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Besomi D Ed Crises and Cycles in Economic Dictionaries and e
Besomi D Ed Crises and Cycles in Economic Dictionaries and e
PART I
Introductory 1
1 Introduction 3
Daniele Besomi
1.1 Dictionaries as a literary genre 4
1.1.1 Encyclopaedias, dictionaries, lexica and glossaries 4
1.1.2 The fragmentation of knowledge 6
1.1.3 Dictionary architecture 8
1.1.4 The encyclopaedic goal 12
1.1.5 The elected audience 13
1.1.6 Dictionaries and textbooks 16
1.1.7 A literary genre 16
1.2 Dictionary articles and the history of economic thought 17
1.3 Structure and limits of this project 20
3.1 Introduction 54
3.1.1 Words in prominent position 54
3.1.2 ‘Panics produce texts’ 55
3.2 Semantics and chronology 57
3.2.1 Glut 57
3.2.2 Distress 59
3.2.3 Embarrassment 60
3.2.4 Stagnation 62
3.2.5 Panic 66
3.2.6 Bubble 70
3.2.7 Depression 74
3.2.8 Crisis 78
3.2.9 Cycle 89
3.2.10 Fluctuations 102
3.2.11 Recession 108
3.3 Concluding note on the choice of terms 111
PART II
The classic dictionaries 165
Figures
2.1 Number of specifically economic dictionaries, by size 46
2.2 Number of specifically economic dictionaries, by language 47
2.3 Number of social sciences dictionaries, by size 48
2.4 Number of social sciences dictionaries, by language 49
2.5 Number of dictionaries concerned with economics, by language
and size 50
2.6 Number of dictionaries concerned with economics, by size and
language 51
3.1 Frequency of occurrences of specific terms in titles of writings on
crises and cycles, 1815–1860 113
3.2 Frequency of occurrences of specific terms in titles of writings on
crises and cycles, 1861–1905 114
3.3 Frequency of occurrences of specific terms in titles of writings on
crises and cycles, 1906–1945 115
3.4 Frequency of occurrences of specific terms in titles of writings on
crises and cycles, 1928–1975 116
3.5 Frequency of occurrences of specific terms in titles of writings on
crises and cycles, 1969–2009 117
25.1 Stylized development of the PBC literature 465
Tables
25.1 The PBC literature according to the cycle’s length 476
25.2 PBCs in economic dictionaries, encyclopaedias and handbooks 477
Contributors
While each chapter carries its own reference list, dictionaries and encyclopaedias
are listed (by compiler and by title) in a general bibliography at the end of the
volume (Chapter 29); citations are preceded by the symbol →.
In references, attributed authorship or publication dates of anonymous or
unpublished writings are cited between square brackets.
Unless otherwise specified, translations from languages other than English are
by the author of the chapter concerned, and citations reproduce the original
emphasis.
The titles of entries are cited in small capitals in the original language; non-
obvious translations are supplied on the first occurrence in each chapter.
Part I
Introductory
1 Introduction
Daniele Besomi*
Crises, cycles and other distressful phenomena intrinsic to the dynamics of capitalist
economies have been, and still are, the subject of a vast literature, often topical
(coming in waves following the events themselves: see Chapter 3) but sometimes
also dedicated. There are therefore multiple viewpoints from which the subject
can be studied historically.
In this volume we examine how these phenomena have been and are discussed
in encyclopaedias and specialized dictionaries. These reference works played an
important role in the popularization but also in the systematization of knowledge
during the nineteenth century and the early twentieth century, and – judging from
the continuing exponential increase in their publication – are still widely used in
the support of teaching and, to a lesser extent, research. What is recorded in dic-
tionaries is therefore rather influential, in particular for those works recognized by
contemporaries to be authoritative.
Yet the choice of this perspective is perhaps unnatural enough to require an
explanation. Encyclopaedia writings, in fact, nowadays can hardly claim to lie at
the cutting edge of research, the outcome of which is normally housed in dedicated
treatises and articles, and their purpose is related much more to the diffusion of
*
I am grateful to the participants and especially the discussants (Marco Guidi and Michael Trautwein)
of the session on crises in economic dictionaries held at the 2008 ESHET conference in Prague. The
project behind this book is one of the outcomes of a Research network on business cycle and crises
theories. Some of the participants have contributed chapters (Pascal Bridel, Cécile Dangel-Hagnauer,
Ludovic Frobert, Harald Hagemann); others contributed to the preliminary discussions (Muriel Dal-
Pont Legrand and Alain Raibaut). My gratitude extends to all. The contributors have sometimes
commented on each other’s chapters; these discussions are collectively acknowledged here.
4 Daniele Besomi
knowledge than to its conception. Nevertheless, dictionary articles have not always
been rearguard materials, while the peculiar nature and style of such writings define
a literary genre offering, individually and as a class, a precious vantage point for
assessing the state of the reflections on specific topics such as crises and cycles,
and on their perception by the scholarly community (both qualified academics and
those being trained) and laypeople. The texts so produced, in fact, carry some
features that make them particularly interesting for historians of thought due to
the selection of materials they discuss, the structure of the argument and their expert
authorship. Most of these articles – in particular, those incorporated in large
encyclopaedic works, thus having enough space to expound their argument in full
– place the subject in the context of contemporary debates on crises, and thus reveal
the perspective their prominent authors deemed to be noteworthy.
This introductory chapter begins by characterizing the scientific–literary genre
of dictionary and the structure and purpose of this project.
At the time of writing, Chailley had already (unknowingly) witnessed the extinc-
tion of the major one-man dictionaries: in particular →Ganilh’s Dictionnaire
analytique d’économie politique (1826), quoted as an example to be superseded
by →Coquelin and Guillaumin’s Dictionnaire de l’économie politique (see Chapter
8), of which Say and Chailley purported to be a new edition (see Chapter 12);
→McCulloch’s Dictionary, practical, theoretical, and historical, of commerce and
commercial navigation (1832–1839, and various subsequent editions); →Ott’s
Introduction 7
Dictionnaire des sciences politiques et sociales, 1854–1855 (see Chapter 10);
→Macleod’s Dictionary of political economy, 1863 (aborted at letter C: see
Chapter 13); and finally →Boccardo’s Dizionario (Boccardo, as we have seen,
had criticized Guillaumin and Coquelin precisely on the ground of the danger of
inconsistency pointed out by Chailley).
The second of Chailley’s concerns pertains to the quasi-monographic character
of the articles:
Say and Chailley’s dictionary, like most others at the time, used a system of
cross-references that partly remedied the problem. →Seligman’s Encyclopaedia
of the social sciences (1930–1935) attempted to offset the atomizing effect of this
fragmentation by means of special surveys of social sciences, of long general articles
of an historical character, and of ‘symposium treatment’ offering different per-
spectives on special problems (Lasswell, 1936, p. 388; Lentini, 1999, pp. 262–263).
Yet the problem of the fragmentation of knowledge leading to a partial under-
standing of problems not only remains, but grows worse with the increased
specialization of scientific disciplines. This leads to further breaking down of the
main topics into subentries, so that Chailley’s two problems merge into one, as the
potential lack of homogeneity affects not only the dictionary as a whole, but even
a specific topic. The subject matter of this book, crises and cycles, offers a neat
example. While up to the Second World War most dictionaries carried one or two
entries on cycles or crises, in recent dictionaries we find a plethora of articles
discussing one or another special aspects of the problem.9 While there are cross-
references to some (but by no means all) cognate entries, it is generally not remarked
in the apparatus that crises pertain as essentially as does ‘equilibrium’ (and related
concepts) to the discussion of the ‘normal’ behaviour of the economic system;
but crises are usually discussed separately from their antithesis and rarely (if at
all) do the corresponding entries cross-refer to each other. Moreover, it happens
that entries within the same dictionary go as far as incorporating, without discussion,
views that are antithetic to each other – such as, for example, TRADE CYCLE by
Medio and BUSINESS CYCLES by Dotsey and King in →The new Palgrave (1987).10
This problematic situation is still unresolved. As neatly summed up by the
Encyclopædia Britannica,
Those who favoured this more fragmented approach argued that by focussing
on the smaller part of the whole, the editors could facilitate the user’s search
8 Daniele Besomi
for specific information and that the liberal provision of cross-references would
facilitate a recombination of the fragments by those interested in the bigger
picture. Against this practice, it was argued that most cross-references are not
followed up by most readers, that the shorter fragmented pieces work against
a correct understanding of the larger subject, and that fragmentation inevitably
involved a great amount of repetition of basic information throughout all of
the related articles.
(ENCYCLOPÆDIA, online version, June 2010)
The features of the dictionary genre described above, joined with the production
of both a myriad of smaller dictionaries aimed at students and laypeople – thus,
highly influential in the diffusion of knowledge – and especially of a smaller but
significant number of monumental reference works depicting the state of the art at
their time, and sometimes even offering glimpses of research in the making (for a
brief history of economic dictionaries, see Chapter 2), make encyclopaedic articles
a particularly interesting source of documents for the history of economic thought.
In general terms, the very fact that well-qualified (and sometimes excellent)
authors agree to distil in a few self-contained pages aimed not only at specialists
but also at a more generalist public everything they deem to be important concerning
a subject is itself a sufficient reason of interest, even though the treatment is bound
to be somewhat disconnected from the remainder of the body of knowledge. One
can reasonably expect to find authoritative statements and good guides to the
relevant literature, although perhaps not fully up to date and sometimes espousing
one or another special viewpoint.
More specifically concerning the subject of this book, crises and cycles, the fea-
tures of the dictionary genre are productive of consequences. Some lie in the nature
of each specific encyclopaedic article, and are explored in Part II of this volume,
18 Daniele Besomi
where 30 such entries are discussed, summarized and analysed, and the dictionaries
or encyclopaedias that house them and the author who wrote them are presented.
Some of these – in particular Juglar, Tugan-Baranovsky, Mitchell, Spiethoff,
Tinbergen – were undisputedly among the best authorities in the field at the time,
and their entries clearly show it; some entries have been widely cited by con-
temporaries – Coquelin’s (as witnessed by Boccardo’s entries), Roscher’s,
Wagner’s, Herkner’s and Spiethoff’s; some have so far remained unknown, in spite
of their high quality, outside their country of origin, due to obvious language barriers
– Tugan’s, Tinbergen’s, Konyus’s; one (Ott) remained unknown due to the outsider
character of its author, but anticipates theoretical developments that took place only
six decades later; and some are retrospectively rather disappointing, denying the
systematic character and the relevance of the phenomenon at a time when major
lines of research into it were developing – Macleod, Laveleye, and the entries in
Palgrave’s Dictionary of political economy – their interest lying more in what they
fail to say or explicitly deny than in what they affirm.
While the merits of each of these entries will be discussed in their respective
chapters, it is important to stress here that these articles, together with those that
it has not been possible to discuss individually in this volume, also have a collective
significance. The very first macro-structural decision of dictionary compilers
(Section 1.1.3) concerns the choice of the concepts entering the word-list, which
involves decisions as to both the inclusion or exclusion of a concept, and the
appropriate name for it.31 There is nothing ‘natural’ and objective in such a decision,
as the case of crises and cycles illustrates.
Although crises have repeatedly affected the mercantile world at least since the
early eighteenth century and have accordingly been discussed in the contemporary
literature, the notion of ‘crisis’ – under any of the alternative names used to indicate
troubled states of the economy, such as ‘distress’, ‘embarrassment’, ‘panic’,
‘mercantile delusion’, ‘glut’, ‘pressure’, ‘commercial revulsion’ or ‘convulsion’ –
did not make it to any dictionary heading until the mid-1830s,32 when a number of
dictionaries and encyclopaedias started carrying entries on ‘commercial crises’
or, more often, ‘commercial crisis’ in the singular (see Chapters 5 and 6). Although
most crises had hitherto affected Britain and, to a lesser extent, the United States,
these reference works were all French, while this notion was conspicuous for its
absence in English-language dictionaries – including in particular →McCulloch’s
1832 Dictionary . . . of commerce and commercial navigation, notwithstanding
the author’s numerous writings on the subject (e.g. McCulloch, 1826). This is not
to say that there was no room for crises in dictionaries; they were, however,
discussed parenthetically under different headings, such as BANK OF ENGLAND
(in →Montefiore’s Commercial dictionary, 1803), CORN LAWS AND CORN TRADE
and BANKS (ENGLISH PRIVATE AND PROVINCIAL) (in →McCulloch’s 1832
Dictionary), PAPER-MONEY – BANKS (McCulloch, in →Encyclopædia Britannica,
7th edition, 1838) or CREDIT (in Lieber’s →Encyclopaedia Americana, 1830). The
recording of commercial crises as dedicated entries in dictionaries and ency-
clopaedias sanctions the acknowledgement of the importance of such phenomena,
which at some point were recognized to be frequent and relevant enough to deserve
Introduction 19
a proper definition and contextualization within the body of economic knowledge
– first in France, Germany and Italy, and at long last (slowly and timidly) also in
the English language (see Chapter 6).
At the time the first encyclopaedic entries on crises were published, the
term ‘crisis’ itself was already predominant in the French literature to describe
the phenomenon, and was therefore the natural and undisputed choice. After the
1837 crisis, it became the dominant term also in English, so that most entries
published up to the 1920s were headed ‘crisis’ – often accompanied by the qualifier
‘commercial’, occasionally alone, or with the attribute ‘production’ (Roscher:
see Chapter 7), ‘financial’ (Juglar and Des Essars, CRISES FINANCIÈRES ET
COMMERCIALES, in →Say, Dictionnaire des finances, 1889) or ‘industrial’ (CRISE
COMMERCIALE ET INDUSTRIELLE, in →Monbrion’s Dictionnaire universel du
commerce, de la banque et des manufactures, 1838: see Chapter 6).
As the focus on crises was progressively substituted by an emphasis on the entire
cycle at the beginning of the twentieth century, dictionaries and encyclopaedias
slowly adapted. At first they carried entries on ‘crises’ but explained that the ‘new
theories of crises’ saw them as part of a cycle; then they started carrying entries
on both crises and cycles; and finally, after the Second World War, most entries
were titled ‘business cycles’ or ‘trade cycle’ (see Chapter 3, Sections 3.3.8–9 and
Chapter 4, Section 4.5). The term ‘crisis’, however, persisted in the French
language, where it was used more or less interchangeably with ‘cycle’, and has
had a resurgence since the 1970s, when some dictionaries chose to reintroduce it
in the word-list with the intent of emphasizing a distinction between crises and
cycles (see Chapter 28).
The issues at stake here are not purely terminological, but conceptual, theoretical,
and to some extent involve worldview switches not devoid of political implications.
Incorporating ‘crises’ as a distinct entry in encyclopaedias implies the recognition
that such phenomena are not marginal and occasional, but affect the economic
system at its core; this questions the idea that the economic system is self-adjusting
– even if some writers of dictionary entries did their best to prove the opposite,
the very fact of doing so revealing that the proposition denied was elsewhere
being affirmed with sufficient insistence to call for a rejection. Substituting ‘crises’
with ‘cycles’ involves again a different kind of understanding of the working of
the economic system, no longer in terms of sudden and violent cessation of an
overspeculative phases, bringing the system back to ‘normal’ (as the prevalent
explanation of crises during the nineteenth-century ran), but in terms of fairly gentle,
regular and somewhat mechanical alternation of general ups and downs.
Besides the inclusion or exclusion of ‘crises’ or of ‘cycles’ in the word-list, the
very definitions of these phenomena add further specification to their understanding.
As it turns out, these definitions show some variability through time and space,
but tend to be characterized by national traditions.33 For instance, most French
dictionaries during the nineteenth century defined crises as a generic disturbance
to the smooth flow of affairs, while German dictionaries emphasized instead the
disruption of the equilibrium of supply and demand – thus pointing at different
potential culprits, and involving different theoretical relationships among the
20 Daniele Besomi
various components of the economic system (see Chapter 3, Section 3.2.8.3 and
Chapter 4, Section 4.3).
The chronological unfolding of dictionary entries on crises and cycles naturally
reflects, perhaps with some delay, the developments in the field and the attitude
towards the subject, and is therefore broadly illustrative of its history. The very
multiplying of entries concerned with these phenomena under different headings
epitomizes the growing complexity of the subject and the increasing richness of
its treatment. The appearance of some subheadings, such as ‘remedies to the cycle’,
political business cycles (Chapter 25) or cycles of different length (Chapter 24),
and the increased focus on mathematical approaches, or again the emphasis given
to the history of the discipline (Chapter 4), show that research has firmly taken
certain turns that after some point become non-renounceable.
This is not to say that dictionaries capture everything. What they leave out is
retrospectively also interesting, as indicating what, at the time, was not thought to
be of sufficient relevance to be included. Whether by inclusion or by exclusion,
dictionaries are perceived, by authors and readers alike, as a repository (or perhaps
the repository, when talking of major dictionaries) in which to record, systematize
and assess what should be known on the subject for contemporary (and perhaps
also future) users – be they laypeople, students or scholars. And it is precisely as
readers interested in such a legacy that in this volume we look at these dictionary
entries, examining both the knowledge they want to transmit and what they fail to
capture or decide not to convey.
As described in the preceding section, the bulk of this book (Part II) consists of 19
chapters, each devoted to one significant entry on cycles or crises in specialized
dictionaries or encyclopaedias (or occasionally a small set of them), mostly written
before the Second World War. Each chapter devoted to a single entry has a section
explaining the features, scope and purpose of the dictionary or encyclopaedia;
one presenting the author and the merits that led him34 to be selected for the
task; one describing the entry; and one assessing its historical relevance and
impact.
As explained in Section 1.1.2, recent dictionaries have multiplied the number
of cycle-related entries, sometimes juxtaposing inconsistent entries without
placing them in context. For these works, a structuring of chapters as described
above would not be appropriate. We have instead selected five recurring themes
and surveyed their treatment across post-war dictionaries: long waves, political
business cycles, real and equilibrium business cycles, non-linear business cycles,
and crises. Significantly, there is no chapter dedicated to business cycles in general.
Major dictionaries, in fact, either do not carry entries for this term and discuss
instead cycles with one or more of the above qualifications, or camouflage specific
business cycle approaches under one of the above headings; the definitions of
‘business cycles’ in recent dictionaries, whether major works or quick reference
Introduction 21
tools, are discussed in Chapter 3, Section 3.2.9, while the historical approaches to
the subject are surveyed in Chapter 4.
The first part of this book includes a brief history of dictionaries of economics
and related subjects, a chapter on the semantics of cycles and crises, focusing in
particular on the usage in encyclopaedic entries, and a general survey of the dic-
tionary treatment of the history of doctrines of crises and cycles. Besides their
obvious purpose of clarifying terminological issues in historical terms and,
respectively, of examining and classifying the various readings of the history of
the subject, these chapters are also designed to partially remedy an obvious limitation
of this project. Space constraints have made it necessary to be selective in the choice
of dictionary entries to be analysed in Part II, thus creating some regrettable gaps.
In Chapter 3, the definitions of crises, cycles and other related terms given in the
neglected dictionaries have also been considered, in order to reconstruct a full
panoramic view of how the related notions have changed through time and across
nations. This chapter also finds a place for the general notion of ‘business cycle’
(without specific qualifiers) emerging from post-war dictionaries and not otherwise
surveyed in Part III. Equally important is the way in which dictionary contributors
have dealt with the previous history of the subject (Chapter 4): while often not really
illuminating the alleged subject of such reconstructions, the history of doctrines
offered by a particular author is normally very informative on the author himself
or herself, on the contributor’s perspective on the previous developments, and on
the place in it where the writer believes his or her contribution belongs.
NOTES
1 For a list of titles of reference works concerning economics, see the general bibliography
(Chapter 29, Section 29.2).
2 Encyclopaedias can thus be translated into other languages, while linguistic dictionaries
cannot (Lara, 1989, p. 284; Béjoint, 1994, pp. 23 and 30).
3 ‘Dictionaries of proper names’, strictly speaking, supply encyclopaedic information,
and belong therefore to the category of encyclopaedic dictionaries.
4 Some, however, characterize a lexicon as a dictionary with words arranged semantically
rather than alphabetically (Béjoint, 1994, p. 15).
5 See, for instance, DICTIONARY and ENCYCLOPÆDIA in Encyclopædia Britannica, 2010;
Lara, 1989; Rey, 1982, pp. 17–24; Béjoint, 1994, pp. 21–23; GLOSSARY, DICTIONARY,
ENCYCLOPEDIA, LEXICON in Hartmann and James, 1998; Van Hoof, 1994, pp. 9–11;
Green, 1996, pp. 1016 and passim. For a rejection of this (and any other) distinction
between dictionaries and encyclopaedias, see Haimann, 1980 and 1982, contra Frawley,
1981.
6 The size of general dictionaries is normally measured by the number of entries (see e.g.
Landau, 2001, pp. 28–32). Here we are interested in both depth and extension.
7 In Chapter 3 on the semantics of crises and cycles, however, reference is occasionally
made also to the definitions given in ‘minor’ dictionaries.
8 Although Boccardo was referring to the fact that knowledge broken down to special
articles cannot claim to represent (and therefore substitute for) the whole, his admission
points to a recognized contradiction between the unifying methodological intent of
general encyclopaedias and the disciplinary specialization of sectorial dictionaries
(Gemelli, 1999, p. 135).
22 Daniele Besomi
9 The 2nd edition (2008) of the →New Palgrave features the following: CREDIT CYCLE;
TRADE CYCLE; REAL BUSINESS CYCLES; KONDRATIEFF CYCLES; BUSINESS CYCLE
MEASUREMENT; MONETARY BUSINESS CYCLE MODELS (STICKY PRICES AND
WAGES); KUZNETS SWINGS; POLITICAL BUDGET CYCLES; POLITICAL BUSINESS
CYCLES; GROWTH AND CYCLES; MONETARY BUSINESS CYCLES (IMPERFECT
INFORMATION); CHAOTIC DYNAMICS IN ECONOMICS; CURRENCY CRISES; BANKING
CRISES; CURRENCY CRISES MODELS; UNDERCONSUMPTIONISM; COBWEB THEOREM;
GREAT DEPRESSION (MECHANISMS); GREAT DEPRESSION, MONETARY AND
FINANCIAL FORCES IN; GREAT DEPRESSION; BANKRUPTCY, ECONOMICS OF;
MULTIPLIER–ACCELERATOR INTERACTION. The 2nd edition of the International
encyclopedia of the social sciences (2008) also carries several entries on the topic,
including BUBBLES; BULL AND BEAR MARKETS; BUSINESS CYCLES, THEORIES;
BUSINESS CYCLES, EMPIRICAL LITERATURE; BUSINESS CYCLE, REAL; BUSINESS
CYCLE, POLITICAL; COBWEB CYCLES; ECONOMIC CRISES; DEPRESSION, ECONOMIC;
RECESSION; GREAT TULIP MANIA; INTERNET BUBBLE; LONG WAVES; NONLINEAR
SYSTEMS; OVERPRODUCTION; PANIC; PANICS; PONZI SCHEME; SOUTH SEA BUBBLE;
STAGNATION; UNDERCONSUMPTION.
10 While carrying multiple entries under different titles on the same subject was part of
the strategy of The new Palgrave for taking into account different views, the result
often strikes one as inconsistent rather than catholic, due to the lack of contextualization.
The same problem of contradictory entries failing to cross-refer to each other was pointed
out by Blaug (1988, pp. 15–16) regarding other topics in The new Palgrave.
11 In the PRESENTAZIONE of his →Dizionario di economia politica (1982–1990), Lunghini
explains that it is based on the premise that economics is a science that does not progress
in a linear and cumulative way, with the newest contributions superseding the
older theoretical approaches; each concept incorporates instead its own history. The
microstructure reflects this approach: ‘The introduction to each entry supplies a
preliminary definition of the concept. The first Part highlights its changing contents, its
position and its momentum within each major epoch of the history of economic analysis:
the classical economists, Marx, the neoclassical economists, Keynes, and the post-
Keynesians. Part 2 describes the current state of the art’ (vol. 1, pp. 10–11). The word-
list consists of only 40 subjects (ordered following a thematic rather than alphabetical
arrangement), but each concept is discussed at great length – around 80 pages each.
12 Coquelin and Guillaumin (→Dictionnaire de l’économie politique, 1852–1854) seem
to have been the first compilers to have decided to include in all entries a bibliography
of the relevant writings on each subject matter (see Chapter 8).
13 Some reference works explicitly emphasize this distinction. Most famously, the
Encyclopædia Britannica physically separated general treatises, large articles and short
entries into distinct volumes – a methodic part, one dedicated to knowledge in depth,
and one for quick reference (see below in this section, in particular note 18). Among
economic dictionaries, →Brémond and Gélédan’s Dictionnaire économique et social
(1981) announces in the title that it offers 100 thematic articles and 1,200 definitions.
Without physically separating different kinds of entries, several (if not most) recent
economic dictionaries allot different numbers of words for different typologies of entries.
As the PREFACE to the first edition of →The new Palgrave (1987) explains, ‘there is
obviously a rough and ready correlation between the size of entry and the importance
which the editors attach to the person or subject concerned, but the correlation is very
far from perfect’.
14 Occasionally, encyclopaedic works lack such structure. Wikipedia is an obvious case
in point: although there are portals (with subportals) for specific disciplines (some,
such as mathematics, are highly structured, while others, such as economics, more poorly
so), ‘Each page in Wikipedia can be annotated with multiple categories, organized
into a loose ontology of topics. However, any user can add or change a category
assignment to any article or category. The resulting category structure is noisy, ill-
Introduction 23
formed, and difficult to make sense of’ (Kittur et al., 2009, p. 1509 and passim). The
case of →Krünitz’s Ökonomisch-technologische Enzyklopädie is equally interesting. In
spite of its title, this is the largest general-purpose encyclopaedia ever printed: 242
volumes, published between 1773 and 1858. The project grew inordinately, especially
after Krünitz’s death, as new entries were added to the original word-list to update
previously published entries with the new scientific discoveries. This lack of coherence
induced the editors of the digital edition (www.kruenitz.uni-trier.de) to reorganize the
materials, superimposing an extraneous system of classification: they used the Dewey
decimal library classification system (Seifert, 2007). The time between planning and
completion of an encyclopaedic work is likely to undermine the consistency of all large
editorial projects, and not only in extreme cases such as Krünitz’s.
15 See e.g. Béjoint, 1994, p. 30; Rey, 1982, p. 19.
16 With the advent of the internet and the extreme facilitation of communications, authors
often have chances to offer their services to compilers of encyclopaedias. Circular
messages posted on mailing lists asking for contributors and suggestions of topics to
be discussed are not exceptional. The editors normally make the final choice. In the
Wikipedia experiment, however, articles are the result of anonymous collaborative (or
competitive) writing. As a reaction, the editor of the 2nd edition of the →International
encyclopedia of the social sciences (2008) emphasizes that all its articles are signed
and include the identification of authors – the ‘experts’, as opposed to ‘popular’
authorship – as part of the vision of the new edition (Darity, INTRODUCTION, pp. xi,
xiii, xv).
17 General equilibrium, 1989; Finance, 1989; The invisible hand, 1989; Capital theory,
1990; Marxian economics, 1990; Money, 1989; Problems of the planned economy, 1990;
Time series and statistics, 1990; Social economics, 1989; The world of economics, 1991.
18 This feature was introduced since the first edition (1768–1771). Since its 15th edition
(1952, revised 1985, currently under revision), the Encyclopædia Britannica is physically
divided into three sections: the methodic Propædia, or Outline of knowledge; the
Micropædia, or Ready reference and index; and the Macropædia, or Knowledge in depth.
19 In the AVANT-PROPOS to Perroux’s volume, Gaston Berger explains that the
encyclopaedia ‘is not a juxtaposition of monographs where each author has written his
small part without caring much of the others. The encyclopaedia aims at making the
reader understand; for this, it engages in choosing the viewpoints from which one may
grasp the entirety and take hold of the unity [of knowledge]’ (pp. 902–908).
20 In their presentation of the dictionary, the authors explain that ‘each article constitutes
a whole, collecting elements of information often dispersed in traditional works.
Historical data and economic analysis are often compared. Microeconomic and
macroeconomic approaches are discussed together. . . . All the elements that contribute
to the understanding of a phenomenon are reunited within the same article. This approach
enables us to unify knowledge and better understand the connections. It corresponds to
the natural movement of thought which suggests that one looks for information in the
perspective of the problem to be solved. The grouping together by themes enables
the reader to perceive more immediately the problems related to those themes, and the
comparison of different problems invites the reader to ponder more actively on the
consistency of each current of thought’ (PRÉSENTATION, in Brémond and Gélédan,
→Dictionnaire des théories et mécanismes économiques, 1984, p. 6).
21 Coleridge, letter to Robert Southey, July 1803, in Coleridge, 2000, p. 956. Coleridge
authored in 1817 the (no longer extant) prospectus of the Encyclopaedia metropolitana,
which aimed at reintroducing a rational arrangement of the articles in a ‘methodical
compendium of human knowledge. See e.g. Yeo, 1991, pp. 34–39.
22 Cross-references are part of the codes of all dictionaries. They lie both at the micro level,
as they connect words used in the text of the entry to the article discussing them, and
at the macro level, as they connect the entry heading with other concepts related to it
(Rey-Debove, 1971, p. 59, and more in detail, 1989).
24 Daniele Besomi
23 On these and other difficulties, noted by Coleridge, see Yeo, 1991, pp. 39–40.
24 While electronic editing offers the chance of structuring the materials at hand along
multiple dimensions, one of the two dictionaries available online (The new Palgrave)
is rather disappointing, while the other, the Gablers Wirtschaftslexikon, has opted for
a structure emerging from the network of links between entries: see Section 2.4.3.
25 Scholarship diverges on the relative importance of this issue. Cernuschi (1996), for
instance, places the ‘tree of knowledge’ at the centre of Diderot’s organizing effort,
while Yeo maintains that the systematic classification of the sciences ‘was not the
dominant impetus or the central organizing element of the encyclopaedic project’ (1991,
p. 27).
26 See, however, among the encyclopaedias discussed in this volume, Berthelot’s Grande
encyclopédie, 1885–1892 (Chapter 15).
27 See note 11 for the implications of this assumption for the microstructure of the entries.
An historical approach (though not as systematically pursued) is also explicitly sought
by The new Palgrave (PREFACE to the first edition, 1987).
28 ENCYCLOPÆDIA, in Encyclopædia Britannica, online version June 2010; see Green,
1996, pp. 14–15 and Chapter 15, for different biases affecting dictionaries, in the form
e.g. of the exclusion of words, or prescriptivism, in particular in deference to political
correctedness.
29 The first work of this kind, however, was published early in the eighteenth century by
the publisher Johann Friedrich Gleditsch in Leipzig with a preface by Johann Hübner,
under the title Reales Staats- und Zeitungs-Lexicon Worinnen sowohl die Religionen
und Orden, die Reiche und Staaten, Meere, Seen, Flüsse, Städte, Vestungen, Schlösser,
Häfen, Berge, Vorgebürge, Pässe, Wälder und Unterschieder der Meilen, die Linien
deutscher Häuser, die in verschiedenen Ländern üblichen Ritter-Orden, Reichs-
Täge, Gerichte Civil und Militair-Chargen zu Wasser und Lande, Müntzen, Maß und
Gewichte, die zu der Kriegs-Bau-Kunst, Artillerie, Feld Lägern, Schlacht-Ordnungen,
Schiffahrten, Unterschied der Schiffe, und derer darzu gehörigen Sachen gebräuchlichen
Benennungen, als auch Andere in Zeitungen und taglicher Conversation aus allerhand
Sprachen bestehende Termini Artis, denen Gelehrten und Ungelehrten zu sonderbarem
Nutzen klar und deutlich beschrieben werden (1704). It went through 31 editions by
Gleditsch, the latest of which was published in 1824–1828, and through a number of
republications and translations by other publishers.
30 The previous edition of the →International encyclopedia of the social sciences (edited
by Sills, 1968) was addressed to ‘serious scholars’ (most likely to look up articles in
fields other than their own) and students (expected to look up topics in their own field)
(Sills, 1962, pp. 31–32).
31 For a generous sample of the crises-related entries in dictionaries, surely including
most of the articles of some length in the main European languages, see the Index of
entries cited in this volume.
32 The medical meaning of ‘crisis’ was, of course, previously recorded by general ency-
clopaedias and medical dictionaries.
33 National traditions in the understanding and in the way of approach to the subject thus
overlap with national traditions in the use and diffusion of the dictionary literature
(Section 1.2), and with the national tradition in the making of encyclopaedias
(Meschonnic, 1996, p. 22).
34 Among writers on this subject, women seem to be represented even worse than in
economics generally; it seems that none authored encyclopaedia articles on crises before
the Second World War.
Introduction 25
REFERENCES
Astigarraga, J., Zabalza, J. and Almodovar, A., 2001, Dictionaries and encyclopaedias on
political economy in the Iberian Peninsula (18th, 19th and 20th centuries), Storia del
Pensiero Economico, 41, pp. 25–63.
Bailey, R. E., 1994, A voyage round economics: the new Palgrave dictionaries of economics,
and money and finance, Economic Journal, 104: 424, May, pp. 660–677.
Béjoint, H., 1994, Tradition and innovation in modern English dictionaries (Oxford:
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Blaug, M., 1988, Economics through the looking glass. The distorted perspective of the
new Palgrave dictionary of economics (London: Institute of Economic Affairs).
Cernuschi, A., 1996, L’arbre encyclopédique des connaissances. Figures, opérations,
métamorphoses. In R. Schaer (ed.), Tous les savoirs du monde. Encyclopédies et
bibliotèques, de Sumer au XXIe siècle (Paris: Bibliothèque Nationale de France /
Flammarion), pp. 377–382.
Coleridge, S. T., 2000, Collected letters of Samuel Taylor Coleridge, edited by L. Griggs,
Vol. 2, 1801–1806 (Oxford: Oxford University Press).
Dangel-Hagnauer, C., 2010, Clément Juglar on commercial crises: the dictionary articles,
Research in the history of economic thought and methodology, 28A, pp. 97–113.
Frawley, W., 1981, In defense of the dictionary: a response to Haiman, Lingua, 55, pp.
53–61.
Gemelli, G., 1999, Enciclopedie ed enciclopedisti d’oltre Oceano tra l’età di Hoover e la
guerra fredda. In G. Gemelli (ed.), Enciclopedie e scienze sociali nel XX secolo (Milan:
FrancoAngeli), pp. 135–186.
Green, J., 1996, Chasing the sun. Dictionary makers and the dictionaries they made (New
York: Holt).
Haimann, J., 1980, Dictionaries and encyclopedias, Lingua, 50, pp. 329–357.
Haimann, J., 1982, Dictionaries and encyclopedias again, Lingua, 56, pp. 353–355.
Hartmann, R. R. and James, G., 1998, Dictionary of Lexicography (London: Routledge).
Höhmann, D., 2001, Opere enciclopediche e dizionari specialistici in campo economico
nell’area di lingua e cultura tedesca (dal Settecento ad oggi), Storia del Pensiero
Economico, 41, pp. 181–212.
Kilcher, A. B., 2007, Theorie der alphabetisierten Textes. In P. Michel, M. Herren and M.
Rüesch (eds), Allgemeinwissen und Gesellschaft. Akten des internationalen Kongresses
über Wissenstransfer und enzyklopädische Ordnungssysteme, vom 18. bis 21. September
2003 in Pragins (Aachen: Shaker Verlag), pp. 75–94.
Kittur, A., Chi, E. H., and Suh, B., 2009, What’s in Wikipedia? Mapping topics and conflict
using socially annotated category structure. In Proceedings of the 27th international
Conference on Human Factors in Computing Systems (Boston, MA, USA, 4–9 April,
2009) (New York: ACM), pp. 1509–1512.
Landau, S. I., 2001, Dictionaries: the art and craft of lexicography (Cambridge: Cambridge
University Press, 2nd edition).
Lara, L. F., 1989, Dictionnaire de langue, encyclopédie et dictionnaire encyclopédique: le
sens de leur distinction. In F. J. Hausmann, O. Reichmann, H. E. Wiegard and L. Zgusta
(eds), Dictionaries. An international encyclopedia of lexicography (Berlin, New York:
Walter de Gruyter), pp. 280–287.
Lasswell, D. D., 1936, The Encyclopaedia of the Social Sciences in review, International
Journal of Ethics, 46: 3, April, pp. 388–396.
Layton, D., 1965, Diction and dictionaries in the diffusion of scientific knowledge: an aspect
26 Daniele Besomi
of the history of the popularization of science in Great Britain, British Journal for the
History of Science, 2: 7, pp. 221–234.
Lentini, O., 1999, L’Encyclopaedia of the social sciences e il Dizionario di politica. In
G. Gemelli (ed.), Enciclopedie e scienze sociali nel XX secolo (Milan: FrancoAngeli),
pp. 253–287.
McCulloch, J. R., 1826, Commercial revulsions, Edinburgh Review, LXXXVII, June,
pp. 70–93.
Meschonnic, H., 1996, L’encyclopédie sortant de son mot pour se voir. In R. Schaer (ed.),
Tous les savoirs du monde. Encyclopédies et bibliothèques, de Sumer au XXI e siècle
(Paris: Bibliothèque Nationale de France/Flammarion), pp. 19–23.
Milgate, M., 1992, Reviewing the reviews of the New Palgrave, Revue Européenne des
Science Sociales, XXX, pp. 279–312.
Rey, A., 1982, Encyclopédie et dictionnaires (Paris: PUF).
Rey-Debove, J., 1971, Étude linguistique et sémiotique des dictionnaires Français
contemporains (Le Hague and Paris: Mouton).
Rey-Debove, J., 1989, Les systèmes de renvois dans le dictionnaire monolingue. In
H. E. Wiegard and L. Zgusta (eds), Dictionaries. An international encyclopedia of
lexicography, Vol. 1 (Berlin and New York: de Gruyter), pp. 931–937.
Rosa, G., 1857, Dizionario della economia politica e del commercio tanto teorico come
pratico del Professor Gerolamo Boccardo, Archivio storico italiano, N.S. V: 2, pp.
114–132.
Ruiz Damiel, S., 1964, [Review of] Napoleoni (Claudio) Diccionario de economía política,
Moneda y crédito, 88, March, pp. 128–130.
Seifert, H.-U., 2007, Dewey meets Krünitz. A classificatory approach to lexicographic
material. In P. Michel, M. Herren and M. Rüesch (eds), Allgemeinwissen und
Gesellschaft. Akten des internationalen Kongresses über Wissenstransfer und
enzyklopädische Ordnungssysteme, vom 18. bis 21. September 2003 in Pragins (Aachen:
Shaker Verlag), pp. 95–104.
Sills, D. L., 1962, The New Encyclopedia of the Social Sciences, American Behavioral
Scientist, 6: 1, September, pp. 31–34.
Stigler, G. J., 1988, Palgrave’s Dictionary of Economics, Journal of Economic Literature,
26: 4, December, pp. 1729–1736.
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6: 1, September, pp. 35–38.
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September, pp. 23–26.
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Yeo, R., 1991, Reading encyclopedias: science and the organization of knowledge in British
dictionaries of arts and sciences, 1730–1850, Isis, 82: 1 March, pp. 24–49.
2 A brief history of economic
dictionaries
An essay in bibliography
Daniele Besomi
2.1 INTRODUCTION
So far, no complete and detailed history of economic dictionaries has been com-
piled, in spite of the pervasive usage of such reference tools by laypeople, students
and researchers. While the large number of such publications in different languages
may make the picture appear confused, it is nonetheless possible to recognize some
patterns and attempt a preliminary classification. This is the aim of the present
chapter.
It relies on the extensive bibliography of economic dictionaries given in Chapter
29, compiled through a systematic search of the catalogues of the national libraries
and collective OPACs of several countries, which has led to the listing of the full
bibliographic information concerning some 1,160 editions of 650 titles.1 This does
not guarantee completeness: in the languages of which I do not have any under-
standing I have almost surely missed much more than I could find; on the other
hand, for German, Italian, French and English, and perhaps also Spanish and
Portuguese, I am fairly confident that I have captured by far the largest part of the
items.
The following Sections 2.2 to 2.7 offer a systematization of these materials,
describing the major dictionaries classified by their scope, presented in chrono-
logical order. Within the two largest groups of dictionaries considered – those
concerned with economics and with the social sciences – it has been possible to
recognize different traditions related to their languages. Section 2.8 briefly illustrates
these features by means of diagrams constructed using the data concerning size,
date of publication and language drawn from the Bibliography.
Also in the eighteenth century there began the publication of a number of commercial
dictionaries, which continued throughout the nineteenth century. The first of the
kind was →Savary’s successful Dictionnaire universel de commerce. First pub-
lished posthumously in 1723 (2 volumes, almost 4,000 columns, plus a supplement
of about 1,300 columns), it went through a reprint (1726), a second edition
incorporating the supplement in 1741, a third enlarged edition in 1741–1742, a fourth
edition incorporating materials from Diderot’s Encyclopédie in 1759–1765, and a
‘portable’ version of the latter in 1761–1762. It was translated into German as
Allgemeine Schatz-Kammer der Kaufmannschafft (1741–1743), and into Italian as
Dizionario di commercio dei signori Fratelli Savary (1770). Postlethwayt prepared
an expanded English translation under the title →Universal dictionary of trade and
commerce, translated from the French of the celebrated Monsieur Savary, inspector
general of the manufactures for the King, at the Custom-house of Paris: with large
additions and improvements, incorporated throughout the whole works; which more
particularly accommodate the fame to the trade and navigation of these Kingdoms,
and the laws, customs, and usage, to which all traders are subject, first published
in two volumes in 1751–1755 and further re-edited until 1774.
In the eighteenth century we also have →Ludovici’s Eröffnete Akademie der
Kaufleute, oder vollständiges Kaufmanns-Lexicon (1752–1756, 2nd edition
A brief history of economic dictionaries 29
1767–1768) in Germany; in Britain there were published →Rolt’s New dictionary
of trade and commerce (1756; 2nd edition 1761; 3rd edition by Schedel in 1797–
1801) and →Mortimer’s New and complete dictionary of trade and commerce
(1766–1767); while in France we have →Lacombe’s Dictionnaire du citoyen,
ou Abrégé historique, théorique et pratique du commerce (1761), →Baudeau’s
Encyclopédie méthodique: Commerce (1783–1784) – part of Pancoucke’s
Encyclopédie méthodique, a thematic rearrangement of Diderot and d’Alembert’s
Encyclopédie – and →Peuchet’s Dictionnaire universel de la géographie com-
merçante (1798–1799).
In the first three decades of the nineteenth century a few more commercial
dictionaries were published, among them the first explicitly pocket dictionary
related to economics (→Crosby’s merchant’s and tradesman’s pocket dictionary,
1808; 2nd edition 1810) and also → [Buisson]’s Dictionnaire universel de
commerce, banque, manufactures, douanes, pêche, navigation marchande (1805)
and →Mortimer’s General dictionary of commerce, trade and manufactures2 (1810;
2nd updated and enlarged edition 1819 by Dickinson; 3rd edition, 1823). Later,
→Monbrion’s Dictionnaire universel du commerce, de la banque et des
manufactures (1838–1839), →Fort’s Neuestes Universal-Lexicon der gesammten
kaufmännischen Wissenschaften, für Kaufleute, Fabrikanten u. überhaupt jeden
Geschäftsmann (1852; 4th edition, 1864–1865) and →Cerboni’s Enciclopedia di
amministrazione, industria e commercio (1891–1905, five volumes) started
enlarging the scope of these dictionaries by including other sorts of entrepreneurial
activities, in particular business and banking, witnessing with some delay the
transition from a mercantile to an industrial economy.
In the middle part of the nineteenth century a few more titles were published,
but the scene was mainly occupied by →McCulloch’s Dictionary, practical, theo-
retical, and historical, of commerce and commercial navigation: illustrated with
maps and plans, first published in 1832 and subsequently updated, reprinted, sup-
plemented, translated and adapted many times in several countries and languages,
including after the author’s death – the last time in 1882. McCulloch’s dictionary
inspired the French publisher Guillaumin to produce his own →Encyclopédie du
commerçant. Dictionnaire du commerce et des marchandises (1837–1839; 1841;
augmented edition by Granges, 1855). Although it incorporated a hundred or so
articles translated from McCulloch, Guillaumin attempted to produce an original
work. This was successful enough to establish his publishing house on solid
foundations and enable him to become the most important publisher of economic
writings in nineteenth-century France. Although commercial in its title, this
dictionary also contained a number of entries clearly denoted as belonging to
‘économie politique’. The discipline was explicitly referred to in the title of another
commercial dictionary later published by Guillaumin, the →Dictionnaire universel
théorique et pratique du commerce et de la navigation, marchandises: produits
naturels et produits fabriqués . . . Géographie commerciale: état, nature et mou-
vement du commerce de chaque place . . . Droit commercial terrestre et maritime
. . . Navigation . . . Marine marchande . . . Douanes . . . Economie politique
appliquée (1859–1861; 1863). Although not explicitly mentioned in the title or
30 Daniele Besomi
explicitly demarcated, some entries included by McCulloch had a similar scope.
In CORN LAWS AND CORN TRADE, for instance, McCulloch aimed at ascertaining
‘the principles which ought to pervade this department of commercial legislation’
(1832, 377 pages). These commercial dictionaries thus partly overlapped in scope
the first dictionaries specifically dedicated to political economy, which were being
published more or less at the same time (see Section 2.4.1 below).
Towards the end of the nineteenth century, commercial dictionaries eventually
gave way to business dictionaries of a more general scope. The first to drop
altogether the reference to ‘commerce’ was →Pitman’s business man’s guide: a
handbook for all engaged in business, a small reference work of about 300 pages,
which went through 14 editions from 1903 to 1967. Its first compiler, Slater, also
edited a larger work for the same publisher, →Pitman’s commercial encyclopædia
and dictionary of business: a reliable and comprehensive work of reference on all
commercial subjects, specially designed and written for the busy merchant, the
commercial student and the modern man of affairs, in four volumes, which first
appeared in 1912–1913 (4th edition in two volumes in 1930).
Most business dictionaries, however, especially those published after the Second
World War are small – less than 600 pages (and often less than 300). Only in
recent years have a few major multi-volume reference books been produced:
→Malonis’s Encyclopedia of business (2000), →Kaliski’s Encyclopedia of
business and finance (2001; 2nd edition, 2007), →Hillstrom’s Encyclopedia of
small business (2002; 3rd edition, 2007) and →Wankel’s Encyclopedia of business
in today’s world (2009).
Meanwhile, banking and finance dictionaries followed a history parallel to, and
occasionally intersecting with, that of commercial and business dictionaries.
It began in the eighteenth century, with three enterprises in French. The first speci-
men was a small (421 pages) →Dictionnaire des finances, published in 1727 by
Jones in Paris. It was followed by the successful →La banque rendue facile aux
principales nations de l’Europe, compiled by Pierre Giraudeau, which contained
a short glossary of banking terms: Recueil en forme de dictionnaire contenant
l’explication de plusieurs termes de commerce, de terre, de mer & de banque.
The first two editions (1741 and 1754) were published in Geneva, the later ones
(from 1769 to 1799) in Lyon. Much more ponderous was the →Dictionnaire
encyclopédique des finances, compiled in three volumes by Rousselot de Surgy
(1784–1787) as part of Panckoucke’s Encyclopédie méthodique.
The next work specifically dedicated to finance, and the first in English, came
almost a century later: →A counting-house dictionary compiled by Bithell (a small
volume of about 300 pages, in three editions between 1882 and 1903), while the
subsequent →Dictionnaire des finances, edited by Léon Say and published in
two volumes in 1889–1894, was surely more scholarly. In the early twentieth
century there followed →Weston and Crew’s Dictionary of economic and banking
terms (four editions between 1913 and 1937, about 250 pages) and →Munn’s
Encyclopedia of banking and finance in English (1st edition, 1924, 600 pages;
9th edition under the title The St. James encyclopedia of banking and finance
in 1993 in three volumes); in Italian there were →Monetti’s Enciclopedia di
A brief history of economic dictionaries 31
amministrazione, ragioneria, commercio, banca, borsa (1933–1944, in five vol-
umes), →D’Andrea’s Piccola enciclopedia di banca e borsa (1934, 350 pages),
and the →Enciclopedia bancaria, edited by the Confederazione Fascista delle
Aziende del Credito e della Assicurazione (two volumes, 1942); →François-
Marsal’s Encyclopédie de banque et de bourse (five volumes, 1928–1930) in
French; and →Palyi and Quittner’s Handwörterbuch des Bankwesens in German
(four editions between 1933 and 1999, increased from 600 to 1,700 pages).
In the post-war years, financial dictionaries multiplied, as did all other works of
this kind (see Section 2.8, Figures 2.1–2.4). A number of them are small, but some
are worth citing. The →Bank-Lexikon was first published in 1953 under the
editorship of Müller and Löffelholz as a volume of just under 1,000 pages.
Eventually, it had more than doubled by the 10th edition in 1988, titled Gabler-
Bank-Lexikon, but shrank again in subsequent editions, the latest of which (the
13th) was published in 2002. →Bernard and Colli’s Dictionnaire économique et
financier was also revised several times, from the 1,100 pages of the 1st edition in
1975 to the 1,500 pages of the 6th edition in 1996; an abridged edition also exists,
titled →Vocabulaire économique et financier (1976, 415 pages). →Büschgen’s
Handwörterbuch der Finanzwirtschaft (1976; 1990) was resumed as →Gerke’s
Handwörterbuch des Bank- und Finanzwesens, which had two editions, 1995 (2,122
pages) and 2001 (2,444 pages). Also voluminous, but not re-edited, was the →The
new Palgrave dictionary of money and finance edited by Newman, Milgate and
Eatwell (three volumes, 2,500 pages, 1992; corrected reprint, 1994). Smaller, but
regularly updated, is →Villeneuve’s Dictionnaire technique de la bourse et des
marchés financiers, which started publication in 1990 with 233 pages and has grown
to the 876 pages of the 8th edition in 2010.
Almost at the same time as economic dictionaries were blooming in the nineteenth
century, a number of ponderous encyclopaedias of the social sciences – also
including economic information, and sometimes giving it pride of place – were
being published, in particular in Germany. They were, however, preceded in the
eighteenth century by the anonymous →The Politician’s dictionary; or, A summary
of political knowledge containing remarks on the interests, connections, forces,
revenues, wealth, credit, debts, taxes, commerce, and manufactures of the different
states of Europe. Alphabetically digested for the use of those who would wish to
understand whatever occurs in the science of politics ([Allen] 1775, two volumes,
847 pages), and the monumental →Dictionnaire universel des sciences morales,
économique, politique et diplomatique by Robinet, a 30-volume in quarto,
alphabetically organized work dedicated to the ‘homme d’État’ and the ‘citoyen’
(1777–1783), containing extremely long essays (COMMERCE, for instance, begins
in Volume 12 and ends in Volume 13 after 645 pages).
The verbal description of the preceding sections has already given some idea of
the distribution of encyclopaedic dictionaries over time, language and size. This
can be made more precise by means of a few diagrams illustrating the size and
language distribution of specifically economics dictionaries and of social sciences
encyclopaedias per decade of publication, and giving an overall picture of how
the total of the dictionaries related to economics (not only the two categories above,
but also commercial, financial, biographical and hyperspecialized dictionaries, and
works concerned with economics and administration, economics and statistics,
and economics and law, of which there are a few) are distributed per size and per
language.
Some observations additional to those expressed in previous sections are in order.
The first is that the modal language of dictionaries is German, followed by English
and French (Figure 2.5). Given the relative size of the markets, it is apparent that
German and, to a larger degree, French readers are supplied with a much larger
choice of dictionaries than English readers. It would be interesting to complement
these data with the respective print runs to ascertain the density of the distribution,
but the data so far suggest that there is a better market – and thus a wider usage –
of dictionaries in German- and French-speaking countries.
The second observation is that the vast majority of economics dictionaries are
small (the favourite format lies somewhere between 300 and 600 pages) (Figure
2.6), especially those published since the 1960s (Figures 2.1 and 2.3). Thus, they
are likely to be of a ‘popular’ kind (often in the best sense of the word) or thought
A brief history of economic dictionaries 45
of as an aid for study. This applies to all languages, the share of works shorter than
1,000 pages being between 65 per cent (Italian) and 75 per cent (French) in all cases
(Figure 2.5). This suggests that in Germany and France dictionaries are used more
often than in English-speaking countries as a teaching and learning aid, and the
habit so learned is possibly continued into adult age.
Thirdly, the explosion of the number of dictionaries published in the last part of
the twentieth century is due almost exclusively to small reference works, which
were practically absent in the nineteenth century. The publication of medium-sized
dictionaries increased a little, while the output of major reference works has
remained more or less constant since the middle of the nineteenth century (with
the exception of the early part of the twentieth century), notwithstanding the large
increase in their potential users (Figures 2.1 and 2.3).
Fourthly, it may be observed that not only have the Germans produced more
dictionaries, but also they have produced a large share of voluminous reference
works. While about one-third of the small and medium-sized dictionaries are written
in German, the German share of dictionaries producing four or more volumes is
46 per cent of the total of such works. In contrast, French dictionaries are prevalently
small, and large works are scarce. While in the nineteenth century France had
produced some high-quality works of medium to large size, the large output of
dictionaries published in the second half of the twentieth century consisted mostly
of small reference books. English works take a larger than average share of medium-
sized dictionaries (two to three volumes, or over 1,000 pages). The Italians lean
slightly more than average towards large dictionaries (Figures 2.2 and 2.6). These
monumental works, with long articles discussing the matter in depth, are dedicated
more to researchers and teachers than to students; this in turn suggests that German
language countries see dictionaries as a way of diffusing knowledge not only among
students, but also among educators and scientists, so far as economics and the social
sciences are concerned, at any rate.
Finally, while in purely numerical terms the century of dictionaries is not the
nineteenth, as is commonly maintained, but the twentieth, the nineteenth century
is surely an epoch when economic and social sciences dictionaries and ency-
clopaedias were all first-rate, not only in size but also in terms of quality.
These features indicate that as the production of economics and social sciences
dictionaries is subject to very different national traditions which evolve over time,
their usage in learning, teaching and research is also likely to differ substantially.
This suggests that perhaps it is not only the specific contents of economic
dictionaries that are of interest: the usage that is made of these references works
should perhaps also be subject to investigation.
46 Daniele Besomi
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
0
1820s
1830s
1840s
1850s
1860s
1870s
1880s
1890s
1900s
1910s
1920s
1930s
1940s
1950s
1960s
1970s
1980s
1990s
2000s
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
0
1820s
1830s
1840s
1850s
1860s
1870s
1880s
1890s
1900s
1910s
1920s
1930s
1940s
1950s
1960s
1970s
1980s
1990s
2000s
35
30
25
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German French English Italian Other
Figure 2.5 Number of dictionaries concerned with economics, by language and size.
A brief history of economic dictionaries 51
325
300
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. . . . . .
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1 While sometimes different editions only incorporate a few corrections and updates,
on other occasions they are major revisions and constitute an altogether different
work, usually not in its inspiration but in its contents. Whether or not this is the case, re-
editions are a measure of the commercial success of a dictionary, thus of its perceived
usefulness.
2 This work is similar to, but not identical with, the above-cited →New and complete
dictionary of trade and commerce compiled by the same author in 1766–1767.
3 Although the term ‘economics’ was introduced in 1875 by Macleod, readily accepted by
Marshall and Jevons, and generally in use by the 1920s instead of ‘political economy’ (see
Groenewegen, POLITICAL ECONOMY, →The new Palgrave dictionary of economics, 1987),
the first dictionary carrying the term ‘economics’ in its title was published only in 1948,
namely, Horton and Schnappen’s Dictionary of modern economics (if we do not count
→Janzen’s Everyday terms in economics, 1941, and →Wilson’s Helping yourself to
understand economics, 1947, which amount to just over 100 pages between them).
4 Among the dictionaries written in languages I do not understand, the bibliographic data
suggest that the following dictionaries deserve a reference, if their contents match their
size in quality: in Japanese there are the already mentioned post-war editions of the
→Ōsaka Shōka Daigaku Keizai Kenkyūjo’s Keizaigaku jiten; and in Russian there is
the →Ekonomicheskaya entsiklopediya: politicheskaya ekonomiya, edited by Rumyantsev
in 1972–1980, four volumes totalling about 2,400 pages.
5 Like →Perroux’s 1960 L’univers économique et social, part of the thematic Encyclopédie
française by L. Febvre and G. Berger.
6 Bibliographic data suggest that dictionaries published in India may deserve a separate
treatment, but I have not had direct access to them (one excepted). There are at least
six works titled Encyclopaedic dictionary of economics; two of them are fair-sized:
→Dinakar, 2009, 1,424 pages, and →Ghodke, published in 1985–1986 in five volumes
totalling 1,162 pages for 3,258 entries, where the definitions consist of citations of relevant
writers on each subject. One, edited by →Pande and Mithani (1994), is definitely to be
ranked among the major dictionaries, as it counts 3,932 pages in 11 volumes.
7 Greenwald is also the editor of a →Dictionary of modern economics, first published in
1965, later editions 1973 and 1983, with a concise version in 1984.
8 The expression was also used to translate in 1985 the title of →Volkov’s Politicheskaya
ekonomiya: slovar’ (1981).
9 The JEL scheme only works, and not even very well, up to the first digit (a search for
E32, for instance, ‘Business fluctuations and cycles’, only gives three hits, from which
the main entry TRADE CYCLE, as well as all but one of the other 20 or so entries on this
subject in The new Palgrave (for a list see note 9 to Chapter 1), is missing. The higher
level E3, ‘Prices, business fluctuations and cycles’, returns 19 hits but still only captures
3 of the above-mentioned list).
REFERENCES
Astigarraga, J., Zabalza, J. and Almodovar, A., 2001, Dictionaries and encyclopaedias on
political economy in the Iberian Peninsula (18th, 19th and 20th centuries), Storia del
Pensiero Economico, 41, pp. 25–63.
Bailey, R. E., 1994, A voyage round economics: the new Palgrave dictionaries of economics,
and money and finance, Economic Journal, 104: 424, May, pp. 660–677.
Blaug, M., 1988, Economics through the looking glass: the distorted perspective of the new
Palgrave dictionary of economics (London: Institute of Economic Affairs).
A brief history of economic dictionaries 53
Chailley-Bert, J., 1897, [Review of Palgrave’s Dictionary of political economy], Economic
Journal, 7: 26, June, pp. 260–264.
De Vivo, G., 2006. [Review of] The biographical dictionary of British economists.
Contributions to Political Economy, 25: 1, pp. 121–126.
Hollander, J. H., 1926, [Review of Palgrave’s Dictionary of political economy], American
Economic Review, 16: 4, December, pp. 666–668.
Jevons, W. S., 1879. Preface to the 2nd edition. The theory of political economy (London:
Macmillan).
Lachmann, W., 1983, [Review of] Greenwald, D. (ed.), Encyclopedia of economics, Kyklos,
36: 2, pp. 325–326.
Milgate, M., 1992, Reviewing the reviews of the New Palgrave, Revue Éuropéenne des
Science Sociales, XXX, pp. 279–312.
Stigler, G. J., 1988, Palgrave’s Dictionary of economics, Journal of Economic Literature,
26: 4, December, pp. 1729–1736.
3 Naming crises
A note on semantics and
chronology
Daniele Besomi
3.1 INTRODUCTION
The terms used by writers who described or theorized economic troubles have
shown a notable variety over time and space, and several of these terms have
themselves undergone changes of meaning and of implications. At first the process
was tentative and somehow varied: some terms fell into disuse and were never
resurrected; others were coined only after some decades to reflect a different
perception of the phenomenon; at different times, one term or another dominated
the scene, to which often a specific interpretation of the phenomenon corresponded.
This chapter aims at chronologically mapping the terminological and conceptual
changes having taken place in the literature, even though only a very limited number
of terms eventually became dictionary entries – the main ones being ‘crisis’ or
‘crises’ and ‘business (or trade) cycle’, with occasional appearances of ‘panics’,
‘bubbles’, ‘fluctuations’ and a few others. It will proceed by examining the ety-
mology of a number of such terms – with the invaluable help of the Oxford English
dictionary (OED) – and describing and tracing the evolution of their meaning
in the economic literature, with particular care as regards their treatment in dic-
tionaries. These are given pride of place not only because they are the subject of
this book, but also because they often offer explicit and precise definitions of terms,
which is not always the case in the general literature (see, for instance, Chapter 6,
Section 6.5.1, on the first definitions of ‘crisis’ offered by dictionaries).
The recurrence of specific terms to denote the events related to crises shows clearly
recognizable patterns, which will help to characterize the context in which these
words are (or have been) used. This is what will be done in the rest of this chapter,
where the meanings and usages of the various terms are presented more or less in
the chronological order of their first application to economic crises or related
phenomena.5
3.2.1 Glut
The first term associated with an imperfect working of the market is ‘glut’.
According to the OED, it was first used in the sense of ‘A supply of any mercantile
commodity which is greatly in excess of the demand; freq. a glut in the market’ in
1594, when Plat suggested that one should buy a ‘store of Roses [for the distillation
of rose water] when you finde a glut of them in the market’ (p. 31). Its usage as a
verb, meaning ‘To overstock with mercantile goods. Chiefly, to glut the market’
(OED) goes back to 1624: after some ships loaded with fish came to the ports and
made a good profit, when the others ‘came to the same ports, that were all ready
furnished, so glutted the market, that the price was abated’ (Smith, 1624, 1907
reprint, Vol. 2, p. 68). The term frequently recurs in the literature of the seventeenth
to nineteenth centuries. An interesting example is the following passage by Defoe:
It is very unjust and unfair Dealing by the Publick, first to glut the Market,
and over-run it with Goods, and then complain that the Market is dull: How
should the Respiration of Trade be preserved, when ’tis choak’d and suffocated
with Goods? When Blackwell Hall is empty, the Trade breathes; but when we
see it piled up to the Ceilings; the Yards, the Passages and Staircases throng’d,
Trade suffers, it is oppress’d with Quantity, and must die if not relieved.
(1728, p. 267)
As John Stuart Mill noted, the term belonged to mercantile language and was
equivalent to over-supply (Mill, 1848, Bk. III, Ch. 14, § 1). This sense of the
term is indeed not found in early general-purpose encyclopaedias or dictionaries,
such as →Chambers’s Cyclopædia (1728) or →Johnson’s Dictionary (1755).
Mercantile dictionaries do not carry an entry on gluts, although the term is
occasionally found in the text. Under the heading ASSIENTO (an obsolete contract
58 Daniele Besomi
relating to the slave trade), for instance, Mortimer (→New and complete dictionary
of trade and commerce, 1766) and the anonymous compiler of the →Politician’s
dictionary ([Allen] 1775) both reported that the French ‘at length over-glutted the
market, and became sufferers’. The term frequently appears in →McCulloch’s
Dictionary . . . of commerce and commercial navigation (1832); for instance,
discussing the amplifying effect of corn laws upon the natural fluctuations of crops,
he stressed that this system ‘forces up prices in years when the harvest is deficient,
while it leaves the market to be glutted when it is abundant’ (CORN LAWS AND
CORN TRADE, p. 891).
The diffusion of the term does not seem to have made it necessary to define it,
until the very notion of glut became the subject of a controversy.6 In his Definitions,
Malthus thus specified as follows its meaning:
The term ‘glut’ was occasionally used in the title of writings in the classical era,
e.g. in an anonymous pamphlet with A few remarks upon the true origin of rent,
gluts, a corn trade, and the new issue of gold (1826) and in Thompson’s Exposition
of fallacies on rent, tithes, &c. containing an examination of Mr. Ricardo’s . . .
doctrine of the impossibility of a general glut (1826), while recent usage is mostly
limited to historical examinations of the classical debate, beginning from Sowell’s
article ‘The general glut controversy reconsidered’ (1963).
‘Glut’ only seems to have made it to the word-list of dictionaries on two
occasions. In →[Long]’s Political dictionary (1845–1846) the term merely cross-
refers to the unsigned entry on DEMAND AND SUPPLY, where it is argued that
production creates not only goods but also an effective demand for commodities
so ‘that a universal glut of all commodities is impossible’ (p. 731). The term is
used interchangeably with ‘overproduction’, for which there is no entry (not even
as a simple cross-reference) in the dictionary. In →Palgrave’s Dictionary of political
economy, the short entry on the subject is signed by Cannan, who did not hide his
contempt for the very usage of this term: ‘GLUT is a name (cp. glutton) given to
abundance by those who, for any reason good or bad, look on it as pernicious’.
Thus sellers ‘say that there is a glut, or that the market is glutted, whenever there
is so much of the commodity they sell that it cannot be disposed of at prices fairly
remunerative to them. Purchasers on the other hand merely say that the commodity
is plentiful and cheap’. Cannan cites Malthus’s definition above, briefly refers to
the Ricardo–Say–Mill vs. Malthus–Sismondi controversy, but refers to the entries
on DÉBOUCHÉS, THÉORIE DES and OVER-PRODUCTION (see Chapter 16).
Naming crises 59
3.2.2 Distress
‘Distress’ is defined by the Oxford English dictionary as ‘The sore pressure or strain
of adversity, trouble, sickness, pain, or sorrow; anguish or affliction affecting the
body, spirit, or community’ (OED, 2a); this is the passive sense of ‘The action or
fact of straining or pressing tightly, strain, stress, pressure; fig. pressure employed
to produce action, constraint, compulsion; less usually, pressure applied to prevent
action, restraint’ (OED, 1a). The term has been applied to conditions of economic
suffering since at least the 1720s, when an anonymous writer addressed the electors
of Members of Parliament, pointing out that the way they used the power, the trust
and the property they possessed ‘will always have the most universal and affecting
Influence on the Success or Prosperity, the Distress or Misery, of this [. . .]
Renown’d Native Country’ (Anonymous, 1722, p. 1). The first systematic occur-
rences associated distress with poverty, in particular following a scarcity of food,
such as in Hustler’s pamphlet The occasion of the dearness of provisions, and the
distress of the poor (1767) or in Brooke’s The true causes of our present distress
for provisions (1800).
The extension to banking and finance seems to be due to the French. Their term
‘détresse’ indicates either the sentiment of powerlessness, neglect and solitude
experienced in a difficult and anguishing situation, or the difficult and anguishing
situation itself, in particular with reference to the dramatic lack of material resources
(Le Grand Robert). In the Étrennes financières of 1789 we find the expression
‘throwing banking and finance into distress’ (‘jetter dans la détresse la banque et
la finance’: Martin, 1789, p. 121); in the following year Boislandry wrote some
Observations sur les dangers du papier-monnoie & sur l’insuffisance de cette
ressource: pour remédier a la détresse actuelle des finances (Boislandry, 1790);
and Clavière thought that the assignats were a consequence, not the cause, of the
distress of public finance (‘il faudroit ne pas oublier que c’est la détresse des finances
qui conduit aux assignats, et ne pas attribuer à ceux-ci l’effet de la détresse’: 1790,
p. 99). With the 1793 crisis ‘distress’ began to be associated with commerce, manu-
facture and credit also in English. Patrick Colquhoun produced some Reflections
on the causes which have produced the present distress in commercial credit (1793),
and James Currie wrote of the ‘general distress in the commercial and manufac-
turing interests’ (1793, p. 17) and made it clear that that he understood ‘distress’
as the opposite of ‘prosperity’ (p. 1). Not only must such terms have been widely
perceived as antonymous, but the view that prosperity is, in some way, the cause
of distress was held by enough people to induce Richard Brinsley Sheridan to openly
dispute it during a debate before the House of Commons: ‘To assert that the distress
of commercial credit was owing to the great prosperity of the country might make
a very sonorous period, but would not be much relished in the city. It would be
considered as but a poor compliment to congratulate a man on his having proved
himself one of the most industrious manufacturers, or enterprising merchants, by
getting into the Gazette as a bankrupt’ (Great Britain, Parliament, 1793, p. 31).
The opposite view was reasserted during the same debate by Mr Rose, who said,
‘That the time of the greatest prosperity of a country might be the time of the greatest
60 Daniele Besomi
distress to commercial credit, appeared from what happened in this country in 1772’
(ibid, p. 33).
‘Distress’ is a fairly elastic term. It can refer to individuals (The precipitation
and fall of Mess. Douglas, Heron, and Company, late bankers in Air, with the causes
of their distress and ruin, Anonymous, 1778), to classes (for instance Suggestions
for producing public improvements, and affording employment for the distressed
manufacturers and the labouring poor, Phillips, 1816, or Letters addressed to the
Earl of Liverpool . . . on the distress of the mercantile, shipping, agricultural, and
manufacturing interests, Pinsent, 1820, or A letter to the . . . Earl of Liverpool, . .
. on the means of relieving the present distress of the farmer, Torrens, 1816), or
more frequently to the entire nation (for instance, Exposition of one principal cause
of the national distress, particularly in manufacturing districts, Anonymous, 1817;
Letters . . . on the pecuniary distresses of the country, Sinclair, 1797; or
‘Commercial distress of the country’, McCulloch, 1816). Although rarely, it has
also been used in the plural – suggesting awareness that such phenomena are
recurrent – the first time as early as 1796 when Mr Swanwick, in a debate before
the Congress of the United States, disputed the view that ‘our late commercial
calamities were no proof of our want of prosperity’ by referring to ‘commercial
distresses’ (Carpenter, 1796, p. 49); similarly, Sinclair wrote of ‘pecuniary embar-
rassments’ (1797, p. 61 and passim) and ‘pecuniary distresses’ (p. 61); Anderson
maintained ‘there is no doubt that, while this nefarious system [the possibility of
issuing paper money] is continued, as no bounds can be set to speculation, distresses
and embarrassments will be felt at irregular periods’ (1797, p. 39); later, Joplin
wrote that ‘our national distresses proceed from a destruction of income, . . . and
that our distresses arise from this species of derangement, or limitation of the
national industry, . . . originally produced by pressures or scarcities of money in
the London Money Market’ (1844, p. 85).
Notwithstanding this variety of usages, a common feature needs to be stressed.
The term ‘distress’ is used in a passive and subjective sense, as a condition suffered
by people. The term thus refers to the consequences of the crisis, rather than
characterizing the event itself or identifying its causes. It is therefore scarcely useful
in theoretical terms. Indeed, its usage was characteristic of the first attempts to
discuss the phenomenon, but was soon substituted by more suitable concepts (see
Figure 3.1). It was the prevalent descriptor until the 1837 panic, remained in use
(although only among a minority of writers) during the 1847 crisis, and rapidly
fell into disuse afterwards. No dictionaries record its meaning in association with
crises; there are, however, two entries on its connotation in jurisprudence in
→[Long]’s Political dictionary (1845–1846) and in →[Knight]’s Standard library
cyclopaedia (1853–1860).
3.2.3 Embarrassment
An ‘embarrassment’ is defined by the OED as ‘1. embarrassed state or condition:
a. of (or with reference to) affairs, circumstances, etc.; often in pecuniary sense. 2.
Something which embarrasses; an impediment, obstruction, encumbrance. In pl.
Naming crises 61
often = “pecuniary difficulties”’. The term is also used in French (‘embarras’),
also meaning impediment, obstruction, in general and in the medical sense with
reference to digestion; the idiom ‘embarras d’argent’ means poverty, lack or scarcity
of money (Le Grand Robert de la langue française).
The earliest occurrence I have been able to find was expressly used in the sense
of ‘pecuniary difficulties’, which appeared in the same passage as ‘pecuniary
embarrassments’ in a 1797 pamphlet by Sinclair (p. 11). In 1801, Boyd and Francis
Baring used the expression ‘general embarrassment’ to indicate a state of obstructed
monetary circulation. Boyd wrote of the ‘notorious embarrassment of the general
circulation of the metropolis’ (1801, p. 5), and disputed Barings’s claim (1801,
p. 8) that the ‘general embarrassment’ was caused by a reduction of banknotes
(Boyd, 1801, p. xxii). A few years later the expression ‘commercial embarrass-
ments’ became a shorthand descriptive for a situation of general commercial
difficulty. We find it in the body of text and in the title of a number of writings.
Among these, an anonymous merchant expounded some Considerations on the
causes which have produced our present commercial embarrassments (1811);
McCulloch, in a review also using several other expressions for crises, discussed
‘Commercial embarrassments and trade with France’ (1819); an anonymous writer
produced a pamphlet titled An enquiry into the causes of the present commercial
embarrassments in the United States (Anonymous 1, 1819); Joplin discussed
The cause and cure of our commercial embarrassments (1841), and [Duncan]
discussed Mercantile embarrassments, and the present state of the banking system
(1842). The expression, however, is more easily found in the popular press, both
in Britain and the United States, and must therefore have exerted some appeal (for
example, see Orleans Gazette, 1819; Raleigh Register, 1819; Bristol Mercury,
1819; Providence Patriot, 1822; Hampshire Telegraph and Sussex Chronicle, 1825;
The Times, 1826a and 1826b; New York Spectator, 1837; The Economist, 1846;
Bankers’ Magazine (Anonymous 1, 1850)). It occasionally appeared in the body
of text of some later publications (mostly magazines).
There are no dictionaries carrying dedicated entries to ‘embarrassment’. The
term, however, is occasionally used in dictionaries. The first occurrence is in
the entry BANK OF ENGLAND of →Montefiore’s Commercial dictionary: ‘As
the public attention was particularly drawn to the imperial loan at the time, and as
it formed the prominent feature in the remonstrances from the bank, it has been
considered as the sole cause of the general embarrassment. But it was the magnitude
of the sum, not the description of service, which created the difficulty’ (1803,
n.p.). The term is used a few times in James Mill’s entry on BANKING in the 1824
supplement of the →Encyclopædia Britannica with reference to the business of
central banks: ‘the embarrassments to which the Bank of England has been
occasionally exposed from the fluctuations of commerce, and from the effects of
political alarms’ (p. 78); and ‘the Bank of France was considerably embarrassed
by the drain of its specie’ (p. 89; see also pp. 83 and 84). Ganilh estimated that
‘paper [money] embarrasses internal circulation, while gold and silver coins
facilitate and encourage it’ (CRÉDIT, in →Dictionnaire analytique d’économie
politique, 1826, p. 185). Juglar used the term as a descriptive of the state of affairs
62 Daniele Besomi
during a crisis or its successive liquidation, or even as synonymous with both, as
for example in the following passages: ‘the excesses of domestic and foreign trade,
at prices inflated by speculation rather than at their natural level. This is the main
cause of all embarrassments’ (CRISES COMMERCIALES, in →Block’s Dictionnaire
général de la politique, 1863, p. 621: see Chapter 12); ‘in December, in the midst
of the embarrassments of a painful liquidation . . .’ (p. 620); or ‘whereas commercial
embarrassments last a fairly short time, at most one or two years, prosperous times
extend over several years, six to seven on average’ (p. 621). Macleod also used
the expression ‘embarrassments in the mercantile world’ (CRISIS, COMMERCIAL,
in his →Dictionary of political economy, 1863, p. 631; see Chapter 13). Much later,
a couple of entries used the term ‘embarrassment’ in relation to economic difficulties
pertaining to individuals. In the entry CRÉDIT MOBILIER in →Bliss’s Encyclopedia
of social reform, for instance, it is reported that a seller of the shares of Crédit
Mobilier asserted that from them no embarrassment could follow (1897, p. 396);
Mitchell also used the term in this sense: ‘In the face of threatened bankruptcy an
embarrassed house may sacrifice accumulated stocks for what can be had’
(BUSINESS CYCLES, in →Seligman’s Encyclopaedia of the social sciences, 1933,
p. 106; see Chapter 22).
3.2.4 Stagnation
The Oxford English dictionary defines ‘stagnation’ as follows: ‘1. The condition of
being stagnant; an instance of this. a. of water, ice or air. b. Phys. of blood, sap, etc.
in a living body. 2. fig. Unhealthy absence of activity, energy, etc. Also spec. in Econ.,
an absence or low rate of growth’. Economic usage through history, however, is
actually more varied. While indeed generally indicating the absence (or, rather, a
low level) of economic activity, the term has been used in at least five distinct ways.
The precise definition offered by the OED has been employed only recently,
and features in some dictionary entries. For instance, in Géhanne’s CRISES ET
FLUCTUATIONS ÉCONOMIQUES, ‘stagnation’ is used as follows: the downwards
phase of the business cycle can be characterized by a non-negative slope of the
GDP curve, ‘a simple stagnation of the rate of growth rather than a depression’
(1995, →Dictionnaire thématique des sciences économiques et sociales, Vol. 2,
p. 99). Similarly, in the entry on ECONOMIC CYCLES for →Kaliski’s Encyclopedia
of business and finance, it is stated that during the contracting phase of the cycle
‘There might be a period of stagnation during which there is no growth or even a
decline in economic activity’ (P. Luft, 2001, p. 262). Two dedicated entries
explicitly define the term consistently with the OED definition: Penrose’s
STAGNATION for →Sills’s International encyclopedia of the social sciences (1968,
p. 137), and Dutt’s entry under the same title for the second edition of the same
encyclopaedia (2008, p. 83). As we shall see below, the adoption of this definition
is somehow problematic as it is inconsistent with the usage of classical economists,
to whom, however, a reflection on ‘stagnation’ is attributed.
The earliest usage of the term was more generically applied to any situation in
which trade (whether in individual branches, or generally) or credit take place at
Naming crises 63
a very slow pace. An anonymous writer, inquiring into the effects of the introduction
of copper money, argued that the subsequent inflation would halt domestic trade:
‘All domestick Commodities being raised [in price], there must either follow an
entire Stagnation of Trade, or a proportionable Rise of all foreign Commodities’
(Anonymous, 1724, p. 29). The following example illustrates the metaphorical
transfer of the verbal form from medicine, and opposes ‘paralysis’ and ‘stagnation’
to ‘prosperity’, while pointing out that trade is only stalled to a degree: ‘War to a
Trading Nation is a Degree of Death; it is a strong Paralytick, it stagnates the Blood;
and, in a word, is fatal, if not to the Trade itself in general, yet to the Prosperity
and Health of it’ (Anonymous 2, 1729, p. 24).7 Similarly, Madden writes that the
preference for ‘coin money’ over paper money ‘stagnates our Affairs and Business
to a great Degree’ (1738, p. 180). Analogous examples are scattered through
eighteenth- and nineteenth-century literature, also in French, German and Italian.
The term first appeared in titles in 1819 (an anonymous Friendly Address to the
Manufacturers in those districts which are now suffering from the stagnation of
trade) and 1820 (J.-B. Say’s Lettres à M. Malthus sur différens sujets d’économie
politique, notamment sur les causes de la stagnation générale du commerce,
promptly translated into English).
‘Stagnation’ in this sense is naturally also used in dictionaries. The first appear-
ance seems to be in the entry on COMMERCE in →Ganilh’s Dictionnaire analytique
d’économie politique, where it is argued that if a country limits the imports of
foreign products, it is hindered in producing its own goods, and eventually ‘will
become stationary, or rather reduced to a stagnation8 from which it will never be
able to emerge’ (1826, p. 145). McCulloch used the term in reporting of the dimin-
ished consumption caused by ‘the loss of a great part of our colonial possessions,
the stagnation of commerce, and difficulty of obtaining employment, occasioned
by the American war’ (CORN LAWS AND CORN TRADE, →McCulloch’s Dictionary
of . . . commerce and commercial navigation, 1834, p. 405). Occasionally, such
generic usage reappears in later writings, including contemporary dictionaries.
A common feature to this usage of ‘stagnation’ as a slowing down of trade is
that how slow is not defined with precision: surely, trade never comes to a complete
stoppage, but a slowdown (with respect to some unspecified standard) will produce
noticeable effects, giving the impression that everything is stalled. In spite of the
fuzziness on this precise point, even this generic usage of ‘stagnation’ has some
advantages with respect to the notion of ‘distress’ (see Section 3.2.2). While the
latter is referred to a condition subjectively felt by individuals or by collectivities,
the idea of ‘stagnation’ refers to a state of trade. ‘Distress’ thus refers to the con-
sequences of the economic difficulties, while ‘stagnation’ tries to characterize them.
When crises started to be explicitly discussed, ‘stagnation’ in the sense of lan-
guishing trade was mentioned (in particular in French dictionaries) as one of the
features of crises. The following considerations are offered in the entry on CRISE
COMMERCIALE ET INDUSTRIELLE in →Monbrion’s Dictionnaire universel du
commerce, de la banque, et des manufactures. The author argues that unforeseen
excesses of production cause a reduction of prices and a complete stagnation in
manufacture and trade, and that ‘such a stagnation becomes in a way necessary to
64 Daniele Besomi
give time for the excess of products to be absorbed by the daily consumption and
exportation. For this reason after a crisis, as a natural reaction, one should expect
that activity in general increases, because industry must satisfy the arrears of
demand for consumption that were left in suspense during the stagnation’ (1838,
p. 637; see Chapter 6). Ott also discussed the role of the stagnation of trade in the
generation of a crisis: ‘Eventually the market will be glutted insomuch as only a
small number of products can be sold, and at a considerable loss. Sales, purchases
and production will then stop. And if this phenomenon affects important goods,
those involving large masses of capital and occupying a large number of workers,
or if it affects a large number of goods at once, then the stagnation in these branches
will spread to all others, and there will be a full commercial crisis’ (CRISE, in →Ott’s
Dictionnaire des sciences politiques et sociales, 1854, p. 1389; see Chapter 10).
Garnier thought instead of stagnation as one of the consequences of a crisis:
‘in most cases social and political shocks, revolutions and all sorts of unrests
produce a general crisis, the effects of which . . . are, in brief, uncertainty about
the future, shrinkage of consumption, of exchanges and of production by means
of a general stagnation, which is synonymous with diminution of wages and
profits, that is, with straits and misery’ (CRISES COMMERCIALES, →Guillaumin’s
Dictionnaire universel, théorique et pratique du commerce et de la navigation,
1859, p. 921; see Chapter 6, Section 6.6).
This introduces the third usage of ‘stagnation’. Sometimes the term was used
(often in opposition to ‘prosperity’) to indicate either periods of bad times generally,
or a specific phase of the cycle. This usage is already found in early writings, such
as in the following passages: ‘as Plenty is the constant Attendant of Peace, so
Poverty is the never-failing Companion of War; which proceeds, entirely, from
the certain Stagnation of Trade under the latter, and its prosperous and flourishing
Condition under the former’ (Anonymous, 1743, p. 5), and ‘panics, runs for gold,
fluctuations in the currency, and all the old vicissitudes of periods of high prosperity,
alternating with seasons of extreme scarcity and stagnation of trade, recurred with
as deplorable a frequency and intense severity as ever’ ([Page] 1842, p. 97). As to
the term being used referring to a phase of the cycle, there are examples in
dictionaries. The entry on CREDIT in →Lieber’s Encyclopaedia Americana was
among the first writings to describe the circular and periodic path (the ‘ebbs and
flows’) through which credit passes, at one point of which ‘the acceleration of
industry, and the extension of credit, go on until a surplus and stagnation are again
produced’ (1830, p. 9). The most famous early description of such a circle, in ten
phases, one of which is ‘stagnation’, is due to Overstone, and naturally we find it
occasionally cited in dictionary entries – for instance, Herkner’s KRISEN for
→Conrad’s Handwörterbuch der Staatswissenschaften (1890, p. 891; see Chapter
18) and much later in Vosgerau’s KONJUNKTURTHEORIE, in →Albers et al.’s
Handwörterbuch der Wirtschaftswissenschaften (1978, p. 479).
A fourth usage of the term ‘stagnation’ is associated with Hansen’s thesis of the
maturity of capitalism (1938), further elaborated by Kalecki, Steindl and others.
Dictionaries began to incorporate a discussion of this theme in business cycle entries
two decades after the first publication, beginning with Johr’s KONJUNKTUR (II)
Naming crises 65
POLITIK for the →Handwörterbuch der Sozialwissenschaften. John was, however,
more interested in discussing the permanent character of the suggested remedies,
as opposed to the more time-specific interventions implied, for example, by the
Keynesian approach (1959, p. 118). Other dictionaries classified the ‘secular stagna-
tion’ approach among the theories of underconsumption and oversaving (W. Weber,
KONJUNKTUR UND KRISE, in →Klose’s Katholisches Soziallexikon, 1964,
p. 555; and Ciocca, CRISI ECONOMICHE: IL NOVECENTO, in →Carmagnani and
Vercelli, Economia e storia, 1978, p. 146; King also cites Steindl in this context:
UNDERCONSUMPTION, →Elgar companion to post Keynesian economics, 2003,
p. 372). A Marxist dictionary reported Joan Robinson’s benevolent but critical
reinterpretation of Rosa Luxemburg as an early version of the secular stagnation
thesis (V. Holesovsky, KONJUNKTUR UND KRISE, in →Frenzel’s Ökonomie
(Marxismus in Systemvergleich), 1973, p. 305).
The few dictionary entries dedicated to ‘stagnation’ all discuss (some non-
exclusively) the term in this connection. The first was →Hanson’s Dictionary
of economics and commerce (1965), which defined the STAGNATION THESIS as
‘the belief that in advanced economies saving might be so great as to make the
maintenance of full employment difficult’, adding that ‘few people now hold this
view’. →Taylor’s New dictionary of economics also carried a short entry on
STAGNATION, THEORY OF, explaining that mature economies are characterized by
a much lower schedule of the marginal efficiency of capital than was the case in
the nineteenth century, so that investment opportunities have declined (1966,
p. 274).
These entries were followed by a short sceptical entry on SECULAR-STAGNATION
THESIS (MATURE-ECONOMY THESIS) in the →McGraw-Hill dictionary of modern
economics (1983), where Hansen’s original interpretation of the US having reached
maturity in the 1930s is rejected as the events after 1939 proved ‘that the depression
of the 1930s was, in fact, only a deep cyclical contraction which ushered in decades
of economic growth in even the most mature industrial economies. Nevertheless,
fears of secular stagnation are revived during each downturn. In the early 1960s,
secular stagnationists pointed to the prevailing high unemployment rate in the
United States as a confirmation of the stagnation thesis’. →The new Palgrave
carried a long and detailed entry on STAGNATION by Josef Steindl (1987; the entry
was not retained in the 2nd edition, 2008), where the origin of various strains of
the idea of secular stagnation is traced to the recognition of historical patterns
of stagnation and decadence of society, to the biological analogy with maturity
and ageing, and to the dogmatic belief that all class systems must sooner or
later decay. Steindl refers to long waves as an alternative interpretation of the
stagnation of the 1930s, but dismisses it as being based on little theories and carries
on by reviewing the ideas of Hansen, Sweezy, Kalecki, Sylos-Labini and his
own.
The two entries titled STAGNATION for the first and second editions of the
→International encyclopedia of the social sciences (Penrose, 1968, and Dutt, 2008)
start with a definition of the term based on the rate of growth of output being close
to zero (Dutt adds, and Penrose implicitly maintains, that such a condition relates
66 Daniele Besomi
to a relatively long period of time). On the basis of this notion, they examine the
economists’ discussions of the various possible occurrences of such circumstances.
Their examination in this context of the classical economists’ notion that the system
will eventually tend to a ‘stationary state’ seems to suggest that the classics used
the term in this sense, while this does not seem to be the case: the few occurrences
of the term in the writings of Smith, Ricardo and Malthus are all consistent with
the idea of temporarily languishing trade. Both these entries also discuss the idea
of stagnation developed in the framework of Keynesian economics, and the issue
of the stagnation in less-developed countries.
The fifth usage of the term ‘stagnation’ is associated with the declining phase
of long waves (on which, see Chapter 24), or at least with the long-run trend. Medio,
for instance, in the entry on TRADE CYCLE for the 2nd edition of →The new
Palgrave (2008), remarked that ‘There also exists an inverse causal relation running
from trend to cycle; that is, the characteristics of a cycle, in particular its amplitude
and duration, are markedly different according to whether the economy is in a phase
of stagnation or prosperity’. In the same dictionary, Solomou uses the word in
passing in the same sense, with reference to the years preceding and following the
Second World War: ‘the most significant long-run growth variations are associated
with the growth stagnation of the 1930s and the resurgence of growth in the 1940s’
(Solomou, KONDRATIEFF CYCLES, →The new Palgrave, 2008). Similarly, J. N.
Cohen characterized the lowest phase of the long wave as follows: ‘When the
leading sector’s life cycle reaches maturity and declines, the economy will have
lost its underlying engine of growth. Stagnation will begin and it will continue
until a new technology is found’ (LONG-WAVE THEORY, in Clegg and Bailey, 2008,
p. 832).
3.2.5 Panic
The Oxford English dictionary defines ‘panic’ as follows: ‘1.a. A sudden feeling
of alarm or fear of sufficient intensity or uncontrollableness as to lead to extravagant
or wildly unthinking behaviour, such as that which may spread through a crowd
of people; the state of experiencing such a feeling. Also: an instance or episode of
such feeling; a scare. 1.b. A condition of widespread apprehension in relation to
financial and commercial matters, leading to hasty measures to secure against pos-
sible loss.’ The general meaning 1a predates in usage the specific meaning relating
to financial matters. Examples of the former, in fact, can be noted in the first half
of the seventeenth century, while the first occurrence of the latter I have been able
to find dates from exactly a century later. In 1742, an anonymous Member of
Parliament, discussing the flood of bank bills issued by the Royal Bank of France,
eventually leading to the bursting of the Mississippi bubble, pointed out that ‘the
immense Sum which was emitted in Bank-Bills, was more than the Cash or Specie
in the Bank was sufficient to circulate; especially upon any extraordinary Draught;
so that the Bank, being unable to stand the Shock of the least Panic, was suddenly
broke’ (Anonymous 1, 1742, p. 15). The same passage is cited in full, in a pamphlet
critical of the view that the Regent was not responsible for defrauding his citizens,
Naming crises 67
with the added question: ‘Sir, whence did that Panic arise, but from the Suspicion
of the Regent’s Conduct? (Anonymous 2, 1742, p. 14).
The term ‘Panic’ reappears indicating a ‘Time of Danger, [with] People’s running
for their Money’ in a 1756 pamphlet attributed to [Magens] (p. 27). In the following
year, Harris explained that debasing the standard of money ‘would make a havoc
alike of all property, and create universal panics and distrust, not easily to be after-
wards repaired’ (1757,Vol. 2, pp. 108–109), and that ‘No alteration can be made
in the standard of money without an opprobrious breach of the public faith with
all the world; . . . without the risk of producing infinite disorders, distrusts and
panics among ourselves’ (ibid., p. 31). In the following six decades the term was
used only occasionally. In 1816 it was endorsed by Ricardo. He argued that even
the best scheme to prevent fluctuations of the value of the currency other than those
to which the standard itself is subject would fail and generate an embarrassment
on those extraordinary occasions, when a general panic seizes the country, and
when everyone is desirous of possessing the precious metals as the most
convenient mode of realizing or concealing his property. Against such panics,
Banks have no security, on any system; from their very nature they are subject
to them, as at no time can there be in a Bank, or in a country, so much specie
or bullion as the monied individuals of such country have a right to demand.
Should every man withdraw his balance from his banker on the same day,
many times the quantity of bank notes now in circulation would be insufficient
to answer such a demand. A panic of this kind was the cause of the crisis in
1797.
(Ricardo, 1816, pp. 28–29)
At the outburst of the November 1825 crisis the term made it first to the title of
an anonymous pamphlet, A brief sketch of the causes and consequences of the
present panic ([Hart] 1825), and again appeared in the title and text of a number
of writings in the following year; thereafter it was used frequently, in particular on
the occasion of the 1847, 1857, 1866, 1873 and especially 1907 crises. The usage
quickly petered out from the titles of writings, to reappear occasionally from the
1990s.
Few dictionaries carry entries on panics, although naturally some use the term
in discussing related subjects. The early encyclopaedias only record the general
meaning. In the first edition of →Chambers’s Cyclopædia (1728), for instance,
PANIC, or Panic-Fear, is defined as ‘a Term used for a needless, or ill-grounded
Fright’. The origin of the expression is indicated as being either in a trick played
by the god Pan, whose soldiers were in large minority but scared the enemy without
engaging in battle by producing a lot of noise in an echoing valley, or by the same
god scaring the Titans by means of a shell used as a trumpet. A similar entry is
found in →Johnson’s Dictionary of the English language (1755).9
The first dictionary referring to financial panics seems to be →Montefiore’s
Commercial dictionary (1803). The consequences of a fear caused by a non-
economic event are outlined: ‘the general rumour of a French invasion, which was
68 Daniele Besomi
confirmed in the minds of many, by the landing of a handful of French troops in
Wales . . . occasioned a panic, which gave rise to an immediate demand for money,
to which neither gold nor silver bullion could be applied, as nothing would be
accepted but the circulating coin of the kingdom’; again, a few pages below:
‘suppose that a general panic or discredit rose to such a height, as to incline all those
who could, to realize their notes in gold . . .’ (BANK OF ENGLAND, not paginated;
references are from the 12th and 15th pages of the article). For the rest of the century,
‘panics’ featured in dictionaries as mainly indicating ‘run on the banks’. For
instance, in the entry on BANQUES in →Ott’s Dictionnaire des sciences politiques
et sociales, the general panic referring to the same episode of the fear of a French
invasion in 1797 is described as follows: ‘panic became general. The immoderate
demand for money, after having caused the cracking of several country banks,
placed in serious difficulties the Bank of England, which was authorized to suspend
payments in species until the end of the war’ (p. 640). More generally in the same
entry, Ott commented that independently of the paper money system, whether John
Law’s or Proudhon’s, whenever a commercial disturbance occurs, a panic will
follow. The rumour spreads that some traders have gone bankrupt, that discounts
will not be paid for on the due date; the holders of banknotes, then, upon realizing
that guarantees are failing, want to change their money into some visible and
concrete value. People run to buy precious metals, or even any commodity. The
sellers of goods in turn are scared, raise their prices, and soon refuse to accept paper
money. The entire system collapses, only a few speculators resist amidst universal
ruin (p. 647). Similarly, Macleod, in the entry on CRISIS, COMMERCIAL for his
own →Dictionary of political economy (1863; see Chapter 13), writes:
In ordinary times, raising the rate of discount checks the undue expansion of
credit and the demand for notes, and prevents the efflux of gold. But in times
of panic, though of course the rate of discount ought to be raised to attract
gold from abroad, and to prevent its export, it has no effect whatever in check-
ing the demand for notes. It is then not a question of profit, but of existence.
When the power and the resources of the Bank are visibly diminishing before
the eyes of the commercial public, every one thinks only of his own security.
In such circumstances, raising the rate of discount has only the effect of making
the demand for notes stronger. Every one will rush to over-provide himself,
and then hoard away the notes.
(p. 646)
In the last two decades of the century, some dictionaries started reflecting on
the relationship of panics and crises.10 Raffalovich saw panics as one of the possible
features of crises (‘sudden accidents, which often have the features of a panic’:
CRISE, in →Guyot and Raffalovich, Dictionnaire du commerce, de l’industrie et
de la banque, 1898, p. 1127). White saw panics as the first phase of the crisis:
Hadley, in the entry on COMMERCIAL CRISES for the 3rd edition of →Johnson’s
new universal cyclopædia (1893), shifted the emphasis from bank runs onto
financial panics more generally. He pointed out that
Crises are often confounded with panics. There is almost always a connection
between the two; but a crisis really means something much wider and longer
than a panic. A panic starts among a group of speculators – perhaps in Wall
Street, perhaps in the Chicago Produce Exchange, perhaps in the London
money market. There are many failures, with much forced liquidation; but
when the liquidation is accomplished the matter may be soon over. The panic
is purely financial; the crisis which may follow is industrial. It affects not
merely the speculators, but the producers; not merely the dealers in securities,
but the laborers; not merely the bankers, but the community as a whole. Panics
are possible under any system, but the chance for crises, affecting all industry
for such a long time, is peculiar to modern industry, and forms perhaps the
gravest charge which the socialists can make against the existing industrial
system.
(pp. 423–424)
3.2.6 Bubble
The Oxford English dictionary reports the following figurative meaning of ‘bubble’:
‘3. Anything fragile, unsubstantial, empty, or worthless; a deceptive show. From
17th c. onwards often applied to delusive commercial or financial schemes, as the
Mississippi bubble, the South Sea bubble’; correspondingly, used as an adjective,
it means ‘Unsubstantial, fragile, delusive; often with reference to fraudulent
commercial undertakings, as in bubble company, scheme’. The dating for the refer-
ence to delusive financial schemes, however, is unsubstantiated.11 The earliest
example cited by the OED is Swift’s humorous poem ‘The bubble’ (1721). There
are some earlier occurrences, but none going as far back as the seventeenth century.
A piece titled Credit restored satirized the establishment of the South Sea Company
in 1711 as a means of financing Britain’s war debt. ‘Bubble’ premonitorily rhymed
with ‘trouble’: ‘Those extravagant Rogues would have spent in a trice, / What
they gain’d with much Danger and Trouble; / But our Governors prudent have
found this Device, / That they might not their Families bubble’ (Maynwaring, 1711).
Humorous writings were the cradle for most of the early occurrences of the term
‘bubble’ as applied to financial matters and, needless to say, the events related to
the South Sea bubble were the first target. No less than eight pieces employing the
Naming crises 71
term ‘bubble’ were published in 1720 and 1721. Some of them, carrying the term
in their title, were of a burlesque character (among these, there is a set of South
Sea bubble playing cards), while only a few writings that were trying more seriously
to make sense of the events used the term ‘bubble’.
An essential ingredient of the usage of the term ‘bubble’ at the time was the
fraudulent character of the schemes involved, made more apparent in its use as a
verb; before 1720, this was indeed the main implication of the usage as adjective
(‘bubble company’) or as a noun and a verb, as in the following example: ‘it is all
a Trick, a Juggle, to bubble and cheat a deluded Nation, and make them take a
glittering Bauble for true Gold, and make the Trade appear with a Face different
from what it ought to wear’ (Anonymous, [1713]). The first dedicated dictionary
entry, in →Mortimer’s New and complete dictionary of trade and commerce (1766),
is fully centred around the theme of deception:
BUBBLES, by which the public have been tricked and deceived, are of two
kinds, viz., 1. Those which we may properly enough term trading-bubbles.
And, 2. Stock, or funds-bubbles. The former have been of various kinds, and
the latter at different times; as in France and England in 1719 and 1720, and
when any remarkable alterations have been made, with regard to the property
of our monied corporations.
(n.p.)
Those who make stock-dealing their employment, and lie in wait to take
advantage of the innocent, the unwary, and ignorant, make it their business to
get such intelligence, and will answer their end, either by buying or selling
stocks; and, if such can obtain no real intelligence, to occasion a fluctuation
in the stocks, they make no great difficulty to invent such as will answer their
purpose. To which end, it is common to propagate one thing in the city, and
whisper another at St. James’s, and write different from either both at home
and abroad. Have we not known at critical conjunctures, that letters have been
72 Daniele Besomi
forged as coming from foreign correspondents, with intelligence only to raise
or fall stocks, according to the intention of the forgers?
An interesting observation is that dealing in stocks not only fails to produce any
wealth, but distracts people from engaging in the activities that really enrich the
nation: ‘while men’s minds are engaged in shuffling of property from hand to hand
among ourselves only, which makes us never the richer, with all the bustle of these
transactions, they neglect solid and useful commerce, which alone can make the
nation really richer’.
The term ‘bubble’ retained the connotation of fraudulent scheme through most
of the nineteenth century. In 1824, for instance, in his Treatise on the laws of
commerce and manufacture, the barrister Joseph Chitty still describes Bubbles as
‘deceitful enterprizes’ which, ‘by holding out a prospect of sudden wealth, introduce
into the minds of the commercial classes a spirit of gambling, and a contempt for
the slow profits of regular industry, while their failure involved all, who were even
remotely connected with them, in beggary and ruin’ (p. 253). In describing what
later became known as the ‘Bubble Act’,12 passed in 1720 and repealed in 1825,
Chitty explicitly refers to the ‘false pretense of public good’ and ‘mischievous
projects’, and qualifies the South Sea scheme as a ‘fraudulent design’ (pp. 254–255).
An even stronger identification of bubbles with fraud is found after the railways
speculations of 1847, when criminal law was invoked to deal with those ‘who
perverted . . . the Stock Exchange . . . so openly as to “rig” bubble schemes,
concocted to rob the public, up to bubble premiums, and who received large bribes
for so openly rigging the market’ (Anonymous, from the Railway Gazette, 25
November 1848, cited in Salt, 1850, p. 82). Similarly, but less strongly, towards
the end of the century we find in a newspaper that the ‘Union [Générale] was a
bubble company of the ordinary kind, a vulgar swindle’ (Anonymous, 1882).
In two entries on bubbles in →Palgrave’s Dictionary of political economy (1894),
the overtly fraudulent implication of bubbles was set aside to focus on the inflated
value of stocks. Bubbles were defined as follows: ‘joint-stock undertakings the
shares of which were “blown up by the air13 of great words”’ (J. Bonar, BUBBLE
ACT, Vol. 1, p. 182); and ‘term . . . commonly applied since the 17th century to
any unsound commercial undertaking accompanied by a high degree of speculation’
(Nicholson, BUBBLES, HISTORY OF, p. 182). Note that while it is made clear that
the object of speculation is an ‘unsound undertaking’, it is not specified what a
‘sound undertaking’ would be.
