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, 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 implies natural ...

Yale University Yale University is a Private university, private Ivy League research university in New Haven, Connecticut, United States. Founded in 1701, Yale is the List of Colonial Colleges, third-oldest institution of higher education in the United Stat ...

History

It was created as the Cowles Commission for Research in Economics at

Colorado Springs Colorado Springs is the most populous city in El Paso County, Colorado, United States, and its county seat. The city had a population of 478,961 at the 2020 census, a 15.02% increase since 2010. Colorado Springs is the second-most populous c ...

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 for Research in Economics, an influential research institute which advanced the field of econometrics in t ...

. In 1939, the Cowles Commission moved to the

University of Chicago The University of Chicago (UChicago, Chicago, or UChi) is a Private university, private research university in Chicago, Illinois, United States. Its main campus is in the Hyde Park, Chicago, Hyde Park neighborhood on Chicago's South Side, Chic ...

under Theodore O. Yntema.

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 P ...

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

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 a behavioral 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 anal ...

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 an application of statistical methods to economic data in order to give empirical content to economic relationships. M. Hashem Pesaran (1987). "Econometrics", '' The New Palgrave: A Dictionary of Economics'', v. 2, p. 8 p. 8 ...

. 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 or ...

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 inaccurate, closed-minded, prejudicial, or unfair. Biases can be innate or learned. People may develop biases for or against an individ ...

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 In statistics, linear regression is a statistical model, model that estimates the relationship ...

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 estimating the parameters of an assumed probability distribution, given some observed data. This is achieved by maximizing a likelihood function so that, under the assumed stati ...

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 simultaneous equations model, system of equations is the result of solving the system for the endogenous variables. This gives the latter as functions of the exogenous variables, ...

; :7. Independence of the

explanatory variable A variable is considered dependent if it depends on (or is hypothesized to depend on) an independent variable. Dependent variables are studied under the supposition or demand that they depend, by some law or rule (e.g., by a mathematical function ...

s; :8. A priori identified structural equations; :9.

Normally distributed In probability theory and statistics, a normal distribution or Gaussian distribution is a type of continuous probability distribution for a real number, real-valued random variable. The general form of its probability density function is f(x ...

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. The sign of the covariance, therefore, shows the tendency in the linear relationship between the variables. If greater values of one ...

s, a nonsingular

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.

Notable alumni

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 (), commonly referred to as the Nobel Prize in Economics(), is an award in the field of economic sciences adminis ...

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 ...

Kenneth Arrow Kenneth Joseph Arrow (August 23, 1921 – February 21, 2017) was an American economist, mathematician and political theorist. He received the John Bates Clark Medal in 1957, and the Nobel Memorial Prize in Economic Sciences in 1972, along with ...

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 University, Harvard and Yale Uni ...

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 scholar whose work influenced the fields of computer science, economics, and cognitive psychology. His primary research interest was decision-making within organi ...

Joseph E. Stiglitz Joseph Eugene Stiglitz (; born February 9, 1943) is an American New Keynesian economist, a public policy analyst, political activist, and a professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences (2 ...

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,

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 outcom ...

, and

Harry Markowitz Harry Max Markowitz (August 24, 1927 – June 22, 2023) was an American economist who received the 1989 John von Neumann Theory Prize and the 1990 Nobel Memorial Prize in Economic Sciences. Markowitz was a professor of finance at the Rady Scho ...

. 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 described it as "the most beautiful street in America ...

New Haven, Connecticut New Haven is a city of the U.S. state of Connecticut. It is located on New Haven Harbor on the northern shore of Long Island Sound. With a population of 135,081 as determined by the 2020 United States census, 2020 U.S. census, New Haven is List ...

References

External links

Cowles Foundation at YaleMacroeconomic modeling: the Cowles Commission approach
{{authority control Research institutes in Connecticut Economic research institutes Yale University Research institutes of the University of Chicago Research institutes established in 1932