Charles C. Holt
Encyclopedia
Charles C. Holt is Professor Emeritus
at the Department of Management at the McCombs School of Business
at the University of Texas at Austin
.
Holt holds BS
and MS
degrees from the Massachusetts Institute of Technology
(1944). He later earned a MA
(1950) and a PhD
(1955) from the University of Chicago
.
, John Muth
and Herbert Simon
) came together at the Graduate School of Industrial Administration (GSIA) at Carnegie Mellon University
in the 1950s and set out to develop quantitative and computerized decision methods for business and industry. Holt further claims that, "[l]ooking back, all members of the team would likely agree that their GSIA years were among the most interesting and exciting of their careers."
Holt had come from an engineering
background at M.I.T. Franco Modigliani had worked on consumption and production smoothing. Jack Muth, with an undergraduate degree in industrial engineering and was interested in applying engineering methods in economics. Herb Simon was dedicated to determining how managers actually made decisions in organizations and in modeling their behavior. The four developed control methods and applied them to microeconomics by computing variables for production, inventories and the labor force in a firm. Their solutions were in the form of linear decision rules where production, for example, at a point in time was made a linear function of past inventory levels. The four were eager not only to develop the theory and mathematics of this subject but also to demonstrate how their ideas could be put to work in an actual enterprise. So they searched around in Pittsburgh
until they found a paint factory that was willing to supply them data. The result was one of the earliest uses of control methods in economics, namely Holt, Modigliani, Muth and Simon (1960).
After the completion of the paint-factory work, Holt (1962) turned his attention to the use of linear decision rules in macroeconomic models. He developed a model that was quadratic
in the criterion function and linear
in the systems equations to analyze fiscal
and monetary policy
.
All of these developments with optimal linear decision rules can be thought of today as optimal feedback rules which are computed using dynamic programming methods on linear-quadratic systems that yield Riccati equation
s, which are used to obtain the key components of the feedback gain matrix. This approach is sometimes called “modern control” to distinguish it from “classical control”.
Charles C. Holt (1962), “Linear Decision Rules for Economic Stabilization and Growth”, Quarterly Journal of Economics, 76, 20-45.
Charles C. Holt (2002), ``Learning How To Plan Production, Inventories, and Work Force”, Operations Research, 50(1), pp. 96–99. http://www.eng.tau.ac.il/~ami/cd/or50/1526-5463-2002-50-01-0096.pdf
Emeritus
Emeritus is a post-positive adjective that is used to designate a retired professor, bishop, or other professional or as a title. The female equivalent emerita is also sometimes used.-History:...
at the Department of Management at the McCombs School of Business
McCombs School of Business
The McCombs School of Business, also referred to as the McCombs School or simply McCombs, is a business school at The University of Texas at Austin. In addition to the main Austin campus, McCombs offers classes outside Central Texas in Dallas, Houston and internationally in Mexico City...
at the University of Texas at Austin
University of Texas at Austin
The University of Texas at Austin is a state research university located in Austin, Texas, USA, and is the flagship institution of the The University of Texas System. Founded in 1883, its campus is located approximately from the Texas State Capitol in Austin...
.
Holt holds BS
Bachelor of Science
A Bachelor of Science is an undergraduate academic degree awarded for completed courses that generally last three to five years .-Australia:In Australia, the BSc is a 3 year degree, offered from 1st year on...
and MS
Master of Science
A Master of Science is a postgraduate academic master's degree awarded by universities in many countries. The degree is typically studied for in the sciences including the social sciences.-Brazil, Argentina and Uruguay:...
degrees from the Massachusetts Institute of Technology
Massachusetts Institute of Technology
The Massachusetts Institute of Technology is a private research university located in Cambridge, Massachusetts. MIT has five schools and one college, containing a total of 32 academic departments, with a strong emphasis on scientific and technological education and research.Founded in 1861 in...
(1944). He later earned a MA
Master of Arts (postgraduate)
A Master of Arts from the Latin Magister Artium, is a type of Master's degree awarded by universities in many countries. The M.A. is usually contrasted with the M.S. or M.Sc. degrees...
(1950) and a PhD
PHD
PHD may refer to:*Ph.D., a doctorate of philosophy*Ph.D. , a 1980s British group*PHD finger, a protein sequence*PHD Mountain Software, an outdoor clothing and equipment company*PhD Docbook renderer, an XML renderer...
(1955) from the University of Chicago
University of Chicago
The University of Chicago is a private research university in Chicago, Illinois, USA. It was founded by the American Baptist Education Society with a donation from oil magnate and philanthropist John D. Rockefeller and incorporated in 1890...