The following dictionary entry dedicated to bubbles was published in
→Seligman’s Encyclopaedia of the social sciences. W. L. Thorp correctly traced
the first usage to early in the eighteenth century, reported William Blackstone’s
narrow definition (in the commentary on a statute enacted in 1721: Blackstone,
1822, Book 4, p. 116) as ‘unwarrantable undertakings by unlawful subscription’,
and noted: ‘But the term has since acquired a more general application, and is
used with reference to any situation in which the cumulative effects of widespread
speculation has been to enhance prices to a point of having no apparent relation to
the object of speculation’ (BUBBLES, SPECULATIVE, 1931, p. 24). After tracing the
Naming crises 73
history of some famous bubbles, Thorp added that ‘the bubble is fundamentally a
psychological phenomenon. It is based on the principle of projection. The speculator
. . . sees only the anticipated profit. The character of his position, emotional rather
than rational, makes him extremely susceptible to rumor, and assures a severe crisis
when the reaction sets in’ (p. 27).
The theme of rationality returned with force in the 1980s, when rational expec-
tations theory brought a new perspective on bubbles and opened a lively discussion
on the phenomenon – more precisely, on whether such a phenomenon exists. The
dividing line passes through the very definition of the term. Those who admit the
existence of the phenomenon incorporate in their definition a cumulative mech-
anism in which a price rise is driven by expectations of further price rises, and
explicitly stress that such phenomena are intrinsically fragile. In the entry INTERNET
BUBBLE for →Darity’s International encyclopedia of the social sciences (2008),
for instance, R. J. Klotz defines a bubble as ‘an unsustainable increase in the price
of an asset type driven by the expectation of further price increases rather than
fundamental characteristics. Bubbles are a concern of social science since they
result from individual calculations about the behavior of others in society’ (p. 109).
Similarly, the →VNR Dictionary of business and finance (1980) defines a BUBBLE
as an ‘investment that may or may not be intrinsically and dangerously speculative,
but which becomes so as irrational buying pushes it higher and higher, far beyond
the real value of its underlying assets’. Spotton and O’Hara write that ‘Speculative
bubbles describe a process denoting movements in asset prices that cannot be
justified on any reasonable economic grounds, and are not sustainable’, and explain
that they ‘occur when competitive bidding, motivated by repetitive and self-
fulfilling expectations of capital gains, drives up asset prices in excess of any
reasonable value for the asset’ (SPECULATIVE BUBBLES AND FUNDAMENTAL
VALUES, in →O’Hara’s Encyclopedia of political economy, 1999, pp. 1079–1080).
Kindleberger writes of bubbles as a condition in which ‘Rising prices [lead] to
further price increases’ (FINANCIAL CRISES, in →Deane and Kuper, A lexikon of
economics, 1988, p. 138), and in →The new Palgrave loosely defines them ‘as a
sharp rise in price of an asset or a range of assets in a continuous process, with the
initial rise generating expectations of further rises and attracting new buyers –
generally speculators interested in profits from trading in the asset rather than its
use or earning capacity. The rise is usually followed by a reversal of expectations
and a sharp decline in price often resulting in financial crisis’ (BUBBLES, in 1st
edition 1987; and BUBBLES IN HISTORY, in 2nd edition, 2008). In the entry on
BUBBLE in →Dobson’s Bulls, bears, boom, and bust, it is explained that ‘when
prices for a commodity rise far beyond the intrinsic value of that commodity, a
bubble can occur. Speculators continue bidding the price up until, quite abruptly,
demand or interest in the commodity evaporates’ (2007, p. 4). In the entry BUBBLE
THEORY (OF SPECULATIVE MARKETS) in →Lee and Lee, Encyclopedia of finance
(2006, p. 40), bubbles are defined as referring ‘to security prices that move wildly
above their true values and eventually burst’. In the entry on BUBBLES for
→Darity’s International encyclopedia of the social sciences (2008), J. E. Leightner
writes of the phenomenon taking place ‘when there is excessive investment in
74 Daniele Besomi
financial assets, such as stocks, or in real assets, such as housing. The bubble
“bursts” when the value of the investment plummets’ (p. 378).
These definitions are characterized by the absence of a precise reference as to
what the ‘true value’ is, or when speculation becomes ‘excessive’. The alternative
approach to bubbles takes instead as a starting point the notion of ‘fundamental
value’ of an asset, defined as ‘the present value of the stream of cash flows that
its holder expects to receive. These cash flows include the series of dividends
that the asset is expected to generate and the expected price of the asset when sold’
(S. S. C. Steimetz, BUBBLES, in →Henderson’s Concise encyclopedia of economics,
2007). Bubbles are said to occur ‘when an asset’s price movements do not reflect
changes in the asset’s fundamental value’ (Baddeley, SPECULATIVE BUBBLES, in
→Snowdon and Vane, An encyclopedia of macroeconomics, 2002, p. 668; simi-
larly, Iraola and Santos, SPECULATIVE BUBBLES, in →The new Palgrave, 2008)
or ‘if the price exceeds the asset’s fundamental value’ (Brunnermeier, BUBBLES,
in →The new Palgrave, 2008); similarly, if ‘an asset is persistently trading at a
price higher than its fundamental value, we would say that its price exhibits a bubble
and that the asset is overvalued by an amount equal to the bubble – the difference
between the asset’s trading price and its fundamental value’ (Steimetz, BUBBLES,
cited). If investors are subject to rational expectations, however, such a situation
is impossible, as markets are by definition bound to be efficient. ‘Bubbles’ are
thus defined in such a way as not to exist in a rational world, and thus to be inter-
preted – if observed ex post, as the ‘fundamental value’ taken as a reference point
is not an intrinsic feature of the asset but the unobservable result of expectations
concerning its future value – as irrational phenomena.14
3.2.7 Depression
The earliest occurrences of the term ‘depression’, or more frequently of the corre-
sponding verb ‘to depress’, in relation to economic matters, refer to the old-fashioned
figurative meaning reported in the Oxford English dictionary as follows: ‘4. Fig.
The action of putting down or bringing low, or the fact or condition of being brought
low (in station, fortunes, etc.). Now rare’. The earliest occurrences date from the
late seventeenth century, and further examples are found throughout the eighteenth
century. A few instances will suffice. A writer argued that high interest discourages
trade and wholly depresses land (Anonymous, 1692, pp. 60–61). Ferguson reckons
that the constitution of the India Company by an act of the Scottish Parliament would
‘encrease the Trade, and raise the grandeur of the Dutch, and [. . .] depress and lessen
the Trade of England’ (1695, p. 58). In Paxton, 1704 we find: ‘this . . . must naturally
depress the Value of our Goods’ (p. 64). Bath laments that ‘heavy Taxes [. . .]
impoverish the People, and depress our Trade (1734, p. 52).
Towards the end of the eighteenth century, we find the first occurrences
of the term used in the sense of ‘5. a. A lowering in quality, vigour, or amount;
the state of being lowered or reduced in force, activity, intensity, etc. In mod. use
esp. of trade; spec. the Depression, the financial and industrial ‘slump’ of 1929 and
subsequent years. Also attrib.’ (OED). Interestingly, among the first occurrences
Naming crises 75
we find ‘depression’ used in contraposition to ‘prosperity’, both referring to the
economic state of the country as a whole. In The wealth of nations, for instance,
Smith writes that ‘statuaries and painters are not likely to be worse rewarded in
times of wealth and prosperity, than in times of poverty and depression’ (1776,
1979 ed., p. 208). After the term ‘depression’ in this sense became widespread
enough to make it to the title of a publication (Brand’s pamphlet A determination
of the average depression of the price of wheat in war, 1800), Francis Randolph
suggests the parameters by which prosperity and depression are to be measured:
‘the return of the Customs, the price of Stock, the facility of negociating loans,
and the favourable terms on which they are borrowed, compose a sort of state
barometer, which we are told to consult, if we would ascertain the height of Britain’s
prosperity. Should these indicate no depression,15 we assume a lofty attitude’ (1808,
pp. 71–72). By 1823, the pair ‘prosperity and depression’ made it to the title of a
book by Mathew Carey, The crisis: A solemn appeal . . . on the destructive effects
of the present policy of this country, on its agriculture, manufactures, commerce,
and finances. With a comparison between the extraordinary prosperity of Great
Britain, and the general depression in the United States.
Although the early usage of ‘prosperity’ and ‘depression’ as antonymous indicates
that writers were already aware of the alternation of good and bad states of affairs,
the emphasis soon shifted to crises and the causes of their outbreaks. The terminology
in use from the 1837 crisis onwards is characterized by the predominance of the
words ‘crisis’ and ‘panic’ (see Sections 3.2.8 and 3.2.5 respectively). Towards the
middle of the nineteenth century, the term ‘depression’ indicated a low or very low
level of, say, prices, as in the following examples: ‘when the price is ruinously
depressed’ (Macleod, CREDIT, in his own →Dictionary of political economy, 1863,
p. 588); or: when, in the case of abundant crops, ‘the surplus is thrown upon the
market, it cannot fail . . . to cause a ruinous depression. Now, this was the precise
situation of this country at the end of the war. . . . The first luxuriant crop must have
occasioned a ruinous decline of prices’ (McCulloch, CORN LAWS AND CORN
TRADE, in his own →Dictionary of . . . commerce and commercial navigation, 1834,
p. 412). The notion of ‘depression’ as a specific state of affairs was not really explored,
witnessing that the idea of a ‘cycle’ characterized by the alternation and chained
causation of prosperity and depression was not yet ripe (see Section 3.2.9). By the
late 1870s, however, the term ‘depression’ became predominantly applied to the
new economic situation, and was consistently used to describe economic distur-
bances in the last two decades of the century. Its meaning, however, changed again.
The new notion of ‘depression’ arose from the necessity of distinguishing
the sudden and violent character of crises, as they had occurred from the second
to the sixth decades of the century, from the sluggish and persistent character of
the depressions of the mid-1870s, the mid-1880s and the mid-1990s. While on
previous occasions the recovery from crises was relatively quick, the effects of
the crisis of 1873 were still felt in 1879. By 1876, the question became (as aptly
titled by The Economist) ‘Why the commercial depression is so protracted’
(Anonymous 2, 1877), and within three years the word ‘depression’ was being used
more frequently than the word ‘crisis’ in the titles of writings (see Figure 3.3). The
76 Daniele Besomi
terminological switch, however, was not accompanied by a reflection on the precise
meaning of terms. There seems to have been a sentiment that the state of trade
differed from the old crises, and there were indeed some attempts to compare them,16
but without explicitly codifying the outcome of the inquiry into definitional
statements. The few attempts at defining the depression did not distinguish this
concept from the old notion of glut. Price, for instance, wrote as follows: ‘What is
the meaning of the expression – commercial depression? Want of buyers, deficiency
of buying power, markets unable to take off the goods made and repay their cost
of production. Makers and sellers are depressed; they cannot find the indispensable
buyers’ (1879, p. 270); similarly, Millington: ‘“Depression of Trade,” simplified,
means a limitation upon the part of the community to purchase the various
commodities for subsistence which have been produced; hence the various markets
are glutted with valuable goods for which purchasers are not forthcoming, from
which cause the whole commercial community are injuriously affected and
workmen thrown out of employment’ ([1885], p. 3).
Dictionary writers attempted instead to distinguish between crises and depres-
sions, precisely focusing on the sudden and violent character of the former as opposed
to the chronic and creeping features of the latter. This is exemplified by the entry
on CRISES (COMMERCIAL AND MONETARY) for →Bliss’s Encyclopedia of social
reform, 1897: ‘A time of general difficulty and pressure in commercial and monetary
circles, if acute, is called a crisis; if prolonged it is usually called a period of
depression’ (p. 430). Notably, some of the first of such entries were in French
(Laveleye’s CRISE in the →Grande encyclopédie, 1886–1902 (see Chapter 15), and
Raffalovich’s CRISE, in →Guyot and Raffalovich, Dictionnaire du commerce, de
l’industrie et de la banque, 1898) and German (Herkner’s KRISEN, in →Conrad,
Handwörterbuch de Staatswissenschaften, 1892 (see Chapter 18) and Wellstein’s
KRISEN, in →Bruder’s Staatslexikon, 1911, p. 525), and all referred to the English
term ‘depression’ (the corresponding passages are cited in Section 3.2.8.4).
When the notion of ‘cycle’ had firmly taken over the emphasis on ‘crises’ in the
theoretical discussion on economic disturbances, the term ‘depression’ changed
meaning again. In most twentieth-century dictionaries the term is associated either
with the descending phase of the cycle generally, or with a specific phase of the
cycle. The former of these meanings echoes the opposition of ‘prosperity’ and
‘depression’ in use in the early nineteenth century. The setting, however, is new,
as the reference is not to generic states of good and bad trade but to a systematic
alternation, and mutual causation, of phases of intensification and regression of
economic activity. An early example is found in White’s entry on COMMERCIAL
CRISES in →Lalor’s Cyclopædia of political science, which is remarkable for
the first appearance of the pendulum analogy for describing the cycle: ‘These
undulations of trade, of alternately high and low prices, of alternate activity and
depression in business, have their root in the mental and moral constitution of
mankind’ (1882, p. 524). ‘The pendulum has now (1881) begun to swing back,
and there are many signs that the country has started on a new career of prosperity,
to be succeeded by another crisis, another period of commercial depression,
revulsion, stagnation’ (p. 525). Similarly, →Pitman’s business man’s encyclopedia
Naming crises 77
uses the term as follows: ‘Just as a period of industrial activity leads to a period of
depression and sooner or later to a commercial crisis, so a period of depression
leads up to another spell at industrial activity’ (COMMERCIAL CRISIS, 1927).
Similarly, F. Vinci, in the entry CRISI ECONOMICA for →the Dizionario di politica
by the Partito Nazionale Fascista, describes a cycle based on the excess of
investment characterizing prosperity and the supervening of pessimism during
depression, and explains that a new cycle will follow this phase (1940, p. 690).
More recently, C. D. Romer’s entry on BUSINESS CYCLES in the →Fortune
encyclopedia of economics also writes in similar terms, but in an interpretative
framework resembling more the early nineteenth century’s than the one prevailing
a century later. The definition runs as follows: ‘Periods of economic expansion
are typically called booms; periods of economic decline are called recessions or
depressions. The combination of booms and recessions, the ebb and flow of
economic activity, is called the business cycle’ (1993, p. 173). The business cycle,
however, is not seen as a necessity: the alternation of booms and depressions is
chronological but not causal, precisely as a succession of heads is bound to alternate
with a succession of tails in the throwing of a coin. Indeed, as the author herself
suggests, the term ‘fluctuation’ would better represent the phenomenon than the
term ‘cycle’ (see Sections 3.2.9 and 3.2.10 on cycles and on fluctuations).
Most dictionary entries in the twentieth century referred to ‘depressions’ as a
specific phase of the cycle: ‘The typical business cycle is usually divided into four
successive stages: recovery, prosperity, recession, and depression’ (BUSINESS
CYCLES, in →Horton et al., Dictionary of modern economics, 1948), or ‘The
fluctuation is from a period of prosperity, or boom, down through a recession, to
depression, or slump, then a recovery to prosperity through a period known as
revival’ (TRADE CYCLE, in →Taylor, A new dictionary of economics, 1966). Medio
stresses that the name of the four traditionally recognized phases may vary, and
suggests that the two main phases – expansion and contraction – are divided
as follows: the recovery, during which the system begins raising from the lowest
point; the prosperity, or boom, when the system raises above the normal level to
reach the peak; during the recession the system returns down towards its normal
level, while during the depression it keeps falling below that point until the
movement is reversed again at the trough (CICLO, in →Lunghini, Dizionario di
economia politica, 1983, Vol. 10, p. 12). There are also, however, divisions
in stages in a different number of phases. Weinberger, for instance, reported the
five phases listed by the Harvard Institute: ‘Depression, Recovery, Prosperity,
Financial Strain, Industrial Crisis’ (KONJUNKTUR U. KRISEN, 1929, in the 5th
edn of the →Staatslexikon, edited by Sacher – English in the original). →Munn’s
Encyclopedia of banking and finance distinguished instead seven phases: crisis,
emergency liquidation, depression, readjustment, revival, prosperity, and over-
extension and speculation. The depression is described as follows: ‘This is a period
of “hard times” in which the disturbance in the normal equilibrium between supply
and demand is still felt. Prices are low and efforts are made to work off the excess
of goods. There is a drastic curtailment of production, resulting in wide-spread
unemployment, reduction or elimination of profits, accumulation of money supply
78 Daniele Besomi
through the deflation of credit, and a general practice of economy. There is a
constant “feeling for the bottom” in the price movement’ (BUSINESS CYCLE, in
all editions from 1924 to 1993).
Finally, some writers reserve the name ‘depression’ for particularly deep
contractions of economic activity. In dictionaries this distinction seems to date
from Burns’s entry on BUSINESS CYCLES: GENERAL in →Sills’s International
encyclopedia of the social sciences, which used ‘recession’ to indicate moderate
downturns lasting about a year and ‘depressions’ to indicate longer and deeper
contractions (1968, p. 229).17 Mullineux takes up the emphasis on the severity of
the contraction, and distinguishes recessions from depressions on the grounds of
whether the contracting phase of the economy shows a ‘slower than average growth
(a recession), or a period of negative growth (a depression)’ (BUSINESS CYCLES,
in →Kuper and Kuper, The social science encyclopedia, 1985, p. 83). Similarly,
we find in →Hillstrom’s Encyclopedia of small business that ‘A particularly severe
recession is known as a depression’ (BUSINESS CYCLES, 2007, p. 114); Géhanne
also contrasts the mild character of a recession with the ‘brutal’ downturn and the
cumulative process associated to a depression (CRISES ET FLUCTUATIONS
ÉCONOMIQUES, in →Géhanne, Dictionnaire thématique des sciences économiques
et sociales, 1995, Vol. 2, p. 84). Pollard emphasizes instead the duration aspect.
He explains that ‘By general consent’, the declining phases of none of the short-
and medium-length cycles are normally termed depressions. ‘That term is reserved
for longer periods of more serious adversity on an international scale, in particular
the Great Depressions of c. 1873–1896 and of the 1930s. By analogy, the distressed
years following the Napoleonic wars and the years since the downturn of 1973 have
also been included in that category. In view of the fact that these seem to have
occurred at fairly regular intervals, attempts have not been lacking to explain them
as part of an alternating movement also.’ Pollard thus discusses depressions in the
context of long waves (DEPRESSIONS, in →Eatwell et al., The new Palgrave, 1987).
Keen points out that while ‘There is an accepted statistical definition of a recession,
developed by the National Bureau of Economic Research, as the period from the
peak to the trough of a range of cyclical economic data’, ‘No such accepted
statistical definition exists for the much more severe and infrequent phenomenon
of a depression. At the minimum, depressions are recessions extended in either
severity or duration; symptomatically, they are marked by financial crises and
falling prices’ (DEPRESSION, ECONOMIC, in →Darity, International encyclopedia
of the social sciences, 2008, Vol. 2, p. 302).
3.2.8 Crisis
3.2.8.1 Etymology
The term ‘crisis’ originates from a Greek term meaning ‘discrimination’, ‘decision’,
and from the corresponding verb meaning ‘to decide’. The original usage in English,
dating from the sixteenth century, was in the field of medicine; the term indicates
‘The point in the progress of a disease when an important development or change
Naming crises 79
takes place which is decisive of recovery or death; the turning-point of a disease
for better or worse; also applied to any marked or sudden variation occurring in
the progress of a disease and to the phenomena accompanying it’. Later, it was
also used in a figurative sense as ‘A vitally important or decisive stage in the
progress of anything; a turning-point; also, a state of affairs in which a decisive
change for better or worse is imminent; now applied esp. to times of difficulty,
insecurity, and suspense in politics or commerce’ (OED).
3.2.8.2 Usage
The first, isolated occurrence on record of the use of the term to indicate a financial
crisis is found in the dedication of a pamphlet with some Reflections on the late
alarming bankruptcies in Scotland, published in the wake of the June 1772 financial
crisis (Boswell, 1772). It was ‘Addressed to all ranks: But particularly to the different
classes of men from whom payments may soon be demanded. With advice to such,
how to conduct themselves at this crisis.’ The term ‘crisis’ was occasionally used
in an economic sense at the time of the 1793 and 1797 crises, and in correspondence
with the high price of provisions of 1800, but it was only with the panic of 1825
that it began to recur with some frequency, mostly within the text. Its final con-
secration took place with the 1837 crisis, on which occasion it became the most used
catchword in titles, and so it remained from the 1847 panic until the mid-1870s,
when the situation was better described by means of the term ‘depression’ (see
Section 3.2.8.4). ‘Crisis’ was normally accompanied by the qualifier ‘commercial’,
occasionally by ‘monetary’, ‘financial’ and more rarely by ‘industrial’. Later, the
adjective ‘economic’ encompassed the previous qualifiers to stress the pervasive
character of crises. As Huart (1911) explained, ‘we prefer to use the qualifier “eco-
nomic” rather than “commercial” as used by Juglar. A commercial crisis, in fact, is
but one of the forms of the crisis, and as such it does not sufficiently characterize
the universality of modern crises. Economic crisis – a term already used by Yves
Guyot (Le commerce et les commerçants, Ch. XI, p. 180) and by W. G. Langworthy-
Taylor, La théorie cinématique des crises économiques (Lincoln, Nebraska, 1904)
– indicates instead that all branches of the national economy are affected – not only
trade, but also industry, finance, agriculture, the banking system, etc.’.18
The relatively late use of the term ‘crisis’ applies to both Britain and the United
States. In French, the expression ‘crise commerciale’ came into common use a few
years earlier than in English. It is found in an article in Mercure de France, where
it is remarked that ‘the political crisis is not less severe than the commercial crisis’
(Anonymous, 1810), and most famously by Sismondi in his detailed discussion of
the phenomenon in 1819 (p. iv). It is thus in this language that the term was first
recorded in dictionaries, beginning with Lemonnier’s CRISES COMMERCIALES in
Duckett’s →Dictionnaire de la conversation et de la lecture (1835). The first such
entry in English is due to Macleod in 1863; meanwhile, eight more French entries
were published,19 two of which translated into Italian;20 an original Italian entry was
published in 1857 by Boccardo (see Chapter 11), and three German dictionaries
also preceded Macleod, beginning with Roscher’s entry dated 1849.21
80 Daniele Besomi
The term ‘crisis’ returned to prominence in the titles of writings on these
phenomena with the panics of 1893 and 1904, and remained predominant until the
First World War. After the war, the term ‘cycle’, which had already been preferred
by a few occasional writers in the previous decades, fully conquered the field. By
the mid-1920s, the notion of ‘cycle’ had successfully replaced that of ‘crises’
(dictionaries, however, have been slow to catch up22), except for a temporary resur-
gence in 1931–1932. Since the late 1990s, however, there has been a strong
resurgence in the use of the word ‘crisis’. In the 1960s and 1970s, writings with
‘crisis’ or ‘crises’ in the title accounted for about 10 per cent of the total writings
listed in Econlit on economic troubled times. This percentage rose to about 20 per
cent after the depression of the early 1980s and suddenly jumped to about 50 per
cent in 2000, remaining well over 30 per cent even in the prosperous years after
2004, apparently rising again (but data are not yet final) with the 2008 financial
crisis (see the Appendix to this chapter).
3.2.9 Cycle
3.2.9.1 Etymology and early uses of the term
The term ‘cycle’ (deriving from the Latin ‘cyclus’, in turn deriving from the
Greek word meaning ‘circle’ and ‘wheel’) carries different meanings in various
90 Daniele Besomi
disciplines, in particular in astronomy, physics, chronology,32 medicine, botany,
zoology, geology, literature.
Three of these usages recur in the economic literature on the issues we are
discussing here. The most common usage in the last eight decades of the nineteenth
centuryt with some occasional occurrences also in the twentieth century, is that of
‘cycle’ as ‘an interval of time during which a characteristic, often regularly repeated
event or sequence of events occurs’ (American Heritage 1), or ‘A period in which
a certain round of events or phenomena is completed, recurring in the same order
in succeeding periods of the same length’ (OED, 2b). For example, Petty referred
to the average duration of the ‘Cycle, within which Dearths and Plenties make their
revolution’ as the time unit to evaluate ‘the ordinary rent of land in corn’ (Petty,
1662, pp. 24–25), and to the ‘Cycle of time, as within which all contingencies of
Land revolve’ as a time unit for assessing taxation on land (p. 31). Similarly, Burke
wrote that the Government ought ‘seriously to consider that years of scarcity or
plenty, do not come alternately or at short intervals, but in pretty long cycles and
irregularly’ (1800, p. 32), and Cooke referred to ‘cycles of favourable and
unfavourable seasons for the production of grain’ (1842, p. 8). More commonly,
however, the word was loosely used to indicate an interval in time in expressions
such as ‘cycle of prosperity’ or ‘cycle of depression’, as, for instance, in this passage:
‘cycles of abundance which are supposed to alternate with cycles of dearth every
five years’ (Anonymous 1, 1849, p. 573). An interesting example of this usage is
found in an article in the Morning Chronicle: ‘after another cycle of prosperity,
renewed speculation springs up, a fresh revulsion occurs, a drain of gold follows,
to curtail their issues, a commercial epidemic ensues, which, after a repetition of
the calamities which happened in 1825, were repeated in 1836–37, were seriously
threatened in 1838–9, broke out with more intense mischief in 1847–48’
(Anonymous, 1855). Although the passage refers to a repeating pattern of events,
the word ‘cycle’ is only used to refer to an unspecified period of time during which
business was prosperous.
The other two notions of ‘cycle’ both refer to recurring events following the same
pattern. One of them, however, focuses on what happens within a single cycle,
while the other refers to the succession of cycles. The former of these is defined
as follows: ‘A single complete execution of a periodically repeated phenomenon’
(American Heritage: 2a; see also OED: 4 or Grand Robert: 2). This usage of the
term ‘cycle’ stresses the order in which events occur within each cycle; as an
example, one may consider the cycle of a washing machine which goes through a
number of phases, from pre-washing to spinning, following a constant order, but
which stops after the last one, and only resumes when the button is pushed again.
The other notion focuses more on the repetition of the sequence than on the sequence
itself within a single course; this is somehow taken for granted. It is defined as
follows: ‘A recurrent round or course (of successive events, phenomena, etc.); a
regular order or succession in which things recur; a round or series which returns
upon itself ’ (Oxford English dictionary: 3a; see also American Heritage: 2b
or Grand Robert: 2). An example is the working of a piston in a combustion
engine.
Naming crises 91
A clear example of the usage of ‘cycle’ in the sense of one single course of events
is found in a pamphlet by Cargill, describing how the British economy between
1822 and 1825 ran through ‘a cycle of enterprise, prosperity, speculation, madness,
and ruin’ (Cargill, 1845, p. 27). The most famous instance of this usage of the world
‘cycle’ is surely Overstone’s characterization of the ten phases through which the
general state of trade runs:
The history of what we are in the habit of calling the ‘state of trade’ is an instruc-
tive lesson. We find it subject to various conditions which are periodically
returning; it revolves apparently in an established cycle. First, we find it in a
state of quiescence, – next improvement, – growing confidence, – prosperity,
– excitement, – overtrading, – convulsion, – pressure, – stagnation, – distress,
– ending again in quiescence.
(Loyd, 1837, p. 31)
This passage was often cited by Overstone’s contemporaries, and is still referred
to nowadays as an early example of a cyclical description of the economy. It should
be noted, however, that this is the only reference in the entire pamphlet to such a
circular course of events. The description has a definite starting and arriving point,
quiescence, and there is nothing to suggest how and why after reaching quiescence
the cycle should resume its course. Thus, three of such cycles later, the Liverpool
Mercury could note that ‘Overstone has described accurately the cycle which we,
to our sorrow, see has made another turn’ (Harvey, 1867). This is no accident, but
reflects the prevalent state of the theory of crises prevalent throughout most of
the nineteenth century, based on the credit–speculation–overtrading–collapse
mechanism. These writers clearly understood how a state of prosperity could easily
tempt traders into new and hazardous speculations, and that bankers could in turn
be tempted to finance such speculations, which would at some point become
excessive, until the entire cumulative mechanism suddenly broke down. But they
considered in some way that prosperity was the ‘normal’ state of trade, which would
establish itself as a matter of course, and accordingly felt no need to explain how
and why after the liquidation improvement would take place and the cycle resume
– except perhaps noting that the ‘liquidation’ of bad debts set the conditions
for the resumption of credit. On the other hand, these writers had the analytical
problem of characterizing the common features of these events, and the naming of
a number of phases was an important step in the description of their morphology.
The usage of the term ‘cycle’ as a succession of stages in one round of the
phenomenon simply reflected its theoretical understanding and the analytical
necessities of the time.
Most of the writers using ‘cycle’ with reference to a single course of events
were aware of their periodical recurring; when they wanted to stress this fact, they
added a specific remark, e.g. stressing the beginning of one of those cycles (‘. . . a
new glut and a new panic shall come to complete the now regularly recurring
commercial cycle’: Anonymous 2, 1850, p. 113; ‘many of the [American] States
[. . .] have gone through all the vicissitudes attending the creation, culmination, and
92 Daniele Besomi
final liquidation of an immense amount of bank capital. They have now commenced
a new commercial cycle, with the experience of the past for their guide and caution:
Anonymous 1, 1843, p. 659; ‘the new commercial cycle which we may consider
as now beginning [after the recent shock]’: Anonymous 1, 1857) or by stressing
their periodical character (‘From the time of the South Sea Bubble, or even earlier,
the public have passed through Periodical cycles, very similar in their characters’:
Anonymous 2, 1857). The following extract is illustrative of the usage of ‘cycle’
in the sense of a single course of events but also of the repetition of such cycles:
As a last example of this usage let us consider this definition offered by Baker:
Explanation of terms. – The periods of about ten years each which have been
so constantly marked by undue extension of Trade beyond the natural growth
of the means to sustain them, resulting in an inflation and relative collapse of
Credit, are repeatedly referred to by the use of the words cycle and credit cycle.
(Baker, 1876, p. 203)
The sense in which the word ‘cycle’ was used by most writers in the first half
of the twentieth century, and by some schools of thought in the later part of the
century, in expressions such as ‘business cycle’ or ‘trade cycle’, implies not only
the idea that each complete course of events follows a path similar to the others,
but also that such paths are chained to each other, chronologically and causally.
This idea goes beyond the awareness of the fairly regular recurrence of crises
through similar steps. Reflections on periodicity date back to the end of the
eighteenth century, were fairly common by the 1830s, and by the 1850s most writers
were convinced that crises returned with decennial regularity – so much that soon
some felt the need to deny that this was the case (Besomi, 2010a); the recognition
of specific phases is as old as the attempts at explaining the phenomenon by means
of endogenous mechanisms.33 The notion that all the various phases of the cycle
are chained to each other required that one renounced the idea that prosperity is
the normal state of the economy and as such does not require an explicit explanation,
and identify instead a turning point actively engendering a reversal of the movement.
This step was theorized by Juglar in 1889 (implicitly recognizing that it was lacking
Naming crises 93
in his previous work: pp. xvi, 4, 21), but there are earlier – albeit occasional –
instances of writers incorporating complete cyclical mechanisms. The first seems
to be due to Wade, who produced two cobweb-like models in 1826 and 1833;34
Corbet also explained how ‘one excess, like the high and low or hot and cold fits
of a fever, always [gives] birth to and [generates] another’ (1841, pp. 105–106).
The associated use of the term ‘cycle’ is illustrated by this passage, where the
concept, remarkably is likened to a ‘natural law’:
From past experience, we may learn, that the commercial world has its cycle
of events, so fixed and invariable as to seem almost like a natural law. When
trade is bad, and has reached a certain point of depression, it takes a turn for
the better: little by little it improves: it becomes good – very good – madly
good, and then a change, often an abrupt one, takes place, and it again becomes
bad – again to run the same appointed course. This uniform cycle, I am sorry
to say, has just brought to us the melancholy vicissitude of a paralyzed trade,
and, along with it, its usual incidents of extravagant theories, bold promises,
thoughtless credulity, discontent with the present condition of things, and an
angry impatience for some change.
(Anonymous, 1848, p. 3)
Several other examples are available. The following passage closes the circle of
Overstone’s description cited above by stating explicitly that the cycle recommences
from where it ended:
We find Lord John [Overstone] likewise laying down a dreary theory of trade
cycles – first, the growth of trade – then the prosperity of trade – then the
inflation of trade – then distress and distrust – then the bursting of the trade
bubble – and then the beginning of the cycle anew again. In fact his Lordship
seems to hold this periodicity of fortune and misfortune, of extravagance and
ruin, necessary to the maintenance of circulation in a healthy state, and to
preserve its convertibility and par. . . . Mr Disraeli holds Lord John’s cycle
theory in as little respect as he does his ancient instances of commercial distress.
(Anonymous 3, 1857)
This aspect is probably what irritated the critics of the emerging notion, who found
the term ‘cycle’ convenient for summarizing the target of their attacks. Laveleye,
for instance, disputing the ‘received theory, more or less clearly devised and very
firmly held, that periods of commercial prosperity and adversity recur as regularly
as the tides’, used the expressions ‘economic cycles’ (cycles économiques) and
‘theory of cycles’ (1865, pp. 293 and 297). Cardoza also denied the existence of
cycles, maintaining that the course of events leading to the seemingly periodic crises
is not uniform; yet he uses the word ‘cycles’ as the title of the corresponding section
of his article (1869, pp. 693–694).
Particularly important for this usage of the word ‘cycle’ is a seminal paper by
John Mills, where he depicted the periodical ‘waves’ through which commerce
fluctuates, described the typical phases of a ‘normal’ cycle of credit, their ‘suc-
cessional order’ and causal chaining, represented them graphically (with Jevons’s
help), and characterized the whole phenomenon as ‘facts of a new order’. So far
as he described the ‘type-cycle of credit’, the term ‘cycle’ was used in the singular
(so to speak). The title of the paper, however, uses the term with references to
the succession of cycles: ‘On credit cycles, and the origin of commercial panics’
(1868). The terminology was approved by Jevons (1878, 1884 reprint, p. 224),
who obviously had in mind the astronomical meaning of cycle. So did Jevons’s
commentators, both approving and critical towards the sunspots theory or towards
Jevons’s rigid notion of periodicity, and this use of the term definitely won
acceptance in the profession.
the independence of the totality of market conditions from the actions and
aspirations of the economic agents. The assertion of the dependence of business
men upon conditions not of their making involved a criticism of the atomism
of classical economics, for the latter ignored the organic interdependence of
economic processes and maintained that all profits are earned gains.
(p. 204)
Later,
Naming crises 97
With the spread of the historical descriptive method of economic study and
an increase in the number of monographic studies of the various aspects of
conjuncture in Germany, the concept suffered a slight but significant change
in meaning. The emphasis now was not on the independence of the market
from the individual but on the incalculable variability of market conditions,
which in the simultaneous oscillations of supply and demand presented a
puzzling problem from the point of view of equilibrium economics.
(ibid., p. 204)
More empirically and less historically oriented was the discussion of ECONOMIC
CONJUNCTURE written by Konyus for the Russian →Granat Encyclopedic dic-
tionary (1933), on which see Chapter 21, Section 21.3.
The term also has equivalents in French and Italian. In →Romeuf’s Dictionnaire
des sciences économiques (1956), Sauvy wrote of CONJONCTURE that ‘the term
is still used with a flavour relating to its origin, medieval astrology. It was used in
the 18th century [presumably in France] in the sense of “movement of business,
of the economic situation” (in a non-static meaning of “situation”); then it disap-
peared, to return from the Russian and German languages’, where the term desig-
nates both the science and its object. The author of the entry on CONJONCTURE in
→Suavet’s Dictionnaire économique et social (1962) explains that up to a few
decades earlier the word was used to designate ‘a combination of circumstances’
(Larousse) while ‘Recently it has acquired a new meaning in economics: it desig-
nates on the one hand the economic situation at a given time; on the other, it
designates the science studying this situation and its evolution’ (p. 103). Similarly,
in Italian, Cipolletta reports that CONGIUNTURA ECONOMICA is the combination
of socio-economic factors determining, at different times, a specific evolution of
economic systems. But while the previous entry referred the term to ‘a given time’,
here it is stressed that it does not give a picture, but a ‘movie’ which indicates short-
time tendencies (12 to 18 months) (in →Bedeschi, Enciclopedia delle scienze
sociali, Vol. 2, 1991).
The issue was taken up in the following edition (the 7th) of the same dictionary,
specifying that the new growth theory understands that there is an equilibrium
growth rate at which there is normal utilization of capacity, so that the cycle
can be defined in terms of deviations from such level (Mälich, KONJUNKTUREN,
1987, p. 614). More recently, a short entry in →Hohlstein et al., Lexikon der
Volkswirtschaft, defined KONJUNKTUR as ‘cyclical fluctuations in the degree of
utilization of the overall production potential. The whole oscillation process of eco-
nomic development through certain economic phases is called Konjunkturzyklus’
(2003, p. 418). The only non-German entry carrying this notion is found in Bullock
Naming crises 99
and Stallybrass’s Fontana dictionary of modern thought: TRADE OR BUSINESS
CYCLE consists in ‘cyclical fluctuations in the level of economic activity, where
activity is defined with reference to the degree of utilization of productive resources’
(1988, p. 867).
By far the most crowded group of definitions offered in specialized dictionaries
are purely descriptive in character. They list the most remarkable features of the
phenomenon, with some difference of emphasis, the simplest ones only referring
to the alternation of good and bad times, the most complex ones adding remarks
on their regularity, duration, amplitude, co-existence with other kinds of fluctua-
tions, and so on. The archetype of such definitions was offered by Mitchell – both
chronologically and in terms of explicit reference:42
This usage of the term is rather loose and neutral, and so far free of an ‘ideological’
commitment to affirm or reject a thesis, as it only involves alternating ups and
downs. The relationship of ‘fluctuations’ and crises during the nineteenth century
was thus rather varied. Fluctuations were sometimes seen as the cause or as the
consequence of crises or panics, or simply accompanying them, or sometimes (in
the case of ample fluctuations) as being the essence of crises, or on the contrary
they were denied to constitute panics. Perhaps the most common position was
that fluctuations are one of the causes of distress – in particular fluctuations in the
value of money. Huskisson, for instance, noted: ‘Nor is the distress occasioned
by a fluctuating value of the currency limited to the proprietors of land. Much of
the commercial distress, which at frequent intervals has prevailed in this country
since the period of the French revolution, must be ascribed to the same cause’
([Huskisson], 1830, p. 144); similarly, the chairman of the Bank of Liverpool stated
that ‘rapid change and fluctuations are always productive of distress somewhere’
(Brown, 1834, p. 289); and W. Anderson maintained that ‘every great fluctuation
in the distribution of property is necessarily productive of great calamity, and
nothing has evidently a greater tendency to produce such fluctuations, than alter-
ations in the amount of the currency’ (1821, pp. 48–49). ‘Fluctuations’ were rarely
conceived as the prime mover: they normally reflected some other phenomenon,
and contributed to the generation of crises by transmitting further its consequences.
Speculation and over-trading, in particular, were often indicated as the culprit: the
‘excess of speculation . . . produces violent fluctuations, bringing to crises and
disaster’ (Bartholony, 1839, p. 91). Macleod, in the entry on CREDIT in his own
→Dictionary of political economy, expounds in detail the causation chain:
Some writers insisted that panics are phenomena intrinsically different from the
normal fluctuations of trade. In James Mill’s entry on BANKING in the Supplement
to the 4th, 5th and 6th editions of the →Encyclopædia Britannica, it is stated that
The drain of specie to which a great national bank may be subjected from the
prevalence of a general alarm, is in all respects different from that which may
be produced by a great foreign expenditure, or by the fluctuations of trade.
The impulse given by panic is, in its very nature, sudden and instantaneous.
It generally terminates also, and that speedily, in some violent crisis.
(1824, p. 86)
Other writers, on the contrary, interpreted crises and panics as the summation
of fluctuations of different kinds. Jevons, for instance, is cited as follows in the
entry on CRISES (COMMERCIAL AND MONETARY) in →Bliss’s Encyclopedia of
social reform:
Jevons explained crises in part by bad crops, and these by sun-spot periods.
He says, in a communication to the British Association (1862): ‘There is a
periodic tendency to commercial distress and difficulty during these months
(October and November). It is when great irregular fluctuations aggravate
this distress, as in the years 1836–39, 1847, 1857, that disastrous breaches of
commercial credit occur.’
(1897, p. 431)
Naming crises 105
Another writer maintained that crises are nothing but very bad and concentrated
fluctuations:
To some such system we must come before we can hope for the permanent
prevention of such crises as the present. The unavoidable fluctuations of
commerce, which would break harmlessly upon a wide surface, tear down
every thing in their course when they come to be concentrated, as they are at
present, upon a single point, of strength and stability wholly unequal to resist
them! These fluctuations, on the present extended scale of our transactions,
actually exceed the narrow limits of the Bank’s solvency, or, which is prac-
tically the same thing, of the public belief in it.
(Knowles, 1837, p. 77)
The latter passage provides an early instance of an interpretation that has often
been contrasted with the view that crises first, and cycles later, are a specific
phenomenon that should be inquired into for its own merits, and as such deserve
a proper name. By 1837 a number of writers had already devoted specific inquiries
to the occurrence and the recurrence of crises,49 but this approach was still adopted
by a small minority of writers, although it was gaining ground. Sceptical comments,
however, were formulated as soon as the proposition that the conditions for crises
are rooted in the previous prosperity was expounded. One of the lines of counter-
argument that recur throughout the entire history of crises and cycle theories is
based precisely on Knowles’s argument that the ‘normal’ fluctuations accompany-
ing trade, and actually constituting its essence, occasionally cumulate into major
and sudden disruptions of trade and industry. Knowles was only contributing his
own interpretation and was not confrontational with the ‘crisis’ theory. Towards
the end of the twentieth century, however, this argument was couched into an analyt-
ically more refined form, and the term ‘fluctuation’ – with emphasis on its feature
of irregularity – was used in direct contraposition to ‘cycle’, not only to stress the
lack of regularity of economic fluctuations, but also to reject the very idea that
capitalist economies are subject to a cyclical dynamics. The quasi-regularity of
the cycle, then, is disputed not so much as an empirical feature, but rather for its
implication that the phenomenon is subject to some more or less strict economic
law implying the recurrence of bad times.
Some recent dictionary entries accordingly place the terminological choice
between ‘cycles’ and ‘fluctuations’ right on the line separating two incongru-
ent views on the nature of capitalistic dynamics, one which sees a rhythmical
course of economic development admitting the possibility of the occurrence of
deep depressions and crises, as the product of the lack of a mechanism
of adjustment capable of bringing the system back to equilibrium once it is
disturbed; and the other believing instead in the existence of powerful equilibrating
forces, interpreting fluctuations precisely as the result of the system’s response to
external shocks. The following example, extracted from C. Romer’s entry on
BUSINESS CYCLES in →Henderson’s Concise encyclopedia of economics, makes
this clear:
106 Daniele Besomi
In many ways, the term ‘business cycle’ is misleading. ‘Cycle’ seems to imply
that there is some regularity in the timing and duration of upswings and
downswings in economic activity. Most economists, however, do not think
there is. [. . .] [E]xpansions and recessions occur at irregular intervals and last
for varying lengths of time. For example, there were three recessions between
1973 and 1982, but, then the 1982 trough was followed by eight years of
uninterrupted expansion. The 1980 recession lasted just six months, while the
1981 recession lasted sixteen months. For describing the swings in economic
activity, therefore, many modern economists prefer the term ‘short-run eco-
nomic fluctuations’ to ‘business cycle.’ [. . .] Just as there is no regularity in
the timing of business cycles, there is no reason why cycles have to occur at
all. The prevailing view among economists is that there is a level of economic
activity, often referred to as full employment, at which the economy could stay
forever.
(2007)
(See also the same entry in the previous edition, 1993, where the expression
‘economic fluctuations’ was used in place of ‘short-run economic fluctuations’.)
On the other side of the gulf we have Mullineux’s entry on BUSINESS CYCLES
for →Deane and Kuper’s Lexikon of economics:
There has been some debate about whether business cycles are systematic
economic fluctuations, or whether they are instead purely random fluctuations
in economic activity. It is certainly true that business cycles are not regular,
in the sense of a sine wave with constant period and amplitude. But the weight
of evidence, largely due to the accumulated studies produced through the
National Bureau of Economic Research, indicates that business cycles are
sufficiently uniform to warrant serious study.
(1988, p. 31)
Before the advent of the theories of business fluctuations associated with rational
expectations, the word ‘fluctuations’ had been used for decades as more or less
equivalent to ‘cycles’,50 as witnessed by Burns and Mitchell’s definition of business
cycle as ‘a type of fluctuation found in the aggregate economic activity of nations’
(Burns and Mitchell, 1946; a similar passage is cited in full in Section 3.2.9.4),
and by the use of the term ‘fluctuation’ in the title of a number of landmarks in the
literature on cycles written throughout the twentieth century, such as Hawtrey’s
Good and bad trade. An inquiry into the causes of trade fluctuations (1913),
Robertson’s Study of industrial fluctuations (1915), Pigou’s Industrial fluctuations
(1927; the expressions ‘wave movements’ and ‘cyclical fluctuations’ are treated
as equivalent to ‘industrial fluctuations’: pp. 3–4), Kalecki’s Essays in the theory
of economic fluctuations (1939), and Tinbergen and Polak’s The dynamics of
business cycles. A study in economic fluctuations (1950). Accordingly, most of
the recent dictionary entries are content with associating the usage of ‘cycles’ and
‘fluctuations’ with the more or less regular character of the alternation between
Naming crises 107
prosperity and depression. There are several examples besides those already
cited in the last paragraph of Section 3.2.9.4. French dictionaries often stress that
‘cycles’ implies relatively constant periodicity and amplitude, which is not the
case for ‘fluctuations’ (Géhanne, CRISES ET FLUCTUATIONS ÉCONOMIQUES,
in his own →Dictionnaire thématique des sciences économiques et sociales, 1995,
Vol. 2, p. 84; FLUCTUATION, in →Lakehal, Dictionnaire d’économie contempo-
raine, 2001; Portier, CYCLES ÉCONOMIQUES, in →Jessua et al., Dictionnaire des
sciences économiques, 2001, p. 248; and CRISES ÉCONOMIQUES ET SOCIALES, in
→Bremond and Gélédan, Dictionnaire économique et social, 1992, p. 109.
Similarly, Guitton, in the entry on BUSINESS CYCLE for the Encyclopædia
Britannica, online edition, 6 May 2010). Among entries in English, we find similar
observations to this effect in the →Fontana dictionary of modern thought (‘TRADE
OR BUSINESS CYCLE. . . . The term applied to fluctuations in growth that have some
uniformity in the cyclical pattern, as distinct from more random changes in the
economy’: [Matthews] 1988, p. 867) and in →O’Hara’s Encyclopedia of political
economy (‘Business cycles are recurrent, relatively periodic fluctuations in the level
of economic activity. The word “cycle” implies persistent patterns, but because
the periodicity or timing of oscillations in the economy is often irregular, many
economists prefer the term “economic fluctuations.” The term “trade cycle” has
also been used. For our purposes, the three terms are synonyms’: C. J. Niggle,
BUSINESS CYCLE THEORIES, 1999, p. 50).
Other dictionaries do not even inquire on any difference in meaning, and use
‘fluctuations’ in a way roughly interchangeable with ‘cycle’, as in the following
examples: ‘The limit cycle can thus be thought of as fluctuation around a steady-
state growth path’ (E. A. Thompson, GOODWIN, RICHARD MURPHEY (1913–), in
→Glasner’s Business cycles and depressions: an encyclopedia, 1997). In Dimand’s
entry on MACROECONOMICS, ORIGINS AND HISTORY OF for the 2nd edition of
→The new Palgrave dictionary of economics (2008), the term ‘fluctuations’ is used
(but not defined) as equivalent to ‘cycles’. And in P. Skott’s entry on BUSINESS
CYCLES in King’s →Elgar companion to post Keynesian economics (2003), the
term is used as follows:
The time path of aggregate output and its main components exhibits significant
fluctuations around trend values, as do other important variables, including
employment, productivity, prices, wages, interest rates and stock prices. These
fluctuations are recurrent but not regular. The pattern of comovements between
the different variables, the amplitudes of the fluctuations and the length of the
cycle vary over time. In fact, the delineation of cycle from trend raises many
problems, and cycles of different length may coexist in the data; short-run
fluctuations may take place with reference to a long-run cycle, rather than
around a constant exponential trend. The term ‘business cycles’ usually refers
to relatively short cycles.
(2003, p. 38)
108 Daniele Besomi
3.2.11 Recession
The term ‘recession’ originally applied to medical conditions: ‘2. a. Chiefly Med.
The relief or remission of (a disease, symptoms, etc.); the diminution or decline of
(a faculty, function, etc.). Also: an instance of this. Later occas. in extended use’,
with the first instances dating from the early seventeenth century (Oxford English
dictionary). The meanings in which we are interested originated much later: ‘5. a.
orig. and chiefly Econ. A reduction or decrease in value or amount. b. Econ. A
period of economic decline during which trade and industrial activity are reduced.
According to one commonly used economic indicator, identified by a fall in a
country’s gross domestic product for two consecutive quarters’. To these conno-
tations identified by the OED, we should add a third one: ‘recession’ as the upper
turning point of the business cycle.
Chronologically, the earliest occurrences of the term are in the sense 5.a. of the
OED. Several instances are found from 1826 throughout the entire nineteenth
century, usually accompanied by a qualification of the magnitude being reduced
in value – e.g. ‘recession in value’, ‘in price(s)’, or ‘in rates’. The earliest instances
seem to be these: ‘Veal was dull of sale at a recession of 4d. to 6d. per stone from
Friday’s quotations’ (Anonymous 1 (Bristol Mercury), 1826); and ‘Prime small
beasts, owing to their increase in numbers, . . . sold heavily at a recession of about
4d. per stone from Friday’s quotation’ (Anonymous 2 (Morning Chronicle), 1826);
they were followed by other occurrences in the Bristol Mercury, also taken up by
other papers. Later examples further illustrate this usage of the word: ‘. . . we
endeavoured to prepare the mind of the Era readers, on the first recession of the
market from the price to which the stock had been forced’ (Anonymous 2 (The
Era), 1843); ‘Churnet valley Railway – A great sensation has been created by the
recession in the prices of these shares . . .’ (Anonymous (Liverpool Mercury), 1845).
The term was used in this sense also by J. S. Mill: ‘In addition, therefore, to the
original diminution of one-tenth in the cost of production, there will be a further
diminution, corresponding with the recession of the “margin” of agriculture to land
of greater fertility. There will thus be a twofold fall of price’ (1848, book 4.III.20).
With the beginning of the new century, rather than referring to a single price,
‘recession’ became associated with the condition of the entire economy. The earliest
example quoted by the OED is dated 1905: ‘The year of 1903 was one of recession
in the business world. The bottom was knocked out of the speculative craze which
had seized the country’ (from the Iowa Recorder, 18 January). Next we find it
used by the president of the Commercial National Bank in Chicago: ‘no recession
in business was observable up to the date of the panic’ (Roberts, 1908, p. 345). Its
usage by Irving Fisher may have helped to make it acceptable to the profession:
‘in spite of the apparently impending recession, we are still in a period of incubation
for a future crisis’ (1911, p. 304). Mitchell also used it in this sense in 1916: ‘To
the depressing influence of these non-business factors there was added the recession
of business activity in Europe’ (p. 127).
To Mitchell we owe the elevation of ‘recession’ to a phase of the cycle, in
substitution of the old ‘crisis’. As we have seen in Section 3.2.8.5, in the first two
Naming crises 109
decades of the twentieth century ‘crisis’ had turned from the central concept in the
theories of crises dominating in the nineteenth century to a phase of the cycle – the
upper turning point, marking the transition from prosperity to depression. Mitchell
was still not satisfied, as the notion of ‘crisis’ carries the implication that there is
some ‘organic disturbance’ of business life, and possibly also some grave financial
strain or panic. He thus found the term inappropriate to describe the downturns, as
sometimes these are rather mild, and accordingly suggested that it be substituted
in the naming of the phases of the cycle by ‘recession’ (‘business cycles are treated
as having four phases – depression, revival, prosperity and recession’), and that
the word ‘crisis’ as well as ‘panic’ be used to indicate the degree of intensity (1926,
p. 37; 1927, p. 381). Mitchell’s suggestion was immediately taken up by Persons
(1926, p. 94), who a few years later specified that ‘“crisis” and “depression” are
descriptive of a state of business, while we need terms descriptive of the direction
of business: “business expansion” and “business recession”’ (as reported by King,
1930, p. 208).
The first dictionary entry to take up the term, with explicit reference to Mitchell
and Persons, was an Italian one: ‘In the United States from 1790 to date cycles
have an average length of 40 months. The most recent inductive inquiries on
economic dynamics give much emphasis to the cycles we can call “minor”, which
culminate not in major and very apparent crises but in a slowdown of economic
activity. This is denominated “recession” by English-American writers’ (Bachi,
CRISI ECONOMICHE, in →Enciclopedia italiana, 1931, p. 917). Mitchell himself,
of course, used the term in this sense in the entry for →Seligman’s Encyclopedia
of the social sciences: ‘BUSINESS CYCLES [. . .] have a wavelike pattern – each
cycle includes a phase of revival, expansion, recession and contraction’ (p. 92; note
the substitution of ‘depression’ by ‘contraction’ and of ‘prosperity’ by ‘expansion’,
tacitly following Persons’s suggestion). Further terminological specifications along
this line are given by Burns, in the entry on BUSINESS CYCLES. I. GENERAL for
→Sills’s International encyclopedia of the social sciences:
The terms used by economists to describe the phases of business cycles are
rich in diversity but are gradually becoming standardized. The ‘peak’ of a
business cycle marks the end of ‘expansion’ and the beginning of ‘contraction.’
The ‘trough’ marks the end of contraction and the beginning of expansion.
Frequently, ‘prosperity’ is used interchangeably with ‘expansion,’ although it
is better practice to restrict terms such as ‘prosperity’ or ‘boom’ to the higher
reaches of particular expansions when full employment is closely approxi-
mated. The term ‘recession’ does double duty. It is widely used to refer to
the transition from expansion to contraction, just as ‘recovery’ or ‘revival’ is
used to refer to the transition from contraction to expansion. Contractions of
varying intensity are also commonly distinguished by the terms ‘recession’
and ‘depression’; the former refers to a moderate contraction of aggregate
activity that lasts in the neighborhood of a year, while the latter refers to a
severe contraction or to one which, while moderate, lasts distinctly longer than
a year. The term ‘crisis’ originally was used to denote the financial disturbances
110 Daniele Besomi
that frequently occurred during the transition from expansion to contraction,
but later it came to be applied to any transition from expansion to contraction.
Nowadays, the term ‘crisis’ is usually reserved for a violent disruption of
financial markets without regard to the stage of the business cycle in which
such a disturbance occurs.
(1968, p. 229)
As Mitchell himself had noted (1926, pp. 34–37; 1927, pp. 378–381), this ter-
minological shift was not devoid of consequences as to the establishment of a
chronology of cycles, and ultimately as to the notion of ‘cycle’ itself. The business
rhythm is cadenced not by major and significant crises, nor even by severe
depressions,51 but by any downturn bringing a decrease of significant duration.52
While writers of the early twentieth century still emphasized the violence of crises,
and therefore only discussed those events having that feature (Lescure including
less than Aftalion, Bouniatian less than Lescure, and Tugan-Baranovsky restricting
the field even more), in the hand of Mitchell cycles thus became more frequent
and, on average, less severe. Crises and depressions returned to be exceptions to
the norm, as they were in the view of most commentators of the nineteenth century,
after having been, in the hands of the pioneers of business cycle research, an essential
component of the ‘normal’ business cycle.53 After Mitchell, the difference between
one of the frequent setbacks and an extraordinary crisis is only one of degree, while
it used to be a difference between a minor adjustment and the true rhythmical nature
of the explosion of the instability of capitalistic productive relationships.
Mitchell’s notion of ‘recession’ is taken up, without further discussion on the
meaning of the term, in most dictionary entries on business cycles. There seem to
be only two dedicated entries. The first, brief one is in →Carson’s Gale encyclo-
pedia of U.S. economic history. RECESSION is defined as
a downturn in the business cycle that occurs when the real gross national
product (GNP) – the total output of goods and services produced by the U.S.
population – declines for two consecutive quarters, or six months. Recessions
are usually characterized by a general decrease in output, income, employment,
and trade lasting from six months to a year. A more severe and long-lasting
economic crisis is known as a depression.
(2000, p. 866)
The second entry, by T. Mayer for the second edition of the →International ency-
clopedia of the social sciences, is far more precise. The definition runs as
follows:
The idea that recessions are characterized by two consecutive quarters of GDP
decrease is thought to be naive; two alternative procedures are better. One is based
on the following definition of ‘recession’ produced by the National Bureau of
Economic Research (NBER): ‘a significant decline in economic activity spread
across the economy, lasting more than a few months, normally visible in real GDP,
real income, employment, industrial production, and wholesale–retail sales’; it thus
rests on different series of data, monthly GDP being the most important. This
method, however, has been criticized for containing subjective or arbitrary ele-
ments, and the determination of turning points can only be done with some delay.
Other procedures (not dealt with in detail) have thus been developed, based on the
growth rate of GDP in successive quarters, that overcome these limits (Mayer,
RECESSION, 2008, pp. 103–105).
The decision to use one term instead of another is never free of consequences. Some
of the implications of the choice of words are purely technical. Yet most of them
also carry a vision of the working of the economic system and, as such, the ter-
minology becomes an ideological battleground. In a world where crises are seen
as disconnected accidents temporarily and unsystematically disturbing an otherwise
serenely fluid state of affairs, the phenomenon can either be ignored (thus dismissed
as irrelevant) or discussed under the heading ‘crisis’ in the singular. This view
was prevalent in the first half of the nineteenth century. Dictionaries accordingly
opted for titling their entries ‘crisis’, when they carried one.
When the recurring character of crises was recognized, in view of their periodical
returning and thanks to a conceptual switch, making it possible to understand their
role in the working of the economic system, the use of the word in the singular
was no longer appropriate to account for the phenomenon. Dictionaries thus
switched, as they did in the second half of the nineteenth century and up to the inter-
war years, to entries titled ‘crises’ in the plural.
Early in the nineteenth century cycles supplanted crises not only by subsuming
them as a phase of the overall movement, but also by substituting the view of a
movement periodically broken by a violent discontinuity with an understanding of
a rhythmical and much smoother form of development. Dictionaries thus started
carrying entries on ‘cycles’ (prefixed by the adjective ‘business’, ‘trade’ or ‘eco-
nomic’), fostering the tranquillizing view that after ‘bad times’ better times would
112 Daniele Besomi
mechanically follow. The soothing effect of the transition was again completed on
terminological grounds, with the substitution of ‘crises’ with the much tamer
‘recessions’.
The dissent from such a view once more relied on terminological change,
eventually recorded in dictionaries. On one side, those who reject the idea of an
in-built mechanism periodically bringing downturns and revive instead the idea
that these are caused by disconnected external events to which the economic system
reacts, prefer to speak of ‘fluctuations’, a term that expurgates the oscillations from
the inevitability implicit in the term ‘cycle’. On the other side, those who reject
the idea that the system operates smoothly and emphasize instead the violent and
sudden character of the downturn – thus disputing another implication of the
mechanistic character of ‘cycles’ – resurrect instead the term ‘crisis’, which indeed
re-emerges in the literature, both popular and academic, on the occasion of a major
disruption of economic life.
Dictionaries are the linguistic repository and propagators of the tradition of
thought to which they belong and which they represent, and their editors are
therefore very careful in the choice of their word-list, as they are in the choice of
their contributors. Dictionaries are, therefore, a privileged place for logomachy,
and crises and cycles are no exception – indeed, they are probably one of the main
loci of doctrinal clashes. It is precisely in this respect that the following chapters
of this book will look not only at the contents of the entries on crises and cycles,
but also at the general purpose and choices of dictionaries themselves.
1859
1857
1855
1853
1851
1849
1847
1845
1843
1841
1839
1837
1835
1833
1831
1829
1828
1825
1823
1821
1819
1817
1815
0 5 10 15 20 25 30 35 40 45 50 55 60
Fluctuation Other
Figure 3.1 Frequency of occurrences of specific terms in titles of writings on crises and
cycles, taken from Besomi’s database, 1815–1860 (see Section 3.1 for details).
‘Other’ consists of ‘convulsion’, ‘revulsion’, ‘stagnation’, ‘embarrassment’,
‘pressure’, ‘bubble’.
114 Daniele Besomi
1905
1903
1901
1899
1897
1895
1893
1891
1889
1887
1885
1883
1881
1879
1877
1875
1873
1871
1869
1867
1865
1863
1861
0 10 20 30 40 50
Fluctuation Other
Figure 3.2 Frequency of occurrences of specific terms in titles of writings on crises and
cycles, taken from Besomi’s database, 1861–1905 (see Section 3.1 for details).
‘Other’ consists of ‘convulsion’, ‘revulsion’, ‘stagnation’, ‘embarrassment’,
‘pressure’, ‘bubble’.
Naming crises 115
1944
1942
1940
1938
1944
1934
1932
1930
1928
1926
1924
1922
1920
1918
1916
1914
1912
1910
1908
1906
0 10 20 30 40 50 60 70 80 90 100 110
Fluctuation Other
Figure 3.3 Frequency of occurrences of specific terms in titles of writings on crises and
cycles, taken from Besomi’s database, 1906–1945 (see Section 3.1 for details).
‘Other’ consists of ‘convulsion’, ‘revulsion’, ‘stagnation’, ‘embarrassment’,
‘pressure’, ‘bubble’.
116 Daniele Besomi
1974
1972
1970
1968
1966
1964
1962
1960
1958
1956
1954
1952
1950
1948
1946
1944
1942
1940
1938
1936
1934
1932
1930
1928
0 10 20 30 40 50 60 70 80
Figure 3.4 Frequency of occurrences of specific terms in titles of writing on crises and
cycles, taken from the JSTOR database, 1928–1975 (see Section 3.1 for details).
Naming crises 117
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
1970
1969
Figure 3.5 Frequency of occurrences of specific terms in titles of writings on crises and
cycles, taken from the Econlit database, 1969–2009 (see Section 3.1 for details).
118 Daniele Besomi
NOTES
1 For instance, the term ‘depression’ appears with unusually high frequency in 1937–1939.
This finding is due to my work in progress on Haberler’s Prosperity and depression
(1937), which induced me to list in the database all the reviews and commentaries I have
been able to find.
2 Occasionally, some titles are counted more than once, when they include more than
one of the terms under examination.
3 Reviews do naturally repeat the title of the reviewed book; its multiple occurrences are
in a way a reflection of its perceived importance.
4 These diagrams are not meant to substitute for serious statistical analysis. Their only
purpose is to illustrate when the terms examined in this chapter made their appearance
in such a prominent position as the title of published writings, and the fluctuations of
such appearances over time. Different kinds of writings are grouped together,
notwithstanding the obvious differences in their relevance and influence, the discussion
of which would require an analysis of the diffusion and reception of each different
contribution.
5 It is expedient, however, to discuss ‘fluctuations’ after ‘cycle’, in spite of the much longer
history of the former.
6 The expression ‘glut debate’ is of much later invention. JSTOR first records it in a
1946 article by Hla Myint (p. 126); the second appearance is in a review of a book by
this author (Smith, 1949).
7 The earliest instance of the reference to the ‘stagnation of blood’ cited in the OED is
dated 1707. The reference to prosperity as ‘health’, also a frequent medical metaphor,
is illustrative of the difficulties in making precise the degree at which trade is dead. In
most medical dictionaries up to the middle of the nineteenth century, the definitions of
‘health’ and ‘disease’ referred to each other in a circular way. For a discussion, see
Besomi, 2011, Section 4.1.
8 In the →Spanish translation of the dictionary, the term is rendered as ‘estagnacion’
(1827, p. 250).
9 The legend of the echo is also reported in a discussion of the panics of 1857 and 1866
(Anonymous, 1873, p. 938).
10 Without using the term ‘panic’, Juglar had already denied in 1863 that ‘monetary crises’
are, in most cases, independent phenomena, but are nothing but one of the possible
manifestations of commercial crises (Crises commerciales, in →Block’s Dictionnaire
général de la politique).
11 Nicholson’s entry BUBBLES (HISTORY OF) in →Palgrave’s Dictionary of political
economy also states that ‘the term bubble has been commonly applied since the 17th
century’ without, however, supplying any examples (1894, p. 182).
12 ‘An Act to Restrain the Extravagant and Unwarrantable Practice of Raising Money by
Voluntary Subscription for Carrying on Projects Dangerous to the Trade and Subjects
of the Kingdom’. The name ‘Bubble Act’ seems to originate in the second half of the
eighteenth century; the earliest occurrence may be due to Richard Price, who wrote of
the ‘act against Bubbles’ (1772).
13 An accompanying verb for bubbles is, indeed, ‘to inflate’.
14 A number of dictionary entries discuss in some detail the debate between ‘believers’
and ‘sceptics’, from both the theoretical and the empirical viewpoint – e.g. Spotton
Visano, SPECULATION, in →Darity’s International encyclopedia of the social sciences
(2008); Brunnermeier, BUBBLES, in →The new Palgrave, 2008; and Leightner,
BUBBLES, in →Darity’s International encyclopedia of the social sciences (2008).
15 Although this occurrence may suggest that ‘depression’ is borrowed from meteorology,
this does not seem to be the case, as the first instance of such usage listed by the OED
dates from 1881.
Naming crises 119
16 Frewen, writing in 1885, maintained that the current depression responded to the same
‘laws of Nature’ as the regular periodic crises of the previous two centuries. ‘The present
depression is only peculiar because of its unusual accessories: because it is accompanied
by a very low range of prices and an abundance of the necessaries of life; because of
its extreme protraction; and because it has antedated by several years the normal period
of its return’ (p. 593). Jamieson wrote that ‘in two very notable respects the present
depression is distinguishable from most of those similarly unhappy periods which have
preceded it; the depression which commenced in 1875 has been more protracted, and
it has been more universal, than any of its predecessors’ (1885, pp. 3–4). Similarly,
Wallace (the biologist, who submitted a paper for the Pears prize for the best essay on
the depression of trade) noted that the ‘present Depression of Trade is remarkable, not
so much for its intensity or for its extent in both of which respects it has been equalled
or surpassed on previous occasions, but for its persistence during the long period of
eleven years . . . its remarkable persistence has been commented on by politicians and
public writers. Usually a period of depression is quickly followed by one of comparative
prosperity. Such a reaction has been again and again predicted in this case; but up to
the present time there are no satisfactory indications that the evil days are passing away’
(1885, pp. 1–2). Giffen also found that the depression he was witnessing was not
substantially different from previous occurrences, and actually was fairly mild on most
standards except for an abnormal fall in prices, which he saw as the only cause of the
deep gloom of which the country suffered (1885, pp. 800–807).
17 The passage is cited in full in Section 3.2.11, where it is placed in the context of Mitchell’s
redefinition of terms leading to the elimination of ‘crises’ and ‘depressions’ from
business cycle terminology to incorporate milder downturns, and reduce them as an
indication of the degree of intensity of the phenomenon.
18 1911, p. 284; references are to Guyot, 1909 and Taylor, 1904. Much earlier instances
in various languages are an anonymous reporter of a French debate on ‘economic crises’,
1861, p. 593 and, among others, Ferrara’s ‘delle crisi economiche’, 1864; Pierna y
Hurtado’s entry on CRÍSIS ECONÓMICAS in the →Vocabulario de la economía, 1877;
Öchelhäuser, Die wirtschaftliche Krisis, 1876; Della Bona, Delle crisi economiche,
1888, followed by several other Italian writings; Frewen, The economic crisis, 1888;
Issaïev, ‘Les principales causes des crises économiques’, 1893; and of course Jones’s
Economic crises, 1900.
19 Blanqui, CRISE COMMERCIALE, in →Encyclopédie des gens du monde (1836), Michel,
CRISE COMMERCIALE, in Guillaumin’s →Encyclopédie du commerçant (1839),
Monbrion, CRISE COMMERCIALE ET INDUSTRIELLE in his →Dictionnaire universel du
commerce, de la banque et des manufactures (1838), Dupin, CRISE COMMERCIALE, in
the →Encyclopédie du dix-neuvième siècle (1846), Courcelle-Seneuil, CRISE, in the
→Dictionnaire politique (1842; on all these see Chapters 5 and 6), Coquelin, CRISES
COMMERCIALES, in the →Dictionnaire de l’économie politique (1852; see Chapter 8),
Ott, CRISE, in his own →Dictionnaire des sciences politiques et sociales (1854; see
Chapter 10), Garnier, CRISES COMMERCIALES, in the →Dictionnaire universel
théorique et pratique du commerce et de la navigation (1859; see Chapter 6).
20 Monbrion’s, in →Antonelli’s Enciclopedia del negoziante, 1841; Blanqui’s, in six
editions of the →Nuova enciclopedia popolare italiana, 1841 to 1875, and also in the
general purpose →Enciclopedia economica, 1860.
21 Roscher, DIE PRODUKTIONKRISEN MIT BESONDERER RÜCKSICHT AUF DIE LETZTEN
JAHRZEHNTE, in →Die Gegenwart, 1849 (see Chapter 7); the other two entries on
HANDELSKRISIS appeared in Meyers Konversations-lexikon, 1849, and in →Pierers
Universal-Lexikon, 1857.
22 The American Economic Review was also slow in adapting: from Vol. 1, 1911, to Vol.
31, 1941, it carried a review section titled ‘Trade, commerce, and commercial crises’.
23 Medical dictionaries of the time suffered of the same problem. For a discussion of the
medical metaphor for crises in the early nineteenth century, see Besomi (2011).
120 Daniele Besomi
24 The terminology associated to Say’s law, ‘loi des débouchés’ in the French original,
deserves a comment. This expression, used by Say, his supporters and his critics, is often
translated as ‘the law of markets’, but this is not fully satisfactory. The etymon includes
‘bouche’, mouth, and indicates a passage from a closed or narrow space or channel into
a larger space, such as a river’s mouth. It thus conveys the idea of a flux and of a release,
both particularly important for the critics of Say’s law who stressed the pressure on
the supply side and pointed out that continuity is essential to the smooth working of the
system. This meaning is well caught by the Italian ‘sbocco’, also based on the root
‘bocca’, mouth (Say’s law is translated as ‘legge degli sbocchi’). In English the sense
of escape or release seems to be better caught by the word ‘outlet’, which is instead
absent in the word ‘market’; it was used in this sense in the entry OUTLET in →Lalor’s
Cyclopædia of political science (1881–1884), which translated the entry DÉBOUCHÉS
in →Coquelin and Guillaumin, Dictionnaire de l’économie politique, 1852, in turn
consisting of the transcription of large excerpts from Say’s own discussion. Higgs, in
the entry DÉBOUCHÉS, THÉORIE DES for →Palgrave’s Dictionary of political economy
(1894), translated the expression as ‘theory of outlets or of vents’. Unfortunately, ‘outlet’
is also associated with a specific market point, in particular a store or a shop. The verbal
phrase ‘find a vent’ can indeed be a valid alternative.
25 There are echoes of this notion of crisis also in the early twentieth century. For instance,
the →Encyclopédie pratique du commerce, 1907, stressed that all CRISES are character-
ized by a break of equilibrium, a stoppage in all current operations and of exchanges
(p. 457); the →Vocabulaire économique et social defined CRISE as the tremor that arises
when the relationships which should equilibrate production and consumption, or the
various elements of production with respect to each other, are disturbed (1909, p. 52);
Jahn defined WIRTSCHAFTSKRISEN (economic crises) as disturbances of the equilibrium
between demand and supply, noting that these can go out of gear for different reasons
(→Politisches Handwörterbuch, 1923, p. 986).
26 Translation by Cécile Dangel-Hagnauer, in Juglar, 2010, p. 116; the passage in brackets
was added to the second edition, 1873.
27 Schäffle criticised J. S. Mill for not being capable of going further than characterizing
crises by the incapacity of a large share of traders to fulfill their obligations (reference
is to Mill, 1848: ‘There is said to be a commercial crisis, when a great number of
merchants and traders at once, either have, or apprehend that they shall have, a difficulty
in meeting their engagements’: III.12.12); on the same ground, he also rejected
Coquelin’s remark that ‘crises are generally nothing else than a temporary disappearance
of credit’ (p. 527). This view, however, is not part of Coquelin’s definition, but is an
implication he drew; Coquelin’s emphasis in this passage is not on the disappearance
of credit, but on its temporariness: as the existence of a credit system is a necessary
condition for crises, Coquelin set out to dispute the view that crises undo all the
advantages brought by credit in terms of the possibility of progress, arguing that the
consequences of the stoppage actually serve to measure the benefits of the presence of
credit). Schäffle’s view was taken up by Jones (1900, p. 4n), who sarcastically reported
John Stuart Mills’s similitude of the man who died for ‘want of breath’.
28 There naturally remained a few entries offering a typical nineteenth-century treatment
of crises. The 3rd edition of →Pitman’s business man’s encyclopaedia, for instance,
characterized a COMMERCIAL CRISIS as ‘the glut or slump succeeding a boom’.
Most of the discussion is based on the cumulative process of advance and its breaking
down, while it almost parenthetically observes that ‘just as a period of industrial
activity leads to a period of depression and sooner or later to a commercial crisis, so
a period of depression leads up to another spell at industrial activity’ (1927, pp.
414–415).
29 The partial translation of Spiethoff’s entry – approved by the author – is titled ‘Business
cycles’ (Spiethoff, 1953).
30 The writers who stressed the distinction between ‘old’ and ‘new’ approaches to the
Naming crises 121
problem of crises also offered a classification of crises theories along this line: see for
a discussion Chapter 4, Section 4.5.
31 This interpretation of the position of the crisis at the intersection point as a fact is at
odds with Lescure’s definitional approach in his treatise on crises: ‘The general
overproduction crisis is the intersection point of a period of expansion lasting three to
five years, and of a period of depression of similar duration. Moreover, the crisis is
periodical’ (Lescure, 1907, pp. 9 and 19; 1932 edition, pp. 2–3). This definition had at
the time provided the terminological basis for the interpretation of crises as a phase of
the cycle, soon taken up by Aftalion, 1913 (Vol. 1, p. vi; the passage is cited in Chapter
28, Section 28.1) and eventually largely accepted in the literature (see Chapter 28).
32 The sense of ‘A recurrent period of a definite number of years adopted for purposes of
chronology’ (OED 2a) is the one referred to in →Chomel’s Dictionnaire oeconomique,
citing in particular the solar, lunar and Roman indiction cycles (2nd edition, 1718,
p. 776) and →Félice’s Encyclopédie oeconomique (1770, Vol. VI, p. 226); more exten-
sively, also →Chambers’s Cyclopædia (1728, Vol. 1, p. 364), Diderot’s Encyclopédie
(1754, Vol. IV, pp. 586–590), and the New and complete dictionary of arts and sciences
(1763, Vol. 1, pp. 833–834) all under the heading of CYCLE.
33 Besides the trivial denoting based on the alternation of ‘prosperity’ and ‘distress’, which
goes back at least to 1722 (Anonymous, p. 1) and itself carries no more meaning than
observing that tossing a coin gives rise to an alternation of heads and tails, we have more
precise division into periods beginning from the 1830s. Among the early writers we
have Huskisson, who supplied a fairly clear-cut description of the various phases of the
cycle, beginning from a state where ‘supply and demand would continue in the same
relation to each other’, followed by ‘speculative purchases’ causing an advance of prices
at an accelerated rate, after which demand becomes languid and a pause ensues while
goods continue to be offered for sale; in such conditions, ‘a glut or superabundance of
goods is said to exist’. This begins a time of distress, during which prices fall and the
bills of exchange are reduced in amount, until the goods in excess of demand are
eventually sold (Huskisson, 1830, pp. 446–452). Briaune suggested a three-phases
division: crisis, recovery, commercial development (1840, p. 13); Longfield suggested,
like the already cited Overstone, a cycle of ten phases, which he described in much detail
and graphically represented as a circle (1840, pp. 222–223); Corbet noted that
overproduction (or overtrading) ‘is necessarily followed by exhaustion, relaxation,
depression, and distress – which again, after a time, are succeeded by a period of unusual
briskness and activity’ (1841, p. 105).
34 For a discussion, see Besomi, 2008. Wade still used the word ‘cycle’ in the sense of a
singular round course of events: ‘The commercial cycle is ordinarily completed in five
or seven years, within which terms it will be found, by reference to our commercial
history during the last seventy years, alternate periods of prosperity and depression been
experienced’ (1833, p. 211).
35 We shall not be concerned with the usage of this and similar expressions for purposes
of chronology (‘A year is but a portion of time consisting of 365 days; it is no fixed
commercial cycle into which, bodies wandering in eccentric and anomalous orbits
periodically return. The revolution of the earth does not affect the tide of pecuniary traffic’:
Gilmer, 1820, p. 65) or to indicate the series of successive operations involved by the
trading process (e.g. as in the following: ‘the circuit of the world is carried on, and the
commercial cycle kept in continual gyration’, Thompson, 1832, p. 44 of the 1842 reprint).
36 Some writers report that in popular parlance, the term ‘Konjunktur’ used to refer to
prosperity alone (e.g. Diehl, KONJUNKTUR, KONJUNKTURTHEORIE, in →Elster’s
Wörterbuch der Volkswirtschaft, 1932, p. 600; KONJUNKTUR, in →Sellien and Sellien’s
Gablers Wirtschafts-Lexikon, 1956, p. 1600; Besters, WIRTSCHAFTLICHE
KONJUNKTUREN, in →Görres Staatslexikon, 1963, p. 737; KONJUNKTUR, in →Stein’s
ABC der modernen Wirtschaft, 1972, p. 210).
37 The term can be interpreted in a dynamic sense: the state of the system at one point of
122 Daniele Besomi
time is defined not only by its position at that point, but also by its rate of change (and
higher order differentials). If the laws determining the state of the system at one instant
are known, its rates of change determine its state at the following instant. The study of
conjuncture and its determinants thus embraces the overall movement of the system.
When some authors emphasized the dynamic character of Konjunkturtheorie as opposed
to the punctual character of the theories of crises (see Section 3.2.15.5), they probably
had in mind some such interpretation.
38 Arndt, KONJUNKTUR, in →Handwörterbuch des Kaufmanns, 1926, p. 395; Weinberger,
KONJUNKTUR UND KRISEN, in →Sacher’s Staatslexikon, Vol. 3, 1929, p. 512; Diehl,
KONJUNKTUR, KONJUNKTURTHEORIE, in →Elster, Wörterbuch der Volkswirtschaft,
Vol. 2, 1932, p. 601; Ruberg, WIRTSCHAFTSSCHWANKUNGEN, in →Nicklisch,
Handwörterbuch der Betriebswirtschaft, 1939, p. 2417; Weber, KONJUNKTUR UND
KRISE, in →Klose, Katholisches Soziallexikon, 1964, p. 553.
39 KONJUNKTURWELLEN, in Sellien and Sellien’s Gablers Wirtschafts-Lexikon, 1956.
40 The entry on KONJUNKTURZYKLUS in →Palyi and Quittner, Handwörterbuch des
Bankwesens, 1933, cross-referring to KONJUNKTURTHEORIE. →Geigant’s Lexikon der
Volkswirtschaft defines KONJUNKTURZYKLUS as ‘wave-like oscillating movement
of economic activity’ of various frequency, from Kitchin to Kondratiev cycles
(1975, p. 275). →Sellien and Sellien’s Gablers Wirtschaftslexikon defined the
KONJUNKTURZYKLUS as the period between the beginning of the first and the end of
the last phases of the cycle (1956, p. 1611).
41 Diehl, KONJUNKTUR, KONJUNKTURTHEORIE, p. 600; KONJUNKTURBEWEGUNG, in
→Bülow’s Wörterbuch der Wirtschaft, 1936.
42 Several dictionaries later cited Mitchell’s definition in the modified form incorporated
in Burns and Mitchell, 1946, p. 3. The difference with the dictionary entry lies in the
estimate of the duration (in the later version, one to 10 or 12 years), and in the addition
that cycles so defined are not divisible into shorter cycles of similar character and
amplitude.
43 An example will suffice. ‘TRADE CYCLE (or business cycle) is a general fluctuation in
the economic activity of a society where the means of production are mainly privately
owned. The fluctuation is from a period of prosperity, or boom, down through a recession,
to depression, or slump, then a recovery to prosperity through a period known as revival’
(→Taylor, A new dictionary of economics, 1966, pp. 288–289).
44 The necessity of complementing the descriptive definition with an historical-theoretical
part in order to fill the empty box with an interpretation (or interpretations) is only
acknowledged in one of the dictionary entries I have seen: Drahokupil, BUSINESS
CYCLE, in →Encyclopedia of governance, 2007, p. 63).
45 In this paragraph I have summarized the issue more or less as stated by Keynes in 1934,
who ranged himself among the ‘heretics’ who did not believe in the stability of the
system. That this is the fundamental problem in business cycle theory, and also the key
point for classifying the theories on the subject, was nevertheless also agreed by a
representative writer taking the opposite side, Hayek. For references and a detailed
discussion, see Besomi, 2006, and for a discussion of the dictionary treatment, see
Chapter 4, Section 4.9.4.
46 An unsigned entry in →Thalheim’s ABC der Volkswirtschaft, for instance, stressed
that in the capitalistic era favourable and unfavourable times ‘have taken a rhythmical
form, so that one can speak of “wave-like behaviour of economic life”’ (KONJUNKTUR
UND KRISE, 1934, p. 166); similarly, Horton defined BUSINESS CYCLES as ‘rhythmic
fluctuations in general business activities, characterized by a tendency of prices,
profits, production wages and employment to move more or less together in a complete
cycle from peak to peak over several years’ (in →Dictionary of modern economics, 1948).
47 In the first three-quarters of the nineteenth century, writers often characterized crises as
‘periodic’, but they had in mind the meaning of ‘recurring, or appearing intermittently’
(OED) rather than stressing the regularity of the interval (Besomi, 2010a). The intro-
Naming crises 123
duction of the ‘astronomical’ sense of the term is due to Jevons; the debates towards
the turn of the century were polarized between the few who espoused Jevons’s view,
and those who argued instead against an absolute regularity of occurrence. Among
dictionary entries, I am aware of only one defining theoretically cycles as ‘Regular
fluctuation of economic activity, of fixed periodicity and amplitude; theoretically they
can be represented by sinusoidal waves’; the author admits, however, that ‘the observed
cycles do not always correspond to the theoretical definition’ (CYCLE, in →Albertini
et al., Lexique d’économie, 1992, pp. 182–183).
48 The heading of the review section of the American Economic Review (not included in
the counting mentioned in the text) is consistent with the prevalent usage. From the
first volume (1911) to December 1941 the section was titled ‘Trade, commerce and
commercial crises’; then it became ‘Business cycles and fluctuations’; and from March
1949 to December 1968 it dropped the ‘cycles’ and reduced to ‘Business fluctuations’.
From the first issue in 1969 to 1990, the Journal of Economic Literature reviews were
classified under the heading ‘Economic growth; development; planning; fluctuations’;
reference to fluctuations disappeared from the main headings in 1991, and articles on
the subject are now classified under ‘Macroeconomics and monetary economics’,
subheading on ‘Prices, business fluctuations, and cycles’.
49 The earliest formulation of a complete theory of crises of which I am aware, explaining
their premises and the necessity of their outburst, is due to William Huskisson and was
published in 1810: see Besomi, 2010b.
50 Persons used the expression ‘business fluctuations’ as a wider concept than ‘business
cycles’, as it covered: ‘A. Irregular movements (non-recurrent): 1. Plus and minus devi-
ations from some chosen basis of measurement which do not reveal definite characteristic
phases and do not recur. 2. A series of plus and minus deviations which pass through
definite phases but do not recur. B. Business cycles (recurrent): 1. Non-periodic cycles
of which the wave lengths and amplitudes are variable. 2. Periodic cycles of which the
wave lengths are approximately uniform’. He explicitly excluded, however, monthly
variations (1926, pp. 95–96).
51 Burns and Mitchell commented that Mitchell’s previous emphasis on ‘depressions’ led
to overlook milder, but nonetheless important, recessions: 1946, p. vii.
52 Fluctuations within a cycle are admittedly a problem for Mitchell’s definition, and the
presence of multiple peaks required that additional criteria be set for deciding which
downturns are significant. One requires that business cycles cover more than one year,
the other that the amplitude of minor fluctuations is not of the same order of amplitude
as the cycle itself (Burns and Mitchell, 1946, pp. 7–8). These conditions, however, do
not seem to warrant an unambiguous breaking down of intervals within major crises:
if the intermediate fluctuations had the same order of amplitude of major crises, they
would indeed be major crises themselves.
53 For a discussion of ‘normality’ of the cycle, see Besomi 2006 and 2010c.
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Naming crises 125
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4 Dictionary reconstructions of
the history of the theories
of crises and cycles
A meta-taxonomy
Daniele Besomi
If there is one proposition on which all students of business cycle may agree, it is
that classifying business cycle theories is an awkward task. The number of different
theories and models,1 the variety of causal factors influencing one aspect or another
of the cyclical development, the different views on the working of a capitalist
economy held by those who have written on crises and cycles, the variety of
analytical approaches with the implications of each specific tool, the prevailing
problems (practical and theoretical) and outlooks at the time of writing, as well as
a number of other variables, all contribute to ensure that whatever classificatory
scheme is adopted, it is bound to be too rigid to accommodate some of the opinions
on the subject.
In spite of this difficulty, there are a number of attempted categorizations.
Not only did the few existing fully fledged histories of cycles and crises theories
endeavour to classify business cycle theories, but so did numerous writers as an
introductory chapter to their business cycle treatises. Dictionaries also house a
number of such attempts, which are completely suited to the educational purpose
of dictionaries and scarcely avoidable in entries of suitable length. Although the
entries are naturally inhomogeneous as to the level of detail, they all share the
need to compress the argument into a very limited number of pages. When a cat-
egorization is offered at all – more often than not without justifying the criteria
followed in constructing the taxonomy – the dividing lines are thus often sharply
defined, offering the reader a clear viewpoint.
This chapter surveys such taxonomic endeavours by dictionaries. If we except
a small number of oddballs, such classifications turn out to be of a surprisingly
small number of kinds. At first, dictionary writers only referred to a handful of
theories of particular interest to them – mostly with a critical purpose in mind. Then,
especially in Germany in the third quarter of the nineteenth century but later also
in the US, the discriminating factor was Say’s law vs. overproduction. Towards
the end of the nineteenth century, when there finally was a reasonable number and
variety of theories to be classified, we have first a classification in political terms
(1880–1910), then a number of entries broadly separating the ‘old’ theories of crises
134 Daniele Besomi
from the ‘new’ theories of the cycle (during the inter-war years). There followed
some categorizations based on the kind of causal factors involved in the explanation,
in particular between the 1920s and the 1960s. Such an approach was later
abandoned in favour of a search for a deeper and more fundamental line of division,
which was sought in the premises characterizing various schools of thought, in the
adherence to or rejection of Say’s law, in the adoption of an exogenous or an
endogenous approach, or in the belief (or lack thereof) in the self-adjusting capacity
of the economic system.
The entries on crises in most early dictionaries were not so much compilations
of theoretical knowledge, but mostly reports of the author’s own reflections on
the subject. Two of them, however, already identified the main issues at stake at
the time. The first such entry – MONEY, in →[Long]’s Political dictionary, 1846
– referred to the opposition between the Banking and Currency schools on the
causes of crises, and adopted Overstone’s moderate currency position:
There are some political reasoners who have ascribed every commercial
convulsion to an ill-regulated currency; while others deny its influence upon
prices and upon the general arrangements of commerce. The opinions of both
these parties are probably extreme, and their facts somewhat exaggerated; but
the temperate view taken by Mr. S. Jones Loyd may be adopted with less
hesitation. He says, ‘The currency in which all transactions are adjusted has
the same reference to the healthy state of trade, which the atmosphere in which
we all live has to the physical constitution of our bodies; irregularities and
disorders may arise from a variety of causes, but the duration and virulence
of them will materially depend upon the pure, healthy, and well-regulated
condition of the medium in which they exist. A well-managed currency cannot
prevent the occurrence of periods of excitement and overtrading, nor of their
necessary consequences, commercial pressure and distress; but it may tend
very powerfully to diminish the frequency of their return, to restrain the
suddenness of their outbreak, and to limit the extent of their mischief.’
(MONEY, p. 359; reference is to Loyd, 1940, pp. 90–91)
In France and Britain, Say’s law was largely accepted as a matter of course (or at
least not disputed) by most writers (among dictionary writers, Auguste Ott’s entries
on CRISE and DÉBOUCHÉS for his own →Dictionnaire des sciences politiques et
sociales (1854) is a relevant exception; see Chapter 10). In spite of the various
possible interpretations of the law of markets, there was general agreement that
it ruled out general overproductions, or general gluts, as logically impossible.
Accordingly, most theories of crises either sought for external causes (for example,
Blanqui, CRISE COMMERCIALE, in →Encyclopédie des gens du monde, 1836),
institutional impediments (Coquelin, CRISES COMMERCIALES, in →Coquelin
and Guillaumin, Dictionnaire de l’économie politique, 1852) or miscalculations
on the part of entrepreneurs (Raffalovich, CRISE, in →Guyot’s Dictionnaire du
commerce, de l’industrie et de la banque, 1898), or only considered partial over-
productions (Guyot, SURPRODUCTION, in →Guyot’s Dictionnaire du commerce,
de l’industrie et de la banque, 19012), or circumvented Say’s law by explaining
crises as difficulties arising in the monetary domain, in particular in the issue of
paper money (this was debated by the Currency and Banking schools) or in over-
trading and speculation fostered by easy credit (Juglar, CRISES COMMERCIALES,
in →Block’s Dictionnaire général de la politique, 1863; Macleod, CRISIS,
COMMERCIAL, in his own →Dictionary of political economy, 1863; see respectively
Chapters 12 and 13). In these entries, there could be hardly any references to the
136 Daniele Besomi
gluts debate: Sismondi’s name, for instance, is only cited by Garnier when
commenting that ‘Say had proved against Sismondi that there can be no general
overproduction’ (CRISES COMMERCIALES, in →Guillaumin’s Dictionnaire
universel théorique et pratique du commerce et de la navigation, 1859, p. 923).
In Germany, on the contrary, Say’s law was not treated with deferential respect
and was instead an openly debated matter (see Chapters 7 on Roscher, 14 on
Wagner, 18 on Herkner, 19 on Lexis and 20 on Spiethoff). Referring to the gluts
debate and relating it to the credit and overtrading strain of theories was not,
therefore, taboo.3
Schäffle introduced the problem by way of a survey of the notion itself of ‘com-
mercial crisis’. He thought of crises as periodically returning disturbances to the
equilibrium of production and use. He argued that these phenomena had not yet
been given an exhaustive scientific treatment, and that they were mostly described
on the basis of their symptoms rather than accounted for. In Schäffle’s view, J. S.
Mill did not go further than defining them as taking place when a large share of
traders cannot fulfil their obligations; Coquelin argued that crises are nothing else
but the sudden disappearance of credit; Juglar, as well as Max Wirth, followed the
development of crises in the banking statistics, but did not attempt a theorization.
In Schäffle’s view, only Roscher started instead from the right point of view, by
considering the organic regularity in the development of production and con-
sumption. The cause of the crisis can then be sought among the factors disturbing
either production or consumption (HANDEL, HANDELSPOLITIK, in →Bluntschli’s
Deutsches Staats-Wörterbuch, Vol. 4, 1859, p. 638).
More explicitly, Wagner examined the gluts debate, comparing the positions of
Say, Ricardo, James Mill and John Stuart Mill on one side and Malthus and
Sismondi on the other, espousing the view of the former, treating the idea of general
overproduction as a contradiction in terms, while admitting the possibility of partial
overproduction, with the purpose of rejecting the view of Roscher. He compared
this approach with the writings emphasizing instead the excesses of speculation
and credit – Juglar’s, Gilbart’s, Schäffle’s and his own (KRISEN, in →Rentzsch’s
Handwörterbuch der Volkswirthschaftslehre, 1866, pp. 131–133; see Chapter 14).
Similarly, Adolf Held, in the entry on HANDELSKRISEN for →Löning’s Bluntschli’s
Staatswörterbuch, divided the field between those writers who see the nature of
the crisis as a disequilibrium between supply and demand, and accordingly see
credit and money as subordinate, and the writers who, on the contrary, deny that
a general overproduction is possible, and thus see money and credit as the main
villain of the piece (1871, p. 173).
Even if, apart from in Germany, overproduction lived only furtively in the under-
world of heretics,4 it never died out. Indeed, by the end of the century the argument
that overproduction is a feature of crises had gained enough weight (for example,
by its being recognized as a partial explanation of the depression by the Royal
Commission on the Depression of Trade and Industry (Northcote, 1886, p. xvii)
and by the US Commissioner of Labor in his first Report (Wright, 1886, pp. 88–89))
that some dictionaries carried entries on ‘overproduction’ to disprove the case.
The first is due to Hadley, who argued that Sismondi, Chalmers and to some extent
Dictionary histories of crises theories 137
Malthus confused three issues: (1) overproduction as disproportionate production
of one particular article; (2) overproduction as a hindrance, preventing placement
of goods in the most advantageous market; and (3) a general fall of prices. From
the first argument, they inferred that overproduction is general, but failed to realize
that this is the result, not the cause, of the crisis (OVER-PRODUCTION, in →Lalor’s
Cyclopædia of political science, 1882). Hadley was followed by Edgeworth, who
rejected OVERPRODUCTION theories for →Palgrave’s Dictionary of economics.
He opened by quoting J. S. Mill’s dictum that ‘The theory of general over-
production implies an absurdity’, and continued by reporting that ‘the impossibility
of a “general glut” has been demonstrated by almost all authoritative writers of
last century’, while ‘on the other side are the weighty names of Malthus, T.
Chalmers, and Sismondi; followed by a crowd of inferior writers’ (Vol. 3, 1899,
p. 45; see Chapter 16).
Other entries took the opposite side. The anonymous entry on OVERPRODUCTION
in →Bliss’s Encyclopedia of social reform (1897) sympathetically surveys the
overproduction argument of A. D. Wells and especially of Hobson, and criticizes
the views of the socialist writers who deny the idea of overproduction based on
the existence of the unsatisfied needs of the workers. Lexis, who also held an
overproduction thesis (see Chapter 19), discussed the views maintaining (against
Say’s and Mill’s view that general overproductions are impossible) that over-
production and production crises (Produktionskrisen) are necessary and periodical
occurrences even in the absence of excessive speculation. The earlier literature
(Owen, Malthus, Chalmers, Sismondi) pointed at the increased productivity of
machinery, eventually generating unemployment and insufficiency of purchasing
power. Later, Rodbertus and Proudhon too argued that workers cannot buy back
their product. Marx and Engels in their Manifesto argued that the development
of the productive forces that is a condition for the orderly progress of society at
the same time menaces bourgeois property relationships and has to be restrained,
thereby upsetting the entire social order. J. S. Mill emphasized instead the fall
in the profit rate (KRISEN, in →Elster’s Wörterbuch der Volkswirtschaft, 1911,
Vol. 2, p. 209). Spiethoff, in the entry on OVERPRODUCTION for →Seligman’s
Encyclopaedia of the social sciences, classified the approaches to overproduction
under two headings, contrasting ‘old’ and ‘new’ theories (see Section 4.5). Classical
economists (that is, Say and the followers of his law of markets) were concerned
with the issues of the possibility of overproduction and with the distinction between
partial and general overproduction; curiously, Spiethoff does not mention any
contemporary critics of Say. Modern overproduction theory could only arise with
a fully developed capitalistic system, where a particular kind of overproduction is
present with a clearly defined pattern through all periodically recurring depressions,
and is an integral part of the explanation of the transition from prosperity to
depression (1933, pp. 515–516; see Chapter 20).
138 Daniele Besomi
4.4 OPTIMIST LIBERALS AND PESSIMIST SOCIALISTS
The first dictionary entry (and probably the first writing in absolute terms) with
a full and articulated section surveying the history of the doctrines on crises
and attempting a classification within a taxonomic scheme is due to Heinrich
Herkner. Titled KRISEN and included in the first edition of Conrad et al.’s
→Handwörterbuch der Staatswissenschaften (1890), the entry also contains a rich
bibliography – though biased towards the German literature – to which several later
dictionary entries referred (see Chapter 18).
Herkner found that the easiest grouping of the theories of crises is between
optimistic free traders and pessimistic socialists. The former see crises as an evil,
but an evil also bringing some advantages that could not be eliminated without
worsening the situation. As an illustration, Herkner quotes Wirth writing of crises
being as destructive as storms but eventually bringing the feverish system back
to health,5 Roscher noting that those who climb higher fall harder than those
staying on the ground, and Brentano stating that crises are inseparable from the
individuality of consumption, without which, however, life is not worth living.
The pessimists see instead in the crisis the striking proof that capitalism is rotten
to its core and that it is ripe for its demise (1882, p. 902). The list of optimists begins
with Say and Ricardo, who denied the possibility of a general overproduction;
they are followed by J. S. Mill, who emphasized the tendency of the profit rate to
fall; the Currency school related crises to the issuing policy of the Central Bank;
Bagehot and Jevons emphasized the failure of crops; Morier Evans, Wirth and
others wrote on fluctuations in the stock exchange; the German and French literature
emphasized the role of world markets; and Juglar wrote on monetary crises. Lexis
is the link between these writers and the socialists; he recognizes the ‘blatant
economic contradictions’ of overproduction coupled with underconsumption by
the masses, but believes that the resulting oscillations are intrinsically part of the
nature of capitalistic production without implying that capitalism should be replaced
by another system.
Under the heading of ‘pessimist socialists’, who have the merit of having initiated
a deeper inquiry into the specific fundamental conditions under which the capi-
talistic system shows signs of decline or economic disorder, Herkner has assembled
a motley body. Their father is Robert Owen, with his emphasis on machinery
increasing productivity and thus reducing purchasing power for consumption. A
similar argument is found in Malthus, Lauderdale, Chalmers and Sismondi, who
had to challenge Say’s law. This diatribe on the equilibrium between production
and consumption was later taken up by Rodbertus and Kirchmann. The position
of Marx and Engels is represented with a long quotation from their Manifesto, and
among later Marxists Kautsky and Lassalle are cited. In France we have Fourier
and Proudhon, in the US Henry George. The positions of Michael Flürscheim and
Otto Wittelshöfer are represented by means of long quotations.
In the second and third editions of the dictionary (1900 and 1910), Herkner
modified his approach. The categorization was tripartite. First he described the
debate on crises between Malthus, Sismondi and Say, concluding that today it is
Dictionary histories of crises theories 139
difficult to understand how a theory, recognized as a tautology by its own author,
could survive so long and have such an echo in economics, and even find adherents
among Marxists such as Tugan-Baranovsky. The second group included, as before,
the socialists. The list is updated to include Hobson and J. M. Robertson. Notably,
from the second edition Marx’s Capital is cited instead of the Manifesto, for the
first time in dictionaries. The third subsection is devoted to recent German eco-
nomics, occupying a middle stance between liberals and socialists.6 The second
edition discusses the ‘classical’ Wagner, Schäffle and Roscher and refers to
Brentano, Neuraths and Philippovich, and the Marxists E. Bernstein and C. Schmidt,
while the third updates the discussion (and the bibliography) to H. Cohn, Spiethoff,
and the new theorists: Eulenburg, Pohle, Sombart, Bouniatian.
The implication of the recognition of this middle stance is worth noting. The
contradictions of capitalism take the form of oscillations (in the words of Lexis
cited in the first edition) – i.e. the cycle; this is an idea expressed more explicitly
a few years later by Kalecki, when the notion of ‘cycle’ had acquired a solidity
which was totally lacking at the time of Herkner’s writing of this entry in 1882,
but which began to be apparent in the German-speaking countries by the second
and especially the third edition of the Handwörterbuch. This form is describing a
new kind of ‘normality’, which is not as smooth as the steady progress the optimistic
free-traders took to be the normal state of the economy, but neither is destructive
like the violent crises and the breakdown envisaged by socialists.7 A new theoretical
approach was superseding the old one, which seemed to be making obsolete the
old ideological division between socialists and liberals, between pessimists and
optimists.8 And it is precisely the old being subsumed by the new that provided
the guidance for a new schematization of the theories of crises and cycles.
The classificatory approach used by the vast majority of dictionary writers is based
on the cataloguing of the dominant factors invoked in the explanation of the cycle.
Even a number of entries using different criteria as the main approach (e.g. old vs.
new theories, exogenous vs. endogenous, etc.) further subdivide their primary
categories into classes based on the leading causal factor involved in the explanation
of the phenomenon. This approach (if not the classificatory schemes themselves)
was borrowed (sometimes explicitly, sometimes tacitly) and adapted from illus-
trious predecessors, in particular von Bergmann’s still unsurpassed history of the
theories of crises, Jones’s alternative classification of the same materials, and the
classifications of business cycle theories offered by Patterson, Persons, Mitchell,
Hansen and Haberler.
