The Cowles Foundation for Research in Economics is an

economic An economy is an area of the Production (economics), production, Distribution (economics), distribution and trade, as well as Consumption (economics), consumption of Goods (economics), goods and Service (economics), services. In general, it is ...

research institute A research institute, research centre, research center or research organization, is an establishment founded for doing research. Research institutes may specialize in basic research or may be oriented to applied research. Although the term often i ...

Yale University Yale University is a private research university in New Haven, Connecticut. Established in 1701 as the Collegiate School, it is the third-oldest institution of higher education in the United States and among the most prestigious in the wo ...

. It was created as the Cowles Commission for Research in Economics at Colorado Springs in 1932 by businessman and economist Alfred Cowles. In 1939, the Cowles Commission moved to the

University of Chicago The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park neighborhood. The University of Chicago is consistently ranked among the b ...

under

Theodore O. Yntema Theodore Otte Yntema (1900 – September 18, 1985) was an American economist specializing in the field of quantitative analysis in finance. Education Yntema graduated summa cum laude in 1921 from Hope College as valedictorian. in 1922, he rece ...

Jacob Marschak Jacob Marschak (23 July 1898 – 27 July 1977) was an American economist. Life Born in a Jewish family of Kyiv, Jacob Marschak (until 1933 Jakob) was the son of a jeweler. During his studies he joined the social democratic Menshevik Party, ...

directed it from 1943 until 1948, when

Tjalling C. Koopmans Tjalling Charles Koopmans (August 28, 1910 – February 26, 1985) was a Dutch-American mathematician and economist. He was the joint winner with Leonid Kantorovich of the 1975 Nobel Memorial Prize in Economic Sciences for his work on the theory o ...

assumed leadership. Increasing opposition to the Cowles Commission from the department of economics of the University of Chicago during the 1950s impelled Koopmans to persuade the Cowles family to move the commission to

in 1955 where it became the Cowles Foundation. As its motto ''Theory and Measurement'' implies, the Cowles Commission focuses on linking

economic theory Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyzes ...

to mathematics and statistics. Its advances in economics involved the creation and integration of

general equilibrium theory In economics, general equilibrium theory attempts to explain the behavior of supply, demand, and prices in a whole economy with several or many interacting markets, by seeking to prove that the interaction of demand and supply will result in an ov ...

and

econometrics Econometrics is the application of Statistics, statistical methods to economic data in order to give Empirical evidence, empirical content to economic relationships.M. Hashem Pesaran (1987). "Econometrics," ''The New Palgrave: A Dictionary of ...

. The thrust of the Cowles approach was a specific, probabilistic framework in estimating simultaneous equations to model an economy. Its ultimate goal in doing so was to gain

policy Policy is a deliberate system of guidelines to guide decisions and achieve rational outcomes. A policy is a statement of intent and is implemented as a procedure or protocol. Policies are generally adopted by a governance body within an organ ...

insight. The Cowles approach structured its models from a priori economic theory. One of its main contributions was in exposing the

bias Bias is a disproportionate weight ''in favor of'' or ''against'' an idea or thing, usually in a way that is closed-minded, prejudicial, or unfair. Biases can be innate or learned. People may develop biases for or against an individual, a group, ...

ordinary least squares In statistics, ordinary least squares (OLS) is a type of linear least squares method for choosing the unknown parameters in a linear regression model (with fixed level-one effects of a linear function of a set of explanatory variables) by the prin ...

regression in identifying coefficient estimates. Consequently, Cowles researchers developed new methods such as the

indirect least squares Simultaneous equations models are a type of statistical model in which the dependent variables are functions of other dependent variables, rather than just independent variables. This means some of the explanatory variables are jointly determined ...

