Fw: multiplier-accelerator issue

["J. Barkley Rosser, Jr." <rosserjb@xxxxxxx>]

----- Original Message -----
From: "Daniele Besomi" <dbesomi@xxxxxxxxxxxxx>
To: "J. Barkley Rosser, Jr." <rosserjb@xxxxxxx>
Sent: Friday, May 25, 2001 2:18 AM
Subject: Re: multiplier-accelerator issue


> (as I see all this is going on the PKT list, feel free to forward this, if
> you think it to be useful)
>
> >     2)  Although one reads frequently that R.F. Kahn
> >"discovered" or "invented" the multiplier (according
> >to Keynes, anyway), I do not know where he published
> >that result, if he even did.
>
>  "The Relation of Home Investment to Unemployment", Economic Journal XLI,
> June 1931, pp. 173-198.
>
> On the Multiplier literature see H. Hegeland, The Multiplier Theory, Lund
> 1954 (which ignores Giblin and Hawtrey). There's a chapter in Shackle's
> Years of High Theory (and before that his article in EJ 1951); on Hawtrey
> see R. Dimand, Hawtrey & the Multiplier, Hist. Pol. Economy, 1997.
>
> >     3)  Although he did not work out a mathematical model,
> >J.M. Clark not only had the idea of the accelerator, but
> >understood that it was associated with a multiplier effect
> >as well prior to both Kalecki and Harrod.  The source
> >is J.M. Clark, "Capital Production and Consumer-taking:
> >A Further Word," Journal of Political Economy, Oct. 1932,
> >pp. 692-93.  In particular, although he sees an initiation
> >of a change in investment from a decrease in consumer
> >demand, he then notes that the decrease in investment,
> >"in turn reduces purchasing power, unless offset by opposite
> >movements elsewhere, and results in a positive decrease
> >in consumers' demand."
> >     If that is not the multiplier effect interacting with the
> >accelerator effect, I do not know what is.
>
> One should be cautious with such statements. Recognizing that a decrease
in
> investment affects purchasing power is NOT a theory of the multiplier:
Kahn
> recollected (if I remember rightly, in his Mattioli lecture -which I don't
> have here for reference) that that was a well-known relationship (see for
> instance the discussions surrounding the Liberal Yellow Book: everybody
> recognized that public expenditure gives rise to SOME secondary
employment,
> but people kept discussing on HOW MUCH of such employment was generated);
> the multiplier theory consisted in QUANTIFYING such a relationship (and
the
> leakages associated with it: Mr. Meade's relation). If that's not a
> multiplier-accelerator relationship (and even less a
multiplier-accelerator
> theory of the cycle), it's a (Wicksellian?) cumulative process -which
> almost everybody in the 1920s put at the basis of their trade cycle
> theories (and which is, by the way, how Haberler considered Harrod's
theory
> -in a letter to him in 1937).
>
> This comment of mine, however, is solely based on the above citation. If
> one looks at the section on Clark in Hegeland's book cited above, one sees
> that in other of his writings Clark clearly dealt with the multiplier in
> connection to the trade cycle: Hegeland refers to Clark's Economics of
> Planning Public Works (Public Works administration, Washington 1935) and
> "Cumulative effects of changes in aggregate spending as illustrated in
> public works" (Am. Ec. Rev,. 1935), none of which I have read.  so that
> case may still be open.
>
> >     4)  The Kalecki model has certain mathematical problems.
> >It is a sort of multiplier-accelerator model, but not a full blown
> >one.
>
> It would seem (also in conjunction with 5) below) that you consider a
> "model" only if formulated without mathematical problems. I would consider
> instead a multiplier-accelerator trade cycle model a model (in the general
> sense of an intellectual construction for explaining some phenomenon, not
> necessarily of a mathematical kind -that's a restrictive view of what a
> model is: it isn't, for instance, what Keynes was thinking of in his
famous
> discussion with Harrod in July 1938) which associates distinct and
> recognized "multipier" and "acceleration" effects. I doubt (and not for
> mathematical reasons) that Kalecki had a fully developed multiplier
> (although there were some ingredients of it in his 1935 Econometrica
> paper). (and I can't remember having read of mathematical problems in
> Kalecki's model, in spite of having studied it fairly thoroughly some time
> ago: it was subject of the limitations of linear models, and people like
> Frish pointed out some implications of that immediately after publication,
> but that was common of all mathematical models at the time)
>
> >     5)  In his original paper in REStat in 1939, Samuelson
> >only mentions Alvin Hansen (who wrote in 1938) as an
> >influence on him.  He reiterates this in a piece in 1959
> >in REStat.  However, he discusses Harrod's role in his
> >less well known paper from later in that year, "A Synthesis
> >of the Principle of Acceleration and the Multiplier," Journal
> >of Political Economy, 1939, Dec. 1939, pp. 786-797.  He
> >provides the quote from Clark in there that I just noted.  He
> >gives a lot of credit to Harrod (and does not mention Kalecki),
> >but also declares that "Upon rigorous analysis his exposition
> >will be found to abound with non sequiturs and
> >oversimplifications. On the whole Harrod's intuition surpasses
> >his reasoned conclusions."
> >     In short, Harrod clearly played a very important role.  But,
> >he would appear to be neither the inventor of the idea of
> >combining a multiplier with an accelerator, credit for which
> >should probably go to J.M. Clark, nor of producing a fully
> >consistent and rigorous model that does so.
>
> I indeed referred to the JPE article. I am fully aware of the limitations
> of Harrod's book (which, nonetheless, I consider a great book for what he
> attempted: far superior to all the more famous books and articles Harrod
> wrote later); but nonetheless the multiplier-accelerator model is there:
> the two principles are clearly expounded, individually first and in their
> interrelation later. Harrod was fully aware of what he was doing: he
> explicitly stated it in the 1936 book and in correspondence.  Which I
still
> think we can't say of the other "claimants" to the title of priority.
>
> The point is: looking for forerunners is always a dangerous business,
> because one is tempted to look for vague similitudes (which one can always
> find, somewhere) and attribute them some properties which were not
> originally there but which we, with hindsight, can now recognise as
> containing some of the ingredients we are looking for. Such similitudes
> should be seen as a problem, not as a discovery: why did such author
almost
> get there, and could not do the final step? What presuppositions,
> historical conditions, theoretical background etc. shaped the author's
> thought to bring him/her to that point and not beyond it?
>
> Daniele
>
>
> _____________________________
> Daniele Besomi
>  c.p. 7
> 6950 Gola di Lago
> Switzerland
>
> Phone and fax: + 41 91 9433635
>
>
>