As Mitchell stressed, his classification and Persons’s are similar. But while Persons
is primarily concerned with a survey of theories, Mitchell is classifying theories
with a view to singling out the working hypotheses he could use for his own
constructive study of the cycle. Some writers are thus pigeon-holed in different
categories (Mitchell, 1927, p. 49n).
Alvin Hansen (1927), citing Mitchell (1927) but none of the other classifications
mentioned above, also starts with the observation that most explanations are multi-
causal and are in most cases not mutually exclusive, so that authors could contribute
to more than one category. He distinguishes three broad types of categories. The
first is concerned with the features of a capitalist economy: some believe that
the problem resides with the distribution of income, others with some technical
features of production (inventions disturbing equilibrium, or fluctuations in demand
affecting investment). The second group comprises the theories focusing on the
competitive exchange economy. The theories in the third group attribute the cycle
to the monetary economy (‘the interrelations of the rate of interest, the prospective
rate of profits, and the price level’ and ‘the interrelations of costs and prices, profit
margins, and capitalization’).
The most celebrated (and cited and imitated) survey of business cycle theories is
due to Haberler. He aimed at proving that in most cases different theories of the cycle
are not incompatible after all, so that they can be synthesized into a comprehensive
explanation of the phenomenon. The discrepancies between the various theories, in
spite of being often overemphasized by their authors, can sometimes be accounted
for by differences in their terminology, or they can result from differences in
emphasis. The phenomenon of the cycle, in fact, is so complex that hardly any inquirer
believes it can be ascribable to a single cause. But each writer tends to emphasize
one or a few of these causes, taking the others as data or as conditions defining the
institutional setting of the problem. Conflicts between writers, then, are more apparent
than real, and can often be ascribed to different choices as to what is a cause and
what is a condition.11 It could thus be helpful to distinguish between causes and
conditions, between controllable and uncontrollable factors, between exogenous
and endogenous causes, but the dividing lines are blurred. Having observed that
cycles have shown a remarkable persistence even in the absence of external causes,
Haberler thus starts from the assumption that the system is intrinsically unstable.
This allows him to focus on the economic factors and relegate external disturbances
to the role of the originators or disturbers of the endogenous process (Haberler, 1937,
pp. 5–12). There results the following taxonomy (from the less complicated to the
more complicated): purely monetary theories; overinvestment theories (monetary,
non-monetary and resulting from changes in the demand for finished goods); changes
in costs, maladjustments, and over-indebtedness; under-consumption theories;
psychological theories; harvest theories.
Dictionary histories of crises theories 145
4.6.2 The aetiological approach in dictionaries
The common feature of the aetiological approaches is the mechanical principle that
causes can be taken apart and analysed in isolation (and, if necessary, recombined
into a new explanation). In principle, none of the causes is privileged: they all
contribute to the comprehensive picture, in one role or another, and can be recom-
bined into ‘new’ comprehensive explanations as deemed suitable. As the archetypes
summarized above illustrate, there is no unique way of dismantling and pigeon-
holing the resulting pieces. The recognition of the places where something can
go wrong (e.g. by disrupting equilibrium) essentially depends on the classifier’s
theoretical approach and view of the working of the capitalist system, which there-
fore also guides the construction of the taxonomy of the causes of the cyclical
movement.
The same condition is found in the classifications attempted in dictionary entries
– the most recent of which also had to deal with additional theories to be placed.
The aetiological classificatory approach in dictionary entries was particularly
popular between the late 1920s (in correspondence with the similar attempts in
the general literature on cycles) and the 1960s, with some later instances.
Tugan-Baranovsky has already distinguished three groups of theories of crises
according to whether the cause of the phenomenon belonged to the domains of
production, exchange or distribution (ECONOMIC CRISES, in the →Brockhaus–
Efron Encyclopedic dictionary, 1895: see Chapter 17). Bergmann inspired
Spiethoff’s 1925 categorizations of the ‘old’ theories of crises (see Section 4.5) as
well as W. Heller’s cursory list, including general overproduction, underconsump-
tion, socialist explanation of underconsumption due to income distribution, and
disproportions, to which – like Spiethoff – he added the theories focusing on the
entire cycle (KRISENTHEORIE, in →Nationalökonomie (Theorie und Geschichte),
1926, pp. 100–101). Within the main division of ‘old’ vs. ‘new’ theories, Diehl
similarly constructed a causal taxonomy in six categories for the old theories
of crises (KRISEN, in →Elster’s Wörterbuch der Volkswirtschaft, 1932, Vol. 2,
pp. 687–689), while Thalheim’s dictionary – also as a subdivision of the ‘old’ vs.
‘new’ approaches – divides the theories of crises into only three categories:
monetary, overproduction and underconsumption (KONJUNKTUR UND KRISE, in
→Das ABC der Volkswirtschaft, 1934).
Mitchell, in the entry on BUSINESS CYCLES for →Seligman’s Encyclopaedia
of the social sciences (1933), naturally takes up his own 1927 classification scheme
(see Chapter 22, Section 22.2 for further discussion). Bachi, in the entry on CRISI
ECONOMICHE for →Treccani’s Enciclopedia italiana (1931), discusses the diffi-
culty of logically isolating and separating the various causes at work (p. 913),
maintains that the eclecticism of all discussions of crises defies any attempt at
classification, although Mitchell’s and Persons’s attempts are noteworthy, and
produces his own list of remarkable causal families of theories (pp. 917–918).
Another Italian, Masci, a few years later also remarked that none of the classifica-
tory schemes is completely satisfactory. Yet he sketched a categorization similar
to Mitchell’s, to which he added the group focusing on the saving–investment
146 Daniele Besomi
relationship – an explanation to which he himself adhered (CICLO ECONOMICO,
in →Confederazione Fascista delle Aziende del Credito e della Assicurazione,
Enciclopedia bancaria, 1942).
The first dictionary to introduce a category representing Keynesian economics
was →Horton’s Dictionary of modern economics: in the entry BUSINESS CYCLES,
THEORY OF, next to overinvestment theories there appears the class of under-
investment theories. The proposed classification is admittedly ‘somewhat artificial,
depending more on a matter of emphasis than upon unique explanations’ (1948,
pp. 40–41). The entry on KONJUNKTURTHEORIEN in →Sellien et al., Gablers
Wirtschafts-Lexikon (1956) takes up (without giving explicit reference to)
Haberler’s scheme and preliminary reflections on causation. Haberler’s categories
are instead expressly cited, but only briefly, in the entry on BUSINESS CYCLE in
→Munn’s encyclopedia of banking and finance (Garcia, 1962 and later editions).
Taylor also offers a very cursory causal schematization, nevertheless inserting a
class for ‘Keynesian economics’ (TRADE CYCLE, in →A new dictionary of
economics, 1966). Much later, M. F. Foss took up Haberler’s classification, to which
he added a summary of the monetarist, equilibrium and real business cycle theories,
and of the empirical approach of Mitchell and the NBER (BUSINESS CYCLES, in
→Outhwaite’s Blackwell dictionary of modern social thought, 2006).
Even at the acme of its success, the causal scheme of classification was not uni-
versally adopted. Before it was substituted by other preferred approaches, a few
alternatives had been articulated. Müller-Armack explained in 1929 that he would
classify theories according to the models of thought (Denkmodelles) used to explain
the development of economic conditions rather than according to the concrete
descriptions of their cyclical evolution. These descriptions, in fact, lack an unam-
biguous ascription to a certain basic model, be it the equilibrium theorem or a
specific view of economic dynamics. The explanatory value of causal descriptions
can only be ascertained by connecting the concrete phenomena to the general
theoretical scheme; to different schemes, different explanatory values are associ-
ated. Accordingly, he produced a threefold classification of business cycle theories.
First, those relating to the equilibrium theorem. If the production and exchange
processes bring about an optimal economic condition, no genuine crises or cycles
can really exist. Any fluctuations must therefore be attributed to chance movements,
such as fluctuations in crops, speculation etc., which spread to the entire system
due to the solidarity between its parts. To this family belong theories emphasizing
maladjustments on the goods side, such as changes in fashion on the side of demand
or changes in productivity on the side of supply, and the explanations in terms of
monetary or credit phenomena. A second category of theories is made up of those
accounting for economic development in terms of the accumulation of capital.
Socialist theories see the impetus to capitalist expansion in the circulation process.
Because of the continuity of technological progress, entrepreneurs, instead of
Dictionary histories of crises theories 147
consuming their surplus, accumulate it. From this, two disproportions follow in
Marx’s theory, namely, the tendency of profit rates to fall and underconsumption
by the workers. Some – e.g. Rosa Luxemburg – here link theory of crisis and theory
of imperialism. To this category also belong the old underconsumption theories,
such as Sismondi’s, or the new ones, such as the liberal-socialist Oppenheimer’s
(based on the pressure on wages due to the monopoly of land), or Lederer’s (based
on the rigidity of consumers’ incomes). Finally, the third category includes the
theories maintaining that the capitalistic process itself generates the forms of its
growth and the means of sustaining the demand for its products; this is nothing
else than a new formulation of Say’s law. To this group belong writers such as
Schumpeter, Hahn, Pigou, Hayek, Mises, Lavington (KONJUNKTURFORSCHUNG
UND KONJUNKTURPOLITIK, in →Elster’s Handwörterbuch der Staatswissen-
schaften, Vol. 4, 1929, pp. 649–655).
H. Besters, in the entry on WIRTSCHAFTLICHE KONJUNKTUREN for the
→Staatslexikon of the Görres-Gesellschaft (Vol. 8, 1963), described the theories
of the cycle according to some general views concerning the working of the
economic system. Besides the old purely exogenous theories, which he thought to
be unsatisfactory as they failed to give a clear account of how the external causes
exerted their effects on the economic processes, Besters considers the explanations
assuming a barter economy (the naive overproduction and underconsumption
theories of the mercantilists, and the classics and Say’s law); those assuming instead
a monetary economy and focusing on the mismatch between circulations of goods
and of money (the disproportionality theories, those focusing on overinvestment);
the mechanistic explanations (the multiplier–acceleration mechanism); those
focusing on the mechanisms giving rise to cycles when disturbances of equilibrium
are corrected; and the theories considering the interrelation of cycles and growth
(the pre-war theories interpreting the cycle as part of the growth process, and
pessimistic post-war theories considering instead the hypothesis of a tendency to
stagnation) (pp. 740–747). It should be noted that while this choice of perspective
enabled Besters to tidy up the field somewhat, it is rather arbitrary and omits a
number of approaches.
First, we consider whether the principal active forces responsible for motion
are assumed to come from the outside or are assumed to be endogenous parts
of the economic system itself. The first type of model is sometimes called an
open model, and the second type is called closed. Second, for each of these
two types of models, we consider whether the cycles are produced because
148 Daniele Besomi
the driving force is itself cyclical (‘forced oscillations’) or because of the
particular way in which the economic system responds to the stimulating forces
(‘free oscillations’).
(BUSINESS CYCLES: MATHEMATICAL MODELS, in →Sills,
International encyclopedia of the social sciences, 1968, p. 247)
Haavelmo was aware that a model could fall into more than one of his four
categories, and that therefore this taxonomy does not offer a unique categorization.
Both the exogenous/endogenous and the free/forced oscillations distinctions were
also considered, or at least implied, by some of the aetiological taxonomists –
indeed, in Haavelmo’s mechanistic framework, ‘forces’ are nothing but ‘causes’.
The advances in mathematical modelling, however, made it possible to conceive
of the possibility (which would have seemed at least very unlikely to Jones in 1900)
of exogenous models giving rise to periodical free oscillations.
The latter point is further discussed by Medio, who pointed out that between the
purely exogenous interpretation of cycles sustained by periodical external shocks,
or the purely endogenous interpretations of persistence based on non-linear models,
it is also possible to adopt a middle way consisting in fairly regular fluctuations
resulting from exogenous a-periodic shocks superimposed upon a system predis-
posed to oscillate (CICLO, in →Lunghini’s Dizionario di economia politica, 1983,
pp. 11–12). The presentation of the theories (in line with the Dizionario’s approach;
see Chapter 1, note 11) is chronological, but with an eye on the state of modelling:
classical economists did not have a proper theory of the cycle, but had discussed
the equilibrium conditions of the economic system and whether or not it was
inclined to crises; crises, however, were not yet seen as a part of a general phe-
nomenon. Towards the end of the nineteenth century there began the modern phase
of business cycle research: the cycle became the focus of analysis, and writers
sought to identify the causes of the phenomenon and frame them into theories. No
models, however, were produced at this stage. During the ‘contemporary’ phase
of the history of business cycle analysis we witness instead attempts to give a
rigorous couching in mathematical terms to the previous intuitively formulated
theories (pp. 17–18). The survey, examining a number of representative writers
for each epoch, concludes by taking up the issue of the persistence of fluctuations
in terms of the properties of linear vs. non-linear modelling (pp. 53–55; see Chapter
26, Section 26.2).
Some of these themes are taken up by Mullineux, although more as a list of
contrasting approaches than as a proper classification of theories. Besides the issues
of systematic vs. random fluctuations, shocks vs. non-linear models and the
in/stability of equilibrium, he also mentions the issue of the separation of cycles
and trends (BUSINESS CYCLES, in →Kuper and Kuper, The social science
encyclopedia, 1985).
Dictionary histories of crises theories 149
4.9 DIGGING RATHER THAN SKATING: THE QUEST FOR
A FUNDAMENTAL LINE OF DIVISION
Upon reading the first draft of Haberler’s classification of business cycle theories,
Keynes commented as follows in a letter to Felkin:
My essential point is that the method you have adopted forces you to a high
degree of superficiality. As I said before, I cannot believe that the solution
can be reached by bringing together in selected packets excerpts from the views
of a large number of writers, each differing from the other more or less in
fundamentals. The answer must lie somewhere much deeper down; yet your
method tempts you to skating rather than digging.
(Keynes, 1934b)12
Although Haberler’s approach was widely acclaimed at the time (Keynes himself
later admitted that the final result ‘is all very skilful and clever’ (Keynes, 1939)),
and was adopted by several writers in the following three decades, the artificial
character of the classification in terms of causes at some point became apparent,
and the need for a taxonomy focusing on more fundamental features of business
cycle theories made itself felt. Several solutions have been explored, which share
the idea that the theories of crises and cycles should be grouped according to the
general perspective on the working of the economic system. An interesting impli-
cation of this shift of approach is that the distinction between the old theory of crises
and the new theories of the cycle becomes secondary with respect to the emphasis
on the significance of crises and cycles for the working of the economic system.
Accordingly, the theories advanced in the nineteenth century are treated on an equal
footing with the more recent contributions, after having been treated for almost half
a century (if not ignored altogether) as rather ‘primitive’.
150 Daniele Besomi
4.9.1 Say’s law (again)
In 1956, →Napoleoni’s Dizionario di economia politica included a long entry (38
pages) on FLUTTUAZIONI ECONOMICHE by Thomas Balogh. Although Balogh
does not seem to have written anything else on the subject, the result is an able
essay (some inaccuracies notwithstanding) reconstructing the history of the theories
of crises and cycles as seen from a precise (though far from unbiased) perspective,
namely, how Say’s law had hindered the development both of theoretical advances
in the field and of appropriate economic policies, until this ‘colossal deception’
(p. 645) was eventually dismantled and several strains of theories could flourish
in a heterogeneous yet consistent way.
Equivocally as it was formulated, it is difficult to pin down Say’s law to a precise
proposition. Balogh sees its roots not so much in a sociological desire to give a
rational foundation and justification to the liberal principles of individual freedom
in economic matters, but in the economists’ objective of founding an ‘objective’
science modelled on Newtonian physics. The law of markets has been one of the
most tenacious cornerstones of economics as a static science of equilibrium, as it
postulated that any divergence between supply and demand (whether it be of goods,
as in early classical economics, or of capital, as in post-Ricardian classical and
neoclassical economics) is automatically corrected thanks to the elasticity of both
demand and supply with respect to prices and interest (pp. 645–648). Crises and
cycles were accordingly treated as secondary and residual phenomena, rather than
as facts that required a reconceptualization of the entire theoretical approach in
order to be incorporated within the general theory (p. 649).
Balogh’s survey of pre-Keynesian theories of crises and cycles thus examines
how Say’s law either constrained crises theories or, on the contrary, how writers
challenged it. On the latter point, however, his conclusion is rather drastic:13 ‘after
Malthus no academic economist, up to after Keynes, has attempted to insert the
recurrent and insistent phenomenon of economic crises within a general and
accepted theoretical scheme. The body of economic theory – whether based on the
theory of labour-value or on the system developed by the various marginalist and
mathematical schools – was more or less based on the doctrine of continuous full
employment of available resources, since any deviation from this condition was
quickly and automatically corrected, unless there were frictions due to an imperfect
working of the price mechanism’ (p. 647). Balogh’s emphasis is on the place of
equilibrium and of its stability (an issue he seems to consider as more or less
equivalent to Say’s law, or at any rate implied by it) in the theoretical construction.
I will not follow the details of Balogh’s reconstruction from the overtrading theories
of the early nineteenth century14 to the empirical researches of the inter-war years,
via the theories based on crop fluctuations, credit, monetary theories of under-
consumption, the monetary theories (pure, and of overinvestment), those based on
the character of capitalistic production. The point to note, for the purpose of this
chapter, is that Balogh identifies the mechanisms deployed by each of these strains
of theory to explain how the action of Say’s law is counteracted or temporarily
suspended, thereby permitting the occurrence of crises (pp. 651–663).
Dictionary histories of crises theories 151
An article by Löwe published in 1926 radically questioned the compatibility
of the kind of movement observed during business cycles with the existing
static theoretical system, and postulated that a dynamic system should be erected
in its place. Balogh argues that although Löwe was not able to propound such a
system, he laid the ingredients for the solution of the problem (FLUTTUAZIONI
ECONOMICHE, pp. 650–651). This was eventually built upon two foundations.
The first was Sraffa’s 1926 criticism of neoclassical theory, questioning the ceteris
paribus assumption and the postulate of independence of variations and thereby
opening up the possibility that small changes in one sector feed back further
changes, and accordingly cannot be relegated to the realm of the second order of
magnitude. The second, due to Kahn (1931), was the economics of production as
a whole, so that income could be treated as the result of the interaction of aggregate
demand and supply rather than being given by some long-term factors. This ‘broke
the incredible and unintelligible spell’ of Say’s law, and opened the door to the
formulation of an entirely new and consistent system – Keynes’s General theory.
Here comes the notable historiographical point of Balogh’s entry. He argues that,
after Keynes, a true and complete synthesis of business cycle theories has become
possible. Löwe had shown that previous theories were contradicting each other and
failed to give a consistent explanation of the cycle (p. 650). He could thus distinguish
between various schools of thought, and associate the ‘monetary’ theories mainly
with an Anglo-Saxon approach, while the ‘real’ theories were mainly of Continental
origin (pp. 665–666). The same method of presentation was followed by Haberler
(1937), who was not aware that Keynes made uniforming possible (p. 666).15 This
lies in the proposition that saving and investment decisions are independent of each
other, and that there is no automatic adjustment mechanism ensuring that they
balance each other at the level of full employment. Combining saving and invest-
ment functions, various models are possible and, especially if no assumption as to
the rigidity of parameters is made, they can accommodate all the most important
elements of the old theories, which can then be synthesized in a consistent and satis-
factory way. The differences between various theories and schools have become
a matter of detail, often concerning the mathematical method rather than the essence
of the theory (pp. 667–669).
On the one side are those who believe that the existing economic system is,
in the long-run, a self-adjusting system, though with creaks and groans and
jerks, and interrupted by time lags, outside interference and mistakes [. . .].
Dictionary histories of crises theories 157
These authorities do not, of course, believe that the system is automatically or
immediately self-adjusting. But they do believe that it has an inherent tendency
towards self-adjustment, if it is not interfered with and if the action of change
is not too rapid. On the other side of the gulf are those who reject the idea that
the existing economic system is, in any significant sense, self-adjusting. They
believe that the failure of effective demand to reach the full potentialities of
supply, in spite of human psychological demand being immensely far from
satisfied for the vast majority of individuals, is due to much more fundamental
causes.
(Keynes, 1934c, pp. 486–487)16
All business cycle theories are based upon one of two sharply distinct
Schumpeterian ‘pre-analytic visions.’ One approach sees the economy as being
essentially stable, with its normal state being one of relatively full utilization
of resources, and growth in the level of output resulting from supply-side
factors. Expansions or contractions in economic activity are due to exogenous
shocks to the system such as technological change, fluctuations in the prices
of imported goods, changes in the quantity of money in circulation, or war. If
disturbed, powerful equilibriating forces, coordinated through changing price
levels in competitive markets, quickly return the economy to its normal, high-
employment growth path. Most of the classical economists appear to have held
this vision, and it reappears in contemporary orthodox economics as part of
the new classical economics.
In sharp contrast is the vision shared by dissenting heterodox economists,
including Marx, Kalecki, Mitchell and Keynes. They saw the economy as being
potentially unstable, with growth and full utilization of resources a possible but
no more likely state than recession, depression or boom. Fluctuations in economic
activity are seen as being due to inherent endogenous processes that take place
during expansions. Furthermore, the equilibriating, stabilizing power of markets
is weak and the processes slow. Although the various theories sharing this vision
differ with respect to the specific disturbance variables seen as the most important
proximate cause of fluctuations, most of them emphasize aggregate demand
factors. In addition, many heterodox theories treat demand-side fluctuations as
dialectically connected with the process of supply-side economic growth.
(In →O’Hara’s Encyclopedia of political economy, 1999, p. 51)
In the first epoch of business cycle theorizing – classical economists and Marx
– the watershed is Say’s law’s condemnation of general gluts as absurd, against
the opposition of Malthus’s underconsumptionism and the early cycle theories of
Tooke, J. S. Mill and Marx. In the second phase, covering the time between Marx
and Keynes, business cycle theories flourished as a separate line of inquiry, accom-
panied by the spreading of the perception that the instability of capitalism was
increasing. The theories of Tugan-Baranovsky, Hawtrey and Robertson are men-
tioned, Schumpeter and Keynes summarized at some length. The third phase of
the development of business cycle theories sees the opposition of the investigations
of Mitchell, the multiplier–accelerator models, and the post-Keynesian theories of
Minsky and modern Marxists on one side, and the monetarist approach and of real
business cycle theories on the other.
Besomi’s entry on BUSINESS CYCLES, THEORIES for →Darity’s International
encyclopedia of the social sciences (2008) reports how the epistemic implications
of the stability issue became apparent in the reflections on the nature of the business
cycle in the inter-war years (in particular due to Löwe, Hayek and Harrod) and how
Dictionary histories of crises theories 159
the subsequent theoretical developments dealt with the issue, on one side or the
other of the divide between the ‘orthodox’ who believed that the system even-
tually tends towards a state of equilibrium, and the ‘heretics’ who disputed such
assumption. The development of ‘formal dynamics’ was particularly affected by
this issue: it was explicitly discussed in the debate between Frisch and Kalecki, and
taken up by Kaldor and then Goodwin when they introduced non-linear modelling
precisely to account for the persistence of the cycle, while the equilibrium and real
business cycle theories revived instead the orthodox approach.
The taxonomy of taxonomies offered in these pages unavoidably suffers the same
limit as the original attempts at classifying business cycle theories: due to the
richness and complexity of the materials at hand, any categorization is bound to
be unable to fit all contributions into one and only one pigeon-hole. Indeed, some
dictionary entries could also fit into sections other than those used here, while some
do not fit at all. Among these, some are of scant interest (e.g. Dietzel’s distinction
between crises of agricultural and non-agricultural origin in the entry on ERNTEN
(ERNTZYKLUS UND WIRTSCHAFTSZYKLUS) (Harvests (harvest cycle and eco-
nomic cycle)), in →Conrad et al., Handwörterbuch der Staatswissenschaften,
1909), but others are more intriguing.18
Jöhr offers an articulated, mixed-approach survey of business cycle theories.
He categorizes the various contributions in the field by the direction of research.
The first, ‘theoretical business cycle research before Keynes’, is a mixed bag
referring to the classical debate between Say and Ricardo on one side, and Malthus
and Sismondi on the other; Marx; and business cycle theory before the First World
War, from which Haberler’s schematism is explicitly borrowed. Jöhr’s second
category is ‘Empirical business cycle research’, including the descriptive approach
of the German historical school and the statistical approach pioneered by Juglar
and later pursued by Mitchell and the various business barometers institutes. The
next categories include the writers linking theoretical and empirical research, in
particular Tugan-Baranovsky, Aftalion, Lescure and Schumpeter. There follow
Keynes and the Keynesian dynamic models; the econometric business cycle
research, ‘the second stage of the synthesis between theory and empiricism’;
and finally the research into psychological and political business cycles. Jöhr
also discusses, with reference to a number of authors, the main problems of business
cycle research, namely, the relationship of causal explanations and empirical
research, of statics and dynamics, and of exogenous and endogenous explanatory
factors (KONJUNKTUR. I. THEORIE, in →Beckerath, Handwörterbuch der
Sozialwissenschaften, Vol. VI, 1959, pp. 97–105).
Manfred Neumann, starting from the principle that the problem of business cycle
theory is to explain the disequilibrium between production and aggregate demand,
and taking for granted that no such thing can take place in a barter economy, lists
the following kinds of explanation: first, endogenous theories, of which he discusses
160 Daniele Besomi
the multiplier–accelerator models, the insertion of ceilings and floors, and the
approaches stressing the intrinsic instability of growth. Second, the theories
focusing on distributive conflicts, in particular Marx and Goodwin (on Neumann’s
account of Goodwin’s non-linear model, see Chapter 26, Section 26.2). Third, the
theories relying on accidental causes: econometric models and models incorporating
exogenous shocks (KONJUNKTURTHEORIE, in →Glastetter, Handwörterbuch der
Volkswirtschaft, 1978).
Weinberger briefly lists the categories suggested by Heinrich’s taxonomy (1928),
namely, the disproportionality theories that try to explain crises from the side of
goods; the monetary theories, focusing instead on the monetary side; and the natural
and psychological theories, relying on crop fluctuations, weather cycles, demo-
graphic changes, and on shifts of moods (KONJUNKTUR UND KRISEN, in
→Sacher’s Staatslexikon, 1929, p. 514). Eric Streissler classifies business cycle
theories according to their position with respect to three opposing viewpoints. The
first contrasts monetary and real theories, with Wicksell, Hayek and later Lucas
on one side, and the multiplier–accelerator theories on the other. The second
opposes psychological theories (Pigou and Jöhr) to physical theories (for instance,
those based on disproportionalities). The last contrasts underconsumption and
overinvestment approaches, represented respectively by Keynes, and by Hayek
and Spiethoff (KONJUNKTURTHEORIE, in →Herzog et al., 1987, Evangelisches
Staatslexikon). The latter opposition is also found in Ricossa’s otherwise unsys-
tematic survey, which lists a number of important theories, but especially pauses
on underconsumption and overinvestment theories, which he, like Streissler,
considers as the complementary side of the same issue. Emphasis on lack of
consumption is qualified as ‘leftwing’, while emphasis on excess of accumulation
is qualified as ‘rightwing’ (CICLO, in →Ricossa, Dizionario di economia, 1982,
p. 65). Guerrien suggests (without, however, elaborating further) that ‘practically
all theories of the cycle can be grouped into two broad categories: those attributing
a decisive role to monetary and financial phenomena, and those looking for the
causes of crises at the level of production and exchange’ (CYCLE (THÉORIES DU),
in →Guerrien, Dictionnaire d’analyse économique, 2002, p. 136)
De Vecchi’s very long entry on CRISI for →Lunghini’s Dizionario di economia
politica (Vol. 7, 1983) is entirely devoted to the history of the subject. The
presentation is chronological and by schools of thought (as required by the
dictionary’s layout; see note 11, Chapter 1). The author, however, is particularly
interested in the epistemic distinction between mechanistic approaches and
approaches incorporating instead into their core non-predictable and non-calculable
elements, which he follows through the history he reconstructs (for a more detailed
description, see Chapter 28, Section 28.7). In his brief reconstruction of the usage
of the term CONJUNCTURE, Kuznets also focuses on an epistemic issue, namely,
the shift from the atomistic approach of the classical economists towards the
emphasis on organic interdependence by the first German users of the term
(Lassalle, Schäffle and Wagner) and finally towards the emphasis on the incal-
culability of market conditions by the later German users (in →Seligman’s
Encyclopaedia of the social sciences, 1931).
Dictionary histories of crises theories 161
4.10.1 A chronosophical approach
One of the most intriguing schematizations of crises and cycle theories is offered
by Krzysztof Pomian in the entry on CICLO for the →Enciclopedia Einaudi (Vol.
2, 1977). The author is interested in the notion of time in relation to history, and
in the relationship between past, present and future, which he calls ‘chronosophy’.
The entry is concerned with the philosophical and historical aspects of these issues,
but several pages (1164–1174) are dedicated to the idea of progress and cyclical
recourse in economics. During the first half of the nineteenth century, most econ-
omists shared the view that the development of capitalism is of a linear and
cumulative kind. They had no theoretical interest in crises, and were assisted in
their belief by Say’s law, which guaranteed that disruptions of the harmony between
supply and demand could only be caused by desultory accidents. As a consequence
of the work of Clément Juglar, who supplied statistical evidence of the periodicity
of crises,19 the general perspective started to change and new questions were asked
– in particular, whether the development of the economy must necessarily follow
a cyclical course. The cycle, however, was no substitute for progress: the new
chronosophy combined the traditional faith in progress with the new oscillatory
behaviour. This, however, in the view of Juglar and his contemporaries during the
second half of the nineteenth century, was still due to causes essentially alien to
the ‘normal’ working of the economy: the speculative ‘human nature’ for Juglar,
Jevons’s sunspots, the oscillations of crops or in the value of gold for other
economists. ‘All these attempts are based on the conviction that linear growth is
the normal evolution of capitalist economy. The mechanisms governing it cannot
be deemed responsible for the recurrence of crises. Their causes must therefore be
sought outside it. Thanks to this duality between internal perturbations and external
factors it was possible to reconcile economic cycles and linear time. The latter
characterizes history, the former depend on nature.’ Only Marx was an exception.
He thought that the disequilibria of capitalist economies – disequilibria not between
supply and demand, but in the relationship between capital and work, both taken
as a totality – would grow in size as production progressed, so that deeper and
deeper crises would succeed each other at shorter intervals.
Up to the world crisis in 1929, the study of cycles focused on the endogenous
causes of their periodical return. At first – in Pomian’s reconstruction – writers tried
to recognize the common elements in all cycles and to identify their common cause.
Soon, however, explanations combined several causes, also because meanwhile
cycles of different lengths were described, and the nature itself of ‘the’ cycle became
much less clear-cut than it was in Juglar’s time. Yet this line of research remained
anchored to a static approach until the early 1930s, when the new ‘dynamic’ theories
emerged emphasizing the role of time. The lag between cause and effect was called
upon to explain the chaining of events, capable of determining cumulative
consequences. While these theories were well suited to explaining the causes of
oscillations, they left out the long-term development. Schumpeter tried instead to
account for both cycles and growth, and for cycles of different length.
In Pomian’s view, only the theories of Marx and Schumpeter are open to
chronosophical problems. They incorporate reflections on issues that are not strictly
162 Daniele Besomi
economic; they focus on the relationships between the present and future of capi-
talism, and of the present and the past modes of production. The ‘time’ incorporated
in their analys not only is linear and cyclical at the same time, but also is a global
time, the time of the history of capitalism, rather than the local time of its economic
domain only.
NOTES
1 Duncan’s observation in 1842 that to almost every writer discussing crises there
corresponds a different explanation is still largely applicable nowadays (‘According to
Hudibras, and other learned authorities, “every why has a wherefore”; and so various
are the theories which have been formed on this subject, that it might almost be added,
that “every man has a wherefore”’ ([Duncan] 1842, p. 5).
2 In the German-speaking area this view was held by Wagner, KRISEN, in →Rentzsch,
Handwörterbuch der Volkswirthschaftslehre, 1866 (see Chapter 14).
3 This is reflected in the definition of ‘crisis’: while mid-nineteenth-century dictionaries
in other languages defined crises in terms of ‘disturbances’, German dictionaries could
specify that the disturbances referred to the equilibrium between supply and demand
(see Chapter 3.3.8.3).
4 I use Keynes’s convenient expression, but I must point out that these writers were far
more numerous than the three listed by Keynes: Marx, Gesell and Douglas. Keynes’s
modern critics and supporters of Say’s law (see e.g. Kates, 2003) also underestimate
the number and variety of criticisms of the law of markets.
5 These – especially the medical one – were frequently used metaphors at the time. For
a discussion, see Besomi, 2011.
6 This intermediate category may have been introduced as a partial response to von
Bergmann’s criticism, who pointed out that writers such as Wagner, Schäffle and
Lexis occupied a middle ground, which he described as ‘social’. Bergmann also
observed that Herkner found particularly easy the classification in terms of the economic
consequences as these normally show sharper contours than the real theories, and that
he was led to include – rather oddly – Malthus with the socialists (Bergmann, 1895,
p. 432). More on Bergmann on the taxonomy of crises theories below, Section 4.6.1.
7 A political taxonomy based on the opposition between liberals (classical and neo-
liberals) and Marxists was also offered much later by Bernard and Colli. Classical liberals
saw crises as abnormal incidents resulting from interferences (whether individual or
political) with the self-regulatory action of the market; this intention of such a view is
more apologetic than explanatory. While the classical liberals based their interpretation
on a static view of equilibrium, the new-liberal approach moves from a dynamic analysis
seeing crises as the result of some objective friction or delay of reaction; this analysis
has been progressively integrated within the study of cycles. Marxist analysis, based
on causal dialectics, sees the origin of overproduction crises in the discordant devel-
opment of production means and demand, the latter depending on income distributon
and the tendency of profit rates to fall (CRISE (ÉCONOMIQUE), in →Dictionnaire
économique et financier, 1996, pp. 494–495).
8 In 1978, Giannetti also stressed that the cycle was a form that could substitute for both
the optimism of classical economists and the Marxist faith in the final breakdown of
capitalism, equally shattered by the prolonged depression of the last quarter of the
nineteenth century (CRISI ECONOMICHE: L’OTTOCENTO, in →Carmagnani and Vercelli,
Il mondo contemporaneo, pp. 111–112).
9 For a detailed discussion of the terminological issues implied by this change, see Chapter
3, Section 3.2.9.
Dictionary histories of crises theories 163
10 On which more below, in Section 4.6.1.
11 Haberler’s successor at the League of Nations, Tinbergen, also believed in the necessity
of unifying conflicting theories: see Chapter 23, Section 23.4.
12 I am grateful to the Provost and Fellows of King’s College, Cambridge, copyright
owners, for permission to cite these passages from unpublished manuscripts by Keynes.
13 This conclusion is consistent both with Keynes’s own and, ironically, with that main-
tained by the modern supporters (against Keynes) of Say’s law; see Section 4.3.4 above.
14 It is worth emphasizing that Balogh was the first and only contributor to dictionaries in
the twentieth century to mention these theories, by far the richest class of explanations
throughout most of the nineteenth century.
15 It is only fair to say here that Haberler’s aim was precisely that of synthesizing the
elements of truth of various theories once freed of the seeming differences between them
generated by their peculiar languages.
16 This is the transcript of a radio conversation, which explains Keynes’s loose language.
That this problem was fundamental, however, was an opinion shared by other authorities,
such as Hayek and Löwe. For a detailed discussion, see Besomi, 2006a.
17 Although this epistemic distinction was already clear to some writers in the inter-war
years (in particular Löwe, 1926 and Harrod, 1934; see Besomi, 2002, and Besomi,
HARROD’S INSTABILITY PRINCIPLE AND TRADE CYCLES, in →O’Hara’s Encyclopedia
of political economy, 1999), the mathematical formalism available at the time did not
permit the early ‘econometricians’ to explore the requirements for endogenous models
of the cycle. Linear functional equations, in fact, admit persistent oscillations only with
a specific set of parameters, at which the system becomes structurally unstable (strictly
speaking, this is not true of lagged differential equations, but these properties were
discovered only later). Writers could thus find themselves in the odd situation of wanting
to express a system the nature of which was intrinsically oscillatory by means of an instru-
ment that did not allow them to do so. A case in point is Kalecki: see Besomi, 2006b.
18 The recognition of three theoretical scenarios offered by Pierluigi Ciocca in the entry
on CRISI ECONOMICA E FINANZIARIA for →Bedeschi’s Enciclopedia delle scienze
sociali (1991) – a Thornton–Bagehot line, the explanations based on the theories of
credit and speculation, and the approaches falling in the Marx–Keynes–Schumpeter line
– also does not fit in any of the above typologies. It is summarized in Chapter 28, Section
28.6.
19 Pomian stresses that this was itself a novelty, as previous chronosophies were based on
projections into the future of evaluations of the present and past conditions mostly on
ideological grounds. After Juglar, the presence of the repetitiveness of the cycle becomes
an observable fact (pending the judgement on the pertinence of the chosen indexes).
REFERENCES
Before its definite conservative turn following the events of 1848 (Le Van-Lemesle,
2004), the French Liberal School put forward an original neo-Smithian economic
analysis, which was embedded in a doctrinal programme which, in more or less
radical versions, dominated liberal industrialism (Béraud et al., 2004). Although
a part of the Liberal School with Charles Dunoyer had already developed an intran-
sigent economic liberalism, other movements within the School had more balanced
views. One such case is represented by Adolphe Blanqui, who succeeded Jean-
Baptiste Say at the Conservatoire National des Arts et Métiers, while remaining
Crises in early French dictionaries 169
both an attentive and a critical reader of the Saint-Simonians, Fourierists and their
related dissident movements (Arena, 1991). In 1848, his report on the working
classes banished him from the Liberal School (Des classes ouvrières en France
pendant l’année 1848, 1849). Towards 1840, a moderate liberal such as Blanqui
opposed, first and foremost, the rebirth of an economic nationalism supported by
the Orleanist power and perfectly expressed in the speeches of Baron Charles Dupin
(Todd, 2008). In 1839, the Baron observed ‘the alternation of convulsive progress
and sudden convulsion’ suffered ‘by national industry’ (Dupin, 1839, p. 5), linked
the phenomenon to the excess of individualism and competition, and took up the
defence of a capitalism of large units in constant relationship to the state, the only
system capable of ensuring the coordinated development of national industry
(Charles Dupin, CRISE COMMERCIALE, in →Encyclopédie du dix-neuvième siècle,
1846, Vol. 9, pp. 308–311). In contrast, Blanqui developed a conception which
relativized the gravity and periodicity of the crises, a conception in which the
linearity of progress depends upon the healthy cohabitation of industry and liberty,
a liberty controlled by the Saint-Simonian imperative of attending to the improve-
ment ‘of the most numerous and poorest class’. Progress globally represents a
growing trend; industrial growth, however, constitutes a complex process and it is
thus not surprising that it can be troubled from time to time by accidents and crises.1
Confronted with this dynamic, complex process, the error lies in the constant temp-
tation of an ‘excess of protection’; the control of industry by the state is possible,
the regulation or organization of competition in certain areas such as credit is
necessary, but these interventions must not become excessive. In this context, crises
are thus ‘disruptions which commerce or industry undergo from time to time under
the influence of often very diverse causes, internal or external . . . they are temporary
accidents, storms which momentarily trouble the serenity of the industrial horizon
and after which, apart from a little damage, business returns to its usual course’
(A. Blanqui, CRISE COMMERCIALE, →Encyclopédie des gens du monde, 1836,
Vol. 7, pp. 257–259). With a few variations, the ‘commercial crisis’ entries of
the later liberal dictionaries used this general outline (Charles Coquelin, CRISES
COMMERCIALES, →Dictionnaire de l’économie politique, 1852–1853, Joseph
Garnier, CRISES COMMERCIALES, →Dictionnaire universel théorique et pratique
du commerce et de la navigation, 1859).
During the years 1830–1848, the French Liberal view on crises and progress
consisted of three propositions: regular growth is a characteristic feature of indus-
trial society; this growth may be temporarily and irregularly disturbed by crises of
mainly exogenous origins; and social progress is the natural destiny of industry.
Under the July monarchy, the Republican party remained mainly prohibited and
clandestine. However, during the 1830s, clubs and associations broadly developed
and diffused the republican ideas and doctrines (Tchernoff, 1901; Weill, 1928;
170 Ludovic Frobert
Gilmore, 1997). In the autumn of 1833, Jean Reynaud and Pierre Leroux were
entrusted with the publication of a manifesto, a synthetic text for the republicans
gathered together in the Société des Droits de l’Homme, of which they were to
write, ‘this party unanimously conceives liberty to be its goal, the assistance of the
proletariat to be its first duty, the republican to be its agent and the sovereignty of
the people to be its principle; finally it considers the right to [free] association to
be the consequence of this principle and the means to bring about its execution’
(Leroux and Reynaud, 1833, p. 6). After several defeats (most notably in June 1832
and April 1834), the republican movement recomposed its moderate branch under
the direction of men such as Armand Marrast, Étienne Garnier-Pagès and younger
zealots who wrote in their paper Le National. One of the main problems confronting
these authors was to study the parallel and paradoxical growth of industry and
exchange, on the one hand, and of pauperism, on the other, and to show how the
Republic could solve this problem, which had appeared even more complex since
the recent investigations carried out by Louis-René Villermé (Tableau de l’état
physique et moral des ouvriers des manufactures de coton, de laine et de soie, 1840)
and Étienne Buret (De la misère des classes laborieuses en Angleterre et en France,
1840). In his study, Buret explained that ‘destitution is morally felt poverty’ (Buret,
1840), an expression which bears witness to the fact that the evils of the nascent
industrial system were not only material, but also moral and political, since the
workers were constantly threatened by domination. In 1842 this republican move-
ment published its own general survey, →Duclerc and Pagnerre’s Dictionnaire
politique. Within the group writing the Dictionnaire, tensions already existed
between, on the one hand, those who believed that suffrage reform and the advent
of republican power would suffice to resolve the social issue through strictly
political means and, on the other hand, those who already thought that, as well as
the political dimension, reform should also lead to profound modification of the
workings of the economy. The main contributor for the economic entries of the
Dictionnaire politique was Jean-Gustave Courcelle-Seneuil.
Courcelle-Seneuil explained that the crisis manifests itself in industry and
commerce as a suspension of business. Thus, ‘the principal character of these crises
is the weakening of credit’ (CRISES, Dictionnaire politique, pp. 298–299). The
origins of such a phenomenon are numerous: ‘disturbances’, ‘surplus of commerce
or unfortunate speculations’, ‘sudden variations in the prices of merchandise’; in
his 1840 work, Le crédit et la banque, Courcelle-Seneuil noted that ‘these
alternatives of rise or fall are generally caused by the vicissitudes of war, the
alternatives of war or peace, and, above all, production surpluses’ (1840, p. 17).
What must be seen in this list of disparate causes is, above all, the extreme
vulnerability of the present economic system, which spontaneously and without
doubt produces wealth, but which also creates cumulated disorder and disturbances
(here Courcelle-Seneuil is insisting on the propagation of crises) and thus requires
regulation. So the author does not condemn the economic or financial system but,
rather, the absence of adequate political regulation of this system. Thus, in
1840–1842 these reasons led him to ultimately place at the origin of crises a sum
of individual errors, erroneous economic choices made without any element of
Crises in early French dictionaries 171
collective guidance: ‘commercial crises are but the multiplication of particular
disasters that the lack of foresight or unexpected accidents inflict daily on com-
merce’ (CRISES, p. 299). Significantly, the entry on CRISES ends in an examination
of the possibility of preventing crises by balancing production and consumption,
and curbing the excessive anticipations of agents. However, Courcelle-Seneuil
notes that, at present, this prevention is as yet impossible, given the ‘powerless-
ness’ of ‘political economy’. But at this time, Courcelle-Seneuil and the other
authors (such as, for example, Louis Blanc, who wrote the entry BANQUE in the
Dictionnaire politique) were confident concerning the progress of a republican
political economy. They thought that democratic regulation of a market economy
was possible and they favoured state intervention and the development of a
property-owning democracy (Frobert, 2010).
In consequence, around 1840 the Republicans presented their own vision of crisis
and progress. They favoured the development of commercial societies, but they
were also aware of their new pathologies and, notably, the crisis. Commercial crises
were not of exogenous causes but a consequence of growth and thus they must be
regulated, even if this regulation seemed complex. Finally, this regulation could
only be conducted by a future democratic regime with the power and the will to
conduct welfare politics.
Shortly after the publication of Nouveau christianisme and the death of the Comte
de Saint-Simon (1825), the Saint-Simonian School was founded around such figures
as Barthélémy-Prosper Enfantin, Saint-Amand Bazard, the Pereire brothers,
Philippe-Joseph Buchez and Pierre Leroux. The school was soon shaken by
schisms, with, among others, Buchez and Leroux becoming dissidents and each
creating their own school around 1830. Although they differed on numerous points
concerning the doctrine which should prevail for the new world of industry,
orthodox Saint-Simonians and the dissident Saint-Simonians who followed Buchez
or Leroux had a relatively similar common vision of the relationships between crisis
and progress.
The notion of progress through alternating ‘critical’ and ‘organic’ periods is
central to the original vision of the Saint-Simonians (see [Barrault], Doctrine de
Saint-Simon. Exposition, 1829, Vol. 1), whose intention was to construct a
mathematical science of history (Picon, 2002). The critical periods constitute the
phases of dissolution and dispersion, whereas the organic periods are dominated
by unity and a single direction in industry, science and religion. In this alternation
which punctuates the evolution of humanity, good dominates over evil and leads
to progress. The 1830s should therefore close the critical period dominated by the
Enlightenment, 1789 and the French Revolution, and inaugurate a new organic
period dominated by industrialism. Moreover, this industrial society, in which the
172 Ludovic Frobert
major obstacle that individual property constitutes would have been removed,
undoubtedly represents for the Saint-Simonians a sort of end to history: once
industry and association have established themselves, and the ‘administration of
things’ has replaced the ‘government of men’, there will be progress but ‘without
interruption, without crises, continuously, regularly and at every instant’ ([Barrault],
Doctrine de Saint-Simon. Exposition, 1829). The Saint-Simonian point of view on
the articulation of crisis and progress is perfectly expressed by Charles Lemonnier
in the entry on CRISES COMMERCIALES (commercial crises) for the →Dictionnaire
de la conversation et de la lecture (1835, Vol. 18, pp. 216–218). The crisis is an
alteration of the commercial movement leading to a ‘momentary’ paralysis of the
economy. Wars and revolutions and the bellicose past of Europe constitute one of
the principal causes of economic disruptions. Innovation or technological change
which produces creative imbalance constitutes the other cause since it is organically
linked to the future blossoming of the world of industry. Given this, if ‘a commercial
crisis is nothing more than a pause in the industrial development of a people’, it is
often the condition of ‘future progress’ (CRISES COMMERCIALES, p. 216).
Lemonnier continued to affirm that in a state in which all the industrialists are
associated, it would be necessary to attenuate the crises, to control their impact on
the most vulnerable working populations, and to equitably distribute their transitory
negative consequences while still preserving the role they play as a stimulus to
industrial progress.
The link between alternation and progress can be found in the principal dissident
Saint-Simonian movements. Pierre Leroux, however, is more inclined to insist on
the notion of ‘continuous progress’ and to relativize the theme of alternation.
Significantly, in the →Encyclopédie nouvelle (the work by Jean Reynaud and Pierre
Leroux, the first fascicles of which were published in 1833–1834), no ‘commercial
crisis’ entry is to be found, even if Jules Leroux (Pierre’s younger brother and author
of the principal economic articles of the Encyclopédie) evoked the ‘alternation of
progress and collapse’ experienced by commerce (COMMERCE, in Encyclopédie
nouvelle, Vol. 2, p. 708). In this Saint-Simonian dissident movement, the alternation
of periods of rise and fall is not truly a condition of progress. From this perspective,
Pierre Leroux would later write, ‘A crisis which bears all its fruit is not followed
by other crises’ (Lettre au Docteur Deville, 1859).
Pierre-Joseph Buchez represents another major Saint-Simonian dissident
movement which is interesting in that it extends the Saint-Simonian philosophy
of history accentuating the link between progress and alternation: ‘Until now,
the development of humanity has occurred through a succession of alternating
movements which sometimes presents an organic character and sometimes a critical
character’ (Introduction aux questions sur les sciences et les savants, 1828, MS
quoted in Isambert, 1967). In the work of Buchez, even more than in that of the
orthodox Saint-Simonians, one finds a complex cyclical theory of social evolution
in which progress is again the consequence of alternation. It is thus no surprise to
see the Buchez School taking an interest in commercial crises and their periodicity:
the example provided by Auguste Ott is undoubtedly revealing (A. Ott, CRISE,
→Dictionnaire des sciences politiques et sociales, 1854; see Chapter 10).
Crises in early French dictionaries 173
In brief, despite obvious differences, the vision of the Saint-Simonians, be they
orthodox or dissident, presents three characteristics: the modern history of
humanity, that of the new world of industry, achieves progress and this progress
operates in the present through the alternation of critical and organic phases; the
alternation of major phases has, in part, an equivalence at the level of crises and
economic fluctuations (these fluctuations constitute an important element of the
explanation of general alternations); and in a future state to be achieved by
humanity, that is, the global association of all the industrialists, alternation will
disappear and progress, driven by technological innovation, will be linear.
Charles Fourier and his school provided a radical demystification of the idea of
progress. Fourier ceaselessly denounced the ‘vices of civilized industry’ (‘indus-
trialism is the collection of all the vices, falsification, monopoly, bankruptcy,
speculation, cornering [of markets] and usury’ (Fourier, 1829). Moreover, he found
it frankly obscene to talk of progress when one observed the misery and precar-
iousness that affected nine out of ten people at the time. Thus, he put forward the
idea that, in its contemporary form, industrial civilization was heading straight for
disaster. In this conception we cannot find the idea of a naturally ascending series
whether it be with or without rhythm. Capitalism and the continuation of its
destructive logic lead not to progress but to catastrophe.
This vision integrates a reflection on crises and even if the Fourierists did not
publish any dictionaries, their singular view on crisis/progress must be mentioned
here. For Fourier and his disciples the crisis and its repetitions are vectors of decline.
This reflection can be found in Fourier’s work, which uses the 1826 crisis as an
example. Here, as elsewhere, he creates his own vocabulary, coining the expressions
of ‘plethoric reversal’ (refoulement pléthorique) and ‘repercussions of abortive
failure’ (contre-coup d’avortement) to designate two harmful commercial phenom-
ena: poor anticipation of outcomes and attempted monopolization, the only aim of
which is to cause a rise in prices. He wrote, ‘reversal is a periodic effect of the blind
cupidity of merchants’, while ceaselessly denouncing the ‘anarchic commerce called
free competition’ (Fourier, 1829). In 1833–1834, in La Réforme industrielle ou Le
Phalanstère, the first journal of the Fourierist School led by Victor Considérant,
Jules Lechevalier and Abel Transon, this articulation between crisis/decline or
progress was taken up: Leroux’s idea of ‘continuous progress’ is rejected and the
writers consider that social movement, in whichever direction, occurs through what
Lechevalier calls ‘alternation’ of contrary movements (‘this alternation [. . .] con-
stitutes the movement and life’ (Lechevalier, 1832, p. 131). Yet, in ‘civilization’
(French society of the 1830s, in Fourierist vocabulary) these alternations work for
the decline and fall of this social system, with Abel Transon observing ‘descending
vibrations’ in contemporary economic crises (Transon, 1833, p 16).
174 Ludovic Frobert
Finally, when Fourier analysed the entire ‘social movement’ and drew a ladder
representing the ages of humanity, he took great care to distinguish between the
‘false state’ and the ‘true state’. After a veritable overthrow or reversal, the three
stages of the false state – patriarchy, barbarism and civilization (civilization being
the contemporary period of liberal industrialism) – are followed by the stages of
the true state – guarantism, socialism and harmonism. Thus, there is revolution
and a change of system between the false and true states of humanity.
The Fourierist vision is therefore structured by three themes: industrial civiliza-
tion is fundamentally rotten and the idea of progress associated with this economic
system is a fraud; in the present system, crises and their recurrence constitute
an indicator of decomposition; and the appearance and repetition of these crises
will constitute vectors for a change of system and for the transition towards an
economic and social regime which is radically different from liberal industrialism
(‘guarantism’).
5.6 CONCLUSION
In this short survey, we have tried to make a rough sketch of the main different
visions of the relationship between crisis and progress presented in dictionaries and
encyclopaedias in France in the 1830s. A table can serve to summarize this
intellectual hilly landscape:
1 In the specialized dictionaries of the time, one also finds a general interpretation under-
lining the view that the period is one of political, economic and technological transition
and that the institutions responsible for credit, especially financial and banking institutions,
are not adapted to the ongoing evolutions and cannot cope with these impacts and changes.
This interpretation, nevertheless, leads to the diagnosis of the subsiding of the crises based
on, first, a more peaceful economic development and, second, a maturing of financial
regulation (Monbrion, CRISE COMMERCIALE ET INDUSTRIELLE, →Dictionnaire uni-
versel du commerce, de la banque et des manufactures (1838), Vol. 1, pp. 636–637;
Michel, CRISE COMMERCIALE, in →Guillaumin’s Dictionnaire du commerce et des
marchandises (1839), Vol. 1, pp. 757– 758).
REFERENCES
French encyclopaedias and specialized dictionaries in the early part of the nine-
teenth century are remarkable not only for their number, but also for the fact
that they started to carry dedicated entries on crises well before dictionaries in
other languages. By the time the first German entry was published (Roscher’s
DIE PRODUKTIONKRISEN MIT BESONDERER RÜCKSICHT AUF DIE LETZTEN
JAHRZEHNTE in [Brockhaus’s] Die Gegenwart, 1849; see Chapter 7), France had
already seen six such articles, the first being published in 1835; two of these were
also translated into Italian before the first original entry in that language was
published (Boccardo’s CRISI, in his own →Dizionario della economia politica e
del commercio, 1857; see Chapter 11); meanwhile, two more French entries were
included in dictionaries. By the time English-speaking countries saw their first entry
on crises in 1863 (Macleod’s CRISIS, COMMERCIAL, in his own →Dictionary of
political economy, 1863; see Chapter 13), France had two more, and a number of
reprints and re-editions.
As the previous chapter has demonstrated, this quantitative abundance reflects
different perspectives on the role of crises in economic and social development. In
spite of this variety of interpretations, however, the explanations of the phenomenon
offered by the entries published in the first half of the century were rather similar
to each other and fairly poor if compared to the best contemporary writings on the
subject – a situation that only changed with the contributions by Coquelin, Ott and
Juglar in the 1850s and early 1860s (see respectively Chapters 8, 10 and 12). As a
whole, however, these entries fairly reflect the state of the understanding of crises
just before the middle of the nineteenth century. This chapter aims at presenting
the entries published in the 1830s and 1840s in the light of the overall development
of the theories of crises; it relies on Chapter 5 for the political an ideological context
in which they were written. The entries are, in chronological order: Lemonnier,
CRISES COMMERCIALES, in →Dictionnaire de la conversation et de la lecture,
1835, Vol. XVIII (reprinted unchanged in the 2nd edition, Vol. XVI, 1859);
Blanqui, CRISE COMMERCIALE, in →Encyclopédie des gens du monde, Vol. 7,
1836;1 [Monbrion], CRISE COMMERCIALE ET INDUSTRIELLE, in Monbrion’s
178 Daniele Besomi
→Dictionnaire universel du commerce, 1838;2 Michel, CRISE COMMERCIALE, in
Guillaumin’s →Encyclopédie du commerçant, 1839;3 Courcelle-Seneuil, CRISE,
in →Duclerc and Pagnerre’s Dictionnaire politique, editions from 1842 to 1860;
and Dupin, CRISE COMMERCIALE, in →Encyclopédie du dix-neuvième siècle,
1846.4 Hereafter, they will be cited in an abbreviated form.
Having defined crises as a perturbation of the regular course of business, our writers
moved on to examine their causes and sometimes describe the train of events
bringing to the crisis.
Lemonnier’s entry (1835) is interesting for his effort at abstraction. He first
described the ‘ordinary’ course of events beginning from the early symptoms
of crises, namely, a depreciation of certain products, a rise in interest rates and
difficulties in discounting, a stagnation or even a drop in consumption. At this
point a number of firms are unable to continue their business, and failures ensue
until a liquidation takes place, during which the losses of the largest numbers
(and sometimes the appalling enrichment of a few) are consolidated. After that,
business restarts with new impetus, if the perturbing cause is no longer present.
180 Daniele Besomi
The ‘universal and general’ outcome of all crises is that both consumption and
production are temporarily restrained. As to the sources of perturbation, Lemonnier
noted that they can be of two kinds. Either they originate from a sudden and
unforeseen change in the conditions of production or in the needs of consumption;
or they are related to the general perturbations following political or social
revolutions. Under the first heading there are technological changes in production.
Although these cause misery to some people in the short term (for instance, the
invention of the spinning jenny caused unemployment among hand spinners), such
suspensions of industry in the long term are a form of progress and development.
The perturbations arising from political or social revolutions act by displacing
people and wealth, by creating hostility between neighbouring countries and
between social classes within each country, and by channelling capitals towards
unproductive usages.
While Lemonnier stopped short of qualifying his two classes of causes as
‘internal’ and ‘external’, Blanqui (1836) placed such a distinction in his very
definition (cited in Section 6.2). Among the external causes of crises, Blanqui
considers political events. The internal ones, however, are far more important. They
include the state of economic legislation, merchants’ mistakes and the lively
competition among producers. Blanqui also refers to the difficulties generated by
the internationalization of trade, as failures in one market may bring failures
elsewhere; to the unreasonable speculation frenzies that sometimes capture a whole
nation, as was the case in England in 1825; and to the difficulties caused by changes
in the monetary system – with reference to the suspension and the subsequent
resumption of convertibility in England. Moreover, with the introduction of more
and more machines and the improvement of the division of labour, entrepreneurs
have sometimes neglected to proportion their supply to demand. Blanqui concludes
his entry by pointing out that the periodical return of crises has an ‘identical source’:
protectionism, which turns some slight perturbations into major crises. ‘The excess
of protection leads to a congestion [of the markets], which is followed by the
disposal of goods at a low price. The bait of high returns available in the privileged
industries attracts capitals, which are depreciated by the very competition they
create, thus contributing to the falling of entrepreneurs’ (p. 259). The only possible
remedy is the return to the liberty of industry and trade, for whenever governments
tamper with the principles ruling the production and distribution of wealth, they
multiply the already too numerous chances of commercial crises.
Monbrion (1838) distinguishes between the causes of commercial and industrial
crises. Among the former he lists wars, in particular those at sea, political events
and the abuse of credit, with the corresponding bad use of capital. Monbrion does
not explain how and why there is abuse of credit in the first place, but describes its
breakdown as follows: at some point distrust replaces credit, circulation of wealth
stops or slows down, prices fall because of the artificial scarcity of money,
manufacturers can no longer employ the same number of workers, failures begin
to spread. If central banks do not have sufficient reserves, they cannot contain the
bankruptcies. As to the causes of industrial crises, Monbrion cited inventions giving
strong impulses to the development of some branches of production which result
Analysis of crises in early French dictionaries 181
in overproduction, and the competition of foreign industries, unless the government
protects the national manufacturers with tariffs.
Similarly to Blanqui, Michel also explicitly distinguishes between the causes of
crises external to the industrial economy and those pertaining to the very nature of
commercial and industrial organization. The external causes include the calamities
occasionally affecting mankind and political events. In spite of their exogenous
origin, they propagate via an economic mechanism. As all commercial interests
are interrelated, and traders are involved in a web of mutual indebtedness, an incident
such as a war disrupting the chain of payments may cause the collapse of the entire
system. Michel maintains that the importance of endogenous causes is generally
underestimated. They consist in the abuse of credit and in the misdirection of
productive forces – the latter being often caused by the former, as credit encourages
excesses of production, although excessive credit is alone sufficient to cause a
disruption of trade. The issue of a large number of notes enables entrepreneurs to
purchase larger amounts of raw materials, raising their prices (often generating
speculative enterprises) and thereby depreciating paper money. Gold will therefore
leave the country and the banks will lack the specie necessary to convert paper
money. When doubts arise as to their solvency, a run on the banks ensues. Banknotes
are withdrawn from circulation, the price level drops, causing losses and the interrup-
tion of credit, and eventually a general crisis occurs. It is indeed observed that in
France, crises had always been preceded by an exaggerated circulation of com-
mercial bills. Michel supplies figures relating to the crises of 1811, 1819, 1825–1826
and 1830, in the first attempt in a dictionary entry to provide a quantitative argument.
Courcelle-Seneuil explained that the catastrophic interruptions of business and
breaks in the chain of payments in which crises consist ‘are ordinarily caused by
turmoil, excesses of trade or unfortunate speculations, and finally by sudden changes
in the price of goods’ (1842, p. 208). He does not elaborate (the entry occupies
just over one column), except to examine as an example the effects of the tariff
change in 1814.
Dupin (1846) lists a number of possible causes of crises.8 Although there is no
explicit hierarchy, he seems to give pride of place to overspeculation. Occasionally,
trading peoples are driven by speculation fever,9 which at first accelerates trade,
giving a false sense of prosperity – public and private stocks rise, everybody sees
prosperous times and feels like spending and being generous. But as soon as it
becomes necessary to face one’s debts, the results are disillusionment and bank-
ruptcies, dragging into their vortex also those who have refrained from foolish
speculation as their debtors are forced to default; also the trading houses that are
financially sound but are just above the threshold of rentability are swept away.
Overspeculation can also generate crises beginning abroad, when the prospects
generated by the opening of new markets induce excess supply, with subsequent
price falls and losses. Crises can also be caused by political and social troubles, by
a transition from peace to war, or from war to peace, or by a period of bad crops
following a series of years of abundant harvests. The latter is all the more damaging
if the good years have been accompanied by intense speculation, as was the case
in 1826 and 1847.
182 Daniele Besomi
6.4 THE FUNCTION OF CRISES
The next issue tackled by the authors of these entries concerns the nature of crises
and the function they perform in the working of the economic system.
Lemonnier maintains that crises will inevitably be tied for a long time to our
system of production, which will thus undergo every now and again interruptions
in industrial development. These interruptions, however, are often favourable.
‘Considered as a whole and seen from a distance’, in fact, some crises are caused
by technological progress, which temporarily disrupt the productive relations but
in the long run accelerate production (1835, pp. 216–217).
Contrary to Lemonnier, Blanqui does not seem to be seeing any silver lining in
the recurrence of crises. As they originate in entrepreneurial mistakes, foolish
speculations or wrong legislation, they cannot bring any good. Also, the increased
competition between producers at home and abroad is not seen as a cause of possible
progress overall but only of ruin. The only consolation is that they are of a temporary
nature and, as storms do, can only momentarily trouble the clarity of the industrial
horizon (1836, p. 257).
Monbrion is surely more optimistic, as he feels that crises have a positive function
to perform: they restart the economy at a quicker pace and are going to disappear
in the near future. He believes that although crises have been subject to periodical
recurrence in the past, this is no longer the case. The commercial and industrial
movement of a country is naturally subject to fluctuations, due to the development
of industry and commerce abroad, to changes in fashion and preferences, to tariffs,
and to the overabundance of some products, which causes a reduction in their prices
and therefore a complete stagnation of production and trade. In this case, this
stoppage in production is necessary to give time to absorb the excess of production
via normal consumption or exportation, and after the crisis economic activity
restarts ‘by natural reaction’ at a faster pace, for it is necessary to satisfy the con-
sumer demand that has remained unfulfilled during the stagnation. Well-directed
speculations may take advantage of such fluctuations in the prices of products by
calculating in advance the effect of the moderating laws governing industry and
trade, always keeping them within the bounds of the true needs of consumption
(1838, p. 637). Monbrion failed to observe, contrary to Lemonnier, that the indus-
trial crises resulting from the introduction of new technologies will bring progress
in the long run; this is all the more strange as he explicitly remarked that such
inventions bring quick development to some branches of production, increase output
at lower prices and improve quality (p. 637).
In Michel’s account there is no explicit statement as to the function fulfilled by
crises. Nevertheless, his description of the consequences of the excess of credit –
that is, the main cause of crises – implicitly depicts crises as the outcome of
the self-adjusting mechanism eliminating the excess of notes issued by banks
(1839, pp. 757–758). Michel believes that the causes of perturbation are becoming
weaker. With peace, public credit has strengthened its foundations, the intensity
of innovation has diminished after the early era of the Industrial Revolution, so that
changes in working conditions are not so dramatic; and the experience of the past
Analysis of crises in early French dictionaries 183
has induced the Bank of England to try to prevent a recurrence of circumstances
similar to those of 1825 by increasing the discount rates; at the time of writing
(November 1836), it seemed to Michel that the Bank was going to avert the crisis
that had been menacing Britain for several months.
Courcelle-Seneuil (1842) thought of crises as the cumulation of the fluctuations
of individual businesses:
Commercial crises are but the multiplication of the private disasters which
trade experiences daily due to lack of foresight or unexpected events. Is there
a way to prevent them, to establish an exact equilibrium between production
and consumption, of expunging error from commercial speculations? To this
serious problem, political economy has not yet been able to find a solution.
(p. 209)
Dupin (1846) does not express any opinions as to the nature and function of crises.
With the sole exception of Monbrion, who mentioned the ‘moderating laws of
industry’ (1838, p. 637), the other five authors considered here referred to the diffu-
sion mechanisms propagating the disastrous effects of crises to the entire economy
or internationally, or transmitting and amplifying the ‘fever of speculation’.
Lemonnier explained how commercial crises first affect some industries and crush
them, and how their immediate and total ruin gives rise to a series of falls and
calamities, the extension of which depends on the forces and numbers of those
swept away by this sort of avalanche (1835, p. 216). Blanqui (1836) stressed that
failures in one market bring distress elsewhere, and that the frenzy of speculation
sometimes captures entire nations. Michel discussed how exogenous shocks
propagate to the entire economic system by means of an endogenous mechanism
based on the interrelation of credit relationships (1839). Courcelle-Seneuil similarly
noted how ‘Commercial crises spread from one country to another: when one trader
goes bankrupt, his failure often affects his correspondents abroad. All commercial
nations are interdependent: reciprocal needs and credit have created indissoluble
links between them, and none of them can undergo notable losses without the others
being hit as well’ (1842, p. 208). Dupin refers to the ‘speculation fever propagat-
ing between capitalists’ (1846, p. 310). These views of the working of capitalist
economies, then, admitted at least some islands of instability capable of holding
in check the system’s capacity to absorb shocks.
Mary Hennell wrote in similar terms that ‘the balance of production and con-
sumption is every moment disturbed; hence commercial catastrophes and crises’
(1844, p. 105). James Wilson also struck the same chord, but introduced the
distinction between monetary and commercial crisis: ‘the panic of 1836–37 . . .
was most strikingly a money crisis, and a money crisis only, a disturbance of the
channels of connexion between producer and consumer, and not a disturbance
in any general relative ability of consumption and production’ (Wilson, 1840,
pp. 68–69). ‘[T]his crisis was a mere reaction to the unnatural abundance of money
and excitement of commercial enterprise’ (p. 70).
A descriptive definition is given by de La Farelle in 1842: ‘at almost periodical
times, and more and more frequently, all the home markets become glutted, all the
markets abroad close down at once, and shortly after that, all the workshops also
go out of business. This is what is called a commercial crisis’ (pp. 93–94). The
blockage of production is also taken up by Tooke (1848), who adds the stoppage
of payments and insists that the terms ‘crisis’ should be applied only to cases of
some severity:
The course of commercial events, from the beginning of August to the week
ending the 23d of October [1847], thus proceeded in an uninterrupted
progression of disaster, discredit, and dismay. At the close of that week, all
circumstances tended to what is termed a crisis; not such a crisis as, by
profanation of the term, has been applied to comparatively slight cases, but to
so critical a state of things as threatened to involve a total suspension of all
business and of all payments.
(p. 317)
How can this scarcity of explicit definitions of ‘crisis’ be explained? A first reason
may lie in the fact that crises are rather complex phenomena and are not easy to
characterize in terms of a few essential features. A second reason is that most of
the literature of the time was highly topical: it was stimulated by the occurrence of
each crisis (see Chapter 3, Section 3.1.2), and was directly aimed at suggesting a
remedy. Each crisis was then considered as an event in itself, with its own cause(s)
and specific features, and to most writers at the time the abstract category of ‘crisis’
would not have made much sense. What different crises had in common, in the
general perception, was their effects on individual and social well-being, as is
witnessed by the prevalence up to that point of the term ‘distress’ to describe them.
186 Daniele Besomi
There were naturally some exceptions, as some writers perceived and tentatively
described the systematic aspects of the recurrence of crises. These dictionary entries
are part of this still small minority of contributions. Their very existence, with their
shift of emphasis from the consequences of crises to the phenomenon itself and with
their attempts to convey the fundamental character of crises into an explicit
definition, witnesses that the attitude towards crises was beginning to change. The
inclusion of this topic in dictionaries not only reflects such a change in attitude, but
contributed to strengthening it, in particular by institutionalizing the adoption (in
French at least, for the time being) of the term ‘crisis’ as appropriate to characterize
the phenomenon and by making crises a suitable topic of learned discussion.
Having acknowledged the novelty of these early dictionary definitions, it is
necessary to point out that the actual theoretical content of these entries was not
particularly innovative. The definitions given, expressing the understanding of crises
in terms of disturbances to the regular progress of trade, translate in clear words
the widespread, but often implicit, viewpoint that crises are an anomaly with respect
to the normal condition of prosperous times. There are also explicit statements to
this effect; one dates back to 1810, when Erick Bollmann stated that ‘this regular
course of business becomes interrupted by the approaching crisis of the closing
bank’ (1810, p. 29). Also, the implication of this definition, that a disturbance must
have a cause that can be recognized in order for a remedy to be suggested, was
explicitly stated years before these dictionary entries were written. Mathew Carey,
for instance, explained he was to ‘cast a retrospective glance on the course of affairs,
which gradually led to and finally produced the present crisis’, because in order ‘to
prescribe efficiently for any disorder, it is incumbent on us to investigate the
predisposing causes’ (Carey, 1816, p. 17). Besides these unequivocal statements,
this view of crises is apparent also in the analogies used by a large number of writers
in substitution of proper definitions. The most frequent similes evoked for crises
were storms and tempests, and especially diseases (Blanqui, in his 1836 entry,
used them both). The former convey the idea of a fatality which one has to expect
after a period of good summer weather, while the medical metaphor contrasts the
normal, healthy state of the system to the disease, and suggests that the cause of
the disturbance needs to be sought out and removed in order to restore health (for
a detailed discussion of the medical metaphor in this context, see Besomi, 2011).
6.5.2 On causality
A common feature of all these entries is their openness to multiple causal expla-
nations of crises. They produced fairly similar lists of possible disturbances: wars
and social or political unrest among the external perturbations, and changes in
consumers’ preferences or in the technical conditions of production, competition
and overspeculation among the internal causes. This approach was almost universal
in the first half of the nineteenth century, and still very common in the following
decades: if crises are seen as (the result of) a perturbation, any disturbance that is
sufficiently intense can give rise to a crisis. Crises are then understood as individual
events, disconnected from each other.
Analysis of crises in early French dictionaries 187
Shortly after the first entries on crises in French dictionaries were published,
this approach was subject to attacks on epistemological grounds. Some writers in
England, Ireland and France espoused the opposite interpretation of crises, rejecting
the view that they are individual events and affirming instead that they are connected
to each other within a broader pattern. These arguments were based on some
form of the causal principle. Starting from the observation that crises tend to recur
with some regularity and that they share common features, the critics of the ‘indi-
vidualistic’ approach concluded that they must have a common cause. Naturally,
they did not deny that external events and internal maladjustments or frictions
played some part in the development of crises, but reinterpreted their causal
role. While in the individualistic approach, these events were understood as the
primary cause of each individual crisis, these same events or impediments were
interpreted by the critics as subordinate causes or triggering events, possibly
anticipating or amplifying or otherwise altering the actual course of each crisis,
the primary and necessary cause of which, however, was common to the entire
series of events. The kind of causal reasoning as applied to crises was thus turned
on its head.
Not only were the critics aware of their radical departure from the earlier tradition,
but they attacked with some violence the alternative approach, charging its authors
with ignoring the basic tenets of scientific reasoning. The first such assaults date
from 1840. Robert Cockburn criticized the various explanations offered by other
writers, observing that whatever the proximate cause evoked, it could only operate
provided that the system was predisposed to suffering a crisis: ‘A very slight
reflection must convince us that the causes enumerated could not produce the effect
upon a sound system of trade. Infection is not easily communicated, where the body
is not pre-disposed by weakness or ill-health’ ([Cockburn], 1840, pp. 1–2). In
France, also in 1840 (some of our dictionary writers could thus have been aware
of this contribution), Briaune rejected the predominant individual explanation of
crises by mocking the adversaries and bringing home an epistemological point at
once. He attacked the ‘popular preconceptions’ (préjugés populaires – shared, in
reality, by renowned economists, including our dictionary writers) ascribing crises
to ‘political causes’ by arguing that the political and institutional setting can only
be a secondary cause, making things worse or better, while the fundamental cause
must be sought elsewhere, on the ground of the ‘general principle that seeks the
same cause for a series of similar effects’. The destructive part of Briaune’s
argument consists of a long list of political causes that should have produced
precisely the opposite effect to the one actually observed: for instance,
one should profess that the prosperity from 1820 to 1827 was due to the
changed electoral law, to the suspension of the freedom of the press and of
individual freedom; to the riots in the schools, to the Paris, Saumur, Bedford
and La Rochelle conspiracies that were its consequences; to the Spanish war,
to the compensation laws, to the primogeniture rights, and to sacrilege, which
were its continuation and complement.
(Briaune, 1840, p. 3)
188 Daniele Besomi
The constructive part states the positive principle that should guide the reflection
on the causes of crises:
If these were the true causes, they would have had impact on the crises of 1811,
1817 and 1827, for the periodical return of the same affliction necessarily
implies the existence of identical and permanent causes. However, nobody
would assign to past crises the supposed origin of the present crisis; it is indeed
rather illogical that similar effects, obviously linked to each other, are always
attributed to different accidents. Against the general principle that for a series
of like effects the same cause must be sought, one should bring irrefutable
evidence; but such a proof is still missing.
(ibid., pp. 3–4)
A third contribution along similar lines is due to Isaac Preston Cory (1842):
A variety of causes has been assigned to account for this depression, and as
many remedies have been proposed to obviate it. The national debt, taxation,
the currency, the unlimited power of the Bank of England over its issue, the
excess of population, the corn laws, the oppressions of the millowners, have
each their advocates, who would fain persuade us, that an alteration of some
one or more of these would give relief and restore prosperity.
It is not my intention to deny, that each and every one of them have their
effect, and may, in some degree, influence the state of trade: but in the following
pages I propose to avoid, as much as possible, the discussion of any of these
subjects which have been worn threadbare, and upon which every one has
made up his mind; while I would direct attention to what I humbly conceive
to be a preliminary evil, much more extensive than all of them put together –
a canker in the very heart of our trading prosperity, which is ever and anon
producing the same recurrences of distress – temporary they may seem, but
which, I fear, are rather of a periodical nature, like the returns of the shivering
fits which precede the dissolution of the body by an internal ulcer.
(p. 3)
A few years later similar arguments made their way into dictionary entries, in
particular thanks to Coquelin (CRISES COMMERCIALES, in →Coquelin and
Guillaumin’s Dictionnaire de l’économie politique, 1852; see Chapter 8) and Juglar
(CRISES COMMERCIALES, in →Block’s Dictionnaire général de la politique, 1863;
see Chapter 12). Notable contributions along these lines also came from James
Anthony Lawson, John Mills and Stanley Jevons.10
Among the factual premises for the reversal of the causal interpretation, one
was fully incorporated into our dictionary entries, the other less so. As noted above
(Section 6.2), the entries under consideration acknowledged that crises tend to recur
with some frequency, and most of them explicitly use the attribute ‘periodical’
to describe this fact. This was not exceptional, as by the mid-1830s the observa-
tion that crises are ‘periodical’ – that is, recurring, with little or no implication
Analysis of crises in early French dictionaries 189
as to a strict regularity in the timing – was already fairly frequent (see Besomi,
2010a).
The second premise, that the shared features of crises are recognized and
emphasized over their differences, was instead rather less common. Of our writers,
only Lemonnier attempted a general (i.e. abstract) description of the phenomenon,
while the other contributors emphasized instead the differences among individual
crises. In the literature, by contrast, there are a number of detailed descriptions of
the development of a crisis from its preparation during the previous prosperity to
its outbreak and successive liquidation. William Huskisson, for instance, discussed
how ‘the expansion of . . . paper circulation, combined with an unfavourable foreign
Exchange, leads to overtrading, till overtrading again forces a contraction of the
currency: thus, producing those alternations of extravagant excitement and of fearful
depression, which this country has so often experienced of late years’ (Huskisson,
1826, p. 28); in 1830, he described the various phases of the cycle, beginning from
a state where ‘supply and demand would continue in the same relation to each
other’, followed by ‘speculative purchases’ causing an advance of prices at an
accelerated rate, after which demand becomes languid and a pause ensues while
goods continue to be offered for sale: in such conditions, ‘a glut or superabundance
of goods is said to exist’. This begins a time of distress, during which prices fall
and the bills of exchange are reduced in amount, until the goods in excess of demand
are eventually sold ([Huskisson], 1830, pp. 446–452). A few years later, Overstone
formulated a description of the cycle in ten phases, which was immediately and
repeatedly cited in the literature (Loyd, 1837), echoed by another, much more
detailed description by Longfield (also in ten phases, represented graphically as a
circle) and by a characterization in only three phases by Briaune: crisis, recovery,
commercial development (Longfield, 1840, p. 13).
Of these developments, there is absolutely no trace in the entries under exam-
ination. Their views remain anchored to an understanding of crises as disconnected
events, rather than as instances of the same phenomenon and thus subject to a
common law, so that the periodical return of crises remained a matter of observation
rather than being incorporated into a theory of crises. This is also revealed by the
fact that most of the causes of crises suggested by our writers are of an unsystematic
and avoidable nature – this surely applies to the external causes, but also to changes
in fashion and entrepreneurial miscalculations. The relevant exceptions are
Lemonnier’s technological progress, and Dupin’s and Michel’s excesses of credit
and overspeculation. The explanation based on the idea of credit permitting over-
trading which eventually degenerates into open overspeculation was surely the most
popular at the time; but while some writers had already stressed the economic
mechanisms that induced both traders and bankers to indulge in overtrading,11 in
Dupin’s and Michel’s entries this is ascribed to a temporary and not clearly moti-
vated insanity. More interesting is instead Lemonnier’s argument; he caught at once
not only the perturbing role of innovations, but also the necessity of their occurrence
as a key to progress. Coupled with his attempt to give an abstract description
of the phenomenology of crises, this makes his entry the most intriguing one among
the early contributions on the subject.
190 Daniele Besomi
6.6 SUMMING UP: GARNIER’S ENTRY ON COMMERCIAL
CRISES
The six early entries we have discussed above were all short and rather sketchy,
but this was about to change. The general literature on crises was becoming more
abundant and refined, and some book-sized discussions were being published.
Dictionaries correspondingly started to carry more extensive entries, some of which
also dedicated attention to the publications on the subject.
In 1859, →Guillaumin’s Dictionnaire universel théorique et pratique du
commerce et de la navigation carried an entry on CRISES COMMERCIALES by
Joseph Garnier, which showed a remarkable immunity to the theoretical advances
that were taking place in the literature and in other dictionaries (in particular in
Coquelin’s entry on CRISES COMMERCIALES, 1852, and Ott’s entry on CRISE
in his own →Dictionnaire des sciences politiques et sociales, 1854) and recast, in
a much better articulated way, the essence of the argument we find in the early
French dictionary entries. This entry is worth expounding in some detail not only
because it is clear and very detailed, but also because it explicitly links to the
theoretical scheme that lies behind the understanding of crises as disconnected
events – namely, Say’s law of markets.12
Garnier opens his entry (1859) by defining a crisis in general terms as ‘a
perturbation of the natural state, an anomalous condition during which the nature
of things struggles against a morbid cause to return to a better condition’. With
reference to our subject,
As all productive activities are interconnected, each of them being the market for
another one, any obstruction or derangement has a chain effect, which eventually
leads to the impossibility of selling at a price that covers the cost of production,
with disastrous effects on producers and workers. Crises can be general or partial
(affecting only certain industries) or local (affecting only certain regions), but they
are all preceded, followed or accompanied by perturbations in the means of
exchange, of circulation or of credit (specie, banknotes or commercial bills). Here,
therefore, lies the key to the explanation of the general disorder in business. During
generally prosperous times, when business grows and multiplies, the needs for
transactions means increase accordingly, while the available amount of them,
sufficient for ordinary circulation, proves to be too scarce. This causes an increase
Analysis of crises in early French dictionaries 191
in the rates of interest and of discount, and generally a monetary crisis. Conversely,
during times of sluggish business and low confidence, if for any reason (e.g. a
political event) people seek to hoard specie and the circulation of credit bills is
slowed down, the opposite kind of monetary crisis ensues.
Ultimately, the causes of this scarcity of money and of crises generally are
numerous and varied in nature. They can all be classified under the following
headings:
Political and social agitations, causing worries about the future and lack of
safety.
Wars, and the consequent re-establishment of peace.
Famines; the scarcity of crops of important raw materials; any catastrophe;
abundance.
A slowing down of consumption, with its consequences for exchange and
production.
A rapid increase in production due to excitement in the spirit of enterprise
and to speculation fevers, which incite the undertaking of badly conceived
operations.
The diversion of capital due to the development of public works or to new
large enterprises.
The development of credit and the monopoly of credit institutions.
A rapid increase in the quantity of precious metals, gold or silver.
A sudden increase in tariffs, national or foreign.
The backlash of foreign crises.
(ibid. p. 921)
NOTES
1 There is a partial translation and adaptation of this entry under the title CRISI
COMMERCIALE in the Nuova enciclopedia popolare italiana (without mentioning the
source or the author). The first edition (1841–1849) translated it almost in full; only the
last paragraph is slightly emended and abridged – in particular, it omits the remark that
each day witnesses the outbreak of a new crisis or the end of an old one (Blanqui’s
passage is cited in Section 6.2 below). The 4th edition (1858) adds, among the causes
of crises, the extensive works of public utility, such as roads or railways, which absorb
huge sums of capital not always proportionate to the nation’s savings (Vol. 6, p. 60);
this cause is given pride of place. This edition omits entirely Blanqui’s concluding
remarks on protectionism (see Section 6.3), and adds a reference to the crises of
1846–1847 and 1857. The 6th edition, titled Nuova enciclopedia italiana, is practically
identical to the 4th, but adds at the end a reference to the crises of 1866, 1872 and
Analysis of crises in early French dictionaries 193
1876–1877, and cross-refers to the entries on BANCO (Bank) and CREDITO (Credit) for
a discussion of the banking crises, which have become the most formidable and frequent
crises in recent times (1878, Vol. 6, p. 847).
2 This entry is translated into Italian as CRISI COMMERCIALI E INDUSTRIALI in
→Antonelli’s Enciclopedia del negoziante, Vol. 3, 1841, without reference to the source
or author.
3 Michel (his complete name is nowhere indicated and nothing is known about him) dated
the writing of his entry as November 1836 (p. 758), while the dictionary’s frontispiece
indicates 1839. The volume’s date probably refers to the appearance of the last fascicle
that composed it.
Michel’s entry was taken up by Mora for his article on CRISIS COMERCIAL in the
→Enciclopedia moderna (1851–1855); see Chapter 9.
The Encyclopédie du commerçant. Dictionnaire du commerce et des marchandises,
the success of which launched the Guillaumin editions, was originally meant to adapt
→McCulloch’s Dictionary, practical, theoretical, and historical, of commerce and
commercial navigation (1832). Guillaumin, however, soon found many shortcomings
and decided to have it completely rewritten with the collaboration of Blanqui, Garnier
and others (Garnier, 1865, p. 114). McCulloch’s Dictionary does not carry entries on
crises.
4 Here as well, the dating of the volume is not consistent with the time of writing of the
entry on crises. As Dupin refers to the 1847 crisis, 1846 may refer to the publication
date of the first fascicle of the volume.
5 Although in his entry Dupin does not explicitly stress the role of disturbances to the
regular course of business, except perhaps by implication of the passive tense of the
verb in the expression ‘being thrown into a difficult situation’, he opened his book on
the 1839 crisis with the following words: ‘If national industry only received, from people
and from things, regular and constant impulsions, and if the same constancy and regu-
larity governed the needs, the taste and the desires of consumers, then and only then
could we hope that this industry would no longer be subject to the alternations of
convulsive progress and sudden regression which characterize nowadays the phases of
its existence’ (Dupin, 1839, p. 5).
6 Only later did →Coquelin’s and Guillaumin’s Dictionnaire de l’économie politique
(1852– 1853) carry a defence of PROGRÈS INDUSTRIEL and an entry on DÉBOUCHÉS
(outlets), the latter being nothing else than a long quotation from J.-B. Say.
7 The logical connection between the notion of crisis as disturbance and the quest for the
cause of perturbation is clearly explained in Dupin’s book on the 1839 crisis: ‘As it is
impossible to rely on an unshakeable continuity in the favourable circumstances per-
petuating our commercial prosperity, without regrettable alternations, it is important to
study with deep care the perturbing cause or causes which, from time to time, have
exerted a disastrous influence on the useful arts and thus on the destiny of people’ (1839,
p. 5; this passage immediately follows the one quoted in note 5).
8 For a detailed account of Dupin’s view on crises, see Simonin, 2009.
9 The image of the fever (as well as that of madness, also used by Dupin, p. 310) was
widespread at the time to indicate the paroxysmal character of speculation, implying
that the ‘diseased’ state of the economy was not the crisis but the ‘excesses’ of the
previous prosperity, or, rather, ‘apparent prosperity’. See Besomi, 2011.
10 Lawson, 1848; Mills, 1868; Jevons, 1878. For a discussion, see Besomi, 2008 and 2010b,
pp. 208–217.
11 A first instance is William Huskisson’s account of commercial delusions in 1810. For
a discussion and context, see Besomi, 2010c.
12 Say’s law is never cited in the other entries examined here. It was explicitly discussed
only in →Ganilh’s Dictionnaire analytique d’économie politique, 1826. Although
it does not carry a dedicated entry on crises, the entries on CONSOMMATION
(Consumption) and PRODUCTION are of interest on the subject for their explicit rejection
194 Daniele Besomi
of the thesis, recently advanced by ‘some writers’, that ‘production creates consumption,
and that if consumption does not fully absorb production it is because too little is
produced’ (PRODUCTION, p. 351). Ganilh dismissed this ‘revolting . . . paradox’ (p. 352),
pointing out that while production increases the means for consumption, it does not at
the same time increase the number of consumers and their desire to consume. Historically,
the richest countries are not those producing more, but those having more markets.
Beyond sophisms, the principle regulating production is that ‘the markets [débouchés]
guarantee consumption, as consumption stimulates production’ (ibid.). In the entry on
CONSOMMATION, Ganilh attacks Say’s law as ‘impossible and contrary to the law of
exchange of products, or of their sale and purchase’. It is based, in fact, on the assumption
that each producer can sell his products because with the proceeds he buys other products
of the same value. Yet this requires that producers can find buyers who need their products
and have the means to pay them. Producers as a whole do indeed consume the largest
part of production. The rest must be sold to consumers, who do not give other products
in exchange for them, but can only offer their services. But as soon as consumers have
spent their income in buying the consumption goods they want to acquire, they have
neither the will nor the means to buy any more. ‘The claim that the very fact of the creation
of a product instantly opens a market (débouché) to other products is therefore incorrect;
on the contrary, it is evident that consumption necessarily rules production’ (pp. 158–161).
Ganilh does not directly relate this argument to crises, except for noting that over-
abundance of products ‘is a grave misfortune for a country’ (p. 351).
It may be interesting to note that the law of markets found a formulation in a
dictionary well before Say’s or Mill’s times. In the entry on COMMERCE in →Robinet’s
Dictionnaire universel des sciences morale, économique, politique et diplomatique (Vol.
12, 1780) we find the following statement: ‘nobody can be a buyer unless he is also a
seller; since buying implies paying, nobody can buy unless he sells, because only by
selling can he procure the money to buy what he buys. From the fact that every buyer
must be a seller and that he can buy only if he sells, a second axiom results, namely,
that every seller must also be a buyer, and he cannot sell unless he buys. Therefore every
vendor must, by way of the purchases he performs in turn, provide everybody else with
the money for buying the goods the vendor wants to sell them.’ There may not be perfect
matching between individual sales and purchases, but if someone becomes richer by
selling more than he buys, someone else is ruined by buying more than he sells, so that
‘by the opposition between these two sorts of disorder, equilibrium is re-established in
the general mass of sales and purchases (pp. 444–445).
13 It should be noted that Garnier’s view was different from Coquelin’s (on whom, see
Chapter 8). The banks’ monopoly is not a constant and systematic cause of strain, but
induces the monopoly bankers to make mistakes in their calculations.
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of the History of Economic Thought, 32: 1, March, pp. 85–132.
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of business cycles, Research in the History of Economic Thought and Methodology,
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committee, to inquire into and examine the statements contained in the various petitions
from persons engaged in the silk manufacture (London: J. Hatchard & Son).
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7 Wilhelm Roscher’s crises
theory
From production crises to sales
crises
Harald Hagemann
Wilhelm Roscher was born in Hanover on 21 October 1817 and died in Leipzig
on 4 June 1894. He was the youngest of five children of Conrad August Albrecht
Roscher and his wife Wilhelmine von Rudloff, who both came from families of
higher public servants and officers. After the early death of his father he developed
even stronger ties to his mother, with whom he lived until her death in 1857. He
finished secondary school in Hanover, where his teacher Ludwig Adolf Petri
deepened Roscher’s religiousness.
From 1836 Roscher studied history and political science at the universities of
Göttingen, where he received his doctorate in September 1838, and Berlin, where
he studied with Ranke. He started his academic career in Göttingen, where he made
his habilitation and became Privatdozent in 1840 and extraordinary professor in
1843. In 1842 he published his book on Thucydides and in the following year his
Outline to lectures on the state economy in accordance with the historical method
(Roscher, 1843), in which he transferred the historical approach of the lawyer
Savigny and his followers in a programmatic way. With this book Roscher
established himself as the main founder of the ‘Older Historical School’, together
with Bruno Hildebrand (1812–1878) and Carl (Karl) Knies (1821–1898). In January
1844 he was promoted to full professor of political economy at the University of
Göttingen. Three months later he married.
In 1848 Roscher moved to the University of Leipzig, where he taught until his
death in 1894. Roscher felt at home in Leipzig and, also at the request of the King
of Saxony, declined offers from the prestigious universities of Vienna, Munich and
Berlin.
While at Leipzig, Roscher wrote the five volumes of his textbook System der
Volkswirthschaft, which were published between 1854 and 1894. The first volume,
Wilhelm Roscher’s crises theory 199
Grundlagen der Nationalökonomie, analysed mainly the same topics as classical
economics: production, circulation, distribution and consumption. In contrast
to classical authors, Roscher supplemented his theoretical analysis with long
historical treatises, such as on the development of prices, rent, interest and wages.
However, Roscher was much closer to the ideas of the classical economists than
were Schmoller and other members of the younger Historical School, to whom
Roscher was ‘too theoretical’. Like his admired ‘teacher’ Rau,1 with whom German
economics started to specialize in a stronger subjective value mood or ‘proto-
neoclassical tradition’, making substantial contributions to the development of
utility theory,2 Roscher had a stronger influence on Alfred Marshall, and particularly
on Carl Menger, who dedicated his Grundsätze (1871) to Roscher (see Streissler,
1990).
Roscher’s enormously successful textbook succeeded Rau’s Lehrbuch der
politischen Ökonomie (Principles of political economy), which had been published
between 1826 and 1837 and established the tripartite division of economics into
economic theory, economic policy and public finance, as the bestselling textbook
in Germany. The first volume of Roscher’s System der Volkswirthschaft went into
26 editions, the last five published posthumously. It was translated into many foreign
languages. The English edition was a translation of the 13th German edition by
J. J. Lalor and published in two volumes as Principles of political economy in 1878.
The other four volumes dealt with issues of applied economics and were even
more historically oriented. Roscher basically kept Rau’s tripartite division, with
economic policy comprising three volumes: Volume 2 on the economics of agri-
culture (1859), Volume 3 on the economics of commerce (1881) and Volume 5 on
social policy and poor relief (1894), which also reflected Roscher’s own practical
experiences in Leipzig poorhouses. That Roscher found it necessary to add a special
volume on social policy shows the growing importance of this problem in the second
half of the nineteenth century. Social policy issues were also at the centre of many
debates within the Verein für Sozialpolitik, which had been founded by a group of
conservative social reformers, the ‘Kathedersozialisten’ (socialists of the chair),
in 1872 (see Hagemann, 2001).
Perhaps Roscher’s most valuable work is his Geschichte der National-
Oekonomik in Deutschland (1874), which gives the first systematic treatment on
the history of political economy in Germany. It is a remarkable achievement of
professional learning. At the initiative of King Maximilian II of Bavaria, a great
research project on the history of sciences in Germany had been started. It was
directed by the Historical Commission of the Munich Academy. Roscher con-
tributed his most outstanding work, which established him as the most eminent
historian of early political economy in Germany. A closer look into the book reveals
that Roscher’s historical viewpoint does not prevent him from engaging in
theoretical considerations. His fairness and sense of judgement, for example, are
illustrated in his examination of the importance of Thünen’s work (Roscher, 1874:
pp. 879–902), although the latter’s exact mathematical method is distant from
Roscher.
200 Harald Hagemann
7.3 ROSCHER ON CRISES
Roscher bases his theoretical reflections primarily on the doctrines of the British
classical economists, to whose ideas he was closer than were Hildebrand and Knies
(the most eminent theorist of the three main representatives of the older historical
school), albeit in an eclectic way and with emphasis on historical relativism. That
Roscher’s historical viewpoint is not anti-theoretical comes out best in his important
essay on crises.
The controversy that had developed in the early nineteenth century around
Say’s law, and the question of general gluts had also been taken up intensively by
German economists before Roscher (Hagemann, 1995, pp. 176–178). The great
majority joined company with the classical doctrine of savings and investment, as
developed by Smith, Ricardo and Say. This comes out best in the careful investi-
gation of the macroeconomic role of saving by Hermann, who emphasized the
beneficial role of savings and came to the conclusion that ‘on no account is it to
be feared that the application of savings will have a negative impact on the
economy’ (1832, p. 372).
In contrast to Hermann, Roscher’s admired teacher Rau had first attempted to
mediate between the adherents to Say’s law and the dissenters in the general glut
controversy. In his long postscript to the German edition of letters between Malthus
and Say on the causes of the current sales stoppage, Rau (1821) agreed with Malthus
that an increase in production does not necessarily lead to an equivalent increase
in consumption. Five years later, however, in his Principles of political economy
(Rau, 1826), the influence of Malthusian and Sismondian ideas had disappeared
and Rau now considered equilibrium between production and consumption as
a necessary condition of the wealth of nations and viewed a general overproduction
as ‘unthinkable’ (ibid., p. 380).
Like his role model Rau, Roscher in his analysis of the theory of crises first points
to the necessity of an equilibrium between production and consumption. However,
he soon continues to criticize Adam Smith and classical political economists for
putting too much weight on production while neglecting consumption. On the
other hand, the dissenters such as Lord Lauderdale, Malthus and Sismondi made
the reverse error in one-sidedly emphasizing the role of consumption and demand.
One should therefore take a balanced approach and pay equal attention to the
problems caused by excess production and excess consumption.3 ‘The proportional
development of production and consumption, of supply and demand, is one of
the most important conditions for the prospering of the economy. All disturbances
of this equilibrium belong to the most dangerous shocks, just like diseases of
the great economic body, and it can hardly be said whether a temporary pre-
dominance of consumption or of production will have worse consequences’
(PRODUCTIONSKRISEN, p. 723; Roscher, 1861, pp. 288–289). Production only
increases where there are growing wants. Entrepreneurs will only invest when
they expect that demand for their products will increase. ‘Every expert will wish
to increase productive capital only in so far as he expects also an increase in sales
with the consequential increase of production’ (Roscher, 1861, p. 287).
Wilhelm Roscher’s crises theory 201
Roscher then distinguishes between partial overproduction and a general glut
of commodities. He first discusses a partial crisis and points out that the commodity
which happens to be in superabundance falls in price, which leads to a diminution
of profits in that particular branch of production. The possibility of a glut of
particular commodities did not seriously worry the classical economists because
they believed that if any commodity is in greater quantity than the demand, some
other commodity must be in less demand, and that there can be no glut of com-
modities in the aggregate. Moreover, the classical economists believed that the
price level was highly flexible, so that an excess supply (excess demand) under
the pressure of competition would quickly bring about an appropriate fall (rise) in
the price level to restore equilibrium between the demand and supply of goods. The
mobility of capital via gross investment plays an important role in the adjustment
process. The lowness (highness) of the price in the good which is superabundant
(scarce) invites a quantity of capital away from (into) that branch of production
until the demand and supply are synchronized and the profit rates are equalized.
Under conditions of competition there is always a tendency towards a uniform
rate of profits at work. Ricardo, for example, had emphasized that it is ‘always a
matter of choice in what way a capital shall be employed, and therefore there can
never, for any length of time, be a surplus of any commodity; for if there were, it
would fall below its natural price, and capital would be removed to some more
profitable employment’ (Ricardo, 1951, p. 291).
Roscher, on the other hand, regards perfect competition as a rather unrealistic
case, but he does not rely on fixed prices.4 Instead, he points to the limited mal-
leability of the fixed capital stock, which requires time and costs for the adjustment
process, and he sketches a negative multiplier process without being able to work
it out in greater detail (Roscher, 1861, pp. 289–290). He comes to the conclusion
that ‘Without doubt most sales crises are special ones, i.e. supply exceeds demand
only in single branches of commerce. However, there are also general crises where,
with the exception of money, there is a lack of sales for all commodities at the
same time’ (ibid, p. 293; PRODUCTIONSKRISEN, p. 724).
The consequence of this statement is that Roscher has to get down to the general
glut controversy or Say’s law debate in which the dominant side precisely denied
the possibility of a general glut. Roscher therefore comes to grips with the argument
of those ‘excellent economists’, like Ricardo, Say and the two Mills, who empha-
sized that demand is only limited by production, money is only the medium of
exchange and that all sellers are ex definitione buyers. In particular, Roscher
criticizes the limited view of reducing the role of money to its ‘means of exchange’
function and points out a decisive difference between a monetary economy and a
barter economy.
So, among other things, Say’s rigorous theory as it were is thwarted by the
mere introduction of monetary transactions. When the original raw barter
still dominated, supply and demand were directly confronted. But the medi-
ation of money enables the seller to buy only after some time, i.e. to delay
the second half of the exchange as much as he likes. Herewith in reality on
202 Harald Hagemann
the markets, the supply will not always carry along an equivalent demand
with it.
(PRODUCTIONSKRISEN, p. 726; 1861, p. 297)
Roscher here makes a very strong and important argument. The consequence of
the role of money as a store of value is the separation of the act of purchase and
the act of sale. Sellers now are not automatically buyers any more, as in the barter
economy or in Ricardo’s monetary economy, where money only functions as a
medium of exchange. This argument is in the centre of all later critique of Say’s
law, as, for example, in Marx and Keynes.
According to Roscher (1861, pp. 298–300), sales crises (Absatzkrisen) are
generated because of commercial overspeculation. If traders expect a rise in
prices they start to increase their stocks, thereby causing prices to rise. The whole
process is promoted by the availability of credit and sooner or later will be corrected
when circumstances occur which impair the ‘general hopefulness’.5 As a conse-
quence, the following development will take place: ‘Everybody collects his claims
and seeks to convert his stores into cash as soon as possible, i.e. everybody wants
to sell, nobody wants to buy. How is this different from a general sales crisis?’
(Roscher, 1861, pp. 299–300).
Roscher (PRODUCTIONSKRISEN, p. 726; 1861, pp. 300–301) also discusses the
case of a sales crisis caused by the bankruptcy of the state which leads to a
redistribution of national income. In Roscher’s example there are 300,000 families
as creditors who lose the same amount of money per year as five million taxpayers
will save. Every creditor family will lose £100 sterling per year, whereas the tax-
payer families will gain only £6 per year. Roscher draws the following conclusion:
‘Whoever wins in such a case will not enlarge his consumption as quickly as the
loser must reduce it, for the simple reason that the former generally cannot estimate
his gain as precisely as the latter his loss’ (PRODUCTIONSKRISEN, p. 726; 1861,
p. 301).
It therefore could be concluded ‘with certainty’ that those creditors who have a
high level of consumption will decrease their consumption strongly, whereas many
taxpayers will not react at all or will increase their consumption only a little. Clearly,
Roscher’s argument suffers from not taking into account that the many taxpayers
with their lower income level will have a higher marginal propensity to consume
than the creditors (who normally have a lower propensity to spend, which has made
them creditors and which is the very essence of Fisher’s debt-deflation effect6), so
that the impact on aggregate consumption demand in the short term might be exactly
the opposite.
