I'm not exactly sure what Tom wants to achieve with his latest on
Wicksell. He would be incorrect with the impression that it was
Wicksell who put the cumulative process argument "on the map," hence
deserving recognition for it. I think a more plausible explanation for
the incorrect attribution to Wicksell as the originator of the principle
is the poor light into which classical economics was cast following the
ascendancy of Keynesian economics. Keynes made the classics look like
those who never knew economic reality, and Keynes had a high regard for
Wicksell. So, people like Axel Leijonhufvud (1981) could wax on about
the Wicksell connection regarding the (credit) theory of interest as if
the classical theory had nothing valid about it. However, anyone who
read the classics carefully, and in particular understood what they
meant by "capital" in their theory of interest, could understand the
liquidity effect, price-level effect, and expectations effect from from
variations in the quantity of money from what they wrote. Besides,
Marshall even used the word "cumulative" in his explanation of the
phenomenon. But who would pay much attention to Marshall if they
believed Keynes's characterization of Marshall's exposition of the
theory of interest to be "nonsensical" and "absurd"? Here's Marshall's
restatement from his 1887 version of the cumulative process at the Gold
and Silver Commission:
"Looking at the special case of the effect of an increase in currency on
the rate of discount in the western world, the cycle seems to be this.
The new currency, or the increase of currency, goes, not to private
persons, but to the banking centres; and, therefore, it increases the
willingness of lenders to lend in the first instance, and lowers the
rate of discount. But it afterwards raises prices. This latter movement
is /cumulative/. ... Thus, a fall in the purchasing power of money
tends, after a while, to raise the rate of discount and the rate of
interest on long investments. (Marshall 1923: 257; emphasis added.)
Another reason may be the view that central banks should be in charge of
manipulating interest rates (even if as a means of regulation the price
level), whereas the classical explanation of the cumulative process
shows what naturally would happen overtime. The natural rate is "some
rate about which the market rate oscillates, and to which it always
tends to return" (Mill /Works/, 3: 648). In the age of Keynes, policy
makers should take charge; the free market forces can't be relied upon
to do any good for the economy. After all, we've been through the Great
Depression, haven't we?
However, historians serve the course of knowledge better when they can
uncover misattributions and make the appropriate corrections rather than
to chalk them up to Stigler's Law. And when they encounter an incorrect
attribution under the guise of Stigler's Law, historians should also
speak up. And example is Robert Barro's (1989) reference to Stigler's
Law in his claim that David Ricardo had argued the public's
capitalization of future tax liabilities owing to budget deficits, and
which would nullify the Keynesian expected expansionary effect of budget
deficits. But Ricardo explicitly argued that people don't behave that
way, and gave reasons why they won't. James Buchanan's (1976)
attribution of that (Barro's) view to Ricardo, subsequently endorsed by
Gerald O'Driscoll (1977), should quickly and long have been shown to be
in error.
As for Marshall's supply and demand diagram, it follows closely after
J.S. Mill's restatement of the classical theory of value -- explanation
of market prices. And Mill was reformulating the theory of value from
Smith, Malthus, and partly Ricardo. I wouldn't want to follow Tom's
treatment of Marshall's recognition for that diagram under Stigler's Law.
James Ahiakpor
Thomas Humphrey wrote:
> Re: Knut Wicksell and his cumulative process analysis. It occurs to me
> that what economists call the "Wicksellian cumulative process" is a
> perfect example of the operation of Stigler's Law of Eponymy according
> to which "No scientific discovery is named for its original discoverer."
>
> For as James Ahiakpor and others have shown in these posts, 18th and
> 19th century classical economists including Hume, Smith, Thornton,
> Ricardo, Joplin, and others had assembled and put together elements of
> the cumulative process model long before Wicksell did so in his 1898
> Interest and Prices. Those classicals were the original discoverers of
> the cumulative process analysis. Yet today we refer to the model as
> the Wicksellian cumulative process rather than as the
> Hume-Thornton-Ricardo-Joplin cumulative process.
>
> Why? Because it was Wicksell more than his classical predecessors who
> made the model sing and who put it on the map. It was Wicksell's
> formulation that was most instrumental in influencing economists to
> accept the model as a valid depiction of the process of price-level
> change. For that reason, Wicksell gets the honor of having the model
> bear his name. Stigler's Law.
>
> The same thing happened with the ordinary microeconomic
> demand-and-supply curve diagram, which today bears the label "the
> Marshallian Cross" after Alfred Marshall. But it wasn't Marshall who
> discovered the diagram. Rather A. A. Cournot was its original
> discoverer in his 1838 Researches into the Mathematical Principles of
> the Theory of Wealth. And after Cournot but before Marshall, at least
> four economists including Karl Rau, Jules Dupuit, Hans von Mangoldt,
> and Fleeming Jenkin presented the diagram, often in quite elaborate
> and sophisticated forms. Yet today we honor Marshall, not his
> forerunners, by naming the diagram after him.
>
> Why? Because it was Marshall who in his 1890 Principles of Economics
> made the diagram sing and who put it on the map. It was his version
> that caught the attention of the entire economics profession.
> Stigler's Law again.
--
James C.W. Ahiakpor, Ph.D.
Professor
Department of Economics
California State University, East Bay
Hayward, CA 94542
(510) 885-3137 Work
(510) 885-7175 Fax (Not Private)
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