Re: WWW -- Harrod home-page (fwd)

["Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>]

James:

Re. the following:

> it seems a rather barren quest to determine who
> was "first."
> Much more important is our current understanding of the concept and
> its practical role in policy.

The 10th (1976) edition of Samuelson's 'Economics' explains and defines the
multiplier concept as follows:

"Modern income analysis shows that an increase in investment will increase
national income by a multiplied amount - by an amount greater than itself!
Investment spending - like any independent shifts in governmental, foreign,
or family spending - is high-powered, double-duty spending, so to speak.

"This amplifed effect of investment on income is called the "multiplier"
doctrine; the word "multiplier" itself is used for the numerical coefficient
showing how much above unity is the increase in income resulting from each
increase in investment."

"The multiplier is the number by which the change in investment must be
multiplied in order to present us with the resulting change in income." (p.
226)

And what does all this mean?

It means that analysis of an economy's income and expenditure accounts -
"modern income analysis" - reveals a greater than one-to-one ratio between
entries labeled "income" and "investment".

Yet, "investment" in factor inputs to the economy's production process is
another label for "income" received by suppliers of factor services - as in
the Circular-Flow view of the economic process.

Thus, it would seem to follow that the concept of a multiplier greater than
one is rooted in the definitions used by national accountants WITHOUT regard
to the underlying - elementary - economics involved.

Gunnar









----- Original Message -----
From: "schulte-baeuminghaus" <cresscourt@xxxxxxxxx>
To: "J. Barkley Rosser, Jr." <rosserjb@xxxxxxx>; "Daniele Besomi"
<dbesomi@xxxxxxxxxxxxx>; "Post Keynesian Thought" <pkt@xxxxxxxxxxxxxxxx>
Sent: Thursday, May 24, 2001 9:09 PM
Subject: Re: WWW -- Harrod home-page (fwd)


