A century of economic scholarship
Department’s centennial celebrates the emergence of a discipline

By Diane Ainsworth, Public Affairs

The bronzed “apple core” trophy goes to the winner of the annual football contest between the Cal and Stanford economics departments, held the day before the Big Game. The trophy honors the Nobel Prize-winning work of Gérard Debreu (Cal) and Kenneth Arrow (Stanford), coaches of the first year’s match, for their theoretical work on the “core” of an economy. Noah Berger photo

30 October 2002 | Since its founding 100 years ago, Berkeley’s Department of Economics has contributed significantly to research that explains the ways in which societies and people behave. Its faculty has touched people’s lives in important ways — from understanding the likely economic outcomes of procrastination to appreciating how the availability of information affects the supply of goods and services.

Ranked among the top economics departments in the U.S. by the National Academy of Sciences, Berkeley’s department has been building its reputation since its inception. Its early theoretical work in political economy has grown into a substantive body of scholarship that helps economists track consumer trends, explain the laws of free-market trade, and advise government officials on socioeconomic policies in need of reform.

“Berkeley was a leader in developing mathematical economics in the early days,” says department chair Richard Gilbert, who points to such examples as the department’s contributions to general equilibrium theory and game theory. “But the department has had a major influence on applied economics too. Daniel McFadden’s work on ‘discrete choice’ behavior, for instance, is striking, because it represents some of the very best work in both theory and applications.”

That century of work, punctuated with Nobel laureates, MacArthur geniuses, and Clark honorees, will bring faculty, staff, alumni, and invited guests to a campus celebration on Friday, Nov. 8. The festivities will feature Berkeley’s current work in the fields of macroeconomic policy, public finance, social policy, and new approaches to economic theory, experimentation, and quantitative analysis, while giving participants an opportunity to honor the department’s long legacy of groundbreaking research.

Academic excellence, social traditions
A century ago, most universities did not recognize economics as an academic discipline. Rather, the field of economics emerged from political economy, which melded history with economic development. At Berkeley, a lone instructor, Professor Bernard Moses, taught the first undergraduate courses in political economy from 1876 to 1890. He had little competition attracting students: Apart from Stanford University, which founded its economics department in 1893, few universities anywhere in the country recognized economics as a separate discipline.

Among the early scholars to leave an indelible mark on the fledgling department was Cora Jane Flood, whose generous 1898 gift to the university endowed the College of Commerce and its successor units, the Department of Economics and the School of Business.

It wasn’t until 1902 that the Department of Economics was formally established, at the request of growing numbers of faculty specializing in the fields of finance and commerce. The new department consisted of commerce faculty, who were supported by the Flood endowment, and the first department chair, Adolph C. Miller, who held the title of Flood Professor of Economics and Commerce. Another department chair, labor economist Ira B. “Doc” Cross, taught the principles of economics for more than 30 years to an estimated 60,000 students. As one former student noted, “The Doc’s” teaching method was “education by sting” — he always shook students out of their complacency, challenging them to think outside the box about economic and labor trends.

Other prominent individuals in the department’s early history included Professor Jessica Blanche Peixotto, one of the department’s first graduate students and only the second woman ever to receive a Ph.D. at Cal. Peixotto’s specialty was “social economics,” which addresses the causes, consequences, and potential solutions to socioeconomic problems, such as poverty, illness, crime, and unemployment. By 1925 the discipline was one of four areas of concentration (along with economic theory, economic history, and labor) within the Department of Economics, and in 1940 the School of Social Welfare was established.

In 1942, the College of Commerce was reorganized and became the College of Business Administration, the predecessor of the Haas School of Business, with nine faculty members and three teaching assistants from the economics department. The college offered undergraduate and graduate programs in business, finance, and economics, and faculty often shared joint appointments with other departments, a practice that continues today.

The Nobelist coaches
As the department grew in size and stature, it developed its social traditions, some of which live on. One of the more popular traditions is the “Little Big Game,” which grew out of the Berkeley-Stanford rivalry in football. In 1983, economics graduate students from Cal and Stanford decided to hold an intradepartmental touch-football game the day before the Big Game.

The first game was coached by Nobel laureates Kenneth Arrow of Stanford and Gérard Debreu of Cal. Debreu knew nothing about American football, but was very enthusiastic about coaching it anyway. No one remembers who won, but the contest has become an annual event, and the winner is awarded a bronzed apple core trophy in honor of Arrow’s and Debreu’s Nobel Prize-winning theoretical work on the equilibrium (the “core”) of an economy.

The Little Big Game may have been sparked that year by both the department’s growing national reputation and the buzz going around — that several faculty might be among the potential Nobel Prize winners.

Right they were. Debreu, a mathematical economist, won the award for his theory of value in 1983. The theory, first published in 1959, described the mathematical models underlying free market supply and demand. A decade later, the late John Harsanyi was awarded a Nobel prize for groundbreaking work derived from his early experiences living first under the Nazis, then under the Communists, in his native Hungary. Those experiences inspired his lifelong study of ways to understand and manage conflict.

Ushering in the new millennium were two more Nobel laureates: Daniel McFadden, who won in 2000 for his work on the factors that influence people’s decision-making; and George Akerlof, who won last year for his analysis of the effects of “asymmetric information” on markets.

The awards reflect Berkeley’s strength in behaviorial economics, which seeks to explain economic behavior using psychological principles. In parallel with that research, however, faculty are making inroads in other subdisciplines, such as macroeconomic policy, labor relations, and public finance.

“The Berkeley economics department has an enormous legacy,” says Gilbert, “and has had a tremendous influence on the development of economics. Our faculty has sustained the tradition of innovation at Berkeley and is on pace to make extraordinary contributions to the profession.”