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 ...
at
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
Colorado Springs is a home rule municipality in, and the county seat of, El Paso County, Colorado, United States. It is the largest city in El Paso County, with a population of 478,961 at the 2020 United States Census, a 15.02% increase since ...
in 1932 by businessman and economist
Alfred Cowles
Alfred Cowles III (September 15, 1891 – December 28, 1984) was an American economist, businessman and founder of the Cowles Commission. He graduated from Yale in 1913, where he was a member of Skull and Bones.
He was the grandson of Alfred Co ...
. 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 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
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 ...
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
In mathematics, a set of simultaneous equations, also known as a system of equations or an equation system, is a finite set of equations for which common solutions are sought. An equation system is usually classified in the same manner as single e ...
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, ...
of
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,
instrumental variable
In statistics, econometrics, epidemiology and related disciplines, the method of instrumental variables (IV) is used to estimate causal relationships when controlled experiments are not feasible or when a treatment is not successfully delivered to ...
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 In statistics, and particularly in econometrics, the reduced form of a system of equations is the result of solving the system for the endogenous variables. This gives the latter as functions of the exogenous variables, if any. In econometrics, the ...
;
: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 multiplica ...
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
Joseph Eugene Stiglitz (; born February 9, 1943) is an American New Keynesian economist, a public policy analyst, and a full professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the Joh ...
,
Lawrence Klein
Lawrence Robert Klein (September 14, 1920 – October 20, 2013) was an American economist. For his work in creating computer models to forecast economic trends in the field of econometrics in the Department of Economics at the University of Penn ...
,
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
Harry Max Markowitz (born August 24, 1927) is an American economist who received the 1989 John von Neumann Theory Prize and the 1990 Nobel Memorial Prize in Economic Sciences.
Markowitz is a professor of finance at the Rady School of Management ...
.
The Cowles Foundation is located at 30
Hillhouse Avenue
Hillhouse Avenue is a street in New Haven, Connecticut, famous for its many nineteenth century mansions, including the president's house at Yale University. Both Charles Dickens and Mark Twain have described it as "the most beautiful street in Amer ...
,
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
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Research institutes in Connecticut
Economic research institutes
Yale University
University of Chicago
Research institutes established in 1932