The possibility of a sales crisis increases with the state of the development
of an economy. The higher the degree of the division of labour, the more difficult
it will become to keep supply in balance with future demand. According to Roscher,
sales crises are a seamy side of the higher culture, which is inevitable (1861,
p. 308).
The more advanced economy is also characterized by more mechanized methods
of production and the introduction of new types of machinery. Roscher discusses
Wilhelm Roscher’s crises theory 203
the economic importance of the machine industry in another chapter (see essay 5,
Ueber die volkswirthschaftliche Bedeutung der Maschinenindustrie in Roscher,
1861, pp. 173–277) in which he also addresses the issue of technological unem-
ployment and the conditions for compensation of those workers who have been
displaced by the introduction of new machinery. Roscher makes it clear that the
possibility of a temporary technological unemployment is the consequence of
the sudden introduction of new technology on a large scale. He takes up this issue
again in his Absatzkrisen essay in the section where he discusses various factors
(such as fashion changes) which lead to a sudden and large discrepancy between
production and consumption and thus cause a sales crisis. Here Roscher points
to an important distinction between the long-run advantages and the short-run
inconveniences of the sudden and large-scale introduction of new machinery
(p. 315). He clearly identifies an aggregate demand condition for the advantages
dominating in the longer run. Technical progress leads to cost and price reductions,
thereby stimulating the demand for goods. In flourishing economies, consumption
demand would increase more than production costs have been reduced, thus leading
to an overall increase in employment. Roscher not only reproduces the classical
compensation principle, i.e. the theory that technological unemployment is at best
a ‘transient evil’, because innovations bring about price reductions and the expan-
sion of output, as had been clearly stated for the first time by Say (1821, Ch. VII),
but also struggles to grasp the notion of the elasticity of demand without elaborating
on it.7
In a world with an uncertain future, information problems exist. In particular,
producers have the problem of distinguishing transitory from permanent increases
in demand. Temporary increases, although welcome in the short term, can turn
out to be fatal in the long term if they are misinterpreted as permanent increases
and stimulate producers to invest and enlarge productive capacities far beyond
what is necessary (PRODUCTIONSKRISEN, p. 732; 1861, p. 328). This implies a
misallocation of resources which will often lead to crises and thus painful
corrections in the future. An allocation of resources not in line with the long-run
comparative advantages of the economy and thus crisis-prone can also be the
consequence of the outbreak of wars necessitating a structural change. A crisis
can also arise with the restoration of the old production structure in the wake of
subsequent peace settlements. Roscher’s essay is full of historical examples,
especially from the Napoleonic wars.
But sales crises do not only play a negative role, as Roscher added in his later
version. An interesting element in Roscher’s view of the function of the economic
crisis is that, seen from an evolutionary perspective of capitalist development, the
downturn of the economy also has some positive aspects (Roscher, 1861, pp.
360–361). Superfluous luxury consumption will be eliminated and replaced by
parsimony and new capital formation. The crisis teaches entrepreneurs a severe
lesson which is beneficial for society as only the fittest entrepreneurs will survive,
and will invest again and rationalize the production process. Quoting Marx and
skilfully turning round Marx’s argument, Roscher perceives sales crises as great
Weltmarktgewitter (‘world market thunderstorms’), in which the contradictions
204 Harald Hagemann
between all the elements of the bourgeois production process burst, thus clearing
the air and fertilizing the ground for further economic development (ibid., p. 361).
Furthermore, he refers to Wagner’s excellent discussion on the three stages that
follow in the process of overspeculation,8 and to Juglar’s empirical analysis, and
emphasizes the cyclical character of economic crises, i.e. the quasi-rhythmical
variations of upturns and downturns (ibid, p. 362).
Finally, in a section called therapy, Roscher draws some policy conclusions.
Using physicians’ language, Roscher distinguishes between preventive and
mitigating means. There are three remedies which Roscher ascribes to the first
category: a far more elaborated statistics to improve the information available to
economic actors, liberating the economy from the fetters of guild regulations and
all other kinds of trade barriers (including Rechtsunsicherheit – legal uncertainty
– which he regarded as the worst fetter), and, most important, the reliability of
economic policy. Roscher rightly diagnoses that a confidence problem is a major
element of a sales crisis. Time and again he emphasizes trust and confidence
as decisive preventive means. This becomes clear when he discusses the role of
banks and the double-sided nature of credit, which in normal times will stimulate
production and sales but can also lead to and worsen economic crises. As a repre-
sentative of a theory of effective demand, Roscher naturally is in favour of the
positions of the banking school emphasizing a certain amount of monetary control,
not by discretionary measures of the government, but by a system of checks and
balances with the decisive categories being discipline and confidence.9
Confidence is enhanced by an economic policy based on clear rules, including
the growth of public debt. Roscher is very much concerned with the destabilizing
tendencies caused by the burden of a high public debt, which gives an incentive to
the government as well as to private actors to make risky and precarious speculations
(PRODUCTIONSKRISEN, p. 743; 1861, p. 373).
But what to do when the crisis has already occurred? Since the essence of a
sales crisis consists in the preponderance of production over consumption, any
therapy must bring into line the levels of supply and demand. The natural lapse of
the disease would work in that direction although in a very painful manner (1861,
p. 363). Any economic policy should not contradict this natural remedy. Roscher
points to the limited possibilities of state interventions in open economies. But
despite his plea against costly quackeries (PRODUCTIONSKRISEN, p. 740; 1861,
p. 365) he proposes some anti-cyclical public investment programmes to fight
unemployment, which may be called mildly Keynesian. Because of the cyclical
character of sales crises the government should plan and preferably save such public
works programmes for the next crisis. The impetus behind Roscher’s Keynesian
recipes clearly was more of a conservative nature. Bearing in mind the revolutionary
events in France and Germany in 1848, the year before his essay had originally
been written, Roscher pointed out the political and moral dangers of mass unem-
ployment, which therefore should be avoided.
Wilhelm Roscher’s crises theory 205
7.4 ASSESSMENT
Wilhelm Roscher was the most influential German economist in the third quarter
of the nineteenth century. Even for Schumpeter, who in general was very critical
of the German literature of the time, ‘Roscher was the incarnation of professorial
learning, mainly of a philosophico-historical nature, although ‘he conscientiously
retailed, in ponderous tomes and in lifeless lectures, the orthodox – mainly English
– doctrine of his time, simply illustrated by historical fact’ (Schumpeter, 1954, p.
809). He attested to the ‘honest scholarship and sound common sense’ of Roscher’s
works, which ‘helped to make them perhaps more useful to many generations of
students than would have been more original productions’ (ibid., p. 508).
Schumpeter pointed this ambivalent assessment not only at Roscher in general,
but also at his essay on the theory of sales crises in particular. He perceived Roscher
as a leading representative of the view ‘that crises will occur when anything of
sufficient importance goes wrong’, and stated that ‘Roscher presented what can
only be described as a fricassee of most of the ideas that were current at the time
he wrote’ (ibid., p. 741).
A completely opposite assessment is given in Erich Streissler’s modern inter-
pretation of Roscher’s essay. Streissler recognizes Roscher’s splendid article ‘Zur
Lehre von den Absatzkrisen’ as ‘a climax of German economics in the nineteenth
century’ (Streissler, 1995, p. 112) and goes so far as to say that ‘if Keynes had
only read and borne in mind Roscher, it would have left little that was new for his
General Theory’ (Streissler, 1994, p. 121). Once excited, Streissler perceives in the
author of the most successful contemporary textbook, System der Volkswirthschaft,
a ‘world-class economic theoretician’ (Streissler, 1994, p. 37): ‘the German
Samuelson of his time’ (Streissler, 1995, p. 112).
Which of these contradictory views is justified? It can be agreed with Streissler
that Roscher’s historical view is not anti-theoretical, and that this can best be seen
by looking at his crises essay from a modern perspective. We also agree with
Streissler (1994, p. 46) and with Schumpeter (1954, p. 540) about the great similarity
between Roscher and John Stuart Mill in their way of thinking, procedure and
method, as comes out in a comparison of Roscher’s Grundlagen with Mill’s
Principles (1848). Interestingly, it is Mill who, in his essay ‘Of the influence of
consumption on production’, written in 1829 in reaction to the crisis in Britain of
1825–1826 but published only in 1844, was the first economist to clearly state that
money not only is a medium of exchange, as pointed out by his teacher Ricardo,
but enables the one act of interchange in a barter economy ‘to be divided into two
separate acts or operations; one of which may be performed now, and the other a
year hence, or whenever it shall be most convenient’ (Mill, 1844, p. 70).10
So it is clear that it was John Stuart Mill and not Roscher who was the first
economist to emphasize the consequences of the store of value-function of money
to allow the separation of sale and purchase. Roscher, who normally is reliable in
his quotations and does not claim unwarranted originality, already in his 1849 crises
essay is referring to Mill’s Principles (where Mill does not repeat his argument
but adheres to the long-term implications of the quantity theory of money) but
206 Harald Hagemann
nowhere to Mill’s 1844 essay. There remains a margin of doubt whether Mill’s
essay ‘Of the influence of consumption on production’ was known to Roscher when
he wrote the PRODUCTIONSKRISEN article in 1849. If it was, then Roscher was less
innovative than believed by Streissler, but it once more clearly shows his pragmatic
intelligence. A good cook has to buy the best and freshest ingredients available on
the market to produce a tasty fricassee. This was certainly the case with Roscher,
who then would have based his crises theory on ‘the freshest of Mill’s economic
writings’ (Hicks, 1983, p. 61). Furthermore, Roscher put much more emphasis on
the role of money as a store of value and the consequent separation of purchases
from sales in a monetary economy than the later Mill, who nowhere made this
argument in his early essay the regression line of his thought.
However, neither Roscher nor Mill developed an assets or speculative motive
regarding money demand. The potential separation of purchases and sales is not
sufficient to refute Say’s law. Adam Smith had already pointed out that annual
savings could be consumed productively by a different set of people, and later on
orthodox economics relied on the interest rate mechanism to keep in line savings
and investments for the economy as a whole. So a speculative-demand motive for
holding money has to be added. Keynes therefore used the liquidity preference
theory to score a debating point against the classical case of an equilibrium solution.
Streissler (1994, p. 115) perceives in Roscher’s explanations an anticipation of
Keynes’s speculative motive, albeit in an inverse and real rather than monetary
form. In our view, Streissler’s excessively modernistic interpretation of Roscher
goes too far.
However, it cannot be denied that Roscher’s crises essay is an important one.
The key argument has entered all later critiques of Say’s law as a necessary, albeit
insufficient, element. This also holds for Marx, who was hostile to Roscher because
of the latter’s refusal to acknowledge the labour theory of value and criticism of
socialism. Marx called Roscher a ‘puny German plagiarist’ emitting ‘eclectic pro-
fessorial twaddle (Marx, 1867, pp. 251, 295) His contemptuous remarks, however,
cannot conceal that he had studied Roscher’s writings carefully and that some of
his statements on economic crises, especially in Volume III of Capital, were
influenced by Roscher (and Mill). This is a good indicator for the lasting importance
of Roscher’s crises article.
NOTES
1 Roscher repeatedly called Rau his ‘teacher’, although in a formal sense Roscher never
was a student of Rau, who taught at the University of Heidelberg from 1822 until 1870.
2 For greater detail, see Chipman, 2005.
3 Roscher (PRODUCTIONSKRISEN, p. 723, note 2) refers to Canard, who had compared
the relationship between production and consumption in the economy with the
relationship between arteries and veins.
4 Modern macroeconomic theory has shown that deficient price flexibility is not a
necessary condition for the existence of underemployment equilibria. For a deeper
analysis of this argument with regard to Roscher’s theory of crises, see the discussion
in Streissler, 1994, pp. 110–11).
Wilhelm Roscher’s crises theory 207
5 Roscher did not work out all the consequences of a credit economy as, for example,
Wicksell did later. For a critical evaluation of Roscher’s monetary theory, see Barkai,
1989.
6 See Fisher, 1933 and Tobin, 1980, Ch. 1.
7 On this point, see also Schefold, 1994, p. 18.
8 See Wagner, 1857 and the contribution by Gioia on Wagner in this volume, Chapter
14.
9 Roscher’s argument very much resembles the one made by Hicks in his last book,
A Market Theory of Money, where Hicks (1989) emphasized the discipline and
confidence requirements of the central country’s currency in a polycentric model of the
international economy.
10 For a detailed assessment of Mill’s crises theory, see Hagemann, 2002.
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Roscher, W., 1854–1894, System der Volkswirthschaft (Stuttgart: Cotta). Vol. 1: Die
Grundlagen der Nationalökonomie (1854, 26th edn, published in 1922; English
translation from the 13th edn by J. J. Lalor as Principles of political economy, 2 vols.,
Chicago: Callaghan and Company, 1878); Vol. 2: Nationalökonomik des Ackerbaues
und der verwandten Urproduktionen (1859; 14th edn, 1912); Vol. 3: Nationalökonomik
des Handels und Gewerbefleißes (1881; 8th edn, 1912–1917); Vol. 4: System der
Finanzwissenschaft (1886; 5th edn, 1901); Vol. 5: System der Armenpflege und der
Armenpolitik (1894; 3rd edn, 1906).
Roscher, W., 1861, Ansichten der Volkswirthschaft aus dem geschichtlichen Standpunkte
(Leipzig and Heidelberg: C. F. Winter’sche Verlagshandlung). 3rd enlarged and corrected
edn, 1878.
Roscher, W., 1874, Geschichte der National-Oekonomik in Deutschland (Munich: R.
Oldenbourg).
Say, J.-B., 1803, Traité d’économie politique ou simple exposition de la manière dont se
forment, se distribuent et se consomment les richesses (Paris: Rapilly); English translation
from the 4th French edn, 1821: A treatise on political economy (reprint, New York, 1971:
Augustus M. Kelley).
Schefold, B. (ed.), 1994, Wilhelm Roscher’s Ansichten der Volkswirthschaft aus dem
geschichtlichen Standpunkte (Düsseldorf: Verlag Wirtschaft und Finanzen).
Schumpeter, J. A., 1954, A history of economic analysis (London: George Allen & Unwin).
Streissler, E. W., 1990, The influence of German economics on the work of Menger and
Marshall. In B. Caldwell (ed.), Carl Menger and his legacy in economics. Annual
supplement to Vol. 22, History of political economy, pp. 31–68.
Streissler, E. W., 1994, Wilhelm Roscher als führender Wirtschaftstheoretiker. In B.
Schefold, (ed.), Wilhelm Roscher’s Ansichten der Volkswirthschaft aus dem
geschichtlichen Standpunkte (Düsseldorf: Verlag Wirtschaft und Finanzen), pp. 37–121.
Streissler, E. W., 1995, Wilhelm Roscher. Zur Lehre von den Absatzkrisen. Oder: Gibt es
in der relevanten Konjunkturtheorie und -politik in den letzten 140 Jahren etwas Neues?.
In E. Matzner and E. Nowotny (eds), Was ist relevante Ökonomie heute. Festschrift für
Kurt W. Rothschild (Marburg: Metropolis), pp. 111–121.
Tobin, J., 1980, Asset accumulation and economic activity (Oxford: Basil Blackwell).
Wagner, A., 1857, Beitraege zur Lehre von den Banken, Leipzig: Voss.
8 Charles Coquelin
Banking monopoly and
commercial crises
Daniele Besomi
8.1.2 Influence
Yet almost 40 entries of the original dictionary had recently been translated
and incorporated in →Lalor’s Cyclopædia of political science (19 of which were
written by Coquelin, not including, however, his entry on crises 8), which went
through a second edition (again incorporating those entries) at the same time
as Chailley revised the Nouveau dictionnaire. Other articles had previously
been translated into Italian by Francesco Ferrara for his Biblioteca dell’economista.
Eight of these were written by Coquelin (again, neither BANQUE nor CRISES
COMMERCIALES).
The importance of the Dictionnaire was widely acknowledged abroad. Macleod,
for instance, thought it ‘excellent’ (COQUELIN, CHARLES, in →Macleod’s
Dictionary of political economy, 1863, p. 557). Jevons described ‘Guillaumin’s
excellent Dictionnaire de l’Économie Politique’ as ‘on the whole the best work of
reference in the literature of the science’ (but criticized it for not mentioning
Cournot) (Jevons, 1879). The judgement was taken up and qualified as ‘just’ by
Ingram (1888, p. xiv). De Vivo, in a quick list of economic dictionaries, describes
it as ‘still useful today’ (2006, p. 121). Indeed, a cursory search on the internet
shows several hundred citations of entries from the Dictionnaire.
Charles Coquelin was born in Dunkirk on 25 November 1802. The son of a family
of merchants, he had an inside knowledge of trade. However, he studied law in
Paris, where he became acquainted with political economy. He practised law in
Dunkirk until 1830, but his main interest seems to have been directed towards
economics. In 1827 he founded a periodical titled Les Annales du Commerce, which
lasted only one year. In a series of articles published in it, he already advocated
freer banking, arguing that such a system would reduce commercial fluctuations
212 Daniele Besomi
and increase prosperity (later, he radicalized this position and maintained that free
banking would eliminate fluctuations altogether). He moved to Paris in 1832 and
started writing economic articles for Le Monde, Le Droit and Le Temps (a journal
linked to the liberal left). In the latter periodical, he published some articles on
banking in the United States, where he lauded the freer banking practice but
admitted that some regulations might be necessary and useful. There followed
pieces on banking in England, where he opposed the views of both the Currency
and the Banking schools, and argued that the privileges of the Bank of England
had a destabilizing effect.
Before deepening and radicalizing his views on banking, Coquelin acted as an
adviser to the linen industry. He wrote some articles on the subject and a Nouveau
traité complet de la filature du lin et du chanvre (1846), and meanwhile started
collaborating with the prestigious periodical Revue des Deux Mondes, to which he
contributed some articles on money and banking. In 1844 Coquelin took part in
Bastiat’s movement for free trade, and in 1848 he took over from Bastiat the
editorship of Le Libre-Échange. In 1848 he started writing for the Journal des
Économistes. His eclecticism and erudition induced Guillaumin to choose him as
editor of the Dictionnaire de l’économie politique. He died at the age of 50 on 12
August 1852.9
Coquelin’s main writings on crises are an article titled ‘Les crises commerciales
et la liberté des banques’, published in the 1 November issue of the Revue des
Deux Mondes (1848a, pp. 445–70), translated as ‘The causes of commercial crises’
in Hunt’s Merchants’ Magazine and Commercial Review (October, 1849, pp.
371–389) and abridged as ‘Restrictions on banking the cause of commercial crises’,
Bankers’ Magazine (London) (1850); and the book Le crédit et les banques,
published in 1848 by Guillaumin (2nd edition, 1859; 3rd edition, 1876) – the chapter
on commercial crises takes up in its entirety the Revue des Deux Mondes article,
with the addition of a supplementary section on the 1837 crisis in the United States.
Coquelin’s entry for the Dictionnaire on CRISES COMMERCIALES takes up by and
large the specific explanation of the phenomenon advanced in the Revue des Deux
Mondes article, adding, however, special emphasis on the epistemic aspects of the
causal interpretation of the phenomenon.
Even though crises are related to credit, one should not conclude that credit is
itself negative. During crises, there is indeed a temporary disappearance of credit.
This can offset some of the advantages brought by credit, while all the relationships
based on monetary exchanges remain unaffected. Crises, therefore, by recreating
the conditions that characterize a credit-less economy, enable one to appreciate
the former advantages of credit.
Crises can thus occur without an obvious, external reason. This (so to speak)
spontaneous character of crises is one of the most curious phenomena at the present
time. The origin of such events must lie within the commercial system itself.
‘Spontaneous’ crises recurred frequently and ‘almost periodically’ (pp. 526, 528,
530, 533) during the nineteenth century: for France these occurred in 1811, 1819,
214 Daniele Besomi
1825, 1830–1831, 1837 and 1846, and more or less the same dates applied for
England, the solidarity being due to the common interests shared by traders, who
were subject to the same influences, good or bad. Only the intensity of crises varies,
depending on the degree of the extension of credit. Such catastrophes are all the
more surprising as they often happen in the midst of the most prosperous times.
As the emergence of crises is contemporary to both the development of industry
and the extension of credit, two kinds of explanations have been offered for the
phenomenon. Some stressed the excessive or misdirected development of produc-
tive forces in manufacture,11 others stressed instead the abuse of credit, favoured
by banking institutions. Excess of commercial speculation is also often mentioned,
but this is normally so strictly associated with the abuse of credit that it can hardly
be considered a distinct cause. J.-B. Say explained the English crisis of 1825 as a
consequence of the banks’ capacity to issue money. He claimed that banks had
over-issued banknotes, which they had used to discount an excessive amount of
commercial papers. Correspondingly, traders and entrepreneurs could expand their
firms well beyond their capital. At the same time, however, the over-issue of paper
money had determined a fall in its value as compared to gold sterling, so that holders
of paper currency ran to the banks to have their money converted into gold. The
banks, being obliged to convert, thus had to buy gold at any price and coin money
with it, at considerable expense. To avoid this, they started withdrawing banknotes
from circulation, thereby ceasing to discount commercial papers and depriving
traders of the resources on which they counted for creating and expanding their
firms. To find the necessary cash to fulfil their obligations, merchants were forced
to sell their goods at a loss; prices dropped, unemployment rose, and business
failures and bankruptcies spread throughout the country (Say, 1832, p. 474 of
the 1852 edition). According to Coquelin, there is some truth in this account, in
particular regarding the excessive discounts given by the banks. These were much
larger just before the crisis than in previous years, and these discounts undoubtedly
fuelled speculation. Yet this explanation is not sufficient, as the primum mobile,
namely, the first cause of this abuse and of the wild speculations, remains unac-
counted for. Say ascribes the crisis to the run on the banks. However, if this were
the case, the number of notes in circulation should have dropped at the critical time,
while the opposite happened, with the number of notes being higher at the peak of
the crisis early in 1826 than at its outbreak in 1825. What really caused the crisis
was not requests for the conversion of notes, but the withdrawal of deposits on
current accounts. The result is the same, but the principle is different.
The other explanation of the 1825 crisis reported by Coquelin, which was as
unsatisfactory as Say’s, was offered by J. Wilson, who attributed it to a speculation
mania caused by the tempting appeal of some operations. According to him, in
1824 speculation was stimulated by the success of almost all the foreign lending
undertaken in the previous five years, and by the high price of such foreign funds;
mining abroad was also profitable. Moreover, and most importantly, imports of
goods were quite small, barely covering demand, so that prices rose significantly.
Fostered by these conditions, speculation became feverish in the early months of
1825 (Wilson, 1847, p. 172). Yet, as described by Wilson himself, speculation
Coquelin on bank monopoly and crises 215
affected many different kinds of enterprises and goods of all kinds, and it is hardly
conceivable that ‘the same mood emerged at once in so many different directions,
unless it was determined by a common cause. One must seek to identify this prime
cause.’ However, Wilson does not offer any.
Undoubtedly, admitted Coquelin, the abuse of credit was a common condition
of all commercial crises since the beginning of the century, and is one of their deter-
mining causes. It is also beyond doubt that excessive speculation characterized all
these events. But the origin of the abuse of credit and of speculation mania still has
to be explained: ‘affirming that fevers are breaking out is purely playing with words.
There is nothing natural in similar diseases breaking out without being induced by
something. The almost periodical recurrence of these calamities proves instead that
they have a hidden cause, steadily acting’ (p. 530). This cause lies in the existence
of privileged banks (banques privilégiées) and in their way of operating.
The facts of the crises are as follows. At the time of crises, a large number of
individuals withdraw their deposits in current accounts. Accordingly, the total
amount of deposits shrinks considerably. At the same time, the number of discounts
increases. Both factors combine to reduce the banks’ balances in specie. Figures
for both England (1825 and 1837 crises) and France (1846–1847 crisis) show that
the circulation of banknotes does not diminish at the time of crises and even rises
slightly, while deposits by both the public and the government decrease by a sizeable
amount and the banks’ discounts visibly escalate. How can these facts be ascribed
to their prime cause, the monopoly of the privileged banks?
If no public banks were authorized to issue paper money, the placement of savings
would be somewhat difficult: either they would be retained by the saver until enough
were accumulated to be put to use, or they would be temporarily deposited in
commercial banks that could in turn lend them out, or they would be lent directly
to manufacturers or merchants. The interest rate associated with such operations
would be fairly high, as it would have to compensate for the risk involved and
enable the lender to retain his position. Such a situation is very inefficient, but the
risk of gluts of savings is remote. Where instead there is a privileged bank entitled
to issue banknotes, the situation is completely different. Apart from its own deposits,
such a bank can lend out the paper currency it creates. A much lower interest rate
can thus be charged to obtain the same yield on the bank’s capital. Issuing banks
can therefore increase their profit rates and compete on an unequal footing with
the commercial banks and private lenders. The latter tend to disappear, while
commercial banks are reduced to the role of intermediaries between the public
and the issuing bank. (The matter is discussed in more detail in Coquelin’s entry
on BANQUE in the same Dictionnaire.)
The savings previously managed by private lenders and commercial banks can
no longer be placed on the capital market. They accumulate without being able to
find a placement apart from the estate market, some Treasury bonds and a limited
number of direct investments, and therefore are eventually temporarily deposited
in commercial banks or even directly at the issuing bank for a very small interest
rate. The issuing bank, in turn, can use these deposits to further expand its discounts.
Such a situation, however, is rather dangerous, as the issuing bank is lending money
216 Daniele Besomi
which it only has in temporary custody and which can be withdrawn at any time,
and thus placing itself at risk of becoming overdrawn. The speculative frenzy
described by Wilson originates precisely in the large amount of unused capital
looking for an outlet. Any project, even the most risky, is more interesting than
receiving a ridiculously low interest rate. Bank directors are also keen to engage
in such business deals, as well as manufacturers and merchants, so that extended
plans for absorbing the funds seeking placement are set up and quickly attract the
floating capital. This is then withdrawn from the bank where it was temporarily
deposited. The commercial banks, whose reserves quickly diminish, attempt to
replenish them by withdrawing their own funds from the central bank or trying to
convert more banknotes. As a consequence, the specie reserves of the central bank
diminish very rapidly, accelerated by the Treasury also withdrawing its deposits
to deal with the scarcity of specie prevailing everywhere.12 To avoid bankruptcy,
the issuing bank is forced to tighten credit at once, thus bringing about the situation
described by Say.
This is the typical progression of the ‘unfortunate perturbations called commer-
cial crises’, those occurring ‘spontaneously’. They all have the same features and
the same origin, and are necessarily followed by a period of inactivity and life-
lessness. The spirit of speculation lies dormant for a while, frightened by the recent
disasters; capital remains somewhat distrustful, and at any rate the general state of
depletion makes it easy to find alternative placements. However, as the same cause
– the issuing bank’s monopoly – is constantly operating, sums of capital seeking
placement slowly start to accumulate and become overabundant, and after some
time produce the same effects. ‘This is how crises become almost periodical’ (p.
533). Excess and speculation are their determining cause, and are systematically
accompanied by the abuse of credit. However, the first cause is the exclusive
privilege of the issuing bank.
Before such institutions existed, commercial crises were unknown, and they will
disappear when banks are free to compete under the same conditions. In fact, if
the central bank started to cause, as a consequence of its issuing of paper money,
an excess of capital, the owners of these savings would reunite and start discounting
commercial paper just as the central bank would normally do; if this second bank
were not enough, a third or more would be founded. Not only would a glut of capital
be impossible, but as banks would operate on their own deposits rather than on
third-party capital, the risk of being overdrawn would be considerably reduced.
The spirit of speculation would have far less reason to arise, and even if it did, its
consequences would be far less dramatic.
8.4 ASSESSMENT
Coquelin’s explanation of crises belongs to the family of theories which see them
as the result of some systematic institutional friction or impediment preventing
the correct working of economic laws. Like most of his contemporaries, Coquelin
saw the culprit as being in the monetary field; he was, however, more radical than
Coquelin on bank monopoly and crises 217
most of them, as rather than blaming some special operation of the banking system,
he pointed the finger at the very existence of a privileged bank.13
This view had a precedent, which Coquelin himself quoted in the 1848
article for the Revue des Deux Mondes (but not in the entry, disgracefully one of
the few lacking a bibliography), namely, Carey’s The credit system in France, Great
Britain and the United States (1838).14 His view on crises, however, failed to
break through,15 although he is occasionally quoted for his views on free banking.
Historically, the range of crises he considered is rather limited, as it only starts
with the 1811 crisis (the same applies to the 1848 article), while some of his con-
temporaries were examining a longer series of events, going back to 1797 and
occasionally also to the 1763 crisis. This is a natural consequence of the point he
wanted to argue, as the Bank of France was only founded in 1800, and its privilege
of issuing banknotes extended nationwide only in 1848. The Bank of England had
indeed been privileged since the Bank Acts of 1708 and 1709, but only had a partial
monopoly, within 65 miles of London, which became nationwide with the Bank
Charter Act of 1844; notes above £5 were only made legal tender in 1833.
Nevertheless, some parts of Coquelin’s argument are noteworthy. Although he
certainly wasn’t the first writer to claim that crises recur almost periodically, he
was among the first who actually attempted to explain periodicity. This phenomenon
(more in the sense of the recurrence of crises, rather than as regularity in their rhythm)
had been noted for a long time before Coquelin; there are observations dating from
the end of the eighteenth century, growing in frequency as crisis succeeded crisis
and becoming widespread enough to be quoted, by the time of Coquelin’s article in
the Revue des Deux Mondes, in official documents such as the 1839 Report of the
Secretary of the Treasury (Woodbury, 1840) and the House of Commons Secret
Committee on Commercial Distress (1848), and to be recorded in Mill’s Principles
(1848).16 Yet most of these writers were content to record the fact. Some took it as
indicating that crises are not disconnected phenomena, but are related to each other,
and are endogenously generated by the working of the economic system, possibly
favoured or caused by the specific institutional setting. Coquelin reports that ‘As
the establishment of [privileged] banks has so far almost everywhere been followed
by commercial perturbations more or less serious, which have become in certain
countries more or less periodical, it has generally been thought that these fatal
accidents are the inevitable results of these institutions’ (1848a, p. 372). He went
further than most of his contemporaries, however, and tried to explain the recur-
rence of crises. In the 1848 article, after reconstructing the ‘rigorous chain of
consequences’ of privileged banks ending ‘in an inevitable crisis’, he argued that
after the ‘explosion of the mine’ and the general break-up, the surviving capitalists
– not trusting anyone else – deposit the money they have been able to save from the
wreckage in the privileged bank: ‘the accumulation of deposits recommences, to end
again, some years later, in the same results’ (ibid.; 1849 translation, pp. 377–379).
The explanation is incomplete, but the attempt is interesting. Like most of
his contemporaries, Coquelin implicitly takes for granted that after the crisis the
productive system will automatically restart along a path of advance. While his
thought as to what happens to the savings is clear, the origin of the growth out of
218 Daniele Besomi
which these savings are coming from remains unexplained. The result is an account
of the recurrence of crises, but not of a cyclical mechanism describing a proper
alternation and mutual causation of periods of advance and depression.
Nevertheless, the epistemic reflection leading to his statement, as recast in the
dictionary entry, is interesting and – jointly with similar attempts – proved to be
momentous in the transition from crises to cycle theories.
Already in the 1848 article, Coquelin lamented that the existing literature on
crises (the list of which he boiled down to Tooke, Torrens, Overstone and Wilson)
focused on the difference between the various crises rather than on ‘their traits of
resemblance’, dwelling ‘upon the particular circumstances of commercial crises,
without studying sufficiently their general and dominating character’, ‘stopping
almost always at the immediate or secondary causes by which they are determined,
instead of going up to the primordial cause which engenders them’ (Coquelin,
1848a, 1849 translation, p. 384). This distinction between a primary and secondary
cause was also not new in the literature, but it only had four antecedents. Two, due
to Robert Cockburn (1840) and to Isaac Preston Cory (1842), were rather vague.
The French agricultural economist Jean-Edmond Briaune had argued that similar
effects must have similar causes, so that the proper approach for the explanation
of crises is to focus on the common, primary cause while considering the specific
determinants of each occurrence as secondary causes (Briaune, 1840; for a more
detailed discussion of these three contributions, see Chapter 6, Section 6.5.2). A
few months before Coquelin’s article was published, James Anthony Lawson
referred to the causal principle, according to which similar causes must be followed
by similar effects, and argued that the mechanism based on credit–overtrading–
speculation destabilizing the system must be the primary cause, while the actual
shocks toppling it are only secondary causes of the crises (Lawson, 1848; for
a discussion, see Besomi, 2008). Several years later, the distinction was taken
up, and placed at the very foundation of his argument, by Juglar (1862, Chapter
1), and later also by Mills (1868) and Jevons (1878). The common trait of these
approaches is that they turned crises from individual, disconnected events into
instances of the same class of events, thereby paving the way for their discussion
in terms of a general law (for a discussion, see Besomi, 2010b, pp. 208–217).
Accordingly, Coquelin’s entry is dedicated to ‘commercial crises’ in the plural;
only Lemonnier (CRISES COMMERCIALES, in →Dictionnaire de la conversation
et de la lecture, 1835; see Chapters 5 and 6) and Roscher (PRODUKTIONSKRISEN,
in [Brockhaus’s] →Die Gegenwart, 1849; see Chapter 7) put it in the plural
before him, while earlier entries had the title in the singular: Blanqui’s CRISE
COMMERCIALE, in →Encyclopédie des gens du monde, Vol. 7, 1836; [Monbrion]’s
CRISE COMMERCIALE ET INDUSTRIELLE, in Monbrion’s →Dictionnaire universel
du commerce, 1838; Michel’s CRISE COMMERCIALE, in Guillaumin’s
→Encyclopédie du commerçant, 1839; Courcelle-Seneuil’s CRISE, in →Duclerc
and Pagnerre’s Dictionnaire politique, editions from 1842 to 1860; Dupin’s CRISE
COMMERCIALE, in →Encyclopédie du dix-neuvième siècle, 1846 (see Chapters 5
and 6); and the anonymous HANDELSKRISE, in →Das große Conversations-
Lexikon für die gebildeten Stände (Meyers Konversationslexikon), 1849.17
Coquelin on bank monopoly and crises 219
The interesting addition introduced in the dictionary entry concerns the specific
mode of operation of the causal factor. Having identified a common primary cause,
Coquelin explained that it is its constant operation that determines the periodical
recurrence of crises (p. 533). The system continuously accumulates tension, until
after a time it explodes and relaxes. There were a number of explanations of crises
relying on this principle, in particular those based on credit leading to overtrading,
speculation and eventually abuse of credit until the system collapses. But there were
also explanations relying instead on periodically operating causes: Briaune, for
instance, attributed crises to the fluctuations in crops (1840), as later did Jevons
(who attributed the cause of the latter to fluctuations in solar activity). Although
Coquelin’s remark was not meant to be polemical with the alternative view, it is
nonetheless interesting that he explicitly stressed this feature.18
Another aspect better emphasized in the dictionary entry than in the Revue article
is that the outbreak of the crisis can be determined by any occasion, when the
operation of the mechanism has been building up enough tension. The primary
cause of the crisis is the factor generating this tension, while the occasioning event
plays a subordinate part and is a secondary cause. Coquelin stopped short of reach-
ing the conclusion to which similar arguments brought Lawson before him (1848)
and Juglar later (1862) to argue that the system becomes unstable, and that it is
precisely this instability that makes for the endogenity of crises. The expression
used by Coquelin, a ‘débordement quelconque’ (p. 532), that is, ‘any overflow’,
anticipates the metaphor later used by Juglar, who compared the accumulation of
tension to the overfilling of a glass of water, when a single drop of water (the
secondary cause) would determine the spillage (on Juglar, see Chapter 12).
NOTES
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222 Daniele Besomi
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Coquelin on bank monopoly and crises 223
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Jones, E. D., 1900, Economic crises (New York and London: Macmillan).
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Ridgway).
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Angleterre et aux États-Unis (Paris: Guillaumin).
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1815–1950 (Paris: Comité pour l’histoire économique et financière de la France).
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[McCulloch, J. R.], 1826, Commercial revulsions [review of The late crisis in the money
market impartially considered, London, 1826], Edinburgh Review, XLIV, June, pp.
70–93.
Mill, J. S., 1848, Principles of political economy with some of their applications to social
philosophy, London. In J. S. Mill, Collected works, Vols II and III (Toronto: University
of Toronto Press, and London: Routledge, 1965).
Millot, L., 1837, Études sur les principales causes des crises commerciales et périodiques
(Paris: E. Legrand et Descauriet).
Mills, J., 1868, On credit cycles and the origin of commercial panics. Transactions of the
Manchester Statistical Society, Session 1867–1868, pp. 5–40.
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September–October, pp. 167–176 (reprinted in the 3rd edn of Coquelin, 1848).
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Économistes, XXXVII, October–December, pp. 420–432.
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Henry Charles Carey and Charles Coquelin. In R F. Hébert (ed.) Perspectives on the
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224 Daniele Besomi
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293–298.
9 Commercial crisis and credit
in the first Spanish general
encyclopaedia (1851–1855)
Jesús Astigarraga and Juan Zabalza
9.1 INTRODUCTION
Mora’s life might be the canonical example of the committed liberal in the first
half of the nineteenth century in Spain. He was born in Cádiz in 1783 and was
brought up according to Jansenist, rationalist and naturalist principles. He became
a Professor of Logic at the San Miguel College of Granada, where he taught
Condillac and Bentham between 1802 and 1808, which was unusual at that time
in Spain (Monguió, 1967). During this early period, Mora read the works of the
so-called Scottish philosophers of common sense, T. Reid and D. Stewart, who
greatly influenced his life, and his literary style and ideas. In fact, Mora learned
from Reid that axioms and definitions are not to be ‘proven’ and are the foundation
of all reasoning and science – from mathematics to rhetoric; this approach should
substitute the scholastic philosophy that prevailed in Spain at the time (Mora, 1845).
In fact, Curso de lógica y ética según la escuela de Edimburgo (Course of logic
and ethics based on the Edinburgh School), which was published six times in Latin
America and in Spain between 1832 and 1853, symbolizes the role played by Mora
in spreading the ideas that he considered crucial for bringing up young people
according to the principles of liberal society. Mora explicitly recognized that he
228 Jesús Astigarraga and Juan Zabalza
was a mere translator trying to spread the philosophical system of the Scottish
philosophers. Nevertheless, the philosophy of common sense was also a protest
against the exclusive systems of thought and this seems to be Mora’s statement
regarding literary, economic and religious issues. Such an approach was exemplified
by his admiration for romanticism or his rational approach to religion. This
eclecticism that so characterizes Mora’s way of thinking also extended to his
economic thought (Smith, 1968).
Mora’s patriotic convictions saw him fighting against the Napoleonic troops that
invaded Spain in 1808 and he became a prisoner in France. After returning to Spain
in 1817, he began his career as one of the country’s main propagators of science
and literature. Later, during the brief Liberal period (1820–1823), he expanded his
activities by becoming a founder and promoter of newspapers, a translator into
Spanish of philosophical and political books, a professor in the Ateneo Español
(Spanish Athenaeum) and a member of a number of political societies. By then,
together with other economists such as J. M. Vadillo or M. Marliani, he formed
part of the first generation of the Spanish advocates of free trade, led by his friend
the outstanding economist A. Flórez-Estrada.
Mora’s exile in Britain was crucial to explaining the evolution of his thought and
his commitment to spreading liberalism.4 First, he reinforced his connections with
British culture and became an anglophile writer. Second, he read the works of the
main British economists and he had a personal relationship with Bentham and
J. R. McCulloch. In fact, he translated the pamphlet Consejos que dirige á las Córtes
y al pueblo español Jeremías Bentham (Jeremy Bentham’s advice to the Spanish
parliament and people) into Spanish (Schwartz, 1999), and he is said to have met
J. R. McCulloch on several occasions, whom he considered to be the most important
economist at that time (Mora, 1843). Third, and most importantly, he met the
German publisher R. Ackermann, who appointed him director of two newspapers
and as a contributor to Forget-me-not, which was the British version of the popular
German literary annuals. It seems that Ackermann recruited Mora for his skill as
a journalist, but also for his profound intellectual background (Llorens, 1979).
Furthermore, Ackermann found in Mora, together with other Spanish liberals exiled
in London, the perfect propagator for his publishing plans in the recently founded
republics of Latin America, which included the translations of some successful
English educational works written mainly by William Pinnock (Roldán, 2003). In
fact, the catechisms of Geography, Grammar and particularly of Political Economy
were probably written by Mora himself. This frenetic activity created the opinion
that Mora was a superficial and vacuous intellectual. However, as R. S. Smith
pointed out, ‘Mora was not a professional economist; however, he was capable of
understanding the trends in economic science at that time. Furthermore, he was
sufficiently skilled to set them out in such a way that they could be popularized’
(Smith, 1967).
Undoubtedly, the main interest of Spanish liberals was to promote the estab-
lishment of liberal institutions and, in the case of Mora, to endorse free trade in
Latin American republics (Monguió, 1967). When Mora moved to Argentina –
invited by the then Prime Minister Rivadavia, whom he had met in England – and
Crises in the first Spanish general encyclopaedia 229
afterwards to Chile, Peru and Bolivia, he practised what he had preached in London.
First, he continued spreading liberal ideas through countless articles. With regard
to political economy, he included some articles in Crónica Literaria y Política of
Buenos Aires and later in El Mercurio Chileno, which, retrospectively, suggests that
Mora intended to publish them as a dictionary. He also advised the reformist leaders
B. Rivadavia, A. de Santa Cruz and S. B. P. Pinto to promote the introduction of
free trade in South American countries. Mora was also involved in setting up liberal
institutions, such as the Chilean Liberal Constitution in 1828, and promoted the
creation of some educational institutions. In fact, he published several textbooks
specifically devoted to instruction.5 Mora’s educational goals may be symbolized
by the interpretation of Destutt’s literary ideas, as he admitted that the French thinker
helped to purify the Spanish language in such a way that scientific principles could
be more clearly explained in the Spanish republics (Amunátegui, 1888).
In the 1840s, when Mora returned from exile, he published De la libertad de
comercio (On the freedom of commerce, 1843), which was based on a wide range
of sources but mainly inspired by J. R. McCulloch, the Italian F. Mengotti or the
Spaniard P. Pebrer, and other significant writings such as Memoria sobre los puertos
francos (Memorandum on free ports, 1844) which were of his own creation. A large
number of excerpts from these works were finally inserted in Enciclopedia
moderna. He continued his activities as a lecturer at the Colegio San Felipe Neri
(Cadiz), contributed to journals, and finally he achieved public acknowledgement
in his own country when he was appointed as a member of the Royal Academy of
the Spanish Language and as General Consul of Spain in London in 1856. He died
in Madrid in 1864.
Mora seems to have nurtured the idea of writing some entries to be included in
a dictionary or encyclopaedia for a long time. In particular, a quarter of a century
earlier, Mora had published a series of articles in El Mercurio Chileno that had
similar titles to some entries in Enciclopedia moderna. Furthermore, Mora inserted
some of his previous publications in the encyclopaedia without making any
significant changes to them. For instance, the manuscript ‘España (industria y
comercio)’ (Spain, industry and commerce), dating back to 1850 and discovered
in the Argentinian National Library, was finally published in Enciclopedia moderna
under the entry ESPAÑA (Siegrist de Gentile, 1992). Similarly, the above-mentioned
work Memoria sobre los puertos francos, first published in 1844, was included in
the entry PUERTOS FRANCOS (Free ports) in Enciclopedia moderna, as well as a
large number of excerpts from De la libertad de comercio (1843).
Two economic entries in Enciclopedia moderna are of importance for the notions
of economic crisis and cycles: CRÉDITO and CRISIS COMERCIAL. There is also a
minor reference made to financial crises in the entry BANCOS EXTRANJEROS
(Foreign banks) that is not worth commenting on in this article (Enciclopedia
230 Jesús Astigarraga and Juan Zabalza
moderna, 1851–1855; Vol. III). The entries CRÉDITO and CRISIS COMERCIAL in
Enciclopedia moderna are contained in Vol. XI, which means that they were
probably drafted before the publication of →Coquelin and Guillaumin’s
Dictionnaire de l’économie politique (1852), which turned out to be one of the most
profusely quoted intellectual sources in the subsequent economic entries written
by Mora in Enciclopedia moderna. As previously mentioned, Mora first considered
writing economic entries for inclusion in an encyclopaedia during his Chilean exile.
By this time he had drafted several entries that were published as articles in different
issues of the journal El Mercurio Chileno. There was not, however, anything in
these articles that might be connected to what would be the entries for CRÉDITO
and CRISIS COMERCIAL in Enciclopedia moderna. The articles BANCOS DE
DESCUENTO (Banks of discount), CIRCULACIÓN (Circulation) and BANCOS
(Banks) described a kind of credit crisis that Mora blamed on the bad management
of public credit – which he exemplified with the famous crisis of the so-called
System of Law – and therefore he put crisis down to specific and exceptional
circumstances that obviously were not linked to any periodical or oscillating
phenomenon (Mora, 1828). Conversely, as we will demonstrate below, a large
part of both entries were taken from a French mid-nineteenth century dictionary:
→Guillaumin’s Encyclopédie du commerçant. Dictionnaire du commerce et des
marchandises (1837–1839).
were the influence of credit and agents of credit on industrial wealth, it does
not follow that they are factors of production or that they create capital. Credit
and ‘credit agents’, however, are useful since they boost the circulation of the
existing capital. Hence, capital finally flows towards the hands of those who
employ it in the most efficient way for society, and thus, bank notes are not
able to produce wealth directly, as wealth is the result of man’s labour.
(p. 560)
(Mora, CRÉDITO)
Nevertheless, he stressed that labour cannot be set into motion without the support
of capital.
The second part of the entry, which focused on public credit, is far less interesting
from the point of view of this article. Nevertheless, there are a number of interesting
suggestions that were taken from Michel’s entry on CRÉDIT, and others that seem
to be original contributions made by Mora. Indeed, Mora clearly defends the role
of public credit in facing certain unusual circumstances like the reduction of money,
financing wars and infrastructure, or the bankruptcy of the Exchequer. The idea
that credit plays a more prominent role in constitutional countries in which freedom
and property are guaranteed by law than in monarchies is presented in a more
understated way than it is in Guillaumin’s Encyclopédie, in spite of Mora’s political
commitment to economic freedom. In fact, he merely mentions that the policy of
public credit is more desirable than selling territories of the Crown in order to obtain
public revenues. Finally, Mora, as in the entry for CRISIS COMERCIAL, recom-
mended the implementation of certain economic policy measures such as amortizing
public debt through funds from the public national budget – which he thought to
Crises in the first Spanish general encyclopaedia 233
have been successful in Britain and France – and the adoption of certain general
rules (máximas generales) in order to ‘satisfy the needs of some and foster
the interests of others’ (Mora, CRÉDITO). On the other hand, according to Mora,
policies and behaviours such as immoderation in public expenditure, the improv-
idence and imprudence of officials, a perturbation in the social economy caused
by the ‘passion for politics’, senseless wars and, of course, trade barriers impeded
the fulfilment of such economic goals.
The entries for CRÉDITO and CRISIS COMERCIAL in Enciclopedia moderna portray
the secondary role that Spain played in the development of the political economy
in Europe during the nineteenth century, as it was a country that did not make
any relevant contribution to economics during this period. Spanish economists,
however, were committed to spreading and successfully adapting imported ideas
from other European countries. During certain periods of time, the adaptations to
the Spanish economic context were so skilfully carried out that they have been
considered by historians as actual contributions to the history of economic thought
(Llombart, 2000). In fact, the authors of the economic entries in Enciclopedia
moderna used a wide variety of foreign economic sources such as the main British
and French classical works and journals or the main encyclopaedic works –
specialized in political economy or otherwise – of the eighteenth and nineteenth
centuries (Astigarraga and Zabalza, 2007).
However, as we have seen, this is not the case for the entries for CRISIS
COMERCIAL and CRÉDITO in Enciclopedia moderna, as Mora translated a large
part of them from Guillaumin’s Encyclopédie. It seems, therefore, that Mora, at
the time of writing these entries, did not use, and was therefore probably unfamiliar
with →Coquelin and Guillaumin’s Dictionnaire de l’économie politique (1852–
1853), which was published almost at the same time as the first economic entries
in Enciclopedia moderna. Nonetheless, Guillaumin and Coquelin’s Dictionnaire
influenced the subsequent economic entries of the encyclopaedia, such as the crucial
entry for ECONOMÍA POLÍTICA (political economy), which was published some
time after CRÉDITO and CRISIS COMERCIAL (Astigarraga and Zabalza, 2007).
Both entries in Guillaumin’s Encyclopédie du commerçant (1837–1839) were
compiled by a certain Michel, about whom we have no further information. As
mentioned earlier, there are almost no references in Mora’s previous works to the
analysis of commercial crisis. Therefore, it seems that Mora, once he was involved
in compiling the entries for Enciclopedia moderna, had to draw upon secondary
sources and, in this particular case, upon the entries drafted by Michel almost half
a decade before. Such transcription explains why the entries are, to some extent,
anachronistic in comparison with similar entries in Guillaumin and Coquelin’s
Dictionnaire (1852–1853). Nevertheless, the crucial idea of relating crises to credit,
which was almost universally accepted at the time, is shared by Michel, Coquelin
234 Jesús Astigarraga and Juan Zabalza
and Mora. In particular, the abuse of credit as the main cause of commercial crisis,
the insignificance attributed to the misuse of factors of production in causing a
commercial crisis, the acknowledgement that credit is an essential means to achieve
the wealth of a nation or the irrelevance of the mismanagement of productive forces
of manufacture in provoking a commercial crisis are features that are self-evident
in the economic entries drafted by Michel, Coquelin and Mora. Nevertheless,
Michel, as well as Mora, entitled the entry ‘Commercial crisis’ in the singular, as
did most other contributors on crises in early encyclopedic writings (see Chapter
6), in strong contrast with the plural formula used by Coquelin, who assumed that
crises were a periodical phenomenon that should be explained. Therefore, Mora’s
interpretation belongs to the group of theories that explain crises as the result of
some institutional conflict that impedes the correct performance of the economic
system, and, like Coquelin – and obviously Michel – he assumed that the problem
should be placed within the context of monetary issues (see Chapter 8 on Coquelin).
However, there is no mention of the existence of privileged banks as the main
cause of the abuse of credit, as Coquelin pointed out in the entry on CRISES
COMMERCIALES in Guillaumin and Coquelin’s Dictionnaire (1852–1853).
Mora only refers to the ‘immorality’ of bankers who merely seek profit for them-
selves and, consequently, there is insufficient evidence in Mora’s contributions to
make any reliable comparison with Coquelin’s advocacy of free banking. In this
respect, we can only infer that Mora did not consult Guillaumin and Coquelin’s
Dictionnaire. Nevertheless, it should be mentioned that he makes reference to
Jackson’s criticism of the monopoly of the American central bank in the entry for
BANCOS (Enciclopedia moderna, Vol. II).
Mora’s transcription from Guillaumin’s Encyclopédie du commerçant, however,
was not complete and some characteristics of commercial crisis that were high-
lighted by Michel were dismissed. For example, Mora did not discuss the periodical
recurrence of commercial crises despite the description of the mechanism of crises
in Guillaumin’s Encyclopédie, which implicitly refers to periodicity when crisis is
related to credit. In other respects, Mora’s approach to commercial crisis is actually
of no interest, as he did not take into account aspects such as the timing of crises,
their regularity or lifespan, and, even less, obviously, the causes of their cyclical
recurrence. Mora’s disregard towards such questions is significant since both entries
were copied from Guillaumin’s Encyclopédie du commerçant. It seems, however,
that Mora was not actually concerned with theoretically analysing commercial
crisis. Conversely, his interest in economic crises resided in their connections to
economic growth, and, naturally, to the adoption of free trade by Spanish policy
makers as the best way to promote the prosperity and welfare of Spain, which was
the main statement defended in the rest of the economic entries in Enciclopedia
moderna (Astigarraga and Zabalza, 2007).
Consequently, we believe that Mora was, in fact, fleshing out the entry with
information about the phenomenon of commercial crisis and its connections to
credit – or abuse of credit – which did not generate any real interest in the rest of
the Spanish economists at the time, or at least historians have not noticed such
interest towards crises. A pamphlet presenting some Reflections on the present
Crises in the first Spanish general encyclopaedia 235
mercantile distress experienced in Great Britain: and more or less affecting other
nations on the continent of Europe, &c. &c., originally written in English, was
published in 1826 by the outstanding Spanish economist A. Flórez-Estrada during
his exile in Britain (Flórez-Estrada, 1826). According to Flórez-Estrada, the fall in
money supply caused by the independence of Latin American republics lay behind
the British economic distress of 1825. Flórez-Estrada’s work seems to have had a
certain impact among British and French economists – in particular, Jean-Baptiste
Say – who criticized his theories regarding the contemporary British economic
crisis. However, we have found no indication of any possible influence of Flórez-
Estrada’s approach on the Spanish economists at the time, not even on those like
Mora who were living in England at the time when this work was published. In
fact, the work was published for a second time in English and only the third edition
was finally published in Spanish (Llorens, 1979). Furthermore, historiography has
largely ignored Flórez-Estrada’s contribution.
In this regard, the few indications that suggest a level of interest in this area, such
as the diffusion of Sismondi’s approach to crises or the strong influence in Spain
of Cours complet by Jean-Baptiste Say, in which Chapter XIX, entitled ‘Abus des
banques de circulation’, approaches this issue, require further research to gain a
better understanding of the attention paid by Spanish economists to the phenomenon
of economic crises (Say, 1828; Lluch and Almenar, 2000). Nevertheless, it should
be pointed out that, in contrast with France and Great Britain, Spain did not
experience economic crises until 1848. Even in this case, historians have debated
animatedly about the capitalistic nature of this crisis but they have not reached a
consensus on it. Whatever the interpretation of economic historians, Mora did not
mention the economic problems of the Spanish economy at the end of the 1840s,
which would lead us to believe that he did not interpret this phenomenon as being
analogous to the British and French economic experiences. On the other hand, it
seems that Mora prevalently intended to place the analysis of commercial crisis
and credit within the context of the debate on economic policy, and more specifically
the discussion on economic freedom and free trade that took place in Spain in the
mid-nineteenth century, as his proposals for facing economic crisis seem to suggest
(Bru, 1980; Astigarraga and Zabalza, 2007).
We conclude by referring to the significance of these entries in the context of
the international flow of economic ideas. Mora’s entries in Enciclopedia moderna
demonstrate how differently economic ideas are transferred across nations. In this
case, diffusion, obviously, should be classified as popularization as it was addressed
towards an assorted and non-specialized public. Such a broadly based audience
probably thought that the economic entries in the encyclopaedia were drafted by
using the works of outstanding economists such as Smith or McCulloch as intel-
lectual sources. The article, however, demonstrates how economic ideas are spread
through secondary means, in this particular case through the economic entries in
Guillaumin’s Encyclopédie du commerçant. Therefore, their influence was chan-
nelled through intermediaries who, to some extent, tinged original concepts with
some nuances according to the author’s intellectual background, and economic and
political interests, the limitations imposed by the publisher or the indispensable
236 Jesús Astigarraga and Juan Zabalza
simplifications required for their popularization. Such circumstances contribute
strongly to explaining the changes experienced by original ideas once they have
embarked on an international itinerary.
NOTES
REFERENCES
In a work like this the reader wants to find a large number of facts and docu-
ments, rather than an elaboration of the author’s views. So far as theory is
240 Daniele Besomi
concerned, the reader requests to be introduced to the different writings,
researches and opinions expounded in each of the social sciences, and wants
to become acquainted with the issues raised by each of them. As to practical
matters, he wants to know about the institutions that existed and about the
real facts as depicted by history and by the legislation of various countries.
The following plan will therefore be followed:
Under the heading of each scientific discipline, of each social institution,
and of each problem under discussion, we have presented the general state of
each discipline, the definitions that are related to it, the history of each insti-
tution and its current features, and the opinions concerning each particular
problem.
(PRÉFACE, p. 15)
If this explains the full dictionary title, it does not, however, represent how Ott
proceeded in the entry on CRISE. While the history of the subject is lacking from
the entry, this is nonetheless fortunate as Ott’s own view is rather original and
well worth having.
Auguste Ott was born in Strasbourg on 20 January 1814 and died at the age of 89
on 6 August 1903.2 Little is known about his schooling, except that he took
humanités, that is, Latin and Greek literature. He was trained as a lawyer, was called
to the Bar in 1836 and obtained a doctorate in Law in 1839. Very soon his
interests in philosophical and moral issues prevailed. In 1840–1842 he published
a Handbook of universal history, followed in 1844 by a critical account of the
Hegelian and Kantian systems, Hegel et la philosophie allemande. He became a
follower of the doctrines of the Catholic associationist Philippe Buchez, with whom
he collaborated in revising the Histoire parlementaire de la Révolution Française
for the 2nd edition (5 volumes, 1845–1847). He was one of the founders, with
Buchez, of the Revue Nationale, which he edited from 1847 to its demise in 1851.
When Buchez died, he wrote his obituary and an account of his doctrines (Ott, 1865
and 1866).
Ott’s main work, a Traité d’économie sociale ou l’économie politique coordonée
au point de vue du progrès (Treatise on social economics, or, political economy
restated from the perspective of progress, 1851),3 is a systematization of Buchez’s
views, placed in the context of the developments of economic ideas.4 Interestingly,
Ott does not focus exclusively on the orthodox approach – English political econ-
omy, represented in France by the doctrines of Say and his followers – but also
considers the views of the critics, in particular, the numerous writings aimed at
suggesting social reform, with special attention to the doctrines of Proudhon, Owen
and the Saint-Simonians (on the latter, see Chapter 5). None are necessarily con-
sistent or free of errors, and accordingly Ott attempts to expound all views and
understand them in a unified methodological setting in order to prepare the ground
Auguste Ott on expectations and crises 241
for channelling the evolution of political economy into a truly social economy,
guided by the ‘supreme principle of social progress, that is, the realization of justice
in economic relationships, the emancipation of the working classes and the
improving of their physical and moral condition’ (Ott, 1851, p. ix).
Ott’s casting of the problem is of interest for us, as it builds the foundations of
his approach to crises. The ‘English’ view focuses on wealth and material produc-
tion. For political economy, as a ‘physical’ science, man is nothing but the producer
of wealth, and eventually its consumer. Accordingly, the problem of the distribution
of wealth is approached in terms of the conditions under which it takes place easily
and without interruption, but ignoring the issue of its justice. On the other hand,
consumption is seen as a destruction of wealth; the problem of the preservation of
both society and individuals is therefore also disregarded. Ott, on the contrary,
thought that social economy, being a moral science, should incorporate an inquiry
into the means of achieving the reproduction of society via a just retribution of
work. He thus redefined the object of economics as ‘labour considered from the
social point of view, or, alternatively, as society from the point of view of labour’
(p. 14). The objective and result of work is not only the physical preservation of
the individual, but also the preservation of society.
Ott’s syncretistic approach, consisting in the identification of the elements of
truth in each doctrine, led him to critically examine the foundations of Say’s law,
on which the orthodox doctrine of production and demand was based. Ott eventually
turned Say on his head, and it is on the reversal of the causal relationship between
markets and production that he built the interpretation of crises he eventually
advanced in the Dictionnaire.5
Crises are discussed almost exclusively in two entries of the Dictionnaire: CRISE
and DÉBOUCHÉS. The issue of the law of markets was dealt with at length in the
Traité, and the entry in the Dictionnaire consists almost entirely of passages taken
from the earlier discussion. A part we retrospectively recognize as being of the
utmost interest, namely, the determination of the conditions of reproduction of
the system, was instead omitted. The entry on crises, on the contrary, is mostly
new and supplies a rather original explanation of the phenomenon.
In the entry on DÉBOUCHÉS, Ott at first approves of Say’s way of couching the
problem of whether and how production finds its vent on the market. He agrees
with the principle that products in the end exchange against products, regardless
of the value of money. But he rejected Say’s inference that each product will nec-
essarily eventually find a buyer. True, Say had admitted that this only happens on
condition that the exchange value of the product covers its cost, and that partial
maladjustments are always possible. Yet this is not sufficient. As Sismondi had
already argued, and ‘the commercial crises regularly recurring at fixed times, so
to speak’ prove, conditions of general overproduction may occasionally occur.
On the one hand, producers may supply goods that are not needed by consumers;
242 Daniele Besomi
on the other hand, consumers may lack the purchasing power to buy those goods,
even if they would like to buy them.
As to the first aspect, Ott points out that the individual demand for goods depends
on their utility. While needs may well be unlimited, people have priorities, and at
any rate one cannot consume more than a certain amount of a specific commodity,
such as bread. Anything produced in excess of that is bound to be unsaleable. As
to purchasing power, Ott maintains that as incomes are a share of what society
produces, the way in which production is distributed is of the utmost importance
for its market. Most people (he estimates about 5 million out of the 6.5 million
families living in France) have an income lower than 1,000 francs and can only
afford to buy basic wage goods. Another 1.3 million families have an income of
between 1,000 and 5,000 francs; they can thus afford some better-quality goods
and even some luxury goods. The production of most luxury goods, however, is
mostly addressed to the remaining 200,000 families. The country’s production must
therefore satisfy the demand of specific goods arising from the different income
classes.
Ott concludes that production must conform to its market, which in turn depends
on demand. He thus turns Say’s conclusion on its head:
The market [débouchés] therefore depends on the buyer’s interest, on his will-
ingness to buy, on demand, not on production, on the willingness to sell.
Demand and market are, so to say, synonymous. Instead of saying, following
Say, that the extent of markets is proportionate to the extent of production,
one must affirm that the extent of production is proportionate to the extent of
the markets. The society’s total production must be equal to the aggregate
of individual demands. This is the first law of markets.
(DÉBOUCHÉS, Vol. 2, p. 50)
Each [entrepreneur] must rely on his own appreciation, on his own guess as
to the future state of the market. On what is such an estimate based? On the
high price of commodities, on their temporary scarceness on the market, on
the high profits that can be gained by producing them. On these grounds, he
244 Daniele Besomi
will seize the occasion and start producing. But others will do the same, and
soon the goods that used to be scarce become overabundant. Prices will
decrease, and at some point fall below production cost. Eventually the market
will be glutted, and only a small fraction of the products will be able to be
sold, and sold at a considerable loss. Sales, purchases and production then
come to a halt. If this happens to some important kind of goods – those
involving large amounts of capital, employing a large number of workers or
requiring for their production several kinds of other goods –, the stagnation in
these branches will affect all the others. This is a full commercial crisis.
(CRISE, Vol. 1, col. 1389)
In support of this view, Ott cites (ibid.) a passage from the testimony of Koechlin
before the commercial enquiry of 1834, in which he stressed that ‘the profits related
to high prices [of calicoes] have induced the creation of new factories. These new
factories have contributed to an increase of production at a time when internal
consumption was diminishing and when external markets were being lost. This
led to an overproduction crisis’.7 Ott also cited the passage in the Traité (Ott, 1851,
p. 86n), without, however, explicitly connecting it to a general interpretation of
commercial crises and especially without interpreting it in terms of expectations.
Ott concluded that such a chain of events can only be prevented by means of
forecasting institutes that could supply some approximate estimate of what the
market’s need will be. Ott’s discussion, however, stops here and there is no further
elaboration.
10.4 ASSESSMENT
Despite its brevity, Ott’s entry on CRISIS is extremely innovative. His explanation
of how expectations are bound to be systematically disappointed is, to the best of
my knowledge, the first of its kind. True, Ott relies on a cobweb-like mechanism,
of which there were some earlier instances. In particular, John Wade presented a
model of the cycle based on the delayed response of quantities produced to price
fluctuations, while demand reacts faster (Wade, 1826, 1833; for a discussion, see
Besomi, 2008). The passage by Koechlin cited by Ott is indeed rather similar to
Wade’s approach. But in Ott the lag between production decisions and the delivery
of output plays quite a different role. In Wade’s cobweb model the delay is respon-
sible for the mismatch between production and demand by means of simple inertia.
Ott’s emphasis on the formation and disappointment of expectations in conditions
of genuine ignorance of the future, and the awareness that this very future is affected
by the decisions made today by independent competitors all trying to guess how
the future will be, is well ahead of its time. It involves two thorny issues: the
role of uncertainty in disrupting equilibrium, and the mismatch of individual
decisions and their collective outcome. His discussion is sketchy, but the problem
is expounded fairly precisely; nobody, however, seems to have taken it up before
the Swedes in the inter-war years.
Auguste Ott on expectations and crises 245
Ott emphasized the periodical character of crises, and claimed that the expla-
nation of crises he advanced was capable of accounting for the regularity of their
recurrence. Yet he failed to see that his mechanism was easily reversible and suited
to explaining not only the upper turning point of a cycle, but also the trough.8 He
only thought of it almost four decades later; in the second edition of his Treatise
he depicted as follows the ‘true relationship’ between production and demand:
NOTES
1 Migne’s strategy consisted in integrating scientific knowledge into his Encyclopédie only
after having moralized the corresponding disciplines: the advances of science were first
interpreted as philosophical problems, and subsequently subsumed under theology
(Bénichou, 1992, p. 121).
2 Short biographical notes on Ott can be found in Dantès, 1875; Lermina, 1885; Glaeser,
1878; Sitzman, 1909–1910; Vapereau, 1893; the richest biographical entry is Anonymous,
1966. None of these indicates Ott’s death year, while Timmermans, 1977 suggests that
he died around 1890. Yet Ott’s death date was announced shortly after his passing away
by de Molinari in the Journal des Économistes (1903).
3 Besides the Dictionnaire and a second edition of this treatise, published in two volumes
in 1892, Ott published little else on economics. After the mid-1850s, he only published
historical and philosophical writings, and edited and translated German books. Nor did
his contributions to other dictionaries touch upon economic themes; one was on the
Catholic Church (ÉGLISE CATHOLIQUE, for →Block’s Dictionnaire général de la
politique, 1863), the other on MALTHUS (for Vol. 15 of the →Encyclopédie du dix-
neuvième siècle, 1851), where only the theory of population was discussed.
4 Ott’s historical approach may have played some part in Migne’s entrusting him with the
writing of the Dictionnaire. The idea – originally developed by the Abbé de Lamennais
and Olympe Philippe Gerbet in the early 1830s – of a ‘Catholic science’ on which Migne’s
Encyclopédie théologique was based in fact relied on a historical method consisting in
the extraction of the true and universal character of Catholic religion from the historical
development of religious ideas. By extension, the histories of sciences prove their uni-
versal character, revealing their deep Catholic nature (for a full discussion, see Laplanche,
1992, in particular pp. 21–27). In the economic entries of the Dictionnaire, however, Ott
did not pursue the historical method to the same extent.
5 On Ott’s views on co-operation and his position in the Catholic associationist movement,
see Demoustier and Rousselière, 2005a, 2005b; Duroselle, 1951; Desroche, 1991;
Gaumont, 1924; Gueslin, 1998.
Auguste Ott on expectations and crises 247
6 The entry is titled in the singular, but after briefly supplying a definition of ‘crisis’ in
political language and of ‘commercial crisis’, Ott switches to the plural and devotes
the bulk of the entry to the discussion of ‘commercial crises’.
7 Full citation not given. It may refer to Koechlin, 1835.
8 In contrast, other early propounders of cobweb-like mechanisms immediately caught
the symmetry of their construction and used them to explain the reversals of the movement
in both directions.
9 While Buchez was content with claiming that workers should co-operatively organize
production, Ott went much further in specifying how production should be organized (see
Duroselle, 1951, p. 107).
REFERENCES
11.1.2 Reception
Boccardo’s Dictionary was well received in Italy and abroad.6 When the publication
of the fascicles of the first volume was still under way, the Giornale dell’Ingegnere,
Architetto ed Agronomo appreciated that an Italian dictionary of political economy
was seeing the light, stressed that the experience of the previously published foreign
dictionaries enabled its author to avoid their mistakes, and praised the style and
organization of the materials (Pareto, 1857). A few years later, upon the publication
of the 51st fascicle (of the 80 planned), the same journal confirmed that the
Dictionary was fulfilling its promises and was receiving good press in Italy and
abroad (Pareto, 1860).
The Annali Universali di Statistica systematically reported in long articles the
progress of Boccardo’s work, all written by the journal’s editor, Giuseppe Sacchi,
citing large excerpts of some relevant entries. The first article praised the filling of
the gap in the literature and lauded the author as one of the most conscientious
Italian economists, before reproducing Boccardo’s declaration of intentions (Sacchi,
1857a); the second reproduced in full the first two parts of Boccardo’s PREFAZIONE,
briefly referred to a few articles (ABBONDANZA, ACQUE, ACCATTONAGGIO,
AFRICANO COMMERCIO, AMERICA, AGGIOTAGGIO, that is, respectively, ‘Abun-
dance’, ‘Waters’, ‘Begging’, ‘African trade’, ‘America’, ‘Stock-jobbing’) and
reported large extracts of ANARCHIA (‘Anarchy’) (Sacchi, 1857b). By July 1858
the fascicles up to letter F (well into the second volume) had been published, and
the reviewer could report that the work was receiving unanimous praise from the
Italian periodical press (Sacchi, 1858a). In October and November, Sacchi
reproduced in full the entry ECONOMIA POLITICA, to which he appended a critical
note disputing Boccardo’s definition of the discipline (an improved version of the
one propounded by Say) and arguing that true economists should become
consultants for the government (Sacchi, 1858b). By mid-1859, the third fascicle
of Vol. III was published, and in the issues of July and August Sacchi reproduced
most of the article on LIBERTÀ NELLE MATERIE ECONOMICHE (‘on economic
freedom’), for ‘it expounds the act of faith shared by all Italian economists’ (1859,
p. 265).
The Accademia dei Georgofili, announcing that the publication of the dictionary
was proceeding speedily in spite of the difficult times, commented that the high
hopes raised by the project were being fulfilled (Tabarrini, 1859, p. xciv). The
Archivio Storico Italiano announced the publication in 1857, when eight fascicles
had already been printed, noting that the important topics were discussed with a
fair amount of economic doctrine and historical erudition, and expecting that the
finalized work would give to Italy a book of undoubted utility and would be one
of the most important publications in economics (Anonymous, 1857). A proper
Boccardo on internally generated economic crises 253
review by G. Rosa was published later in the year. It began with an apologia
concerning dictionaries as a genre and a rebuttal of the criticisms of popularizing
literature, which itself indicates that such a tool was much more controversial in
Italy than elsewhere in Europe (Rosa, 1857, pp. 114–116, 119–120). Rosa praised
the broad scope of the dictionary, in particular the outlining of the links between
economics and statistics, law, history and geography, and saw in Boccardo’s wide
knowledge, in particular of history, and intimate understanding of the discipline
the best person for the task. Of the specific articles in the fascicles published by
then, the reviewer noted that the major entries such as BANCA and AGRICOLTURA
were very extensive treatises in themselves, characterized by original research rather
than resulting from an assembly of the views of others (p. 122). Finally, the reviewer
recommends the dictionary not only to scholars but also to administrators of
public and private businesses and to shopkeepers, for laying out a host of useful
notions in an accessible way, without, however, renouncing scientific precision
(pp. 131–132).
Interestingly, like Rosa, a number of Italian notices on the Dizionario discussed
the merits and limits of dictionaries as opposed to treatises. In the collection of
reviews compiled by the publishers at an early stage of publication ([Franco], 1858],
this is one of the most common themes – surely brought to the fore by the fact that
Boccardo himself begins his PREFAZIONE by discussing it. Most commentators
stressed the usefulness of dictionaries in popularizing individual concepts or entire
disciplines, and in supplying a handy tool to the learned to find quickly the infor-
mation they need; in doing so, some explicitly rejected the arguments of the
detractors of such tools,7 witnessing that in Italy there was some resistance to the
usage of such reference works.
I could not find many reviews in the foreign periodical press – not even in the
Journal des Économistes, where Boccardo’s work had often been reviewed, or
at least mentioned. The publication of the Dizionario, however, was announced
by the Zeitschrift für die gesamte Staatswissenschaft and by the Bibliothèque
Universelle de Genève (the latter’s article is reproduced in [Franco], 1858). The work
is not mentioned in Loria’s obituary (1904) of Boccardo for the Economic Journal,
but it was reviewed (together with →Macleod’s Dictionary of political economy8)
in the Jahrbücher für Nationalökonomie und Statistik. The reviewer focused on the
lexicographical aspects (promising a further article on the substantive aspects, which,
however, does not seem to have been published), stressing Boccardo’s elegant style
and reporting his scope and selected readership (Kircheisen, 1864).
The subject of crises is discussed in a dedicated entry titled CRISI (in Italian, the
word crisi is unchanged in the plural; it is clear from context, however, that
Boccardo meant the plural) and in the entry on BANCA, with scattered observations
elsewhere.
Make free the industry and trade, and whenever one branch of production
suffers, capital will either move to other branches or flow in in help of the
diseased one, depending on the case. Abolish protection and monopoly, and
those weak trees growing under their shade and protection and liable to fall at
the first blow of free air will no longer sprout. Make banks free, and the most
terrible crises, those spontaneously arising from the privileges of these power-
ful institutions, will become impossible. Make interest rates free, and capital
will move wherever it is needed. The public will then enjoy the invaluable
advantages of competition.
(p. 736)
The body of the entry on crises ends here. Boccardo, however, added an
Appendix on the crisis of autumn 1857 (‘when the article was already in press’,
p. 736). He concluded that its main cause was overtrading in the United States
(where the crisis originated), with speculation being particularly rampant in the
undercapitalized railway companies. Banks incautiously financed many such
ventures, at first enabling the entire speculative system to take off and later, in
turn, to fail. This was coupled with an increase in the consumption of luxury goods
imported from Europe, far above what the country itself was capable of producing.
The death blow was delivered when capital was recalled to Europe to finance the
Crimean War.
Boccardo warned that some banks’ reckless behaviour should not be taken to
be the main cause of the crisis, for after all the ratio of reserves to issues (about 35
per cent) was overall higher than at the time of the 1837 crisis (28 per cent); he
258 Daniele Besomi
stressed that it should not be inferred that the fault was intrinsic in the liberal banking
system adopted in the United States (p. 736). He submitted that better communica-
tions on the two sides of the Atlantic would have eased the crisis, for in Europe
people panicked at the first, delayed news from America before knowing that the
productive system was quickly recovering, and their alarmed reaction fed back into
the American crisis (p. 737).
With regard to remedies, Boccardo insisted that no direct and immediate national
cure can exist, because the disease originates from a complexity of causes of a much
wider scope. It would be possible, however, to prevent the recurrence of similar
events (or at least diminish their nefarious effects) by appropriate legislation pinning
central banks down to their core business of helping trade, relieving their portfolios
of the public funds obstructing them, eliminating all constraints on the ratio
of issues to reserves (in the article on BANCA Boccardo argued that unfettered
Banks would find the appropriate ratio, depending on the needs of the market:
Vol. 1, pp. 294–295), and making the use of paper money more popular by lowering
the minimum face value of banknotes.
But so long as this advice from men of science will appear paradoxical to
practical people; so long as banking law is governed by the principles of
monopoly; so long as questionable institutions such as the Crediti mobiliari13
favour and encourage gambling on the stock exchange; so long as, in pros-
perous times, speculators will blindly trust overtrading companies but will
panic at the first signals of impending danger; so long as, in other words,
economic science will be mastered by a few privileged people rather than
becoming familiar to the public, crises will recur periodically, as well as the
errors and prejudices in the speeches of those who suggest their supposed
remedies.
(CRISI, p. 738)
The periodicity of crises was further discussed in the entry PERIODICITÀ (Vol.
4, pp. 31–32). Boccardo argues, with reference to Vico’s doctrine of recurring
cycles of history, that the law of periodicity is one of the fundamental laws of
order and harmony of the universe, which surprisingly no economist has so far
perceived, and placed it among the general principles of economics. The satisfaction
of economic needs induces people to become more and more audacious in their
activities, and the credit system and financial operations give them the means of
further multiplying the means for doing so. This, however, makes such ventures
more and more risky; speculation and stock gambling take over, until crises break
out, ruin most people, and bring the system to rest. Everybody is discouraged and
economic activity goes back to basics. After some time, new capital is formed,
confidence returns and the ascending cycle recommences, resulting in the same
outcome. ‘Only this series of facts can explain the remarkable phenomenon of the
periodical return of those economic diseases of society we call crises, which several
economists have perceived but so far failed to explain.’14
Boccardo on internally generated economic crises 259
11.3.2 The later editions
The entries on CRISI in the second and third editions of the dictionary are practically
identical to each other, including their pagination, but differ from the first. The most
relevant emendation consists in the elimination of the Appendix on the 1857 crisis,
which was not substituted with discussion of later events. The other differences
are mostly matters of detail. Boccardo dropped the quotation marks around citations,
so that one no longer knows which passages are quoted verbatim; and he shortened
the citations from his 1854 Report on the crisis, substituting the remainder with
an expanded discussion of speculation (p. 643). He dropped the explicit reference
to banking freedom,15 but he incorporated an explanation of the ‘law of remarkable
periodicity’16 which commercial and banking crises seem to obey – a discussion
that again owes much to Coquelin (who is not named in this connection).
Interestingly, while most contemporary explanations of the return of crises
emphasize the instability of the overtrading and speculative processes but take for
granted (and therefore do not think necessary to explain) that a new phase of
prosperity will follow naturally the crisis and its aftermath, Boccardo explicitly
stresses instead the instability of the depressed state created by the cumulation of
unused loanable capital (an explanation that had recently been advanced by Walter
Bagehot, 1873, from whom Boccardo may have borrowed).
The ruins of which the markets are scattered [after a crisis] induce a state of
gloom and discredit, during which capitalists not only refrain from gaming and
hazardous speculations, but also abstain from the routine and safe trading
operations. Capital either cumulates in the banks’ coffers at a very low interest,
or is invested in real estate. But such a state of things is necessarily precar-
ious. Those who know that their capital could yield an 8 or 10 per cent, cannot
be content with a 3 or 4 per cent. The temptation to go back into more profitable
business soon turns into a craving. This change in the mood is awaited by the
adventurers, the project-makers, and the founders of new companies promising
a 100 per cent gain. At this point (sooner where the national temper makes
people bold, as in America; later elsewhere; but inevitably everywhere) the
tide of speculation, gaming and pumping and dumping – in a word, of the crisis
– rises again.
(CRISI, p. 643)
Besides the alterations that Boccardo introduced in the later editions, one he did
not insert should be mentioned. Boccardo was an early (yet not uncritical) supporter
of Jevons’s sunspot theory (1875, 1878). He had already suggested in 1872 (p. 310)
that sunspots are related to meteorological phenomena that affect the abundance
of crops and in turn influence human affairs, and thus welcomed Jevons’s more
articulated and explicit statements. In 1879, Boccardo wrote an article ‘The laws
of periodicity of crises. Economic perturbations and sunspots’, where he stated
the problem, cited large excerpts of Jevons’s 1878 article for Nature, discussed
further literature and expounded additional data he was himself gathering, sug-
gesting that there is high probability, if not certainty, that the regularity of crises
260 Daniele Besomi
reflects the existence of some law, as opposed to the reign of chaos (1879a, pp.
410–411).17 Most of these considerations were incorporated in the 6th edition of
Boccardo’s Trattato (1879b), but not in the last edition of the Dizionario (1881).
11.4 ASSESSMENT
Boccardo’s treatment of crises is far from original. The core of his argument is
explicitly borrowed from Coquelin, and does not need further discussion, except
perhaps to point out that Boccardo also took up Coquelin’s distinction between
the occasional, immediate cause of crises and their deep causes – the banking
monopoly (BANCA, p. 301).
Notwithstanding this lack of originality, Boccardo’s entry on CRISES introduced
two interesting novelties. The first is the categorization of different kinds of
crises18 and the discussion of their relationship. Strictly speaking, this is not the
first such distinction. In the entry CRISE COMMERCIALE ET INDUSTRIELLE
of →Monbrion’s Dictionnaire universel du commerce, 1838 (translated into
→Antonelli’s Enciclopedia del commerciante, 1841), these two kinds of crises
are assigned different causes, but the distinction is introduced more as a matter of
course than by methodological necessity (see Chapter 6). Boccardo is adamant
that he was instead thinking of a more cogent criterion, which, however, he failed
to specify; regrettably, his explanation for its introduction is limited to the statement
‘for love of methodological exactness’ (p. 739).19 Nevertheless, something more
specific can be inferred from Boccardo’s discussion of monetary crises. At an early
stage of writing, he had planned to have an entry specifically for them, as is indicated
by a cross-reference in the entry AMERICA (p. 124). He must have soon realized,
however, that this would have given to his reader the impression that monetary
crises are a kind of event distinct from the other categories he listed, while they
should be classified instead as a subspecies of commercial crises (p. 733). The
wrong classification would reflect a bad understanding of the phenomenon, as was
the case for the writers who interpreted the 1857 crisis as being caused by the
scarcity of money. Boccardo insisted instead that the real cause of the crisis was a
lack of trust, while the scarcity of money was a consequence of the credit crisis
(Appendix to the entry on CRISI, p. 737). In the entry on MONETA (currency),
Boccardo took up the matter again and explained that most monetary crises are
not an isolated phenomenon, but are the consequence of other perturbations
affecting the economic and financial world. Misinterpreting the monetary aspect
of the crisis as its essence is a consequence of mistaking the effects for the causes
of the phenomenon and results in turn in proposing as panaceas remedies that are
likely to make the disease worse and perhaps even chronic (Vol. 3, p. 419).20
The second novelty consists of the distinction between internal and external
causes of crises. This is normally attributed to Mentor Bouniatian (see e.g. Vogel,
1917, p. 16, and Hayek, 1933, p. 143), but Boccardo had already outlined it in his
1854 ‘Report on the commercial crisis’, where he suggested that two groups of
crises should be distinguished: ‘those deriving from corrupted intrinsic conditions
Boccardo on internally generated economic crises 261
of a country’s trade, and those arising as a consequence of causes alien to the sys-
tem of commerce’. He added that the former are ‘more simple and spontaneous’
(p. 4). The wording echoes Coquelin’s, who dubbed as ‘(so to speak) spontaneous’
the crises originating from within the commercial system itself (see Chapter 8,
Section 8.3.2). If, also on this, Boccardo’s starting point was almost surely Coquelin,
he pushed the distinction one step beyond the French writer, and beyond the similar
distinction introduced by Blanqui in his entry CRISE COMMERCIALE for the
→Encyclopédie des gens du monde, 1836, and by Michel in CRISE COMMERCIALE
for Guillaumin’s →Encyclopédie du commerçant, 1839 (see Chapter 6, Section
6.3). While Coquelin was merely interested in stressing the endogenous character
of crises and his predecessors only aimed at differentiating the causes of crises,
Boccardo not only appreciated the importance of Coquelin’s point but added that
the crises whose causes are internal are ‘more important and more susceptible of
scientific enquiry’ (CRISI, p. 733). Such a distinction leads very far, for it tends to
restrict the theoretical field to crises born from the inner logic of commercial
relationships within a given institutional setting. Boccardo even came close to
reversing the logical implication and denying a scientific status to the propositions
ascribing crises to external facts. After outlining the facts of the 1857 crisis, in
fact, he stated: ‘it is almost incredible that many of our fellow citizens insist in con-
sidering the crisis [. . .] as an isolated fact and as depending on subordinate causes’
(p. 737).
Also interesting is Boccardo’s interpretation of the periodical return of crises in
terms of a general cyclical view of history, a perspective that encompasses also
other economic, social and physical phenomena. Boccardo offers one of the few
explicitly cyclical interpretation of crises at a time when the phenomenon was
indeed widely recognized but understood in terms of recurring crises, with the
explanatory emphasis on crises more than on their recurrence. Yet some ambiguity
remains, as this view is not directly incorporated in the CRISIS entry (in the first
edition) but confined to a subordinate entry (not even cross-referenced from CRISI).
Crises are an example of Boccardo’s law of periodicity, rather than periodicity
being at the core of the nature of crises. Such a transition, however, required another
half a century to be completed.
NOTES
1 The covers indicate as publication years 1858–1863, while the corresponding first pages
report 1857–1861; the difference originates in the fact that the work was published in
separate fascicles, bound together only at a later stage.
2 We shall see below, however, that Boccardo denied that the government could possibly
remedy commercial crises.
3 Thus he had, for instance, a purely philological entry on BANCO, from which the word
‘bank’ derived in several languages, including the Italian ‘banca’.
4 PREFAZIONE, Vol. 1, pp. xix–xx. The Accademia della Crusca, founded in 1583, is
one of the leading Italian institutions devoted to research in the field of the Italian
language.
5 Comuzzi Pighin, 1978–1979, p. 127. This essay is dedicated to the borrowing of French
262 Daniele Besomi
economic and commercial terminology in Boccardo’s Dizionario. A number of these
terms are still in use.
6 An early collection of notices and reviews of the Dizionario in the Italian and foreign
press is given by the publisher ([Franco], 1858. I am grateful to Riccardo Faucci for
giving me a photocopy of this compilation). Most of these articles, to judge by perusing
of a limited number of fascicles, were rather favourable, as regards both the general
spirit of the work and the treatment of specific issues.
7 See in particular a reviewer initialled N.R., writing in the Gazzetta del Popolo, 15–16
September 1857, cited in [Franco], 1858, p. 27.
8 Macleod’s Dictionary (on which, see Chapter 13) carries an entry on BOCCARDO,
GEROLAMO; it deals mostly with the Trattato, but refers to the ‘comprehensive and very
excellent’ Dizionario as Boccardo’s best work (1863, p. 276).
9 Courcelle-Seneuil praised this separation as the first attempt to set in practice an idea
suggested by Pellegrino Rossi, but regretted it was not pushed far enough (1854, p.
152; 1859, p. 458).
10 For a characterization and an editorial history of this work, see Bianchi and Faucci, 2005
and 2008.
11 For additional details on Boccardo’s life and writings and further assessments, see the
essays included in Augello and Pavanelli, 2005.
12 In the entry on BANCA, Boccardo uses several pages of his Trattato; there, he explicitly
acknowledges that he has strictly followed Coquelin’s argument and numerical example.
The precise source is not indicated, but is easily identified as Coquelin, 1848, pp.
212–219.
13 The banks or societies of Credito mobiliare were institutions specializing in giving
financial assistance to start-up companies or companies in financial difficulties by buying
their shares, and taking care of the issuing of new shares or launch on the stock exchange.
Boccardo was extremely critical of such institutions, as they used their vast capitals to
influence share prices only in order to raise the value of their own stocks (see entries
CREDITO MOBILIARE and PEREIRE).
14 A reference to the ‘remarkable periodicity of crises’ is already found in Boccardo, 1854,
p. 3. This kind of explanation was far more common at the time than Boccardo seemed
to believe, although the emphasis was more on the recurrence of crises than on their
regular timing (Besomi, 2010).
15 Bianchi and Faucci (2005) point out that Boccardo’s early support of a plurality of issuing
banks turned into a support of a unique issuing bank in 1863.
16 This duplicates in substance the argument, and also the terminology, of the entry on
PERIODICITÀ (unchanged in the various editions of the dictionary).
17 Boccardo supported the sunspots theory to the end of his life, as illustrated by a popu-
larizing article on ‘Sunspots and economic crises’ in the monthly supplement to the daily
Corriere della Sera (Boccardo, 1904).
18 Besides the kinds of crises listed in the text, in the entries on BANCA (Vol. 1, p. 288)
and on CINA (‘China’) (Vol. 1, p. 519) Boccardo used the expression crisi finanziaria
to indicate a crisis in public finances.
19 The following distinction between different kinds of crises, limited to the differences
between monetary and commercial ones, is due to Juglar’s 1863 entry on CRISES
COMMERCIALES in →Block’s Dictionnaire général de la politique; see Chapter 12.
20 A similar argument, without a general classification of the different kinds of crises but
with a denunciation of the confusion between ‘pecuniary crisis and credit crisis’, was
already expounded in Boccardo, 1854, p. 8.
Boccardo on internally generated economic crises 263
REFERENCES
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Storico Italiano, 5: 1, pp. 170–171.
Augello, M. M. and Pavanelli, G., 2005, Tra economia politica e impegno civile: Gerolamo
Boccardo e il suo tempo (Genoa: Brigati).
Azuni, D. A., 1786–1788, Dizionario universale ragionato della giurisprudenza mercantile
(Nice: Società Tipografica), 4 volumes. 2nd enlarged and corrected edition, Livorno:
dai torchj di Glauco Masi, 1822–1823, 4 volumes. 3rd edn, nella quale si è fusa la nuova
giurisprudenza dall’avvocato Giuliano Ricci, in 2 volumes (Livorno: Fratelli Vignozzi),
1834. 4th edn, in 2 volumes (Livorno: Fratelli Vignozzi), 1837. 5th edn (and 1st edn in
Sardinia) (Sassari: L. Azzati), 1844, in one volume.
Bagehot, W., 1873, Lombard Street (London: King).
Besomi, D., 2010, The periodicity of crises: a survey of the early literature, Journal of the
History of Economic Thought, 32: 1, March, pp. 85–132.
Bianchi, G. and Faucci, R., 2005, Genesi e struttura del ‘Trattato’ e del ‘Dizionario della
economia politica e del commercio’. In M. M. Augello and G. Pavanelli, 2005, Tra
economia politica e impegno civile: Gerolamo Boccardo e il suo tempo (Genoa: Brigati),
pp. 111–138.
Bianchi, G. and Faucci, R., 2007, Il Trattato di Gerolamo Boccardo e le sue edizioni. In
M. M. Augello and M. E. L. Guidi (eds), L’economia divulgata. Stili e percorsi italiani
(1840–1922). Vol. I: Manuali e trattati (Milan: Franco Angeli), pp. 79–101.
Boccardo, G., 1853, Trattato teorico-pratico di economia politica (Turin: Società editrice
della biblioteca dei comuni italiani), 3 volumes.
Boccardo, G., 1854, Rapporto sulla crisi commerciale (Genoa: Camera di commercio).
Boccardo, G. 1858, Manuale di storia del commercio delle industrie e dell’economia politica
ad uso delle Scuole Speciali Secondarie (Turin: Franco).
Boccardo, G., 1872, Il sole operajo e la economia industriale. In G. Boccardo, Prediche di
un laico (Forlì: F. Gherardi).
Boccardo, G., 1879a, La legge di periodicità delle crisi. Perturbazioni economiche e macchie
solari. Archivio di statistica, III: 3, pp. 385–412.
Boccardo, G., 1879b, Trattato teoretico-pratico di economia politica, 6th edn (Turin: Roux
e Favale).
Boccardo, G., 1904, Macchie solari e crisi economiche. La lettura – Rivista mensile del
Corriere della Sera, 1904: 1 January, pp. 26–30.
Comuzzi Pighin, P., 1978–1979, Francesismi e neologismi nel Dizionario della economia
politica e del commercio di Gerolamo Boccardo, Studi mediolatini e volgari, 26, pp.
125–141.
Coquelin, C., 1848, Du crédit et des banques (Paris: Guillaumin).
Courcelle-Seneuil, J. G., 1854, Traité théorique et pratique d’économie politique. Journal
des Économistes, 13 (2nd series, 1st year), 7 July, pp. 151–155.
Courcelle-Seneuil, J. G., 1859, Trois publications nouvelles de M. Boccardo. Journal des
Économistes, 23 (2nd series, 6th year), 9 September, pp. 457–464.
[Franco, S.], 1858, Giudizi dei pubblicisti si esteri che nazionali sul dizionario della economia
politica e del commercio cosi teorico come pratico utile non solo allo scienziato . . .
(Turin: Sebastiano Franco e figli).
Giocoli, N., 2001, La voce ‘Economia matematica’ da Boccardo a Debreu, Storia del
Pensiero Economico, 42, pp. 123–143.
264 Daniele Besomi
Gioli, G., 2001, Dizionari economici ed enciclopedie in Italia nella seconda metà
dell’Ottocento, Storia del Pensiero Economico, 41, pp. 231–256.
Hayek, F. A., 1933, Monetary theory and the trade cycle (London: Cape).
Jevons, W. S. [1875], The solar period and the price of corn. In W. S. Jevons, Investigations
in currency and finance, edited by H. S. Foxwell (London: Macmillan, 1884), pp.
194–205.
Jevons, W. S., 1878, Commercial crises and sun-spots, Nature, 14 November. Reprinted in
W. S. Jevons, Investigations in currency and finance, edited by H. S. Foxwell (London:
Macmillan, 1884), pp. 221–243.
Kircheisen, J., 1864, Ein englisches und ein italienisches Wörterbuch der Volkswirtschaft,
Jahrbücher für Nationalökonomie und Statistik, 2, pp. 456–461.
Marmocchi, F. C., 1854–1862, Dizionario di geografia universale: contenente gli articoli
piu necessari della geografia fisica secondo le idee nuove ed i lavori piu insigni de’
geologi e de’ naturalisti (Turin: Società Editrice Italiana).
Pareto, R., 1857, [Review of] Dizionario della economia politica e del commercio. Giornale
dell’ingegnere, architetto ed agronomo, 5, November, pp. 275–276.
Pareto, R., 1860, [Notice on] Dizionario della economia politica e del commercio. Giornale
dell’ingegnere, architetto ed agronomo, 8, April, p. 206.
Rosa, G., 1857, [Review of] Dizionario della economia politica e del commercio. Archivio
Storico Italiano, 5: 2, pp. 114–132.
Sacchi, G., 1857a, [Review of] Dizionario della economia politica e del commercio. Annali
universali di statistica, 13 (3rd series), February, pp. 115–116.
Sacchi, G., 1857b, [Review of] Dizionario della economia politica e del commercio. Annali
universali di statistica, 13 (3rd series), March, pp. 280–288.
Sacchi, G., 1858a, [Review of] Dizionario della economia politica e del commercio. Annali
universali di statistica, 19 (3rd series), July, pp. 3–4.
Sacchi, G., 1858b, [Review of] Dizionario della economia politica e del commercio. Annali
universali di statistica, 20 (3rd series), October, pp. 42–62, and November, pp. 119–131.
Sacchi, G., 1859, [Review of] Dizionario della economia politica e del commercio. Annali
universali di statistica, 22 (3rd series), June, pp. 265–286; 23, July, pp. 7–32.
Tabarrini, M., 1859, Rapporto del ff. di Segretario delle Corrisp. Avv. Marco Tabarrini, letto
nell’Adunanza ordinaria del dì 10 luglio 1859. Atti della R. Accademia Economico-
Agraria di Georgofili di Firenze, NS 6, pp. xc–xciv.
Vogel, E. H., 1917, Die Theorie des volkswirtschaftlichen Entwicklungsprozesses und das
Krisenproblem (Vienna: Hölder).
12 Clément Juglar (1863–1891)
Tracking and interpreting the
periodic return of crises
Cécile Dangel-Hagnauer
The sound economic doctrines whose banner France has always held so high,
and that scholars like Jean-Baptiste Say, Bastiat, Michel Chevalier and others
defended so brilliantly, are strongly attacked today. I am almost alone in
defending them against our foreign learned adversaries, and I dare to say that
I am constantly beavering away at it.
(1907, p. 13)
The Dictionnaire général de la politique went through two editions. The first
edition came out in 1863–1864 and was reprinted in 1867; 144 scholars contributed
to its two volumes, representing 1,180 and 1,140 pages. In the PRÉFACE, Block
writes that this dictionary on politics has brought together ‘elite intelligences’ in
order to present, on the one hand, ‘the political and social notions that have
supported the proof of criticism and facts’ and, on the other hand, ‘the discussion
of the ideas that an in-depth examination will still have to classify among truths or
268 Cécile Dangel-Hagnauer
errors’ (p. v). In line with Block’s adherence to the views of the French liberal
school, the principles underlying this collective work embrace the recognition of
‘the effectiveness of freedom, the need to enlarge the scope of individual initiative,
the beneficial action of moral and material progress, the obvious error of extreme
opinions’ (ibid.). Published in 1873 and reprinted in 1884, the 2nd edition also
included entries by 144 contributors (with few changes from the list of those who
contributed to the first edition). In the new PRÉFACE, among the dictionary’s objec-
tives Block states that of offering a neutral ground for contributors of different
opinions. He also specifies that the term ‘politics’ has been taken in its broadest
sense, that is, that of ‘science of government’. As such, it encompasses many topics,
from forms of power to different sorts of constitutions, but also doctrines and facts.
Because it seeks to be comprehensive, the dictionary deals with topics such as
taxation, as well as with subjects pertaining to political economy or concerning
public services in so far as they touch upon the science of government. This explains
how Juglar’s entry on CRISES COMMERCIALES found its way into this dictionary.
Finally, whereas only ten years separate the two editions, new articles appear in
the second one, in which almost all the entries have been revised. This is the case
for Juglar’s own entry.
As attested by the review authored by Jules Simon (1865), the Dictionnaire
général de la politique was well received. This dictionary, Simon writes, bridges
a gap in a country where there are only ‘inaccessible libraries or insignificant
pamphlets’ (p. 155). While Simon questions whether political science is actually
a science, he considers that Block’s dictionary provides the knowledge that is
necessary for those seeking to enter a political career. It includes historical, financial,
economic as well as legal knowledge. Simon stresses that, however impartial the
authors have tried to remain, the doctrine underlying the dictionary is that of the
‘great and noble school that aspires to liberty . . . [and] strives at . . . bringing on
progress’ (ibid.). The success of the dictionary, both in France and abroad, is also
emphasized by Henri Baudrillart (1874) in his review of the second edition of
the dictionary. He pays tribute to the work, stressing its ‘capital importance and
indisputable utility’ (p. 476), the great abundance of facts and documents it contains
and the clarity and reliability of the exposition of doctrines and theories. Among
the features underlined by Baudrillart, there is its ‘judicious and grand liberalism’,
founded firmly upon ‘certain essential and fundamental principles’, although it
is ‘a book of principles without being partisan’ (ibid.). Like Simon, Baudrillart
commends the dictionary’s broadness of scope – ranging from the analysis of
different constitutions to the study of education and of agricultural, industrial and
demographic resources – but more especially he approves of the space assigned to
political economy and law, thereby providing evidence that ‘politics does not
separate itself from the elements of civil life’, all the more so as ‘alongside the
role of the state extends the even vaster role of individual activity’ (ibid.).
Clément Juglar and the periodic return of crises 269
12.1.2 The Nouveau dictionnaire d’économie politique
The Nouveau dictionnaire d’économie politique also went through two editions,
but with the second one being merely a reprint of the first. It comprises three
volumes that appeared in 1891 (1,168 pages), 1892 (1,345 pages) and 1897 (277
pages). Actually, the third volume is a supplement to the first two. As the first edition
sold well, the editors, Léon Say and Joseph Chailley-Bert, began preparing a second
edition, but decided instead to issue this Supplément, which appeared one year after
the death of L. Say.
Whereas the Introduction to the Nouveau dictionnaire was written by Chailley-
Bert, as the latter writes in the PRÉFACE of the third volume: ‘The Supplément,
like the Dictionnaire, was entirely written under the high inspiration of M. Léon
Say. It is he, in concert with me, who decided upon the list of topics, chose the
authors, read the manuscripts, revised the proofs’ (PRÉFACE, p. v).6
The politician and economist Léon Say was born in Paris in 1826. Like his
grandfather, Jean-Baptiste Say, he was a strong advocate of free trade. Having
completed his studies at the Law Faculty in Paris, he worked for the Eichtal Bank
(1850–1852) and sat on the board of numerous companies. From 1869 to his death
in 1896 he held several political positions (as member of parliament, prefect, finance
minister, very briefly ambassador of France in London and president of the senate).
He was also a professor at the École libre des sciences politiques and was elected
to the Académie des sciences morales et politiques in 1874 and to the Académie
française in 1886. In his article devoted to SAY (LÉON, JEAN-BAPTISTE) in the
supplement of the Nouveau dictionnaire, Chailley-Bert insists on the important
role Say played within the ministry of public finances, of which he was the minister
for six years. Chailley-Bert describes Say as driven by a single motive: ‘the defence
of liberty . . . in all its forms and in all circumstance’ (p. 263). In particular, he
was an adversary of the protectionists as well as of the socialists, going so far as
to assert that socialism proceeded from protectionism (ibid., p. 264).
Joseph Chailley-Bert was born in 1854 in Saint-Florentin and died in Paris in
1928. He was an essayist and served as a politician, holding several positions
between 1906 and 1919. With a doctorate in law, he became a professor at the École
libre des sciences politiques and contributed articles to the Revue des Deux Mondes
and the Journal des Débats, a journal controlled by the French liberals. His main
interest was in colonization and he founded the Institut colonial international in
1893.
In its first edition, the Nouveau dictionnaire was published in the form of fas-
cicules. The first volume of the Nouveau dictionnaire begins with a 16-page
introduction by Chailley-Bert, written when the last article of the second volume
had just appeared. The INTRODUCTION, common to the two editions, is divided
into five sections. In the first section, Chailley-Bert presents the Nouveau dictio-
nnaire as an entirely revised edition of →Coquelin and Guillaumin’s Dictionnaire
de l’économie politique, whose two volumes were first published in 1852 and 1853.7
A new edition was indeed necessary, Chailley-Bert writes, in the wake of the
‘veritable economic revolutions that occurred very soon after its publication’
(INTRODUCTION, p. v).
