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Oral History Center, The Bancroft Library, University of California Berkeley Oral History Center University of California The Bancroft Library Berkeley, California Lester Telser: Beyond Conventions in Economics Economist Life Stories Interviews conducted by Paul Burnett in 2017 Copyright © 2018 by The Regents of the University of California Oral History Center, The Bancroft Library, University of California Berkeley ii Since 1954 the Oral History Center of the Bancroft Library, formerly the Regional Oral History Office, has been interviewing leading participants in or well-placed witnesses to major events in the development of Northern California, the West, and the nation. Oral History is a method of collecting historical information through tape-recorded interviews between a narrator with firsthand knowledge of historically significant events and a well-informed interviewer, with the goal of preserving substantive additions to the historical record. The tape recording is transcribed, lightly edited for continuity and clarity, and reviewed by the interviewee. The corrected manuscript is bound with photographs and illustrative materials and placed in The Bancroft Library at the University of California, Berkeley, and in other research collections for scholarly use. Because it is primary material, oral history is not intended to present the final, verified, or complete narrative of events. It is a spoken account, offered by the interviewee in response to questioning, and as such it is reflective, partisan, deeply involved, and irreplaceable. ********************************* All uses of this manuscript are covered by a legal agreement between The Regents of the University of California and Lester Telser dated April 18th, 2018. The manuscript is thereby made available for research purposes. All literary rights in the manuscript, including the right to publish, are reserved to The Bancroft Library of the University of California, Berkeley. Excerpts up to 1000 words from this interview may be quoted for publication without seeking permission as long as the use is non-commercial and properly cited. Requests for permission to quote for publication should be addressed to The Bancroft Library, Head of Public Services, Mail Code 6000, University of California, Berkeley, 94720-6000, and should follow instructions available online at http://bancroft.berkeley.edu/ROHO/collections/cite.html It is recommended that this oral history be cited as follows: Lester Telser, “Lester Telser: Beyond Conventions in Economics” conducted by Paul Burnett in 2017, Oral History Center, The Bancroft Library, University of California, Berkeley, 2018. Oral History Center, The Bancroft Library, University of California Berkeley iii Economist Life Stories The impact of economics in our society is hard to overstate. Economics structures government policy, guides decision-making in firms both small and large, and indirectly shapes the larger political discourses in our society. To enrich the understanding of the influence and sources of powerful economic ideas, the Becker Friedman Institute for Research in Economics at the University of Chicago set out in 2015 to capture oral histories of selected economists associated with Chicago economics. The aim was to preserve the experiences, views, and voices of influential economists and to document the historical origins of important economic ideas for the benefit of researchers, educators, and the broader public. This oral history with Lester Telser, conducted in ten sessions in Chicago, IL, from July to October 2017, is the third interview for the project. Economist Life Stories is more than a collection of life histories; it chronicles the history of a scholarly community and institutions at the University of Chicago, such as the Graduate School of Business, the Cowles Commission, and the Department of Economics. It also reflects the achievements of faculty and students in the domains of economic policymaking and private enterprise around the world. Although this project focuses on the leaders and students of the University of Chicago Department of Economics, the Graduate School of Business, and the Law School, we hope to add more stories from economists around the world as the project expands. Acknowledgments Hodson Thornber and Paul Burnett organized the project with Toni Shears and Amy Boonstra of the Becker Friedman Institute, with important support from an advisory group of historians and economists. Financial support for this work was provided by Hodson Thornber, a member of the Becker Friedman Institute Council, whose contribution is gratefully acknowledged. Oral History Center, The Bancroft Library, University of California Berkeley iv Photograph by Leena Schwartz, 2016 