Foreword
by James Tobin

For me, it is a great pleasure and a signal honor to introduce this volume of the collected essays of Nancy Dunlap Ruggles and Richard Ruggles, my good friends and colleagues over many decades. The Ruggles and Ruggles partnership was, from their marriage in 1946 to Nancy’s tragic accidental death in 1987, a husband–wife team unsurpassed, at least in economics, in its unity and its scientific and professional contributions. Most of their work, regardless of formal attribution, was at bottom joint between them.

The sixteen essays in this volume cover an extensive range of microeconomics, devoted to economic theories, their applications to important issues of policy, and their consistency with detailed empirical data. The topics differ, but the essential characteristics of the approaches to them remain the same. The authors are accomplished, resourceful and focussed practitioners of a style of economic research and exposition that is, unfortunately, out of fashion today. Here are its main features: Nancy and Richard Ruggles always selected socially important problems and issues, and they concentrated on logic and fact relevant to them. Whatever their topic, they exhaustively, sympathetically, and critically surveyed the past literature, and took off from the existing state and uncertainty of knowledge. They rarely used mathematics or wrote down equations, and they relied sparingly on formal statistics and econometrics. Yet they were able to state and explain theoretical propositions and debates clearly and accurately, and they skillfully and tellingly brought empirical data to bear. These essays were written between 1940 and 1990 but almost all of them are very relevant to issues of great importance in 2000.

It is fitting that the volume begins with three essays that constituted the bulk of Nancy’s Harvard Ph.D. dissertation. Economic life is rife with cases of increasing returns to scale involving significant fixed costs, in long runs as well as short runs. These cases are ever an embarrassment to pure theory, which is most comfortable with constant or decreasing returns to the scale of inputs and with competition among sellers and buyers who individually have no control over prices. How to introduce scale economies (including public goods) into formal general equilibrium models of the Arrow–Debreu type is still an active but unsuccessful pursuit of formal theorists. When Nancy Ruggles tackled this subject half a century ago, it had already for many years challenged the best theoretical minds of the profession. The holy grail, many thought and hoped, was somehow to impose the marginal cost pricing principle, for which optimality could be claimed in ordinary competitive circumstances. But who would pay the fixed costs? Nancy Ruggles reviewed thoroughly and expertly the large literature on this problem, and she showed conclusively that there is no answer to this key question that does not involve arbitrary relative valuations of utility outcomes of different individuals. Thus, there is no way to separate marginal cost pricing as the efficiency condition from the distributional consequences of paying for it. Current-day theorists struggling with such questions, including the roles of price discrimination and multipart price formulas, could profit from reading these papers.

Richard Ruggles’s skeptical call for operationally meaningful tests of economists’ basic assumptions of value theory — marginal revenue equals marginal cost — is a fitting conclusion to Part One on Price Theory. He prescribed and practiced the use of disaggregated microdata, surveys and censuses of business establishments.

Price Measurement, the topic of Part Two, is a subject on which Richard Ruggles has been a leading contributor during his long career. Today his contributions are again central, as economists, statisticians, politicians, government agencies and the general public worry about the accuracy of index numbers and their suitability for their various uses, especially in adjusting social security pensions, taxes, wages and other outlays and incomes. Characteristically he undertook a thorough history of index number theory, and he was importantly involved in official reviews of the Consumer Price Index and Wholesale Price Index. Measuring quality change is a key issue in index number construction today; Richard was perceptively worrying about it in 1961. He and Nancy were also concerned, both conceptually and practically, with measurement of geographical differences in prices and welfare.

Richard Ruggles’s earliest economics publication (1940), the opening essay in Part Three, was an entry in a statistical debate about a conjecture in Keynes’s General Theory, namely that, while money wage rates move procyclically, real wage rates move countercyclically. John Dunlop, then a young Harvard faculty member, challenged Keynes’s conjecture with empirical evidence. Ruggles, writing before his graduation from Harvard College in 1939, convincingly questioned Dunlop’s findings by means of simple but ingenious statistical tests.

The use of microdata on a macroissue was to become typical Ruggles methodology, exemplified in the remaining three articles in Part Three. One took up the issue of price flexibility in cyclical depression. Richard first converted a popular, but vague hypothesis, that price inflexibilities in concentrated industries make recessions worse, into an economically meaningful question. He then found, taking account of structural differences among industries, no evidence that concentration or monopoly made prices rigid.