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The econometric challenge to Keynes: arguments and contradictions in the early debates about a late issue

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  • Francisco Louca

Abstract

The paper investigates the discussions between Keynesians and 'reconcilers' about the interpretation of the 'General Theory', and the effect of the transformation of economics during the thirties as the outcome of that discussion. It highlights the contribution of some of the first econometriians, who argued for a new view of economics as an exact science based on mechanical models and mathematically defined theories, while supporting planning rather than the indirect steering devices suggested by Keynes. The inroduction of this type of mathematical models in the framework of Keynesian macro-policies is related to two major events: the Oxford meeting of the Econometric Society in which the IS-LM model emerged, and the Cambridge meeting dedicated to the discussion of Tinbergen's work on business cycles. The framework, antecedents and consequences of Keynes-Tinbergen debate on the role of econometrics is here assessed on the basis of unpublished documental evidence. Although most of the econometricians took sides with tinbergen against Keynes's scepticism on the use of formal models and simple representations in macroeconomics, several of them, including the more influential of the then young mathematically inclined economists, shared some of the basic elements of the critique. These discussions among Frisch, Tinbergen, Lange, Divisia, Roos, Marschak and others are reviewed in the paper and related to the evolution of the Cambridge group itself.

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  • Francisco Louca, 1999. "The econometric challenge to Keynes: arguments and contradictions in the early debates about a late issue," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 6(3), pages 404-438.
    • Handle: RePEc:taf:eujhet:v:6:y:1999:i:3:p:404-438
    DOI: 10.1080/10427719900000074
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    References listed on IDEAS

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    1. Hendry,David F. & Morgan,Mary S., 1997. "The Foundations of Econometric Analysis," Cambridge Books, Cambridge University Press, number 9780521588706.
    2. Vasilev, Aleksandar & Maksumov, Rashid, 2010. "Critical analysis of Chapter 23 of Keynes’s Notes on Mercantilism in The General Theory of Employment, Interest and Money (1936)," EconStor Research Reports 155318, ZBW - Leibniz Information Centre for Economics.
    3. Peter Groenewegen, 1995. "A SOARING EAGLE: Alfred Marshall 1842–1924," Books, Edward Elgar Publishing, number 193.
    4. Moggridge, D E, 1992. "The," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 207-209, Summer.
    5. Harry Garretsen, 1992. "Keynes, Coordination And Beyond," Books, Edward Elgar Publishing, number 175.
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    Cited by:

    1. Francisco Louçã, 2015. "The improbable econometric connection - Schumpeter and Frisch at the midnight of the century," Journal of Evolutionary Economics, Springer, vol. 25(1), pages 173-184, January.
    2. Alessandro Dafano, 2016. "Keynes In Italian Econometric Models During The Seventies. The Experience Of Prometeia And Confindustria," Working Papers 0316, CREI Università degli Studi Roma Tre, revised 2016.
    3. Rafael Galvão de Almeida, 2019. "How economics became an interventionist science (and how it ceased to be)," Textos para Discussão Cedeplar-UFMG 612, Cedeplar, Universidade Federal de Minas Gerais.

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