270 Cécile Dangel-Hagnauer
The goal that Say and Chailley-Bert had pursued in preparing their dictionary
was to ‘enhance [its] doctrinal value and [its] practical usefulness’ (p. vii), as stated
in the second section. To that effect, they had called upon a limited number of
contributors, ‘united within a common doctrine’ (p. vi), who were asked to write
all the articles that were related to the same subject. Chailley-Bert adds that ‘none
of our collaborators wrote a word without seeking agreement with us with regard
to the fundamentals of doctrine’ (p. vii). As to the contents of the Nouveau dic-
tionnaire, it covers the ‘theories of pure political economy’ but also more applied
issues related to ‘commerce, agriculture, banking, money, public finances and, in
another connection, the issues of contingency, co-operation, participation in profits,
association, and finally what is referred to as the doctrine of the socialists’ (ibid.).
Finally, Chailley-Bert draws the reader’s attention to the three tables included at
the end of the second volume. Altogether, the three tables add up to 133 pages. A
‘bibliographic table’ comprises the names of the authors and the titles of the books
cited in the dictionary. Interestingly, a ‘methodical table’ indicates in what order
the articles of the dictionary should be read for it to be used as a ‘Treatise on political
economy.’8 An ‘analytical table’ brings together all the scattered material related
to a given subject. The second section closes with Chailley-Bert indicating that L.
Say and he are thinking about preparing a second edition.9
The third section of the INTRODUCTION is entirely devoted to the doctrine
of the liberal school, which Chailley-Bert describes as a ‘school of progress’,
as attested by the names of its leaders: ‘Turgot and Adam Smith, J.-B. Say and
Stuart Mill, Cobden and Bastiat, Herbert Spencer, and to a certain extent the
French positivists’ (ibid.). This statement is followed by a genuine profession of
faith:
This said, Chailley-Bert notes the evolution of political economy and emphasizes
the need to add to the principle of freedom the principle of solidarity, affirming
that the liberal school has become the ‘school of individual activity and collective
responsibility’. Accordingly, he argues that the teachings of evolutionism, and the
Clément Juglar and the periodic return of crises 271
idea of the ‘survival of the fittest’, do not apply to society so long as all people
behave as active participants, so that co-operation breeds progress.
Moreover, the author points to the change visible in the liberal school, indicating
that its adherents have become less hostile to government interference than J.-B.
Say and display more indulgence towards association. Finally, Chailley-Bert indi-
cates that subjects such as the theory of value or the theory of the ‘appropriation
of wealth’ are not dealt with in the Nouveau dictionnaire, whose purpose is that of
being ‘a work of popularization’ (p. x).
It is important to note that Chailley-Bert does not believe in the contribution
of historical facts and statistics to scientific advance, prompting the lengthy and
virulent attack on the German historical school contained in the fourth section.
However, Chailley-Bert is also critical of the state of the ‘French school’. In the
fifth and final section, he shows that the latter’s decline is due to three factors: the
way political economy is taught in France, the lack of consideration it enjoys and
the distinctive character of the turn of mind of the French. Almost two pages are
devoted to deploring the fact that political economy is taught in law faculties and
to advocating the establishment of ‘faculties of economic and political sciences’.10
He also laments the lack of political influence of (liberal) ‘economists’ and the
small number of those who have occupied political positions, hence their lack of
influence in matters regarding political economy, the sole exception being the
‘intermittent victories of free trade’ to which they contributed (p. xix). However,
even here, Chailley-Bert considers that the economists’ involvement in the defence
of this ‘menaced liberty’ has damaged their reputation among the French public,
who were generally hostile to the opening of the country’s borders to international
trade. Another consequence of their quasi-exclusive focus on free trade, also
emphasized by Chailley-Bert in his review of →Palgrave’s Dictionary of political
economy for the Economic Journal, is that it has distracted them ‘from the study
of the whole of economics . . . [and] taken away all leisure for attacking, following
and solving other problems’ (1897, p. 262).11
The Nouveau dictionnaire was reasonably well received. It was, in any case,
sufficiently well circulated for Juglar’s entry to attract enough attraction and deserve
a translation in Rhodes Journal of Banking (Juglar, 1894). Commenting earlier on
the first three instalments, Seligman (1890) indicates that 15 more instalments were
expected for the completion of this entirely different edition of the dictionary, which
had been previously edited by Coquelin and Guillaumin. Interestingly, he deplores
the lack of contributions by the ‘adherents of the newer school, represented by the
Revue d’Economie Politique’ and the too rare contributions by non-French writers,
his overall assessment being that the dictionary will be of value to those wishing
to keep ‘abreast of French development’.
In his review of 1893, André Liesse points out the favourable reception with
which the Nouveau dictionnaire was met, also presenting it as the new edition of
→Coquelin and Guillaumin’s Dictionnaire de l’économie politique, which had
become outdated. Comparing the two editions, Liesse regrets that ‘the combative
spirit that ran through the columns of the old Dictionnaire’ was no longer there,
whereas ‘A word, an article, at the time when Guillaumin published the first
272 Cécile Dangel-Hagnauer
economic encyclopaedia was a cartridge fired at the protectionist or socialist enemy’
(p. 283). A puzzling comment is made by Liesse, who notes that ‘the doctrines of
Darwin and Spencer, of the evolutionists in a word’ (p. 281) had left on the Nouveau
dictionnaire their powerful mark, which contradicts Chailley-Bert’s own assertion.
More to the point, among the subjects dealt with in the new edition, Liesse welcomes
the inclusion in particular of topics relating to public finances and to private finance,
in accordance with the recent development of commercial banking in France. He
ends his review by describing the dictionary as not only a useful reference but also
a work for study, drawing the reader’s attention to the three tables that complete
the dictionary.
Following in the footsteps of his father, Juglar studied medicine and became a
physician at the age of 27. However, he quickly abandoned the medical profession
as a result, it seems, of the events of 1848 and of his travels, which both aroused
his interest in social and economic matters. Juglar travelled enormously, to England,
Spain, Italy, Greece, Turkey and Algeria. Visiting Spain in 1850, he returned with
a statistical inquiry on Spanish hospitals. In 1851, he began writing a series of
articles, published in the Journal des Économistes and the Annuaire de l’Économie
Politique, on the demographic evolution of France between 1772 and 1849, and
on the colonization of Algeria. His training as a physician had developed his skills
of observation, which he applied first to the statistical study of the French population
and that he would soon apply to the study of commercial crises. Between 1856
and 1861, he published several articles on commercial crises and on banking
statistics. However, his first important contribution was the memorandum for which
he was awarded the prize of the Académie des sciences morales et politiques in
1860. This memorandum was published as the first edition in 1862 of Des crises
commerciales et de leur retour périodique en France, en Angleterre et aux Etats-
Unis. Juglar also submitted a memorandum to the Académie in 1865 on the
conditions of the circulation of credit and on the differences between banknotes
and other forms of credit. It would later be published in 1868 as Du change et de
la liberté d’émission (On foreign exchange and the freedom of issuing). In the
meantime, Juglar had been entrusted, along with Paul-Jacques Coullet of the Bank
of France, with the work of translating and publishing in 1865 the Extraits des
enquêtes anglaises sur les questions de banque, de circulation monétaire et de
credit (Extracts from the English parliamentary enquiries on the issues of banking,
circulation of money and credit). Juglar was then to spend the next 40 years writing
and publishing (predominantly in the Journal des Économistes) on commercial
crises, money, credit, banking and other financial matters (such as foreign exchange
and bimetallism), as well as on demographics and social policy. His most important
contribution in that period was the publication of the second edition in 1889 of
Des crises commerciales, a third edition of which he was preparing, according to
Paul Beauregard (1908), just before his death.
Clément Juglar and the periodic return of crises 273
In his obituary, Beauregard provides a summary of Juglar’s method:
12.3.1.3 Causation
Having identified the movements in banking statistics that accompany prosperities,
crises and liquidations, Juglar goes on to explain the phenomena at hand. Actually,
half of the article is about the causes of crises: the long introduction is followed
by a lengthy subsection titled ‘Causes of crises’; the entire second section discusses
other economists’ opinions on the subject.
In ‘Causes of crises’, Juglar rejects the usual explanations such as wars and
food shortages. His goal is to prove that crises occur repeatedly and in very different
contexts. To do so, he uses a distinction borrowed from medicine, the opposition
between ‘predisposition’ and ‘determining cause’. A patient will contract pneumo-
nia if he has a predisposition to catching it. If not, he can stay out in the cold and
remain in good health. In an analogous fashion, crops can be bad, but the ensuing
food shortage will produce no effect unless there is some ‘social predisposition’
that will cause a crisis to occur. So it is this social predisposition that Juglar seeks
to bring out.
Clément Juglar and the periodic return of crises 277
As it is typical of human nature, speculation is a plausible candidate. Yet,
although Juglar does underline the role that speculation plays during business
upswings and the role played by the return of confidence at the end of the liquidation,
he also insists on the role played by credit. Whereas speculation plays the leading
part, the supporting role is filled by credit. Where there is little reliance on credit,
speculation has little impact. In contrast, the development of credit during the
nineteenth century, in particular between agents located in different countries,
caused crises to have sweeping effects, in particular by building interdependence
(solidarité) among nations, causing crises to spread across borders from market to
market.
In other words, Juglar’s objective is not only ‘to determine the circumstances
in which crises develop and specify the causes that lead to their outbreak’, but also
to discover ‘the conditions that are indispensable for them to exist, . . . the phenom-
ena that are then constantly observed regardless of the so numerous and so diverse
causes that are mentioned depending on the need of the moment’ (emphasis added)
(CRISES COMMERCIALES, 1863–1873, English translation as Juglar, 2010a, p. 118).
These conditions are the division of labour, the expansion of industry, commerce
and foreign trade, and the widespread use of credit. Although speculation is a deci-
sive ingredient – indeed, the adverse effects of credit would be small in its absence
– on the other hand, speculation could not develop if it were not fed by credit.
In his eulogy of Juglar’s contribution to the theory of cycles, Schumpeter goes
so far as to quote Juglar apocryphally, writing, ‘the only cause of depression is
prosperity’ (Schumpeter, 1954, p. 1124). The closest Juglar gets to writing some-
thing of the sort is: ‘The determining cause is elsewhere. It is the consequence of
a previous state that must be studied carefully’ (Juglar, 2010a, p. 118).
In the second section of the entry, Juglar goes to great length to show that crises
do not have political causes and that they do not coincide with wars or other political
events: they occur outside uprisings and revolutions and break out in periods of
political calm.
In the final subsection on the ‘Opinions of the main economists’, Juglar seeks
to show that crises are caused neither by the excess issue of banknotes nor by sudden
withdrawals of banknotes, citing the opinions of J.-B. Say, Senior, Wilson, Tooke,
Coquelin and du Puynode. In particular, he challenges Coquelin and his position
in favour of free banking (see Chapter 8). Almost an entire page is devoted to
showing that granting banks issuing freedom would not prevent speculation and
crises. In particular, Juglar examines the minima and maxima of deposits and shows
that their erratic oscillations are disconnected from those of reserves and are thus
unrelated to crises. He also points to the fact that the countries where free banking
prevails are not better protected from speculation than others. More generally, he
discusses central banking and the conduct of monetary policy. Alluding to the
critiques of the Peel Act of 1844, he examines the restrictions imposed upon the
Bank of France (in the employment of its equity), its monopoly in the issuance of
banknotes, and its discount rate policy.
Before closing the entry, Juglar mentions that other indicators (economic,
demographic, financial) are synchronized with banking statistics (discounts and
278 Cécile Dangel-Hagnauer
reserves), referring the reader to Des crises commerciales. The article actually ends
with Juglar’s statement that there is no way to prevent crises other than perhaps
through a better governance of banks. On the contrary, Juglar emphasizes that crises
are the price to be paid for economic progress: the business sluggishness caused
by the crisis is actually a ‘prelude to more beautiful destinies’.
Juglar’s contribution marks an important stage in the transition from the theory of
crises to the theory of cycles. However, its novelty has probably been exaggerated,
as Besomi (forthcoming) demonstrates. Juglar owes his celebrity, as is well known,
essentially to Schumpeter, who adopted in Business cycles a ‘convenient descriptive
device’ in the form of a ‘three-cycle schema’ formed by three classes of cycles –
‘Kondratieffs’, ‘Juglars’ and ‘Kitchins’ (1939, p. 170). Schumpeter also wrote
that Juglar was the ‘great outsider who . . . created modern business-cycle analysis’
(1950, p. 149) and that he was also ‘the first to have a clear perception of how
282 Cécile Dangel-Hagnauer
theory, statistics and history ought to cooperate in our field’ (1939, pp. 162–163),
the method advocated by Schumpeter himself (1954). Yet Juglar’s writings
themselves have not stirred great interest, even in France, with the exception of
the reference to Juglar by early-twentieth-century French economists writing on
the business cycle, Aftalion (1913), in particular. Outside France, Juglar’s
contribution very often remained ignored, barring Thom’s (1893) ‘Englished’ trans-
lation of Des crises commerciales, which is anything but a translation, however
‘very freely’ a translation may be ‘rendered’ in order to be considered as such
(p. 1).
Why, then, have Juglar’s writings suffered this neglect? The first reason that
comes to mind is that they were scattered among numerous articles, as attested by
the bibliography drawn up by F. Allisson et al. (2009). On the other hand, his
writings on crises were brought together in the two editions of Des crises commer-
ciales. However, in addition to having never been (properly) translated, the book
is repetitious, its organization lacks rigour – especially in its bulky second edition
– it is inelegantly written and Juglar’s sentence structure is frequently ambiguous.
In the end, attempting to make sense out of it can be at times quite a trying
experience.
In sharp contrast, these two dictionary entries are easy to read and reasonably
well written. They are concise and they bring forward Juglar’s main line of reason-
ing. Comparing the entries shows how Juglar’s analysis evolved over the period
between the two editions of Des crises commerciales. In addition, these entries
reveal the method he used to track the recurrence of crises, based on the analysis
of the balance sheets of the issuing banks, this being especially visible in →Block’s
Dictionnaire.
These entries are thus quite valuable for forming an idea of Juglar’s contribution
to the emergence of business cycle theory. From this viewpoint, Juglar’s main
contribution was probably that of being (one of) the first economist(s), along
with Jevons, to have systematically used statistics in his analysis of economic
fluctuations. In the 1863–1873 entry, Juglar painstakingly scrutinizes the movement
of economic activity through the evolution of central banks’ discount portfolios
and metallic reserves. These indicators provide evidence that crises recur
periodically and enable the author to bring to light several contiguous series of
‘prosperities’, ‘crises’, and ‘liquidations’. In contrast, banking statistics are not
reproduced in the 1891 entry, although they remain instrumental to Juglar’s
exposition of the movement of business activity.
The main shortcoming that these two entries bring out is that while Juglar
succeeds in establishing an empirical relationship between banking statistics and
the course of business activity, he does not provide a theoretical explanation of
what he observes. Yet these entries also portray Juglar striving over the years to
reach this goal. Indeed, whereas we see Juglar placing great emphasis on causation
in the 1863 entry and laying the blame on speculation for the recurrent outbreaks
of crises, by 1873, in the entry’s second edition, foreign exchanges are also ascribed
a role in triggering the crisis. By 1891, greater stress is placed on the causal role
played by credit, and the workings of the capital market are introduced as an
Clément Juglar and the periodic return of crises 283
additional major factor. In particular, there is an attempt, albeit unsuccessful and
incomplete, in the second entry to show how the three phases are connected to one
another and to explain why prices grow during prosperity, why they stop increasing
at the outbreak of the crisis, and why they start rising again at the end of the liqui-
dation. However, Juglar makes no attempt to build a theory of the determination
of prices, which it would have provided the proper basis for the definition of the
crisis – the ‘stoppage’ in the increase in prices – that he suggests in his last writings.
In addition to bearing witness to the maturation of Juglar’s conception of the
‘oscillations’, these two dictionary entries exhibit some formal differences. The
entry in →Say and Chailley’s Nouveau dictionnaire is more carefully constructed
than the one written for →Block’s Dictionnaire. More strikingly, the discussion
in the 1863–1873 dictionary relies heavily on analysing the entry’s numerous tables
of statistics, whereas only one table is contained in the 1891 entry. This contrasts
with the improved quality of the statistics that Juglar relied upon in the 2nd edition
of his book, which includes a list of prices of commodities and presents a refined
utilization of the maxima/minima methodology. Undoubtedly, this contrast reflects
the preferences of the editors of the two dictionaries. Whereas Maurice Block was
a statistician, Joseph Chailley-Bert clearly expressed his dislike of statistics and
inductive reasoning.
NOTES
1 In France, two articles on Juglar were published, in 1991 (Gilman) and 2000 (Pellissier).
More recently, a special issue of the Swiss Revue Européenne des Sciences Sociales
(Bridel and Dal-Pont Legrand, 2009) was dedicated to Juglar, following the conference
organized by Jean de Mathan, Juglar’s great-grandson. It was held in Paris at the Institut
de France, the seat of the Académie des sciences morales et politiques (to which Juglar
was elected in 1892), in celebration of the centennial of Juglar’s death in December
1905.
2 He was the son-in-law of Paul Bert, a French physiologist and politician.
3 See Le Van-Lemesle, 2004, pp. 311–316.
4 For additional details on the French liberal school, in particular on the role played by
G.-U. Guillaumin, see Chapter 8, Section 8.1 of this volume.
5 In the PRÉFACE of the Petit dictionnaire, Block explains that he had felt that a more
affordable version of the Dictionnaire general de la politique should be made available
to meet the needs of a wider public. He argues that universal suffrage assigns serious
duties to citizens, who need to be able to assess the acts of the people they elect. Whereas
some of the articles are mere reprints of the initial authors’ contributions, more than
three-quarters of the Petit dictionnaire is made up of articles written by Block himself.
It includes an entry on CRISES COMMERCIALES – in fact, a shortened version of Juglar’s
entry, in the form of a selection of passages, from the 1873 edition.
6 By some strange stroke of fate, the text was modified in the 1900 edition to ‘in concert
with him’.
7 For a presentation of →Coquelin and Guillaumin’s Dictionnaire de l’économie politique,
see Chapter 8 on Charles Coquelin’s CRISES COMMERCIALES.
8 The table distinguishes eight headings: Pure political economy, Finances, Agriculture,
Industry, Commerce and navigation, Colonization, Contingency, and Sociology. Crises
are not considered as part of pure political economy; Juglar’s entry on CRISES
COMMERCIALES is included instead under the heading Commerce and navigation.
284 Cécile Dangel-Hagnauer
9 As the 2nd edition was merely a reprint of the 1st, this statement remained unchanged
when the latter actually came out.
10 Actually, Chailley-Bert’s plea remained unheard until 1957, which was when law
faculties in France were transformed into faculties of law and economics, and 1968,
when specific economics university departments were created (see Le Van-Lemesle,
2004, pp. 641–645). However, in the meantime, in 1896, a special competitive exami-
nation had been established for the recruitment of professors of economics (ibid., pp.
321–326). The author would like to thank Annie L. Cot for her valuable help in seeking
this information.
11 In this review, Chailley-Bert points to the differences, opposing the conceptions
underlying the Dictionary of political economy and the Nouveau dictionnaire d’économie
politique. For further details, see Chapter 2, Section 2.4.1 of this volume.
12 This issue is carefully analysed by Besomi, 2010, pp. 225–239. Examining the transition
from the theory of crises to the theory of cycles, he introduces a fourfold distinction
among four approaches: ‘crises’, ‘alternations’, ‘recurring crises’ and ‘cycles’. This
typology allows him to characterize Juglar’s contribution as belonging to the third
approach.
13 For a more detailed presentation of this aspect, see Besomi, 2010, pp. 195–197.
14 This is the case, for example, for the following sentence, where the emphasized passage
(italicized by C. D.-H.) was added to the original 1863 version: ‘At the same time, the
banknotes issued in exchange for discounted mercantile paper are instantly presented
for reimbursement, and under the influence of unfavourable foreign exchanges the
metallic reserves diminish as swiftly as portfolios build up.’ The text continues and the
paragraph ends with: ‘the exchange rate returns to par, and the reflux of specie begins’,
also an addition (italicized by C. D.-H.) to the 1863 entry.
REFERENCES
Aftalion, A., 1913, Les crises périodiques de surproduction (Paris: Editions M. Rivière).
Allisson, F., Breban, L. and Bridel, P., 2009, Bibliographie des écrits de Clément Juglar
(1846–1904), Revue Européenne des Sciences Sociales, XLVII: 143, pp. 107–124.
Arena, R., 2001, J-B. Say and the French liberal school of the nineteenth century: outside
the canon? In E. L. Forget and S. Peart (eds), Reflections on the classical canon in
economics: essays in honor of Samuel Hollander (London: Routledge), pp. 205–223.
Baudrillart, H., 1874, Dictionnaire général de la politique, par M. Maurice Block, avec la
collaboration d’hommes d’État, de publicistes et d’écrivains de tous les pays; nouvelle
édition, Journal des Économistes. 33, March, pp. 475–477.
Beauregard, P. 1908, Notice sur la vie et les travaux de M. Clément Juglar (Paris: Institut
de France).
Besomi, D., 2010, ‘Periodic crises’: Clément Juglar between theories of crises and theories
of business cycles, Research in the History of Economic Thought and Methodology, 28A,
pp. 169–287.
Besomi, D., forthcoming, The fabrication of a myth: Clément Juglar’s commercial crises
in the secondary literature, History of Economic Ideas.
Bridel, P. and Dal-Pont Legrand, M., eds, 2009, Clément Juglar (1819–1905): Les origines
de la théorie des cycles, Revue Européenne des Sciences Sociales, XLVII: 143.
Chailley-Bert, J., 1897, Dictionary of political economy. Edited by R. H. Inglis Palgrave,
F.R.S., Vol. II. F.–M. (London: Macmillan. 1896, pp. xvi, 848, large 8vo). The Economic
Journal, 7: 26, pp. 260–264.
Clément Juglar and the periodic return of crises 285
Cheysson, E., 1907, Notice sur la vie et les travaux de Maurice Block, Publications of the
Institut de France, no. 9.
Coullet, P.-J. and Juglar, C., 1865, Extraits des enquêtes anglaises sur les questions de
banque, circulation monétaire et de crédit, traduits et publiés par ordre du Gouverneur
et du Conseil de régence de la Banque de France et sous la direction de MM. Coullet et
Juglar, Vols 1–8 (Paris: Furne et Ce and Guillaurium et Ce).
Gilman, M.-H., 1991, Clément Juglar 1819–1905 – Analyste des crises. In Y. Breton and
M. Lutfalla (eds), L’économie politique en France au XIXème siècle (Paris: Economica).
Juglar, C., 1862, Des crises commerciales et de leur retour périodique en France, en
Angleterre et aux États-Unis, 1st edn (Paris: Guillaumin).
Juglar, C., 1868, Du change et de la liberté d’émission (Paris: Guillaumin).
Juglar, C., 1889, Des crises commerciales et de leur retour périodique en France, en
Angleterre et aux États-Unis, 2nd edn (Paris: Guillaumin).
Juglar, C., 1894, Commercial crises, translated from the French of M. Clément Juglar in
the Nouveau dictionnaire d’économie politique (Paris), Rhodes Journal of Banking,
pp. 437–449.
Juglar, C., 2010a, Commercial crises (1863–1973). Translation by C. Dangel-Hagnauer of
CRISES COMMERCIALES, in →Block, Dictionnaire général de la politique (1863, 1873),
Research in the History of Economic Thought and Methodology, 28A, pp. 115–147.
Juglar, C., 2010b, Commercial crises (1891). Translation by C. Dangel-Hagnauer of CRISES
COMMERCIALES, in →Say and Chailley, Nouveau dictionnaire de l’économie politique
(1891), Research in the History of Economic Thought and Methodology, 28A, pp.
149–167.
Le Van-Lemesle, L., 2004, Le juste ou le riche – L’enseignement de l’économie politique
1815–1950 (Paris: Comité pour l’Histoire Économique et Financière de la France,
Ministère de l’Économie, des Finances et de l’Industrie).
Levasseur, E., 1901, Nécrologie – M. Maurice Block, Journal des Économistes, 60, March,
pp. 268–269.
Liesse, A., 1893, Nouveau dictionnaire d’économie politique, publié sous la direction de
M. Léon Say et de M. Joseph Chailley-Bert, Journal des Économistes, 52, March, pp.
281–285.
Niehans, J., 1992, Juglar’s credit cycles, History of Political Economy, 24: 3, pp. 545–569.
Pellissier, D., 2000, Clément Juglar: Héritage et actualité de sa théorie des crises. In
P. Dockès, L. Frobert, G. Klotz, J.-P. Potier and A. Tiran (eds), Les traditions
économiques françaises – 1848–1939 (Paris: CNRS Editions).
Schumpeter, J. A., 1939, Business cycles: a theoretical, historical and statistical analysis
of the capitalist process (New York: McGraw-Hill).
Schumpeter, J. A., 1950, Wesley Clair Mitchell (1874–1948), Quarterly Journal of
Economics, LXIV: I, pp. 139–155.
Schumpeter, J. A., [1954] 1994, History of economic analysis, reprinted (London:
Routledge).
Seligman, E. R. A., 1890, Nouveau dictionnaire d’économie politique, Political Science
Quarterly, 5: 2, June, pp. 334–336.
Simon, J., 1865, Dictionnaire général de la politique, par M. Maurice Block, 2 vol. gr. in-
8. Paris, O. Lorenz, 1864, Report to the Académie des sciences morales et politiques.
Journal des Économistes, 23, January, pp. 154–155.
Thom, DeCourcey W., 1893, A brief history of panics and their periodical occurrence in
the United States (New York: G. P. Putnam’s Sons).
13 Henry D. Macleod’s
Dictionary of political
economy
Britain’s first, aborted attempt
Cécile Dangel-Hagnauer
Part III advertised here represents around 120 pages in the final volume. Four
more years were necessary for the production and publication of the remaining half
of the dictionary’s single volume.
Part I was issued in 1858 and was reviewed in The Literary Examiner, where
it was extremely well received. The anonymous reviewer hails the dictionary as
the first English dictionary of political economy, underlining that whereas ‘the
best literature’ in this ‘science’ was ‘written in the English language’, the dictionary
would meet the needs of many students. Accordingly, he pays particular tribute to
the ‘bibliographical knowledge’ amply supplied by many notices. More generally,
he notes that Macleod was perfectly qualified for writing such a dictionary, on
account of his interest and acquaintance both with the subject itself and with
the works of others, owing to his ‘indefatigable zeal as a reader’ and ‘energy of
independent thought’.
The review contains a long passage from the Dictionary that provides some
insights into Macleod’s conception of political economy. It is taken from the entry
on AESCHINES, whose Eryxias Macleod commends as the first surviving treatise
on political economy, and from which he quotes a long extract, thereby endorsing
the opinions of the author, notably that value is rooted in exchangeability and that
‘intellectual wealth . . . is part of national capital’. For Macleod, ‘one of the chief
defects of Adam Smith and Ricardo’ lies in their failure to have recognized this
truth, whereas it was well apprehended by ‘the modern French school of Political
Economy at the head of which stands J. B. Say’. The reviewer also provides some
rapid observations on several other entries, but makes no comment on Macleod’s
‘articles Bank and Banking’, for lack of space and more especially as ‘Mr Macleod
[had] already written an able book on the Theory and Practice of Banking’. The
reviewer ends by alluding to Macleod as ‘a man sturdy in reading, thought, and
288 Cécile Dangel-Hagnauer
speech’, with whom he was not always in agreement, while entirely perceiving
the value of the book.
This review also indicates that Macleod projected to produce the dictionary in
15 instalments of 96 pages each, which altogether would have represented some
1,440 pages. Was it the 683 pages needed to handle the first three letters of the
alphabet that made ‘the publishers . . . put typographical considerations first, thus
turning Macleod into a kind of unlyrical economic Schubert’ (Maloney, 1985,
p. 123)? As testified by J. Kircheisen’s review article in the Jahrbücher für
Nationalökonomie und Statistik, published the same year as the Dictionary, the first
volume had actually required seven parts (Kircheisen, 1864). Hence Kircheisen
expresses his doubts as to whether the eight remaining parts would suffice to
complete the entire dictionary. Nevertheless, he points out the quality of the article
on banking, comparing it to Lawson’s History of banking, and underscores the
excellence of several articles, in particular the ones on the BULLION REPORT and
on CRISIS, COMMERCIAL. He also states that the articles on CAPITAL, on CREDIT
and on CURRENCY had already gained attention, in particular in the Jahrbücher.
Finally, the German reviewer praises Macleod’s writing, its ‘French elegance and
clarity’.
In France, the publication of the first instalments of the Dictionary and of
Macleod’s Elements of political economy provided Michel Chevalier with the
opportunity to write, in 1862, an article for the Journal des Économistes, in which
he discusses the author’s definition of political economy as well as his conception
of currency, credit and capital. Whereas the discussion of the first point is rather a
pretext for Chevalier to present his own conception, in contrast the article shows
he is visibly convinced by Macleod’s approach of the latter subject.
Kircheisen and Chevalier’s articles bear witness to the good reception of
Macleod’s Dictionary in Germany and in France, on which Macleod prided himself:
The first volume of my Dictionary was published in 1863; it was received with
the warmest approval by the most distinguished foreign Economists, but, of
course, the devotees of John Stuart Mill utterly ignored it. I wrote every word
of it myself, and published it at my own expense, but it scarcely paid its
expenses, and I did not think it advisable to continue such thankless work.
(1896b, p. 149)
This passage also indicates that it was Macleod’s own decision to interrupt the
production of the Dictionary, as it did not sell well.
That the Dictionary was a financial failure was perhaps due to the strong grip of
→McCulloch’s Dictionary, practical, theoretical, and historical, of commerce and
commercial navigation,2 which was not, however, a proper dictionary of political
economy. Another explanation is that Macleod failed to achieve recognition with
Henry Macleod’s Dictionary of political economy 289
respect to his contribution to economics on the part of his British contemporaries,
more particularly those he depicts as ‘the devotees of John Stuart Mill’.3
A reversal of opinion began in the 1930s. In his notice on MACLEOD, HENRY
DUNNING, published in →Edwin R. A. Seligman’s Encyclopaedia of the social
sciences (1933), Hayek provided a balanced assessment, describing Macleod as
‘one of the more remarkable of that great number of self-made economists who,
discovering certain problems neglected by orthodox economists, believed it was
their task to rebuild the science from its foundations’. Macleod was also, Hayek
writes, ‘one of the first to obtain a clear grasp of the role of discount theory’.
Schumpeter, in History of economic analysis, also praises Macleod for having ‘laid
the foundations of the modern theory of banking’ and for having made ‘the first –
though not wholly successful – attempt at working out a systematic theory that fits
the facts of bank credit adequately’ (1954, p. 1115). However, both authors point
out that Macleod ‘failed to secure recognition’, to quote Hayek’s words, or ‘even
to be taken quite seriously’, as Schumpeter writes.
It is, however, Macleod the polemicist who makes the first impact. A barrage
of uninterrupted invective beats down upon the reader, page after page; all
sensations being relative, we feel the sweetness of respite when, occasionally,
overbearing rudeness is throttled back to mere stridency. The hectoring, at first
entertaining, soon becomes as wearisome as the hair-splitting. Macleod, taken
more than a few pages at a time, is not a very readable writer.
(1985, p. 120)
Now, as to whether crises could occur in the absence of credit, on this matter readers
are left to their own devices and have to be content with Macleod’s assertions that
‘Commercial Crises originating in Credit have . . . a comparatively modern origin’;
and ‘They increase in magnitude and danger with the gigantic development of
Credit (p. 626).
The author does provide some explanation nonetheless as to why crises originate
in the abuse of credit. A crisis results from ‘over-production’, of which Macleod
294 Cécile Dangel-Hagnauer
provides his own definition. Credit, he argues, is ‘productive by being purchasing
power, – purchasing power, however, which has always to be redeemed. As a result,
if people ‘produce, or bring forward for sale in any way whatever, or buy so much
on credit, so that the price of the goods, &c, when sold cannot redeem the credit,
. . . they have brought forward or produced too much’. For Macleod, ‘this is the
true meaning of that often used but ill-defined expression Over-Production’, and
‘Every mercantile operation, therefore, attended with a loss, is over-production’.
As the author observes, the frequent occurrence of crises raises two main issues,
namely, whether they can be prevented through proper regulation, and how they
are to be dealt with, in particular through the guidance of ‘the conduct of great
Banks . . . during the tempest’. A related issue is whether assistance should be
provided to borrowers who have been affected by the crisis but still remain solvent.
Indeed, because crises generate widespread discredit, they harm not only those
‘who speculate injudiciously’ but even ‘persons . . . of the highest standing’.
However, to address these issues, one needs to be able to ‘discern the symptoms
that betoken the approach of those terrible convulsions’, which requires knowing
what their causes may be.
Although Macleod distinguishes four different causes, speculation is the driving
force that always causes the trouble. Crises can be produced by prolonged low
interest rates; the opening of new markets; bad harvests; or ‘the sudden commence-
ment, or the sudden termination of a war’, as Macleod briefly indicates.
First, a protracted period marked by low interest rates is likely to give rise to a
crisis, as it creates the conditions for ‘wild speculators’ to breed schemes so as to
take advantage of the credulity of those seeking ‘more profitable investments’.
Macleod describes speculation as the purchase of shares with the intent of reselling
them, thereby comparing it to gambling nourished by ‘speculative fever’ and
manias. At some point, however, either because of calls or because ‘the circle of
dupes has been exhausted, prices begin to waver’, which causes everyone to sell
and prices to fall, thereby generating a ‘crash’. So, it is the decline in prices that
leads borrowers to failure, a fact that is merely stated, as Macleod offers no analysis
of the formation of prices, let alone of their variations.
Second, the large gains provided by new markets attract the most enterprising
adventurers, soon joined, though, by a herd of less capable imitators, causing ‘over-
production’. Third, the failure of a subsistence crop can create a sharp price increase
that will attract speculators before ending in disaster. Finally, a ‘great general cause’
like the outbreak of war or the signing of peace will disrupt the normal course of
business by increasing the demand for certain goods to the detriment of others, such
disturbances being, of course, conducive to speculation.
Having provided these initial indications, Macleod goes on to state the ‘object’
of the article, that is, ‘to examine the history of these catastrophes, and to explain
what has been the action of the Bank of England, to consider the opinions of various
persons, who are regarded as authorities on the subject, and to investigate the
principles and the policy of the Bank Act of 1844’.
Henry Macleod’s Dictionary of political economy 295
13.3.2 The history of commercial catastrophes
The greater part of CRISIS, COMMERCIAL is an historical account of the crises that
occurred in the later half of the eighteenth century, on the one hand, and between
1825 and 1857, on the other hand.
With regard to the series of events that led to the Bullion Report, the ‘fearful
monetary disasters’ that occurred between 1815 and 1817, the crisis of 1819, ‘fol-
lowed by the total suspension of cash payments by the Bank and the circumstances
preceding the great crisis of 1825’, Macleod refers the reader to his section on
‘Banking in England’ and to the entry on the BULLION REPORT.
This disaster was the second notable penalty which the county paid within four
years for the unjustifiable monopoly of the Bank. Never was there a more
unfortunate example of monopolizing selfishness; it would neither establish
branches of its own in the country, nor would it permit any other private
company of power and solidity to do so, whose credit might have interposed
and aided in sustaining its own. Moreover, when failure in confidence was
felt in the country notes, it refused to supply notes of its own to supply in their
place. The power of issuing what plays so important a part in commerce was
absolutely forbidden to wealthy companies, and left in an unbounded freedom
to private persons, many of whom had no capital or property to support their
issues, and whose credit vanished like a puff of smoke in any public danger.
The Bank consequently was left to bear the whole brunt of the crisis, solitary
and unsupported, and finally succumbed.
(p. 631)
Ironically, though, Macleod also asserts that the war with France would have
necessitated the suspension sooner or later, hence arguing that it was probably
advantageous for the country that it did occur so early in the conflict.
The arbitrary limitation of the word Currency to bank notes payable to bearer
on demand exclusively, is . . . quite erroneous and contrary to all sound philos-
ophy. The Currency Principle itself is a pure delusion; and . . . it is the greatest
delusion of all to suppose that Bank Act of 1844 carries it out.
(p. 645)
For Macleod, the main source of this ‘delusion’ lies in a ‘mistaken view of the
nature of credit’ and money:
Henry Macleod’s Dictionary of political economy 301
Nothing is more common than to say that money has intrinsic value, and that
paper is only the representation of value. The very contradiction of the ideas
involved in this language is shewn under CREDIT, CURRENCY, VALUE. It is
totally forgotten that money has no value except what it will exchange for,
and that whatever will exchange for gold is the value of gold. Paper that is
always exchanged for gold . . . is equal in value to gold. The true problem then,
is to discover how paper may best be kept at the value of gold.
(ibid.)
Second, Macleod emphasizes what he considers as both the merits and the draw-
backs of the Act of 1844. Accordingly, Macleod considers that the Act ‘compelled
the Directors to pay a strict attention to the rate of discount’, by inducing them to
raise it to avert a foreign drain of reserves. He also welcomes the fact that the public
had begun to understand the need to do so. On the other hand, Macleod underlines
that the Act had the effect of transforming a crisis, which the Bank of England had
no power to prevent, into an outright panic. To make matters worse, the Act created
an anomalous state of affairs by obliging the Bank to commit a breach of law, a
‘pernicious [situation] in a constitutional country’.
Third, Macleod argues that in times of crisis, raising the discount rate is insuf-
ficient. Quite the contrary, since the expectation that it will be raised induces agents
to borrow more and to increase their hoards, as it ‘is then not a question of profit,
but of existence’, a statement that is reminiscent of the view developed by Thornton.
In contrast, the decision to increase the issue of banknotes has the effect of causing
hoarded ones to come ‘out of their hiding places’.
A fourth issue to which Macleod returns is whether insolvent borrowers should
be bailed out. Whereas, in principle, ‘insolvent houses should be swept away’, the
author also points to the fact that insolvent borrowers have creditors, who do not
all deserve to fail, all the more so as ‘the modern system of credit’ causes ‘the
mischief’ to extend even to the ‘paper of the greatest houses’, which itself becomes
‘unmarketable’. The climate of uncertainly thereby created by the ‘general distrust’
that characterizes crises requires that the Bank provide large-scale assistance, simply
because ‘The Bank only has the means of judging which houses are solvent and
ought to be supported, and which are insolvent and ought to fail’.
The article ends with some reflections on the constitution of the Bank of England.
While Macleod believes that the Act of 1844 should be repealed, he is also quite
certain that the directors would now manage the bank on ‘sound principles’.
Reaffirming his disapproval of the monopoly of the Bank of England – considering
it is ‘utterly opposed to all sound principles of political economy’ – he argues that
it had created an abnormal situation where the directors could claim simultaneously
that they exercised ‘a great function of State’ and that they ought ‘to be exempt of
all interference as a private body’, whereas, on the other hand, ‘their interests as mer-
chants were opposed to their duty as bankers’. Nevertheless, Macleod seems con-
fident that the risk no longer existed that the ‘latter gave way to the former’. In other
words, like Bagehot (1873), he accepts the situation created by historical tradition,
despite regretting that the Bank of England had become ‘an engine of the State’.
302 Cécile Dangel-Hagnauer
13.4 CONCLUDING REMARKS
The dictionary format has the advantage of imposing constraints on its contributors.
Accordingly, several of Macleod’s deficiencies raised by commentators such as
Maloney do not appear here. The tone is moderate, the language is rarely excessive
and the piece is clear, well-written and does not go into overly technical legal details,
while remaining well documented, in particular thanks to the insertion of several
tables containing trade and banking statistics. More specifically, the Dictionary’s
entry on CRISIS, COMMERCIAL provides an interesting historical account of the
events that unfolded at the time of the crises that occurred throughout the century
preceding the publication of the Dictionary. The scope of the article is, however,
quite narrow, as it concerns central bank policy only and deals, almost exclusively,
with the evolution of the doctrine that underpinned the action taken by the Bank
of England when faced with the various crises. As a result, apart from a few short
incursions into difficulties met by Scottish banks, the mention of the events that
took place in the United States at the onset of the crisis of 1857, and some cursory
allusions to the Banks of France, Amsterdam and Hamburg, notably the application
of the currency principle to the management of the latter two, the focus is chiefly
on crises in England.
Consequently, the reader whose curiosity may have been aroused by the title
of the entry, CRISIS, COMMERCIAL, is more than likely to be disappointed. Eager
to understand what crises are, why the disruptions that affect credit recur period-
ically, and how they relate to the disturbances affecting production and trade that
accompany them, he or she is left unsatisfied. Admittedly, the introduction does
provide a few indications as to the role played by credit in both stimulating economic
activity and causing overproduction, and it clearly appears that this ambiguous
outcome is the work of speculation. Yet no proper analysis of speculative behav-
iour enables us to understand its intimate relationship with credit and its effect
on prices. Whereas Macleod is prolix when it comes to expounding his views
on subjects related to credit and banking, here it is quite clear that he has little to
say.
The reader would have also appreciated, in the course of the exposition of the
historical events that accompanied the various crises, some analysis of the ‘causes’
that triggered each crisis, at least as an illustration of the four causes the author
lists in his introductory section. For example, while noting that the Bank of England
maintained low interest rates in the spring of 1847, whereas speculation was on
the rise, Macleod does not seize the opportunity to analyse and illustrate the actual
effect of such conduct. Whereas he states the discovery of new markets as one of
the causes conducive to crises, he only mentions in passing the losses related to
the Mexican mining schemes and to the South American 1822–1825 episode.
Conversely, whereas Macleod refers to the ‘rottenness’ of the commercial world,
embezzlement is not listed among his causes of crises.
Moreover, although Macleod often cites John Stuart Mill throughout his works,
his attention was seemingly not drawn to Mill’s analysis of the role of speculation
in bringing about crises, whereas the latter’s first writings on the subject date back
Henry Macleod’s Dictionary of political economy 303
to as early as 1826 (Forget, 1990).9 Indeed, the following flat statement is the closest
Macleod comes to depicting the unfolding of the crisis:
The speculative fever was at its height in the first four months of 1825, when
it had spent its force, and came to an end in the natural course of things. . . .
In the meantime that slack water, which Mr. Tooke observes always precedes
a great turn of prices, took place. The increased prices of commodities which
speculation had caused, could no longer be kept from being realized, and prices
fell as rapidly as they had risen.
(p. 632)
In other words, the crisis is thus the ‘natural’ outcome of speculation. At some
point, the rise in prices stops and is followed by their decline. Besides, sooner or
later the crisis comes to an end, thanks to the intervention of the Bank of England,
but Macleod makes no explicit mention of the recovery and the return of prosperity.
In addition, whereas Mill advanced an explanation of the periodic recurrence of
crises (Besomi, 2010, p. 97), Macleod is content with just asserting that ‘Every
one knows that commercial crises will recur periodically’ (p. 647).
An issue that would be worth addressing more thoroughly concerns the place of
Macleod’s contribution within the nineteenth-century English debates on money
and banking. Whereas he repeatedly states his hostility with regard to the currency
principle, he shows no clear adherence to the banking school. On the contrary, he
underscores his disagreement with Tooke as to the effect of the Act of 1844 on the
variations of the discount rate (too frequent, according to the latter). On the other
hand, he expresses his disapproval of the monopoly of the Bank of England, but
it is more for doctrinal – considering it is contrary to the principles of sound laissez-
faire economics – and practical – arguing it has led to the development of weakly
capitalized country banks – reasons, than on analytical grounds. Accordingly,
Charles Coquelin is granted a short entry in the Dictionary, but Macleod makes no
mention of his position in favour of free banking (on which, see Chapter 8).
Yet Macleod developed both an interesting conception of money and an advanced
view of banking, and clearly understood the need for a lender of last resort, but he
did not combine these elements together within a comprehensive theoretical
framework. In other words, he produced the necessary building blocks, but he did
not endeavour to construct a coherent theory of money, credit and banking.
More specifically, a question that comes to mind is to what extent Macleod can
be considered as having participated in the process that led to the widespread
acceptance, within what Fetter (1965) labels ‘British monetary orthodoxy’, of the
role of the central bank as lender of last resort. In the historical process that led to
Walter Bagehot’s specification of the functions of the lender of last resort, Macleod
appears to be more a witness than a real participant. In effect, he clearly shows his
approval of Thornton’s assessment of the events of 1797, and successfully picks
up the main ingredients that make up Thornton’s conception. He also cites Sir
Francis Baring, but does not pick up his terminological usage of ‘dernier resort’.
Like Bagehot, he considers that it is the central bank’s role to increase the issue of
304 Cécile Dangel-Hagnauer
banknotes in the advent of a panic. In particular, that the central bank will behave
in this fashion is something that must be publicly stated and known to everyone.
He also believes that the central bank should only bail out solvent borrowers. On
the other hand, although he is in favour of raising the discount rate in times of panic,
he does not go so far as to explain, like Bagehot, the rationale behind imposing a
penalty rate, in particular that doing so would encourage greater efficiency in bank
management.10 Furthermore, he does not explicitly defend the principle that the
central bank should hold large reserves.
Overall, the greatest shortcoming of this entry lies perhaps in its general lack
of originality. A large proportion of the entry is made up of quotations from
‘authorities’ heard by the parliamentary committees that were appointed in the wake
of the different ‘commercial catastrophes’. More disappointing still is the fact that,
although Sir Francis Baring is cited twice and Henry Thornton is generously quoted,
the notion of lender of last resort does not stand at the centre of his argument,
whereas Macleod clearly understood that this was the function of the Bank of
England that was at work each time it intervened to put an end to bank runs and
panics. Unlike Thomas Joplin and Vincent Stuckey, who were important actors
during the 1825 crisis and the 1832 hearings (O’Brien, 2003), Macleod did not take
part in developing the concept of lender of last resort. Nor did he participate,
alongside Bagehot,11 in disseminating the idea of lender of last resort and helping
both the economics profession and the public to understand its importance. This
is precisely what could have been expected from a dictionary article – another
missed opportunity, another instance of his ‘being out of touch’ (Maloney, 1985,
140)?
NOTES
1 Several entries refer to articles that never came into being. For instance, ACCUMULATION
refers to COMPANY, and COMPANY refers to PARTNERSHIP. The dictionary ends with
an entry devoted to CZÖRNIG, C.F. VON, followed by an additional one on COOPERATION,
apparently forgotten along the way, which also refers to PARTNERSHIP.
2 For details, see Chapter 2, Section 2.3 of the present volume.
3 A notable exception is Jevons; see White, 2004.
4 Interestingly, the bibliography that Juglar appends to his dictionary article of 1891
(see Chapter 12 of the present volume) refers to Macleod’s entry on crises in his
Dictionary of political economy. However, the designation of the entry (‘Banks crisis’)
is erroneous.
5 Macleod’s contribution to the theory of credit was the subject, early in 1866, of N. G.
Koopmans’s Ph.D. dissertation in Belgium. Also noteworthy is M. Lindner’s (1929)
Ph.D. dissertation on the same subject and defended in Germany. Both references are
cited by Hayek in 1933.
6 Macleod makes extensive use of capital letters, emphasizing words by writing them in
upper-case. These words have been emphasized here with the use of italics.
7 For an in-depth analysis of the relation between Jevons and Macleod, see White, 2004.
8 This distinction is reminiscent of Juglar’s division between the ‘determining cause’ of
all crises and the ‘occasional causes’ or particular circumstances in which crises burst
out; see Chapter 12 of this volume.
Henry Macleod’s Dictionary of political economy 305
9 This is, in fact, unsurprising, considering Macleod’s general assessment of J. S. Mill,
stated in his History of Economics and cited by White, 2004: ‘Every page of [J. S. Mill’s]
work is full of the most glaring ignorance and blunders; and there is scarcely a single
point in which he does not contradict himself. Now, in sober seriousness, we must ask
how is this more consistent with scientific morality than cheating at cards, or forgery,
or issuing base coin’ (Macleod, 1896b, p. 123).
10 As noted by Laidler, 2003, p. 70, fn. 16), Goodhart takes issue with T. M. Humphrey’s
(1987) interpretation of the ‘very high’ rate, which Bagehot advocates the central bank
should apply to protect reserves, as a ‘penalty’ rate (Humphrey, LENDER OF LAST
RESORT, in →The new Palgrave dictionary of money and finance, 1987); see also
p. 71, fn. 18.
11 As Fetter (1965, pp. 269–271) writes: ‘In 1860, . . . [Bagehot] became the editor of the
Economist . . . Bagehot, despite his devotion to the principle of free trade, . . . brought
in the idea of the Bank as a lender of last resort in a way that ran counter to much of
James Wilson’s thought expressed earlier in the Economist’.
REFERENCES
Not only the younger Austrian school, Menger, Böhm-Bawerk, Sax, but many
German writers who stand apart from that movement, even the founders and
most uncompromising representatives of the older German historical school,
Roscher and Knies, with scholars like the late Professor Nasse, and many
310 Vitantonio Gioia
among the living – none would wish be judged abroad by the narrow opinions
of the younger historical school, more particularly not by the opinions of the
scientific head of that school, Professor Schmoller.
(1891, p. 319)
Wagner then added: it is true that most of us in Germany are ‘so far members of
the historical school that we point to the need for induction side by side with
deduction; that we warn against hasty generalization, against exclusive reasoning
on the basis of economic self-interest; that in practical problems we have no faith
in any absolute solution, and insist upon the principle of relativity’ (Wagner, 1891,
p. 319). These approaches, as is well known, are not only shared by Gustav
Schmoller (Schmoller, 1923, Vol. I, pp. 100 ff.; 1898), but are explicitly recalled
by Marshall in his Principles with reference to Schmoller and his methodological
orientation (Marshall, 1920, p. 29).
Schmoller saw two inconsistencies in Wagner’s position. First, notwithstand-
ing his liberal views in economic matters, Wagner’s ethical approach to the
analysis of economic phenomena assigned ‘to the law and to the state’ ‘a more
significant role than that imagined by the scholars of the classical school’. Second,
while Wagner advocated the integration of theory and history, in his defence
of the Ricardian approach he clearly underestimated – in Schmoller’s view –
its implications in the method of long-term analysis, which severs theory from
history.
Nevertheless, in his address (5 March 1905) for Wagner’s seventieth birthday,
Schmoller acknowledged that he not only founded (with Schäffle and Rodbertus)
‘so-called state socialism’, but worked also in the making of ‘an intermediate path
between the old and the new in economics’ (Schmoller, 1913, p. 282; see also Salin,
1944, p. 158). In the future, he added, Wagner will be considered (with Rodbertus
and Schäffle) as an influential representative of a ‘predominant orientation
of German economics of the last century’, because ‘state socialism is an indis-
pensable component in the development of our political and economic ideal world
in the crucial struggle between individualism and socialism’ (Schmoller, 1913,
p. 283).
In conclusion, the theoretical distances between them were less relevant than
the harshness of their reciprocal criticisms in some periods would lead us to believe.
It is not by chance that Jonas defined their contrast as like a skirmish (Vorgefecht),
which only superficially seemed to anticipate the Methodenstreit (Brinkmann,
1937, pp. 126–127; Jonas, 1964, pp. 122–123). It suffices here to recall what Wagner
wrote in 1895:
The entire historical school, the younger ones in a livelier way . . . , reacts
against the inquiry method of later English and continental economics, against
the overestimation of speculative deduction, addressing itself mainly to the
inductive method, history, statistics and the use of direct observation. The
German historical school considers the economy as an historical product,
which could not be sufficiently explained through abstract speculation. It
Adolf Wagner on crises, capitalism and human nature 311
begins, then, the correction of the unilateral and narrow economic psychology
of the British doctrine . . .
(p. 18)
Adolf Wagner died on 8 November 1917, the same year as his great opponent,
Gustav von Schmoller. This death marked the end of an epoch, which saw German
economics become an international point of reference not only for economists,
but also for sociologists and other social analysts.
As Mitchell noted, for a century or more Western Europe experienced ‘at intervals,
speculative manias, glutted markets, and epidemics of bankruptcy’, but the real
‘discovery of the problem’, concerning the necessary relationship between capi-
talistic dynamics and fluctuations of economic affairs, arises only in the course of
the nineteenth century. The structural change in the capitalistic economy, and rapid
technological transformation, forced, from 1815, ‘the problem to the fore’ (Mitchell,
1927, p. 3). Contrary to what happened in other countries, German economists
immediately manifested a peculiar sensitivity towards this issue. They ‘contributed
some notable surveys . . . , when comparatively very little work was being attempted
on it by English theoretical economists’ (Hutchison, 1953, p. 132). Roscher, Nasse,
Wagner, ‘and finally Spiethoff, not to mention the followers of Marx and Rodbertus,
all contributed to build a “body of doctrines” which was significant and largely
influential on the development of the analyses of economic crises and business
cycles’ (ibid.).
The reasons for this strong interest probably stem from the approach of the
German economists, aiming to create a fruitful bridge between theories and history,
in order to overcome what they perceived as the limits of the ‘speculative deduction’
of the English school. Of course, they generally criticized not the use of deductive
procedures in economic analysis, but the fact that they were used ‘too unilaterally’
and ‘with little caution’, demonstrating their incapability of explaining economic
and social changes (Wagner, 1895, p. 14).
Wagner’s contribution must be seen in the light of the many serious reflections
on economic crises that took place in Germany after K. H. Rau’s Malthus und Say
über die Ursachen der jetzigen Handelsstockung, published in 1821. In it Rau
reconstructed the debate between Malthus and Say by means of abstracts from
Malthus’s Principles and through the correspondence of J.-B. Say with the English
economist. What struck German economists was the fact that Rau considered
seriously the objections that Malthus addressed to J.-B. Say. So, while he considers
the Malthusian idea concerning the possibility of a general glut unacceptable, at the
same time he calls for an adequate evaluation of the relationship between the increase
of commodities and the dynamics of income distribution (Rau, 1821, p. 262). It is
necessary, he points out, to avoid the temptation to consider commodities as an end
312 Vitantonio Gioia
in themselves without relating them to human needs and people’s capability to buy
them (ibid., pp. 263 ff.). From this point of view, Rau’s attention to the theories of
Malthus and Sismondi does not diminish his trust in free competition and in the
capability of market mechanisms to produce satisfactory balances. It emphasizes,
if anything, the necessity of a more careful analysis of the conditions that can assure
market balances, given the rapidity of economic changes, the demographic dynamics
and the transformation of consumption patterns (Rau, 1855, paragraphs 327–331;
Italian translation, pp. 468 ff.; Hagemann, 1995, pp. 177 ff.)
Wagner’s critical target was Roscher’s view on crises (DIE PRODUCTIONSKRISEN
MIT BESONDERER RÜCKSICHT AUF DIE LETZTEN JAHRZEHNTE, in →Die
Gegenwart, 1849; for a full discussion, see Chapter 7). Roscher’s position is in
many aspects similar to that of Rau. He unrolls his reflections in the context of
a classical approach (Schumpeter, 1986, p. 802; Ikeda, 1995; Streissler, 1995; Gioia,
2000, pp. 33 ff.), maintaining that in a progressive and dynamic economy it
is difficult to take for granted the balance between the supply and demand of
commodities. Of course, a ‘proportional increase of production and consumption,
supply and demand is the essential condition for the prosperity of every economy’.
The problem is that in capitalism, ‘troubles’ (Störungen) periodically occur; they
manifest themselves as imbalances between the supply and demand of commodities,
often assuming the features of a general disease of the economic system. For this
reason we cannot consider – as J.-B. Say does – these phenomena as marginal
in the analysis of today’s economy (PRODUCTIONSKRISEN, p. 724). Roscher
addressed two kinds of objections to Say: one was epistemological in nature; the
other concerned the content of his theory.
As far as the first aspect is concerned, Roscher points out that in a monetary
economy characterized by an extraordinary dynamism and by strong pressure on
individuals, who are required to take advantage of every favourable economic occa-
sion in the search for increased personal earnings, it is difficult to balance in
an optimal way the level of individual plans and the level of macroeconomic
movements. Perturbations normally occur as phenomena produced by the intense
dynamism of economic systems (PRODUCTIONSKRISEN, p. 723).
Anyway, to represent the capitalistic economy as a stationary economy, basically
grounded on barter (exchanges of commodities with commodities), is simply a
mistake. In fact, the introduction of money in the economic circuit determines
phenomena that affect consumers’ and producers’ behaviour in a significant way
(Hagemann, 1995, p. 180; Gioia, 2001):
Say’s theory strictu sensu is brought into question by the simple introduction
of monetary exchange. As long as primitive and rough barter predominated,
the goods supplied and demanded were immediately comparable. But with
monetary mediation the buyer is in a condition to buy only after a while or to
postpone, according to his will, the other half of the exchange. As a consequence,
supply will not imply a corresponding demand on the market. Then the sudden
reduction of the medium in the circulation process can generate a general crisis.
(PRODUCTIONSKRISEN, p. 726)
Adolf Wagner on crises, capitalism and human nature 313
As for the second aspect, the empirical evidence, referring to today’s economy,
shows that ‘not every production implies the guarantee of a corresponding demand’.
As a matter of fact, such an eventuality could occur ‘only if production harmonically
develops in all the sectors of the economy’ (PRODUCTIONSKRISEN, p. 727). The
problem is that only when the products are on the market will we be able to ascertain
the effects of changes and the relevance of imbalances. These are inevitable if we
consider the following features of capitalism:
1 the increasing division of labour: ‘the more the division of labour is developed,
the more it is difficult to maintain the supply of a good always in equilibrium
with future demand’ (PRODUCTIONSKRISEN, p. 728);
2 the fact that every change involves significant effects in the income distribution
and in consumption level, producing further imbalances between supply and
demand (PRODUCTIONSKRISEN, p. 726);
3 uncertainty affects the psychological attitude of entrepreneurs, changing their
expectations from optimism to pessimism and leading to relevant reductions
of investment levels (PRODUCTIONSKRISEN, p. 723);
4 the adjustment mechanisms are not so instantaneous as Say asserts: the time
factor plays a significant role during economic dynamics, amplifying the fluc-
tuations: the one who ‘takes advantages . . . [from the new economic situation]
does not increase his consumption so rapidly as someone else is forced to
reduce it because of his losses: this is partially due to the simple fact that the
first one cannot so precisely calculate the level of his earnings as one who
evaluates his losses’ (PRODUCTIONSKRISEN, p. 726).
Wagner’s starting point is the traditional distinction between partial or special crises
(speciale Krisen) and general crises (allgemeine Krisen). In his opinion, careful
analytical work is needed in order to distinguish between recurring or occasional
causes in the development of crises. Such work has to be particularly devoted to
an adequate evaluation of historical features of every crisis. For this reason, Wagner
adds, it is difficult to comprise ex ante and ‘in a precise definition all the determining
factors of a crisis’ (Wagner, KRISEN, p. 526). In Wagner’s opinion, at the empirical
level every crisis seems to be characterized by the same phenomenology: a great
quantity of commodities remain unsold. The following market turmoil brings
significant economic losses for the producer and a decrease in investments.
Production and credit collapse because money holders do not want to part with
money (die zeitweilige Unlust der Geldbesitzer, sich ihre Geldes zu entäu‚ern),
by reason of their pessimistic attitude. This makes ‘special crises’ and a ‘general
crisis’ comparable.
These recurring phenomena could prima facie be compatible with an explanation
grounded on an underconsumption theory à la Malthus (KRISEN, p. 532), but
this approach has two relevant limits: first, it is based on the analysis of the
circulation process and it has only a descriptive function; second, it is unable to
distinguish between the several types of crises and is incapable of explaining the
factors that change a special crisis into a general one (ibid., p. 529; see also Mill,
2006, pp. 574–576).
Wagner criticizes the overproduction view and the Malthusian idea of a ‘general
glut’, reminding us that these hypotheses have been successfully demonstrated
as unfounded by Say, Ricardo, James Mill and John Stuart Mill: ‘a real general
Adolf Wagner on crises, capitalism and human nature 315
overproduction of all goods and, as a consequence, a lack of market outlets cannot
exist, because also in a monetary economy, in the last resort goods are exchanged
with goods’ (KRISEN, p. 532). If a particular commodity is overproduced and
supplied in excess, a partial glut might occur. However, this means that another
commodity has been produced in insufficient quantity, and, as a consequence,
competition in a free market will correct such disequilibria.
Say’s law shows that the economic system has self-regulatory mechanisms able
to determine, under conditions of competition, a dynamic equilibrium between supply
and demand. By contrast, the economists who seek to refute it are convinced that
these balances are impossible, and try to demonstrate the presence of a kind of struc-
tural defect (organischen Fehler) in the economic system. As a consequence, they
evaluate as a ‘defect’ what is simply a peculiarity of capitalism (KRISEN, p. 532).
In Wagner’s opinion, an adequate explanation of general crises and of their
peculiar features implies not only a knowledge of the circulation processes (John
Stuart Mill’s ‘mercantile . . . facts’), but especially a deep understanding of the
radical changes typical of contemporary capitalism in all the productive sectors.
We need, Wagner continues, a theoretical framework able to fix the peculiar
character of the economic system (KRISEN, p. 532) and the endogenous reasons
that determine the phenomenon of the tendency of profits to a minimum rate.
The periodicity of general crises can be understood because the extraordinary
increase of wealth in the capitalistic system is deeply intertwined with two signifi-
cant phenomena: recurring overspeculation and the tendency of profits to fall to a
minimum. The latter changes the speculation as a physiological aspect linked to
market dynamics into a large pathological phenomenon (overspeculation), prepar-
ing the context of the general crisis.
Speculation represents a useful phenomenon, given the peculiar features of a
capitalistic economy: it makes possible the rapid adjustment mechanisms of prices
and quantities of commodities necessary for the optimal working of the economic
system, determining sound balances between supply and demand (KRISEN, p. 527).
Besides, by means of speculation, capital is channelled towards the sectors where
it can be used in an optimal way. So, speculation unrolls a decisive regulatory func-
tion with reference to production and commerce by exploiting the effects of price
differentials in space and time (KRISEN, p. 527).
In Wagner’s opinion, there is another important effect determined by speculative
tendencies which should not be underestimated: the low level of discount rate
favours credit expansion and the rise of investments also in the presence of a high
level of risk. In a phase of growth, characterized by optimistic expectations,
entrepreneurs tend to invest in high-risk enterprises, creating or consolidating firms
that are useful not only for that specific phase of growth but also for a renewal
process of the entire economy. As a consequence, ‘investments in firms with high
density of capital, certainly not realizable without this speculative tendency, are
promoted’ (KRISEN, p. 530). Moreover, an extensive economic application of new
discoveries occurs thanks to the disappearance of the previous constraints, favoured
by the optimistic climate determined by the spread of speculative tendencies
(KRISEN, p. 531).
316 Vitantonio Gioia
Unfortunately, speculation is not ruled by self-regulatory mechanisms and tends
to overcome the phase of positive conjuncture. Entrepreneurs, seeking easy profits,
increasingly invest in risky activities, encouraged by the possibility of easy access
to credit. The speculative circuit enlarges, involving all economic activities and the
capital market (KRISEN, p. 531). Overspeculation (Überspeculation) occurs, leading
to progressive imbalances between the supply and demand of capital. Credit
becomes more costly, the phase of growth ends and panic breaks out (KRISEN,
p. 534).
At this point, any small and otherwise insignificant event, or a single failure,
suffices to widen the credit abuse and generate a negative effect on prices. Nobody
grants credit, nobody buys; the crisis breaks out and rapidly spreads to the capital
market and to the commodities market (KRISEN, pp. 534–535).
In Wagner’s opinion, the complex phenomenology of the crisis is compatible
with Say’s law and can be conveniently explicated only thanks to it. He does not
take Roscher’s objections into due consideration and even though he acknowledges,
as we have suggested before, the features of the new phase of the capitalistic econ-
omy, he is convinced that the changes it has undergone do not modify the explicative
effectiveness of Say’s law. In Wagner’s opinion, Roscher ‘during his polemic
against the view of Say and James Mill . . . did not produce any fact which could
render necessary a fundamental modification of it’. On the other hand, neither the
introduction of money, nor the emergence of a peculiar mercantile rank, nor the
extensive use of credit justifies the refusal to accept Say’s law or to consider the
‘Millian explanation as inadequate’ (KRISEN, p. 532).
Probably, Wagner insists, we can accept the ‘practical indications’ of Roscher’s
criticisms. They consist in the emphasis he attributes to the distance existing
between the over-abstractly conceived formulas and the complexity of the concrete
reality of the crisis (ibid.). Nevertheless, if that is true, we can solve the problem
not by modifying Say’s law, but by using new analytical devices (especially, deeper
statistical researches) in order to increase our knowledge of the economic phe-
nomena. From this larger knowledge, more correct empirical laws are likely to
derive (bereits einige empirische Gesetze ableiten können), bridging the gap
between theory and history. As a consequence, within the theoretical framework
assured by Say’s law, the theory of economic crises becomes simply a problem of
more rigorous inductive inquiry (ibid., p. 533).
Besides, a better knowledge of the crisis phenomenon could possibly prevent
its more negative aspects or, when a crisis occurs, could point the way to the
adoption of more adequate measures able to mitigate the intensity of fluctuations.
In Wagner’s opinion, also considering this side of the problem, the pathway seems
clearly traced: a prudent intervention by the banking system is certainly required,
while the serious mistake of direct state intervention (considered as unacceptable
and deplorable) should be avoided (ibid., p. 535).
Adolf Wagner on crises, capitalism and human nature 317
14.5 CAPITALISM, CRISES AND ECONOMIC MOTIVES
REFERENCES
Is there really, [derived] from the very nature of the facts, a classification of
the sciences amongst themselves? . . .
In a word, are there scientific laws or not? That is the question to be asked
on the threshold of the general classification of the sciences.
The encyclopaedia should answer in the affirmative or renounce the pursuit
of its work.
(PRÉFACE, p. vi)
Dreyfus argued that the inventory and subsequent classification of subjects and
sciences had become essential since societies of the late nineteenth century were
living through a period of transition and brutal acceleration of the progress of the
sciences, a period in which actions and interventions should be tempered.
In the 18th century, an epoch which was destructive on the one hand and
constructive on the other, the encyclopaedia had to be at one and the same time
both a weapon of combat for destruction and a pulpit of doctrine for building;
in our intermediate epoch in transition, the encyclopaedia must be a work of
exposition . . . our times are characterized by the full awareness of such a
transformation, we are aware of this unceasing movement of things and beings.
(PRÉFACE, p. ix)
Is it not the peculiarity of our modern society to seek to rid itself little by little
of the political forms of the past, which hinder the development of democracy,
[and] to passionately engage in the search for a new distribution of social forces
and economic elements, without, however, having given democracy its defini-
tive form [nor] society this stable equilibrium between two feuding brothers
who must be reconciled, Capital and Work?
(PRÉFACE, p. ix)
322 Ludovic Frobert
15.1.2 Laveleye and the Grande Encyclopédie
Émile de Laveleye died in 1892 and could only participate in the first volumes of
the Grande encyclopédie. His participation was very minimal and seems (at first
glance) to be limited to the writing of the entry CRISE. When the first volumes
appeared in the late 1880s, he did not write the important entries linked to B ANQUE,
CRÉDIT or even ÉCONOMIE POLITIQUE. This sporadic collaboration could have
had different causes and it would be unwise to attribute this situation to any
particular one. Nevertheless, it should be remembered that his point of view, which
was highly historicist and ultimately very sympathetic to German reformist
socialism, went beyond the limits of the positivist and notably solidarist credo of
the Grande encyclopédie. Whereas Ferdinand-Camille Dreyfus, who was respon-
sible for the ‘political economy’ section, defended the idea that ‘the physical world
and the social world evolve unceasingly following identical laws, the infinitely
slow and hardly perceptible effects of which are irresistible by their persistence in
eternity’ (DREYFUS, Grande encyclopédie, Vol. 14, p. 1087), Laveleye advanced,
as we shall see, a very different proposition in the field of economics. The
LAVELEYE entry in the Grande encyclopédie thus puts him ‘at the extreme left of
the socialism of the professorial chair’3 (Vol. 21, pp. 1056–1057). And in the entry
on ÉCONOMIE POLITIQUE (political economy), André Berthelot’s judgement of
Laveleye is far from positive:
Émile de Laveleye was born in Bruges in 1822 and trained in philosophy and law
at the universities of Louvain and Ghent. His participation in the discussions of
the Société Huet between 1846 and 1851 marked the beginning of his intellectual
training. Under the guidance of the philosopher François Huet (1814–1869), this
intellectual circle was the Belgian birthplace of an original tradition of liberal
socialism. Huet was a professor of philosophy at the University of Ghent who
considered that the ‘new social dogma’, inaugurated by the 1789 Revolution and
gropingly prolonged by socialist doctrines and experiments until 1848, did nothing
but express the true demands and directions of Christianity. In Le règne social du
christianisme (1853), Huet attempted to define the relevant directions of this social-
ism, situated halfway between individual egoism and communism. He underlined
Émile de Laveleye on crises, Christianity and socialism 323
the need for a radical redefinition of the property law which would guarantee a
minimum of resources for everybody, and thus liberties and autonomy for all.
Moreover, this reform should also equitably regulate the distribution of resources
and the retribution of every agent engaged in economic transactions (Bertrand,
1907; Cunliffe and Erreygers, 1999).
When Émile de Laveleye explained later that ‘democratized property must save
democracy’ (Laveleye, 1878, p. 23), he was clearly asserting the Huet inheritance.
He enriched this intellectual inheritance with the ideas of authors such as John
Stuart Mill or Charles Dupont-White. From his earliest writings, particularly Études
historiques et critiques sur le principe et les conséquences de la liberté du commerce
international (1857), he criticized unconditional laissez-faire, writing that ‘the
doctrine of free trade in its absolute terms is, in theory, only true [given] two con-
ditions: 1st that all men are owners; 2nd that all the Nations are united’ (quoted in
Mahaim, 1892, p. 94). Laveleye was appointed professor of political economics at
the University of Liège in 1864. As an essayist attracted to the most varied subjects,4
he wrote for a large number of periodicals and published three major works on
economics.5
The first edition of De la propriété et de ses formes primitives was published in
1874. Laveleye employed historical methodology in order to criticize judicial and
economic apriorism which leads to the turning of individual and hereditary property
into a natural right. He noted that land ownership had been collective or semi-
collective for a long period. Property is therefore an institution which is variable
depending on time and place, and these collective choices, which enable different
societies to guarantee a certain amount of usefulness and equity, constitute its true
foundations. Rejecting approaches that consider that occupancy, work, contracts,
convention or the law constitute the foundations of property, Laveleye contends
that over time a ‘rational’ rather than a natural property right emerges: ‘the personal
right of man in relation to nature is to possess a sphere of action sufficient [for
him] to draw from it his means of living,’ he wrote, adding:
the right consists in the set of conditions necessary for the physical and spiritual
development of man, in so far as these conditions depend on the will of man.
Property is the realization of the set of means and conditions necessary for
either the physical or spiritual development of each individual in quality and
quantity in keeping with his individual needs.
(Laveleye, 1891, p. 557)
on the contrary, they think that in the economic domain as amongst animals,
in the fight for existence and the struggle of egoisms, the strongest crushes
Émile de Laveleye on crises, Christianity and socialism 325
or exploits the weakest, unless the State, the organ of justice, intervenes to
attribute to each what is legitimately his. They add that the State must contribute
to the progress of civilization and accept as its principal mission the improve-
ment of the moral, intellectual and material condition of the working classes.
Finally, instead of professing, with the orthodox economists, that unlimited
liberty is sufficient to put an end to social struggles, they claim that a series of
reforms and improvements, inspired by sentiments of equity, is indispensable
if one wishes to escape civil dissensions and the despotism which they bring
in their wake. They admit that socialism has been truly useful in drawing atten-
tion to the evils and inequalities of the present social order, and in penetrating
the souls of decent men with the desire to remedy them.
(ibid., p. 320)
15.3 CRISES
Laveleye began his reflection on economic crises around 1860, associating the
‘regular and almost periodical return of these disastrous disruptions’ (Laveleye,
1865, p. 9), these ‘storms of the world of business’, with an alteration of circulation:
crises are first manifested in a ‘profound disorder of the mechanism of exchange’
(ibid., p. 107), the origin of which must be determined. In a period marked by the
French lagging behind in innovative banking and financial matters, and during
which, among the majority of liberal economists, a metallist conception of money
was predominant, as was widespread agreement concerning the Banking principle
(Breton and Lutfalla, 1997), Laveleye presented a flexible and pragmatic line of
argument. He challenges the principle, which is specific to the Currency principle,
of a strict relationship between metal reserves and the emission of paper money,
while symmetrically rejecting the arguments of the partisans of free banking. He
finally comes down in favour of a flexible regulation of the monetary supply,
adapted to growth and its fluctuations. This direction guides him in the analysis of
crises, the different climates of the money market, its doldrums and hurricanes,
which affect the economy. Yet, in agreement with his general conception of
economics, moral and political science and historical science, Laveleye explicitly
refutes the approach of Clément Juglar in which intangible economic laws are
used to explain crises. For the Belgian economist, crises are events that are
dependent on historical circumstances and institutions. It is therefore possible and
necessary to regulate the rhythms of the money market in order to smooth the growth
of the modern economy. Laveleye advances the idea that modern economies show
three characteristics: they are economies of growth; this growth is more often than
not based on credit (the metal base becoming progressively weaker); and they are
open economies. This situation makes each economy vulnerable to the slightest
contraction of its circulation, and, at present, the major risk for each economy resides
in its participation in international trade and in its balance of payments. Thus, in
1865, Laveleye principally relates the onset of crises to
1st The use of credit in all its forms; 2nd a market heavy with forward trans-
actions and commitments of all sorts: subscriptions to public loans [emitted
by] the State or towns, to bonds or shares in large companies, works of improve-
ment and construction undertaken by private individuals, etc.; 3rd disorder in
the balance of payments which requires the exportation of a notable quantity
of cash to be taken from a circulation which only just possesses the necessary
[amount].
(ibid., p. 149)
Since the crisis is the consequence not of natural economic laws but of historical
circumstances and the institutional milieu, regulation is possible. As early as 1865,
Laveleye mentions several means of ‘prevention’, highlighting the important role
of the central bank: the maintenance of a comfortable metallic base, the modulation
of the official discount rate and the increase of interest rates.
In the late 1880s, when Laveleye wrote the political economy section of the entry
on CRISE for →La grande encyclopédie (there were also a general section and one
referring to pathology), the basis of his explanation remained the same: ‘economic
crises are serious disturbances of a system of exchange based on credit’ (CRISE,
Vol. 13, p. 380). However, the historical context had evolved. During the early
1870s a long depression had begun, seemingly invalidating Clément Juglar’s
analysis in terms of the short cycle and its reassuring periodicity. French economists
discussed Juglar’s thesis and demanded a complement that would analyse these
longer and more profound depressions of a new type (Breton and Lutfalla, 1997).
Diagnoses diverged, with certain economists highlighting structural non-monetary
factors, such as innovation in the area of transport; other economists explained the
depression using monetary factors – an insufficient availability of currency
resulting, in particular, from the demonetization of silver since the beginning of
the 1870s and the decrease in the production of gold. Laveleye adopted this last
point of view, which was also defended by his colleague Alphonse Allard, Director
of the Mint at Brussels (La crise, la baisse des prix, la monnaie, 1885). Laveleye
enriched several elements of his analyses. In the first instance, he presents a typology
of crises, distinguishing ‘commercial and monetary crises’ from ‘industrial crises’
(which only strike a limited number of industrial sectors) and from ‘stock market
crises or crashes’ (speculative crises limited to a single product such as the tulip
in Holland in the seventeenth century, for example). The ‘commercial and monetary
crises’ are, however, the largest, and Laveleye seems to introduce a distinction
between commercial crises and monetary crises. According to Laveleye, the
commercial crisis, which is regular and almost conforms to a ten-year interval,
328 Ludovic Frobert
presents a quite typical morphology within which he distinguishes three principal
phases. The ‘preparation’ phase sees investment opportunities materialize.
Innovations are numerous, new outlets open and savings are available; then
‘economic progress is accomplished calmly and without jolts’ (ibid., p. 380). During
this growth, however, credit facilities rapidly encourage speculative phenomena:
when one obtains money cheaply, a large number of enterprises become pos-
sible which were not before. Thus, capital solicits the spirit of enterprise which
sets itself in motion with growing activity which sometimes becomes feverish.
. . . What singularly encourages this expansion and overexcitement is the use
of credit.
(CRISE, p. 381)
However, this ‘period of expansion’ gives way quite rapidly to the ‘period of
contraction or revulsion’. The speculative process reaches its limits, confidence
crumbles and the system becomes vulnerable to the slightest shock; finally, credit
diminishes, triggering the crisis:
credit was the means of exchange and payment used by everyone, but in these
moments of crisis mistrust is communicative, and rightly so, for one can never
know who will weather the storm and remain standing. It ensues that credit
tightens, shies away or even absolutely refuses [to be given]. . . . Economic
life is, so to speak, suspended because exchange, which is its essential cog,
has stopped.
(ibid., p. 381)
When it came to giving his verdict on the monetary and commercial crisis
experienced by the Belgian economy in the mid-1880s, Laveleye was even more
precise and ambitious: in this instance, his reflections on crises, their causes and
their remedies were at one with his general conception of the political economy.
The general cause of crisis resides in a deficit of monetary resources mainly resulting
from the abandonment of money and bimetallism: the crisis is thus ‘the product
of ill-inspired human legislations’ (Laveleye, 1897, p. 207). Considering that a
different political management of currency was needed, Laveleye would remain
a fierce partisan of bimetallism. Thus, the reflection on crises offered by Laveleye
is also linked to his reflection on the articulations between economics and politics,
growth and democracy. The crisis shines even more light on the problem encoun-
tered by modern societies that support democracy while their economic liberalism
and the wish for non-regulation lead to the widening of inequalities and the
vulnerability of the populations of workers. The crisis should therefore become an
urgent opportunity to revisit this democracy–inequality hiatus. One must prepare
or reinforce democracy (this is the present-day mission of the bourgeois elite,
according to Laveleye): ‘I assume the most radical democracy’ (ibid., p. 193).
This democracy requires free, compulsory, generalized instruction as well as other
laws: ‘this is not almsgiving, but the creation of institutions destined for the intel-
lectual and moral development of the working class’ (ibid., p. 198). Among these
institutions, ‘generalized insurance, an application of the principle of human soli-
darity’ (ibid., p. 201), should be favoured. By means of a policy of great works,
the state must also come to the aid of the populations made the most vulnerable by
the crisis. Finally, these combined advances in democracy and a more humane
and fraternal economy must eventually enable the development of a more partici-
pative economy with broader foundations in dialogue and negotiation. Laveleye
explains that to achieve these aims, the expansion of boards of arbitration and
conciliation must be favoured in order to enable the emergence of negotiated
regulations of work and to encourage the experimentation of co-operative societies.
Laveleye was ‘a sower of ideas’ who provided an overall vision of the evolution
of late nineteenth-century capitalism in his numerous essays, articles, brochures
and books. He was a distinguished representative of liberal socialism and a partisan
of the market economy who also demanded vigilant regulation and control of its
growth. His theory of crises is an integral part of this overall vision. In Laveleye’s
330 Ludovic Frobert
work the crisis is definitely not a normal phenomenon or a natural and periodical
rhythm of growth (progress in contemporary terms). He held that the crisis is an
evil that can and must be prevented and permanently cured. His analysis of crises
tracks this evil in its different forms in the economic system of his time, forms that
he distinguishes, classifies and differentiates. This typology put him on the trail of
numerous innovations – Laveleye is the first dictionary contributor to clearly
differentiate between crisis and depression (see Chapter 3, Section 3.2.8.4). For
Laveleye, the crisis is an evil for two reasons. The first reason is economic and
social, for the crisis is of absolutely no material benefit to anyone – it is not, for
instance, a salutary purge periodically giving new vigour to the economic organism
but is characterized by a large amount of waste, material losses and social suffering.
The second reason is political and moral, for if crises occur it is by error, because
of political immaturity and bankruptcy. In Laveleye’s vision all types of crisis are
accidental and avoidable. Yet the regulation of the crises that punctuate the
development of the market economy can only stem from a strong political power,
that is, in Laveleye’s terms, a democratic one. Laveleye’s conception of economic
crises is an integral part of his more general reflections on the affinities to be
cultivated between growth and democracy.
NOTES
1 ‘La Grande encyclopédie is a work of noble popularization. It intends to account for the
present state of modern science, and to draw up the inventory of human knowledge in
our epoch. A stranger to present-day quarrels and resolved not to be an implement of
battle, La Grande encyclopédie is governed and can only be governed by the present
state of science’ (PRÉFACE, p. i).
2 This was an implicit critique of →Pierre Larousse’s Grand dictionnaire universel du XIXe
siècle. The GDU was judged by the GE team to be too ideological and subjective.
3 Socialists referred to as Katheder-Sozialisten in German.
4 Several works by Laveleye touch on the field of public law and political science (Essai
sur les formes de gouvernement dans les sociétés modernes (1872); Le gouvernement
dans la démocratie (1891)) as well as international relations and nascent nationalities
(La Russie et l’Autriche depuis Sadowa (1870); La péninsule des Balkans (1886); Lettres
d’Italie (1879); Nouvelles lettres d’Italie (1884)). He also wrote several major texts on
the problem of religion: Le protestantisme et le catholicisme dans leurs rapports avec la
liberté et la prospérité des peuples (1875); De l’avenir des peuples catholiques (1876).
5 We should also mention his works in rural economics (Études d’économie rurale, 1865,
1869) and the monetary field (La monnaie et le bimétallisme international, 1891).
REFERENCES
Allard, A., 1885, La crise, la baisse des prix, la monnaie (Paris: Guillaumin; Brussels:
C. Muquardt).
Bertrand, L., 1906–1907, Histoire de la démocratie et du socialisme en Belgique depuis
1830, 2 vols (Brussels: Dechêne et Cie; Paris: Cornely).
Bourgeois, L., 1902, Solidarité, 3rd edn (Paris: A. Colin).
Breton, Y. and Lutfalla, M., 1997, Les économistes français et la longue stagnation. In
Émile de Laveleye on crises, Christianity and socialism 331
Y. Breton, A. Broder and M. Lutfalla (eds), La longue stagnation en France (1873–1897)
(Paris: Economica).
Cunliffe, J. and Erreygers, G., 1999, Moral philosophy and economics: the formation of
François Huet’s doctrine of property rights, European Journal of the History of Economic
Thought, 6: 4, pp. 585–605.
Frobert, L., 2011, Republicanism and political economy in Pagnerre’s Dictionnaire politique,
History of European Ideas, forthcoming.
Jacquet-Pfau, C., 2006, Naissance d’un projet lexicographique à la fin du 19e siècle: La
Grande encyclopédie, Cahiers de lexicologie, no. 88, pp. 97–111.
Jacquet-Pfau, C., 2007, Lexicographie et terminologie au détour du 19e siècle: La Grande
encyclopédie, Langages, no. 168.
Laveleye, É. de, 1857, Études historiques et critique sur la principe et les conséquences de
la liberté du commerce international (Paris and Brussels: [s.n.]).
Laveleye, É. de, 1865, Le marché monétaire et ses crises depuis cinquante ans (Paris:
Guillaumin).
Laveleye, É. de, 1875, Le protestantisme et le catholicisme dans leurs rapports avec la liberté
et la prospérité des peuples (Brussels: Muquardt).
Laveleye, É. de, 1878, La démocratie et l’économie politique (Brussels: Hayez).
Laveleye, É. de, 1884, Éléments d’économie politique, 2nd edn (Paris: Hachette).
Laveleye, É. de, 1885a, Le socialisme contemporain, 3rd edn (Paris: Alcan).
Laveleye, É. de, 1885b, Laveleye et Spencer: L’État et l’individu ou darwinisme social et
christianisme (Florence: Pellas).
Laveleye, É. de, 1891, De la propriété et de ses formes primitives, 4th edn (Paris: Alcan).
Laveleye, É. de, 1897, Essais et études (Paris: Alcan; Ghant: Vuylsteke).
Laveleye, É. de, 1898, Un précurseur. Charles Dupont-White (Paris: Imprimerie Nationale).
Mahaim, E., 1892, Émile de Laveleye, Revue d’économie politique, 6, pp. 93–101.
Mollier, J. Y., 2001, La lecture et ses publics à l’époque contemporaine (Paris: Puf).
Nicolet, C., 1982, L’idée républicaine en France (Paris: Gallimard).
16 Of the ‘old’ Palgrave entries
on crises
Pascal Bridel
Published between 1894 and 1899, the three-volume ‘old’ Palgrave was meant to
reflect state-of-the-art economics at the end of the nineteenth century. In the Preface
to the first volume of his Dictionary of political economy, R. H. Inglis Palgrave
made clear that ‘its primary object . . . is to provide the student with such assistance
as may enable him to understand the position of economic thought at the present
time’ (INTRODUCTION, 1894, p. v). However, when put together, and despite
exhaustive bibliographies in all European languages, the four entries devoted to
CRISIS, PERIODICITY OF CRISES, COMMERCIAL AND FINANCIAL CRISES and
OVER-PRODUCTION are theoretically rather disappointing. Mainly descriptive and
historical in nature, and in clear opposition to some much more exciting work on
the Continent (by e.g. Juglar (1889) or Bergmann (1895)), these entries do not seem
to give an appropriate account of the complexity and richness of trade cycle theory
in England at the time. Half apologetically, while discussing very briefly the problem
of periodicity and the decisive theoretical move from crisis to cycle, Pownall goes
so far as to assert rather ingenuously that ‘cyclical regularity . . . is easier to record
than to explain’ (CRISES, PERIODICITY OF, Vol. I, p. 466). Even if Jevons’s sunspot
theory, Langton’s subtle argument and Mills’s ‘credit cycle’ are casually mentioned,
no theoretical use of these attempts at finding an endogenous explanation of the
periodicity/regularity of cycles is properly reported in any of these entries. One of
the authors seems in fact to display very clearly the dominant ‘old’ Palgrave
approach as to the unimportance of crises and hence of a proper theory of crisis,
The ‘old’ Palgrave entries on crises 333
‘which is not of great permanent importance’ (Fowler, CRISES, 1857– 1866–1890,
Vol. I, p. 465). Moreover, as ‘spasmodic symptoms, and not symptoms of any
serious and continuous disease’, crises should not be brought ‘under some legislative
remedy (ibid.). And the logical impossibility of overproduction still reported by
Edgeworth adds to the idea that a systematic theoretical explanation of crises in
terms of regular and recurrent cycles is not possible, or indeed necessary: ‘events
so exceptional defy regulation’ and hence theoretical explanations.
Besomi (2010) recently suggested an extremely useful typology structuring
systematically the different ways that successive writers understood and explained
the crisis phenomenon. The use of his fourfold distinction between ‘crisis’,
‘alternations’, ‘recurring crises’ and ‘cycles’ allows us to make some sense of the
progressive move away from the straightforward and classical distinction between
(pathological) crises and (normal) cycles, between one-off temporary anomalies
and intrinsic and rhythmical tendencies fully co-ordinated with the equilibrium/
normal state of the economic system. Even if the ‘old’ Palgrave authors did intro-
duce the concept of ‘periodicity of crises’, they seldom, if ever, moved theoretically
away from crisis as a ‘pathological’ event: nowhere can one find an attempt to
explain the recurrence of such crises and, of course, to endogenize them within a
fully developed cycle theory.
Hence, heir to the standpoint initiated by the general glut controversy, the domi-
nant nineteenth-century tradition based on the ‘logical impossibility . . . of a general
overproduction (Edgeworth, OVER-PRODUCTION, Vol. II, p. 45) still largely
prevails in the ‘old’ Palgrave entries. Crises are seen as one-off disconnected
phenomena,1 which are pathological events with regard to the normal state of the
economic system. The causal origins of crises are always exogenous. These external
causes can vary from one crisis to the next. Even if monetary elements seem often
to play a key role as a causal factor, they never interfere in a predictable way with
the normal working of the economic system. As one of the authors of the ‘old’
Palgrave ‘crises’ entry keeps repeating, ‘the causes varying, the results also vary
much’ (Fowler, CRISES 1857–1866–1890, Vol. I, p. 462). Like Ricardo and Say
(as opposed to Malthus and Sismondi), ‘crises’ writers would not have deemed it
coherent to think in terms of cycles: the apparent periodicity of crises throughout
the nineteenth century was the result of accidental (and always different) circum-
stances and, above all, had no theoretical significance: ‘they illustrate the results
of a temporary suspension of the laws which regulate the ordinary currency of a
nation’ (ibid., p. 465).
However, these authors do not focus exclusively on the normal state of the
system, but accept the idea that, along the old ‘gravitational’ Smithian lines, prices
and production might be sometimes above, sometimes below their ‘natural’ level.
Not interested in describing precisely the building of such high or low prices/
production periods, the ‘old’ Palgrave contributors are nevertheless ready to admit
the wave-like ‘alternations’ of crises and good times, without, however, linking
up their ups and downs in terms of cycles. Concentrating on the ‘alternations’ of
crises, they were not to be dragged into an explanation of their repetition beyond
arguments like panics, or various extraneous frictions and maladjustments. The
334 Pascal Bridel
recurrence of crises is clearly acknowledged but neither theorized nor connected
with the normal state of the economy. In particular, no analytical attempt is made
to explore the repetition of such events in terms of equilibrium and cycles. In
particular, these authors are only very marginally interested in examining the
similarities and regularities in the ways crises started, developed, burst out and
ultimately were liquidated. The careful denomination of the various stages of the
crises from prosperity to crisis and liquidation is not yet instrumental in explaining
their occurrence, their uniformity or their recurrence: crises are still instances of
the same type of events.
Before we examine in greater details the content the entries linked to crises, some
remarks on their (sometimes forgotten) authors might not be out of place here.
The entries are:
The reader is immediately struck by the fact that most of the (then few) leading
British economists of the time are not involved in writing crises entries proper. In
the spirit of the Ricardo–Mill tradition of the general glut controversy, Edgeworth
and Cannan each contribute 25-line entries concentrating on the logical impos-
sibility of general overproduction. Despite the modest size of both entries, it appears
clearly that both writers view crises as partial and temporary events resulting from
‘a derangement’ of some sort in the ‘channels of trade’ (Edgeworth, p. 45). Nowhere
in these briefest of entries is there any mention of any other but pathological (or
institutional) causes of partial (and not general) failure of the economic system.
Once again, Keynes’s old dichotomy between fundamental principles (Vol. I) and
money and crises (Vol. II) is clearly present. Moreover, principles are the sanctuary
of the few ‘proper theorists’ teaching in leading universities, while crises are left
to junior staff or ‘practical men’ outside academia (Fowler and Pownall). All in
all, out of the 15 pages devoted directly or indirectly to crises, 12 are by Fowler,
2 each by Pownall, and half a page by Edgeworth and Cannan. Crisis or trade
cycle theory was not yet a fashionable topic in English universities during the second
half of the nineteenth century.
A serious study on the sociological background of the ‘old’ Palgrave’s contrib-
utors would probably be of great help in understanding the allocation of entries
between the then small new breed of professional academic economists and various
The ‘old’ Palgrave entries on crises 335
brands of practitioners such as bankers, lawyers or civil servants.2 Palgrave was a
lifelong banker with no formal training in economics, and later editor of The
Economist, and his technique of recruiting his contributors single-handedly3 must
have relied on his professional network more than anything else. If, in his
INTRODUCTION, Palgrave readily acknowledges for the help of ‘many minds’,
including the crème de la crème of the economics profession (among which,
Marshall, Price, Sidgwick, Bonar, Walker, Higgs, Sanger and Edgeworth, to name
but a few), the bulk of the contributors come from outside the groves of academe.4
Little can be found in terms of solid biographical material on either William
Fowler (1828–1905) or G. H. Pownall.5 Fowler’s central entry on crises is written
by someone whose academic and professional life is the epitome of Victorian
England. Son of a Quaker minister, he obtained a BA with honours in classics and
mathematics at the age of 20, graduated LLB in 1850, was called to the Bar in 1852
and joined Alexander & Co., one of the big three bill brokers in the City. He
contributed a Cobden Club essay on the concentration of landownership (1872),
became interested in prison reform, was an MP for various constituencies between
1870 and 1892, and always remained a keen supporter of free trade. The great crash
of 11 May 1866, known as ‘Black Friday’, found him as a partner in his credit
bank, which bore the brunt of the run on the banks. He was thus at the centre of this
disaster, which left him financially embarrassed for many years. Besides a descrip-
tion of the events leading to the 1866 crash, his slim and hard-to-find pamphlet on
the 1866 crisis (Fowler, 1866) has clearly a self-justifying tone. Together with an
arch-bullionist pamphlet on the appreciation of gold (1886), his 1866 essay is
probably the best index explaining Palgrave’s choice of Fowler for the discussion
of the 1857, 1866 and 1890 crises. The tenor of his explanation of the 1866 crisis
is plainly that of a banker worried by ‘the abuse of credit’ by . . . other bankers:
The abuse of credit is the great cause of commercial disaster, and will certainly
give rise to it under any system of currency; and if those who have the conduct
of banking do not learn by experience how to regulate their investments so as
to be prepared for times of difficulty, it is in vain to seek for any teacher. No
legislation can prevent imprudent and careless men from reaping the conse-
quences of their want of judgement; and any attempt by legislation to enforce
measures of precaution would seriously cripple the freedom of trade, and thus
inflict on the community an injury far greater even than that which is sought
to be avoided.
(1866, pp. 50–51)
Not the economic system, but the bankers’ recklessness is responsible for the crisis,
and any corrective piece of legislation – however sophisticated – would simply make
matters worse. Fowler’s Palgrave entry is a straightforward systematization of his
1866 credit cycle approach extended to a discussion of the 1857 and 1890 crises.
As could be expected from the author of the periodicity crisis entry, again nearly
exclusively devoted to credit cycles, G. H. Pownall (1849–1916) is yet another
banker; he managed the William Deacon Bank and the Institute of Bankers.6
336 Pascal Bridel
A member of the Manchester Statistical Society,7 he was close to the circles of
some of the London School of Economics (LSE) founding fathers and, in particular,
to one of its first professors, Edwin Cannan. Apart from a couple of articles in
early issues of the Economic Journal (1892, 1899), Pownall produced in 1914 a
rather elusive book entitled English banking. The contents of this book were initially
delivered in three lectures at the LSE. The third lecture finalizes the author’s life-
long message already present in his previous publications: the inadequacy of the
metallic basis of each bank and how best to avoid a credit crisis linked to a lack of
cash reserves to unite and maintain in one central reserve the many smaller reserves
of the individual banks. This plea for a centralization of reserves is strongly sup-
ported by H. S. Foxwell in his Preface to Pownall’s book.
F. Y. Edgeworth (1845–1926) had written next to nothing on the Classical
School, and was not really a crisis specialist, and so the reason why he was
commissioned to write the entry on OVERPRODUCTION is probably linked to his
position as an adviser to Palgrave (1894, I, p. vi). As is customary in such large
ventures as nineteenth-century dictionaries and encyclopaedias, members of the
editorial board would allocate between themselves the small and orphan entries.
Finally, even if the entry on GLUT is too short not to sound somewhat hollow,
E. Cannan (1861–1935) was probably the best scholar in the field, having published
in 1893 his path-breaking History of the theories of production and distribution,
in which he criticized past economics from the standpoint of modern marginalist
(i.e. Marshallian) economics.
It is possible to be very brief on the Edgeworth and Cannan entries, which are
peripheral to the crisis/cycle debate and, furthermore, very short.
As mentioned earlier, Edgeworth’s interpretation of the overproduction debate
is completely orthodox and place him squarely in a pathological crisis category.
His outright rejection of the possibility of ‘general overproduction’ (OVERPROD-
UCTION, Vol. III, p. 45) brings him to consider ‘commercial crisis’ as concomitant
with ‘a deficiency of ready money’ squarely linked to bankers’ incompetence.
Nowhere is there a mention of ‘alternations’ or ‘recurring crises’, let alone of cycles.
Interestingly enough, this short entry is built around a series of quotations from
J. S. Mill, Ricardo and Sidgwick. Apart from a very complete bibliography on the
various contributions to the general glut controversy (starting with Commerce
defended and finishing in 1824 with Sismondi), the then recent literature is almost
entirely made up of various publications by Hobson, which are, however, never
used in the main argument. Clearly, for Edgeworth, the nature of crises had very
little to do with Say’s law!
As far as Cannan’s entry on GLUT8 is concerned, comments can be even briefer
(concerning a text of 25 lines, including the bibliography). Equally convinced that
‘universal glut’ is logically impossible, Cannan builds his contribution around
lengthy quotations from Ricardo, Say, Mill, Malthus and Sismondi. The word
The ‘old’ Palgrave entries on crises 337
‘crisis’ does not even appear in the entry. The closer he gets to a definition of a
(partial) crisis is when he asserts that the prices of ‘a considerable mass of
commodities falls below the elementary costs of production’ (Vol. II, p. 216) –
hardly a demonstration of any articulate crisis theory.
William Fowler’s twin contributions make up the bulk of the discussion on
crises in the ‘old’ Palgrave. Awkwardly split between a first entry on CRISES,
COMMERCIAL AND FINANCIAL and a second on CRISES, 1857–1866–1890, largely
descriptive and using unnecessarily lengthy quotations from various ‘authorities’,
these two consecutive contributions are hardly constructed around any theoretical
argument. The reader is forced to chase for the few analytical remarks thinly spread
among these 12 pages. Basically, the first very descriptive entry tries to classify the
various causes of the crises that occurred after the 1790s. The author insists clearly
that each of them displays particular features, which ‘have little in common’ (p. 445)
given that ‘the methods of conducting financial and commercial businesses’ (p. 455)
have been changing rapidly throughout the nineteenth century. In particular, the
progressive sophistication of the English financial system throughout the century
makes each financial crisis ‘of a far different character’ (p. 459) than the previous
one, but the basic synopsis is always the same. From the very beginning, Fowler
adopts a descriptive approach, ironing out as much as possible the similarities
between what remain for him unique events, largely dependent on institutional
characteristics of the banking system. Monetary elements seem often to play a key
role as a causal factor, but they never interfere in a predictable way with the normal
working of the economic system. As Fowler keeps repeating, ‘the causes varying,
the results also vary much’ (p. 462). However, Fowler attempts to uncover
regularities in the succession of phases (usually starting with overinvestment made
possible by banks being overgenerous with their credit, followed by a dramatic fall
in prices, a wave of bankruptcies and bankers calling the government and the Bank
of England to the rescue). Paraphrasing and quoting extensively (and shamelessly)
from Tooke’s History of prices, and from a paper read by Danson (which he misspells
Dawson) before the Statistical Society in London (Danson, 1847), Fowler describes
in the same way and successively the 1796, 1810, 1825, 1836–1837 and 1847 crises.
Referring to sometimes obscure initial causes for each of these events (continental
war, failure of the potato crop, foreign exchange, speculation at home and abroad,
etc.), Fowler concentrates on the inevitable return and on the regularity of the
financial aspects of each of these crises:
Many and heavy banking failures, and a state of commercial discredit, preceded
and formed the earlier stage of the panic. The tendency to speculation, and
the undue extension of credit, was preceded, probably caused, and certainly
favoured and promoted, by the low rate of interest which had existed for some
time previously; and this low rate of interest was apparently prolonged by the
operations of the Bank of England. Facility of banking accommodation which
had existed for some time previously, favoured undue extension of credit,. . .
This led gradually on to great difficulties . . .
(p. 457)
338 Pascal Bridel
Financial data are generously plundered from various sources to support detailed
analyses of the working of the financial system throughout these successive crises;
with the exception of the banks’ responsibilities for ‘keeping a low rate for money’
before most crises, nowhere can one find a proper expression of the connection
between different one-off initial causes and the somewhat similar unfolding of
the ensuing financial crisis. Sentences like ‘so great was the rage for speculation’
or ‘the recoil from these speculations was inevitable’ (p. 458) keep cropping up
but can hardly be considered as more than pathological causes of crises. In the
concluding part of his first entry, while repeatedly stating that ‘crises were brought
on, or increased in severity, by the issues of notes made by the country bankers’
(p. 461), Fowler hastens to add (again) that ‘the lessons to be drawn from [these
crises] are, comparatively speaking, inapplicable to the business circumstances
of the present time’ (p. 461). Despite the similarities, each crisis is a pathological
case from which no generalization can be drawn. Once again, Fowler’s first entry
falls squarely into a ‘crisis’ category, even if some passing comments refer indirectly
to the ‘alternation’ category of crises. As a matter of fact, even if he seems to
admit an ‘alternations’ of crises, Fowler is not to be dragged into an explanation
of their repetition beyond arguments such as panics, bankers’ incompetence or
various other extraneous frictions and maladjustments. The recurrence of crises is
clearly acknowledged but neither theorized nor connected with the normal state of
the economy. In particular, no analytical attempt is made to explore fully the
repetition of such events.
However, and very surprisingly, the bibliography offered by Fowler starts with
the unexpected sentence ‘the periodicity of crises has frequently been noticed’.
