Cowles Foundation

TheCowles Foundation for Research in Economicsis aneconomicresearch instituteatYale University.

Cowles Foundation

Formation	1932
Location	Yale University,New Haven, Connecticut
Director	Larry Samuelson
Website	cowles.econ.yale.edu

History

It was created as the Cowles Commission for Research in Economics atColorado Springsin 1932 by businessman and economistAlfred Cowles.In 1939, the Cowles Commission moved to theUniversity of ChicagounderTheodore O. Yntema.Jacob Marschakdirected it from 1943 until 1948, whenTjalling C. Koopmansassumed 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 toYale Universityin 1955 where it became the Cowles Foundation.

As its mottoTheory and Measurementimplies, the Cowles Commission focuses on linkingeconomic theoryto mathematics and statistics. Its advances in economics involved the creation and integration ofgeneral equilibrium theoryandeconometrics.

The thrust of the Cowles approach was a specific, probabilistic framework in estimatingsimultaneous equationsto model an economy. Its ultimate goal in doing so was to gainpolicyinsight. The Cowles approach structured its models from a priori economic theory. One of its main contributions was in exposing thebiasofordinary least squaresregression inidentifyingcoefficient estimates. Consequently, Cowles researchers developed new methods such as theindirect least squares,instrumental variablemethods, the full informationmaximum likelihoodmethod, 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 ofexogeneityandendogeneity;

6. The existence of areduced form;

7. Independence of theexplanatory variables;

8. A priori identifiedstructural equations;

9.Normally distributeddisturbances with zero means, finite and constantcovariances,anonsingularcovariance matrix,andserial independence;

10. Adynamically stablesystem of equations.

Notable alumni

Several Cowles associates have won aNobel Memorial Prize in Economic Sciencesfor research done while at the Cowles Commission. These includeTjalling Koopmans,Kenneth Arrow,Gérard Debreu,James Tobin,Franco Modigliani,Herbert A. Simon,Joseph E. Stiglitz,Lawrence Klein,Trygve Haavelmo,Leonid Hurwicz,andHarry Markowitz.

The Cowles Foundation is located at 30Hillhouse Avenue,New Haven, Connecticut.

External links

• Cowles Foundation at Yale
• Source HET