This book offers a fresh perspective on the early history of macroeconomics, by examining the macro-dynamic models developed from the late 1920s to the late 1940s, and their treatment of economic instability. It first explores the differences and similarities between the early mathematical business cycle models developed by Ragnar Frisch, Michal Kalecki, Jan Tinbergen and others, which were presented at meetings of the Econometric Society and discussed in private correspondence. By doing so, it demonstrates the diversity of models representing economic phenomena and especially economic crises and instability. Jan Tinbergen emerged as one of the most original and pivotal economists of this period, before becoming a leader of the macro-econometric movement, a role for which he is better known. His emphasis on economic policy was later mirrored in the United States in Paul Samuelson’s early work on business cycles analysis, which, drawing on Alvin Hansen, aimed at interpreting the 1937-1938 recession. The authors then show that the subsequent shift in Samuelson's approach, from the study of business cycle trajectories to the comparison of equilibrium points, provided a response to the econometricians' critique of early Keynesian models. In the early 1940s, Samuelson was able to link together the tools that had been developed by the econometricians and the economic content that was at the heart of the so-called Keynesian revolution. The problem then shifted from business cycle trajectories to the disequilibrium between economic aggregates, and the issues raised by the global stability of full employment equilibrium. This was addressed by Oskar Lange, who presented an analysis of market coordination failures, and Lawrence Klein, Samuelson's first PhD student, who pursued empirical work in this direction.
The book highlights the various visions and approaches that were embedded in these macro-dynamic models, and that their originality is of interest to today's model builders as well as to students and anyone interested in how new economic ideas come to be developed.
Author(s): Michaël Assous, Vincent Carret
Series: Springer Studies in the History of Economic Thought
Publisher: Springer
Year: 2022
Language: English
Pages: 259
City: Cham
Preface
Contents
Acronyms
List of Figures
1 Introduction
References
2 Looking for Dynamic Economics: Tinbergen's Early Breakthrough
2.1 Introduction
2.2 Economic Barometers and ``Cumulation''
2.3 Time Derivatives and the Theories of Maximum Production
2.4 Supply Lags and Market Movements
2.5 The Shipbuilding Model and Mixed Equations
2.6 Summary
Appendix: the shipbuilding model and the Lambert function
References
3 Relaxation Oscillations in the Early Development of Econometrics: A Road Not Taken
3.1 Introduction
3.2 From Natural Sciences to Economics: A Case of Nonmechanical Analogy
3.3 Accounting for a Changing Period and a Constant Amplitude
3.4 Le Corbeiller and the Early Reception of Relaxation …
3.5 Coming (Almost) Full Circle
3.6 Summary
References
4 Frisch's Macro-Dynamics: Inner Stability and External Impulses
4.1 Introduction
4.2 Early Debates on the Accelerator and the Consumption Function
4.3 Closing the Model: Determinants of Cyclical Fluctuations
4.4 The Impulse Problem: Is the Cycle Completely Random?
4.5 Summary
Appendix 1: solving the model with a shifted Laplace transform
Appendix 2: a numerical integration of Frisch's system
References
5 Kalecki's Macro-Dynamics: ``Automatic Cycles,'' Stagnation and Class Struggle
5.1 Introduction
5.2 Kalecki's Ingredients: Profits, Class Struggle and Cartels
5.2.1 Profits and Class Struggle
5.2.2 Cartels and Market Power
5.3 Putting the Ingredients Together: Kalecki's Macro-Dynamic Model (1933–1935)
5.4 Stability and Cycles in Kalecki's Model
5.5 The Problem of Growth and Instability
5.5.1 Tinbergen's 1937 Review of Harrod's Trade Cycle
5.5.2 Lundberg on Economic Expansion and Model Sequences
5.6 Summary
References
6 Tinbergen's Macro-Dynamics: Instability and the Possibility of Collapse
6.1 Introduction
6.2 Beyond the Business Cycle: Unstable States, Multiple …
6.3 Size Matters: Large Shocks and Collapse in Tinbergen's Macro-Dynamic Models
6.4 Macro-Dynamics Rising to the Challenge of Instability
6.5 Summary
References
7 Business Cycles, Pump-Priming and the Role of Public Expenditures
7.1 Introduction
7.2 Tinbergen's Analysis of the Multiplier: A Case for Pump-Priming
7.3 Pump-Priming Debates in America and the 1937 Recession
7.4 The Role of Public Expenditures in the Accelerator–Multiplier Model
7.5 Tinbergen's Nonlinear Accelerator–Multiplier Model
7.6 Summary
References
8 Stability Analysis and Early Keynesian Systems
8.1 Introduction
8.2 Extracting a Model from Keynes's ``System'': The Oxford Meeting
8.2.1 In Search of a Determinate Mathematical Model
8.2.2 The Econometricians' Critique of Meade's Model: Stability and Dynamics
8.3 Connecting Comparative Statics to Stability Analysis
8.4 Summary
References
9 Full Employment and Instability: Disentangling Issues on Existence and Stability
9.1 Introduction
9.2 Hansen, Samuelson and Pigou on the Classical Stationary State
9.3 Lange: Disequilibrium and Instability
9.4 Instability and Empirical Research in Klein's Work
9.5 Summary
References
10 Conclusion
References
Index