.
GSIA
In his paper from 2002, Charles C. Holt describes how a young but very distinguished-to-be group of economists (himself, Franco ModiglianiFranco Modigliani
Franco Modigliani was an Italian economist at the MIT Sloan School of Management and MIT Department of Economics, and winner of the Nobel Memorial Prize in Economics in 1985.-Life and career:...
, John Muth
John Muth
-Legacy:It has hard to point to one substantial area of economic research into dynamic problems which has not changed as a result of the publication of Muth's works at GSIA. Almost paradoxically, the only viable alternative to Muth's hypothesis is the research agenda put forward by Herb Simon and...
and Herbert Simon
Herbert Simon
Herbert Alexander Simon was an American political scientist, economist, sociologist, and psychologist, and professor—most notably at Carnegie Mellon University—whose research ranged across the fields of cognitive psychology, cognitive science, computer science, public administration, economics,...
) came together at the Graduate School of Industrial Administration (GSIA) at Carnegie Mellon University
Carnegie Mellon University
Carnegie Mellon University is a private research university in Pittsburgh, Pennsylvania, United States....
in the 1950s and set out to develop quantitative and computerized decision methods for business and industry. Holt further claims that, "[l]ooking back, all members of the team would likely agree that their GSIA years were among the most interesting and exciting of their careers."
Holt had come from an engineering
Engineering
Engineering is the discipline, art, skill and profession of acquiring and applying scientific, mathematical, economic, social, and practical knowledge, in order to design and build structures, machines, devices, systems, materials and processes that safely realize improvements to the lives of...
background at M.I.T. Franco Modigliani had worked on consumption and production smoothing. Jack Muth, with an undergraduate degree in industrial engineering and was interested in applying engineering methods in economics. Herb Simon was dedicated to determining how managers actually made decisions in organizations and in modeling their behavior. The four developed control methods and applied them to microeconomics by computing variables for production, inventories and the labor force in a firm. Their solutions were in the form of linear decision rules where production, for example, at a point in time was made a linear function of past inventory levels. The four were eager not only to develop the theory and mathematics of this subject but also to demonstrate how their ideas could be put to work in an actual enterprise. So they searched around in Pittsburgh
Pittsburgh, Pennsylvania
Pittsburgh is the second-largest city in the US Commonwealth of Pennsylvania and the county seat of Allegheny County. Regionally, it anchors the largest urban area of Appalachia and the Ohio River Valley, and nationally, it is the 22nd-largest urban area in the United States...
until they found a paint factory that was willing to supply them data. The result was one of the earliest uses of control methods in economics, namely Holt, Modigliani, Muth and Simon (1960).
After the completion of the paint-factory work, Holt (1962) turned his attention to the use of linear decision rules in macroeconomic models. He developed a model that was quadratic
Quadratic
In mathematics, the term quadratic describes something that pertains to squares, to the operation of squaring, to terms of the second degree, or equations or formulas that involve such terms...
in the criterion function and linear
Linear
In mathematics, a linear map or function f is a function which satisfies the following two properties:* Additivity : f = f + f...
in the systems equations to analyze fiscal
Fiscal policy
In economics and political science, fiscal policy is the use of government expenditure and revenue collection to influence the economy....
and monetary policy
Monetary policy
Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment...
.
All of these developments with optimal linear decision rules can be thought of today as optimal feedback rules which are computed using dynamic programming methods on linear-quadratic systems that yield Riccati equation
Riccati equation
In mathematics, a Riccati equation is any ordinary differential equation that is quadratic in the unknown function. In other words, it is an equation of the form y' = q_0 + q_1 \, y + q_2 \, y^2...
s, which are used to obtain the key components of the feedback gain matrix. This approach is sometimes called “modern control” to distinguish it from “classical control”.
Selected publications
Charles C. Holt, Franco Modigliani, John F. Muth and Herbert A. Simon (1960), Planning Production, Inventories, and Work Force, Prentice-Hall, Inc., Englewood Cliffs, New Jersey.Charles C. Holt (1962), “Linear Decision Rules for Economic Stabilization and Growth”, Quarterly Journal of Economics, 76, 20-45.
Charles C. Holt (2002), ``Learning How To Plan Production, Inventories, and Work Force”, Operations Research, 50(1), pp. 96–99. http://www.eng.tau.ac.il/~ami/cd/or50/1526-5463-2002-50-01-0096.pdf