Publications and Working Papers

Peer-reviewed articles:

Moving Dynamics Beyond Business Cycles: Jan Tinbergen’s First Macrodynamic Model (1934-1936)

Abstract
As soon as 1932, Jan Tinbergen proposed an explanation of the Great Depression based on a specific treatment of unstable processes and multiple equilibria. After his involvement in the early meetings of the Econometric Society, he worked on different dynamic models accounting for this instability. In 1934, he built a macrodynamic model generating new types of economic movements that did not return to a stationary state. This led him in 1936 to consider the possibility of having two equilibria, with damped or self-sustained cycles around the high equilibrium and a collapse around the low equilibrium. Tinbergen saw these models, with reference to Irving Fisher’s 1933 paper, as a way to interpret the potential of a crisis to trigger the collapse of the economy. In the end, it turns out that Tinbergen managed to extend the perspective for the study of the business cycle mechanism to non cyclical behaviors which, strikingly, remains almost totally ignored in most histories of macroeconomics and econometrics.
Citation
Assous, Michaël, and Vincent Carret. 2023 “Moving Dynamics Beyond Business Cycles: Jan Tinbergen’s First Macrodynamic Model (1934-1936)” The European Journal of the History of Economic Thought. Forthcoming.

Rupture and continuity in the original divide between micro-dynamics and macro-dynamics

Abstract
In 1933, Ragnar Frisch introduced a distinction between micro-dynamics and macro-dynamics in his paper on “Propagation problems and impulse problems in dynamic economics.” His claim that he proposed the first macro-dynamic analysis and that micro-dynamic schemes were limited to the dynamics of specific markets or behaviors had a lasting impact on the field. But the introduction of this separation created a narrative hiding what had been done before and introduced a tension between the two approaches. By going back to the content of micro-dynamic analysis, we are led to two lines of research that were pursued during the 1920s and early 1930s: cobweb models and intertemporal optimization. A pivotal economist for going beyond micro-dynamics was Jan Tinbergen, who had contributed to both these approaches, and went beyond with new analytical tools. However, the idea of intertemporal optimization met with some opposition when it was scaled up to the whole economic system. This prompted Frisch to propose his new approach, which met with immediate success as more schemes were proposed. Tinbergen was himself one of the first converts to macro-dynamics, but the links between the two approaches and the new tensions created by their separation remained. This tension between the newly created categories can be viewed as a result of opposing views on causality, which were rooted in differing mathematical approaches, a point explicitly made by the next generation.
Citation
Carret, Vincent. 2022 “Rupture and continuity in the original divide between microdynamics and macrodynamics” The European Journal of the History of Economic Thought. Forthcoming.

The importance of multiple equilibria for economic policy in Jan Tinbergen’s early works

Abstract
This article provides a comprehensive view of Tinbergen’s macrodynamic models developed during the 1930s and early 1940s, showing how the economist’s concerns evolved from problems of instability to the idea of reaching higher positions of equilibria. Tinbergen built these ideas in the framework of nonlinear models, which he used to shed a new light on several policy problems: wage changes, government expenditure and its relation to pump-priming, and the regulation of purchasing power. This work on multiple equilibria was complementary to the macroeconometric models developed in the late 1930s, where linearity was justified by the assumption of small shocks.
Citation
Assous, Michaël, and Vincent Carret. 2022 “The importance of multiple equilibria for economic policy in Jan Tinbergen’s early works” The European Journal of the History of Economic Thought. Forthcoming. link

Fluctuations and growth in Ragnar Frisch’s rocking horse model

Abstract
Ragnar Frisch’s famous “rocking horse” model has been the object of much praise and even controversy since its publication in 1933. This paper offers a new simulation of the model to show that there exists cyclical trajectories in the propagation mechanism. By building an analytical solution taking the same form as Frisch’s original solution, we can provide new insights into the ideas encapsulated in his model, in particular the fact that the author constructed a model combining cycles and growth. The exploration of Frisch’s formal construction of the model leads us to link his statistical work on the decomposition of time series with his economic insights on investment cycles, which both led to the 1933 model. We contrast Frisch’s approach to that of other econometricians who used similar equations, showing that their different mathematical solutions were the product of what they wanted to show with their models.
Citation
Carret, Vincent. “Fluctuations and growth in Ragnar Frisch’s rocking horse model.” Journal of the History of Economic Thought. First View, pp. 1-20. link