This statement is followed by comments and references to the literature9 showing
Fowler’s apparent knowledge not only of the periodicity issue but also of a good
part of the then recent literature on this crucial issue. Would such casual remarks
make him an early theorist of the endogenous periodicity of crises? The answer
seems to be negative. Given the balance between the various entries, and the fact
that Pownall’s entry is specifically devoted to the periodicity of crises, the brief
given to Fowler was probably to concentrate on the financial aspects of crises.
This feeling is reinforced by Fowler’s strong methodological statement (appearing
also in his bibliography):
Clearly, for Fowler, the characteristics and unfolding of each individual crisis are
more important than the possible and untested common features they might display.
This impression is strengthened by Fowler’s second entry. Using the same
methodological approach, he examines in turn the 1857, 1866 and 1890 crises.
Once again the overall priority is given to the financial aspects of crisis and, in
particular and as expected, to the vagaries of individual banks’ cash reserves.
The ‘old’ Palgrave entries on crises 339
However, some methodological statements made en passant bolster the interpre-
tation of Fowler’s contribution as being in between the plain ‘crises’ and the more
sophisticated ‘alternations’ categories. A few quotations will suffice to convey
this argument.
On the one hand, Fowler refers to authors who, in the past, had expressed
themselves approvingly about the periodicity of crises:
It was formerly regarded as almost a law of nature that a crisis should arise
every ten years or thereabouts, and the years 1825, ’37, ’47, ’57 and ’66 con-
firmed this impression.
(p. 462)
Similarly, 30 lines later, and after a lengthy discussion of the peculiarity of the
Baring crisis, Fowler seems to strengthen his initial argument:
In some respects all crises are alike, inasmuch as all such events arise from
what is called an ‘abuse of credit’.
(ibid.)
However, the argument is brutally turned completely upside down by the end of
the same paragraph:
But that abuse may take various forms. . . . The causes varying, the results also
vary much.
(ibid.)
Panic is . . . avoided [if it] is not dependent in the worst of times on the caprice
of a Chancellor of the Exchequer, who may be a man ignorant of the dangers
and difficulties of commerce, or who only knows them vaguely, as set forth
in the books of mere theorists.
(p. 466; italics added)
The remaining entry by Pownall on CRISES, PERIODICITY OF does not alter the
overall understanding of crisis contained in the ‘old’ Palgrave and reached so far.
In his brief essay, Pownall is, in fact, reviewing, and with a good deal of scepticism,
five leading English writers who have extolled at various stages the idea of the
periodicity of crises – i.e. in the sense of a ‘recurring crises’ category. In other
words, these writers should be viewed as characterizing crises by their uniformity
and their recurrence, and by the connection between these two elements. Hence,
thus defined, crises should be viewed as instances of the ‘same class of events’.
Intimately linked, the regularity of their return as well as the recurring succession
of various stages in their development should go together further into the elaboration
of a genuine theory. However, it is a long way from the cup to the lips.
On the one hand, and in full agreement with Fowler, Pownall is visibly unsym-
pathetic to this thesis and to the main theorists presenting it. On the other hand,
marred by too heavy a recourse to quotations, his argument is not very convincing.
It is hard to understand how Thornton (1802) could be considered as a
‘periodicity-of-crisis’ theorist when Pownall offers a brief discussion of the 1793
crisis only. Tooke is quoted at length to demonstrate that he is the precursor of
Langton, Jevons and Mill in the long line of ‘credit cycle’ theorists:10 ‘immediately
preceding a crisis, a great revulsion and derangement of commercial credit had
occurred’ (p. 466). This is fair enough, but no analytical progress is offered when
compared to Fowler’s entries. In particular, despite the regularity that Tooke had
allegedly discovered, the recurring succession of events does not go further than
this basic link between a credit crunch and the ensuing crisis. Moreover, Pownall
adds immediately that ‘a variety of causes brought about the serious crash of 1847’.
The five lines devoted to William Langton shows plainly Pownall’s confusion
between a proper explanation of the periodicity of crises lining regularity with
stages and the much simpler idea of trying to devise a calendar time repetition of
crises based on a ‘decennial period’ (p. 467). Theoretical periodicity is not the same
notion as trying to forecast the next crisis on the basis of the frequency of previous
downturns historically recorded.
The ‘old’ Palgrave entries on crises 341
Jevons’s sunspot theory is given a longer (and more respectful) treatment, even
if this link with ‘the world of physics . . . suited to the exact and scientific mind of
Jevons’ (p. 467) is considered somewhat peculiar by Pownall. In particular, Jevons’s
eccentric sunspot argument is carefully presented in order to show that it is only a
very unusual attempt at explaining the cause of a traditional credit crunch.
Credited with the invention of the term ‘credit cycle’, Mills is cleverly quoted
by Pownall to show that ‘the periodicity of commercial crises is at any rate a fact’
(p. 467). However, when connected with Pownall’s methodological introduction
on the ‘cyclical regularity of fatal years’ (p. 466), nothing much is left of ‘Mills’
minute examination of the life-history of a credit cycle’ (p. 467). Periodicity
remaining a fact ‘which is easier to record than to explain’ (p. 466), Pownall’s entry,
described by its author as a mere ‘statement of some of the more important crises’
– not of the more important theories about crises – can hardly be seen as a step for-
ward away from ‘alternations’ into ‘periodicity’.
One final remark is called for, and it is as modest as the entries themselves. In
comparison to research conducted sometimes 25 years earlier (e.g. Jevons’s or even
some of Juglar’s pieces), these ‘old’ Palgrave entries do not reflect in any way the
much more sophisticated theoretical level reached at the turn of the century by crisis
theory both on the Continent and in Britain. The historical and descriptive methods
used by Fowler and Pownall are not defective per se but lack singularly in generality.
The discussion of crises by bankers reflects not so much the rather banal theoretical
framework behind Fowler’s and Pownall’s entries but rather, above all, the lack of
interest in the topic by the economic profession. Serious and more systematic thinking
would eventually start in the early 1900s in England with Hawtrey and Robertson.
The lack of a proper intellectual framework for discussion, of a base camp for
analytical expedition into difficult and confusing territories, is at the heart of the
relative weakness of the ‘old’ Palgrave entries on crises and cycles. Methodologically,
this discussion brings also, and again, to the forefront the point that dictionary entries
are sometimes backward-looking and rarely at the scientific cutting edge unless the
contributions to the ‘old’ Palgrave on cycles are yet another idiosyncrasy of British
latecomers to the field of economic dictionaries.
NOTES
REFERENCES
Ashton, T. S., 1934 [1977], Economic and social investigations in Manchester, 1833–1933
(London: King. Reprinted Hassocks: Harvester Press, 1977).
Bergmann, E. von, 1895, Die Wirtschaftskrisen: Geschichte der nationalökonomischen
Krisentheorie (Stuttgart: W. Kohlhammer).
Besomi, D., 2010, ‘Periodic crises’: Clément Juglar between theories of crises and theories
of business cycles, Research in the History of Economic Thought and Methodology, 28A,
pp. 169–283.
Cannan, E., 1893, History of the theories of production and distribution in English political
economy from 1776 to 1848 (London: Rivington).
Danson, J. T., 1847, On the Accounts of the Bank of England under the Operation of the Act
7 & 8 Vict., c. 32, Journal of the Statistical Society of London, 10: 2, May, pp. 132–153.
Edgeworth, F. Y. E., 1892, Review of Dictionary of political economy. Edited by R. H. Inglis
Palgrave, FRS, Parts II and III, Economic Journal, 2, pp. 524–525.
Fowler, W., 1866, The crisis of 1866: a financial essay (London: Longmans & Green).
Fowler, W., 1886, Appreciation of gold: an essay (London: Cobden Club).
Juglar, C., 1889, Des crises commerciales et de leur retour périodique en France, en
Angleterre et aux États-Unis, 2nd edn (Paris: Alcan).
Mitchell, W. C., 1913, Business cycles (Berkeley, CA: University of California Press).
Pownall, G. H., 1892, The insufficiency of our cash reserves and of our central stock of gold,
Economic Journal, 2, pp. 530–543.
Pownall, G. H., 1899, Bank reserves, Economic Journal, 9, pp. 394–410.
Pownall, G. H., 1914, English banking: its development and some practical problems it
has to solve. Three lectures delivered at the London School of Economics, with a Preface
by H. S. Foxwell (London: Blades, East & Blades).
Thornton, H., 1802 [1939], An inquiry into the nature and effects of paper credit of Great
Britain, with an Introduction by F. A. von Hayek (ed.) (London: George Allen & Unwin).
17 From crises to cycles
Tugan-Baranovsky and the
Brockhaus–Efron (1895–1915)
François Allisson
The first volume of the most ambitious universal encyclopaedia in Tsarist Russia
was printed in 1890. It was published by a German–Russian company and compiled
by Brockhaus from Leipzig and Efron from St Petersburg. In his Foreword, the edi-
tor, I. E. Andreevsky (1831–1891), rejoiced at the opportunity to produce a universal
encyclopaedia, which was sadly lacking in the Russian language. He aimed ‘to give
[. . .] a perfectly objective representation of universal culture, as well as the specific
conditions of Russia’ (PREFACE, Brockhaus–Efron Encyclopaedic dictionary
(henceforth BE), 1890, Vol. 1, p. i). The way he wanted to accomplish this goal
was mainly to translate the whole of Brockhaus’s German Konversations-Lexikon.
Andreevsky also planned certain necessary additions, such as the inclusion of some
recent articles from French, English and German dictionaries, as well as some
original articles, especially concerning Russia. The initial plan was to publish about
30 volumes, over a five- to six- year period. However, Andreevsky died in 1891,
having completed only three letters of the alphabet in eight volumes, and his
underpaid students produced poor translations.
The subsequent editors, K. K. Arsen’ev (1837–1919) and F. F. Petrushevsky
(1828–1904), pushed the encyclopaedia in a new direction. In their prefactory
note FROM THE EDITORS (BE, 1891, 9, pp. i–iv), they criticize the former editor’s
choices and clearly define their own vision. Brockhaus’s encyclopaedia should still
be used as a reference book, but its structure was too old, intended only for
conversation and, worse still, for the German public.1 Russians’ educational needs
were different from those of Germans. Although there were many specialized
dictionaries in Germany, there were few in Russia. Therefore, their encyclopaedia
344 François Allisson
should be as general as possible to embrace the wide variety of readers’ interests,
but its content must be detailed, like that in specialized dictionaries, in order to
explain every concept ‘that plays or played a role in religion, science, literature,
arts, legislation, public and social life, agriculture, industry, trade, and all other
branches of national activity – materialist and spiritual’ (FROM THE EDITORS, 1891,
9, p. iii). In order to carry out this task, the number of original articles grew enor-
mously, and the editors collaborated with more than a hundred of the most eminent
Russian academics and scientists. For instance, the famous chemist Mendeleev was
editor of all the articles relating to chemistry, technical subjects and industry,
and Solov’ev was the editor for all philosophical entries. Prior to the completion
of their encyclopaedia, the editors congratulated themselves on the correctness of
their approach (FROM THE EDITORS, BE, 1905, 83, p. i). Of course, in order to
include many more original entries – often long and innovative monographs –
they considerably widened their initial project, from 30 to 86 volumes and from
5 to 18 years. However, they definitely met their public, and their BE became one
of the key reference works, together with the →Entsiklopedicheskii slovar’
Russkogo Bibliograficheskogo Instituta Granat (see Chapter 21) and, later on, the
Great Soviet encyclopedia.
Physically, the main Brockhaus–Efron (1890–1907) – also called the Great
Brockhaus–Efron in the literature – contains 82 main and 4 supplementary
volumes.2 The whole set totals about 42,000 pages, 120,000 articles and 8,000
illustrations and maps. More than 30,000 sets were sold, giving the impetus for
further editions to be produced. The Small Brockhaus–Efron (1899–1902; 1907–
1909) was issued twice, the first edition in three volumes, the second in four
volumes. Their low price allowed for a wide circulation. The encyclopaedia’s
information was obviously less comprehensive: it contained a selection of 35 per
cent of the full version’s entries, and the average size of each article was reduced
to 40 per cent of the original, thus making it possible to reduce the encyclopaedia’s
entire content by about 85 per cent. Eventually, Arsen’ev edited a New Brockhaus–
Efron (1911–1916). Due to its comprehensive content, the latter can be called the
second edition. The death of Efron, the Civil War and the Revolution precipitated
its end. Only 29 of the 48 planned volumes were released.3 The various reprints of
this encyclopaedia demonstrate that it represents an enduring and widely used
scientific and historical source in today’s Russian studies.4
Political economy was well represented in BE. The exclusive function of
economic editor is not attributed in each volume, but when it is, three well-
established and respected names are encountered: Manuilov, Posnikov and Janzhul.
A. A. Manuilov (1861–1929), economist, professor and rector at the University of
Moscow, was a specialist in agricultural economics and the classical theory of value.
A. S. Posnikov (1846–1921) was an economist, statesman and publicist. As a
Populist, he was very favourable to the institution of obshchina – Russian communal
land ownership. I. I. Janzhul (1846–1914), economist, statistician and professor at
the University of Moscow, is famous for his investigations into the role of the
state in the economy, labour legislation, public finance and the economics of
industrial and agricultural development. The economists who wrote in BE were
Tugan-Baranovsky: from crises to cycles 345
all in some respect under the influence of the younger German historical school
and were impressed by Marx. They almost all studied for one or two years in
German universities, and some even spent a few months at the British Library to
conduct in-depth studies using English records.5 But this unifying picture should
not hide what differentiates them. Among the authors – i.e. Tugan-Baranovsky,
P. B. Struve, V. P. Vorontsov, A. I. Chuprov, L. V. Khodsky, L. Z. Slonimsky,
P. Miljukov, etc. – we find Legal Marxists and Populists, Socialists and supporters
of free trade.6
Biographical entries on foreign and Russian economists, as well as entries on
economic categories, are present in BE. Those on some representatives of the older
and younger German historical schools, some French Utopian Socialists, Marx, or
Russian statesmen are allocated a few pages, while many others are restricted to
between half a page and two pages. All fundamental economic categories, such as
VALUE, PROFIT, WAGE, COMPETITION, INTEREST, ECONOMIC GOOD, and
CARTEL are adequately covered (from 1 to 5 pages). Some articles giving a full
set of historical data (BANKS, PRICES), and all articles relating to agricultural
economics (COMMUNAL LAND OWNERSHIP, RURAL CREDIT SYSTEM, RENT,
. . .), take up a tremendous amount of space (up to a hundred pages). A notable
feature is that each entry comes with bibliographical details (selected primary and
secondary literature in the case of individuals). In the entry on POLITICAL
ECONOMY, the names of Wagner, Sombart, Schmoller, Knies, J. N. Keynes, J. S.
Mill and Menger (for the Methodenstreit) give the overall tone of BE’s economic
content. The entry RUSSIA represents an entire encyclopaedia within the overall
encyclopaedia, and deserves attention (BE, 1899, 54–55). Interesting for the
economist is its subsection ‘State and finance’, which contains a complete history
of public finance in Russia, as well as the subsection ‘Science’, which describes
the development in Russia of ECONOMIC SCIENCE (Tugan-Baranovsky),
FINANCIAL SCIENCE, by Janzhul, AGRICULTURAL SCIENCE and STATISTICS.
An entry on ECONOMIC CRISES appeared in successive editions of BE. The
following section briefly introduces its author.
the price of securities is based on more or less random future profits and can
thus fluctuate within very broad limits. Eventually their price is determined
by actual yields. Therefore, a speculative rise of their exchange rate, without
actual foundations always ends in a stock market crash.
(p. 743)
The misfortunes of John Law and Bontoux’s Union Générale are typical examples
of credit crises that do not propagate to industry and trade.
Industrial crises refer to a ‘general trouble in industry and in trade due to a fall
in prices, resulting from an excess of the supply over the demand of goods’ (p. 743).
The detailed description of the stages leading to crisis deserves quotation:
both of these theories are unilateral, since the crises usually take place in
countries with a high degree of freedom (the USA) and in countries where
credit is highly centralized and monopolistic (France).
(p. 745)
Giffen explains the actual stagnation by the lowering of gold extraction. Finally,
governments that proceeded from a silver or from a mixed monetary system to a
gold monetary system are completely guilty, according to the bimetallists.
Distribution. The underconsumption theory of Sismondi – ‘the most notable
advocate of this view’ (p. 745) – even if ‘hitherto supported by some leading
economists’, proves to be incompatible with the facts. First, according to his view,
stagnation in industry should be chronic, but up to the present, ‘production has
quickly increased in capitalist economies’ (p. 745). Second, if the present stagnation
is to be considered, ‘it coincided with an improvement, not a deterioration, of the
situation of the workers’ (p. 745). Rodbertus’s theory – ‘the actual causes of crises
[. . .] is not in the absolute low level of wages, but in their relative decline in national
income’ (p. 745) – is worse still.
The choice of a preventing policy against crises largely, if not entirely, depends
on the causes one attributes to them. For instance:
if it is admitted that the main cause of crises lies in the anarchic state of modern
industry, then the natural tool to struggle against them consists in the organi-
zation of production. Some precisely see here the social importance of cartels.
(p. 745)
350 François Allisson
17.3.1.3 History of recent industrial crises
The crises of 1825, 1836, 1847, 1857, 1866, 1873 and the industrial stagnation of
the 1870s–1880s are detailed. An account of the sequences of each specific crisis
is given, together with their causes and factual elements, such as the number of
bankruptcies. The history focuses on English and international crises. The crisis
of 1825, for instance, is due to excessive speculation on mining industries in South
America, which, as long as it lasted, promoted English exports of manufactured
products on this new market, because European markets were devastated at
the end of the Napoleonic Wars. Causes that are frequently cited are wars (the
Napoleonic Wars, 1825; the US Civil War, 1866; the Franco-Prussian War, 1873)
and harvests (1835, 1847, 1866). These particular and almost exclusively exogenous
causes often affected the price of certain crucial products (cotton and corn) or certain
activities (mining, railways and banks), giving birth to speculation. We will not
give here more details on the history of these crises, as what is included is mainly
a sketchy summary of what is detailed in Tugan’s books on crises (1894 and later
editions). We have chosen instead to compare (in section 17.3.3) the handling of
the history of crises in this edition (1895) and in the 1915 edition (since the 1909
entry has no room for history).
This very small entry tells a similar story, except for the causes attributed to crises:
the disorganization of modern industry, the disproportion of production between
sectors, and the disorganization of credit/monetary circulation. The following entry
(1915) goes deeper in this direction.
Tugan-Baranovsky: from crises to cycles 351
17.3.3 New Brockhaus–Efron (1915)
Tugan’s entry for the New Brockhaus–Efron (1915) underwent some rewriting after
1895 and is half as long. It begins with exactly the same definition (see above,
Section 17.3.1). The proportion of space devoted to each topic in the entry has been
changed.14 The bibliography is considerably shortened,15 but contains some new
entries. The following paragraphs do not give a summary, but rather point out the
major changes between the 1895 and 1915 entries.
Industrial crises are the most important form of crises. In developed capitalist
countries they repeated themselves with a great regularity, alternating with
periods of industrial expansion. Consequently, a capitalistic cycle arises,
composed of three phases: 1) industrial expansion, 2) crisis and 3) industrial
stagnation. The phase of acute crisis can fall out and, in this case, the capitalist
cycle is composed of two phases: industrial expansion and stagnation. The
capitalistic cycle in its most eloquent and unequivocal form was expressed
during the development of England’s industry.
(Tugan, ECONOMIC CRISES, 1915, p. 350)
Crises are inherent in the very nature of capitalist economies. Their necessary
nature results from three characteristics of the capitalist economic system: (1)
it is antagonistic, in that the worker is a simple means of production for the
capitalist firm; (2) unlike other antagonistic economic systems, it tends to
unlimited expansion of production (as a means of capital accumulation); and
(3) as a whole, it is a disorganized economy, in which a planned distribution
of social production between the different industrial sectors is lacking. On
the basis of these three characteristics of the economic system, capitalism
inevitably provokes economic crises. The frequency of crises is due to the
fact that free capital accumulates in capitalist economies not at once in industry,
352 François Allisson
but is first delayed in banks. During industrial recovery, banks have enough
of it. When capital runs out, a crisis follows.
(p. 353)
17.4 ASSESSMENT
This section does not intend to evaluate Tugan’s theory of crises,16 nor its influence
on future economists.17 Its purpose is to comment on the opportunity to present a
theory of crises in an encyclopaedia. The transcription of a theory contained in
a book to an entry is first addressed, stressing the constraints of writing for an
encyclopaedia. The evolution of the entry through the various editions of the
Tugan-Baranovsky: from crises to cycles 353
encyclopaedia is then commented on, emphasizing the choice of terminology related
to crises, as well as the problematic question of rewriting history. Eventually, an
entry’s relevance for an intended national audience is discussed.
The following references and categories are Tugan’s. Additional information added
by us are is square brackets. For works cited in this article, see the References
section below.
History of crises
Th. Tooke. A history of prices (L[ondon], 1829–1857).
Francis. History of the Bank of England [(London)].
Max Wirth. Geschichte der Handelskrisen (new edn Frankf. am. M., 1890; transl. in Russian,
SPb, 1875).
[Hyndman]. Commercial crises of the nineteenth century (L[ondon], 1892).
Th. Tooke. Considerations on the state of the currency (L[ondon], 1825).
Horsley Palmer. Causes and consequences of the pressure on the money market (L[ondon],
1837).
[McCulloch]. ‘The crisis in American trade’ (Edinburgh Review, 1837).
Morier Evans. The commercial crisis of 1847 (L[ondon], 1848).
Idem. The history of the commercial crisis 1857–1858 (Lond[on], 1858).
A. Schäffle. Gesammelte Aufsätze. Die Handelskrisis von 1857 [Tübingen, 1886].
Michaelis. Volkswirthschaftliche Schriften (B[erlin], 1873).
W. Fowler. The crisis of 1866 (L[ondon], 1867).
R. Baxter. The panic of 1866 (L[ondon], 1866).
R. H. Patterson. ‘On our home monetary drains’ (Journal of the Stat[istical] Society,
L[ondon], 1870).
[Glagau]. Der Börsen- und Gründungs-schwindel in Berlin [(Leipzig, 1877)].
Neuwirth. Die Speculationskrisis v. 1873 (L[ei]pz[ig], 1874).
[Oechelhäuser]. Die wirtschaftliche Krisis (B[erlin], 1874).
Agricultural crises
Levitskiy. Sel’skokhozyaystvennyi krizis vo Francii [The agricultural crisis in France]
(Kharkov, 1899).
Bulgakov. Kapitalizm i zemledelie [Capitalism and agriculture] ([St Petersburg], 1900).
H. Levy. Entstehung und Rückgang des landw. Grossbetriebes in England ([Berlin], 1904).
Zotov. Ocherki zemlevladeniya i zemledeliya v sovremennoy Anglii [Land ownership and
agriculture in contemporary England] (M[oscow], 1909).
NOTES
1 The new editors gave an example of what should be done, contrary to the previous
pattern: small foreign towns’ entries should be translated only when their population
358 François Allisson
reached a given level, or when the town in question meant something special for Russian
readers. Conversely, all Russian towns should be included, as well as small villages with
significance for Russian culture, and not only those meaningful for a German audience
(BE, 1891, 9, p. ii).
2 Each volume, numerated from 1 to 82 and then from D1 to D4, represents a half-tome.
Therefore, in the literature, one can find the following equivalent quotations: tome XVIa
= volume 31; tome XVIb = volume 32; tome XVIIa = volume 33, etc.
3 The last published entry concerns the family name ‘Otto’. The National Library of Russia
in St Petersburg owns the proofs of Volumes 30 and 31, the last entry describing the
Grand Duchy of Posen, in today’s Poland.
4 BE (1890–1907) was reprinted in 2001 (Terra, Moscow) and an electronic version was
issued (IDDK, 2002 and 2005). The Small Brockhaus–Efron (Small BE, 1907–1909)
was reprinted in 1994 (Terra, Moscow). As far as we know, the New Brockhaus–Efron
(New BE) was never reissued.
5 Some classical examples of these – often highly historical – studies the British economy
by Russian scholars done within the British Library include Tugan-Baranovsky on
industrial crises in England, Manuilov on the rent of land in Scotland and Janzhul on
free trade in England. Slightly off this line, but within the same tradition, Mentor
Bouniatian could be added.
6 But this variety does not include radical authors who did not make good bedfellows with
Tsarist censorship – at least as it was perceived.
7 For the most comprehensive bibliography of and on Tugan, see Amato, 1980.
8 Section V, Chapter 2: (1) Capitalist cycle; (2) Capitalist cycle in England; (3) Theory
of crises; (4) Explanations of capitalist cycle and of the periodicity of crises.
9 Unsatisfied by both Fisher’s quantitative theory and Tooke’s commodity theory of the
value of money, he outlined the foundations of a cyclical theory of the value of money
and, concerned by the need to find a solution to monetary problems at the end of the
First World War, addressed the possibility of an international paper money system.
10 The same occurred to Juglar (see Chapter 12). It may be argued, from Tugan’s and
Juglar’s cases, that an author’s availability to write an entry in a dictionary is higher
soon after the publication of a book on the same subject, while, at the same time, it
renders him more attractive for an editor.
11 In English in the text.
12 In English in the text.
13 The Russian word zastoy refers to something that does not move and is usually translated
as ‘stagnation’, although curiously it was also used to mean ‘depression’. Tugan himself
used zastoy to refer to the English (and French) ‘depression’. Depression and stagnation
were perhaps mixed up in Russian, but stagnation could also refer to an alternative
concept to depression (see Chapter 3, Sections 3.3.4 and 3.3.7). We have chosen to
translate zastoy as ‘stagnation’ in order to preserve this ambiguity.
14 The section on the types of crises was 31 per cent of the 1895 entry and this was reduced
to 27 per cent in 1915. The section on the theories of crises fell from 32 per cent to
9 per cent, the part on the history of crises increased from 37 per cent to 57 per cent,
while a section on agricultural crises, absent in 1895, make up 7 per cent of the 1915
entry.
15 From 41 items to 8 (reproduced below, in Section 17.5.3).
16 For a recent exposition of Tugan’s theory of crises, see Hagemann, 1999, pp. 91–97.
The forgotten and controversial question of the nature of the link between Tugan’s theory
of markets and his theory of the periodicity of crises has been recently reconsidered by
Barnett, 2001, Colacchio, 2005 and Besomi, 2006.
17 This influence is based on Tugan’s books; that on Western economists is based only
on the German (Tugan, [1894], 1901) and French (Tugan, [1894], 1913) editions of
Industrial crises (1894). Amato (1984) offers an historiographic study on Tugan’s theory
of crises. For an account of Tugan’s influence on individual economists, see Hansen,
Tugan-Baranovsky: from crises to cycles 359
1964 for Spiethoff, Cassel, Aftalion and Schumpeter; see Barnett, 2001, pp. 458–462,
on Mitchell, Robertson, Keynes and Kalecki. Tugan is also known to have influenced
in various respects Sombart, Pohle, Haberler, Lescure, Sweezy and the Russian
Kondratiev (on the latter, see Reijnders, 1993, and in this volume Chapter 24).
18 It represented 37 per cent of the 1895 entry and 57 per cent of the 1915 entry.
19 Tugan used in his book the metaphor of the steam engine, the position of the piston
indicating the phase of the cycle while steam represents free loanable capital. This
mechanistic analogy was not used in the BE’s entries.
20 We may conjecture that expounding Marx’s reproduction scheme in a two-column
encyclopaedia in the 1890s could raise some technical difficulty, or that there could have
been ideological problems, or again that an entry on the theory of markets was planned,
to be written by Tugan or someone else, but was eventually discarded.
21 Wary of annoying his readers with a whole set of quotations, Tugan warned in his book
that this absence of scientific apparatus should not hide the fact that he knew the literature
on the subject (Tugan, 1913, p. vi). This is why the explicit bibliographies included in
BE’s entries (Section 17.5) are very valuable information for the sources of Tugan’s
investigations.
22 The following expressions, taken from 1895, confirm the abnormal nature of crises:
‘state of agitation’, ‘the general agitation becomes feverish’, ‘the foundations of craziness
are laid’, ‘this is the signal of disaster’, ‘the whole country feels this deep tremor’ and
‘panic’ (see Section 17.3.1).
23 Albeit not using this word, Tugan even made the explicit statement that exogenous causes
cannot alone provoke crises (1913, p. 242).
24 This is what we could call Robertson’s sketchiness argument. D. H. Robertson, in his
review of Tugan’s Crises industrielles en Angleterre, complained: ‘there is a certain
sketchiness about each of the three parts into which the work is divided, as well as a
certain lack of cohesion between them’ (Robertson, 1914, p. 82).
25 For a detailed analysis of the Russian factory and its links to the Industrial crises in
England, see Barnett, 2005.
REFERENCES
Heinrich Herkner contributed the main article on KRISEN to the first three editions
of the Handwörterbuch der Staatswissenschaften, which had been edited by
Johannes Conrad in co-operation with Wilhelm Lexis, Ludwig Elster and Edgar
Loening, and soon became widely known as ‘Conrad’s Handbook’. As Herkner has
pointed out in his autobiographical reflections, it had been the co-editor Lexis who
had approached him to write the crises entry (Herkner, 1924, p. 17). Lexis himself
had widely published on crises, overproduction and consumption, and contributed
the essay on overproduction to the Handwörterbuch der Staatswissenschaften (see
Chapter 19). He became aware of Herkner as a potential contributor of the crises
entry due to Herkner’s 1890 inaugural lecture ‘Social reform as a commandment
of economic progress’ as an extraordinary professor at the University of Freiburg,
which in the subsequent year was expanded and published as a book (Herkner,
1891). There Herkner outlined his programme of social reforms and emphasized
the impairments of the domestic market which result from the low purchasing power
of the increasing numbers of industrial workers. In that context Herkner also dealt
with the crises problem. It is likely that Lexis approached Herkner to write the
entry to the Handwörterbuch der Staatswissenschaften because he found the latter’s
explanation of the crises problem compatible with his own.
Herkner became directly aware of economic fluctuations as a young child in
his family’s cotton factory. He saw the enormous boom that followed the ending
of the Franco-Prussian War and the subsequent major crisis that soon followed in
1873 when he was ten years old. He recognized the increasing poverty of many
362 Harald Hagemann
working-class families and started to reflect on the strange situation in business
which made goods unsaleable that only shortly before had been in strong demand.
These empirical experiences of his childhood strongly determined the later research
programme of his studies (Herkner, 1924, p. 79).
Herkner contributed the entry on KRISEN to the first three editions of the
Handwörterbuch der Staatswissenschaften (1st edn, 1892, Vol. IV, pp. 891–912; 2nd
edn, 1900, Vol. V, pp. 413–433; 3rd edn, 1910, Vol. VI, pp. 253–276). It is only in
the completely revised 4th edition of the Handwörterbuch der Staatswissenschaften,
which was published after the First World War, that Spiethoff (1925) replaced Herkner
as the author of the important entry on KRISEN (see Chapter 20).
Herkner starts his discussion of crises with reflections on the notion of the crisis.
He points out that in medicine the crisis marks the decisive turning point in the
course of a disease. In economics the key issue are disturbances of the equilibrium
between production and demand capable of purchasing. Whereas in the past crises
were short-lived and could be regarded as turning points in which the best
entrepreneurs were selected for, the analogy with medicine has waned as newer
crises have occurred. These newer crises, such as those of 1873–1879 and
1882–1887, have developed a more chronic nature and might better be termed
‘depressions’. Herkner distinguishes between general and particular crises
according to the extension of the disturbances, and attributes the notions of trade
crises, stock exchange crises, speculation crises, production crises, foundation crises
and monetary crises to the areas where the disturbances manifest themselves at
the time. Concerning the symptoms and the sequel of crises, Herkner quotes
Heinrich Herkner on overcapitalization and underconsumption 367
from Friedrich Engels, whose pertinent analysis has been formulated by Lord
Overstone in a more pregnant way: ‘State of quiescence, improvement, growing
confidence, prosperity, excitement, overtrading, convulsions, pressure, stagna-
tion, distress, ending again in quiescence’ (KRISEN, in Handwörterbuch der
Staatswissenschaften, 1890, p. 891).
After these introductory remarks, the following sections of Herkner’s essay
deal with the causes of economic crises (II), the appropriate therapy (III), crises
theories (IV) and a more detailed historical discussion of the development of crises
in the nineteenth century (V). Herkner is convinced that general crises cannot be
explained by a single cause, but are the result of a combination of several causes.
In his survey of explanations of crises he presents what can only be described as
a pot-pourri of most of the ideas that were available in the literature at the time he
was writing. Thus, the crisis could originate in production, commerce and traffic,
distribution or consumption, or it could be caused by non-economic factors such
as weather influences on the harvest, wars or critical effects from pests (phylloxera,
bark bugs, locusts, etc.).
The adjustment of production to the needs of the people has become more
difficult with the growing division of labour, even more so with the growing
international division of labour and the resulting greater distance between producers
and consumers. The co-ordination problem has been enhanced by the fact that
the number of entrepreneurs who produce consumer goods has declined sig-
nificantly compared to those who produce goods of higher order in the sense of
Carl Menger. On the other hand, recent technical progress in communication may
have contributed to a better organization of the markets by improving the
information of producers on prices, production and demand, and thereby their
estimation of future demand. However, the only decisive regulator – price formation
and the resulting entrepreneurial profits – may fail too easily since price and profit
increases may make entrepreneurs become irrational. If too many of them take
these signals as an incentive to expand production, this may result in general
overproduction. In the second edition of his crises essay, Herkner (1900, p. 415)
refers to the behaviour of the cotton producers in North America in 1892 as a case
study where rational behaviour at the micro level led to an irrational outcome at
the macro level.
Herkner points out an important technological development that had contributed
to the transformation of crises from short-term turning points of economic develop-
ment to long-term events, which are more like chronic depressions.4 The substantial
increase in fixed capital in modern technology – which Herkner illustrates using
the example of the cotton industry, on which he was an expert – makes it hardly
possible to reduce production and supply immediately after a decline in prices
indicates a slowdown in the market. The high amount of fixed capital forces
entrepreneurs to continue production since they must realize the amortization of
the invested capital. One can therefore observe that, with the expansion of the
mechanized system of modern capitalism, in contrast to the earlier manufacturing
period, in times of crises the operation is much more rarely completely interrupted.
This makes crises more pertinacious and long-lasting, because a quick restoration
368 Harald Hagemann
of the equilibrium between production and consumption is no longer possible.
Sometimes production is even expanded in times of crises because large enterprises,
with their cost advantages, can thereby reduce their production costs per unit of
output, and, with lower prices, may increase their market share at the expense of
small and medium-sized firms, which may be completely eliminated from the
market. Crises then contribute to the transformation to large-scale enterprises. As
Lexis (see Chapter 19) has done in his contribution on ‘overproduction’ to Conrad’s
handbook (ÜBERPRODUKTION, Handwörterbuch der Staatswissenschaften),
Herkner also points to increases in the productivity of labour, which are linked to
technological change. As a consequence of the new, more efficient techniques, the
price of commodities declines, which leads to their greater saleability. However,
expansion of the market very often cannot keep abreast of an increase in production
because price decreases come into force only incompletely and with delay. Finally,
Herkner also lists misguided economic policies such as excessive protective tariffs
or export premiums as causes of production crises, an argument that reveals the
free trade attitude of his teacher Brentano.
Crises can also have their source in traffic and circulation. Under the German
term ‘Verkehr’ Herkner first discusses changes in transportation before he deals
more extensively with the currency and credit system. He points out that revolu-
tionary technological changes in transport and communication can lead to economic
disturbances similar to those caused by changes in production techniques. An
intensification of competition may cause a change of location or a transition to
another system of operation. Thus, the enormous productivity increases in transport
due to the development of steam navigation and the American railway system led
to the supply of cheap corn by American producers, with whom Western and Central
European farmers were unable to compete. This has caused spillover effects in
terms of crises since the farmers’ reduced purchasing power could not be fully
compensated by an increase in workers’ purchasing power due to a fall in the price
of bread.
Herkner’s lengthy considerations of crises that originate from the monetary,
credit, stock exchange or currency system do not contain important innovative
theoretical insights. His principal position is the emphasis on the role of a strong
state to regulate the banking system to keep the purchasing power of money stable.
Herkner here emerges as a typical socialist of the chair, sharing Schmoller’s beliefs
in the efficiency and competence of the Prussian civil service in particular. Thus,
Herkner points out that the old dictum ‘free trade in banking is free trade in swin-
dling’ has not lost its importance. ‘As much as banks which are managed solidly
can contribute to the avoidance and curing of economic crises, as great is unfor-
tunately also the damage which is caused by careless granting of credit and dishonest
issuing of banknotes’ (p. 896). Rather surprising in this context are some positive
comments on the role of speculation on the stock exchange, which contributes to
the temporal and regional adjustment of prices.
Bergmann (1895, p. 425) already recognized that Herkner attributed the greatest
importance to the unevenness of income distribution, which causes one of the
most dangerous and deepest disturbances in modern economic life, ‘a pathological
Heinrich Herkner on overcapitalization and underconsumption 369
disposition of our economic body’ (Herkner, 1900, p. 419). Each period, the
receivers of high income withhold large parts of their income from the consumer
market because they want to increase their wealth and future income by saving
and earning interest. However, their capital formation only rarely corresponds to
the capital formation necessary for the whole economy. In most cases it is higher,
i.e. overcapitalization occurs.
Although capital accumulation increases the demand for labour, the growing
purchasing power of workers lags behind the additional production of commodities.
‘If the purchasing power of the newly employed workers were to coincide with
the net returns of the new firms in the economy, then neither interest nor a corre-
sponding profit would result for the entrepreneurs and capitalists’ (p. 896). The
disproportionality between production and consumption, which originates from
the simultaneous overcapitalization and underconsumption, could be obscured in
many ways. Modern large-scale enterprises might blossom and give the apparent
impression of an upturn in the economy. However, the downside consists of a
chronic depression in handicraft and its workers. The excess production might
also be exported without a corresponding import, so that the savings are lent to
foreign countries. These exports then result from social grievances in the domestic
economy. Another ‘solution’ of the disproportionalities between production and
consumption due to overcapitalization as a consequence of inequality, which
Herkner observes in many European countries, is the enormous unproductive
expenditure on the military. This type of public consumption covers the gap between
production and private consumption. The associated permanent increase in public
debt increases the interest rate or prevents its fall. However, the ‘true evil’ – the
great unevenness of income distribution – is not eliminated; on the contrary, a
payment of interest on public debt via an increase in indirect taxes would further
reduce the purchasing power of the masses and thereby aggravate the problem
(see p. 897). In the 2nd edition, written in Zurich and with his Swiss experiences,
Herkner points to the fact that the introduction of a high wealth tax to finance public
consumption could mitigate the problem (KRISEN, 1900, p. 421).
Herkner identifies the underconsumption of the great masses, resulting from
the inequality of income and wealth, and overcapitalization as two sides of the
same coin. The resulting overproduction puts modern economies into a critical state
with the consequence that minor disturbances can lead to major crises and that
the recovery from a crisis has become more difficult. Not only does the great
unevenness of distribution contribute to the development of crises, but also the
crises produce a surplus working population and thereby influence income
distribution in a very negative way.
The distribution of income determines not only the size but also the structure of
consumption. Workers who receive a minimum wage have little disposable income.
The result is a certain uniformity in most workers’ consumption patterns. On the
other hand, the wealthy are free to choose how they spend their money and very
often are subject to the rule of capricious fashions. This leads to greater uncertainty
in the estimation of future demand on the part of producers. A great fluctuation in
fashions can cause local crises. On the other hand, it may stimulate wealthy people
370 Harald Hagemann
to spend more on consumer goods and thereby contribute to restore the equilibrium
between production and consumption.
The latter argument shows that Herkner has a permanent tendency to reach a
balanced view, congenial to his character. His discussion of the various causes of
crises sometimes also gives the impression that they will occur when anything of
sufficient importance goes wrong, because hardly any argument available at the
time is missing. Herkner might have felt this himself because in retrospect not
only does he speak of an immense list of causes such that one may be surprised
that crises do not happen even more often, but also he stresses the interdependencies
of various causes and the task of determining the ‘coefficients of importance’ of
the various causes. Thus, whereas at the beginning of his essay he denies that
crises can be explained as the result of a unifying cause, he now feels the need for
exactly that. There can be no doubt that for Herkner the decisive cause consists of
the great unevenness of income and wealth, which leads to overcapitalization and
underconsumption. This is also indicated by the fact that in his section on Therapy,
Herkner fully agrees with Lexis’s position that only by improving the ability of
the working population to consume more could an appropriate remedy be found
for a chronic crisis based on overproduction.
In his discussion of crises theories Herkner distinguishes between the optimistic
free trade theories of Say, Ricardo and the two Mills, and the pessimistic socialist
crises theories of Owen, Malthus, Sismondi, Rodbertus, Marx and Engels, Kautsky,
Lassalle, Fourier, Proudhon, Henry George et al.5 The members of the Currency
School are attributed with a special position in the former group due to their
emphasis on the credit system. However, their views did not impress Herkner very
much due to the suspension of Peel’s Bank Charter Act (1844) in times of crises
to avoid greater maladies. Lexis is given a special position in marking the traverse
from the former to the latter group, which emphasized the contradiction between
overproduction in the privately organized capitalist economy and objective
underconsumption, which is strongly linked to the distributional factor.
In the second and third version of his Crises essay, Herkner (1900, pp. 423–427;
1910, pp. 265–269) subdivides his Section III on crises theories into three sub-
sections where he discusses the controversy between Malthus, Sismondi and
Say, the socialist crises theorists and the newer German economics, which takes a
middle position between liberal and socialist economics. With regard to the general
glut controversy, Herkner cannot understand why Say’s théorie des débouchés,
‘which was reduced by its originator himself to the most insignificant of tautologies,
nevertheless has been able to maintain such a highly respectable reputation
among economists’ (p. 423). On the other hand, Herkner keeps some distance
from Malthus’s emphasis on luxury consumption, whereas he fully approves of
Sismondi’s view that the equilibrium between production and effective demand is
more disturbed the more uneven the income distribution becomes.
In the first version of his crises essay, Herkner (pp. 896–897, 904) refers to Rau’s
German edition of the letters between Say and Malthus on the causes of the
stagnation of commerce and points out that Rau (1821) basically agreed with
Malthus that an increase in production does not necessarily lead to an equivalent
Heinrich Herkner on overcapitalization and underconsumption 371
increase in consumption. However, Herkner fails to refer to the fact that five years
later in his Lehrbuch der politischen Ökonomie (Principles of political economy)
the influence of Malthusian and Sismondian ideas had wasted away, and Rau
(1826) not only considered equilibrium between production and consumption as
a necessary condition for the wealth of nations, but also pointed out that overall
supply equals overall demand and that a general overproduction is unthinkable.
With regard to the German authors, Herkner is full of praise for Adolf
Wagner’s contribution on KRISEN (in →Rentzsch’s Handwörterbuch der Volks-
wirthschaftslehre, 1866; see Chapter 14), where Wagner had taken up the best ideas
of the liberal school, in particular John Stuart Mill’s emphasis on the tendency of
profit to fall to a minimum as one of the most important causes of crises.
The study of crises and economic fluctuations was a major issue in German
economic analysis from the mid-nineteenth century. The debate intensified at the
turn of the century when Tugan-Baranovsky’s studies on the theory and history
of commercial crises in England were published in German (1901) and a new
generation of younger economists, such as Arthur Spiethoff and Werner Sombart,
made major contributions (see Hagemann, 1999). In particular, the writings of
Spiethoff, who had been a student of Wagner and research assistant to Schmoller,
had a strong influence on Herkner, who wrote the third version of his KRISEN
entry while in Berlin. Herkner completely rewrote the second section of his essay,
which he now termed Theorie des Konjunkturwechsels (Theory of business
fluctuations) instead of Ursachen der Wirtschaftskrisen (Causes of economic
crises). The title as well as the structure of this section – the ‘normal’ state, upturn,
reversal and decline, external causes of business fluctuations – show not only the
stronger influences of Spiethoff but also the beginning of the traverse from putting
almost all the emphasis on the crisis to placing the problem of the cycle as the
focus of attention instead. The way was paved for Spiethoff to substitute Herkner
as the contributor on KRISEN in the fourth and final edition (1925), seemingly
with the consent of Herkner, who had not followed up the modern developments
in business cycle theory and whose energies in the mid-1920s were absorbed by
his chairmanship of the Verein für Sozialpolitik and his membership of the
Reichswirtschaftsrat, the consulting committee of the German government on
economic and financial issues.
18.4 ASSESSMENT
NOTES
1 For details of Herkner’s life and work, see his autobiography (Herkner, 1924), L. Heyde’s
entry on HERKNER, HEINRICH in →Beckerath’s Handwörterbuch der Sozialwissenschaften
(Vol. 5, 1956), and the biography by Backhaus and Hanel (1994).
2 On Roscher and Wagner, see Chapters 7 and 14 of this volume.
3 See Lindenlaub, 1967, pp. 162–168 and Hagemann, 2001. For the history of the Verein
für Sozialpolitik, see also Boese, 1939.
4 On the terminological shift from ‘crises’ to ‘depressions’, see Chapter 3, Sections 3.3.7
and 3.3.8.4; the topic was discussed a few years earlier by Laveleye in completely different
terms; see Chapter 15, Section 15.3.
5 For a full list and a more detailed discussion, see Chapter 4, Section 4.4.
REFERENCES
Backhaus, J. and Hanel, J., 1994, Die Nachfolge – Ein Versuch über Heinrich Herkner, den
Volkswirt (Marburg: Metropolis).
Bergmann, E. von, 1895, Die Wirtschaftskrisen. Geschichte der Nationalökonomischen
Krisentheorieen (Stuttgart: Kohlhammer).
Boese, F., 1939, Geschichte des Vereins für Sozialpolitik 1872–1932 (Berlin: Duncker &
Humblot).
Heinrich Herkner on overcapitalization and underconsumption 373
Brentano, L., 1917, Elsässer Erinnerungen (Berlin: Erich Reiß).
Bruch, R. vom, 1980, Wissenschaft, Politik und öffentliche Meinung. Gelehrtenpolitik im
Wilhelminischen Deutschland (1890–1914) (Husum: Matthiesen Verlag).
Hagemann, H., 1991, Learned journals and the professionalization of economics: the German
language area, Economic Notes, 20, pp. 33–57.
Hagemann, H., 1999, The development of business-cycle theory in the German language
area 1900–1930, Storia del Pensiero Economico, 37, pp. 87–122.
Hagemann, H., 2001, The Verein für Sozialpolitik from its foundation (1872) until World
War I. In M. M. Augello and M. E. L. Guidi (eds), The spread of political economy and
the professionalisation of economists. Economic societies in Europe, America and Japan
in the nineteenth century (London and New York: Routledge), pp. 152–175.
Herkner, H., 1887, Die oberelsässische Baumwollindustrie und ihre Arbeiter (Straßburg:
Trübner).
Herkner, H., 1891, Die sociale Reform als Gebot des wirthschaftlichen Fortschrittes
(Leipzig: Duncker & Humblot).
Herkner, H., 1894, Die Arbeiterfrage (Berlin: J. Guttentag), 2nd edn, 1897, 3rd edn, 1902,
4th edn, 1905, 5th edn, 1908, 6th revised and extended edn, 2 vols, 1916, 7th edn, Vol.
1: Arbeiterfrage und Sozialreform, Vol. 2: Soziale Theorien und Parteien (Berlin and
Leipzig: Vereinigung wissenschaftlicher Verleger Walter de Gruyter – vormals G. J.
Göschen’sche Verlagshandlung, J. Guttentag, Georg Reimer, Karl J. Trübner, Veit &
Comp), 8th edn, 2 vols, 1922.
Herkner, H., 1912, Der Kampf um das sittliche Werturteil der Nationalökonomie, Jahrbuch
für Gesetzgebung, Verwaltung und Volkswirtschaft im Deutschen Reiche, 36, pp.
515–555.
Herkner, H., 1924, Der Lebenslauf eines ‘Kathedersozialisten’. In F. Meiner (ed.), Die
Volkswirtschaftslehre der Gegenwart in Selbstdarstellungen (Leipzig: Verlag von Felix
Meiner), pp. 77–116.
Hutchison, T. W., 1953, A review of economic doctrines 1870–1929 (Oxford: Clarendon
Press).
Lindenlaub, D., 1967, Richtungskämpfe im Verein für Sozialpolitik. Wissenschaft und
Sozialpolitik im Kaiserreich vornehmlich vom Beginn des ‘neuen Kurses’ bis zum
Ausbruch des Ersten Weltkrieges (1890–1914). Part I. (Wiesbaden: Franz Steiner
Verlag).
Rau, K. H., 1821, Malthus und Say über die Ursachen der jetzigen Handelsstockung
(Hamburg: Perthes and Besser).
Rau, K. H., 1826, Lehrbuch der politischen Ökonomie (Heidelberg: C. F. Winter).
Schmoller, G. von, 1900–1904, Grundriss der allgemeinen Volkswirtschaftslehre, 2 vols
(Munich and Leipzig: Duncker & Humblot).
Tugan-Baranowsky, M., 1901, Studien zur Theorie und Geschichte der Handelskrisen in
England (Jena: Gustav Fischer).
19 Wilhelm Lexis
Crises and overproduction
Harald Hagemann
Wilhelm Lexis was born in Eschweiler, near Aachen, the son of Dr Ernst Joseph
Lexis and his wife Gertrud Stassen, on 17 July 1837 and died in Göttingen on 24
August 1914 (Koch, 1985).2 Lexis attended the Friedrich-Wilhelm-Gymnasium
in Cologne. After his final exam he studied at the University of Bonn, first law,
then mathematics and physics. He achieved his doctoral degree with a thesis on
analytical mechanics with August Beer in 1859. After a short period as a teacher
at a secondary school in Bonn, he worked with the famous chemist Robert Wilhelm
Bunsen (1811–1899) at the University of Heidelberg from 1860 to 1861. Thereafter,
he went to Paris for economic studies and earned his living as the economic
correspondent for a German newspaper. At the end of the Franco-Prussian War of
1870–1871 Lexis worked as a journalist for the Amtliche Nachrichten für Elsaß-
Lothringen, first in Haguenau, then in Straßburg.
In 1872 Lexis became extraordinary professor of economics at the newly founded
German-language Imperial University of Straßburg, where Gustav Schmoller was
among his colleagues and where he became closely affiliated with Friedrich Althoff,
who later became famous as an academic policy maker in Prussia. In 1874 Lexis
became full professor of geography, ethnology and statistics at the University of
Dorpat, today’s Tartu in Estonia. From there he moved in 1876 to Freiburg, where
he held a chair in economics and taught until 1884. In that year he left for a pro-
fessorship in economics at the University of Breslau in Silesia, to achieve his final
appointment three years later at the Georgia Augusta.
Lexis taught at the University of Göttingen from 1887 until his death. There he
founded in 1895 the first German university institute for the interdisciplinary study
of insurance problems, a field in which later some of his students, such as Alfred
Manes and Paul Moldenhauer, continued to work. Despite his studies and many
essays on consumption, trade and crises, Lexis became best known as a demog-
Wilhelm Lexis on crises and overproduction 377
rapher and statistician (Lexis, 1875, 1877, 1903). His foremost contribution to
demography was the famous Lexis diagram, in which the abscissa represents the
time of birth and the ordinate represents age. Lexis must be credited as the refounder
of mathematical statistics (Klein, 1914). In that field, he received his highest acclaim
for his dispersion theory, where he investigated how far different statistical ratios
with temporary oscillations remain within the scope, which is decisive for the effect
of random causes, according to Laplace and Poisson. Francis Ysidro Edgeworth
dealt intensively with Lexis’s two methods of precision determination. Lexis’s
dispersion theory was also well perceived by the Swedish astronomer Chalier and
the Russian mathematician Markov. His research in mathematical statistics was
continued by his outstanding student Ladislaus von Bortkiewicz (1868–1931), who
wrote his PhD thesis with Lexis in Göttingen in 1893, as well as by Alexander
Tschuprow, Oskar Anderson and others. Lexis, who was a founding member of
the International Statistical Institute, was elected Vice President in 1889 and
remained in that position for more than 20 years.
While at Göttingen, Lexis became a close long-time adviser to Friedrich Althoff
and the Prussian Ministry of Education, which resulted in his being awarded many
distinguished honours, including in 1904 the title of a Geheimer Oberregierungsrat,
which, according to Prussian tradition, was only given to a professor in exceptional
circumstances. Among the many important publications in this field were two
volumes on German universities on the occasion of the world exhibition in Chicago
(Lexis, 1893), a work on the reform of the higher school system in Prussia (Lexis,
1902) and a four-volume collection on the German education system, which came
out at the world exhibition in St Louis (Lexis, 1904). Lexis organized and edited
all these collective works, to which he himself made several contributions. Unlike
in many similar projects at the time, mathematics and the sciences played a
substantive role in the collections for which Lexis was responsible.
In 1891 Lexis also became co-editor of the Jahrbücher für Nationalökonomie
und Statistik. From 1879 to 1915 the Jahrbücher were edited by Johannes Conrad,
with whom Lexis also closely co-operated in the edition of the Handwörterbuch
der Staatswissenschaften.
As an economist, Lexis strongly favoured the application of statistical methods
as a necessary complement to abstract deductions, which otherwise could be in
danger of leading pure economic theory away from the complexities of real
economic life. Lexis (1881) was also the first economist to perceive that Walras
had not introduced conditions into his general equilibrium system that guaranteed
real and non-negative solutions of the price equations. As a co-founder of the Verein
für Sozialpolitik, Lexis was close to the socialists of the chair on issues of economic
policy and in favour of the admissibility of value judgements. He was an opponent
of the marginalist school and advocated an objective theory of value. Lexis was
also among the very few German professors who immediately took note of the
publication of the third volume of Marx’s Capital. In his long and knowledgeable
contribution to the Quarterly Journal of Economics, Lexis was quite critical about
some of Marx’s theoretical concepts, in particular the abstract value category,
but nevertheless came to the conclusion that Marx ‘is to be assigned a foremost
378 Harald Hagemann
place among the theorists of economic science. In method and in cast of mind
he most resembles Ricardo’ (Lexis, 1895, p. 25). Thus, it is no surprise that his
most brilliant student, Ladislaus von Bortkiewicz, whom Schumpeter (1932,
p. 338) appreciated as ‘by far the most eminent German statistician since Lexis’,
made important contributions not only to mathematical statistics, such as the ‘law
of small numbers’, but also in the critical analysis of value and price in the Marxian
system. At the end of his life Lexis (1910) published a textbook, Allgemeine
Volkswirtschaftslehre, which is also characterized by his ‘theoretical sharpness’
(Bortkiewicz, 1915, p. 331).
• speculation crises, with the two subcategories of trade crises and stock
exchange crises depending on whether speculation refers to goods or to
stocks;
• credit crises, which are always associated with speculation crises and are
characterized by credit rationing and a rapid and strong increase in the interest
rates charged by the banks;
• money crises as the highest form of credit crises; and
• production crises, which Lexis recognizes as the most important and most fatal
type of crisis, marking the end of a period of excessive production combined
with too great a fixing of capital for the maintainence of production.
Lexis identifies the crisis as a turning point in which the preceding boom, which
in general has a real basis but due to speculation is exaggerated, requires some
correction. Lexis’s argument has much in common with the overtrading tradition
scattered throughout the nineteenth century, as is reflected also in Juglar’s explana-
tion of cyclical fluctuations as the consequence of excessive speculative behaviour
which makes crises the necessary corrections to the excesses of the former boom
in the economy (see Chapter 12).
It is only in his long contribution on ‘Consumption’ to Schönberg’s handbook
that Lexis (1882, p. 537) uses the term Absatzkrise (sales crisis) as equivalent to
overproduction. Whereas Roscher found it necessary to substitute the term pro-
duction crises with the term sales crises to characterize the essence of the problem,
namely, a shortage of effective demand (see Chapter 7), Lexis gave up the term
sales crisis in his later writings.
For Lexis, the relation between production and consumption in the economy is
a decisive issue. This comes out very clearly, for example, in his initial and final
arguments in his contribution on consumption to Schönberg’s handbook. There
Wilhelm Lexis on crises and overproduction 379
he points out that classical political economy in general had focused on production
and neglected consumption, with the exception of Say, who paid equal attention
to consumption. On the other hand, overemphasis on the consumption side led to
one-sided views on the importance of luxury consumption, as in the works of
Malthus and Sismondi. Lexis (1882, p. 505) also refers to a passage in The wealth
of nations (Book IV, p. viii), in which Adam Smith in his disputing of mercantilism
stresses: ‘Consumption is the sole end and purpose of all production; and the interest
of the producer ought to be attended to, only so far as it may be necessary for
promoting that of the consumer’ (Smith, 1976, p. 660). After a longer discussion
of temporary sacrifices of consumption in times of crises or wars, Lexis emphasizes
that, unless necessaries are concerned, these sacrifices have only a transitory,
momentary importance, which leads him to the final conclusion ‘that if consumption
is the end of production, it nevertheless is not the end of human being’ (Lexis, 1882,
p. 540).
According to Lexis, uncertainty in the adjustment of production to consumption
is not an exclusive characteristic of the capitalist mode of production, but also
appears in other systems. During the period of the upward movement as well as in
the subsequent crisis, structural changes in the ratio between production and con-
sumption take place. Whereas in the former phase production increases and finally
develops into overproduction, this is corrected in the latter phase. In the final Section
IV on the ‘relation between consumption and production’ of his 1882 essay, in
which Lexis first discusses the problems of crises and overproduction, he empha-
sizes that ‘the interaction of consumption and production has the tendency to put
these two factors into equilibrium . . . This equilibrium, however, is never achieved
in reality’ (Lexis, 1882, p. 535).
In Lexis’s many writings on consumption, crises and overproduction we find a
constant arguing and disputing with the crises theory of Karl Rodbertus-Jagetzow
(1805–1875), whom Schumpeter considered to be the leading representative of
the underconsumption theory of ‘the mass poverty type that attributes gluts to the
inability of labour, owing to low wages, to “buy its own product”’ (Schumpeter,
1954, p. 740, n. 4). The posthumous publication of Rodbertus’s fourth social letter
to von Kirchmann, Das Kapital (Rodbertus, 1884), even animated Lexis to write
a long review essay criticizing Rodbertus’s theories, in particular on rent, value
and crises (Lexis, 1884). Lexis took Rodbertus’s income distribution argument seri-
ously. He first accepted the latter’s view that a declining share of wages in national
income with a constantly growing productivity due to the invention of more efficient
machinery raises sales problems for a growing number of products, an overproduc-
tion that could be avoided by giving wages (as well as profits and rents) a constant
share in national income.3
However, more and more critical comments entered into Lexis’s analysis of
Rodbertus’s theories. Thus, he soon cannot identify as a specific cause of acute
crises a long-term decline in the wage share.
Wage decreases and displacements only took place after the crisis set in. A wrong
assessment on the part of the producers on the saleability of their commodities,
however, is always a main cause of overproduction.
Lexis rightly states that nobody doubts the occurrence of partial crises, but then
he goes on to dispute the view of many economists, in particular Jean-Baptiste Say
and John Stuart Mill, who deny the possibility of a general glut. He develops his
argument first in § 29 of his ‘Consumption’ essay, and then makes it the regression
line of his entry on UEBERPRODUKTION to Elster’s Wörterbuch. The core argument
of Lexis focuses on the decline in prices as a consequence of excess supply.
In fact, production of most commodities very often moves along the edge of
overproduction since the adaptation of supply to demand mostly is characterized by
the rise of new producers and the elimination of older and weaker ones in the pro-
cess of competition. ‘Real overproduction’, however, originates when even the better
entrepreneurs are facing profit reductions and have difficulties surviving in times of
crises, which may last quite some time. The decline in profits (and wages) in one or
more important sectors of production generates spillover effects to other sectors,
which leads to capital losses and finally to a temporary general overproduction.
According to Lexis, it is only a theoretical question of minor practical importance
whether a real overproduction takes place with all commodities. Overproduction
is characterized by a fall in the rate of profits below the normal level. In the extreme,
profits might erode completely. In periods of crises, prices decline; however,
normally not in a proportional way for all commodities. Producers of goods the
prices of which decrease less than average might even benefit from the lowering
of wages and prices of raw materials in a way that could overcompensate for the
price decline. Recovery then starts from these sectors, which makes general over-
production a temporary phenomenon.
Lexis had developed his core arguments already very clearly in his contribution
on UEBERPRODUKTION (Overproduction) to Conrad’s Handwörterbuch der
Staatswissenschaften. There he criticized the arguments of the defenders of Say’s
law, including von Mangoldt in Germany, as ‘suffering from an excess of bloodless
abstractions and a complete neglect of the consideration of the factual relations
under monetary and capitalist production regulations’ (Vol. 6, 1894, p. 296). On
the other hand, Lexis regarded as erroneous the view that overproduction could be
combated by higher consumption of luxury goods by the wealthy since this would
impose further negative consequences on real capital formation. Thus, the overall
economic damage would be greater than the usefulness of the increased sales of
luxury goods. Nevertheless, Lexis came to the conclusion that, in contrast to the
optimistic views of Say, Ricardo and Mill, general overproduction can occur
temporarily in a capitalist economy, which he saw realized in the years 1886 and
1887 (ibid., pp. 297–298).
Wilhelm Lexis on crises and overproduction 381
According to the explanation given by Lexis, general overproduction is mainly
the consequence of increasing productive power, i.e. technological progress which
leads to a new equilibrium system of prices. He clearly distinguished between the
old and the new equilibrium price system and the transition process in which
overproduction phenomena can arise since the reduction in prices will not imme-
diately lead to the reactions expected by abstract theory.
Overproduction in this sense does not necessarily imply an acute crisis. The latter
in general only appears if trade speculation causes excessive price increases which
lead to an expansion of production. Whereas the consequential overproduction
normally is of a short-term nature and will quickly be corrected, overproduction
as the consequence of a change in the overall production and competition conditions
could assume a more chronic character. It could be associated with crises, which
then, however, would only be secondary phenomena.
19.4 ASSESSMENT
Schumpeter, who had a high regard for the work of Lexis in the theory of statistics,
also attested that ‘Lexis did work of a high grade in many fields, especially on
questions of monetary policy and foreign trade. . . . But all these writings show
weaknesses on the theoretical side that are surprising in a man of no doubt
remarkably keen intellect’ (Schumpeter, 1954, p. 852). Schumpeter identified the
cause of these weaknesses in that Lexis ‘took no interest whatever in the work of
improving the apparatus of analysis; . . . he did not even bother to use mathematics
. . . in the service of his economics’ (ibid., pp. 852–853).
In a certain sense this is also reflected in the numerous writings of Lexis on
consumption, crises and overproduction, which contain many insights made by a
sharp intellectual mind. Lexis’s detailed empirical discussions of the crises since
1815 at the end of his KRISEN essays show his own interest as a statistician and
that the outlook of the historical school also interfered with his more theoretical
papers.
Nevertheless, we find important theoretical aspects in Lexis. When he recog-
nized general overproduction as a temporary phenomenon, many passages reveal
thinking in terms of a general equilibrium system. This is reflected very well when
Lexis is discussing what today we would call spillover and feedback effects. When
382 Harald Hagemann
he explains how a general overproduction is generated, Lexis puts much emphasis
on the fact that excess supply on some goods markets reduces the demand for
labour, which lowers the purchasing power of workers and thereby indirectly
enhances excess supply for consumption goods. This is an important point already
well recognized by Eugen von Bergmann (1895, pp. 409–410) in his discussion of
Lexis’s crises theory.
As we have already discussed, Lexis identifies the crisis as the turning point in
which the excesses of the former boom are corrected. Although this is not yet a
proper and well-developed theory of the business cycle, Lexis’s introduction of
the idea that the crisis marks a turning point between a phase of upward movement
and the subsequent collapse, which seems to be influenced by Juglar, anticipates
later explanations by Lescure, Aftalion and Mitchell, which are elaborated in greater
detail. It paved the way for the ‘euthanasia of crises’, which first became just the
turning point, then could be dispensed with altogether and became the ‘recession’
or ‘depression’ phase in a full business cycle.4 It was Schumpeter who credited
Juglar with
the discovery that what former generations had called ‘crises’, were no dis-
connected events, but merely elements in a more deep-seated wave-like
movement. The crises are nothing but turning points from prosperity into
depression, and it is the alternation between prosperity and depression which
is the really interesting phenomenon
(Schumpeter, 1931, p. 6)
NOTES
1 See the Foreword IN MEMORIAM by Ludwig Elster on the history of the Handwörterbuch
der Staatswissenschaften to the first volume of the completely revised 4th edition
published in 1923.
2 For details on Lexis’s life and work, see also Bortkiewicz, 1915, Esenwein-Rothe,
1992, K.-P. Heiss’s entry on LEXIS, WILHELM in the →International encyclopedia of the
social sciences (1968), F. Burkhardt’s LEXIS, WILHELM in the →Handwörterbuch
der Sozialwissenschaften (1959), Klein, 1914, K. Oldenberg’s LEXIS, WILHELM in the
→Encyclopaedia of the social sciences (1933), and S. L. Zabell’s LEXIS, WILHELM in
→The new Palgrave (1987).
3 See Lexis, 1882, p. 539, n. 58, but also his KRISEN entries.
4 On the distinction between cycles and recurring crises, see Besomi, 2010, pp. 225–239.
REFERENCES
Arthur Spiethoff was born in Düsseldorf in 1873. He studied economics and politics
at the University of Berlin. A student of Gustav Schmoller, he was deeply influenced
by the scientific approach professed by the leader of the younger historical school
of economics. He was Schmoller’s assistant from 1899 to 1908. After his doctoral
work on economic crises (1905), he was appointed a full professor at the German
University of Prague (1908). From 1917, after Schmoller’s death, he succeeded
him as editor of the Schmollers Jahrbuch für Gesetzgebung, Verwaltung und
Volkswirtschaft in Deutschen Reiche (afterwards, Zeitschrift für Wirtschafts- und
Sozialwissenschaften). From 1918 to 1939 he was a professor at the University of
Bonn. In 1953 he was elected honorary President of the International Economic
Association.
As is well known, Spiethoff ’s main subject of inquiry was business cycles. As
a theoretician of business cycles, he had a profound impact on the scientific
community. Spiethoff developed his research in a peculiar way. On the one hand,
he created devices, categories and approaches that could be used to systematically
analyse the large series of phenomena occurring in economic fluctuations.1 On the
other hand, he inserted these studies in a theoretical framework that fostered fruitful
co-operation between theoretical and historical views. His aim was to link business
cycle analysis to ‘a synthetic representation of the development of the market
economy through historical Real-Types’ (Kamp, 1958, p. 8).2
His inquiry was explicitly devoted to overcoming the sterile contrapositions of
the Methodenstreit, giving an example of a theoretical approach that was construc-
tively open to history. In Spiethoff’s opinion, only the emphasis on the relationship
between theory and history can render the explanation of business cycles effective,
388 Vitantonio Gioia
opening new explicative dimensions: ‘economics by means of historical experi-
ences and theoretical devices should contribute to the highlighting of a new lifestyle
and economic style in fieri’ (Kamp, 1958, p. 22). The epistemic relevance of this
view was already clear in the lecture he gave at the Association for Political Sciences
at the University of Berlin on 17 December 1901:
I believe that all truly ‘general economic crises’ are essentially uniform
phenomena, but this is quite compatible with the other view, that in individual
historical crises sometimes one feature and sometimes another is especially
prominent, thus lending the phenomenon a distinctive character. Regarding
this latter point, it seems to me that we can now distinguish particular forms
which constitute a historical progression, not in the strict sense of economic
history, but in that of economic theory.
(Spiethoff, 1902, English translation, pp. 68–69)
20.3 KRISEN
The entry on KRISEN was published in 1925 in Vol. VI of the 4th edition of
the Handwörterbuch der Staatswissenschaften (pp. 8–91). It was the outcome
of a long inquiry on the subject of business cycles that commenced in 1901 with
an engaging confrontation with the theoretical contribution of Tugan-Baranovsky.
KRISEN replaces the entries with the same title written by H. Herkner (see
Chapter 18), republished with no significant changes in the other editions of the
Handwörterbuch (except in the section on the history of the discipline: see Chapter
4, Section 4.4). In many respects, Spiethoff ’s work preserves the formal structure
of Herkner’s contributions: after a short introduction, the second part is devoted
to theoretical reflections on crises, the third part to the evolution of crises theories
in the history of economic thought and the fourth part to short analyses of the
crises that occurred in the nineteenth century (Herkner, KRISEN, in Conrad et al.’s
→Handwörterbuch der Staatswissenschaften, 1st edn, Vol. 4, 1892; 2nd edn, Vol.
4, 1900; 3rd edn, Vol. 3, 1910). And yet, apart from this formal structure, it is not
possible to compare Herkner’s contributions with Spiethoff’s work, as the former
Arthur Spiethoff: from crises to cycles 389
are prevalently descriptive in character, while the latter is more theoretically
oriented.
Spiethoff’s KRISEN is a synthetic and unifying study in which all the outcomes
of his previous works meet and contribute to the building of a picture rich in
empirical content, theoretical constructs and methodological directions, aimed at
formulating business cycles theory. As a matter of fact, KRISEN was published in
1925, when, as Mitchell and Lederer noted, the transition from crises theory to
business cycles theory was already completed (Mitchell, 1927, pp. 3 ff.; Lederer,
1925, p. 361). Spiethoff certainly played an important role in overcoming the old
approaches. For this reason, the title KRISEN does not do justice to its content.
Indeed, in the following editions Spiethoff modified it.
KRISEN was translated into English in 1953, under the title ‘Business cycles’
(in International Economic Papers, no. 3). This differs from the 1925 edition by
the addition of a short Preface by Spiethoff, and the omission of the first part of
Sections IV (devoted to the history of business cycles before 1822) and V (devoted
to ‘Other business cycle theories’). A later re-edition in Germany by Edgar Salin,
was titled Die wirtschaftlichen Wechsellagen (1955). This was completed by a
second volume containing the materials of the ‘long statistical series on the features
of economic upswings and downswings’ (Spiethoff, 1955, 2, p. 1).
Spiethoff’s starting point had been clearly enunciated since 1925:
The cyclical upswings and downswings are the evolutionary forms of the
highly developed capitalistic economy and their antithetic stimuli condition
its progress. Medieval economies were stationary over considerable periods;
the capitalistic economy is in continuous movement and can be regarded as
stationary only in abstraction.
(Spiethoff, 1953, p. 78; [KRISEN, p. 8])
This view implies a radical criticism against the two opposing approaches to
business cycles in economics: ‘the classical and neo-classical view versus its oppo-
nents’ (Gioia, 2001). The former identifies the ‘normal state’ of economic affairs
with equilibrium or, more precisely, with a ‘natural’ tendency towards equilibrium
(Jonas, 1954, pp. 527 ff.). In this theoretical perspective, economic crises are mar-
ginal phenomena from the theoretical point of view. By contrast, in the analyses
of the opponents (Malthus, Sismondi, Lauderdale, etc.), economic crises are the
symptoms of a pathology of the capitalistic system (Salin, 1944, pp. 130 ff.).
Against the orthodox theories embedded in Say’s Law, Spiethoff points out
that
Great as are the errors of detail perpetrated by J. B. Say and James Mill in
arguing for their doctrine that the total volume of production and that of demand
necessarily coincide, it is certainly true that on the whole the two do in fact
tally. As a rule, they largely correspond, while disharmony on any great scale
is the exception.
(Spiethoff, 1902, English translation, p. 52)
390 Vitantonio Gioia
The fact is that ‘the production of a commodity does not necessarily correspond
to its consumption’. Production can exceed consumption, in which case ‘the excess
is exported or stored’. If, on the other hand, it is exceeded by consumption, ‘it
must be supplemented by imports or out of the surpluses of previous years’. As a
result, ‘foreign trade can render production and consumption independent of each
other’ (Spiethoff, 1953, p. 96; [KRISEN, p. 19]).
Critical remarks are made regarding to the ‘old theories’ of economic crises
(Malthus, Sismondi, etc.), which are based on the inadequate assumption that a
lasting equilibrium between production and consumption is impossible in a capi-
talistic system. These authors do not consider the overproduction phenomenon as
an aspect of business cycle theory, because they are incapable of distinguishing
between direct and indirect consumption (Spiethoff, 1955, 1, p. 159) and accord-
ingly interpret economic crises as the ‘memento mori’ of capitalism (to use the
famous Kautskian expression) (Spiethoff, 1955, 1, pp. 159–160; see also Röpke,
1936, p. 98).
Considering the historical features of an advanced capitalistic economy
(Hochkapitalismus), Spiethoff argued that disequilibrium (Ungleichgewicht) is
not an accidental and casual aspect, but is the ‘normal state’ (Normalform) of the
system (Spiethoff, 1948, p. 614 ff.). ‘The “normal state” is neither the upswing,
nor the downswing, nor, least of all, the crisis. What is normal in a free, highly
capitalistic market system based on money, is the business cycle’ (der Kreislauf
der Wechsellagen) (Spiethoff, 1953, p. 167; [KRISEN, p. 82]).
Moreover, the business cycle cannot be considered in a simplistic or mechanical
way, by means of the structural and institutional changes determined by economic
dynamics:
For some hundred years now, the economic life of the most advanced countries
has gone through cycles of upward and downward swings, the upswings often
ending in sudden collapse: the crisis. In earlier periods, too, there were good
and bad times, but they had other causes and the alternation was neither general
nor regular, and not a short-term one. It has been said that a cycle completes
itself in a ten-year span. It is not really possible to give definite figures of
absolute regularity; but a series of good years is always followed by a series
of bad years, and vice versa, and each decade witnesses at least one change of
fortunes.
(Spiethoff, 1953, p. 78; [KRISEN, p. 8])
the keystone, the essence of the historical-concrete theory lies in the fact
that the working hypothesis is based on the observation of reality. This allows
for the simultaneous evaluation of initial queries, working hypotheses and
empirical research. One of the greatest difficulties in working with the
historical-concrete theory is that of really letting empirical research fight it
out with theoretical reasoning.
(Spiethoff, 1948, p. 602)
differs from other business cycle theorists in that he does not attempt to derive
business fluctuations predominantly from a single cause or even from a tightly
knit analytical structure, but rather aims to synthesize the features of most
of the prevalent business cycle theories of his time in order to arrive at a
comprehensive picture of industrial fluctuations.
(Hagemann, 2000, p. 429)
And, for the same reason, he can escape from the myth of the search for a single
cause of business cycles without falling into a naive causal pluralism (naive
Ursachpluralismus) (Clausing, 1958, p. 282).
The endogenous factors of business cycles are rooted in three underlying elements
of the capitalistic economy.
‘The first element is economic man and his instinct.’ The impressive increase
in the ‘profit motive’ and its diffusion to the larger ‘strata of society’ foster
favourable expectations towards the chances of getting rich, leading economic
activities into excesses, with growing risks of economic losses: ‘the profit motive
and the spirit of enterprise, both highly stimulated, have assumed a wave-like
movement’ (Spiethoff, 1953, p. 167; [KRISEN, p. 82])
The second element ‘is the nature of capitalistic production’. In capitalism,
production becomes ‘independent of the slow organic processes of growth’, by
means of the promotion of technical and economic conditions capable of deter-
mining an impressive expansion of production ‘prompted by the new spirit of
enterprise’. This leads to overproduction ‘after a certain number of prosperous
years’ (Spiethoff, 1953, p. 167; [KRISEN, p. 82]).
‘The third element is the free-market system based on money.’ Such a system
showed great flexibility and a propensity to rapid economic expansion, but, at the
same time, ‘suffered from the difficulty of controlling it’. The inequality of income
distribution, favourable to the increase of investments during upswings, becomes
a crucial weak point, leading to the depression phases (Spiethoff, 1953, p. 167;
[KRISEN, p. 82]).
Given such features of the capitalistic economy, it is ‘practically impossible to
keep the production of investment goods in exact step with the formation of capital
and the growth of needs’ (Spiethoff, 1953, p. 122; [KRISEN, p. 38]). The ‘funda-
mental question is overproduction’ (Spiethoff, 1953, p. 122; [KRISEN, p. 38]), which
starts at the end of an upswing and flows into the downswing. Overproduction is
decisive for the explanation of business cycle, as it ‘invariably sets an end to all
Arthur Spiethoff: from crises to cycles 393
upswings’ (Spiethoff, 1953, p. 155; [KRISEN, p. 75]). It is clear, then, that one
must inquire into the features of upswings and the way that overproduction occurs.
In this respect, what is in question is the nature of overproduction. Overproduction
has assumed different meanings in the history of economics and has often been
misinterpreted, leading to false conclusions (Spiethoff, 1902, and Spiethoff’s entry
on OVERPRODUCTION in →Seligman’s Encyclopaedia of the social sciences,
1933). In order to highlight this aspect, Spiethoff, with reference to the analyses
of Marx and Tugan-Baranovsky (Spiethoff, 1903), starts from the distinction
between ‘direct consumption’ and ‘indirect consumption’. By ‘direct consump-
tion’, Spiethoff means ‘consumer goods as well as the raw materials entering into
them’. These kinds of goods are ‘acquired out of income for the owner’s personal
consumption or use’ (Spiethoff, 1953, p. 156; [KRISEN, p. 75]). In this category
of goods a special place is reserved for durable consumer goods, whose use is spread
over a longer period and ‘for their purchase income generally has to be accumulated
for some time’. In any case, notwithstanding the fact that their purchase implies
individual savings, they must be included in the category of consumer goods
because they are bought for personal use and not ‘for the purpose of yielding an
income’ (Spiethoff, 1953, p. 156; [KRISEN, p. 75]).
By contrast, ‘indirect consumption’ comprises a category of goods that can
‘satisfy needs only by way of other goods’. Industrial plants and constructions
‘designed to render long-lasting services, cannot be consumed directly, but serve
to satisfy wants by means of intermediary goods (machines, dwelling-houses) which
furnish goods or long-lasting services. Investment goods thus comprise industrial
plant and durable service equipments. The former is usually classed with capital
goods, the latter with consumer goods’ (Spiethoff, 1953, p. 156; [KRISEN, p. 75]).
The feature of investment goods in capitalist society lies in the fact that they are
‘bought not directly with income, but with capitalized income, i.e. with savings’
and ‘serve the production of fresh goods or for long-lasting services’ (Spiethoff,
1953, p. 156; [KRISEN, p. 75]).
Having defined the two aggregates of goods that compose the total amount of
production, Spiethoff can discuss the meaning of overproduction. The ‘word
overproduction is used as a common denominator for widely differing conditions
and has both a general economic and a business meaning. In economics, overpro-
duction means that output or productive capacity exceed consumption’ (Spiethoff,
1953, p. 79; [KRISEN, p. 8]). The production of consumer goods for which there
is no corresponding demand may be a sign of a temporary excess due to speculation
or a temporary imbalance in the allocation of factors of production. This can, of
course, affect the profits and the use of labour forces (unemployment might occur),
but if it represents a phenomenon limited in space and time, the adjustment
mechanisms of the market easily lead to a new balance between demand and supply.
The situation seems to be more difficult when the imbalance between demand
and supply is determined by changes in consumer tastes. In this case, the market’s
adjustment mechanisms are more complex because of the importance of the
variations involved, such as the production of new commodities, use of new raw
materials, major changes in the productive systems, etc.
394 Vitantonio Gioia
Nevertheless, according to Spiethoff, it is difficult ‘to arrive at uniform judgement
regarding the real effect on business cycles of direct consumption dynamics’. In
fact, in comparing different upswing cases,4 he asserts that ‘an increase in direct
consumption is not characteristic of an upswing, since the latter may occur without
any accompanying and improvement in direct consumption’ (Spiethoff, 1953,
p. 95; [KRISEN, p. 19]). On this basis Spiethoff rules out the relevance to the
business cycle of the kind of overproduction that is typical of the ‘old theories’,
which generally considered the ‘commodity world as a single entity’, attributing
an explicative function to direct consumption alone (Spiethoff, 1953, p. 93;
[KRISEN, p. 18]; on this, see Haberler, 1968, pp. 75–76).
In Spiethoff ’s opinion, to explain the upswings and cyclical movements we
have to adopt a more specific meaning of overproduction, abandoning the idea of
‘absolute overproduction’ and paying attention to an overproduction ‘of a special
kind’: ‘the starting and central points are formed by indirect consumption goods
and by investment goods’ (Spiethoff, 1953, p. 155; [KRISEN, p. 75]). The ‘decisive
observation’ is that ‘as far as commodities are concerned, the essential difference
between the cyclical phase of the upswing and downswing consists of changes in
indirect consumption goods and in investment goods’ (Spiethoff, 1953, p. 93;
[KRISEN, p. 18]). The ‘most important form’ of overproduction in highly developed
capitalism is caused by ‘an excess of investment for the construction of industrial
plant and long-term public utilities (investment goods) over both demand and
disposable savings’ (Spiethoff, 1953, pp. 79–80; [KRISEN, p. 9]).
The upswing, characterized by rising profits and increasing investment, rapidly
leads to the full employment of those economic resources that were not completely
used in the previous phase. Spiethoff writes that the phenomena typical of the
economic boom do ‘not all occur simultaneously, nor are they born fully developed’
(Spiethoff, 1953, p. 78; [KRISEN, p. 8]). Normally, this phase starts through the
expansion of investments in old fields of activity, favoured by a propitious climate
and by increasingly optimistic expectations among entrepreneurs. Further stimuli
for new investments are generated.
The opening of ‘fresh markets’, the spread of innovations and the expansion of
exports foster investment in industrial plant and public utilities, providing the
‘impetus and the hard core for the upswing’ (Spiethoff, 1953, p. 149; [KRISEN,
p. 70]; see Hagemann, 2002, p. xi). The rapid increase in investments in ‘indirect
consumption goods’ (iron, coal, building materials, etc.) accelerates the production
of new goods for the market: ‘From here, the movement extends to consumer goods’
(Spiethoff, 1953, p. 149; [KRISEN, p. 70]).
An economic boom occurs, leading to the full use of all material resources
of production. Rapid growth leads to an increase in wages, to the expansion of
consumption accompanied by rising prices, to rising profits and to a general
enhancement of people’s living conditions. It fosters, at the same time, a feverish
quest for new opportunities and new profits. Spiethoff points out: ‘as with a rolling
snowball, each turn expands the sphere: increased investment, increased con-
sumption, rising prices and profits, together with the expansion of consumption
and of capital formation and then again increased investment etc.’ (Spiethoff, 1953,
Arthur Spiethoff: from crises to cycles 395
p. 154; [KRISEN, pp. 74–75]). The result, he adds, ‘is a constant spiral-like self-
raising movement’.
Credit and banking institutions play a crucial role in this phase because ‘only
with the help of credit is it possible to utilize capital in the way in which it is actually
done and which is necessary. In the absence of credit, the owners of capital would
be unable to use a large part of it and the very formation of capital would be on a
smaller scale’ (Spiethoff, 1953, p. 153; [KRISEN, p. 74]).
Given the working of capitalistic economies, the investment level can only be
maintained if investment opportunities are sustained by fresh capital. However, as
demand for capital increases, interest rates rise. Speculation and overspeculation
fuel a continuously overheated market for commodities and securities. The over-
expansion of credit sustains the building of new industrial plants or the completion
of old ones, favouring a further expansion of indirect consumption. The ‘necessary
consequence of the rising investment’ and the expansion of indirect consumption
determine the ‘rise in prices . . . only for indirect consumption goods’ (Spiethoff,
1953, p. 154; [KRISEN, p. 74]), while an ‘expansion in direct consumption and the
rise in the prices of consumer goods are neither necessary nor general’ (Spiethoff,
1953, pp. 154–155; [KRISEN, pp. 74–75]): ‘The upswing meets its natural end in
overproduction’ (Spiethoff, 1953, p. 78; [KRISEN, p. 8].
This unhealthy state of affairs affects the expectations of economic players. The
expansion in the production of indirect goods appears incompatible with the existing
level of capital. ‘A capital scarcity occurs towards the end of every upswing’, leading
to a credit shortage when the investments needed in order to ‘carry out new
undertakings or to enlarge existing ones’ surpass the capacity of the capital market
(Spiethoff, 1918a, 1920; Haberler, 1937, pp. 68–79). So, the collapse of firms
suffering from incomplete financing affects ‘the whole market and induce[s] the
crisis’ (Spiethoff, 1953, p. 108; [KRISEN, p. 26]). As a result, this ‘special kind of
overproduction’, typical of highly capitalistic production, ‘in a system based on
money . . . must lead to a downswing’ (Spiethoff, 1953, p. 167; [KRISEN, p. 82]).
‘Overproduction and crises are both rooted in the upswing, but they are indepen-
dent of each other. Crises have generally come earlier than definite overproduction,
but a crisis may also set in only when overproduction has already been reached, or
when the economy has entered into a downswing. Or else, there may be no crisis
at all’ (Spiethoff, 1953, p. 104; [KRISEN, pp. 25–26]). ‘Every upswing ends in a
state of capital scarcity, but a crisis presupposes an unusual growth of credit during
the time of overspeculation’ (Spiethoff, 1953, p. 109; [KRISEN, p. 29]). When a
‘sudden credit collapse’ occurs, determining ‘numerous suspension of payments’,
the crisis becomes inevitable: ‘every crisis . . . is a credit crisis’ (Spiethoff, 1953,
pp. 104–105; [KRISEN, p. 26]). Outbreaks of panic and a general loss of confidence
are the peculiar aspects of this phase in which the behaviour of the banks has a
decisive impact, because also the entrepreneurs ‘who, at the moment, need no aid,
are seized by fear when the banks refuse to grant credits’ (Spiethoff, 1953, p. 111;
[KRISEN, p. 29]; see also Spiethoff, 1918b, p. 517).
Suddenly, the quantitative disharmonies (between productive sectors, between
goods that are ‘complementary to each other and that are mutually dependent for
396 Vitantonio Gioia
their use’, between supply and demand of capital, between supply and demand of
labour, between supply and demand of commodities, etc.) erupt with violence. ‘The
paralysis of money and credit, the inactivity of a large part of the banks and bankers,
the daily bankruptcies and the fall in prices must extend their effects over the whole
economy’ (Spiethoff, 1953, p. 114; [KRISEN, p. 32]).
In his conclusions, Spiethoff insists on the following aspect: ‘The ultimate
cause of the upward movement is of a psychological rather than of an economic
nature’ (Spiethoff, 1953, p. 147; [KRISEN, p. 82]; see Eucken, 1934, pp. 99–101).
Given the economic environment and the features of economic activity in the
capitalist system, business cycles are inevitable, because ‘the normal stimuli of
daily life’ are not enough to produce conditions that can sustain the feverish
aspiration of profit and the upswing at the same level. This ‘feverish aspiration’ has
to be sustained by strong psychological motivations. As a consequence, if during
the upswing the economic conditions that promoted growth cannot last (because
of increasing scarcity of capital), then a new psychological context will quickly
transform optimism into panic and pessimism.
Spiethoff suggests that a better and more efficient institutional structure might
reduce some negative effects of downswings and crises by contrasting the rapid
deterioration of the psychological environment. He does not rule out the possibility
that the stage of advanced capitalism will be succeeded by a new economic age
characterized by more balanced and harmonious growth and ruled by different
spiritual stimuli and a new cultural environment. In this case, he adds, we probably
have to give up the possibilities of growth typical of the capitalistic economy: ‘let
us harbour no illusions on this point: the growth of economic power and the vast
increase in wealth will then be a matter of the past’ (Spiethoff, 1953, p. 171;
[KRISEN, p. 85]).
In Spiethoff’s opinion, the strong relationship between ‘the rule of acquisitive
economic instinct over the soul of man’ and ‘the rule of business cycle over
the course of a nation’s economy’ (Spiethoff, 1953, p. 171; [KRISEN, p. 85]) is the
secret of the extraordinary increase in wealth produced by the capitalistic system:
‘the cyclical course of economic life is appropriate for an age which increasingly
finds its centre of gravity in economic relations, in the growth of personal wealth,
an age which takes credit for the greatest successes in increasing economic strength.
The increase in wealth can find no more efficient form of development’ (Spiethoff,
1953, p. 170; [KRISEN, p. 85]).
In my opinion, this interpretative work remains to be done. It might not only enable
a better understanding of Spiethoff ’s business cycle, but also make a deeper
comparison possible with the approaches of Marx, Schumpeter and, for some
methodological aspects, with Weber, Sombart and Veblen (see Lane, 1956, pp. 9–39;
Salin, 1944, pp. 177 ff.; Salin, 1956, pp. 41–51; Schumpeter, 1954, pp. 816 ff.).
NOTES
1 As Schumpeter, for instance, noted, ‘the figure for the consumption of iron is the best
index of business conditions; that is, this index which Spiethoff discovered and worked
out’ (Schumpeter, 2008, p. 215).
398 Vitantonio Gioia
2 Real-type analysis was Spiethoff’s challenge to the ideal-type approach. In his opinion,
‘Social scientists build ideal types in order to obtain fixed points of reference in the
perpetual flow of history’, whereas real-type aims at focusing on the historical features
of an economic system in its evolution from a theoretical point of view. Real-type is an
attempt to create an explicative contexts in which ‘recurrent regularities of a historical
object, stripped of its historical uniqueness’ can be represented (Spiethoff, 1953, p. 74;
on this, see also Lane, 1956, p. 21). Schumpeter emphasized the innovative aspect of
this approach as ‘realistic theories of a certain type’, that is, theories that were not
descriptive in character but endowed with analytical content (Schumpeter, 1986, p. 817).
3 On this aspect Spiethoff writes: ‘Attempts have been made to draw a distinction according
to the degree of abstraction, but no matter how small the degree of abstraction, pure theory
can never become observational theory, nor can the highest degree of abstraction transform
observational theory into a pure theory’ (Spiethoff, 1953, p. 75). The pure theories can
have universal validity and can be fruitfully used as a heuristic device in order to explain
reality, but ‘they do not have the relevance to an actually existing reality – past, present
and future – that is possessed by historical theory’ (Spiethoff, 1952, p. 135).
4 For example, the German upswing of the 1940s, the upswing preceding the First World
War and a series of figures concerning direct consumption trends in Hamburg, 1850–1900)
(Spiethoff, 1953, p. 95; [KRISEN, p. 19]).
5 In 1957 Osterrieth Nicol wrote in Weltwirtschaftliche Archiv: ‘Yet, to English-speaking
readers Spiethoff has until recently been more of a name than a concept, partly because
his writings have appeared in relatively inaccessibile publications and partly because
translations were not, until lately, available’ (Osterrieth Nicol, 1957, p. 19).
REFERENCES
*
Thanks are due to Professor Leonid Shirokorad for assistance in obtaining a copy of Konyus’s entry.
402 Vincent Barnett
only completed nearly 40 years later in 1948. Since some volumes consisted of
multiple physical volumes, in total it occupied 74 printed volumes. The first 33
volumes appeared from 1910 to 1917, the remaining volumes from 1922 onwards.
Famous authors who contributed entries included the founder of Bolshevik Russia,
V. I. Lenin, who wrote characteristically on Karl Marx (Cannon, 2008, p. 154).
The entry by Konyus discussed here was published in the Soviet period, and is
especially interesting because it was written in a very turbulent period in Soviet
history (the early 1930s), when economists were subject to special repressive
measures from government bodies. That Konyus was even allowed to write such
an entry is a little surprising, given that (at the same time) other Soviet economists
who had come to prominence in the 1920s were being tried and incarcerated for
their work on closely related themes. In 1938 some economists were even executed
for their supposedly traitorous ideological crimes. The fact that it was reprinted in
a 2010 edition of what was called the selected works of the Conjuncture Institute,
where it was described as ‘an attempt to give an objective evaluation of the scientific
achievements of the Conjuncture Institute’, suggests that it was one of the very
last publications to emanate indirectly from Kondratiev’s group in this period
(Klyukin, 2010, p. 664).
Second, the Granat encyclopaedia was unusual also because it contained some
special subsections devoted to surveying certain themes viewed more generally,
which were included in addition to the more usual alphabetically arranged single
entries on specific topics. Its very large size allowed individual entries sufficient
space to present relatively full accounts of the topics at hand, and some cross-
referencing was found in certain entries. It also included long bibliographies and
some illustrations. It was produced by the Granat Russian Bibliographical Institute
and published in Moscow, and its full title was Entsiklopedicheskii slovar’ Russkogo
Bibliograficheskogo Instituta Granat (The encyclopaedic dictionary of the Granat
Russian Bibliographical Institute).
However, as an historical source it seems less well known in the West than
the Brockhaus–Efron encyclopaedic dictionary, which contained an entry on
ECONOMIC CRISES by Tugan-Baranovsky (as discussed in Chapter 17 of this
volume), and the Granat encyclopaedia is certainly more difficult to locate within
major UK libraries. The British Library, for example, has only an incomplete set,
which is unusual because of this library’s particularly strong holding of Russian
materials, and also because of the known affinity of many Russian intellectuals
with this particular institution. It seems reasonable to assume that (in parallel) the
accounts of the subjects that it contained were less widely disseminated in the West,
at least in comparison to those on similar topics found in the Brockhaus–Efron
encyclopaedic dictionary.
Aleksandr Aleksandrovich Konyus was born in 1895 in Moscow and died in the
same city in 1990. Accordingly, his very long life encompassed Tsarism, Bolshevism,
‘Economic conjuncture’ in the Granat encyclopaedia 403
Stalinism, de-Stalinization, Brezhnevite stagnation, perestroika and finally Soviet
collapse. Few Russian scholars who worked on both economics and statistics
survived virtually the entire twentieth century. Early in his career he developed a
reading knowledge of French and probably also of German (RGAE (Russian State
Archive of the Economy), f. 7733, op. 18, del. 4201, p. 16). After military service
in the First World War, during which he was wounded twice, he enrolled at Moscow
University in 1917, where he first studied physics and mathematics. Konyus was
active against Soviet power in its early days. During the October Revolution he
participated in the struggle to defend the Provisional Government, and for a short
period after the Bolshevik success he campaigned against the new government
(ibid., p. 18). Between 1918 and 1920 he studied statistics at the Moscow Co-
operative Institute, where his tutors included A. V. Chayanov and N. D. Kondratiev.
Konyus subsequently joined Kondratiev’s Conjuncture Institute in December 1922
as deputy head of the section devoted to studying indices and prices (ibid., p. 4).
However, despite such politically dangerous early activities and his direct asso-
ciation with a pro-market agrarian heretic, Konyus outlived all the other members
of the Conjuncture Institute, and he even participated in the reprinting of many of
Kondratiev’s works at the end of the 1980s. With the closure of the Conjuncture
Institute in 1929, Konyus then pursued various jobs in statistics. For example, during
the Second World War he worked on applying advanced statistical methods to
improving metal production techniques. After the war ended, he was employed at
various Soviet research centres for economics and statistics, and continued working
on similar topics such as price indices and correlation analysis. In 1968 he became
a member of the editorial council of the international statistical journal Metron, and
in 1970 he received an honorary doctorate from Munich University (P. P. Maslov,
KONYUS, A. A., in →Rumyantsev, Ekonomicheskaya enciklopediya, 1975, p. 232).
Between 1960 and 1982 he worked at the Institute of Economic Research in
Moscow. Perhaps the main reason for the relative ‘ease’ of his survival during the
Stalinist purges of the 1930s was that the vast majority of his work in economics
was purely statistical and abstract in nature, and had no obvious political or policy
orientations.
Konyus’s early reputation was built upon two well-known contributions that
received some early Western dissemination. His 1924 paper ‘The problem of the
true index of the cost of living’ was first published in Ekonomicheskii byulleten’
Kon”yunkturnogo instituta. An English translation appeared in Econometrica in
1939, together with some introductory remarks by Henry Schultz (Schultz, 1939).
The basic problem was to construct an index that measured the true cost of living
over time. Konyus asked the following question: ‘what quantities of goods should
be consumed to guarantee a constant standard of living, despite a given change in
prices?’ (Konyus, 1939, p. 24). Konyus showed how previous attempts gave incor-
rect results: both an index calculated on the basis of consumption at the base period
and one calculated on the basis of consumption at the current period would be
inaccurate. One would be greater than the true cost of living index, one smaller;
the true index fell between the two (Konyus, 1939, p. 20). To calculate a true index,
consumer budgets at the base and current periods were used to find the ratio of the
404 Vincent Barnett
cost of living functions at identical utility standards. Konyus gave conditions in
which the two standards of living at the base and current period were approximately
equal, thus allowing the true index of the cost of living to be given as the ratio of
the two expenditures (Schultz, 1939, p. 6).
In 1926 Konyus published ‘On the problem of the purchasing power of money’
(Konyus, 1926), together with S. S. Byushgens (and with the help of M. V. Ignatiev
and N. S. Chetverikov). The →New Palgrave dictionary of economics entry on
Konyus described this article as a ‘truly remarkable paper which was well ahead
of its time’ (Diewert, KONYUS, A. A., 1987, p. 62). In the 1926 article Konyus
and Byushgens analysed the structure of the various formulae used to describe the
purchasing power of money, and discussed Irving Fisher’s analysis of index
numbers that were designed to measure this purchasing power. Later contributions
by Konyus were devoted to topics such as the labour theory of value (Konyus,
1964), Marxist economics (Konyus, 1967), aspects of optimal planning and the
development of various statistical techniques, but none of them were as important
as the two articles discussed previously.
In this example, Sp0 was the sum of the prices of goods in a base period, and Sp1
was the sum of the prices of goods in later periods. The second type of index was
expressed mathematically as follows, where n was the number of different
commodities being included in the comparison:
The first method produced an aggregate unweighted index, and the second produced
an unweighted arithmetic average. With the inclusion of quantities of goods into
the calculation (q), the aggregate index was expressed mathematically as follows:
Various further developments of these basic ideas were then discussed. In this regard
Konyus discussed A. Bowley’s article on index numbers from the Economic Journal
in 1928, W. S. Jevons’s Investigations in currency and finance of 1884, W. Persons’s
work on correlation analysis, and also some noted Russian authors such as N. S.
Chetverikov and D. I. Oparin (ECONOMIC CONJUNCTURE, pp. 226–236).
In the fourth section, on the analysis of dynamic time-series, Konyus explained
that the methods of statistical decomposition were used to study and eliminate two
‘Economic conjuncture’ in the Granat encyclopaedia 407
types of additional elements that were commonly encountered: various kinds of
trend (e.g. secular trend) and seasonal fluctuations. Here Konyus sketched some
of the statistical techniques used in these procedures. For example, moving averages
could be obtained using (in the majority of cases) the arithmetic average, but
occasionally other types such as the geometrical average (in the case of accelerating
price inflation) might be appropriate. Konyus then distinguished between ‘flexible
trend’, i.e. fluctuations of less than one year, and ‘stable trend’, which remained
when flexible trend had been removed. He noted Wesley Mitchell’s conception of
secular trend, which related to causes that acted on the economy only over the
long term, i.e. over a longer period of time than that related to conjunctural
fluctuations (or business cycles) of around 11 years in length.
Konyus outlined that some authors had suggested that the progression of par-
ticular economic variables could conform to strict mathematical laws, and hence
that extrapolating their level theoretically might be possible, if such laws could be
pinpointed. For example, it had been suggested that population growth increased
in geometrical progression. Taking this idea one step further, D. I. Oparin had
suggested that connecting such regularities together could produce ‘schemes of
movement’ of economic variables, in which the relations between particular
elements were plotted as theoretical curves. Other examples specified in this regard
were the progression of sales of particular goods, or the process of decreasing
grain supplies being held at any one time. However, Konyus warned that the
creation of such economic ‘schemes’ based on mathematical laws was a task that
presented insurmountable difficulties.
In relation to determining the periodicity of cyclical fluctuations, Konyus
suggested that they might initially be detected by reviewing the graphical plot of
the data. Other methods of statistical decomposition in this respect included
harmonic analysis, as developed by Fourier and applied to economic series by Henry
Moore, and correlation analysis, as discussed, for example, by Mitchell in relation
to measuring coefficients of connection between individual economic series.
In relation to excluding seasonal factors, Konyus outlined two basic methods.
The first simply used yearly data, while the second employed monthly averages
that were then linked to all the months of the year through arithmetic or geometric
progression. He noted that it was not only the degree of connection between
variables that was of interest, but also the specific form of this connection, i.e.
exactly how one particular element (the grain harvest) influenced another (grain
prices).
Konyus also warned that some had suggested that it was impossible to mech-
anically divide the progressive movement of the capitalist economy from the
cyclical forms in which this movement was inevitably expressed. Konyus himself
believed that this was correct in the sense that it was impossible to guarantee
that the fluctuations observed in one period of time would necessarily be repeated
in another. In this regard he warned about the appropriate use of mathematical
methods for analysing economic data, in that the correct theoretical understanding
of the economic phenomena under review was still a necessity (ECONOMIC
CONJUNCTURE, pp. 236–250).
