The Cowles Commission and Foundation for Research in Economics : Bringing Mathematical Economics and Econometrics from the Fringes of Economics to the Mainstream

Founded in 1932 by a newspaper heir disillusioned by the failure of forecasters to predict the Great Crash, the Cowles Commission promoted the use of formal mathematical and statistical methods in economics, initially through summer research conferences in Colorado and through support of the Econometric Society (of which Alfred Cowles was secretary-treasurer for decades). After moving to the University of Chicago in 1939, the Cowles Commission sponsored works, many later honored with Nobel Prizes but at the time out of the mainstream of economics, by Haavelmo, Hurwicz and Koopmans on econometrics, Arrow and Debreu on general equilibrium, Yntema and Mosak on general equilibrium in international trade theory, Arrow on social choice, Koopmans on activity analysis, Klein on macroeconometric modelling, Lange, Marschak and Patinkin on macroeconomic theory, and Markowitz on portfolio choice, but came into intense methodological, ideological and personal conflict with the emerging “Chicago school.” This conflict led the Cowles Commission to move to Yale in 1955 as the Cowles Foundation, directed by James Tobin (who had declined to move to Chicago to direct it). The Cowles Foundation remained a leader in the more technical areas of economics, notably with Tobin's “Yale school” of monetary theory, Scarf's computable general equilibrium, Shubik in game theory, and later Phillips and Andrews in econometric theory but as formal methods in economic theory and econometrics pervaded the discipline of economics, Cowles (like the Econometric Society) became less distinct from the rest of economics