9. Changing Economics: Irving Fisher, the Cowles Commission, and the Econometric Society

The celebration was at Harvard, organized by Joseph Schumpeter, because by then Fisher’s Yale colleagues thought of him primarily as the man who stated in October 1929 that stock prices appeared to have reached a permanently high plateau. Fisher’s 1942 recollection of taking economics courses only because of Sumner neglects courses in corporations, railroads and the history of political economy that he took with Arthur Twining Hadley, then first dean of Yale Graduate School and later president of the university from 1899 to 1921 and of the American Economic Association in 1898–1899, and in the principles of public finance and the history of labor organizations with Henry W. Farnam, the New Haven Railroad heir who was longtime secretary of the university and AEA president in 1909 (and funder of Fisher’s hydraulic mechanism).

See Dorfman (1995). Fisher’s version was of course not identical with equilibrium economics of Walras or Edgeworth, for example regarding Walras’s specification of initial endowments of agents, but Fisher (1892, p. 4) acknowledged that “These equations are essentially those of Walras … That similar results should be obtained independently and by separate paths is certainly an argument to be weighed by those skeptical of the mathematical method.” Max Sasuly (1947) claimed that Fisher’s thesis “probes with mature grasp in the best available thought in the sciences and humanities of the ‘90s … a full panorama of the relevant culture” but Walras and Edgeworth were even more relevant than the authors listed by Sasuly.

Fisher’s foreword to the 1927 reprint of Cournot ([1838] 1897) reported that “the mathematical method has become so general in economic and statistical studies that no attempt has been made to bring the bibliography down to date by adding the many items which would be necessary” (p. vii of the 1927 reprint, quoted on p. v of the 1963 reprint). He further claimed that “there is today little need, as there was then, to emphasize the value of the method, as it is now seldom, if ever, challenged” but Fisher (1930, 1941) show that the growth of the mathematical literature of economics and statistics did not imply general acceptance or remove the need, in Fisher’s view, to make the case for the legitimacy and usefulness of such methods. In addition to celebrating the centenary of Cournot’s book (see Fisher 1938), the Cowles Commission, Econometric Society followed Fisher in the 1930s in drawing attention to earlier mathematical economists, with articles by Akerman (1933) on Wicksell, Schneider (1934) on von Thünen, Hicks (1934) on Walras, and Amoroso (1938) on Pareto.

Norton’s Yale Ph.D. dissertation, Statistical Studies of the New York Money Market (1902), has been belatedly recognized, notably by Judy Klein (1997), as a landmark of time series analysis (although without mention of Yale or Fisher). Fisher’s son and biographer bore the middle name Norton. Norton’s AAAS position was full-time and permanent.

According to Fisher (1934, quoted by Fisher 1956, p. 189), Fisher helped draft Taft’s message to Congress. Taft, while a Yale law professor between being President and Chief Justice, accepted the chairmanship of Fisher’s Life Extension Institute in 1913.

On occasion, instead of an economist disapproving of Fisher for using mathematical economics, the opprobrium went in the other direction. Carl Goldenberg (1975, p. 49) recalled that Stephen Leacock, head of McGill University’s Department of Economics and Political Science from 1908 to 1936, “had his prejudices, particularly against mathematical economists. I always suspected that this was in part due to the fact that Irving Fisher of Yale was one of the first of this breed. He was a teetotaler [and Prohibitionist] and so Leacock had no use for him or his approach to economics. I remember buying Keynes’s General Theory of Employment, Interest and Money when it appeared in 1936 and proudly showing it to Leacock. He opened the book but, unfortunately, at one of the few pages with algebraic equations. He thereupon threw it down and, in disgust, as he walked away, said: ‘Goldenberg, this is the end of John Maynard Keynes.’”

Walter Friedman (2014, p. 79), claiming to follow Christ (1952), dates the visit of Frisch and Roos to Fisher to April 1929 (when Frisch was in Europe) and limits Fisher’s role to agreeing to become a founding member of the Society.

James Harvey Rogers, a Fisher and Pareto student who was the only other Yale economist interested in (or capable of understanding) Frisch’s work, did not join the Yale faculty as Sterling Professor of Economics until the summer of 1930, after Frisch’s visiting professorship had begun, although he undoubtedly had a role along with Fisher in the 1931 offer to Frisch of a permanent position. Rogers published in the first volume of Econometrica in 1933. Oystein Ore, a Norwegian mathematician affiliated with Yale from 1929, was a friend of Frisch, but, as Bjerkholt (1998, pp. 26, 46–47) notes, his interests were in number theory and algebra, not mathematical economics or statistics. Fisher also persuaded Yale to offer Schumpeter a chair, but Schumpeter opted for Harvard.

Alfred Cowles Sr., was business manager, treasurer and one of the incorporators of the Chicago Tribune, of which he owned one third.

Cowles had remained in close contact with Yale since graduating, even if not with Fisher: the story in the New Haven Register on eight Yale economics professors joining the Econometric Society (“New Haveners Join Econometric Society,” May 15, 1932) stated that “The research director of the Cowles Economic Commission is Alfred Cowles, 3rd, who joined with others in his family to establish the Cowles Foundation for the Study of Government at Yale.” That first Cowles Foundation at Yale appears to have become the endowment for the Cowles professorship in political science. See Dimand and Veloce on the Cowles Commission in Colorado until 1939 and Hildreth (1986) and Christ (1994) on the Cowles Commission’s years at the University of Chicago from 1939 until it moved to Yale as the Cowles Foundation for Research in Economics in 1955. Independently, a German-language journal for mathematical economic and social research was launched in 1935 (see von Stackelberg 1935, 1938, Tinbergen 1937, Schneider 1938), drawing contributions from scholars who also participated in the Econometric Society (see Schneider 1934, Tinbergen 1935), but that journal did not survive World War II.

The New York Times, May 17, 1912, listed all forty-five Yale students tapped (chosen for membership) in Yale’s senior societies (fifteen each for Skull and Bones, Scroll and Keyes, and Wolf’s Head), including Alfred Cowles, 3rd, and future Presidential candidate, ambassador and New York Governor W. Averill Harriman for Skull and Bones and future popular composer Cole Porter for Scroll and Keys. The Times even discussed, by name, some students who were not chosen, although they had expected to be, and named one student who rejected Scroll and Keys, hoping for Skull and Bones, and five who rejected Wolf’s Head.