Expectations and full employment. Hansen, Samuelson and Lange

Abstract
From the outset, expectations were a central part of the first business cycles and early growth models. In the 1940s, a third line of research emerged which questioned the capacity of an economy to reach full-employment equilibrium. Starting with Alvin Hansen [1938] and culminating with Oskar Lange [1944], the crux of the debate evolved from the existence of full employment equilibrium to the analysis of its stability, suggesting an increased role of expectations and finally challenging the economic system’s global stability. The present paper traces those debates through the contributions of Hansen, Paul Samuelson and Lange. Using archive materials, we show that while Samuelson’s analysis of instability remained implicit, his correspondence reveals that he encouraged Lange to examine it more carefully. Lange’s results are presented in his 1944 Monograph published by the Cowles Commission for Research in Economics. We point out that his contribution cannot be understood in isolation either from his exchanges with Samuelson or the way that Keynesian ideas were being interpreted in the United States. Finally, we emphasize the ambiguity of Samuelson’s view on instability and expectations.
Citation
Assous, Michaël, Olivier Bruno, Vincent Carret, and Muriel Dal-Pont Legrand. 2021. “Expectations and full employment. Hansen, Samuelson and Lange.” Revue d’économie politique Vol. 132 (3):511–30. link

(In)Stability at the Cowles Commission (1939–1948)

Abstract
Stability analysis touched off extensive discussions at the Cowles Commission between 1939 and 1948. Oskar Lange, later followed by Lawrence Klein and Don Patinkin, among others, advocated for a move from a static analysis aimed at proving the existence of a stationary equilibrium with unemployment towards a dynamic approach exploring stability properties of full employment equilibria. In presence of excess supply of goods and labour with flexible money wages and prices, the message was that macroeconomic pathologies are better regarded as disequilibrium dynamics when full employment equilibrium is unstable – Lange and Klein – or when it is stable – Patinkin. The objective of this paper is to examine this type of modelling and how it provided the basis of a specific political vision shared by most economists of the Cowles Commission in the 1940’s.
Citation
Assous, Michaël, and Vincent Carret. “(In)Stability at the Cowles Commission (1939–1948).” The European Journal of the History of Economic Thought 27 (4): 582–605. link.


Book

Economic (In)Stability - New Perspective on the History of Macroeconomics

Abstract
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.
Citation
Assous, Michaël, and Vincent Carret. 2022. Economic (In)Stability - New Perspective on the History of Macroeconomics. Cham: Springer. Companion website: link


Book Chapter

Econometrics at Harvard

Abstract
The place of Harvard in the development of econometrics is assessed through the research of its faculty and the development of the courses they taught. Over the course of the century, as the content of econometrics was itself transformed, we find that the Harvard department of economics occupied a singular place in the econometric landscape. This idiosyncrasy was defined by large projects such as the Harvard barometer of the 1920s or the postwar development of input-output analysis, but also by the lack of common purpose that often characterized the work of its members. Through the storied halls of the university passed many of the best and brightest, but few were given the chance to pursue their projects durably, to the detriment of the constitution of a “Harvard econometrics.”
Citation
Carret, Vincent, and Michaël Assous. “Econometrics at Harvard.” Chapter to be published in the Palgrave Companion to Harvard Economics, ed. by R. Cord. October 30, 2021.


