The Cowles Foundation for Research in Economics is an

economic An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with the ...

research institute at

Yale University Yale University is a Private university, private research university in New Haven, Connecticut. Established in 1701 as the Collegiate School, it is the List of Colonial Colleges, third-oldest institution of higher education in the United Sta ...

. 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 ...

. 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 university, private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park, Chicago, Hyde Park neighborhood. The University of 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 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

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 and

econometrics Econometrics is the 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 orga ...

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 ...

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 t ...

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 stat ...

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 deman ...

s; :8. a priori identified structural equations; :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 ...

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, 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 ...

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,

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 d ...

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 Un ...

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 ...

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 outcome ...

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 ...

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