, focused his interest on China throughout his career. Alexander Eckstein joined the department a few years after Remer's retirement. He was Chairman of the National Committee on United States-China Relations, which arranged the famous ping-pong diplomacy in 1972 and helped to end two decades of diplomatic estrangement. The department's Far Eastern expertise was enlarged in the 1968-71 period with the appointments of Robert Dernberger and Gary Saxon-house. In addition a program in comparative economic systems was introduced, which also included Morris Bornstein, specialist in Soviet economics.
The central role of quantitative analysis emerged in diverse fields, from Robert Stern's econometric studies of international markets to the new approaches to human capital and labor markets in the work of George Johnson and Frank Stafford. And, during the 1960s, connections were established with other units of the University in the form of joint Ph.D. degree programs. Peter Steiner came in under a joint appointment with the law school, focusing his department work on industrial organization, along with William Shepherd. Appointment of Robin Barlow and William Neenan in Public Finance, and Robert Holbrook and Ronald Teigen in Macroeconomics and Money and Banking, deepened these fields.
In the history of American higher education the 1960s will doubtless be remembered as the era of student activism. The Economics Department played a conspicuous role in this phenomenon, with several of its doctoral students serving as organizers of the prominent Students for a Democratic Society, and, a few years later, the Union for Radical Political Economics. The latter association continues to be active among faculty and students on a number of campuses, although there is no longer a chapter here. Nevertheless, growing student interest in radical political economy, along with some faculty support, led to the introduction of course offerings in this area. Although economics was Page 148a focus of the Black Action Movement in 1970, increases in Black enrollment and the completion of graduate degrees by Black students have fallen below hopeful expectations. This is true also of efforts to recruit Black faculty.
If the 1960s was a period of expansion and excitement, the 1970s might be characterized as a time of reflection and consolidation. New faculty appointments, under the chairmanships of Peter Steiner, 1971-74, Harold Shapiro, 1974-77, and Saul Hymans, 1977-80, represented an effort to add depth to currently offered fields, rather than the addition of new areas. From a faculty of 13 in 1940 the department has grown to a professorial staff numbering 43 in the four decades of this survey. Service to the College and the University has marked the course of the Economics Department's history. Almost every member has, at some time, served on College and University committees, culminating in the appointment of Harold Shapiro to the highest office of this University, the Presidency.