> Giblin might be regarded as a "primitive" in relation to the
> multiplier - not unusual in the development of concepts of this kind.
> He had and rather crudely articulated the basic theme of the
> multiplier which was then to be refined, over a period of some years,
> by others who could claim, with some justification, to have given
> clearer definition to the concept so that it became more useful as a
> tool of economic understanding and policy.
> Within that context, it seems a rather barren quest to determine who
> was "first."
> Much more important is our current understanding of the concept and
> its practical role in policy.
> This role is something of which Keynesians in particular should be
> aware.
> Those who turn their backs on Keynesian concepts tend to turn their
> backs - inter alia - on that of the multiplier.
> That is the real cause for regret.
> It would be a cause for lesser, though still understandable regret, if
> Giblin were not accorded a place in the history of economic thought -
> if only a modest one in keeping with the modest character of the man.
>
>
>
> James Cumes
>
>
>
>
> ----------
> >From: "J. Barkley Rosser, Jr." <rosserjb@xxxxxxx>
> >To: "Daniele Besomi" <dbesomi@xxxxxxxxxxxxx>
> >Subject: Re: WWW -- Harrod home-page (fwd)
> >Date: Thu, May 24, 2001, 10:10 pm
> >
>
> > Daniele,
> >       I have not checked on Giblin.  I was taking it
> > on faith that the claim about him was correct.  Guess
> > I'll go have to look at his lecture.
> >       I think that you are right that the Kalecki model
> > is not exactly the same as the Harrod model.  Clearly
> > Harrod developed his version, that certainly feeds in
> > a more straightforward way into the standard Samuelson
> > version independently from Kalecki.  The fact of the matter
> > is that Kalecki's model as it was published in Econometrica
> > (I have not read either the French or Polish language versions)
> > has some mathematical problems.  It is not a fully consistent
> > model.  Essentially that was what Kaldor did in 1940 in his
> > "Trade Cycle" paper in the EJ, developed a modified version
> > of the Kalecki model that was fully self-consistent.  The
> > mechanism is not exactly the same as in the Harrod-Samuelson
> > version.
> > Barkley Rosser
> > ----- Original Message -----
> > From: "Daniele Besomi" <dbesomi@xxxxxxxxxxxxx>
> > To: <rosserjb@xxxxxxx>
> > Sent: Thursday, May 24, 2001 2:20 PM
> > Subject: Re: WWW -- Harrod home-page (fwd)
> >
> >
> >> Dear Barkley Rosser,
> >>
> >> I have sent this to Steve a couple of days ago, after he forwarded your
> >> messages to me (I am not a PKT subscriber, but I just have had a look
at
> >> the archives); not having had any further messages from him, I am not
sure
> >> he has forwarded it to you (I didn't have your address). So here it is,
> >> with a few additional comments.
> >>
> >> Here you have my feedback on Kalecki (and I'd like to hear what you
think
> >> of it) and a reply on Goodwin (on which I have no doubts). On Kalecki
I'd
> >> like to add that I don't think Harrod borrowed his mechanism from him:
> >> besides of his difficulties in understanding Kalecki's math, he came to
> >> this mechanism in a completely different way: his methodological and
> >> epistemic reflections, which preceded Kalecki, are a fundamental part
in
> >> the whole construction; the multiplier-accelerator model is just the
> >> surface.
> >>
> >> As to Giblin: the PKT discussion seems to have shifted on who invented
the
> >> multiplier: Giblin is surely one of the candidates (but the literature
on
> >> that is rather bulky & growing: new candidates keep adding), but at a
> > quick
> >> look (the paper is posted at
> >> http://socserv2.mcmaster.ca/~econ/ugcm/3ll3/giblin/australi.htm ) I
> > haven't
> >> seen a trace of the multiplier-accelerator trade cycle mechanism.
> > Actually,
> >> his rate of growth does not depend on the accelerator nor on the
> >> multiplier, and even less on their interaction, but on increased
> >> productivity and  on population growth.
> >>
> >> This is not to defend "my" claim (which goes back to Samuelson,
really),
> >> nor to defend Harrod (by the way, his multiplier-accelerator was
expounded
> >> before The Trade Cycle, in an obscure journal called Anglodania,
published
> >> by the British Imprt Union in Copenhagen, February and March 1936,
being a
> >> transcription of a lecture delivered on 10 January and written down a
few
> >> days before). I am just having doubts about Kalecki.
> >>
> >> Priority, after all, is not a very important matter. Harrod, at any
rate,
> >> was consciusly assembling a mechanism based on the multiplier and the
> >> acceleration principle -which cannot be said of the forerunners cited
so
> >> far.
> >>
> >> **********
> >> Dear Steve,
> >>
> >> Thank you for forwarding this. Could you please pass a copy of my reply
on
> >> to Barkley Rosser as well?
> >>
> >> As the remark that Kalecki pre-dated Harrod: firstly, Kalecki's paper,
> >> although published in 1935 (Econometrica, and a less mathematical
version
> >> in French in the Revue D'Economie Politique) was read in 1933 at the
> >> Econometrician's meeting, and was previously published in Polish. I
would,
> >> however, hesitate in calling it a multiplier-acceleration model. The
> >> acceleration principle is surely there (Kalecki indeed got it from
> >> Aftalion), but I am not so sure about the multiplier. A fundamental
> >> ingredient of the multiplier is definitely present, namely, the
inversion
> >> of the causal nexus between saving and investment (or, in Kalecki's
> >> version, profit and expenditure). There is also a formula involving the
> >> equivalent of 1/s. But this is obtained in quite a different way from
the
> >> multiplier: Kalecki says that profit depends on the capitalists'
> >> expenditure, and expenditure in part depends on profits (there is a
> >> constant part + a variable part), and if the relationship is linear we
> > have
> >> a coefficient the denominator of which amounts to the saved part of
> >> variable profit. Although the quantification of the effect of increased
> >> expenditure on consumption looks very much like a multiplier, it only
> >> spreads increases in consumption, not total expenditure, while for JMK
the
> >> effect is global, as it includes (and indeed is centred on) investment.
> >>
> >> In his 1939 article cited by Barkley Rosser, Samuelson recognises
Harrod's
> >> as the first multiplier-accelerator model (pre-dating as it does Hansen
> > and
> >> Haberler). Did Samuelson know of Kalecki's model? I would think it
> > unlikely
> >> he didn't; if he did, he did not recognise K's model as including the
> >> multiplier. Harrod as well knew of Kalecki (some correspondence
survives
> >> between them: Kalecki thanked Harrod for agreeing with his theory in
spite
> >> of not having understood the maths behind it, and suggested that Harrod
> >> read the less mathematical version in French).
> >>
> >> As to Goodwin: the story does not precisely run like that. Goodwin
claimed
> >> that he drew Harrod's attention on Tinbergen's review of The Trade
Cycle
> > in
> >> German, where T. pointed out that Harrod's model, which contained no
lags,
> >> was not suitable for describing a cycle but only exponential growth
(but
> > T.
> >> was wrong, because he transcribed H's model in terms of a linear
> >> differential equation; but H's model is nonlinear -and not only for the
> >> reason Goodwin explained years later, namely that the "ceiling" and
> > "floor"
> >> impose non-linearities-: both the multiplier and the accelerator change
in
> >> the course of the cycle, and this is fundamental to Harrod's theory).
> >> Goodwin thus claimed he was responsible for re-addressing H's theory
from
> >> cycles to growth. But this is a myth, as shown by A. Jolink in the
> > European
> >> Journal Hist. Ec. Thought, 1995: Tinbergen sent himself his review to
> >> Harrod (I suspect Harrod may have asked Goodwin's help for reading it,
as
> >> his German was rather poor. But this is just a conjecture. Harrod
himself,
> >> in 1964 correspondence with Matthews, did not recollect anything like
that
> >> -nor anything about Goodwin's role in the whole business).
> >>
> >> In 1936 Goodwin was a graduate student at Oxford. Harrod was one of his
> >> examiners.
> >>
> >> I'd be glad to know how the Kalecki/multiplier argument strikes you,
and
> >> Barkley.
> >>
> >> Thanks again for sending me this. Be well, Daniele
> >>
> >>
> >> _____________________________
> >> Daniele Besomi
> >>  c.p. 7
> >> 6950 Gola di Lago
> >> Switzerland
> >>
> >> Phone and fax: + 41 91 9433635
> >>
> >>
> >>
> >
>
>