Working Papers

Jan Tinbergen and J. G. Koopmans on Multiple Equilibria and Coordination Failures

Abstract
In a 1932 policy paper, the Dutch economist Jan Tinbergen suggested that there could be two stable equilibria in a model with two firms acting in two sectors, with one of the equilibria having more production and employment. Arguing on the basis of a diagram that firms could not get out of the “bad” equilibrium on their own, he suggested that this justified government interventions to increase employment. While he referred to the general equilibrium systems of Walras and Cassel, he did not present a fully worked out model but referred to the unpublished study of one J. G. Koopmans. The latter was spurred by Tinbergen’s reference to publish his ideas on the problem of multiple equilibria. In his three-part paper, he underlined that a Walrasian system could not show Tinbergen’s coordination problem, because there could be no unemployment at an equilibrium point in a Walrasian model. The examples he presented, with three equilibria, showed that they could not be ordered. After this exchange, Tinbergen moved away from Walrasian multiple equilibria, and abandoned the general equilibrium approach to economic modeling in favor of the macrodynamic approach that was developed at the same time by Ragnar Frisch and Michal Kalecki.
Citation
Michaël Assous, Vincent Carret. “Jan Tinbergen and J. G. Koopmans on Multiple Equilibria and Coordination Failures.” Working Paper. HAL, August 17, 2022.

Debt Diplomacy in the 1920s: the Case of the French and Hellenic War Debts

Abstract
In the aftermath of World War I, a financial war was fought on the battlegrounds of international organizations and financial diplomacy. While the League of Nations’ Economic and Financial Organization tried to ensure the reconstruction of Europe through guaranteed loans and financial reforms, the Great Powers who dominated the League tried to maintain their spheres of influence. The case of the French-Hellenic war debts illustrates those issues: in the 1920s, the Greeks were barred from international capital markets after years of wars and financial mismanagement. A mission was sent to Greece by the League to evaluate the reforms needed before backing the emission of a loan, with several French emissaries among the envoys. The French government subsequently tried to take advantage of the ratification process of the loan, by threatening to block its emission if the Greeks did not repay their war debts. The debt-diplomacy of the French government is an example of a two-level game: pushed to the brink on the domestic side by their own financial troubles and resentment over the German reparations, France sought to obtain an international victory through the process of European reconstruction. On the international scene, they were stymied by the extension of Anglo-American financial interests. The political process of the League shows how much economic problems were subordinate to political considerations, and how domestic and international levels were entangled in the financial diplomacy of the postwar reconstruction.
Citation
Carret, Vincent. “Debt Diplomacy in the 1920s: the Case of the French and Hellenic War Debts.” Working Paper. Available on demand.

Understanding the bitterness of Wassily Leontief: Intention and reception of input-output techniques, 1940s-1950s

Abstract
Although Leontief was and still is one of the most recognized names in economics, inextricably linked to the development of input-output techniques, he remained fiercely critical of other economists’ works and of the state of economic science during his whole life. To understand his bitterness, we go back to the root of the split between Leontief and the rest of the economics profession, through an examination of the debates that took place in the late 1940s. From his input-output model, conceived as an operational theory of economic interdependencies, Leontief drew a specific approach to economic policy and planning which had a lot of success with government agencies, explaining how he could durably sustain his split from the profession.
Citation
Carret, Vincent. “Understanding the bitterness of Wassily Leontief: Intention and reception of input-output techniques, 1940s-1950s.” Working Paper. HAL, March 9, 2022.

Relaxation Oscillations in the Early Development of Econometrics: Coming (Almost) Full Circle (1929-1951)

Abstract
In 1930, Ludwig Hamburger published in Dutch an article on the possibility to account for “economic instability” by using relaxation oscillations, a model of nonlinear vibrations which had recently been developed by the physicist Balthazar van der Pol. Hamburger’s article, translated in French in 1931, attracted a strong interest in the nascent Econometric Society and in particular from Ragnar Frisch and François Divisia, who decided to make it one of the theme of the first European meeting of the Econometric Society, scheduled in Lausanne in 1931. Although Hamburger did not provide an economic theory going beyond the analogy with van der Pol’s equation, he did propose to integrate shocks in his models in a manner that was completely different from what came after him. His approach was however shunned by other economists because its potentialities were not understood for at least three reasons. It took two decades before Richard Goodwin, spurred by the same physicist that was present at the early meetings of the Econometric Society, finally managed to build a convincing economic model relying on nonlinear oscillations.
Citation
Assous, Michaël, and Vincent Carret. “Relaxation Oscillations in the Early Development of Econometrics: Coming (Almost) Full Circle (1929-1951).” Working Paper. HAL, April 23, 2021.