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.