408 Vincent Barnett
In the fifth section, Konyus discussed the history of conjunctural analysis in the
West, including Babson’s business barometer, the work of the Harvard economic
bureau, the German Institut für Konjunkturforschung, the London and Cambridge
Economic Service, the French Institut de Statistique de l’Université de Paris, various
Italian statistical efforts, and conjunctural institutes in Austria and Poland. He also
noted various differences in approach between these various bodies, for example
that the Harvard bureau rejected Babson’s work as not having any scientific value,
and outlined the US-based conception of a ‘barometer’ of business conditions
(ECONOMIC CONJUNCTURE, pp. 250–257).
In the sixth section, on the USSR, Konyus outlined the creation of the Moscow
Conjuncture Institute in 1920, but then noted that some aspects of its work had come
under the influence of ‘bourgeois theory and practice’. He consequently defined
the correct method of studying economic conjuncture in the Soviet context as being
that which was commensurate with the techniques of economic planning. He quoted
a definition that declared that the methodology of the prognosis of conjunctural
movements was identical to that of constructing national economic plans. Since
cyclical fluctuations (and economic crises) had been eliminated from the Soviet
system, conjunctural analysis was employed only when it was necessary to explain
movements in the level of development and the relational dependence of particular
elements, and also seasonal factors (ECONOMIC CONJUNCTURE, pp. 257–263).
21.4 ASSESSMENT
From this summary of much of the entry, it is apparent that Konyus’s conception
of conjuncture in this context was predominantly empirical and statistical in nature,
being concerned with accurately describing the observable features of business
cycles, rather than explaining their underlying causes or in positing any fundamental
mechanisms of cycle propagation. Indeed, Kondratiev had in the mid-1920s per-
sonally arranged for the translation of Mitchell’s 1927 book Business cycles: the
problem and its setting into Russian, this volume being published in Moscow in
1930. Konyus referred to this translation in his entry, noting that Mitchell had
identified 39 separate theories of economic cycles and crises, but refraining from
commenting upon them in any detail (ECONOMIC CONJUNCTURE, p. 255).
In fact, the part of Mitchell’s book that Konyus’s entry most resembled was the
long and substantial Chapter 3 on ‘The contribution of statistics’, which was (like
Konyus’s entry) divided into six main sections (Mitchell, 1927, pp. 189–357), with
a short seventh part on combining theory, history and statistics. In his Chapter 3,
Mitchell discussed statistical techniques, time-series analysis and indexes of
business conditions in a very similar fashion to Konyus. Mitchell did not mention
Konyus by name in his 1927 book, but he did discuss the work of the Moscow
Conjuncture Institute as represented by members like Kondratiev (whom he had
met in person), A. L. Vainshtein and Slutsky.
One especially notable feature of Konyus’s entry was that it made detailed
reference to both Western and Russian/Soviet authorities in the fields of economics
‘Economic conjuncture’ in the Granat encyclopaedia 409
and statistics in a relatively non-discriminatory manner; that is Western and Russian
understanding was integrated in a manner that was quite unusual for this period.
Apart from Irving Fisher and Henry Moore, other Western economists mentioned
included Alfred Marshall, Gustav Cassel, Clément Juglar and Werner Sombart.
Given that the entry was published in a politically very sensitive period in the USSR,
it is remarkable how many references to ‘bourgeois’ economists there were. Another
Russian business cycle analyst of the time, Sergei Pervushin, was being criticized
by Soviet writers as a ‘bourgeois eclectic’ as early as 1928 (Owen, 2009, p. 234),
and was forced to leave the subject area of economic conjuncture completely after
1930.
By 1933 Kondratiev had already been incarcerated for three years, unknowingly
awaiting his final execution in 1938. This makes Konyus’s direct reference to
Kondratiev’s 1928 article on long cycles and Kondratiev’s favoured terminology
of ‘relative conjuncture’ quite remarkable, even though (later in the entry) Konyus
went on to condemn some of the methods of the Conjuncture Institute. That Konyus
was asked to write the entry on conjuncture meant that he was judged as a safe
pair of hands by the authorities, and could be guaranteed not to raise any awkward
issues with respect to Soviet economic doctrine. However, this also partly explains
why there was so little discussion of business cycle theory in Konyus’s entry, as
this aspect of the topic was where most of the politically sensitive questions about
the nature of capitalism as an economic system could be found. Technical questions
on methods of statistical decomposition were relatively safe to pursue, as Slutsky’s
survival and the (adapted) continuance of his research after 1930 also confirmed.
At the end of the 1980s, Konyus’s work was again celebrated in Russia, and
his links with Kondratiev’s Conjuncture Institute were reaffirmed and finally
rehabilitated. However, in an article from 1996 in the prestigious Russian journal
Economics and Mathematical Methods celebrating the centenary of Konyus’s birth,
the Granat encyclopaedia entry was not mentioned at all (Makebonskaya, 1996).
Thus, it cannot stake a claim to have exerted any great influence on economists.
Rather, its wider significance lay in its applied technical approach, which mirrored
both the developing Soviet view of economic planning as a predominantly empirical
activity related to plotting future growth trends, and also the parallel development
in Western economics that sought to replace written discussion of abstract economic
concepts with a more empirically focused concern with the statistical modelling
of economic trends. In the USSR the political motivation underlying this shift was
very apparent, whereas in the West the political components of this development
were much more difficult to detect.
REFERENCES
Barnett, V., 1996, Trading cycles for change: S. A. Pervushin as an economist of the business
cycle, Europe–Asia Studies, 48: 6, September, pp. 1006–1024.
Barnett, V., 1998, Kondratiev and the dynamics of economic development: long cycles and
industrial growth in historical context (London: Macmillan).
410 Vincent Barnett
Barnett, V., 2001, Tugan-Baranovsky as a pioneer of trade cycle analysis, Journal of the
History of Economic Thought, 23: 4, December, pp. 443–466.
Barnett, V., 2006, Chancing an interpretation: Slutsky’s random cycles revisited, European
Journal of the History of Economic Thought, 13: 3, September, pp. 411–432.
Barnett, V., 2008, Russian émigré economists in the USA. In V. Barnett and J. Zweynert
(eds), Economics in Russia: studies in intellectual history (Aldershot: Ashgate).
Cannon, A., 2008, Encyclopedias in Russia. In B. Adams (ed.), The supplement to the modern
encyclopedia of Russian, Soviet and Eurasian history (Gulf Breeze, FL: AIP). 9.
Klyukin, P. N. (ed.), 2010, Izbrannye trudy Kondrat’evskogo Kon”yunkturnogo Instituta
(Moscow: Ekonomika).
Konyus, A. A., 1926, K probleme pokupatel’noi sily deneg, Voprosy Kon”yunktury, 2. With
S. S. Byushgens.
Konyus, A. A., 1939, The problem of the true index of the cost of living. Econometrica, 7:
1, pp. 10–29.
Konyus, A. A., 1964, Notes to article by L. Johansen ‘Labour theory of value and marginal
utilities’, Economics of Planning, 3.
Konyus, A. A., 1967, On the tendency for the rate of profit to fall. In C. H. Feinstein (ed.),
Socialism, capitalism and economic growth (Cambridge: Cambridge University Press).
Makebonskaya, E. I., 1996, K 100-letnyu A. A. Konyusa, Ekonomika i matematicheskie
metody, 32: 2.
Mitchell, W. C., 1927, Business cycles: the problem and its setting (New York: NBER).
Owen, T., 2009, The death of a Soviet science: Sergei Pervushin and economic cycles in
Russia, 1850–1930, The Russian Review, 68: 2.
Schultz, H., 1939, A misunderstanding in index-number theory: the true Konyus condition
on cost of living index numbers and its limitations, Econometrica, 7: 1, pp. 1–9.
22 Wesley Mitchell, Arthur
Burns and Trygve Haavelmo
on business cycles
The two Encyclopaedia of the
social sciences (1930–1935 and
1968)
Pier Francesco Asso and Luca Fiorito
Wesley Clair Mitchell is the author of the entry on BUSINESS CYCLES for the ESS.
He had close personal connections with the two editors of the Encyclopaedia. He
had been a personal friend and colleague of Seligman at Columbia University since
1912, while in 1918, together with Johnson, he took an active part in the foundation
of the New School for Social Research, where he taught for two years before
returning to Columbia until the end of his career. In 1927, when Seligman first set
out the ESS project, Mitchell was among the most influential and representative
economists in the US. His seminal 1913 volume Business cycles had helped him
to gain renown in the profession as a specialist in economic fluctuations, but the
range of Mitchell’s original contributions included monetary history and theory,
the construction of statistical indicators, economic psychology, methodology and
the history of economic thought. In 1924 Mitchell had served as president of the
American Economic Association, and in his famous (and controversial) address
on the ‘Quantitative analysis in economic theory’ he had claimed that empirical
investigations should not be viewed as subordinate to theoretical work, nor even
as complementary. Instead, he argued,
[i]n collecting and analyzing such experimental data as they can obtain, the
quantitative workers will find their finest, but most exacting opportunities for
developing statistical techniques—opportunities even finer than are offered by
the recurrent phenomena of business cycles. It is conceivable that the tentative
experimenting of the present may develop into the most absorbing activity of
economists in the future.
(Mitchell, 1925, p. 9)
Mitchell’s own philosophy and research activities since the early 1920s were
closely associated with the National Bureau of Economic Research (NBER) –
the research institute he contributed to founding in 1920 in order ‘to encourage, in
the broadest and most liberal manner, investigation, research and discovery, and
the application of knowledge to the well-being of mankind; and in particular to
conduct, or assist in the making of, exact and impartial investigations in the field
of economic, social, and industrial science’.1 From 1920 until 1946 Mitchell served
as research director of the NBER. It was his work on business cycles, in its broad
conception of a pattern of change in the whole economy, that provided the central
theme for all the NBER’s activities at least until the late 1940s, as it was Mitchell’s
inspiration that attracted to it a group of young scholars who combined an inclination
for theoretical analysis with a zeal for testable evidence. It was under the auspices
of the NBER that Mitchell had published in 1927 – the same year he was invited
by Seligman and Johnson to participate in the ESS project (Cadmore, 1935) –
Business cycles: the problem and its setting, the book that established him as the
American authority in the field.
Apart from the main entry on BUSINESS CYCLES by Mitchell – which constitutes
the primary focus of this section – the ESS deals with the general topic of business
Mitchell, Burns and Haavelmo on business cycles 415
fluctuations in a cluster of more or less directly related entries which included
BOOM by Max S. Handman, BUBBLES, SPECULATIVE by Willard L. Thorp,
CONJUNCTURE by Simon Kuznets, and CRISES by Jean Lescure. Lescure was a
French economist who had gained repute in the US and who corresponded regularly
with both Mitchell and Seligman; Handman was an institutionalist like Mitchell,
while both Kuznets and Thorp were affiliated to the National Bureau of Economic
Research and had worked under Mitchell’s supervision during the late 1920s. As
far as the content and style of these ‘minor’ entries are concerned, they were all
rather concise and mainly descriptive in character. Theoretical analysis is quite
superficial and limited to passing references to underconsumptionists or to the
psychological explanations of crises. Following the general philosophy of the whole
Encyclopaedia, Lescure offers a brief historical reconstruction of the succession
of crises and observes that
whereas in antiquity and even as late as the eighteenth century the type of crisis
most prevalent and most dreaded was that due to a shortage of goods brought
about by natural and extra-economic factors, such as crop failure and political
disturbances, for the last century and a half crises have been fundamentally
due to superabundance or overproduction caused by forces which seem to
inhere in modern economic organization.
(CRISES, p. 596)
It is worth pointing out that Mitchell, Thorp and Kuznets all emphasized that
the two opening decades of the twentieth century had made it evident that a
relentless campaign of cycle measurements was in preparation. The NBER, to which
these authors were affiliated, was certainly part of this movement. The new amount
of statistical material available to researchers, however, made the task of defining
a business cycle even more complicated. The investigator, Mitchell argued, had to
develop a sharper and more operational concept of the cyclical components
for each time series under examination, but also to devise the general synthesis
resulting from these single cyclical movements. ‘These are problems’, as Mitchell
put it, ‘on which investigators are actively working, spurred on by critics who
hold that “the so-called business cycle is a myth”’ (BUSINESS CYCLES, p. 93).
Mitchell’s words emblematically reveal that at the beginning of the 1930s business
cycle research was still a contended epistemological terrain. Interestingly, this is
confirmed by the space devoted in several entries to the discussion and definition
416 Pier Francesco Asso and Luca Fiorito
of the various terms indicating economic instability. Handman observed that ‘booms
are a part, not always indispensable, of the cyclical ebb and flow of economic
activity’ (BOOM, p. 638); Thorp distinguished between booms and cycles, arguing
that there is ‘some tendency to exaggerate the part played by the speculative element
in the business cycle’ (BUBBLES, SPECULATIVE, p. 27); Kuznets noted that
while the term ‘conjuncture’ is commonly used in German-speaking countries,
Scandinavia and Russia, ‘in American and English literature the term cycle is
uniformly preferred with the result that the emphasis is placed not on the congeries
of conditions displaying variability but on the character of the external manifes-
tations of this variability’ (CONJUNCTURE, p. 204). Finally, Lescure, revealing
his own preference for the term ‘crises’, affirmed: ‘certain economists have thereby
thought themselves justified in speaking of cycles. But this term labors under the
disadvantage of exaggerating the regularity of the phenomenon under consideration’
(CRISES, p. 595).
Therefore, not surprisingly, Mitchell himself began his entry with a working
definition of business cycles. According to the Columbia economist,
This working definition suggests, among other things, that each cycle can be divided
into four distinct stages: revival, expansion, recession and contraction. Turning
points are called peaks – the period immediately preceding a decline in real activity,
or recessions – and troughs – the period immediately preceding an upturn, or
expansion. Accordingly, reference dates can be appointed, preferably to the month,
to bound ‘reference cycles’, which become business cycles upon further confir-
mation of their boundaries. Only troughs and peaks can be dated, inasmuch as ‘the
most important practical and the most difficult theoretical problems’ lie in the
reversals of cyclical swings.
Thus, the identification of ‘specific cycles’ becomes entirely a matter of detecting
waves in each seasonally adjusted series and of setting dates to the troughs and
peaks. Some series, Mitchell observed, lack satisfactory waves, but in most there
are clear-cut fluctuations of approximately the same length as business cycles and
of adequately similar amplitude. For some series, however, the number of specific
cycles may deviate from the number of reference cycles: series may skip a reference
cycle or may run through extra specific cycles. And, more importantly, the con-
formity of specific cycles to reference cycles is uneven, with leads and lags at
reference dates recording considerable dispersion.
Mitchell, Burns and Haavelmo on business cycles 417
Mitchell’s definition of business cycles was deliberately ‘objective’ and mostly
methodological in character, in line with the scientific empiricism professed at the
National Bureau of Economic Research. The intent, as it appears from the section
of the entry on ‘Leading explanations of business cycles’, was to observe strict
neutrality towards competing doctrines about the cycle mechanism. Mitchell’s
explicit caveat leaves no doubt in this connection: ‘The various explanations
sketchily presented here, and the numerous other explanations which might be cited,
are not to be thought of as contradicting each other’ (p. 100). In fact,
Mitchell divided business cycles theories into three classes. In the first class
Mitchell included those ‘physical’ explanations that emphasize exogenous factors,
such as William S. Jevons’s ‘sunspot theory’ or Henry L. Moore’s thesis based on
the planet Venus’s movements. The second class refers to the so-called ‘psy-
chological’ explanations of the cycle, and includes those authors who have felt
that fluctuations in business are due to abnormal alternations between optimism
and pessimism. In this connection, Mitchell mentions John Mills’s essay ‘On credit
cycles and the origins of commercial crises’, and briefly discusses Pigou’s theory
in which irrational waves of optimism and pessimism among entrepreneurs are
conceived as playing a crucial role in the intensification of the rise and fall of
business conditions. The third class – to which Mitchell devotes the longest
discussion – refers to those ‘institutional explanations’ that ‘trace business cycles
to the workings of various economic processes: banking, saving and investing,
producing and consuming, disbursing and using incomes; profit seeking and
economic innovations’ (p. 98). The list of theories mentioned and briefly assessed
in this class is long and heterogeneous and includes Hawtrey’s credit cycle theory,
John A. Hobson’s ‘savings theory’, Aftalion’s version of the accelerator principle,
Spiethoff’s theory of over-investment, the ‘income theory’ of Catchings and Foster,
Veblen and Lescure’s explanations ‘organized around the theme of profit’, and
Schumpeter’s ‘innovation theory’.2
Mitchell dedicated the final four sections of the entry – each dealing with a
specific phase of the cycle (expansion, recession, contraction, revival) – to expose
his theoretical approach, which is in its essence the same as he had presented in
his 1913 monograph. Mitchell linked the major changes in business activity to the
418 Pier Francesco Asso and Luca Fiorito
potential outlook for profits: ‘profits are the focus of economic activity in a business
economy’ (p. 102). Prospective profits depend on sales experience and expectations
and on the price–cost relation, which is itself a function of the rate of employment
and capacity utilization. In the late stages of expansions, costs tend to rise faster
than product prices, provoking a squeeze of profit margins and depressing
expectations. As a consequence, new investment commitments are curtailed well
before sales begin to flatten. At the same time, income receipts and consumption
expenditures decline (falling C/Y and falling W/Y), inventories pile up, and
production cuts take place all over the economy, particularly in capital and durable-
goods industries. Pessimistic expectations spread and are confirmed and worsened
when output and employment suffer a decline. In the contraction that follows,
similarly, price–cost margins and profits first deteriorate and then improve,
excess stocks and other imbalances are gradually liquidated, and new investment
orders, sales and output eventually revive. Thus, crises are an intrinsic phase of
the business cycle and are generally determined by important shocks to economic
fundamentals.
From a theoretical point of view, Mitchell viewed the cycle as an endogenous
process that involves the interaction – intuitively sketched – of the multiplier and
accelerator mechanisms (Sherman, 2001). Mitchell’s description of the expansion
and contraction phases indicates that the American economist had in mind some
form of cumulative process generated by a functional relation between production,
purchasing power and consumption. In addition, as Mitchell insisted, for these
causal relations to produce cyclical movements in real variables, it is also necessary
that wages and prices adjust with some sufficient lags rather than being highly
flexible. However, apart from these theoretical insights, the actual working of the
process is not described in analytical terms, while the multiplier mechanism is
only adumbrated. In this connection, Arthur Burns observed in 1952:
I venture the prophecy that if Mitchell’s homey work [. . .] were translated into
the picturesque vocabulary of ‘propensities,’ ‘multipliers,’ ‘acceleration coef-
ficients’ and the like, it would create a sensation in the theoretical world,
especially if the translator were mindful enough to shift passages here and there
from the indicative to the conditional mood.
(Burns, 1952, p. 26)
Compared to the ESS, the IESS treatment of business cycles presents aspects of
both novelty and continuity. The entry is divided into two parts. One, BUSINESS
CYCLES – MATHEMATICAL MODELS, written by the Norwegian econometrician
Trygve Haavelmo, introduces the most significant element of novelty; this will be
discussed in more detail in Section 22.5 below. By contrast, the most significant
element of continuity is represented by the part written by Arthur Burns, author of
the section on BUSINESS CYCLES – GENERAL. Like Mitchell, Burns was closely
affiliated to the NBER, where he remained for more than two decades, first serving
as director of research from 1945 until 1953, when he was appointed to the Council
of Economic Advisers by President Eisenhower, and then returning as president
from 1957 to 1967.3 In 1946, together with Mitchell, Burns had co-authored the
controversial NBER monograph Measuring business cycles.
Also in terms of its content, Burns’s entry presents striking similarities to
Mitchell’s BUSINESS CYCLES. Burns begins with a general discussion of the
peculiar nature of cycles. Business cycles, he argued, can be clearly distinguished
from other fluctuations in that they are as a rule larger, longer and more widely
diffused. They determine changes in the economy over spans of several years, in
contrast to seasonal or other variations, which generally take place over spans of
less than a year. Equally importantly, cycles reflect, and interact with, long-term
growth trends which dominate development and growth across decades.
Moreover, and again similar to Mitchell’s general structure of the entry, Burns’s
methodological discussion centres around two key features of business cycles.
The first is the subdivision of cycles into distinct phases. Observed fluctuations
vary greatly in amplitude and scope as well as in duration, yet they show a common
pattern of recurring stages: ‘the recurring sequence of changes that constitutes a
business cycle – expansion, downturn, contraction and upturn – is not periodic. In
other words, the phases of business cycles repeat themselves, but their duration
varies considerably and so too does their intensity and scope’ (p. 227).
Mitchell, Burns and Haavelmo on business cycles 421
The second prominent element is the emphasis on the co-movement among
individual economic variables: business expansions and contractions consist of
patterns of recurrent, serially correlated and cross-correlated movements in many
economic (but also social and institutional) features. Indeed, the co-movement
among series, taking into account possible leads and lags in timing, was one of the
distinguishing marks of the NBER method. In their volume Measuring business
cycles, Burns and Mitchell had considered the historical concordance of hundreds
of series, including those measuring commodities, incomes, prices, interest rates,
banking transactions and transportation services. The clusters of turning points in
these individual series were then used to determine the monthly dates of the turning
points in the overall business cycle. Also in the IESS entry, Burns emphasized the
importance of this method.
Compared to Mitchell’s, Burns’s survey of business cycles theories is more
succinct, with scant references to the history of the subject. Burns offers no
taxonomy of the existing approaches, limiting himself to passing comments on
the contributions of Clément Juglar, Mikhail Tugan-Baranovsky, Knut Wicksell,
Albert Aftalion, Joseph A. Schumpeter, Wesley C. Mitchell and John Maynard
Keynes. Not surprisingly, he stresses the recent contributions of ‘economic
statisticians’, with specific mention given to the work of Warren M. Persons, Simon
Kuznets and Jan Tinbergen. They had made ‘significant advances [. . .] in describing
with some precision the major features of business cycles and also in understanding
the processes whereby they are generated’ (p. 230).
In referring to these alternative approaches, Burns acknowledged the existence
of notable disagreements among theories, particularly with regard to the relative
importance of monetary and real factors. Most of these writers, however, considered
business cycles to be caused and conditioned by a number of factors and circum-
stances, and this led Burns to observe that ‘more frequently than not, the various
theories differed mainly in their point of emphasis and therefore served to sup-
plement one another’ (p. 229). On similar grounds, Burns promptly dismissed
the intellectual relevance of any modern revision of the old Methodenstreit on the
primacy of theoretical over empirical investigations and vice versa: ‘The variety
of approaches sometimes leads to methodological controversies. But no serious
student of business cycles any longer questions that empirical research must be
guided by an analytical framework or that speculative theorizing must be tested
by an appeal to experience’ (p. 230). This sentence may be read as a late response
to the famous ‘Measurement without theory’ controversy triggered by Tjalling
Koopmans, who in his 1947 review of Measuring business cycles had accused
Burns and Mitchell of trying to analyse business cycles without having any sound
theoretical background which explained how the several variables involved in the
cycle actually behaved.4
The final sections of Burns’s entry are dedicated to the discussion of each single
phase of the business cycle – another interesting parallel with the ESS entry. The
overall description of the cycle runs along Mitchellian lines. Unit costs of labour
and production tend to rise relative to output prices before and after the downturn,
and they tend to fall before and after the upturn, reflecting changes in capacity
422 Pier Francesco Asso and Luca Fiorito
utilization and productivity; as a result, profits show large fluctuations which explain
the cyclical movements in investment, output and employment. Compared to
Mitchell’s explanation, however, Burns places more emphasis on the role of interest
rates in determining the pace of investments, stressing that interest rates rise faster
than finished commodity prices in expansion while falling faster during depressions.
Accordingly, he concluded that rapidly rising financial costs are a factor, lowering
profits in the final stages of the expansion and even in the earliest stages of contrac-
tion, especially in those sectors, such as the building industry, where interest charges
represent a large fraction of total costs. With regard to the influence of interest rates
on investment, Burns conceded – in a Keynesian fashion – that ‘in deciding to invest
in a particular project, a business firm may have given heed to recent increases in
costs’. However, investment decisions must be followed by another kind of decision,
namely, ‘whether to get the project under way now or later’ (p. 238). Therefore,
increases in financial costs can cause a delay in the actual implementation of
investment and therefore contribute to the starting of a recession. Burns concluded
his entry with a detailed analysis of those factors which, in his view, had recently
contributed to a substantial increase in economic and financial stability.
As in his previous description of the stages, Burns gave relevance to the role
of monetary factors and, most particularly, of monetary policy. Perhaps under the
influence of the post-war records of financial stability and of the 1951 agreement
between the Treasury and the Fed, Burns noticed that the practice of central banking
had advanced significantly in smoothing cycles and speculation on asset prices. It
was a fact that ‘fluctuations of short-term interest rates in the United States became
narrower’ (p. 243). This accomplishment was now deeply entrenched in market
expectations and was reflected in a drastic (and valuable) reduction in the spread
between the federal funds rate and long-term interest rates. He also observed that,
in the booming post-war years, decisions of monetary authorities were swiftly
transmitted to financial markets, and the lag of long-term interest rates ‘during
recoveries and recession became shorter and of late has virtually vanished’ (p. 243).
Second, cyclical stability was increased by the anti-cyclical mix of Keynesian
policies and the building up of modern safeguarding schemes on behalf of the
general welfare of workers and their families. Increased state intervention and the
widespread resort to programmes of social security were powerful built-in stabil-
izers and an important legacy of the post-1930s institutional reforms. Also, the
world of big private corporations seemed to have learnt past lessons in some
way, acting anti-cyclically rather than ‘pro-cyclically’ as they did in the 1920s. One
key factor of this changing behaviour – as Burns put it – was their increasing pursuit
of stable dividend policies, setting aside in good years and rewarding capital in
bad years: ‘As a result of these and related developments, the movement of personal
income is no longer closely linked to the fluctuations of production’ (p. 243). The
stability of the financial markets was also enhanced by structural reforms which
greatly increased the guarantees on behalf of savings, positively influencing
expectations. Among them Burns cited the new regulations of domestic stock
exchanges, the development of the long-term amortized mortgages and, ‘most
important of all, the insurance of bank deposits’ (p. 244).
Mitchell, Burns and Haavelmo on business cycles 423
The third stabilizing factor occurred in the labour market, which in the post-war
boom gradually saw a general increase of occupations in the new industries and,
most significantly, in the tertiary sector. These structural changes significantly
increased the fraction of stable activities with regard to the more irregular occu-
pations. While the first two factors were related to crisis-induced policy reforms,
Burns recognized the importance of the structural and irreversible nature of these
changes in the US labour market: ‘Manufacturing, mining, construction, and freight
transportation are the cyclically volatile industries, but their relative importance
as providers of jobs has been gradually declining in recent decades’ (p. 243).
However, all these institutional reforms, together with the deeper theoretical
and factual understanding of the requirements of business cycle policy, would not
mark the end of business cycles nor of unexpected shocks. Here, Burns implicitly
disagreed with some leading contemporary theorists who, by the mid-1960s, had
foreseen the inevitable decline of business cycle research.5 Quite to the contrary,
according to Burns, a lot of effort ought now to be put into ex ante prevention rather
than ex post moderation. Moreover, as he anticipated, future cyclical movements
would not necessarily coincide with recessions but merely with fluctuations in
aggregate economic activity: business cycles would be supplanted by ‘growth
cycles’, which involved a general reduction of the rate of growth and bring about
the alternation of high-rate phases and low-rate phases. However, it would be overly
optimistic to believe that
the forces that tend to generate cyclical movements have vanished in western
Europe or Japan any more than in the Unites States. . . . Hence, the wise course
for economists is to continue basic research on the nature and cause of business
cycles, to remain watchful of developments that seem likely to bring on a slump
in activity, and to extend the search for acceptable pathways to prosperity
without inflation.
(p. 144).
And again:
NOTES
1 National Bureau, Charter and By-Laws, 29 December 1919. Quoted in Burns, 1952,
p. 31.
2 The lengthy discussion of Veblen’s business cycles theory is revealing both of the latter’s
influence on Mitchell and of the general institutionalist tone of the entry as well as of the
encyclopaedia as a whole. Mitchell interprets Veblen’s business cycle as resulting from
decreasing profit margins. When purchases increase in some particular industry, prices
will increase, inducing firms to launch new investments, which lead, in turn, to increased
demand and higher prices. Increased capacity and the higher value of collaterals serve
as justifications for enhanced capitalization and further extension of credit. Since prices
of finished goods rise faster than costs of production, profit margins increase markedly.
Ultimately, however, even though public utilities prices and raw material prices may not
increase and a cheapening of the process of production may occur, the total expenses
of production overtake the prospective selling price of output. This implies a general
reduction of profit margins. When this happens, real rates of return no longer sustain
anticipated rates of return on which asset capitalization was based, provoking a financial
crisis: ‘Credit ratings are revised downwards; financial obligations are gradually cleared
off or readjusted; unit costs are reduced faster than selling prices; and a bulk of enterprises
gradually get into a position where their prospects of profits begin to grow brighter –
thus laying the basis for a new revival and period of expansion’ (pp. 99–100).
3 See Rutherford, 2005 for a full biographic account of Burns.
4 See Morgan, 1990 for an excellent reconstruction of the ‘Measurement without theory
controversy’.
5 See, among others, Haberler, 1962 ; McKinley et al., 1964; Bronfenbrenner, 1969. Burns
himself (1960) took part in this debate.
6 According to Morgan, ‘the more important practical result of Haavelmo’s paper was
that probability theory provided a framework for testing economic theories’ (1990,
426 Pier Francesco Asso and Luca Fiorito
p. 256), and ‘by laying out a framework in which decisions could be made about which
theories are supported by data and which are not, Haavelmo provided an adequate
experimental method for economics’ (p. 258).
7 The classic reference is Friedman and Schwartz, 1963.
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Review, 15: 1, pp. 1–12.
Mitchell, W. C., 1927, Business cycles, the problem and its setting (New York: National
Bureau of Economic Research).
Morgan, M., 1990, The history of econometric ideas (Cambridge and New York: Cambridge
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Rutherford, M., 2005, ‘Who’s afraid of Arthur Burns?’ The NBER and the foundations.
Journal of the History of Economic Thought, 27: 2, pp. 109–139.
Sherman, H., 2001, The business cycle theory of Wesley Mitchell, Journal of Economic
Issues, 35: 1 (March), pp. 85–97.
23 Tinbergen on dynamics and
conjuncture in Stridiron’s
Bedrijfseconomische
encyclopedie
Peter Rodenburg
23.1.2 Influence
The Bedrijfseconomische encyclopedie was not reviewed in the two leading Dutch
journals on economics, De Economist and the Economisch Statistische Berichten,
most likely because of the popular nature of the encyclopaedia and its focus on
business economics. There are few references to and citations from the encyclopaedia.
Its intended user was, however, the small and practical businessman; it was intended
to help in ‘observing’ different facets of the practice of doing business, such as cost
calculating, budgeting and administration. It is hard to assess how influential the
encyclopaedia was in the circles of practical businessman. For economics it can be
argued that, despite its considerable size of five volumes and almost 2,000 pages,
the fact that big names in economics in the Netherlands contributed to it, and the fact
that it was the only economic dictionary or encyclopaedia until the 1950s, its influence
seems rather small.
Jan Tinbergen on dynamics and conjuncture 429
23.2 THE AUTHOR5
Jan Tinbergen (12 April 1903 – 9 June 1994) was born in The Hague, the
Netherlands, into an intellectually gifted family. Both his parents were teachers,
and both Jan and his younger brother Niko were to be Nobel Prize winners (Niko
in 1973 in Physiology or Medicine). In 1921, at the age of 18, Tinbergen went to
the University of Leiden, where he studied physics and mathematics under the
supervision of the physicist Paul Ehrenfest, a personal friend of Albert Einstein.
During his studenthood, Tinbergen’s concern for social issues developed after
meeting the poor of Leiden, and his commitment to poverty relief would last
throughout his whole career. He joined the Social Democratic Labour Party in 1922.
After receiving his university degree in 1925, Tinbergen was a conscientious
objector to military service. Instead, he served a part of his civil duty at the Central
Bureau of Statistics (the Dutch Statistical Office) in the rather insignificant
Department of Business Cycle Research. The work consisted then of monitoring
and measuring business cycles through the use of economic barometers (Bogaard,
1998). Since Tinbergen felt that he could serve the socialist cause better as an
economist than as a physicist, he engaged in the study of economics through self-
directed learning. His PhD thesis (1929), on the similarity between minimum
problems in physics and economics, marks this transition. After obtaining his PhD,
Tinbergen returned to the Dutch Statistical Office in 1929, where he continued to
work in the Department of Business Cycle Research on the dynamic behaviour of
supply and demand of individual products. The Central Bureau of Statistics was
happy to have Tinbergen back since the number of publications on business cycles
had dropped sharply since Tinbergen had left the Statistical Office. In the 1930s,
Tinbergen’s reputation as a scientist rose quickly. He started lecturing at the uni-
versities of Amsterdam (1930–1939) and Rotterdam (1933–1945) and became
one of the most prominent members of the Econometric Society (although he was
not a founding member). In 1936 Tinbergen presented at the Vereeniging voor de
Staathuishoudkunde en de Statistiek (Royal Economic Association) his innovative
work An economic policy for 1936 (Tinbergen, 1936) (translated into English in
1959). Tinbergen was asked by the Social Democratic Labour Party to give advice
for relief of the ongoing recession. Contrary to the usual way of verbal reasoning
at that time, Tinbergen used a macroeconomic model of the Dutch economy to
assess the consequences of different economic policies. His quantitative approach
was completely new and gave rise to a heated debate among the members of the
Royal Economic Association (Knoester and Wellink, 1996). In the same year,
Tinbergen was invited by the League of Nations to extend his quantitative analysis
and to test business cycle theories statistically. This work was published in two
volumes in 1939 as Statistical testing of business cycle theories (Tinbergen, 1939a,
1939b). The first volume was an exposition of his econometric method, multiple
regression analysis. The second volume consisted of a macroeconomic model of
the US economy. Again, his approach of modelling economy-wide interrelation-
ships in quantitative form turned out to be highly controversial, and most notably
John Maynard Keynes felt compelled to raise criticism against Tinbergen’s method
430 Peter Rodenburg
(Keynes, 1939), resulting in a famous debate in the Economic Journal.6 After the
Second World War, Tinbergen’s approach was fully accepted and institutionalized
in the Netherlands by the establishment of the Central Planning Bureau (CPB), of
which Tinbergen became the first director (1945–1955). Here Tinbergen continued
to work on econometric models based on linear difference equations that produced
Frischean, rocking-horse-like movements because of exogenous shocks and a
damped inner structure. In his CPB period Tinbergen expanded his interests
to economic policy. In particular, he became involved in the reconstruction of
the Dutch post-war economy, planning and the co-ordination of Marshall aid.
In 1955 Tinbergen retired as director of the CPB and put his experience with
model building into print in the publication of the books On the theory of economic
policy (1952) and Economic policy: principles and design (1956). Tinbergen’s
later work involved economic order, economic integration (particularly in
Europe), economics of development and income distribution (Kol and De Wolff,
1993). Tinbergen became a much requested adviser to developing countries and
international organizations. From 1966 to 1974 he was chairman of the United
Nations Development Planning Committee. In 1969 Tinbergen, together with
Ragnar Frisch, was awarded the first Nobel Memorial Prize in Economics. In the
Netherlands, Tinbergen remained the most renowned and influential economist in
the country. Even after his death in 1994, Tinbergen’s influence on the practice of
economic policy making in the Netherlands remained very great (Graafland and
Zalm, 1994; Klamer and Van Dalen, 1996).
23.4 ASSESSMENT
The essence of scientific work is to derive from a thesis (for example Keynes’
thesis) and one or more antitheses (for example Friedman or one of the other
436 Peter Rodenburg
modern schools) a synthesis. [. . .] Criterion for a synthesis is a better expla-
nation for what happened in the (recent) past. Each of the aforementioned
schools made contributions to that but none of them has a monopoly on
wisdom. Testing to the criterion can start with submodels, but the final word
is to a full model.
(Tinbergen, 1982)
Tinbergen applied this approach in his work for the League of Nations, where
he built a complete model of the US economy rather than testing (and rejecting)
each business cycle theory separately. Tinbergen used this approach throughout
his whole career. The debate on whether business cycles are caused by monetary
causes or real causes is therefore not fruitful, as can be seen in Tinbergen’s entry.
For Tinbergen, business cycle theories can be unified in a complete model of the
economy that involves all explanatory variables and the (causal) relations between
them, and so is able to mimic the way shocks propagate through the economic
system.
These views on business cycles are, as explained above, typical of Tinbergen.
His views on business cycles were, however, very influential in Holland. By 1947
Tinbergen was already the most renowned and influential economist in the
Netherlands, and the newly established Central Planning Bureau, which he led as
director, worked entirely along these lines in its modelling approach (Magnus and
Morgan, 1987; Jong et al., 1988). However, not everyone in Holland agreed with
Tinbergen’s view on business cycles. Tinbergen’s biggest critic in the Netherlands
was Jan Goudriaan,10 and the debate in the Netherlands on the economic crisis of
the 1930s, and economic equilibrium and dynamics in general, can very much be
characterized as an ongoing debate between Tinbergen and Goudriaan (Dullaart,
1984; Rodenburg, 2010).11 Like Tinbergen, Goudriaan was a convinced socialist
and had a background in exact science, but Tinbergen and Goudriaan held totally
different ideas about the crisis of the 1930s, its causes and, more generally,
about the nature of equilibria and dynamics in economics. According to Goudriaan
(1931), the depression of the 1930s was rooted in the malfunctioning of the
commodity market: when commodity prices are falling, holders of stocks will
supply bigger quantities onto the market in order to pre-empt further losses due to
a further expected fall in prices. This idea about the working of the commodity
market led Goudriaan to conclude that the economic equilibrium is unstable due
to ‘undetermined prices’. Goudriaan’s solution to the crisis is to stabilize commodity
prices, which can be done, according to Goudriaan, by linking currencies not
to gold, as in the gold standard, but to a basket of important commodities and
so instead introducing a commodity reserve currency. The government should
stabilize commodity prices by means of complementary intervention policies
by central banks, just as in the gold standard. He works out this idea on the
commodity reserve currency in a large number of papers and summarizes them
in his entry GRONDSTOFFSTANDAARD for the Bedrijfseconomische encyclopedie
(pp. 208–210). Goudriaan’s idea on dynamics, however, conflicts sharply with
Tinbergen’s and Frisch’s ideas about equilibria in economic systems, and the
Jan Tinbergen on dynamics and conjuncture 437
ensuing debate between Goudriaan and Tinbergen can, in fact, be seen as a debate
on different metaphors for the economy and the business cycle: Jan Goudriaan’s
metaphor of the ‘collapsing of a bridge’ (Wolff, 1970, p. 124) versus Jan
Tinbergen’s metaphor of the ‘pendulum with friction’. For Goudriaan, a business
cycle was not a movement around a position of equilibrium, but a movement
between two consecutive positions of equilibrium – i.e. the economy is either in
equilibrium on a high income level (on top of the bridge) or, when the bridge
collapses, on a low income level (down in the river). The dynamic adjustment
path between these extreme positions Goudriaan considered irrelevant.12 Of course,
Tinbergen heavily opposed these views and set out to write three articles (Tinbergen,
1941, 1943a, 1944) in which he defines ‘Keynes points’ and ‘Goudriaan points’
of equilibrium to refute Goudriaan’s claims. Fortunately for Tinbergen, Goudriaan
was a controversial figure in Holland and his unorthodox ideas never gained much
ground.13 Through the Central Planning Bureau Tinbergen’s ideas on business
cycles and modelling became the received view and approach in the Netherlands.
Goudriaan’s provocative claims, however, kept stimulating Tinbergen to consider,
reconsider and formulate his own views on business cycles and equilibria.
NOTES
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Part III
The recent dictionaries
24 Nikolai Kondratiev and long
waves in recent dictionaries
and encyclopaedias
Francisco Louçã
24.1 INTRODUCTION
Time, and specifically the emergence of crises and bursts of change, has always
been a major puzzle for economics. The entry on CRISES COMMERCIALES (com-
mercial crises) by Clément Juglar in →Say’s Nouveau dictionnaire d’économie
politique highlights this perplexity: ‘The stoppage is abrupt, seems to break out
like a peal of thunder, as if it were caused by some unexpected accident, always a
new one in each crisis’ (p. 641; English translation as Juglar, 2010, p. 149; see
Chapter 12). The interpretation of such a ‘peal of thunder’ was therefore an early
theme for the founders of economics.
This chapter examines the recent dictionary entries on long waves or Kondratiev
waves et similia in the light of the history of the subject and, in particular, the
presentation in such dictionaries of the social, economic and technical configu-
rations of the modes of development emerging through successive periods of the
history of modern capitalism. These modes of development, or ‘long cycles’ or
‘curves of the conjuncture’, as they were first dubbed, were discussed by several
authors, but the first to receive widespread recognition on this matter was Nikolai
Kondratiev. His decisive contribution was the hypothesis of long waves in capitalist
development, named by Schumpeter and known thereafter as ‘Kondratiev waves’.
The evidence shows that, at least for a few decades, there was widespread agreement
about the relevance of the ‘Kondratiev problem’, since the existence of long periods
with impressively distinctive patterns of development was widely recognized. Such
consensus among economists and historians did not, however, extend to the
explanation of these long phases or cycles and was sanguinely attacked by the
official Soviet authorities, who were responsible for Kondratiev’s execution and
for condemning of his research: ‘This theory is wrong and reactionary’ (Malaia
sovetskaya entsiklopediya, cited in Garvy, 1943).
Moreover, different researchers suggested other interpretations of long periods
of political or military hegemony, as several dictionaries witness (see, inter
alia, FLUCTUATION, in →Cotta’s Dictionnaire de science économique, 1968;
Modelski’s entry on KONDRATIEFF WAVES in →Jones’s Routledge encyclopedia
of international political economy, 2001; and Andre Gunder Frank’s LONG CYCLES
in the Berkshire encyclopedia of world history (McNeill et al., 2005)). These
444 Francisco Louçã
alternative views will not be considered in the following, since this chapter
concentrates on the line of research initiated by Kondratiev.
So the long cycles of the conjuncture represent a deviation in the real level of
the elements of the capitalist system in relation to this same system’s equil-
ibrium [. . .] a process in which the level of equilibrium itself changes.
(ibid., p. 159)
The entries to the dictionaries dealing in some detail with Kondratiev’s works evoke
discussions on two main points. The first was raised by Oparin in the 1926 debate
at the Institute and then, in Western publications, by George Garvy: Kondratiev
was short on the explanation of the cause for the turning points. His endogeneity
dogma prevented any exogenous explanation, and indeed he tried to endogenize
even political processes such as wars for domination. Therefore, his explanation
would stand or fall on the ability to present a causal mechanism generating both
452 Francisco Louçã
the transition from an expansionary long swing to a recessionary one, as well
as the contrary; however, Kondratiev did not deliver this. This is rightly noted
in Garvy’s 1968 entry for the International encyclopedia of social sciences,
in Solomou’s entry for the first edition of the The new Palgrave (1987) and in
Freeman’s entry on LONG SWINGS IN ECONOMIC GROWTH for the same dictionary,
who all argue that this left the lower turning point unexplained.
The long paper by Garvy (1943) presented Kondratiev’s main theoretical
arguments, methods and statistical evidence. Garvy’s main criticism concerned
the lack of theoretical basis for the claim that there is a ‘rhythmical movement of
long duration of the economic system as a whole’ (Garvy, 1943, p. 208).
Furthermore, he argued that there was no explanation for the trend, insisting that
Kondratiev recognized his inability to show that the trend corresponded to the
real economic evolution, and that the acceptance of Cournot’s distinction between
supposedly independent entities as trends and cycles forced Kondratiev to look
upon ‘the economic processes as a sum of the actions of independent forces’
(p. 210). Discarding the long waves hypothesis, Garvy nevertheless argued that
the enigma was relevant, since successive stages with differential growth rates
could be detected in economic history, and actual dynamics should account for
them (pp. 219–220).
As a consequence, there is a second point which was also part of the contem-
porary debate about Kondratiev’s methods: the statistical procedure he favoured
that obtained evidence for long waves from a nine-year moving average applied
to deviations of per capita variables from linear or exponential trends, in order to
eliminate the business cycle evidence. This was justified by the proposed differen-
tiation between reversible or wavelike processes, and irreversible or permanent
processes. However, the justification is short, since it is based on a mechanical
procedure arbitrarily imposing a linear or exponential (in the case of Kondratiev)
description of the historical irreversible processes as a trend. There is neither a
theoretical explanation for this nor a historical description fitting these processes,
and Kondratiev was fully aware of this lack of justification. Moreover, the dating
of the turning points for Kondratiev preceded the application of his detrending
functions and implied the conclusion: in other words, the statistical technique used
by Kondratiev contradicted his own claim of explaining a totally endogenous
movement. Garvy concludes in his entry that the statistical evidence was at least
partially ‘the result of the specific techniques of statistical analysis used and that
the dating of the turning points is arbitrary’ (KONDRATIEFF, N. D., p. 444). Again,
Schumpeter came to Kondratiev’s rescue on this point, as discussed below.
During his short and tragic life, Kondratiev gained the respect of academics all over
the world. He was a member of several international scientific associations and
his papers were translated and published abroad. Political leaders commented on
his work, his interpretation of the history of capitalism proved to be a powerful
Nikolai Kondratiev and long waves 453
and challenging vision, and he contributed to the early spread, application and
discussion of new statistical methods and concepts. This was one of the topics
of discussion among the leading economists by the 1920s and 1930s.
Consequently, when the inaugural list of Fellows of the Econometric Society
was due to be drawn up, his name was immediately proposed: Frisch wrote to
Schumpeter on 7 October 1932 suggesting two Russians, Kondratiev and Slutsky.8
Subsequently, Kondratiev, who was already in prison, became the sole Russian
among the 29 founding Fellows of the Econometric Society elected in August 1933,9
along with Frisch, Mitchell, Schumpeter, Keynes, Divisia, Bowley, Fisher, Schultz,
Gini, Haberler, Hotelling and other distinguished economists. This episode, which
gives the dimension of Kondratiev’s impact among his contemporaries, is not
mentioned by any of the dictionaries under scrutiny (again, except Solomou’s entry
for the The new Palgrave, 2008, discussing Freeman and Louçã, 2001).
In spite of that, some discuss different contributions to this research agenda: e.g.
Kuznets is referred to in Cohen’s piece on LONG-WAVE THEORY for the International
encyclopedia of organizational studies (Clegg and Bailey, 2008, Vol. 2), Imbert
and Schumpeter are cited in Giannetti’s CRISI ECONOMICHE: L’OTTOCENTO in
→Carmagnani and Vercelli’s Economia e storia (1978), Schumpeter is quoted in
Niggle’s BUSINESS CYCLE THEORIES in O’Hara’s →Encyclopedia of political
economy (1999), in Zevin’s KONDRATIEFF CYCLES entry for →Glasner’s Business
cycles and depressions (1997) and in Heertje’s SCHUMPETER, JOSEPH ALOIS
(1883–1950) in the 2008 The new Palgrave. As these entries note, the most ardent
promoter of Kondratiev’s cycles was certainly Schumpeter.
24.5.1 Schumpeter
Schumpeter was the most paradoxical and ignored advocate for long waves, since
he was a neoclassical economist, although an unorthodox one struggling with the
notion of equilibrium, and he was a founder of econometrics, although also being
one of the remaining economists concerned with the role of historical processes in
economics. In any case, Schumpeter was soon convinced by Kondratiev and
dedicated a part of his Business cycles (1939) to the long waves. He specifically
added some major points to Kondratiev’s explanation: as noted by Cornwall in his
entry on LONG CYCLES for the The new Palgrave (1987), by Zevin in his entry
for the Business cycles and depressions and by Syll in LONG CYCLES (→Jones,
Routledge encyclopedia of international political economy, 2001), two were the
role of swarms of innovation and, as a consequence, the attraction of new investment
– an endogenous process emerging out of ‘creative destruction’, an inner property
of modern capitalism for Schumpeter. Eventually, the growth of capital stock
relative to demand would imply a fall in profitability and a recession. However,
there was also another important change suggested by Schumpeter to the Kondratiev
hypothesis: the coupling of business cycles and long waves, generating a four-phase
process of succeeding prosperity, recession, depression and recovery. This scheme,
as Solomou remarks, was used by Schumpeter in order to explain the depth of the
1929 crisis.
454 Francisco Louçã
As Freeman’s entry for The new Palgrave suggests, most critics of the
Schumpeterian explanation do not challenge this four-phase scheme, but support
Kuznets’s argument that bunches of innovations could not be so powerful as to
provoke an upswing, and therefore to explain the lower turning point (LONG
SWINGS IN ECONOMIC GROWTH, 1987). This was later discussed by several
researchers in the continuity of Schumpeter.
For the immediate decades after the Second World War, the discussion on long
waves was at a standstill. During the 30 golden years of post-war expansion, the
neoclassical notions of equilibrium and the neoclassical–Keynesian synthesis and
its models of growth prevailed. The revival of research only occurred under the
impact of the fading out of the expansionary wave and after the turning point of
the 1970s, and it is discussed by some of the contributions to the dictionaries.
Freeman, in LONG SWINGS IN ECONOMIC GROWTH (The new Palgrave, 1987),
notes the influence of Ernest Mandel’s works (1975 and 1980) for this revival:
reconsidering the early debates, Mandel suggested a fundamental asymmetry
between the upper turning point, caused by endogenous forces (the falling rate of
profit), and the lower turning point, bridging between the recession and the expan-
sion, which could only be accounted for by exogenous forces in order to reorganize
the social conditions of profitability and accumulation.
This contribution and others following from it or from the Schumpeterian debate
are reviewed in some of the entries under scrutiny, such as John Cornwall’s entry
on LONG CYCLES for the first edition of The new Palgrave, and Lars Syll’s entry
of the same title for the Routledge encyclopedia of international political economy.
They investigate the case of Gerhard Mensch’s argument (1975), suggesting an
extension of the concept of the life cycle of products to account for the expansion:
it would be due to the swarm of technological breakthroughs during the recovery
phase. Christopher Freeman challenged this notion and its empirical foundations,
and demonstrated that inventions are less important than the process of diffusion
of innovations, and namely of ‘clusters of interrelated innovations (new tech-
nological systems)’ (Freeman, LONG SWINGS IN ECONOMIC GROWTH, 1987),
creating a technological revolution (Freeman, 1977). Furthermore, Freeman argued,
the technological revolution creates a new mode of development (explaining the
upswing), which later comes into contradiction with the social and institutional
framework (explaining the difficulty of superseding the downswing). For Freeman,
Nikolai Kondratiev and long waves 457
and for his collaborator Carlota Perez, the mismatch between the socio-institutional
framework and the techno-economic paradigm could account for a long period of
decreasing profitability and accumulation, whereas a new technological revolution
could eventually emerge from the mode of development based on that paradigm
as soon as the mismatch is solved.
This is reviewed by Syll for the Routledge encyclopedia of international political
economy and by Solomou for The new Palgrave. As they note, other economists
(Van Duijn, 1983; Kleinknecht, 1987; Solomou, 1987; Reijnders, 1990; Tylecote,
1992) discussed this evidence and theories in great detail. In particular, in his entry
on KONDRATIEFF CYCLE for the 1987 edition of The new Palgrave, Solomou
reviews different statistical attempts to prove or to refute the long wave hypothesis,
including his own, in which he obtained no evidence of such long-term fluctuations.
Although the author restricts his entry to a fair representation of the different
statistical investigations, he concludes with a very sceptical stance: ‘the evidence
for regular Kondratieff cycle discontinuities is scarce’.
Indeed, the evidence is very contradictory. Using spectral analysis and an
adequate filter, Reijnders confirmed the long-wave hypothesis, but other researchers
using the same tools challenged his conclusion. In any case, spectral analysis
requires a strictly recursive process, and if the spectrum changes, the conclusion
is suspicious. In this case, as in other methods of statistical inference, a number
of instances are also required in order to detect and identify a process, and that is
certainly not the case for the four or five available long waves. Consequently, any
statistical method suffers from severe limitations, and the conclusions by Van Duijn,
Reijnders, Tylecote and Kleinknecht contradict those of Kuznets, Solomou and
others, and no satisfactory conclusion seems to be possible on statistical grounds.
This is why Freeman argues that ‘it is highly unlikely that those who believe that
long swings in economic life are a significant phenomenon will ever satisfy their
statistical critics’ (Freeman’s entry for The new Palgrave, 1987). In particular,
Freeman emphatically rejects any idea of strict determinism – of a technological
or other sort – in generating the social and economic processes of long waves. On
the contrary, if the determination and causation are attributable to the mismatch
between the economic dynamics and the social and institutional conditions, no
regular cycle is to be expected as an outcome. Consequently, long waves are to be
interpreted as historical processes leading to different phases of economic devel-
opment (Freeman and Louçã, 2001).
Solomou, in the entry on KONDRATIEFF CYCLES for the 2008 edition of The
new Palgrave, suggests a solution in the same sense and a new interpretation of
these debates, writing that
24.7 CONCLUSION
Kondratiev’s research was one of the first major quantified inquiries combining
economic history and the theory of cycles. It established a general consensus on
the dating of the long cycles, and for a while it became a paradigm of the explanation
of changes in long-term development of modern capitalism. It was one of the first
applied statistical investigations in economics and it endured as a reference point
for future research, although the controversy surrounding this effort illuminated
some of its shortcomings. Two conclusions are therefore in order.
The first concerns the importance, depth and scope of Kondratiev’s endeavours.
His work – in spite of its naivety and simplicity – should be reappraised by economic
historians, macroeconomists and statisticians, since it clearly presents part of the
conundrum of the application of mechanical statistical methods to real, concrete
and live history. Indeed, Kondratiev’s paper on forecasting (1926b) is one of
the masterpieces in the early literature about statistics and history. It is a powerful
survey of the contemporary authors in economics, mathematics, physics and
philosophy,11 and deals in detail with the problem of the relationship between
reversible and irreversible processes.
Kondratiev assessed economic history as part of societal evolution, used the
available analytical and statistical tools, and discussed their epistemological
foundations. The original consensus obtained among his contemporaries showed
that long periods of distinctive characteristics were an imposing feature of industrial
capitalism for so many of them. This was indeed Kondratiev’s decisive contribution,
and what makes him worthy of our attention: history is part of economics and
economic methods are analytical and historical.
NOTES
1 His essay was made available only in 1997 in a collection of texts edited by Freeman
(1997). Van Gelderen’s ideas were accessible through the reference made by his friend
Sam de Wolff (1924, translated for the first time into English in Reijnders and Louçã,
1998). De Wolff was a Dutch social democrat who published an account of Van
Gelderen’s theory on long waves in a book that was widely known, since it was the
Festschrift for Karl Kautsky. De Wolff adopted the same dating (1825–1849, ebb tide,
Nikolai Kondratiev and long waves 459
1850–1873, a spring tide, 1873–1895, ebb tide, 1895 and afterwards, a spring tide or
Sturm und Drang) and used sophisticated descriptive statistical methods following Van
Gelderen. The essays by Clarke and Parvus were also translated and published in Louçã
and Reijnders (1998).
2 In spite of the diversity and importance of these insights, a part of this debate, which
developed in Russia, was lost, since most of these papers were not widely publicized,
partly because of the language barrier. As an illustration, when the Institute of
Conjuncture organized a debate about Kondratiev’s 1926 paper, Spektator referred to
the fact that Parvus and Falkner criticized Kondratiev for not acknowledging the works
of De Wolff, Turroni and Tonelli. In his reply, Kondratiev indicated that, after the
preparation of the 1926 draft, he had read Turroni (Kondratiev, 1992, pp. 244, 250, 289),
but not the others. No one yet referred to Van Gelderen. Later on, Kondratiev at least
read De Wolff (and could have become acquainted with Van Gelderen’s arguments
through De Wolff’s) and Pietri-Tonelli.
3 In spite of the polemics generated by the notion of a long wave, most dictionaries
covering the topic do not present a complete biography of its author. This is the case
for the 1968 entry by Garvy in the International encyclopedia of the social sciences;
the 1997 entry by van Duijn and Ducos in Business cycles and depressions; and the 2006
entry by Buyist in the International encyclopedia of the social sciences. This is
explainable by the fact that most of the details of Kondratiev’s life were still unknown
by the time of these publications. The exceptions are the later pieces by Barnett in the
Encyclopedia of Russian history (2004) and essentially the one offered by Solomou in
The new Palgrave (2008), which use the data available by that time.
4 The text of the 1992 French translation of Kondratiev’s works, edited by Fontvieille, is
followed here.
5 The 1924 paper proves that Kondratiev had an impressive knowledge of the literature
on macroeconomic cycles: Jevons, Walras, Pareto, Clark, Marshall, Wicksell, Juglar,
Tugan-Baranovsky, Spiethoff, Lescure, Aftalion, Mitchell and Schumpeter were all
quoted.
6 While in prison, Kondratiev prepared and posted to his wife the plan for a five-volume
work that would include discussions on statics, dynamics, on methods for the study of
social sciences, long waves and other matters. Some of these papers by Kondratiev were
published in Russian in the 1990s (part of them are included in the 1998 Samuels et al.
edition).
7 Kondratiev identified four empirical laws: (1) some years before the beginning of a
new LC, important changes occur in technological innovation, monetary circulation,
the role played by new countries (ibid., p. 138); these changes could occur as much as
20 years before (p. 141); (2) the class struggle, including wars and revolutions, is more
intense in the upswings; (3) agricultural depressions are more intense in the downswings;
and (4) the downswings of the shorter cycles are more intense in the downswings of the
LC, and the reverse is also true (pp. 140 ff.). Van Gelderen had already formulated this
last ‘empirical law’ (Van Gelderen, 1913, p. 49).
8 Slutsky, who had also been involved with the Institute of Conjuncture, did not become
a member of the Econometric Society, for reasons unknown. He was a friend of and a
regular correspondent with Frisch, the driving force behind the new association, and
his 1927 paper (later published in Econometrica, 1937, under the auspices of Frisch)
was widely circulated and attracted much attention. There is no indication in their
correspondence about the reason for Slutsky’s failure to participate in the Econometric
Society, however, although one can speculate that his fear of the political consequences
of being associated with a foreign institution eventually decided the issue. Anyway,
Slutsky survived the Stalinist purges (as did Konyus). On the other hand, the inclusion
of Kondratiev is also an enigma, since he was in jail at that time. Either he accepted via
his wife, or the founders of the society took his participation for granted from previous
contacts with Kondratiev.
460 Francisco Louçã
9 The difficulty or impossibility of corresponding with Kondratiev nevertheless implied
that his name was sometimes referred to (September 1934 list of the Fellows) and
sometimes omitted (October 1933 list), while sometimes there was a reference to the
fact that he was a member ‘if living’ (lists included in the Schumpeter Archive, Harvard
University).
10 I thank Marcel Boumans, Amsterdam University, for this reference.
11 The text included references to, and quotations from, not only Clark, Bowley, Babson,
Jevons, Tugan-Baranovsky, Beveridge, Schmoller, Cournot, List, Marshall, Mill,
Kautsky, Engels, Marx and Pareto, but also Strouvé, Durkheim, Mach, Poincaré,
Meyerson, Comte, Laplace, Boltzmann and Planck.
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25 Political business cycles
Jan-Peter Olters
You can fool all the people some of the time, and some of the people all the time,
but you cannot fool all the people all the time.
(attributed to Abraham Lincoln in speech, 8 September 1858)
25.1 INTRODUCTION
The political business cycle (PBC) theory refers to an exceptionally extensive and
conceptually heterogeneous body of literature that explains economic fluctuations
as a consequence of politicians’ manipulations of market outcomes, strategically
engineered to rally voter support and increase the likelihood of re-election. This
particular branch of non-market economics has policymakers internalize voters’
responsiveness to the state of the economy1 and design economic policies on that
premise, thereby adding elements of (suboptimal) instability to the market.
The PBC literature has sought to (1) reinterpret the social planner, move away
from the apolitical concept of a benevolent dictator, and model representatives of
the executive as democratically legitimized actors; and/or (2) determine and esti-
mate those variables of a social-welfare function that would reflect voters’ (political)
preferences as accurately as possible.2 Conceptually, an inherently economic model
of politics would have an elected politician, party or government maximize a well-
specified politico-economic objective function subject to some set of budgetary
and democratic constraints and credibly commit to the resultant set of policy
parameters. However, it has proved excruciatingly difficult to translate the general
intuition of an electorate reacting to, and insisting on, good economic management
into models with a degree of formal elegance and empirical robustness that would
be comparable to those employed in standard economic theory.
The recognition of the need for an interdisciplinary approach to the study of
‘political’ economy goes back to Wolfe (1944), who, as President of the American
Economic Association, appealed to his colleagues in 1943 to take into account
politico-economic interactions when explaining economic developments; the risks
of not doing so were, at the time, only too obvious. This request was later amplified
by Samuelson (1954), who demonstrated formally that once public goods were
included in a representative household’s consumption basket, the market alone was
464 Jan-Peter Olters
unable to determine the optimal levels of collective consumption. The foundations
for the development of an economic theory of politics (ETP), defined as the appli-
cation of modern economic techniques to political questions (Frey, 1974),3 were
laid by Downs (1957) in his uniquely influential Economic theory of democracy.4
In providing the conceptual analogy between politicians and other market par-
ticipants (based on the vote-maximization axiom), he succeeded in mimicking
utility- and profit-maximization assumptions underlying the economic conduct of
households and firms, respectively, and in deriving the median-voter theorem,
which became a pivotal building block in the ensuing ETP and PBC literature.
McKelvey (1979) demonstrated that the extension of the Downsian analysis to
multidimensional spaces implied that ‘political equilibria’ could only exist if voters’
policy optima were distributed perfectly symmetrically in all directions. Otherwise,
the political system would be characterized by fluctuations in the parties’ ideological
positions and/or in electoral outcomes – with direct effects on the state of the
economy.
Over the decades, the PBC literature has taken important steps towards providing
social scientists with a unified approach to the study of politico-economic questions.
Still, this research area continues to provide scientists with a higher degree of
professional potential than (almost) any other field in economics. Notwithstanding
the central role that ETP models would prove to play in policy design and advice,
they have, by and large, remained outside the mainstream of economic literature.5
Blanchard and Fischer (1989), in their standard-setting textbook on graduate
macroeconomics, acknowledged that by stating that economists, for the most part,
ignored political incentives and constraints and analysed optimal policy starting
from a social-welfare function, leaving to political scientists the job of explaining
the characteristics of existing policies.
It is thus not surprising that most encyclopaedic PBC entries have tended
to treat related contributions as a separate field, detached from economics or
neighbouring sciences. One notable exception is Weingast and Wittman’s Oxford
handbook of political economy, which devoted two entire chapters to unresolved
ETP challenges – one on the inability to link this field to overarching questions in
development economics (North, 2006) and a second one on the difficulty ETP
researchers have in stemming the trend of academic specialization (Hinich, 2006).
The latter author believed that, in the short term, the development of a science of
political economy would most likely be similar to what had happened in the past
– i.e. ‘a stumbling in the dark’. In his entry on VOTING AND THE MACROECONOMY,
Hibbs (2006) echoed this general assessment, concluding that one of the greatest
challenges to future research was ‘to bring forward-looking, competency models
to macroeconomic data with statistical power’.
Hinich’s (2006) view that the study of politics was the ‘hardest task in the
social sciences’ is likely to be echoed by anybody who has tried to close a formal
model capturing the decision-making processes by more complex homines
oeconomici et publici over the optimal allocation of private and public goods. The
peripheral position of the still evolving PBC literature in mainstream economics
thus reflects (1) the inconclusive empirical support for existing PBC models;6
Political business cycles 465
(2) the mathematical complexity inherent in (non-linear) political processes;7 and
(3) the interdisciplinary nature of this field. In terms of both theoretical and empirical
research, social scientists have succeeded only partially in modelling the intricate
dynamics underlying multifaceted politico-economic interactions. This sobering
recognition has contributed to Hinich’s proposal to increase the likelihood for
breakthrough advances by undertaking ‘put-men-on-the-moon-type’ efforts and
establishing a publicly funded research institute fully devoted to the development
of a comprehensive, interdisciplinary approach to ETP-related questions.
The present chapter on PBC entries in dictionaries and encyclopaedias suffers
from the same impossible task faced by the surveyed authors of dissecting – suc-
cinctly, accurately and comprehensively – key lessons learnt from what the recent
‘explosion of contributions in the field of political economy’ (Saint-Paul, 2000)
has left the discipline; the reader is herewith referred to a large number of relevant
textbooks, dedicated chapters and survey articles that have assessed PBC insights
in much greater depth and detail.8 Most encyclopaedic entries have followed the
standard tradition of these publications and categorized related models in a 2 3 2
matrix alongside politicians’ objectives (opportunistic vs. ideological) and voters’
expectations (adaptive vs. rational). Such an organization has the advantage of
reflecting the degree to which the PBC literature has absorbed key influences from
mainstream economics and rearranged the theoretical building blocks in the various
subcategories of the PBC literature. The subsequent discussion will follow the
stylized (non-linear) development of politico-economic research as summarized
in Figure 25.1.
Neo-
Kaleckian
Kaleckian
PBCs
PBCs
Rational
partisan
Partisan
partisan
cycles
cycles
Political
Real
Kitchin
PBCs
opportunistic
cycles
Standard RE-PBCs
PBCs RE-PBuCs
When Samuelson (1954) provided the theoretical basis for the need to develop an
economic theory of politics, he encouraged his peers by stating that the solution
‘existed’; the problem was how to ‘find’ it. More than half a century later, this quote
476 Jan-Peter Olters
has not lost any of its significance and appears to have driven the discipline to the
edge of despair, especially given the fact that the PBC literature has only managed
to make marginal impacts on the development of mainstream economics.
Most entries in dictionaries and encyclopaedias, as well as in handbooks, have
remained largely descriptive, with references only to mixed empirical support.
Franzese and Jusko (2006) acknowledged the inherent deficiency and the apparent
non-regular nature of political business cycles by advocating the need to develop
‘context-conditional’ politico-economic cycles. This seemed to capture succinctly the
key obstacle, as it has become only too evident that PBC research covered an area
that could only be captured in a multifaceted, multidimensional and multidisciplinary
manner (Hinich, 2006). Representing the essence of ‘politics’ – including its
interactions with the economic system and impact on a given voter’s (relative) income
and wealth position within a given society – in a formally elegant and empirically
robust model remains a key challenge for economists and researchers in neighbouring
social sciences. Still, the literature contains a large number of relevant (even though
only partial) answers, demonstrating the fact that different types of political business
cycles with different origins, lengths and intensities appear to co-exist and interact.
Table 25.1 summarizes this alternative view of the PBC literature. The respective
focus of the encyclopaedic entries discussed above is represented in Table 25.2.
Typically less than Typically 4 years About 8 to 12 years Over several decades
a year
Kaleckian PBCs
Political Kitchin
cycles
Standard PBCs
Partisan cycles
RE-PBCs,
RE-PBuCs
Rational partisan
cycles
Real PBCs
Neo-Kaleckian
PBCs
Comments
Vosgerau (1978) survey ... survey ... ... ... ... ... PBC section in
Handwörterbuch der Wirt- general survey of
schaftswissenschaft business cycles
Van der Ploeg (1987) survey ... survey ... ... ... ... ... Reference to policy
The New Palgrave Dictionary of ineffectiveness with
Economics RE
Chrystal (1997) citation ... survey ... ... ... ... ... Reference to election
Business Cycles and Depression: promise cycles, VP
An Encyclopedia functions, RE
Paldam (1997) summary analysis analysis analysis analysis analysis ... ... Formal survey and
Perspectives on Public Choice: analysis of PBC theory
A Handbook
Dickens (2001) survey ... summary . . . ... ... ... ... Institutional view,
Encyclopedia of Political Economy advocates independent
central banks
Frey and Benz (2002) citation citation summary summary summary summary summary . . . Stress of importance
Encyclopedia of Macroeconomics of institutions, incl.
central banks
Table 25.2 continued
Kaleckian PBCs
Political Kitchin
cycles
Standard PBCs
Partisan cycles
RE-PBCs,
RE-PBuCs
Rational partisan
cycles
Real PBCs
Neo-Kaleckian
PBCs
Comments
Keil and Willett (2004) citation ... summary summary summary summary citation ... Comprehensive,
The Encylopedia of Public non-technical survey
Choices
Franzese and Jusko ... ... survey survey survey survey ... ... Advocate PBC models
The Oxford Handbook of that are ‘context
Political Economy conditional”
Hibbs (2006) ... ... analysis analysis analysis analysis ... ... Formal analysis of
The Oxford Handbook of PBC models alongside
Political Economy 232 matrix
Hinich (2006) – forward-looking analysis of existing limitations of PBC research Advocates
The Oxford Handbook of interdisciplinary
Political Economy approach to PBC
research
North (2006) – forward-looking analysis of existing limitations of PBC research Stresses importance of
The Oxford Handbook of links with development
Political Economy economics
Blomberg (2007) summary . . . summary citation summary summary summary . . . Focus on innovations
International Encyclopedia of the in real PBC research
Social Sciences
Drahokoupil (2007) ... ... citation citation citation citation ... ... Stresses impact of PBC
Encyclopedia of Governance models on central bank
independence
Drazen (2008a) ... ... analysis summary analysis survey ... ... In-depth analysis of
The New Palgrave Dictionary theoretical and
of Economics empirical PBC results
Drazen (2008b) ... ... ... ... analysis ... ... ... Focuses on budget
The New Palgrave Dictionary cycles and results in
of Economics transition economics
The table distinguishes citation (without explanation or interpretation), summary (with explanation but without interpretation), survey (with explanation and
interpretation) and analysis (with own research or empirical results)
480 Jan-Peter Olters
While the PBC literature has only had a relatively marginal influence on main-
stream economics, its influence on Ordnungspolitik11-related questions and on
the institutional design of free-market economies has been immense. The ensuing
debate on depoliticizing governments’ economic decision-making processes –
particularly with respect to monetary policies and policy approaches to development
economics – reflected (1) the unfavourable description of politicians’ motives,
and (2) the PBC models’ inherent results that political manipulations of the
economy, especially those effected by ‘opportunistic’ politicians, were suboptimal
from a social welfare perspective. Most of the aforementioned encyclopaedia entries
refer to the (presumed) inflationary bias of democratic systems. Drahokoupil, in
his entry in →Bevir’s Encyclopedia of governance, went one step further and
correctly identified the depoliticization of monetary policy as a direct result from
the PBC literature, leading an increasing number of countries to opt for independent
central banks, frequently in tandem with constitutionally mandated inflation targets
(POLITICAL BUSINESS CYCLE, 2007). This lesson also influenced the debate on the
degree of independence to be given to the European Central Bank, dating as far
back as the 1989 Delors Report, or the 1997 decision to grant the Bank of England
full operational independence. Similarly, the fiscal limits enshrined in the Maastricht
Treaty should be seen in this context. The consensus view of the economic benefits
inherent in public institutions outside the direct control of elected politicians,
especially with regard to monetary policy, influenced and defined the institutional
design of most of the Central and Eastern European transition economies. From
this perspective, the PBC literature has proved unusually influential, also because
it has encouraged research efforts into the economic costs and benefits of alternative
institutional designs overarching the newly developing free-market economies.
At least the presumed inflationary bias of democracies, the principal concern
inherent in the myopic PBC models, has been addressed and is reflected in important
structural changes to the institutional set-up in many industrialized and (post-
)transition economies. Refusing to be fooled all the time, and reflecting PBC
insights, voters got up, stood up, and demanded better, and more accountable,
economic management from their politicians.
NOTES
1 With a view to providing Bill Clinton’s 1992 presidential campaign with an identifiable
key message and a programmatic anchor, chief strategist and campaign manager James
Carville coined a three-word summary (‘the economy, stupid’) that has helped to
immortalize this link, guiding political campaigns ever since.
2 Paldam surveys vote and popularity (VP) functions in the entry ARE VOTE AND
POPULARITY FUNCTIONS ECONOMICALLY CORRECT? in →Rowley and Schneider’s
Encyclopedia of public choice (2004); see also Paldam, 1981; Nannestad and Paldam,
1994; Marti, 1995. Frey and Stutzer (2002) summarize insights won by the research on
happiness. As noted by Paldam (1997) in Mueller’s Perspectives on public choice: a
handbook, these functions have ‘an unfortunate instability’, making them ‘not the most
reliable tool’. For details on the theoretical and empirical difficulties surrounding
Political business cycles 481
the underlying concept of a social-welfare function, see also Olters, 2000, 2004 and the
literature cited therein.
3 Given the lack of clarity on the meaning (and definition) of political economy, this
chapter follows Frey’s definition of an economic theory of politics (of which political
business cycles are a sub-branch). For a recent discussion on the historical origins of
the term political economy (see Waterman, 2002).
4 In Weingast and Wittman’s Oxford handbook of political economy, Hibbs (2006)
referred to Downs’s (1957) Economic theory of democracy as representing ‘by a wide
margin the most important work on the political economy of electoral democracies
published in the twentieth century’.
5 See, e.g., Zarnowitz, 1985, who, in his comprehensive survey on business cycles, referred
to PBCs in a single footnote.
6 See, e.g., Franzese, 2002. In response to the lack of conclusive empirical evidence, Franzese
and Jusko (2006), in their entry to Weingast and Wittman’s Oxford handbook of political
economy, advanced the notion of the ‘context-conditional’ political– economic cycles.
7 Frey and Lau (1968) sought to express government behaviour in terms of both office
motivation and ideology but failed to derive explicit solutions, paying tribute to the
fact that the formal problem was ‘mathematically extremely complex’.
8 For books, see, for instance, Alesina et al. (1997), Frey (1997), Persson and Tabellini
(2000), and Drazen (2000). Principal textbook chapters on PBCs can be found in, e.g.,
Cukierman et al. (1992), Behrends (2001) and Mueller (2003). Recent survey articles
include Frey (1978), Nordhaus (1989), Gärtner (2000), Drazen (2001), Franzese (2002)
and Olters (2000, 2004).
9 See, e.g., Vosgerau, KONJUNKTURTHEORIE, in →Albers et al.’s Handwörterbuch der
Wirtschaftswissenschaft (1978), van der Ploeg, POLITICAL BUSINESS CYCLE, in →Eatwell
et al.’s New Palgrave dictionary of economics (1987), Chrystal, POLITICAL BUSINESS
CYCLE, in →Glasner’s Business cycles and depressions: an encyclopedia (1997),
Mueller’s Perspectives on public choice: a handbook (Paldam, 1997), Dickens, POLITICAL
BUSINESS CYCLES, in →O’Hara’s Encyclopedia of political economy (1999), Frey and
Benz, BUSINESS CYCLES: POLITICAL BUSINESS CYCLE APPROACH, in →Snowdon and
Vane’s Encyclopedia of political economy (2002) and Blomberg, BUSINESS CYCLES,
POLITICAL, in →Darity’s International encyclopedia of the social sciences (2008).
10 Dickens’s contribution to →O’Hara’s Encyclopedia of political economy picks up on
this option, interpreting Kalecki (1943) and Boddy and Crotty (1975) the following way:
‘if fascist regimes (rather than democratic governments) implement the expansionary
policies, then big business can have the higher profits and sustain the work skills and
habits of workers without undermining the discipline and docility of workers’, adding
that ‘[i]f workers are strong enough to prevent the establishment of fascist regimes,
then big business and rentiers must limit their activities to engineering a political business
cycle’ (POLITICAL BUSINESS CYCLES, 2001).
11 There is no direct equivalent in English for this area of ‘institutional’ economics focusing
on the analysis of the constitutional and legal framework and related to the structural
features of an economy which affect the interaction between economic and political
actors and the overall business climate.
REFERENCES
26.1 INTRODUCTION
As Kaldor (1940, pp. 79–81) argued in his ‘Model of the trade cycle’, if one regards
investment and saving functions as linear, ‘as in the absence of further information
one is inclined to do’, there are two possible outcomes. The model can give rise to
an unstable economic equilibrium, but since ‘recorded experience does not bear
out such dangerous instabilities, this possibility can be dismissed’. Alternatively,
a stable equilibrium may result, implying ‘more stability than the real world appears,
in fact, to possess’. Since these outcomes cannot be justified, ‘we are left with the
conclusion that the I(x) and S(x) functions cannot both be linear, at any rate over
the entire range. And, in fact, on closer examination, there are good reasons for
supposing that neither of them is linear.’ Kaldor’s statement stands, perhaps, as one
of the first clear acknowledgements of the limit involved in linear modelling of
the business cycle. In fact, linear models – as exemplified by the multiplier–
accelerator formulation proposed by Samuelson (1939) – may generally describe
only diverging or converging oscillations away from, or tending to, the equilibrium
point; only in very special cases they can guarantee steady oscillations.
Kalecki faced these issues in his earlier works which were dedicated to the
business cycle, and his position is of particular interest since the problem of
(non)linearity dominated all his theoretical production devoted to the formal
investigation of the dynamics of capitalist economies. In his 1935 contribution he
presented a linear model that, although based on a first-order delayed differential
equation, could guarantee sustained oscillations only for a precise configuration
of parameter values (that the author, however, considered ‘to be nearest to actual
conditions’: Kalecki, 1935, p. 336).1 After Frisch and Holme’s (1935, p. 239) cogent
criticism that ‘there is something artificial in fixing, by convention, the values
of the constants in such a way as just to obtain an undamped solution’, Kalecki
initially tried to introduce nonlinear functions in his 1937 paper (in a similar way
to Kaldor a few years later), then, in his subsequent works (see, for instance, Kalecki,
1954), turned back to the so-called impulse–propagation approach already
suggested by Ragnar Frisch (1933), according to which the economic system would
be characterized by damped oscillations revived by erratic exogenous shocks
(a sort of exogenous ‘source of energy’, in Frisch’s words, pp. 27 ff.). After the
486 Giorgio Colacchio
ceilings and floors model proposed by Hicks in 1950, which introduced nonlinear
elements separating trend and cycle in an unconvincing way, relevant improvements
in the nonlinear theory of the business cycle were offered by Goodwin in various
contributions during the 1950s, first by means of models exhibiting limit
cycles (1950, 1951), and later in a seminal work (Goodwin, 1967) where he pre-
sented a nonlinear model that explained at the same time, under a few ‘classical
assumptions’, both growth and cycles. By the early 1970s a first stage in nonlinear
economic dynamic modelling had enabled researchers to conclude (1) that linear
systems can explain persisting oscillations only in very special and hence
implausible cases – purely imaginary eigenvalues in continuous-time systems and
with modulus equal to 1 in discrete-time; and (2) that nonlinear systems may
generate persisting cyclical behaviour, taking into account at the same time both
cycle and trend. While some pioneers set out along this road, neoclassical
economists followed the approach suggested by Frisch, and assumed stochastic
exogenous shocks affecting an economic system postulated to be (log)linear and
intrinsically stable.
Meanwhile, the meteorologist E. N. Lorenz (1963) found that for a large range
of parameter values a three-dimensional nonlinear continuous system exhibits a
very complicated and rich behaviour, displaying sensitive dependence on initial
conditions, aperiodic motion and trajectories converging towards those ‘strange
objects’ that Ruelle and Takens (1971) later named strange attractors. It soon
became apparent that a large class of continuous models of dimension three or
higher could explain this kind of amazing behaviour, so that it should be considered,
in a sense, ‘generic’. Moreover, May (1976) found a similar complex behaviour
in one-dimensional nonlinear discrete maps, in the form of sequences of bifurca-
tions, sensitive dependence on initial conditions, ergodic behaviour, aperiodicity,
etc. These are all hallmarks of what was later defined as chaotic motion. It soon
became clear that these features are common to many one-dimensional unimodal
maps. These results in the early 1980s were well understood by the community of
applied mathematicians; we find them condensed in Guckenheimer and Holmes’s
1983 book, which still represents a mandatory reference for the study of nonlinear
dynamical systems.
The reception of these results in economics began in the early 1980s thanks to
Day’s 1982 and 1983 pioneering contributions, which mark the beginning of a
second phase in the history of nonlinear economic dynamics. It became clear that
once nonlinearities are taken into account, a more or less regular cycle, also in the
form of a limit cycle, is nothing but a trivial case of more complex and richer
dynamics that nonlinear systems may exhibit. Progressively, a shift of emphasis
from cycle studies to this new ‘complex’ dynamics took place (and correspondingly
the interest in economic crises, as a phase of the cycle, soon disappeared). This
led to a change in the main problems faced by researchers, as is documented in the
historical succession of ‘classic’ economic dynamics handbooks that condensed
the current state of knowledge on the subject. The first edition of Gandolfo’s (1971)
Economic dynamics: methods and models ended with the analysis of Goodwin’s
‘Growth cycle’;2 in Medio’s (1978) Teoria non lineare del ciclo economico and in
Nonlinear business cycles 487
Chiarella’s (1990) Elements of a nonlinear theory of economic dynamics, the
structural instability of struggle-for-life models was acknowledged and the main
emphasis fell on limit cycles and bifurcations.3 With the second edition in 1993
of H. W. Lorenz’s Nonlinear dynamical economics and chaotic motion, the new
paradigm of economic dynamics was fully established (as is suggested by the book’s
title), and all the tools necessary for the investigation of nonlinear systems are
illustrated. An unavoidably interdisciplinary approach is implied, since the new
analytical requirements are scattered in various fields of research, such as measure
theory for fractal dimension of strange attractors and computer science for the
numerical computation of trajectories, which generally cannot be determined
analytically. To sum up, we can say that while the main problem used to be the
specification of models exhibiting persisting oscillations, now the task was mainly
to ‘manage’ the huge complexity emerging from this new and obscure nonlinear
world, with all its connected problems: the explanatory power of these models,
the relation between stochastic and deterministic representation of economic
systems, the intricate relation between theoretical model previsions and actual
time-series data, and so on. A long road had been covered since Hicks’s definition
of economic dynamics as that part of economic theory where ‘every quantity must
be dated’ (Hicks, 1946, p. 115) and Frisch’s (1933, p. 1) definition of dynamic
theory as that ‘theory that explains how one situation grows out of the foregoing.
In this type of analysis we consider not only a set of magnitudes in a given point
of time and study the interrelations between them, but we consider the magnitudes
of certain variables in different points of time, and we introduce certain equations
which embrace at the same time several of these magnitudes belonging to different
instants’. Along this road, according to some authors (see, for instance, Rosser
and Dore, 2007), a true Kuhnian paradigmatic shift occurred.
In the dictionary entries we are analysing, this theoretical change – which can
be conveniently labelled as the transition from the study of nonlinear cycles to
that of complex dynamics – is apparent, as is the consequent shift of focus towards
the new related problems we have recalled above. While in the earlier entries, as
we will see, the main stress still falls on more or less regular cycles, in the latest
ones the scene is almost completely dominated by the new issues and techniques
involved in the study of nonlinear dynamical systems, and by the problematic
relation between theoretical outcomes and actual time-series data.
economic agents would sooner or later notice the periodic character of the
dynamics of the system and learn to calculate the amplitude and frequency
of the cycles. This in turn would lead to a revision of their expectations. The
behavioural hypotheses of the model – on which the cyclical motion of the
system depends – would no longer be tenable and the model itself would have
to be reformulated. Incidentally, this criticism of the deterministic models of
the cycle is perhaps the most important element of truth in the theory of rational
expectations.
(p. 669)
first necessary step into the mysterious and hitherto inaccessible realm of non-
equilibrium dynamics [. . .] equilibrium states, stable and unstable and even
limit cycles have now been revealed as rather special configurations in a much
more complex and morphologically rich theoretical universe. As soon as the
linearity assumption has been dropped, even a simple model may exhibit a
very complicated behaviour.
(p. 670, emphasis added)
To the objection that some of these theoretical developments may have little (or
nothing) to do with economics (and with actual economic systems), Medio answers
that aperiodic fluctuations – like those emerging from chaotic systems – would be
more realistic than the usual assumptions of stable equilibria.12
The framework of Terenzio Cozzi’s entry on CICLI ECONOMICI for →Treccani’s
Enciclopedia delle scienze sociali (Bedeschi, 1991, Vol. 1) is very similar to that
Nonlinear business cycles 491
of Medio (1985) which we have examined above, although at the beginning we
find a very intriguing ‘ontological’ argumentation. Cozzi, in fact, starts identifying
two different meanings in Schumpeter’s characterization of the business cycle as
an immanent feature of capitalistic economies:
The most relevant consequence connected to the latter meaning is that the theory
of economic development and that of the business cycle should be conceived on
both theoretical and conceptual grounds, since the only phenomenon under exam-
ination would be represented by the cyclical development of capitalistic economic
systems.13 Furthermore, a better understanding of these complicated dynamics
also requires taking into account the role played by other variables, such as social,
political and institutional factors, and the intricate relationships between them.
Consequently, the analysis of cyclical development thus encompasses – as was
the case in Marx’s and Schumpeter’s pioneering contributions – the entire evolution
of capitalism and illustrates the outcome of its process.
After that, in the following sections we find an historical reconstruction of the
theories of the business cycle (also in this case with a particular emphasis on crises
theories), and an exhaustive discussion of the various matters we have already
encountered in Medio’s entry: exogenous vs. endogenous approaches; the general
limit of linear specifications (that only in ‘highly implausible cases’ (p. 727) may
guarantee sustained oscillations); the various problems that characterized Hicks’s
ceilings and floors model, with a particular stress on the fact that since the intro-
duction of upper and lower bounds turned the original model into a nonlinear one,
the separation between trend and cycle was not mathematically correct,14 etc. The
last subsection is devoted to Goodwin’s ‘Growth cycle’ model: Cozzi recognizes
that it provides an endogenous explanation of both cycle and trend, although its
structural instability is particularly emphasized.15 Extensions to the model which
render it structurally stable are cited (for instance, the reader is referred to Medio’s
contributions), but according to Cozzi these improvements are more formal than
‘substantial’. More specifically, the explanation of the lower turning point of the
cycle still takes place in an excessively mechanical way (p. 730). A point of
interest is represented by Cozzi’s opinion that the outcome of prey–predator models
would be in line with the views of Marx and Schumpeter of the capitalistic economy
as a structurally unstable system ‘subject to continuous changes, somewhat in a
very abrupt, and consequently discontinuous, manner’ (p. 731). This exposition,
however, may lead to confusion since here Cozzi is clearly referring to a non-
mathematical meaning of structural instability. Moreover, his further reference to
the fact that ‘in order to consider these features some scholars are trying to apply
492 Giorgio Colacchio
the mathematical catastrophe theory, developed by René Thom in the study of those
systems which are continuously evolving but subject to sudden shift in behaviour’
(p. 731), may generate further confusion. Actually, the impression one gets is that
here Cozzi is referring more to the non-specialistic reception of Thom’s theoretical
contribution – which was widespread at that time well beyond the scientific com-
munity – rather than to a specific mathematical branch of bifurcation theory.
The opposition between the exogenous and endogenous approaches to the theory
of the business cycle (the former related to Frisch–Slutsky–Kalecki’s contributions,
and the latter dating back to Marx’s and Schumpeter’s pioneering works and in
modern form to nonlinear models, with a particular reference to Goodwin’s seminal
1967 paper) is present in the various entries that offer an historical reconstruction
of the matter, for instance in Andy Mullineaux’s entry on BUSINESS CYCLES for
→Deane and Kuper’s Lexikon of economics (1988) and in Franck Portier’s CYCLES
ÉCONOMIQUES for →Jessua et al., 2001, Dictionnaire des sciences économiques.
According to Mullineaux, the question of ‘whether the business cycle is something
that would die out in the absence of external shocks, or whether it is endogenous
to the economic system’ (p. 32) is still unresolved; furthermore, Mullineaux argues
that ‘nonlinear models have also commonly treated business cycles and growth
theory as separable’ (p. 32), but here – also in the light of the references given at
the end of the entry – it is not clear what kind of nonlinear models the author is
referring to. Anyway, at the end of the entry the stress falls on the role played by
other variables in the explanation of the cyclical dynamics of capitalist economies
(a point that we have already found in Cozzi’s and Vosgerau’s entries), and
particularly on the role of political authorities and then on the so-called ‘electoral
economic cycle’. Portier, instead, after having recalled Goodwin’s nonlinear
contributions, focuses on the ‘lack of microeconomic foundations and [. . .] the
relatively use of ad hoc assumptions’ (p. 253) that would characterize endogenous
explanations of the business cycles. Nevertheless, Benhabib and Day’s seminal
1982 paper on chaotic dynamics in a model à la Diamond with overlapping
generations, and Grandmont’s 1985 paper on cyclical behaviour in a general
equilibrium framework, are cited as microeconomic-based models of endogenous
business cycles. As far as we know, this is the only entry where an eclectic approach
is recognized in Azariadis’s 1981 contribution; here, according to Portier, although
the structural economy is characterized by converging stochastic trajectories, cycle
would be kept alive by self-fulfilling agents’ expectations formed on the basis of
exogenous (in the sense of not depending on the ‘economic fundamentals’) signals
and information. In this case, agents’ expectations would play the role of Frisch–
Slutsky’s exogenous shocks. In this sense, the model results in a hybrid view and
is a cross between exogenous and endogenous approaches.
Nonlinear business cycles 493
26.3 NONLINEAR BUSINESS CYCLES IN ENTRIES
RELATED TO ECONOMIC DYNAMICS: INTO THE
MYSTERIOUS REALM OF NONLINEAR DYNAMICS
In the chronological succession of the entries that we have taken into account, the
change of emphasis that in the introduction we briefly labelled as the shift from
(nonlinear) business cycle to ‘complex’ economic dynamics is well evident. While
the earliest entries we examined focus on the main limits of linear formulations
(with a particular reference to Samuelson’s multiplier–accelerator model), generally
ending up with the analysis of Goodwin’s seminal 1967 paper, in the later con-
tributions the ‘new’ paradigm of economic dynamics is by now fully established,
and all the items and the related investigative tools of (nonlinear) dynamical systems
theory which are applied to economics are fully investigated. In this light it is
significant that the early references to nonlinear business cycles can be found in
entries generally dealing with business cycles (within which a considerable share
of space is still taken, as we have seen, by the analysis of crises as a distinctive
496 Giorgio Colacchio
phase of the cycle), whereas for entries specifically dedicated to nonlinear economic
dynamics, we have to wait for the theoretical developments of the mid-1990s to
be digested. In the latter entries, crises are often not mentioned at all. What emerges
from these latter entries is that this shift has involved a change in the very meaning
of the business cycle itself: now the dynamics of economic systems are generally
conceived as being characterized by a richer, more complex behaviour, rather than
being the ‘simple’ outcome of a (more or less) regular alternation of two (or four)
phases. As is evident, the oscillations generated by a chaotic system are something
quite different, even on a conceptual ground, from the idea of cycle which prevailed
in the history of economic analysis from the early macroeconomic models of the
1930s to those of the late 1970s. One can also say that while for some time the
problem was to define a model that could generate sustained oscillations, now
researchers have to tackle models that, in a sense, show too much.
We conclude by underlining some problematic features that transpire only in part
from these entries and that, more generally, are typical problematic issues of economic
dynamics. The first one, which we have encountered in the earlier entries as well as
in the most recent ones (see, for instance, the entries by Vosgerau and by Benhabib),
lies in the relationship between time-series data and theoretical model outcomes.
Since nonlinear models must be analysed also through computer simulations, the
specification of parameter values plays a fundamental role. This fact involves a crucial
relationship between actual data (obtained throughout econometric estimates),
theoretical models and economic previsions, especially considering that, for most
of these models, the exact value of (at least) one parameter may discriminate between
dramatically different dynamic behaviours; one only has to think about the sequences
of period-doubling/period-halving bifurcations, which have also been found in
continuous-time models (see, for instance, Colacchio et al., 2007), to hysteresis, to
periodic cycles appearing inside chaotic regions (the so-called ‘windows’), etc. These
are all features that depend on precise constellations of parameter values. Goodwin’s
statement that, while a mathematician may assume a parameter to be exactly zero,
such an hypothesis is not permissible in applied or empirical analysis (see note 15),
still stands as a fundamental warning about these aspects.
On a more general epistemological ground, there is another problematic point
that curiously is not present – with the partial exception of Medio’s reference to
model time-specification19 – in the entries we have examined, and which relates
to the general explanatory power and the robustness of (nonlinear) economic models
per se. On this matter the answer by Alligood et al. (1996) to the question ‘Why
study models?’ may be enlightening:
NOTES
1 This conclusion was valid in the light of the knowledge, at that time, of the mathematical
proprieties of these kinds of equations. We now know, however, that also a linear
delayed differential equation of the first order can give rise to cyclical steady solutions
for a large range of parameter values, because bifurcations may occur in the time-lag
parameter. For a general introduction to these equations – still largely neglected in
economic dynamics – see MacDonald, 1989; for an application to Kalecki’s model, see
Szidłowski, 2002.
2 With the exception of a last chapter dedicated to a didactic exposition of delayed
differential equations.
3 This shift is also clearly documented in the successive handbooks published by some
of these authors. For instance, the reader is invited to compare the first edition of
Gandolfo’s handbook we have recalled above with that of 2009 reported in the refer-
ences, or Medio’s book with one of his later contributions on chaotic dynamics in
economics (see, for instance, Medio, 1995).
4 The impression one gets is that here Vosgerau is using this expression in a loose sense.
5 As we will see in the following, with this reference to parameter values estimation,
Vosgerau is anticipating a matter that will become of central interest in the following
theoretical development of nonlinear business cycle (see Section 26.3).
6 Here the author explicitly refers to Desai’s (1973) contribution.
7 A particular emphasis is given to the endogenous role played by the public sector in the
explanation of the business cycle.
8 This dictionary carries only 40 entries, all discussed at great length; see Chapter 1, note
11.
498 Giorgio Colacchio
9 It is interesting to point out that about half of the entry is dedicated to crises rather than
to cycle theory. Moreover, as we have already pointed out, the link between crises and
cycle will progressively disappear in the entries of successive years.
10 This issue is also known as the ‘temporal arbitrage’ problem.
11 An example of this ‘static prejudice’ is certainly represented by the Michel Dotsey and
Robert G. King entry on BUSINESS CYCLES for →The new Palgrave dictionary of
economics (1987, Vol. 1), which is entirely dedicated to rational expectations models
of the business cycle, and particularly to the extensions of Lucas’s seminal 1972 model.
Note that the contrast between the explanations of the business cycle in the form of
deterministic nonlinear (chaotic) models on one side and as log-linear models subjected
to stochastic exogenous shocks with agents with rational expectations on the other, is
nothing but a reproposition in modern terms of the antagonist explanations advanced
in the 1930s, which we have referred to in Section 26.1 above.
12 The fact that this entry stands unchanged in the second edition of →The new Palgrave
dictionary of economics (2008, Vol. 8) may be explained in the light of that paradigmatic
shift we have repeatedly recalled. Actually, the various theoretical advances in nonlinear
economics that took place between the two editions could no longer be recorded in
entries generically dealing with the ‘trade cycle’; now, instead, they must be considered
in entries specifically devoted to economic dynamics (like those we are going to examine
in the following section).
13 This point is clearly and concisely stated by R. M. Goodwin in his entry on GROWTH
AND CYCLES for →The new Palgrave dictionary of economics (1987, Vol. 2) in
the following way: ‘cycles can exist without growth and, conversely, growth can
exist without cycles. The special problem posed by an economy is that they are so
closely interconnected that it is quite improper to analyse one without the other’
(p. 574).
14 As the author points out, in this case the ‘principle of superposition’ is no longer valid,
concluding that ‘if one thinks that nonlinearities are a distinctive features of economic
systems [. . .] the trick of adding a trend to a cyclical dynamics may not be considered
very convincing’ (p. 728).
15 As Goodwin frankly recognized about this kind of model, in his entry on PREDATOR–
PREY MODELS for →The new Palgrave dictionary of economics (1987, Vol. 3, p. 963),
‘a mathematician may assume, as he does, a parameter to be exactly zero, but it is
impermissible in an applied or empirical analysis like that of animal populations’.
16 On this point Chih Ming Tan’s entry ECONOMIC GROWTH NONLINEARITIES for →The
new Palgrave dictionary of economics (2nd edition, 2008, Vol. 2) should be mentioned.
Its main concern is the empirical evidence of sensitive dependence on initial conditions
for the explanation of different (persistent) growth regimes among countries. Actually,
according to ‘nonlinear growth models’, economic path-dependence would cause
countries that start with different initial conditions to be locked into permanently multiple
growth regimes. Against this view stands the so-called ‘conditional convergence’ theory,
which states that different growth regimes depend solely on structural differences (and
not on initial conditions). The main conclusion is that on the empirics there is still much
to do, since ‘while there now is strong consensus in the literature that there exists
substantial heterogeneity across countries, it should be emphasized that this finding
is only suggestive of multiple-growth regimes and is not conclusive evidence of it’
(p. 693).
17 On this point, see the pioneering contribution by Frank and Stengos (1988).
18 A similar statement about the weak empirical evidence of chaotic economic motion
can also be found in Aydin A. Cecen’s entry on CHAOS THEORY for →W. Darity’s
International encyclopedia of the social sciences (2nd edn, 2008, Vol. 1), where the
author states that chaotic dynamics has been demonstrated to prevail only for few
economic time-series data.
19 See above, Section 26.3.
Nonlinear business cycles 499
20 See Lorenz, 1989; 2nd edition, 1993, pp. 85–86 for an interesting treatment of these
matters, with particular reference to the specification of models dimension.
21 In other words, in order to avoid falling into a sort of naive falsificationism, it would
be preferable for this choice to be made on the basis of a consistent, stringent theory,
rather than on the assumed ability of models to explain (or describe) some features of
reality. The same argument may obviously be generally referred to the option between
nonlinear or linear specifications; actually, the former should be preferred on theoretical
grounds rather than on the basis of empirical verification of their explanatory power as
compared to linear models. As Kuhn, 1970, pp. 99–100 has shown in his Theory of
scientific revolutions, also the ‘much-maligned phlogiston theory gave order to a large
number of physical and chemical phenomena’.
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27 An assessment of real
business cycles in recent
dictionaries
Marc Pilkington
The equilibrium business cycle theory that emerged in the last part of the twen-
tieth century revolves around the Walrasian conception of a decentralized market
economy wherein rational economic agents continuously interact by optimizing
their utility functions under constraint. Equilibrium business cycle theory has
sometimes been equated to the transposition of the rational expectations hypothesis
to business cycle theory. Although this categorization is useful, it fails to account
for the diversity of business cycle theories that share these methodological prin-
ciples.
Real business cycle (RBC hereafter) theory endorses the methodological principles
put forward by monetary equilibrium business cycle theorists, although it emphasizes
the real nature of the impulse. In their entry on BUSINESS CYCLES in →The new
Palgrave dictionary of economics (1987), Dotsey and King point out the
methodological continuity between Lucas and RBC theory:
However, the differences between the two theoretical strands are manifold. If we
were to single out one fundamental point of departure, it would probably be the
rejection of the following statement by Lucas (1981, p. 233): ‘everything points to
a monetary shock as the force triggering the real business cycle’. This evolution is
apparent in the literature in spite of the contrasted stance that RBC theorists have
adopted on money neutrality (see Section 27.7.3).
In this chapter, we focus on the defining features of RBC theory as they are
expounded in recent dictionaries. The entries we set out to analyse espouse the
definitional aspects and the stylized facts related to business cycles in the academic
literature. Some of these entries shed light on these central aspects. Others enable
us to clarify the meaning and the scope of the qualifier ‘real’. In fact, we find that
502 Marc Pilkington
the expositions are not always devoid of ambiguity as they often fail to fully
disentangle the real and monetary aspects of the business cycle.
In 1946, Burns and Mitchell provided a widely accepted definition of business
cycles in their book Measuring business cycles:
This often cited operative definition, aiming at being as general as possible, takes
for granted the cyclical nature of the development of capitalistic economies. This
premise is the tacit target of criticism by proponents of the RBC approach. Other
traditions emphasize instead the difference between the initial impulse and the
propagation mechanism. Proponents of the RBC approach precisely aim to tackle
this important issue:
From the RBC point of view, the economy can be seen as a ‘filter’ which
transforms the productivity shocks (the input process) into economic fluctua-
tions (the output process). Individual productivity shocks are generally thought
to be fairly small, displaying some autocorrelation but dissipating fairly rapidly.
By contrast, economic fluctuations are thought to be rather persistent and rather
larger than the productivity shocks.
(Talmain, 2003)
The distinction between the initial impulse and the propagation mechanism is
the outcome of the early ‘formal’ business cycle literature. On the one hand, Ragnar
Frisch (to whom this terminology is due) assumed the existence of an inbuilt
oscillations mechanism upon which external shocks are superimposed and which
keep oscillations alive even in the presence of dampening factors:
These two interpretations of the alternation of ups and down, one stressing
the rhythmic nature of the development of capitalism and the other rejecting the
idea that economic dynamics is intrinsically oscillating, couch in modern language
a dichotomy that goes back to the first reflections on crises in the nineteenth century
and still cast a long shadow on the contemporary theoretical approaches. We shall
find several echoes of this distinction in the entries we are examining.
Another issue taken up by dictionary entries is the aim of RBC theory of concep-
tually integrating growth and economic fluctuations by renewing the methodology
of empirical macroeconomic research – notably through the calibration method –
without betraying the general-equilibrium legacy of new classical macroeconomics.