Oral History Center, The Bancroft Library, University of California Berkeley v Lester Telser is Professor of Economics Emeritus at the University of Chicago. A student at Chicago in the 1950s, Dr. Telser was first a professor in the Graduate School of Business until 1964. Dr. Telser’s life work is the theory of the core, a variant of game theory that involves coalitions of agents as opposed to individuals working to maximize their advantage. He used sophisticated mathematics to study why and how certain forms of markets are organized without appeals to more established concepts in economics. As both a student and colleague at Chicago economics department, and as a fellow at both the Cowles Commission and the Cowles Foundation, Telser is a key witness to the transformation of the field of economics after World War II. Oral History Center, The Bancroft Library, University of California Berkeley vi Table of Contents Interview 1: July 10, 2017 1 Family background — Father from border town (Russo-German), late 19th century — Father’s prosperity, education, cultivation, facility with languages — Uncles’ migration to US prior to World War I — Father in Russian Army during war, POW of Austrians — Father’s rescue by sister Esther — Cousin Jacob studies engineering at the Technische Hochschule in Germany when Albert Einstein was on faculty — Grandfather’s failed “hedge” on World War I — Grandfather’s artistic side — Family connection in small village between Telser and economist Bob Aumann — Uncle, Isaak Kubovitsky, brother Leon a spy in underground during World War II and facilitator of Adolf Eichmann capture in Argentina — Grandparents and father move to Chicago in 1924 — Father and mother married 1929 — Mother’s family from Poland, fleeing Bolshevik rule, arrival in Chicago, 1924 — Secular Judaism and Zionism — Telser’s second cousin, J.D. Salinger — Surviving scarlet fever — Volatile fortunes of friends and family from 1920s to Great Depression — Depression’s effects on Telser family —Telser’s friends’ linkages to the University and to famous historical figures — Writing for high school newspaper — importance of good teachers — Notable graduates of Hyde Park High School — Childhood interests — Taking in refugees from Germany and Belgium during World War II — Losses to the war and impact of Holocaust on family — Unwitting discovery of Manhattan Project war work — The appeal of mathematics — First encounter with work of John von Neumann and his influence on Abraham Wald and Paul Halmos — Minimum-cost “Stigler” diet as minimax problem — More on Adrian Albert — Courses with Abba Lerner and Alvin Hansen — Hansen’s question about the failure of a rise in prices with an increase in the money supply, relevance for 2017 — “Regulation” vs. appropriate rules — Frank Knight on Hayek and Austrian economics — Judgment vs. rules, example of Alan Greenspan and Black Monday Interview 2: July 11, 2017 27 Guidance with college admissions from a teacher — Work with high school newspaper and friendship with Russell Bensley — Selective service draft — Roosevelt College, talent and diversity of faculty and students — Early exposure to the theory of games — Early criticism of von Neumann and national cultures of science — Abba Lerner’s perspective on signal contribution of Keynes to economics — Consideration of mathematics and statistics as academic paths — Impact of Great Depression on career choice — Mentoring influence of cousin Lester Seligman and Abba Lerner — Graduate fellowship to Harvard University — Interest in Keynes stimulated by Depression — Interest in macroeconomics revived by Black Monday in 1987 — Chance encounter with Sumner Slichter — Life as Harvard student — Impression of Alvin Hansen — Unintended lesson of course with Edward Chamberlin — Instruction in economics at Harvard, Wassily Leontief, Gottfried von Haberler, and lack of fit — Leontief’s input-output tables — Influence of Kenneth Arrow’s Social Choice and Individual Values and John Chipman on switch to University of Chicago for graduate school — Work for George Tolley and T.W. Schultz project on inventories of agricultural commodities — Contrasting Harvard and Chicago cultures — Research assistantship at Cowles Commission with Hendrik Houthakker —Cowles Commission at Chicago — Relationship to Chicago workshops — Stimulation from visiting scholars — Colleagues at Cowles, many veterans — James Tobin’s candidacy to head Cowles and Milton Friedman’s opposition — Tjalling Koopmans and postwar mission at Cowles — Oral History Center, The Bancroft Library, University of California Berkeley vii Houthakker and Telser research separate — Military interest in economic planning, linear programming, example of railroad research at Cowles — Milton Friedman’s attitude to linear programming, “non-economics,”