, instrumental variable methods, the full information

maximum likelihood In statistics, maximum likelihood estimation (MLE) is a method of estimation theory, estimating the Statistical parameter, parameters of an assumed probability distribution, given some observed data. This is achieved by Mathematical optimization, ...

method, and the limited information maximum likelihood method. All of these methods used theoretical, a priori restrictions. According to an article by Carl F. Christ, the Cowles approach was grounded on certain assumptions: :1. simultaneous economic behavior; :2. linear or logarithmic equations and disturbances; :3. systematic, observable variables without error; :4. discrete variable changes as opposed to continuous; :5. a priori determination of exogeneity and endogeneity; :6. the existence of a reduced form; :7. independence of the

explanatory variable Dependent and independent variables are variables in mathematical modeling, statistical modeling and experimental sciences. Dependent variables receive this name because, in an experiment, their values are studied under the supposition or demand ...

s; :8. a priori identified

structural equation Structural equation modeling (SEM) is a label for a diverse set of methods used by scientists in both experimental and observational research across the sciences, business, and other fields. It is used most in the social and behavioral scienc ...

s; :9. normally distributed disturbances with zero means, finite and constant

covariance In probability theory and statistics, covariance is a measure of the joint variability of two random variables. If the greater values of one variable mainly correspond with the greater values of the other variable, and the same holds for the les ...

s, a

nonsingular In linear algebra, an -by- square matrix is called invertible (also nonsingular or nondegenerate), if there exists an -by- square matrix such that :\mathbf = \mathbf = \mathbf_n \ where denotes the -by- identity matrix and the multiplicati ...

covariance matrix In probability theory and statistics, a covariance matrix (also known as auto-covariance matrix, dispersion matrix, variance matrix, or variance–covariance matrix) is a square matrix giving the covariance between each pair of elements of ...

, and serial independence; :10. a dynamically stable system of equations. Several Cowles associates have won a

Nobel Memorial Prize in Economic Sciences The Nobel Memorial Prize in Economic Sciences, officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel ( sv, Sveriges riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne), is an economics award administered ...

for research done while at the Cowles Commission. These include

Tjalling Koopmans Tjalling Charles Koopmans (August 28, 1910 – February 26, 1985) was a Dutch-American mathematician and economist. He was the joint winner with Leonid Kantorovich of the 1975 Nobel Memorial Prize in Economic Sciences for his work on the theory o ...

Kenneth Arrow Kenneth Joseph Arrow (23 August 1921 – 21 February 2017) was an American economist, mathematician, writer, and political theorist. He was the joint winner of the Nobel Memorial Prize in Economic Sciences with John Hicks in 1972. In economics ...

Gérard Debreu Gérard Debreu (; 4 July 1921 – 31 December 2004) was a French-born economist and mathematician. Best known as a professor of economics at the University of California, Berkeley, where he began work in 1962, he won the 1983 Nobel Memorial Prize ...

James Tobin James Tobin (March 5, 1918 – March 11, 2002) was an American economist who served on the Council of Economic Advisers and consulted with the Board of Governors of the Federal Reserve System, and taught at Harvard and Yale Universities. He devel ...

Franco Modigliani Franco Modigliani (18 June 1918 – 25 September 2003) was an Italian-American economist and the recipient of the 1985 Nobel Memorial Prize in Economics. He was a professor at University of Illinois at Urbana–Champaign, Carnegie Mellon Uni ...

Herbert A. Simon Herbert Alexander Simon (June 15, 1916 – February 9, 2001) was an American political scientist, with a Ph.D. in political science, whose work also influenced the fields of computer science, economics, and cognitive psychology. His primary ...

, Joseph E. Stiglitz, Lawrence Klein,

Trygve Haavelmo Trygve Magnus Haavelmo (13 December 1911 – 28 July 1999), born in Skedsmo, Norway, was an economist whose research interests centered on econometrics. He received the Nobel Memorial Prize in Economic Sciences in 1989. Biography After attendi ...

Leonid Hurwicz Leonid Hurwicz (; August 21, 1917 – June 24, 2008) was a Polish-American economist and mathematician, known for his work in game theory and mechanism design. He originated the concept of incentive compatibility, and showed how desired outcomes ...

and Harry Markowitz. The Cowles Foundation is located at 30 Hillhouse Avenue,

New Haven, Connecticut New Haven is a city in the U.S. state of Connecticut. It is located on New Haven Harbor on the northern shore of Long Island Sound in New Haven County, Connecticut and is part of the New York City metropolitan area. With a population of 134,02 ...

References

External links

Cowles Foundation at Yale
{{authority control Research institutes in Connecticut Economic research institutes Yale University University of Chicago Research institutes established in 1932