Dictionary entries have accounted for this research methodology in various and
sometimes surprising ways. However, it is useful to assess whether these entries
give a faithful account of the history of business cycle theories.
The entries examined in this chapter cast light on a range of concerns that are
necessary to understand the ramifications, the objectives, the methodology and
the modern advances in RBC theory. Some of these entries can serve as a stepping
stone for a renewed framework assessment insofar as they contain implicit critical
views as well as a blueprint for further theoretical perspectives of development.
Dictionary entries have not always been devoid of confusing statements regarding
the precise origin and the epistemological foundations of RBC theory. In this
section, we briefly examine the emergence of RBC theory through a short discussion
of the (sometimes problematic) terminology as well as links with new classical
macroeconomics.
First and foremost, this entry lacks any discussion of the ontological nature of
real shocks. The non-expert reader is given a few references that are far from satis-
factory and the distinctive conceptual features of real shocks are left in the air.
The alleged ‘source of disturbance’ fits into an exogenous ‘push’ theory empha-
sizing external events, which throw the economy into confusion.
Furthermore, Glasner should also have been clearer about the differences
between real theories of the business cycle and RBC theory. This would have
avoided the following anachronism:
In the 1920s and early 1930s, real business-cycle theories fell out of fashion
as monetary business-cycle theories largely derived from Alfred Marshall or
Knut Wicksell dominated the attention of economists.
Real theories of the business cycle assign a leading role to ‘real’ disturbance to the
economic system in generating economic fluctuations. Accordingly, in his entry
on BUSINESS CYCLE in → Encyclopedia of business and finance (2001), Bowers
argues that the adjective ‘real’ refers to the nature of the shocks triggering business
cycles.
[T]here has in recent years arisen a school of thought emphasizing real business
cycles. This school contends that nonmonetary variables in the private sector
are a major source of cyclical instability.
(p. 79)
506 Marc Pilkington
The same idea is conveyed by Mario Crucini in his entry on INTERNATIONAL
REAL BUSINESS CYCLES in →Durlauf and Blume, The new Palgrave (2008):
The term ‘real’ indicates a sub-area of the business cycle research programme
that focuses on non-monetary dimensions such as changes in productivity,
taxes and government spending, rather than changes in the money supply and
monetary policy.
Apart from opposing ‘real’ to ‘monetary’ shocks, these statements offer little
information concerning the nature of ‘real’ disturbances. More to the point, De
Boissieu argues that real shocks are merely productivity shocks and that in elemen-
tary models, technological progress is best viewed as the holistic outcome of
numerous small and independent factors akin to a random walk: ‘In most RBC
models, and in all foundation contributions (see, for example, F. Kydland & E.
Prescott (1982)), technical progress corresponds to a random walk, because it
is said to result from an entity of numerous small factors with little or no corre-
lation between them’ (CRISE ÉCONOMIQUE, in →Jessua, Labrousse and Vitry,
Dictionnaire de sciences économiques, 2001, p. 229).
However, RBC theory has not remained confined to the study of the effect of
technology shocks, as observed by Francis and Hillstrom, as well as by Fuhrmann.
In addition to ‘technology shocks (shocks that shift the production possibility
frontier of a nation)’, in his entry on BUSINESS CYCLE, REAL Francis refers to other
potential shocks:
In a similar vein, in his entry on BUSINESS CYCLES Hillstrom lists the ‘important
factors in shaping the complexion of business environments’. Inter alia, he mentions
the volatility of investment spending, the momentum impacting the state of
confidence in the economy, technological innovations, variations in inventories,
fluctuations in government spending, political conditions, monetary policy, fluc-
tuations in imports and exports, etc. Hillstrom’s emphasis is nonetheless on
technological innovations that may concern both products and processes.
Hence, Crucini introduces additional variables, which enable the shift from a closed-
economy framework to the open economy:
What emerges from these entries is that their authors have often retained a
long list of possible factors among the disturbances at the origin of real business
cycles, including monetary factors. The main problem, however, is that these
writers frequently fail to specify a hierarchy among these shocks. One important
exception is Bowers, who points to a ‘direction of causation’ linking real and
monetary disturbances. More precisely, in his entry on BUSINESS CYCLE in the
→Encyclopedia of business and finance (2001, p. 75), he emphasizes the direction
of causality running from real to monetary variables: ‘what may be called classical
economists’
Variations of this theory underline, for instance, RBC shocks in the form of
tax, spending or technological evolutions along with an endogenous adjustment
of the money supply to output variations (reverse causation). New variants
explain business fluctuations as induced by economic preferences in models
with overlapping generations (J.-M. Grandmont) or by various psychological
factors, called sunspots.
(pp. 1166–1167)
Recessions in the United States have become noticeably less frequent and
severe since the mid-1980s. The nearly decade-long expansions of the 1980s
and 1990s were interrupted by only very mild recessions in 1990 and 2001.
Economists attribute this moderation of cycles to a number of factors, including
the increasing importance of services (a traditionally stable sector of the
economy) and a decline in adverse shocks, such as oil price increases and
fluctuations in consumer and investor sentiment. Most economists believe that
improvements in monetary policy, particularly the end of overexpansion
followed by deliberate contraction, have been a significant factor as well.
(BUSINESS CYCLES, in →Henderson’s
Concise encyclopedia of economics, 2008)
It is common to refer to these real business cycle models as models that are
driven by aggregate ‘supply shocks.’ While such a description seems approx-
imately accurate for the model driven by productivity shifts, and thus innocuous
enough, it is potentially misleading. In the first place trying to think about these
dynamic general equilibrium models in terms of supply and demand is slippery.
In these models shocks occur to either preferences, technologies/opportunities,
or resources and endowments. Unfortunately, these shocks do not easily
translate into either supply or demand disturbances. Each type of shock will
Real business cycles 509
generally affect both the supply and demand schedules in a particular market.
For example, shifts in technology influence both the supply of goods for a
given level of inputs (work effort in particular), and the demand for goods
through its effect on wealth and the labor/leisure decision.
(p. 57)
In this passage, the author also clearly points to the fact that the shocks considered
within the RBC theory affect demand as well as supply, at variance with the com-
monly held view.
A quick review of the definitional aspects and the stylized facts of the business
cycle will help us understand how certain entries account for the results obtained
by RBC theory.
Her argument is that the precise dating of business cycle components requires a
dose of subjectivity:
Business cycles are dated according to when the direction of economic activity
changes. The peak of the cycle refers to the last month before several key
economic indicators – such as employment, output, and retail sales – begin to
fall. The trough of the cycle refers to the last month before the same economic
indicators begin to rise. Because key economic indicators often change direc-
tion at slightly different times, the dating of peaks and troughs is necessarily
somewhat subjective.
(ibid.)
Yet the issue at stake is not so much the division in phases, but the very notion
of ‘cycle’, with its rhythmic and orderly succession of specific stages as detailed
by Mitchell (as quoted in Section 27.1; see Chapter 3 for a full discussion):
510 Marc Pilkington
In many ways, the term ‘business cycle’ is misleading. ‘Cycle’ seems to imply
that there is some regularity in the timing and duration of upswings and
downswings in economic activity. Most economists, however, do not think
there is. [. . .] Expansions and recessions occur at irregular intervals and last
for varying lengths of time. For example, there were three recessions between
1973 and 1982, but, then the 1982 trough was followed by eight years of unin-
terrupted expansion. The 1980 recession lasted just six months, while the 1981
recession lasted sixteen months.
Hansen’s exposition of stylized facts is not the only reference available in the
literature. However, a number of articles (e.g. Fiorino and Kollintzas, 1994) use
his RBC model as a satisfactory benchmark for stylized facts in RBC theory. We
compare two entries with his presentation.
In their entry on BUSINESS CYCLES in →The new Palgrave (1987), Dotsey and
King describe the stylized facts of the business cycle:
When many sectors are included in this analysis, as in Mitchell (1951), there
is a tendency for co-movement across sectors and considerable stability in
lead–lag relations relative to aggregate output. There do appear to be different
degrees of sectoral co-movement and amplitude. For example, agriculture does
not covary closely with the rest of the economy. Producer and consumer
durable goods manufacturing exhibit greater volatility than services.
First of all, the consumption of non-durables and services is less volatile than
output, whereas investment and consumption of durables (akin to investment
made by households) is more volatile than output. This ranking of volatilities
is sufficiently robust in industrialized countries to qualify for stylized facts of
the business cycle along the lines of the growth stylized facts described by
Kaldor.
(p. 254)
Portier (pp. 251–252) further elaborates upon stylized facts. His observations
match Hansen’s findings, with a few exceptions. Work hours are as volatile as
output and strongly procyclical. Capital stock is slightly procyclical (rather than
acyclical, as in Hansen). Productivity is strongly procyclical (rather than slightly
procyclical, as in Hansen). However, apparent labour productivity is what Hansen
suggests for total productivity. Portier also adds some late stylized facts concerning
nominal variables that are absent in Hansen. These nominal variables are prices
(contracyclical), short-term interest rates (generally procyclical) and money aggre-
gates M1 and M2 (procyclical). One is inclined to extrapolate on the reason for
the introduction of nominal variables in stylized facts by RBC theorists. Our hypoth-
esis is that the contents of entries have accompanied the evolution of the RBC
framework on money neutrality (see Section 27.7.5).
Without adopting the same wording or method of exposition, dictionary entries
are usually consistent with Hansen’s exposition in the academic literature, and
differences therewith are only a matter of emphasis. However, before a theory can
be tested against (or compared with) empirical data, one must determine the
preferred methodology adopted to single out empirical regularities known as
stylized facts.
A very powerful technique designed by Hodrick and Prescott (1980) is the HP
filter aimed at removing low-frequency variations from time series statistics in order
to obtain faithful representations of business cycle fluctuations. Hodrick and
512 Marc Pilkington
Prescott detrended US macro time series and computed standard deviations,
correlations and serial correlations of the major macroeconomic aggregates. Crucini
opts for this approach in his entry on INTERNATIONAL REAL BUSINESS CYCLES
in →The new Palgrave (2008):
This entry is particularly interesting insofar as it offers to define the cycle anew
by mathematical means, thereby renewing its conceptual definition in RBC theory.
However, what the entry fails to explain is how this analytical decomposition
obtained by the HP filter is compatible with the necessary integration of growth
and fluctuations (examined in Section 27.5).
Frank Portier’s entry on CYCLES ÉCONOMIQUES in →Jessua’s Dictionnaire de
sciences économiques (2001, p. 250) contains a very detailed survey of the HP
filter, which is deemed a very pragmatic solution whose operational simplicity
explains its very good results and fast dissemination in the academic literature.
Portier (ibid.) also refers to the very interesting simulations used by Cogley and
Nason (1995) that show how the HP filter can sometimes generate business cycles
even when the latter are not encrypted in the initial data. Finally, Portier’s entry
acknowledges the vast success obtained by the HP filter, which has been widely
adopted by the academic community as well as by major international organizations
such as the OECD. Snowdon and Vane, in the entry on BUSINESS CYCLES: NEW
CLASSICAL APPROACH for their own →Encyclopedia of macroeconomics (2002),
acknowledge the very satisfactory results obtained by Kydland and Prescott:
Kydland and Prescott found that, when the computer simulation of their model
was compared with actual US data, the fluctuations in the model economy
looked very like those in the real data. Thus, they concluded, the new model,
where fluctuations in economic variables only arise as a result of shocks to
the production function, provided a good fit of the ‘stylized facts’.
(p. 85)
Although this entry focuses exclusively on the cyclical side of the dichotomy,
the business cycle and growth processes are not mutually exclusive features
of macroeconomics. That is, one cannot draw any meaningful conclusion about
one feature of the data without a comprehensive understanding of the other.
This was also the stance adopted by Dotsey and King in their entry on BUSINESS
CYCLES in →The new Palgrave (1987):
These entries clearly differ: the passage ‘one cannot draw any meaningful con-
clusion’ in Francis’s entry draws an epistemological conclusion from a statement
on the nature of facts, whereas Dotsey and King’s claim that ‘it is inappropriate to
514 Marc Pilkington
separate [. . .]’ is a plain epistemological claim that the only suitable approach
to these phenomena is the analysis of shocks.
Before proceeding, it is worth reminding the reader that although taken in them-
selves these statements seem to claim a degree of novelty in this approach, the
integration of growth and cycles is scarcely an original idea, as already beginning
from the mid-nineteenth century the view that crises are the price to pay for growth
was fairly common; only in the phase of modelling by means of linear functional
equations (1930s to 1950s) did cycles and growth have to be separated due to the
limitation of the formalism, while it was resumed when the linearity assumption
was relaxed (see e.g. Goodwin’s entry on GROWTH AND CYCLES for the 1987
→The new Palgrave).
The stochastic nature of the shocks is therefore a key ingredient for generating
the cyclical behaviour in the Kydland–Prescott model and there has also been
Real business cycles 515
some scepticism directed toward the nature of these shocks. For example, one
questions whether this construct really captures an exogenous variable.
As such, it therefore reinforces the criticism directed against the strictly exogenous
technological shocks hypothesis (see Section 27.7.2).
As Summers (1991, p. 129) cogently points out, the bulk of empirical macro-
economic research methodology has long focused on the identification of key
parameters underlying the structural apparatus of the economy, the testing of
substantive hypotheses derived from economic theory and the use of sophisticated
statistical techniques in order to disentangle the chain of causation between the
variables of the system.
Nonetheless, Summers (ibid., p. 130) remains very sceptical concerning the
possibility of estimating these key parameters accurately: ‘successful empirical
research has been characterized by attempts to gauge the strength of associations
rather than to estimate structural parameters’. In stark contrast with the conventional
econometric testing approach, and in the light of the limitations thereof, RBC
theorists developed a calibration method defined as the ‘strategy for finding numer-
ical values for the parameters of artificial economies’ (Cooley, 1997). This approach
has profoundly renewed the methodology of macroeconomics research (Hoover,
1995):
[W]e can go way beyond the qualitative comparison of model properties with
stylized facts that dominated theoretical work on macroeconomics until 1982.
We can calibrate models with parameters drawn, to the extent possible, from
microeconomic studies and long-run properties of the economy, and we can
use these calibrated models to generate artificial data that we can compare with
actual data.
(Rebelo, 2005, p. 217)
RBC theory was able to thrive in the 1980s with the design of artificial economies.
In this respect, Robert Lucas (1980) wrote that
Again, the need for objectivity is emphasized in the description of RBC method-
ology. However, from a purely epistemological point of view, the question of the
subjective choices made by researchers, in the initial stages of the modelling
process, does not necessarily boil down to a mere technical problem. The entry
certainly fails to tackle this important issue.
Prescott (1986, p. 22) has redefined the nature of progress in quantitative sciences
by assigning a superior role to theory deemed ‘ahead of business cycle measure-
ment’. In a methodological twist of roles, Prescott (ibid.) suggests that potential
deviations between measurement and theory are not the landmark of theoretical
insufficiencies, but rather of the need for better measurements.
Francis seems to acknowledge the success of the RBC endeavour in his entry
on BUSINESS CYCLE, REAL in the →International encyclopedia of the social
sciences (2008):
Kydland and Prescott (1982) have convincingly argued that a dynamic sto-
chastic general equilibrium model driven by technology shocks can mimic
the main statistical features of U.S. macroeconomic time series when calibrated
using means and variances of macroeconomic data (using reasonable parameter
values to fit the real world) from the U.S. economy.
(p. 407)
RBC theory has been criticized on many fronts. Without being exhaustive, we
review, in the light of a few dictionary entries, some of the contentious issues that
have either weakened the framework or opened new doors for further research.
[T]he weakest part of business cycle theory and the toughest problem in fore-
casting is turning points. Why does the general upward or downward movement
end? Sometimes it is obvious. When, for example, a war begins or ends with
a commensurate and dramatic change in military expenditures, the cause of
the beginning or end of an economic boom is fairly unambiguous. Historically,
however, only a small minority of the turning points are the result of specific,
identifiable occurrences.
(p.75)
the a priori belief that technology shocks are or are not large enough to account
for observed fluctuations is no argument against real business-cycle theories
in general. Even if (in some sense) true, such a view would at most rule out
one-sector real business-cycle models. But if there is an intersectoral
transmission mechanism that amplifies technology shocks to one sector, the
capacity of technology shocks to account for observed fluctuations does not
depend solely on the magnitude of the shocks.
(ibid.)
For example, one questions whether this construct really captures an exogenous
variable (technological change). If cyclical variations in the intensity of utiliza-
tion of capital and labour inputs are significant, then important biases could
arise, since endogenous decisions with respect to utilization will incorrectly
be attributed to changes in technology.
Joseph Schumpeter (1883–1950), noted that nothing is constant over the busi-
ness cycle and nothing ever really returns to its starting place. That is what
makes each business cycle unique. The economy grows and changes with each
cycle – new products, new firms, new consumers.
(p. 76)
The basic neoclassical model of Kydland and Prescott has been criticized on
a number of other grounds that warrant further discussion. First, the model
has no implications for any cyclical variation in employment or unemployment.
That is, the model uses the representative agent paradigm and permits a smooth
tradeoff between hours and output, so all adjustments in labour effort take place
in terms of hours and not numbers of workers.
Since 1999 a new wave of attacks on the real business cycle hypothesis appears
to have delivered the biggest blow yet. These recent studies have found that
positive technology shocks, identified using an econometric technique known
as structural vector autoregressions, are contractionary on the part of labor
input, contrary to business cycle experiences.
(p. 408)
520 Marc Pilkington
Francis (ibid.) goes on to quote a recent study that discards RBC theory:
‘Contemporary research conducted by Neville Francis and Valerie A. Ramey (2005)
has concluded that the technology-driven real business cycle hypothesis appears
dead.’ He nonetheless argues that RBC theorists have not yet conceded defeat:
‘However, proponents of the technology-driven RBC paradigm have not taken
this blow lightly and have tried to save one of the hitherto cornerstones of macro-
economics’ (ibid.). This last sentence is very interesting. At stake is nothing less
than the intellectual survival of RBC theory.
Subsequent research using more general methods than those of Barro has
not convincingly supported the view that only unanticipated money matters.
Frederic Mishkin (1983) even found that anticipated money seems to affect
output. This last result is consistent with recent research that rejects the
superneutrality of money (that output is independent of the rate of inflation).
In their entry on BUSINESS CYCLES, Dotsey and King in →The new Palgrave
(1987) cite a few econometric works running counter to the neutrality hypothesis:
Working at the quarterly interval, Mishkin (1982) and Merrick (1983) provide
evidence against the neutrality hypothesis, where the hypothesized money
supply process and lag lengths are altered from the Barro–Rush specification.
Merrick essentially tries to replicate the Barro–Rush quarterly results on real
GNP, after altering the money supply process by including lagged Treasury
bill rates and stock market returns. He finds that unanticipated money no longer
affects real GNP, but that anticipated money does. Mishkin also alters the
money supply process by including past Treasury bill rates but finds that this
Real business cycles 521
does not affect the Barro–Rush results over a somewhat different sample
period, where an eight quarter maximum lag is imposed. However, upon
extending the lag lengths on unanticipated and anticipated money to twenty
quarters, he is able to reject the joint hypothesis of rationality and neutrality.
Some authors contend that the use of the word ‘real’ entails a semantic confusion
as RBC theory cannot be equated to money neutrality. In this respect, Hoover’s
entry on MONETARY EQUILIBRIUM THEORIES OF THE BUSINESS CYCLE in
→Business cycles and depressions contains an interesting sub-section on Monetary
vs. Real Business Cycles Theories:
One of the fundamental reasons for the rejection of the RBC approach,
especially by central banks, is the absence of role of money in this theory.
This criticism is partially erroneous. Indeed, in the 1980s, research seeks to
find a fundamental reason for the links between the real sphere and the nominal
sphere, particularly the one between the cyclical variations of the currency
and the activity. The first studies evaluate the importance of the currency
shocks economies where currency is held for transactional reasons (Cooley
and Hansen, 1989). The results of this research reveal, in general, that these
shocks produce an insignificant contribution to fluctuations in activity.
The result [of the RBC approach] also had another profound implication and,
along with other research questioning the efficacy of short-run interventionist
policy, has had a significant influence on many modern western governments.
The theory suggested that the object of fiscal policy was not short-term counter-
cyclical intervention, but rather to design tax and expenditure policies partic-
ularly as regards the provision of public goods and education which maximize
the growth rate of the economy.
(BUSINESS CYCLES: REAL BUSINESS CYCLE APPROACH in
→Snowdon and Vane’s Encyclopedia of macroeconomics, 2002, p. 96).
However, in the light of the recent global downturn – the biggest since the Great
Depression – it will certainly be very interesting to examine future dictionary entries
devoted to the desirability and effectiveness of fiscal policy in RBC theory.
RBC theory has certainly not left commentators indifferent. It has been the subject
of criticism (see Section 27.7), albeit widely acclaimed by the economics profession,
most notably by the Nobel Committee in 2004, as reported by Francis in his entry
on BUSINESS CYCLE, REAL: ‘Finn Kydland and Edward Prescott received the Nobel
Prize in economics in 2004 “for their contribution to dynamic macroeconomics:
the time consistency of economic policy and the driving forces to business cycles”’
(International encyclopedia of the social sciences, 2008, p. 407). He further
comments on the impact of RBC theory on the economics profession:
They have also gone beyond static models and have begun to write models
in more dynamic settings. Certainly, this is a practice that is good for the
Real business cycles 523
profession, though some researchers have taken it to the extreme by being so
mathematical in their approach they have neglected the economics.
(p. 409)
NOTE
1 As argued above (Section 27.4.1), a more radical argument was advanced by Romer, who
maintained that the very notion of ‘cycle’ should be rejected as inconsistent with the
nature of the phenomenon: ‘For describing the swings in economic activity, therefore,
many modern economists prefer the term “short-run economic fluctuations” to “business
cycle.” [. . .] Just as there is no regularity in the timing of business cycles, there is no
reason why cycles have to occur at all. The prevailing view among economists is that
there is a level of economic activity, often referred to as full employment, at which the
economy could stay forever’ (BUSINESS CYCLES, in →Henderson’s Concise encyclopedia
of economics, 2008).
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Avouyi-Dovi, S., Matheron, J. and Fève, P., 2007, Les modèles DSGE: Leur intérêt pour
les banques centrales, Bulletin de la Banque de France, No. 149, pp. 21–32.
Burns, A. F. and Mitchell, W. C., 1946, Measuring business cycles (New York: National
Bureau of Economic Research).
Cogley, T. and Nason, J. M., 1995. Effects of the Hodrick–Prescott filter on trend and
difference stationary time series: implications for business cycle research, Journal of
Economic Dynamics and Control, 19, pp. 253–278.
Cooley, T. F. (ed.), 1995, Frontiers of business cycle research (Princeton, NJ: Princeton
University Press).
Cooley, T. F., 1997, Calibrated models, Oxford Review of Economic Policy, 13: 3, pp. 55–69.
Cooley, T. F. and Hansen, G. D., 1995, Money and the business cycle. In T. F. Cooley
(ed.), Frontiers of business cycle research (Princeton, NJ: Princeton University Press),
pp. 1–38.
Fiorito, R. and Kollintzas, T., 1994, Stylized facts of business cycles in the G7 from a real
business cycles perspective, European Economic Review, 38: 2, February, pp. 235–269.
Fisher, I., 1923, The business cycle largely a ‘dance of the dollar’, Journal of the American
Statistical Society, 18, December, pp. 1024.
Francis, N. and Ramey, V., 2005, Is the technology-driven real business cycle hypothesis
dead? Shocks and aggregate fluctuations revisited, Journal of Monetary Economics, 52:
8, pp. 1379–1399.
Friedman, M. and Schwartz, A. J., 1963, A monetary history of the United States, 1867–1960
(Princeton, NJ: Princeton University Press).
Hansen, G. D., 1985, Indivisible labor and the business cycle, Journal of Monetary
Economics, 16: 3, pp. 309–327.
Hodrick, R. J. and Prescott, E. C., 1980, Post-war U.S. business cycles: an empirical
investigation, Discussion Paper 451 (Pittsburgh, PA: Carnegie-Mellon University).
Hoover, K. D., 1995, Is macroeconomics for real? The Monist, 78: 3, pp. 235–257.
Real business cycles 525
Hume, D., 1752, Of money. Reprinted in E. Rotwein, 1955, David Hume: writings on
economics (Madison, WI: University of Wisconsin Press), pp. 33–46.
Keynes, J. M., 1924, A tract on monetary reform (London: Macmillan).
King, R. G. and Rebelo, S., 1986, Business cycles with endogenous growth (mimeo).
King, R. G. and Rebelo, S., 1988, Public policy and economic growth: developing neo-
classical implications, Working Papers 225 (Rochester, NY: University of Rochester,
Center for Economic Research (RCER)).
Kydland, F. E. and Prescott, E. C., 1982, Time to build and aggregate fluctuations,
Econometrica, 50: 6, pp. 1345–1370.
Kydland, F. E. and Prescott, E. C., 1991, The econometrics of the general equilibrium
approach to business cycles, Scandinavian Journal of Economics, 93: 2, pp. 161–178.
Kydland, F. E. and Prescott, E. C., 1996, The computational experiment: an econometric
tool, Journal of Economic Perspectives, 10: 1, Winter, pp. 69–85.
Lines, M., 1990, Slutzky and Lucas: random causes of the business cycle, Structural Change
and Economic Dynamics, 1: 2, pp. 359–370.
Long, J. B., Jr and Plosser, C. I., 1983, Real business cycles, Journal of Political Economy
91: 1, pp. 39–69.
Lucas, R. E. Jr, 1980, Methods and problems in business cycle theory, Journal of Money,
Credit and Banking, 12, November, pp. 696–717.
Lucas, R. E. Jr, 1981, Studies in business-cycle theory (Cambridge, MA: MIT Press).
Merrick, J. J., 1983, Financial market efficiency, the decomposition of ‘anticipated’ versus
‘unanticipated’ money growth, and further tests of the relation between money and real
output, Journal of Money, Credit and Banking, 15, pp. 222–232.
Mishkin, F. S., 1982, Does anticipated money matter? An econometric investigation, Journal
of Political Economy, 90, February, pp. 22–51.
Nelson, C. R. and Plosser, C. I., 1982, Trends and random walks, Journal of Monetary
Economics, 10: 2, pp. 139–162.
Plosser, C. I., 1989, Understanding real business cycles, Journal of Economic Perspectives,
3: 3, pp. 51–77.
Prescott, E. C., 1986, Theory ahead of business cycle measurement, Federal Reserve Bank
of Minneapolis Quarterly Review, 10: 4, pp. 9–21.
Rebelo, S., 2005, Real business cycle models: past, present and future, Scandinavian Journal
of Economics, 107: 2, pp. 217–238.
Rogerson, R., 1988, Indivisible labor, lotteries and equilibrium, Journal of Monetary
Economics, 36: 2, pp. 269–300.
Slutzky, E., 1937, The summation of random causes as the source of cyclical processes,
Econometrica, 5: 2, pp. 105–146.
Snowdon, B. and Vane, H. R., 2005, Modern macroeconomics: its origins, development and
current state (Cheltenham: Edward Elgar).
Solow, R. M., 1957, Technical change and the aggregate production function, Review of
Economics and Statistics, 3: 3, pp. 312–320.
Summers, L. H., 1991, The scientific illusion in empirical macroeconomics, Scandinavian
Journal of Economics, 93: 2, pp. 129–148.
Talmain, G., 2003, Growth and business cycles. In S. Altug, J. Chadha and C. Nolan (eds),
Elements of dynamic macroeconomic analysis (Cambridge: Cambridge University Press),
pp. 509–568.
28 Back to crises
Post-war dictionaries and the
resilience of an old category
Daniele Besomi and Giorgio Colacchio
28.1 INTRODUCTION
The earlier inquirers into the phenomenon, impressed by the devastation fol-
lowing crises, focused only on crisis itself, on the violent break of equilibrium
that is observed for a brief time only. They ignored what precedes it and what
follows it. Today we know, especially thanks to Juglar, that crisis is but one
of the moments – in truth, the most distressing one – of an entire cycle taking
place periodically. [. . .] Crisis is the point [. . .] of intersection between
prosperity and depression, the culmination of one phase and the beginning of
the other. [. . .] What happens during the crisis cannot be understood or
explained without examining the whole of the cycle: the prosperity preparing
the crisis, and the depression which ensues from it and which prepares the return
of good times. When the subject becomes better known, writers will use less
the expression overproduction crises and will use instead economic cycles. In
scientific writings, the latter expression will tend to substitute the former.
(Aftalion 1913, Vol. I, p. vi)
Aftalion’s terminological prediction proved largely correct for the decades to come.
In the inter-war years most writers used the terms ‘trade cycle’ or ‘business cycle’
in English, or some equivalent in other languages. Notable exceptions are recorded
in the immediate aftermath of the 1929 crisis, when the term ‘crisis’ was revived
for a few years, and in Aftalion’s home country and to a lesser extent in Italy, where
the word ‘crise’ remained in usage. Overall, however, usage of the term ‘crisis’ had
considerably shrunk by the 1990s, but had a revival in the last few years of the
twentieth century and at the beginning of the twenty-first.1
The title of dictionary entries reflects, with a lag, the terminological changes
taking place in the literature. Until the mid-1920s the entries on economic diffi-
culties were titled ‘crisis’ or ‘crises’, then ‘cycles’ began to take over; ‘crises’ almost
totally disappeared (except from French dictionaries), to reappear in the late 1970s
Crises in recent dictionaries 527
and become more frequent in recent years. While up to the 1920s entries on ‘crises’
were the exclusive home of all systematic discussion on economic distress (with
some remarks spilling over to entries such as ‘banks’, ‘currency’, ‘credit’ or, occa-
sionally, ‘overproduction’), the recent revival of the use of the term ‘crises’ often
sees it accompanied by a number of other entries. In particular, ‘business cycles’
is rarely missing from dictionaries. This suggests that the notion of ‘crisis’ now
indicates something distinct from the cycle: possibly, as suggested by Aftalion, one
of its phases, but possibly also something different. One of the main issues at stake
is therefore the relationship of cycles and crises, and it will be the main concern
of this chapter.
In French, the term ‘crisis’ never fell into disuse, and accordingly several economic
dictionaries carry an entry under that heading, sometimes exclusively but more
often in conjunction with cycles or fluctuations. With few exceptions, the general
attitude towards crises and cycles reflects Aftalion’s position cited above. The
notion of ‘cycle’ (or of ‘fluctuations’, when writers feel that the regularity associated
with the recurrence of crises in the nineteenth century is lacking in the post-war
world) is understood as encompassing the notion of ‘crisis’, and correspondingly
the more modern theories of the cycle are described as generalizing the old approach
emphasizing crises. The discriminant – the reason for carrying separate entries for
crises and cycles – often lies in the violence, suddenness and dramatic character
of the crisis as compared to the smoothness of a recession (see Section 3.2.11).
These themes are clearly expounded starting with the first post-war French
dictionary, a particularly important one for our purpose due to the eminence of the
author of the entries on crises and cycles. They were written by Henry Guitton,
who had previously authored a number of articles and a voluminous monograph
on economic fluctuations (1951). In the entry on CRISES, he characterized the
modern form of the phenomenon (as distinct from the agricultural crises of the
eighteenth century) as consisting of generalized and epidemic overproduction,
affecting all branches of production and all industrialized countries, and stressed
that they are no longer occasional and somewhat random phenomena but reappear
periodically at more or less regular intervals. ‘The latter feature has led from the
notion of crisis to the notion of cycle’ (CRISES, in →Romeuf, Dictionnaire des
sciences économiques, 1956, p. 350). Accordingly, the theories of crises have been
superseded by the theories of the cycle. The latter, however, ‘did not destroy the
theories of crises; they rather rest on them, in order to improve on them and
generalize them’ (p. 351). Accordingly, in the entry on CYCLES (without qualifiers),
for the same dictionary, Guitton regretted that ‘the organization of a dictionary
forces one to disjoin what, in the real world, is deeply united’, and defined the crisis
as ‘a discontinuous and catastrophic time of interruption of a continuous cyclical
evolution’. What makes crises notable, as distinct from cycles, is the fact that
528 Daniele Besomi and Giorgio Colacchio
discontinuities are more easily perceived than continuous movements. The study
of the latter requires a different attitude, which explains why ‘the study of the
cycle is more theoretical than the study of crises’ (ibid., p. 365).
Guitton is slightly hesitant as to the balance of emphasis between crises and
cycles. On the one hand, he asks himself whether the traumatic experience of 1929
and of the First World War have not jeopardized the notion of cycle and whether
the notion of crisis, perhaps somewhat modified, should again gain pre-eminence
(p. 350). On the other hand, even these shocks have not undermined the foundations
of the previous economic relationships. The economy overall tends to grow, and
in this context crises have been painful but short-lived interruptions of this process;
they are the price to pay for economic progress. There cannot be absolute stability
in this process, but catastrophic crises have disappeared, and even their discon-
tinuous character is undermined. Guitton therefore envisages the possibility of a
protracted growth, on which gentle oscillations are superimposed (pp. 353–354).
The other French dictionaries carrying entries on crises published in the last half-
century basically take up part of Guitton’s themes, rarely adding new considerations
and scarcely offering any reason but the accidents of the alphabet for the existence
of separate entries on cycles and crises. In →Birou’s Vocabulaire pratique des
sciences sociales (1966), a crisis is generally defined as any phenomenon failing to
unfold in a regular way according to the forecasts, or as a state of distress, of perturbed
order, of anomaly (entry CRISE), while a CRISE ÉCONOMIQUE is an acute state of
distress and of malfunctioning of the economic system. In other words, crises
‘correspond to a phenomenon of depression of economic activity’; they ‘are the
minima of the phases of depression of economic cycles’ and are dangerous times
in economic life (p. 73). CYCLES ÉCONOMIQUES, in turn, are a notion resulting from
the existence and periodical return of crises. However, as their occurrence has
become much less regular, the notion of ‘fluctuation’ has become more appropriate.
Interestingly, in contrast with Aftalion’s view (which he took up from Lescure, 1907
(1932 edn), pp. 2–3, and which has been generally accepted in the early and recent
literature) that crises are the upper turning point of the cycle, Birou makes them the
lowest point of the depression, more in accordance with common parlance than with
technical jargon.
The definition was soon modified in →Cotta’s Dictionnaire de science
économique (2nd edn, 1969), where crises are characterized as ‘brutal substitution
of an upwards movement by a downwards movement’ in prices, production and
incomes (CRISE, p. 130). The entry traces a history of crises from 1826 to 1929,
and offers an extremely brief survey of the explanations of crises. Classical
economists blamed crises on accidental mistakes, the Marxists on undercon-
sumption by the workers, others on the physical constraints of production methods,
such as the length of the production process. The survey concludes that as crises
became periodical, all these explanations lost interest and writers focused on
theories of fluctuations. In the post-war world, ‘the era of crises and depressions
seems to have ended’, and even the theory of short fluctuations (the Juglar cycle)
is subsumed under the theory of growth (FLUCTUATION, p. 221; there is no entry
on cycles).
Crises in recent dictionaries 529
Bernard and Colli (→Dictionnaire économique et financier, 3rd edn, 1981)
explicitly interpret crises ‘in the strict sense’ as the ‘brutal turning point of con-
juncture, marking the passage from a phase of expansion to one of depression of
an economic cycle’ (CRISE ÉCONOMIQUE, p. 473; see also CYCLE, p. 485).
They add, however, that the crisis is a break in the equilibrium between supply
and demand of goods and services (p. 473). Taken together, the two definitions
imply that the phase of prosperity is an equilibrium process; this would require
some elaboration, which is, however, lacking from the relevant entries. Three main
interpretations in history are described. The classical, liberal school interpreted
crises as the result of abnormal human behaviour altering the operation of the
readjustment mechanisms that would otherwise maintain equilibrium. The neo-
liberal school, on the grounds of a dynamic conception based on the existence of
lags, has integrated crises within the study of cycles. Marxist analysis focused on
overproduction crises due to the cumulative discrepancy between the development
of productive forces and demand, in turn affected by the distribution of income
and by the falling rate of profit. While Marx predicted a progressive deepening of
crises until the final breakdown, later Marxists incorporated into the analysis the
action of some counteracting forces, making it less mechanical (pp. 474–475).
The theoretical content of the entries remains practically unaltered in the 6th edition
(1996).
→Brémond and Gélédan’s Dictionnaire économique et social (5th edn, 1992)
offers an entry on economic and social crises (CRISES ÉCONOMIQUES ET
SOCIALES) which discusses crises, cycles and fluctuations at once, without clari-
fying what the relationship between these phenomena is, except by pointing out
that terms such as recession, stagnation and turbulence either designate a condition
less brutal than that described by crises, or are used to mask the gravity of an actual
situation (p. 108). Otherwise, the terms are used almost interchangeably. Three
approaches are distinguished: the neo-classical, exemplified by a convergent
cobweb model; the Keynesian, with its underemployment equilibria; and the
Marxist, for which crises are the result of the contradictions of capitalism, and are
an essential ingredient for restoring the profit rates negatively affected by the
previous development, laying the foundations for a new growth bout (112–114).
→Géhanne’s Dictionnaire thématique de sciences économiques et sociales
(1995) defines crises in a strict sense as the turning point of the cycle, while
recessions and depressions are the names of the descending phase of the cycle,
distinguished by their intensity (CRISES ET FLUCTUATIONS ÉCONOMIQUES, p. 84).
Crises therefore are explicitly denied any autonomy as a concept. An entry on ‘crises
and economic theories’ offers a survey of the field, considering classical economists,
Marx, neoclassical theory, and Keynesian and post-Keynesian analysis. Although
schematic summaries of the respective views on the causes of crises are offered,
they are scarcely integrated and often boil down to a few quotations from various
and disparate writers, so that one hardly gets the overall picture (CRISES ET
THÉORIES ÉCONOMIQUES). Similarly, in →Albertini’s and Silem’s Lexique
d’économie (4th edition, 1992) the crisis, defined as a brutal reversal of the
economic conjuncture giving rise to an excess of supply in face of a limited demand
530 Daniele Besomi and Giorgio Colacchio
for goods and services (CRISE. CRISE ÉCONOMIQUE, p. 177), is listed as a phase
of the cycle (CYCLE, p. 183), and correspondingly the theories of crises correspond
to the theories of cycles and of fluctuations (p. 178).
More interesting is de Boissieu’s entry on economic crisis in →Jessua, Labrousse
and Vitry’s Dictionnaire des sciences économiques (2001), where it is mentioned
that there are two lines of interpretation of the phenomenon. Some writers see crises
as the turning point of the cycle, while for others the crisis is a major break due to
an unforeseen shock. The latter view is treated as a qualitative jump, to be analysed
by means of the mathematics of discontinuity such as catastrophe or chaos theories
(CRISE ÉCONOMIQUE, p. 229). Unfortunately, the latter hint is not taken up and
the entry unfolds with the discussion of the nature of shocks – whether exogenous
or produced by the system itself – their amplitude and mechanisms of transmission.
The entry on CRISE in →Alquier’s Dictionnaire encyclopédique économique et
social (1985, 1990) is the only French one attempting to restore the theoretical
autonomy of the notion of crisis from cycles and fluctuations. Not only are such
terms not given the honour of an entry in the dictionary, but Alquier criticizes the
definitions of crisis based on some ‘perturbation’ of equilibrium (he explicitly refers
to Lescure’s entry on CRISES in →Seligman’s Encyclopaedia of the social sciences,
1930–1935; see Chapter 22) as failing to distinguish the notion of crisis from similar
phenomena such as recessions, cycles and fluctuations. He points out (citing
Brochier, 1976) that while the term ‘crisis’ seemed to have been definitely expelled
from the economic vocabulary, following the post-war faith in governments’ power
to regulate the economies, the 1973 crisis has disproved this view, so that the theory
itself underwent a serious crisis (CRISE, 1990, p. 115).
The entry begins with the observation that the notion of crisis is multifaced,
as it is at the same time a common term but also part of a theoretical approach, and
it concerns the economy while at the same time also affecting other aspects of
society. The ‘morphological’ approach implied by a formal definition is therefore
not suitable, and accordingly it is suggested that crises are understood in terms of
a pathology (CRISE, pp. 114–115). The association of crises and pathology is not,
of course, new (see Section 28.4 below for further examples); in fact, the medical
metaphor offered the first conceptualizations of the phenomenon (Besomi, 2011).
Alquier, however, is concerned not so much with the phenomenological aspects
of the malfunctioning of the economy, but with its theoretical representation in
terms of the opposition between the crisis and the normal functioning of the system.
The importance of the system’s pathology lies precisely in revealing its internal
logic by defining the precise conditions under which it can work ‘normally’. The
understanding of crises is therefore strictly connected with the theoretical
approaches of the various schools of economics; it is the benchmark for judging
their ‘truth’ (CRISE, p. 115). While this premise is promising, the development
offered in the entry is too scanty to be fully helpful. From the few lines dedicated
to classical and neoclassical writers, one gets a hint of the implications of Alquier’s
argument. Regardless of their specificities (concerning, for example, the theories
of value or of prices, the emphasis on wealth or on rationality, the macro or micro
approaches), these writers share the same view of equilibrium as an actual and
Crises in recent dictionaries 531
stable state of the system, and accordingly deny the possibility of deep and general
crises. However, the equally short discussion of the dissenters’ view (Malthus and
Sismondi first, Keynes later) only points out that they have incorporated the
possibility of crises in their apparatus, but have not gone so far as to reject the
capitalist system itself. Marx, on the contrary, not only discussed the possibility of
crises, intrinsic in the metamorphosis of capital, but stressed their necessity,2 which
the author attributes mainly to the anarchy of production and to underconsumption
by the workers, with a passing reference also to the falling rate of profit and the
intrinsic contradiction between the development of productive forces and
profitability (pp. 115–119).3
The entries examined so far, in spite of being titled ‘crisis’ rather than ‘cycle’, fail
to recognize an autonomous character to crises and justify the corresponding
separate heading. Marx is frequently seen as an exception, but the only serious
attempt to clarify the relationship of crises to cycles is due to the →Ökonomisches
Lexikon (1970–1971) we have just examined.
Some entries raise the issue of the relationship of crises to cycles in passing but
do not attempt to resolve it. In Kindelberger’s entry in →The new Palgrave dic-
tionary of economics (1987), for instance, a FINANCIAL CRISIS is defined as ‘a
sharp, brief, ultra-cyclical deterioration of all or most of a group of financial
indicators’; it is the counterpart of financial booms (or bubbles), between which a
period of ‘distress’ may take place. Crises are seen in contrast to cycles in some
sense, but the issue is not clear as the meaning of ‘ultra-cyclical’ remains unex-
plained.6
In some entries, the issue is tackled explicitly by interpreting crises as anomalies
with respect to the ‘normal’, cyclical dynamics of the economic system. Crises are
thus seen either as abnormally large fluctuations (either in terms of length of the
depression phase, or in terms of its depth), or as exceptional dramatic downward
deviations from a smooth, regular cycle. This is a new version of the idea that crises
are sudden and unexpected interruptions of the normal train of economic life. While
during the nineteenth century this was interpreted in terms of interruptions of a path
of cumulative growth, now the reference ‘norm’ is a cyclical pattern, where good
trade is followed by bad trade without excesses on either side. ‘Crises’ denote
deviations from the reference pattern, and as exceptions call for an explanation.
Other entries, also treating crises as a pathology, do not specify to what ‘healthy’
state of the economy crises are compared. As was the case with the first crises
theories, such perturbations can either have a contingent, historical nature, or be
intrinsic to the economic process itself; accordingly, they admit of exogenous and
endogenous explanations, but have in common the interpretation of such facts as
pathological deviations from a norm.
Ciocca’s entry on CRISI ECONOMICHE: IL NOVECENTO in →Carmagnani and
Vercelli’s Il mondo contemporaneo (1978) is the neatest example of this thesis.
The author writes explicitly, with reference to the cyclical fluctuations of the
twentieth century, that ‘it is not simple to assess whether these “normal” cycles
tend to occur in more or less severe forms. The very distinction between this kind
of fluctuations and proper crises [. . .] is to some extent arbitrary’ (p. 135) – also
because each cycle differs from all others. The empirical evidence suggests that
the amplitude of the business cycle has tended to decrease since the middle of the
nineteenth century. Ciocca takes this finding as defining the ‘normal’ character of
the cycle (‘normal’ is always written between inverted commas). There are,
however, two striking exceptions: the crises of the early 1930s and 1970s. The
exceptionality of the former lies in the dramatic depression of economic activity
it caused, while the latter is anomalous for having seriously undermined the agents’
confidence in the stability of the system. This neat division between ‘normal’ cycle
534 Daniele Besomi and Giorgio Colacchio
and exceptional crises is projected from the empirical to the theoretical ground,
when Ciocca separately surveys the main theoretical approaches to the problems
of the persistent character of cyclical fluctuations and of the particular gravity of
the two above-mentioned crises.
In the same vein, although less explicitly than Ciocca, Laibman contributed an
entry on CYCLICAL CRISIS MODEL to →O’Hara’s Encyclopedia of political
economy (1999). The expression in the header ‘joins together the concepts “cycle”
and “crisis”, each of which often appears on its own’ (p. 179), as a possible way
of accounting for the recurrent crises affecting capitalist economies. Cyclical crisis
theory, combining a ‘determinate cyclical movement with a moment of sharp
rupture and systemic disorganization’ (p. 180), would be different from both cycle
theory and crisis theory, the former implying a sort of ‘smooth’ fluctuating dynamics
and the latter conceiving crises as catastrophic and/or secular events.
The pathological character of crises is explicitly evoked by Temin in the entry
on the GREAT DEPRESSION for the 2008 edition of the The new Palgrave. He writes
that ‘The world depression of the 1930s was the greatest peacetime economic
catastrophe in history. There had been hard times before, but never without war,
natural disaster or pestilence. The massive and long-lasting unemployment and
hardship of the 1930s was a pathology of industrial society, caused by a malfunc-
tioning of the economic system’. The same idea is expressed much more sharply
by Ohanian in the entry on GREAT DEPRESSION (MECHANISMS) for the same
dictionary. He begins as follows:
In the entries considered so far, the straitjacket of economic terminology and the
problematic relationship of ‘crises’ and ‘cycles’ have limited the explanatory power
and the theoretical autonomy of the concept of ‘crisis’. This does not always apply
to some of the dictionaries mainly concerned with kindred disciplines or with the
history of ideas, where emphasis is given to political and historical issues, some-
times with an eye on general systems theory.
Even among these entries, however, the pertinence of the concept of ‘crisis’ is
not always conceded. Robinson, in the entry CRISIS in the →International encyclo-
pedia of the social sciences (1968), argued that ‘crisis’ is ‘a lay term in search of
a scholarly meaning’ (p. 510). Its usage oscillates between indistinct synonymous
terms such as ‘panic’, ‘catastrophe’ or ‘disaster’, and a more precise connotation
derived from medicine as the ‘turning point between a fortunate and an unfortunate
change in the state of an organism’.7 The term either is generically used with a
multiplicity of non-rigorous meanings, or is associated, in some disciplines (in
particular in the field of decision-making), with extremely narrow definitions.
Robinson argued that, either way, the concept scarcely proves useful: ‘Definitions
are either extraordinarily precise and specific, and hence not widely applicable to
a variety of situations, organizations, and subjects, or they are so unrestricted
in meaning that, in this case, it is difficult to distinguish crisis from noncrisis’
(p. 511).
In Pasquino’s entry on CRISI in →Bobbio’s and Matteucci’s Dizionario di
politica (1976), the meaning of the term ‘crisis’ is analysed in the context of systems
theory. Pasquino gives particular emphasis to politics, but points out that the
resulting view is equally applicable to other domains, including economics. He
thinks of crises as ‘the moment of breaking down in the operation of a system’.
This perspective implies that crises are associated with a qualitative change (often
violent and unexpected) in the ‘normal’ functioning of the system or in the interrela-
tion of its elements;8 such changes can be for the better or for the worse, as in the
original Greek meaning of the term. The author seems to have in mind a sort of
hysteretic process, according to which the system would not return, after having
experienced a crisis, to the original state. The notion is intriguing, although the
author does not seem to be familiar with the conceptual apparatus that would have
enabled him to express this view more rigorously. He tries, for instance, to distin-
guish between physiological and pathological crises: the former affect the working
of the system and drive it to adapt to a new situation, while the latter affect the
structure of the system and cause it to change. He thus seems to have had in mind
a notion of structural stability – developed by mathematicians in the preceding
decades, but only brought to the attention of social scientists at a later stage – which,
however, he tried to express by means of the notion of dynamic stability, arguing
that if the equilibrium is stable the system will return to it after a crisis, while in
the opposite case it will move to another equilibrium position. This notion of
instability does not capture the kind of change envisaged by Pasquino, as the system
itself remains unchanged.9
536 Daniele Besomi and Giorgio Colacchio
In his entry on CRISIS IN HISTORY in Winer’s Dictionary of the history of
ideas, Masur (1968) offers an historical reconstruction of the meaning of the term
‘crisis’ meant to account for its widespread use since the First World War.10
This use of the word indicates ‘an awareness of crisis as a salient feature of con-
temporary consciousness’, and to clear up the confusion as to its exact meaning
caused by its indiscriminate use (p. 589). For the economic part the author takes
as a guideline the modern notion of the business cycle, and therefore excludes at
the outset that the notion of crisis can have a meaningful autonomous significance.
A special place, however, is devoted to Marx’s exception to the interpretation of
crises as phases of a cycle. Besides explaining the cyclical recurrence of crises,
Marx stressed their becoming more and more destructive, ‘thus leading to the final
breakdown of bourgeois society’. Marx thus placed crises in the framework of a
universal historical process of a deterministic kind, making the final crisis the
decisive step in the emancipation of mankind (pp. 590–591). This emphasis on a
historical theory of crises is quite important (as we shall see below, it was later
taken up more in detail by Koselleck). One of the rare writers who interpreted
crises within a theory of the historical process is the Swiss historian Jakob
Burckhardt, whose doctrine is described at length in the entry. We only take up
two points. The first connects to Pasquino’s entry discussed above and concerns
Burckhardt’s distinction between surface crises and genuine crises. The former are
absorbed without touching the fundamental structure of society, while the latter
lead their vital transformation by producing a sudden acceleration of the historical
process. The second is related to Burckhardt’s notions of abortive and arrested
crises. One can ask oneself whether and how some crises could be checked in time
or avoided altogether, and whether some have been aborted. This is indeed an
issue that some writers raised concerning economic crises, as we shall see in Section
28.6.
Koselleck’s long and very rich entry on KRISE in →Brunner’s Geschichtliche
Grundbegriffe (1982; English translation as Koselleck, 2006) is mostly focused
on issues relating to semantics and the philosophy of history. Economics is con-
cerned with both. The author shows that in the German language (but this is true
also in English and French) the term ‘crisis’ was first used in politics and only
later applied to economics, and more with a generic meaning than with a specialized
and analytically precise intention (pp. 623–624). In the writings of the early nine-
teenth century, mostly as newspaper articles or as reports by various chambers of
commerce, the term ‘crisis’ was normally tainted with moralistic judgements, and
was largely substitutable by expressions such as ‘calamity’, ‘disturbance’ or ‘con-
vulsion’. Only after the 1840s, when crises became more common and widespread,
did the term start taking on the more precise meaning either of a diseased state or
of a breach of equilibrium; Roscher’s 1849 entry on PRODUCTIONSKRISEN in →Die
Gegenwart (see Chapter 7) was instrumental in this transition. ‘Crisis’ thus became
a term suitable for expressing all kind of economic difficulties. After recording
that the term was eventually adopted by most schools of thought, Koselleck focuses
on the interpretations of the outcome and role of crises. He first notes that the
economic concept of ‘crisis’ soon acquired an historiographical connotation.
Crises in recent dictionaries 537
Roscher himself, in fact, retrospectively pointed out that during the periods of repose
which in the life of nations alternate with crises, the existing forms (such as the
institutional setting) are consistent with the substance of things, while during crises
‘the changed substance or contents seeks to build up a new form for itself. Such
crises are called reforms when they are effected in a peaceful way, and in accordance
with positive law’ (Roscher, 1854, p. 36; English translation, p. 108). Moreover,
the notion was suitable for both the liberal optimists and the socialist critics. The
former gave a positive interpretation of crises, not simply as part of a recurring
pattern of alternation between good and bad trade, but as a necessary stage on a
path of progress, while the latter interpreted crises as a passage towards a final
redemption of the everyday misery of the working class. Finally, Koselleck points
out that Marx’s position is somehow intermediate between these two and is itself
rooted in his philosophy of history. On the one hand, Marx stressed that the cyclical
return of crises is essential for the working and the progress of the capitalist system,
but on the other hand their recurrence temporarily solves the contradictions of
capitalism only by pushing them to a more advanced stage, to become eventually
the means for the dissolution of the existing productive relationships.
Brunkhorst elaborates upon some of Koselleck’s themes. His entry (CRISIS, in
→Outhwaite’s Blackwell dictionary of modern social thought, 2006) is very dense;
some themes deserve to be further discussed, and some are so compressed that
they are hardly intelligible. Nevertheless, some considerations relating to Marx’s
approach to crises are of interest. The author stresses that crises carry both ‘identity’
and ‘systemic’ implications. As crises (following the etymology) are a time of
decision as to whether or not something continues, each crisis affects the self-
understanding of the concerned subject (or system); in other words, it affects its
identity as a whole. On the other hand, the concept is systemic, as the conflicts
giving rise to a crisis are inborn within the system itself and take place within the
system. The latter is a notion to which Marx was the first to give clear expression,
referring to Hegel’s concept of contradiction. Brunkhorst argues that ‘the con-
juncture of identity crises and system crises produces critical thresholds’ which
decide the outcome of a crisis. He points out, however, that the Marxist expectation
that system and identity crises are systematically conjoined ‘has been shown to be
too speculative’. While Marx’s notion of crises was immersed in his philosophy
of history, which induced him to treat crises as affecting an historic totality, the
scientific concept of crisis focuses instead on a partial aspect of life totality (e.g.
the economic system) and is more open as to the outcome of crises (citing
Koselleck, ‘Every crisis evades the planning . . . based on the belief in progress’).
Yet this notion has an origin in Marx’s own work, where the concept of crisis
‘oriented to the validity claims of antagonistic social groups (classes)’ is combined
with an analysis of ‘objective system crisis identifiable in steering problems and
the imperatives of system maintenance’. This branch of the Marxian analysis
eventually prevailed: ‘The social scientific heirs of the Hegelian and Marxist crisis
model have not only dissolved its unhappy link with the philosophy of history, but
also replaced the paradigm of reflection by that of language and dissolved the unified
perspective into a plurality of crisis tendencies’, so that economic crises could
538 Daniele Besomi and Giorgio Colacchio
be examined without implying a crisis of the entire society leading towards the
transition to a different social order.
Pierluigi Ciocca (whom we have already met in Section 28.4) contributed on crises
for →Bedeschi’s Enciclopedia delle scienze sociali (1991, entry CRISI ECONOMICA
E FINANZIARIA). While in his previous entry ‘crises’ were generically defined as
a consequence of the general instability of capitalism, here they are characterized
with more precision as the times when market economies undergo ‘a deep and not
short contraction of production and investment, and at the same time the values of
“real” and financial assets undergo a rapid and sharp drop’ (p. 607). Such phe-
nomena are again explicitly distinguished from other forms of instability such as
cycles, depressions and related terms. The emphasis, this time, is claimed to lie on
logical grounds (p. 607), rather than merely on the intensity of the events. The
matter, however, is not quite so clear, not only because between the instability of
the cyclical kind and the phenomena related to crises there are multiple points of
contact, but also because the comparison is purposely not explicitly carried out
(ibid.) and the precise meaning of ‘logical’ is not specified. Ciocca’s point is that
the crisis lies on the ridge between the real and the financial sides of the economy.
It is one of the possible consequences of the complex, potentially unstable, inter-
relations between investments (profit expectations), savings (speculative money,
asset demand and hoarding), and the action of the banking system (the role of
interest rates). Changes in expectations can determine falls in production and strong
disturbances in financial and monetary markets, which can either amplify a pre-
existent disequilibrium or generate a new one. Crises can therefore burst out even
if the system is not in the descending phase of the cycle (although this case is less
likely than the opposite), and they are neither periodical nor inevitable (ibid.). In
Ciocca’s view, crises are thus phenomena logically independent of the cycle. This
assumes that the nature of cyclical instability is intrinsically different from the
instability outlined above. However, the former is not discussed in the entry and
we therefore lack a comparison. Moreover, the independence is taken to indicate
that crises can be thought of as arising independently of the business cycle, but
not necessarily that they are severed from cycles: the downturn of a cyclical fluc-
tuation could be triggered by a financial crisis, and the outcome would be that cycles
and crises proceed in parallel. Indeed, the issue of the causal relationship of the
(in)stability of the financial and ‘real’ parts of the economy is not discussed in the
entry, and the relationship of cycles and crises is condemned to remain in the dark.
Ciocca offers a brief survey of the three main branches of theories of crisis. The
Thornton–Bagehot line offers support to the view of the independence of crises
from cycles. In this view, the possibility of crises is ascribed to the lack of confidence
in the banking system, which may arise from both exogenous and endogenous
causes, and will eventually lead to panics and a run on the banks if the public
Crises in recent dictionaries 539
suspects that banks have over-issued credit notes. In such a context, the role of the
central bank as the lender of last resort is essential to restoring confidence and
averting serious crises. A second theoretical interpretation links crises to cycles of
speculation and credit: when new trading opportunities arise, credit allows and
eventually stimulates speculation, which causes prices to increase, thereby inducing
further speculation, until the confidence that the price level will keep rising vanishes
and a liquidation process starts, possibly a very sudden, violent one. Also, the
third line of approach considers crises within a theory of the cycle. Ciocca groups
a rather heterogeneous mixture of theories, following Goodwin’s Marx–Keynes–
Schumpeter synthesis and adding some of his own, stressing the various desta-
bilizing forces at work. The links with cycles, however, is weakened by means of
the following citation from Goodwin (1986, p. 21): ‘These movements are not
strictly speaking cycles; they appear to be similar because the capitalist drive for
profit means an eternal search for cost-reducing innovations, so that sooner or
later growth is always renewed; but then it proceeds too rapidly and breaks down.’
The burden of proof of the independence between financial and ‘real’ crises
is eventually shifted from the logical ground, where Ciocca originally placed it,
to the empirical ground. The author claims that cases when financial tensions do
not degenerate into large falls in productive activity are relatively frequent. As
financial crises are caused by a loss of confidence, if confidence is restored, the
consequences remain limited to the financial sector. In history a number of crises
were thus contained by the appropriate banking policy, thereby limiting the
transmission of excessive damage towards the real sector. One example is cited,
however, of a financial crisis that ran its full course without devastating the rest of
the economy, namely, the 1857 panic, which affected most European stock
exchanges while production kept increasing.
Ciocca’s case that the instability forces that give rise to crises are logically inde-
pendent of – although in practice somewhat related to – the instability forces giving
rise to cycles is not fully convincing. However, the attempt is interesting, and it is
regrettable that the author did not explore it in more detail.
The entries for crises we have examined in Sections 28.2 to 28.4 distinguish crises
from cycles on semantic or on ontological grounds. The entry on CRISI by Nicolò
De Vecchi in →Lunghini’s Dizionario di economia politica (1982–1990, Vol. 7,
1983) approaches the subject also considering a different angle, namely, the
epistemic aspects of crises and cycle theorizing. The author sees the theories of
the cycle as adhering to the formal method, emphasizing calculability and bearing
a mechanistic outlook, while the analysis of crises incorporates instead at its core
non-calculable ingredients. The entry is by far the longest on crises published in
the post-war years,11 giving it enough room to retrace in much detail the history of
the subject. It begins from the classics (Say and later Ricardo and the Ricardians
vs. Sismondi, Malthus and Rodbertus), Marx (to whom a considerable share of
540 Daniele Besomi and Giorgio Colacchio
space is devoted) and the debate among various branches of Marxists, the various
breeds of business cycle theories demoting crises to a phase of the cycle, to conclude
with Keynes and the post-Keynesians. The part on business cycle theories is
examined cursorily only, due to the large number of such theories and to the fact
that the dictionary carries an equally long entry on the trade cycle (see Chapter
26), while the other headings mentioned above are surveyed quite thoroughly. Here
we cannot report on the entire reconstruction, but we shall follow the premise laid
out at the outset. De Vecchi notes that while most writers immediately perceived
the contradictory phenomena becoming manifest during crises (abundance of
wealth and interruption of investment, destruction of resources while resources
are needed to keep the economy going, etc.), of which they gave descriptive
accounts, they had difficulties in integrating these observations within the theoretical
structure of economics.
While trying to distil economic laws from this disorderly tangle of phenomena
or to work out an analysis of the dynamics of the capitalist economy, econ-
omists have often sought to remain faithful to the rules of formal economics
and accordingly modelled idealized pattern of events. In this line crises are
interpreted as a recurrent and foreseeable stage of a more general oscillatory
movement (crises as a phase of the business cycle), or as a distinctive incident
of a mode of production eventually destined, by objective and ineluctable laws,
to fall into ruin (theories of the breakdown), or again as an anomalous
disturbance of an unlimited process of growth, which will be readjusted by
means of some automatic and built-in mechanisms (disproportionality crises).
The preliminary assumption guiding this approach to crises is that a comparison
of the actual and idealized pattern of events is necessary and sufficient to supply
all the information on the causes and the effects of any gap between actual
and ideal, thereby enabling one to deduce an appropriate policy if deemed
necessary. By contrast, there are explanations of crises which, far from simply
pointing out the negative implications of such supposedly anomalous events
or the ineluctable destruction of resources, understand them as the consequence
of cognizant actions of the social classes and as the chance for an equally
cognizant reorganization of the process of reproduction of capital.
(p. 224)
The first economists were hindered in the integration of crises into the theoretical
structure of economics by their understanding of capitalist production as aiming
uniquely to satisfy human needs in conditions of increasing productivity. Under
this premise, exchange value and use value equal the production cost, and
accordingly production and demand are one and the same thing. This apprehension
is epitomized by Say’s law, which led to an interpretation of crises as the partial
result of some temporary impediment to the working of the laws of competition,
which the normal operation of the law itself will redress. The early critics (Sismondi,
Malthus and Rodbertus) stressed the lack of identity between expenditure and
production and thus denied Say’s law. They did not, however, reject its premise
Crises in recent dictionaries 541
that production is aimed at satisfying demand. Accordingly, they appreciated that
gluts are a general and recurrent phenomenon, but failed to understand their role
in the reproduction process of capital. They saw them as the consequence of a
‘natural’ law resulting from the inevitable lack of purchasing power by one or
another class of society – the workers for Sismondi and Rodbertus, the rentiers for
Malthus (pp. 225–230).
Ricardo rejected instead Say’s theory of value, and understood that capitalist
production aims not only to satisfy needs, but also to realize profits. However,
he explicitly accepted Say’s law, and with it the belief in the automatism of the
market adjustment mechanisms. John Stuart Mill eventually tried to reconcile the
impossibility of general gluts sanctioned by Say’s law with their actual occurrence
by blaming crises on speculation. The crisis arises in the capital market without
glutting the goods market, as if monetary and productive capital were totally inde-
pendent of each other, so that the capitalists’ financial decisions were disconnected
from the production sphere and from social relationships (pp. 230–233).
Marx criticized both views at once, by means of the reproduction schemes.
Against Malthus and Sismondi, the schemes show the conditions under which pur-
chases match sales, so that society’s needs are satisfied and capitalists realize their
profits. Capitalistic production is therefore not impossible. However, if the material
exchanges and the monetary fluxes flowing between individual capitalists do not
take place as prescribed by the schemes, capital cannot be valorized and needs cannot
be satisfied, and a general crisis breaks out – contrary to Ricardo’s and Say’s view
– affecting both the circulation and the production processes, and both the credit
and the goods markets. This is made possible by the role of money, which separates
the acts of selling and purchasing, thereby enabling sellers to delay purchases, and
is made necessary by the need for capital to be adequately rewarded. The author’s
reconstruction of Marx’s view especially focuses on the latter aspect. As technology
and the division of labour progress, there follow two consequences for the rate of
profit. On the one hand, the organic composition of capital tends to grow, because
less and less labour is applied to growing masses of capital, thereby tending to
depress the profit rate. On the other hand, the working time to be devoted to the
production of the wage goods decreases. If this extra time is fully appropriated by
the capitalists and turned into surplus labour, capital would reap the entire advantage
of increased productivity. However, this is not necessarily the outcome: the relations
of capital and labour are not ruled by some automatically operating law, but are a
social relationship. If the working class successfully resists the increased exploitation
– which it can do more effectively when there is little or no unemployment – the
profit rate is affected, to the dismay of capitalists who were counting on it to retain
the rate of remuneration they considered customary. This has to be redressed, and
the interruption of accumulation and production is the only means available to the
capitalist class for doing so. The capitalists will not, of course, act as a class; but
any individual producer perceives a reduction in his own profit rate when he has to
pay out higher salaries, and at any rate is forced to comply with the blockage of
production initiated by his colleagues by the interconnectedness of the individual
capitalists, each of whom relies on the other capitalists for a market for their goods
542 Daniele Besomi and Giorgio Colacchio
and is dependent on the credit loaned by other capitalists. As soon as the chain of
payments and purchases is broken, the entire system collapses. Any interruption
of production immediately and violently spreads its consequences and turns into a
full-blown crisis. Capital, both monetary and productive, is destroyed by remaining
inactive, and at the end of the process the rate of profit is brought back to an
acceptable level. The crisis is therefore a resolution of the contradiction between
the development of the productive forces and the productive relationships between
capital and labour, which results in the impossibility of selling the product at a
reasonable profit. However, it is a temporary solution only, as the contradiction is
not eliminated but continuously brought to a higher level.
Quoting several passages by Marx, De Vecchi stresses that the general crisis is
not a necessary outcome, unless social classes intervene in the ever-changing
production process by imposing constraints on the division of the working day
and on the intensity of work that are incompatible with the valorization of capital.
Such a way of understanding the productive relationship is rooted in the Marxian
dialectical methodology. The development of productive forces does not occur
following some harmonic proportionality which market laws will bring back if
the movement is disturbed; competition between capitalists works not by mech-
anically adjusting lack of proportions, but by promoting progress in the backward
branches until their development gives rise to other disproportionalities – nor does
it consist of an unequivocal and automatic tendency to stagnation following the
law of the falling profit rate. The increase in the organic composition of capital does
indeed tend to reduce the profit rate, but this law has only a tendential character;
Marx insists (followed by De Vecchi) that it should not be interpreted as if it were
a natural law, independent of social relationships (pp. 234–252).
This is where the debates on crises between Marx’s followers (or, at any rate,
most of them) abandoned the path traced by Marx himself. His laws of movement
were interpreted as deterministic, to be either rejected as inconsistent with reality
or accepted as necessary and ineluctable, rather than being interpreted within his
anatomy of capitalism. Accordingly, crises were interpreted as temporary and occa-
sional disturbances of the tendency either towards unlimited economic progress,
or towards the final breakdown of capitalism, and were seen as caused (especially
by those who argued by means of reproduction schemes, mechanically interpreted
as expressing the laws of movement of production) either by disproportions or by
underconsumption. In either combination, crises were seen no longer as the prime
mover of capitalist economies, but as the result of some irregularities in production
or consumption. Rosa Luxemburg was the only exception to this pattern, culminat-
ing in Tugan-Baranovsky’s reading of the reproduction schemes as a theoretical
norm and of crises as a deviation from this norm. She was alone in taking up the
Marxian dialectical method and in stressing the role of the social classes in the
process of valorization of capital (pp. 252–263).
Meanwhile, the orthodox approach shifted the emphasis from the suddenness
and violence of crises to the rhythmic and regular alternation of prosperity and
depression, which eventually was seen as fully calculable in mechanical terms,
laying the ground for the theories of the business cycle:
Crises in recent dictionaries 543
Crises became either a scary-sounding synonym for of the cycle, or one of its
components, or (more often) a superimposed anomaly. The concept of crisis
eventually lost any autonomy, which it did not regain even after the great crisis
of the early 1930s. By then, the theoretical problem had completely changed.
It was no longer a matter of explaining the causes of the sudden falls in the
level of economic activity, but of identifying their symptoms, and especially
of establishing the circumstances governing the alternation of phases of getting
close and getting far from a position defined as ‘normal’.
(pp. 264–265)
This change of perspective took place while economists adopted the marginalist
approach. This enabled economists, on the one hand, to dispose of Say’s law, with
all its implicit confusion between the use and exchange values; on the other hand,
although the notion of equilibrium was conceived in different ways, it was inter-
preted as defining the theoretical norm or the ideal type. Fluctuations could thus
be treated as a calculable deviation from this norm and crises as abnormal devia-
tions. Such an approach characterized, with a few exceptions only (the most notable
being Wicksell, who clearly distinguished the theory of crises from the theory of
the cycle, and rejected the view that crises are a phase of the cycle, whether a normal
or an abnormal one), most of the theories of the cycle developed in the first three
decades of the twentieth century, regardless of the causal mechanism called to
explain economic fluctuations (pp. 263–281).
While in the Treatise on money Keynes also emphasized the regularity, period-
icity and symmetry of the cycle (pp. 281–284), in the General theory he offered,
in De Vecchi’s view, a rather different account of the phenomenon. Keynes’s
starting point was the observation that the economic system is not violently unstable,
but oscillates around a middle position which is neither satisfactory nor desperate.
This is not a logical necessity nor the inevitable consequence of some iron law;
if it were so, economic theory would only have to discover the corresponding
automatic mechanisms ensuring stability of equilibrium (whether or not a full
employment one), and in such a case the crisis could only be interpreted as a phase
of the cycle or as an anomalous event. Stability results instead from the observed
behaviour of some key variables; the crisis, as a sudden and violent change in the
course of events, correspondingly results from the alteration in the value of some
such variables. In particular, if the propensity to consume is not much smaller than
1, then small changes in its value give rise to large fluctuations in employment.
And the marginal efficiency of capital, being based on expectations built on con-
ventional (and rather arbitrary) behaviour, is liable to sudden fluctuations. The
sudden character of crises can thus be explained by the conjoint operation of these
factors. The phenomenon can be given pride of place and distinguished from the
smooth and regular oscillations of the cycle precisely because Keynes rejects at
the outset an explanation in terms of automatic adjustments, and incorporates
instead expectations, conventions and psychological principles (pp. 284–290).
Keynes’s approach therefore directly contrasts the mathematical modelling of
the cycle, which was arising more or less at the same time and fully bloomed in
544 Daniele Besomi and Giorgio Colacchio
the post-war years. Regardless of the specific mechanisms at the heart of those
models, they all relied on functions relating decisions and results at different times;
their results were uniform and symmetric fluctuations, and in such a framework
(with a few exceptions only) crises could only be interpreted as a phase of a regular
cycle. In the post-Keynesian world, the system’s behaviour is ruled not by non-
calculable conventions and expectations, but by deviations from a calculable norm.
In the economists’ vocabulary, the term ‘crisis’ has undergone in the first decade
of the twenty-first century a revival that could have hardly been expected a century
earlier, when the infant theories of the business cycle seemed to be founded precisely
on the eradication of the emphasis on crises, and eventually of the very notion of
crisis, to shift the focus onto the overall cyclical movement. Indeed, the word ‘crisis’
began to be largely substituted by the expressions ‘business’ or ‘trade cycle’ in the
1920s, and remained a minority usage until the turn of the century, when it had a
rapid resurgence (see Chapter 3, Section 3.2.8.5).
In the last three-quarters of the twentieth century, the term ‘crisis’ survived in
linguistic niches (French and partly Italian) and in an underworld often associated
with Marxist and other heterodox currents, while the mainstream theoretical
environment was dominated by ‘cycles’ and ‘fluctuations’ (and, of course, ‘equilib-
rium’). Only on the occasion of the outburst of actual crises (the 1930s, 1970s and
especially the years at the turn of the century) did the notion of ‘crises’ experience
a resurgence. Its very survival despite the death sentences pronounced by Aftalion
(cited at the beginning of this chapter) and others (in particular Mitchell, 1913, pp.
5–6) would suggest that the category of ‘crisis’ is autonomous from the category
of ‘cycle’, although admittedly related to it. One would therefore expect to find
explicit discussion of the relationship of crises to cycles in the few dictionaries
carrying separate entries under the heading of ‘crisis’. Yet most of such entries
written by economists are rather trivial – more often than not, crises are understood
as phases of the business cycle, and only occasionally are they specifically seen as
being particularly nasty and sudden downturns. Only historians of ideas stressed
distinctive features characterizing crises as intrinsically different from cycles, in
particular their bringing qualitative changes to the system and their theoretical
usage, implying a specific philosophy of history. With regard to economists, we
only have two attempts to recognize crises as an autonomous category, stressing
that crises and cycle theories have a different logical and, respectively, episte-
mological statute.
Such an attitude by economists may seem schizophrenic, yet it reflects the
prevalent views on the phenomenon of crises. That they occur cannot be denied.
However, accounting for them is a different matter. They are indeed deeply disturb-
ing events. On the one hand, they cause havoc and destruction and as such deserve
a name in popular parlance and in technical jargon; on the other hand, they do not
have a place in most theoretical frameworks, and sometimes explicitly conflict with
Crises in recent dictionaries 545
them. The vast majority of views of the working of economic systems are based
on the idea that the system’s behaviour tends towards some state of order, whether
this be equilibrium or some kind of recursive pattern. The idea that economic
systems undergo cycles or fluctuations can relatively easily be fitted in such a view
(although, historically, a full century of repeated crises has been necessary before
the first accomplished theories of the cycle could see the light of the day). Cycles
are quasi-regular movements characterized by the systematic repetition of specific
phases and guided by some law driving the chaining of such phases; fluctuations
are oscillations around ‘a mean sun’, caused by unsystematic but fully natural
changes in the conditions of production and demand, and by the agents’ trials and
errors in adjusting to such changed conditions. The system pursues some kind of
order; deviations from it, however, are possible due to historical circumstances.
Essentially, crises are disorderly events. They are characterized by violent instability
that causes seemingly small perturbations to bring disproportionately large and
pervasive effects in terms of the destruction of capital (real and financial), loss of
income and loss of employment. Treating such events by means of the customary
theoretical instruments is a contradictio in adjecto. It is therefore far from surprising
that crises are understood mostly in terms of exceptionally ample recessions, or as
pathologies and abnormalities (themselves exceptional).
One of the entries examined in this chapter (Section 28.6) attempted to escape
this trap by stressing that the theories of crises and the theories of cycles are based
on different epistemological premises. Perhaps we can conclude by elaborating
on this perspective, and offer a further viewpoint enabling us to appreciate the
intimate relationship between crises and cycles, but also the different role they play
in cycle and crises theories.
Recognizing the category of ‘crises’ as fully autonomous from ‘cycles’ or ‘fluc-
tuations’ – that is, interpreting them not as deviations from a reference cycle but
as a separate entity – implies that the economic system must be conceptualized at
the outset as capable of producing such phenomena. This, however, is not sufficient.
The epistemic discussion of the possibility of crises is common to several crises
and cycle theorists of ‘heretic’ lineage, and was at the core of the debate on business
cycle theory that took place in the 1920s (see Besomi, 2006a). What distinguishes
the theories of the cycle from those of crises is that the former encompass crises
in a cyclical framework, with a focus on the overall movement rather than on
crises themselves. For cycle theorists, crises are but a phase of the cycle, a phase
that does not require a special explanation, precisely as recovery or the boom would
not need one. Each phase is the product of the preceding one and the forebearer of
the following one, and no phase in particular has theoretical pre-eminence over
the others. A theory of crises, instead, focuses on crises and their recurrence. It does
not neglect what precedes a crisis and what follows it, nor does it ignore the fact
that events are causally chained so that crises do recur in a cyclical way. The
difference is not, however, a pure matter of emphasis. Crisis theorists believe that
crises are the events to be explained, and crises accordingly have a privileged
place in their theoretical structure. Marx, for instance, focused on crises because
he thought that the main feature of capitalistic production was the intrinsic
546 Daniele Besomi and Giorgio Colacchio
contradiction between the development of productive forces and the productive
relationships between social classes. Crises recur because the contradiction is
permanent and its resolution, via a crisis, is necessary but can only be temporary.
The cyclical pattern is therefore a consequence of the main feature of crises, that
of providing a partial resolution of the contradictions of capitalism. On the contrary,
cycle theorists incorporate recurring crises in their theories and models, but only
as a consequence of their cyclical mechanism, possibly coupled with some special
historical circumstance making the downturn particularly sharp, sudden and violent.
NOTES
1 A rough measure of this phenomenon can be obtained by counting the number of items
listed by Econlit and other databases carrying the words ‘crisis’ and ‘cycle’ (and related
concepts) in their title. By the early 1990s, the proportion of titles containing the word
‘crises’ to those containing the word ‘cycles’ was less than 1:3. After 1998, it suddenly
rose to almost 1:2. See Appendix to Chapter 3, Figure 3.5.
2 This point is of interest, as many entries on crises in recent dictionaries (as we shall see
in more detail in the sequel; see Section 28.3) correctly identified Marx as one of the
few writers who had stressed the theoretical autonomy of the notion of ‘crisis’, although
most failed to specify why this is so.
3 The interpretation of crises as a phase of the business cycle is not, of course, an exclusive
feature of French dictionary entries. Papi, for instance, explicitly defines ‘crisis’ as the
upper turning point of the cycle (FLUTTUAZIONE ECONOMICA, in →Papi, Dizionario
di economia, 1967, p. 523). Giannetti, notwithstanding an explicit recognition of the
problematic nature of the relationship of crises and cycles, draws the line (following
Schumpeter) at Juglar, suggesting that before his contribution crises were mainly
intended as pathological and isolated events (entry CRISI ECONOMICHE: L’OTTOCENTO,
in →Carmagnani and Vercelli, Il mondo contemporaneo, 1978). Similarly, de Luca
defines ‘crisis’ as ‘a recession that becomes apparent via disequilibria caused by an
excessive supply of goods and services and a limited demand. It is followed by a general
contraction of economic activity’ (CRISI ECONOMICA, in →de Luca et al., Dizionario
di economia politica, 2006).
4 Oddly, the meaning of turning point of the cycle is deemed to be the ‘original’ one – as
opposed to the encompassing within crises of the entire descending phase of the cycle
(WIRTSCHAFTSKRISEN, p. 130). The entry consists in a long (12 pages) historical
account of crises fom the tulipmania of 1637 to the world crisis of 1929.
5 The reduction of the theory of crises to Marx is not unique to German dictionaries. In
the entry on CRISES in →The new Palgrave dictionary of economics (Eatwell et al.,
1987), Kenway points out that a number of scholars used the concept of ‘crisis’ but
only Marx ‘attempted rigorously to theorize crises as they occur in capitalism’. He refers
to crises both as the final breakdown of capitalism and as recurring events in capitalist
economies, but the latter aspect is not examined in detail, nor there is a discussion of
its relationship with business cycle theories (the entry was dropped from the 2008 edi-
tion of The new Palgrave). Of more interest is Hay’s entry on CRISIS THEORY in the
→Routledge encyclopedia of international political economy (Jones, 2001). Again, the
emphasis is on Marx and other Marxist approaches, but with an ingenious twist: Marx’s
explanation of the recurrence of crises is attributed to the interplay of the tendency of
the profit rate to fall with the counteracting tendencies, in particular the individual
capitalists’ countervailing measures which cause the mechanization of production.
Surprisingly, rather than giving rise to the ten-year cycle, in Hay’s view the ‘result is
Crises in recent dictionaries 547
the characteristic pattern of capitalist accumulation in successive “long waves” or “long
cycles” of acceleration, deceleration, and eventual stagnation’ (p. 268).
6 This view seems to have had an antecedent in Burns’s entry on BUSINESS CYCLES:
GENERAL in →Sill’s International encyclopedia of the social sciences: ‘The term
“crisis” originally was used to denote the financial disturbances that frequently occurred
during the transition from expansion to contraction, but later it came to be applied to
any transition from expansion to contraction. Nowadays, the term “crisis” is usually
reserved for a violent disruption of financial markets without regard to the stage of the
business cycle in which such a disturbance occurs’ (1968, p. 229). In a later entry under
the heading FINANCIAL CRISES for Deane and Kuper’s Lexicon of economics (1988),
Kindleberger dropped the reference to the ultra-cyclical character of financial crises.
7 In truth, the original medical meaning considers a critical time when a change can be
for the worse but also for the better.
8 Taking up Debray’s notion of crisis as giving rise to situations qualitatively distinct from
the pre-crisis state (Debray, 1973, p. 99), Hay points out that that such a conception
implies ‘a particular theory of history in general and of the historical development of
the polity, society and the economy in particular. More specifically, it implies a
discontinuous or punctuated theory of social and political change’ (CRISIS THEORY, in
→Routledge encyclopedia of international political economy, 2001). This theme recurs
in other entries examined below in this section.
9 The theme of the system’s capacity to resist to change at the cost of a change in its
structure is sometimes discussed in the literature. Among these writers there is Tadeous
Kowalik, who wrote an essay on the topic jointly with Kalecki in 1971 (for a comment,
see Besomi, 2006b, pp. 27–28). Surprisingly, in his entry on CRISI for the →Enciclopedia
Einaudi, 1976, where he expounded in much detail Kalecki’s theory of the cycle,
Kowalik did not take up the topic.
10 In the following edition of the same dictionary, Starn points out that the fascination
with the term ‘crisis’ arises from its flexibility and the possibility of focusing on different
aspects: ‘Crises, to be regarded as such, must occur in the course of specific events, but
they can be characterized in organic, mechanistic, or revolutionary terms as critical
episodes in a life cycle, indices of structural dysfunction, or corollaries of revolution.’
He notes, however, that crises studies had peaked by 1970, and were eventually worn
out by overuse (CRISIS, in New dictionary of the history of ideas: Starn, 2005). It should
be noted that this is not the case for the economic use of the term, which has had a marked
revival since the end of the 1990s (see Sections 28.1 and 28.7).
11 The Dizionario di economia politica only carries 40 entries, all discussed at great length
and with ample historical breath (see note 11, Chapter 1, and Chapter 2, Section 2.4.2).
De Vecchi’s takes 83 pages.
REFERENCES
Aftalion, A., 1913, Les crises périodiques de surproduction. Tome I: Les variations
périodiques des prix et des revenus. Les théories dominantes. Tome II: Les mouvements
périodiques de la production. Essai d’une théorie (Paris: Marcel Rivière).
Besomi, D., 2006a, Tendency to equilibrium, the possibility of crisis, and the history of
business cycle theories, History of Economic Ideas, XIV: 2, pp. 53–104.
Besomi, D., 2006b, Formal modelling vs. insight in Kalecki’s theory of the business cycle,
Research in the History of Economic Thought and Methodology, 24A, pp. 1–48.
Besomi, D., 2011, Crises as a disease of the body politick. A metaphor in the history of
nineteenth century economics, Journal of the History of Economic Thought, 33: 1, March,
pp. 67–118.
548 Daniele Besomi and Giorgio Colacchio
Brochier, H., 1976, Réalités et illusions dans la régulation étatique de l’activité économique.
La crise comme nécessité et comme politique, Communications, 25, pp. 73–85.
Burns, A. F. and Mitchell, W. C., 1946, Measuring business cycles (New York: NBER).
Debray, R., 1973, ‘Time and politics’. In Prison writings (New York: Random House).
Goodwin, R. M., 1986, ‘The M-K-S system: the functioning and evolution of capitalism’.
In H.-J. Wagener and J. W. Drukker, The economic law of motion of modern society: a
Marx–Keynes–Schumpeter centennial (Cambridge: Cambridge University Press).
Guitton, H., 1951, Les fluctuations économiques (Paris: Recueil Sirey).
Kalecki, M. and Kowalik, T., 1971, Osservazioni sulla ‘riforma cruciale’, Politica ed
Economia (June), pp. 189–196. English translation in Collected works of Michal Kalecki.
Vol. 2: Capitalism: economic dynamics, ed. J. Osiatynsk (Oxford: Oxford University
Press, 1991).
Koselleck, R., 2006, ‘Crisis’, Journal of the History of Ideas, 67: 2, April, pp. 357–400.
Lescure, J., 1907, Des crises génerales et périodiques de surproduction (Paris: Domat-
Montchrestien; 4th edn, Paris, 1932).
Masur, G., 1968, Crisis in history. In P. P. Winder (ed.), Dictionary of the history of ideas
(5 vols) (New York: Scribner), Vol. 1, pp. 589–596.
Mitchell, W. C., 1913, Business cycles (Berkeley, CA: University of California Press).
Roscher, W., 1854, Die Grundlagen der Nationalökonomie: Ein Hand- und Lesebuch für
Geschäftsmänner und Studierende (Stuttgart: Cotta). English translation of the 13th
edn: Principles of political economy (Chicago: Callaghan, 1882).
Schumpeter, J. A., 1954, History of economic analysis (London: Allen & Unwin).
Starn, R., 2005, Crisis. In M. C. Horowitz (ed.), New dictionary of the history of ideas (5
vols) (New York: Scribner), Vol. 1, pp. 589–596.
29 A bibliography of specialized
dictionaries of economics and
related subjects*
Daniele Besomi
* I am grateful to François Allisson, Peter Rodenburs and Shigeki Tomo for help with Russian, Dutch
and Japanese dictionaries, respectively, and to the participants in the HES discussion list for pointing
out a few omissions.
550 Daniele Besomi
29.2 ECONOMIC DICTIONARIES, BY COMPILER
Abraham-Frois, G., Caire, G. and Hugon, P., 1998, Economie (Paris: Dalloz), 566 pp., 17
cm. 2nd edn, 2002 (Paris: Dalloz), 443 pp., 21 cm.
[Action populaire], 1909, Vocabulaire économique et social (Reims etc.: Action populaire,
s.a.; Paris: Lecoffre), 175 pp.
Ahijado, M., 1985, Diccionario de teoría económica (Madrid: Pirámide), 313 pp.
Ahijado, M. and Aguer, M., 1988, Diccionario de economía general y empresa (Madrid:
Ediciones Piramide), 446 pp. Revised edn: Diccionario de economía y empresa (Madrid:
Ediciones Piramide, 1996), 678 pp., 24 cm.
Albers, W., Zottmann, A. et al., 1977–1983, Handwörterbuch der Wirtschaftswissenschaft
(Stuttgart and New York: Fischer; Tübingen: Mohr; Göttingen and Zürich: Vandenhoeck
und Ruprecht), 10 vols, 6,971 pp., 27 cm (previous edition, compiled by Beckerath, titled
Handwörterbuch der Sozialwissenschaften, 1956–1968).
Albert, L., 1996, 1000 termes commerciaux et économiques: guide pratique (Paris: De
Vecchi), 215 pp., 21 cm. New and updated edition: Dictionnaire des termes économiques
et commerciaux (Paris: De Vecchi, 2001), 204 pp., 22 cm.
Albertini, J.-M., Silem, A. and Auvolat, M. , 1987, Lexique d’économie (Paris: Dalloz),
562 pp. 18 cm. 2nd edn, 1987, 532 pp.; 3rd edn, 1989, 567 pp.; 4th edn, 1992, VIII–576
pp.; 6th edn, 1999, 626 pp., 19 cm; 7th edn, 2002, 681 pp.; 8th edn, 2004, 713 pp.; 9th
edn, 2006, 773 pp.; 10th edn, 2008, 788 pp.
Alisch, K., 2004, Gabler Wirtschafts-Lexikon (Wiesbaden: Gabler), 16th edn, 8 vols;
reprinted 2005. Earlier editions, see Sellien et al., 1956–1988 (1st–12th edns), Wendt et
al., 1993 (13th edn), Arentzen, 1997 (14th edn), Haderler, 2000 (15th edn). Next edn
Roberts et al. as Gabler Wirtschaftslexikon, 2010.
[Allen, G.], 1775, The Politician’s dictionary; or, A summary of political knowledge
containing remarks on the interests, connections, forces, revenues, wealth, credit, debts,
taxes, commerce, and manufactures of the different states of Europe. Alphabetically
digested for the use of those who would wish to understand whatever occurs in the science
of politics (London, printed for G. Allen), 2 vols, 847 pp.
Allen, L., 1999, Encyclopedia of money (Santa Barbara, CA: ABC-CLIO), 328 pp., 26 cm.
Later edition, 2001 (New York: Checkmark Books), 328 pp., 26 cm.
Alquier, C., 1985, Dictionnaire encyclopédique économique et social (Paris: Economica),
601 pp., 24 cm. 2nd edn, 1990, 609 pp., 24 cm.
Altamore, G., 1994, Tutte le parole dell’economia (Milan: A. Mondadori), 237 pp., 18 cm.
Ammer, C., 1977, Dictionary of business and economics (New York: Free Press), 461 pp.,
24 cm; 2nd edn, 1984, 507 pp., 25 cm; 3rd edn, 1986, 507 pp., 24 cm.
Anderson, W., 1819, The London commercial dictionary, and sea-port gazetteer, exhibiting
a clear view of the commerce and manufactures of all nations; and their several products
. . . the various monies, weights, and measures, and the proportions of each to those
of England; all the shipping and navigation laws. To which is added, an appendix,
containing tables of all the export, import, coastwise duties and drawbacks, excise duties,
bounties, &c (London: E. Wilson), 848, 72 pp., 21 cm. 2nd edn, 1826, 848, 40 pp., 23
cm.
[Antonelli], 1839–1843, Enciclopedia del negoziante ossia Gran dizionario del commercio,
dell’industria, del banco e delle manifatture . . . compreso un indice alfabetico generale
e ragionato di tutti i manifattori e fabbricatori d’Italia in ogni genere / compilata per
cura di vari negozianti e industriosi italiani (Venice: Co’ tipi dell’ed. Giuseppe
Antonelli), 7 vols; 2nd edn, 1850, 6 vols.
Bibliography of specialized dictionaries 551
Arentzen, U., 1995, Gabler-Lexikon Wirtschaft: 2200 Begriffe nachschlagen, verstehen,
anwenden (Wiesbaden: Gabler), 6th edn, 342 pp. Later edition [Gabler], 1998, Gabler
Kompakt-Lexikon Wirtschaft: 2500 Begriffe nachschlagen, verstehen, anwenden. Earlier
edition as [Gabler], 1991, Gabler kleines Lexikon Wirtschaft: 2200 Wirtschaftsbegriffe
nachschlagen – verstehen – anwenden.
[Arentzen, U.], 1996, Gabler Bank-Lexikon: mehr als 8000 Stichwörter aus den Bereichen
Bank- und Börsenwesen (Wiesbaden: Gabler), 11th edn, 1 compact disc and instruction
booklet. Previous edn: Müssig and Löffelholz, 1988, Bank-Lexikon: Handwörterbuch
für das Geld-, Bank- und Börsenwesen, later edition: Krumnow, 2000, Gabler-Bank-
Lexikon: Bank – Börse – Finanzierung.
Arentzen, U., 1997, Gabler Wirtschaftslexikon, 14th edn (Wiesbaden: Gabler). For other
edns, see Alisch, 2004.
Arentzen, U., 2006, Ebook Gabler Kompakt-Lexikon Wirtschaft: 3000 Begriffe nach-
schlagen, verstehen, anwenden (Wiesbaden: Betriebswirtschaftlicher Verlag Gabler),
9th edn, electronic resource. Earlier edn Gabler Kompakt-Lexikon Wirtschaft: 2.700
Begriffe nachschlagen, verstehen, anwenden, [Gabler] 1998, 2001.
Arentzen, U. and Brockmann, H., 1996, Gabler Volkswirtschafts Lexikon (Wiesbaden:
Gabler), 4th edn, 2 vols, 1,359 pp., 24 cm; reprinted in 3 vols in 1997. Earlier editions:
Hölzel, 1981, Häfner, 1983, [Gabler] 1990.
Arestis, P. and Sawyer, M., 1992, A biographical dictionary of dissenting economists
(Aldershot: E. Elgar), 628 pp., 24 cm; 2nd edn, 2000 (Cheltenham and Northampton,
MA: Elgar), 722 pp.
[Artel], 1998, Dictionnaire d’économie (Paris: Ed. Aurora, Artel), 350 pp., 23 cm, with a
CD.
Auld, D. A. L., 1983, The American dictionary of economics (New York: Facts on File),
342 pp., 24 cm. Revised edn of Bannock et al., The Penguin dictionary of economics;
2nd edn, 1978.
Auray, J. P., Béresniak, A., Claveranne, J.-P. et al., 1996, Dictionnaire commenté d’économie
de la santé (Paris etc.: Masson), 289 pp., 21 cm. Spanish translation, 1998: Diccionario
comentado de economía de la salud (Barcelona etc. Masson).
Austria Bundeskammer der Gewerblichen Wirtschaft, Vienna, 1972, Wirtschaftskundliches
ABC ([Vienna: Wirtschaftsföderungsinstitut], 2nd edn, 96 pp., 25 × 9 cm; 3rd edn, 1977,
144pp., 24 cm; 4th edn, 1980, 131 pp., 24 cm; 6th edn, 1983, 132 pp.; 7th edn, 1988,
108 pp.; 9th edn, 1995, 142 pp.
Bader, H. et al., 1967, Ökonomisches Lexikon (Berlin: Verlag Die Wirtschaft), 2 vols, 1,190
+ 1,227 pp., 25 cm; 2nd edn, 1970–1971; 3rd edn, 1978–1980, 3 vols, 2,400 pp., 25 cm.
Balling, M., Nielsen, N. S. and Stærmose, B., 1974, Børsens økonomiske leksikon
([Copenhagen]: Forlaget Børsen), 249 pp.; 2nd edn compiled by Brixtofte and Reckweg,
1978.
Bannock, G., Baxter, R. E. and Rees, R., 1972, The Penguin dictionary of economics
(Harmondsworth: Penguin), 427 pp., 18 cm. Translated into Italian as Dizionario di
economia (Rome and Bari: 1974); 2nd edn, 1978, 467 pp.; 3rd edn, 1984, 458 pp., 20
cm; 4th edn by Bannock, Baxter and Davis, E., 1987, 427 pp., 20 cm (Spanish translation:
Diccionario de economia, Mexico: Trilla, 1990, 2nd edn); 5th edn, 1992, 448 pp., 20 cm;
6th edn, 1998, 439 pp., 20 cm; 7th edn, 2003, 407 pp. US editions as Dictionary of
economics: 3rd US edn, 1992; 4th US edn, 2003.
[Banque], 1963, Dictionnaire de la banque et de la bourse: Répertoire alphabétique de termes
définis et expliqués, en usage dans la banque, en bourse, sur les marchées des changes,
de la monnaie et de l’or, par une équipe de banquiers, directeurs et inspecteurs de banques,
552 Daniele Besomi
fondés de pouvoir d’agents de change, professeurs au Centre d’enseignement technique
de banque (Paris: Banque, Editions techniques et professionelles), 622 pp., 19 cm.
Barca, L., 1974, Dizionario di politica economica (Rome: Editori Riuniti), 174 pp., 19 cm.
Barraine, R., 1974, Nouveau dictionnaire de droit et de sciences économiques (Paris: Pichon
et Durand-Auzias, Librairie générale de droit et de jurisprudence), 4th edn, 508 pp., 23
cm.
Bartz, D., 1998, Die Wirtschaft verstehen: das Wirtschaftslexikon der Gegenwart (Frankfurt
am Main: Eichborn), 490 pp.; 2nd updated edn, 1998, 489 pp., 22 cm; 3rd edn, 2002 as
Wirtschaft von A bis Z: kompakt, aktuell, übersichtlich, 511 pp., 23 cm.
Baudeau, N., 1783–1784, Encyclopédie méthodique: Commerce (Paris: chez Panckoucke;
Liège: chez Plomteux), 3 vols (766, 798, 831 pp.). This is part of the Encyclopédie
méthodique ou par ordre de matières, published by Panckoucke in 1782–1832.
Baudhuin, F., 1968, Dictionnaire de l’économie contemporaine (Verviers: Editions Gérard
& Co.), 301 pp., 18 cm. Later editions: 1970, 333 pp.; 1972, 343 pp.; 1973, 349 pp.; 1977,
351 pp.
Bauer, W., and the Arbeitskreis Politische Ökonomie Nürnberg, 1999, Lexikon der polit-
ischen Ökonomie (Nuremberg: Libresso), 240 pp., 21 cm.
Baumstark, A., 1852 [some library catalogues indicate 1846 as publication date]. Staatslexicon:
in einem Bande; staatswissenschaftliches Handbuch der politischen Aufklärung für die
Gebildeten aller Stände / im Vereine mit Andern hrsg. durch Hermann vom Busche
(Stuttgart: Hallberger), 2,844 pp.
Bazzano, C., 1988, Dizionario di economia politica, politica economica e tecnica
commerciale (Naples: Edizioni Scientifiche Italiane), 408 pp., 24 cm.
Beaud, M. and Dostaler, G., 1993, La pensée économique depuis Keynes: historique et
dictionnaire des principaux auteurs (Paris: Éd. du Seuil), 598 pp., 23 cm. English
translation: Economic thought since Keynes: a history and dictionary of major
economists, 1995 (Aldershot; Brookfield, VT: Edward Elgar).
Beckerath, E. von, 1956–1968, Handwörterbuch der Sozialwissenschaften (Stuttgart: G.
Fischer), 12 vols, 9,060 pp., 27 cm. The previous editions were titled Handwörterbuch
der Staatswissenschaften (Conrad, Elster et al., 1890, 1898–1901, 1909–1911; Elster
1923–1929); the following ones Handwörterbuch der Wirtschaftswissenschaft, Albers
and Zottmann, 1977–1983.
Beckmann, M. J., Menges, G. and Selten, R., 1979, Handwörterbuch der mathematischen
Wirtschaftswissenschaften (Wiesbaden: Gabler, 1979), 3 vols (Vol. 1: Wirtschaftstheorie,
by R. Selten, 533 pp.; Vol. 2: Ökonometrie und Statistik, by G. Menges, 318 pp.; Vol.
3: Unternehmensforschung, by M. J. Beckmann, 322 pp.), 24 cm.
Bedeschi, G., 1991–2001, Enciclopedia delle scienze sociali (Rome: Istituto della
Enciclopedia italiana), 9 vols, 29 cm.
Behari, B. and Behari, M., 1983, Concise economic encyclopaedia (Delhi: D. K.
Publications), 340 pp.
Beitone, A., Dollo, C. et al., 1991, Dictionnaire des sciences économiques (Paris: A. Colin),
354 pp., 21 cm. 2nd edn 1995, 379 pp. Further edition, 2001, 445 pp., 24 cm (reprinted
in 2002 and in 2008, the latter with added subtitle 1800 définitions, 22 dossiers pour
maîtriser le vocabulaire et les théories économiques).
Belchior, E. de Oliveira, 1987, Vocabulário de termos econômicos e financeiros (Rio de
Janeiro: Civilização Brasileira), 397 pp., 21 cm.
Bergrath, D., 1978, Gablers kleines Bank-Lexikon: Handwörterbuch für d. Bank- u.
Sparkassenwesen, unter Mitarb. zahlr. hervorragender Praktiker u. Fachgelehrter d.
Bankwesens (Wiesbaden: Gabler), 8th edn, 3 vols, 19 cm. Earlier editions, see Müller
Bibliography of specialized dictionaries 553
and Löffelholz, 1953–1976, as Bank-Lexikon: Handwörterbuch für das Bank- und
Sparkassenwese; later edition titled Bank-Lexikon: Handwörterbuch für das Bank- und
Sparkassenwesen mit Bankenverzeichnis, Grosjean and Loeffelholz, 1983.
Belletante, B., 1996, Dictionnaire de la Bourse et des marchés (Paris: Hatier), 314 pp., 19
cm, 2nd edn by Belletante and Mahérault, 2000, 318 pp.
Berardi, R., 1964, Dizionario di termini storici politici ed economici moderni (Florence:
F. Le Monnier), 170 pp., 17 cm; 2nd edn, 1984 (reprinted 1992), 176 pp., 17 cm.
Bernard, F. de (Groupe d’études et de recherches sur les Mondialisations, Paris), 2002,
Dictionnaire critique de ‘la mondialisation’ ([Paris]: Le Pré aux Clercs), 423 pp., 24 cm.
Bernard, Y., Colli, J.-C. and Lewandowski, D., 1975, Dictionnaire économique et financier
(Paris: Éditions du Seuil), 1,168 pp., 23 cm; 2nd edn, 1978, 1,212 pp.; 3rd edn: 1981,
1,342 pp.; 4th edn Bernard, Colli and Walrafen, T., 1984, 1,346 pp.; (Spanish translations:
Diccionario económico y financiero; Madrid: Associación para el Progreso de la
Dirección, 1975, 1,274 pp., 24 cm; 2nd edn, 1979, 1,304 pp., 24 cm; 3rd edn, 1981, 1,341
pp., 25 cm; 4th edn, 1985, 1,414 pp., 25 cm). 5th edn, 1989, 1,412 pp. (Russian edition:
Tolkovyi ekonomicheskiy i finansovyi slovar’, Moscow: Mezhdunarodnaya Otnosheriya;
Portuguese abridged edition: Dicionário económico e financeiro, Lisbon: Dom Quixote,
1997–1998); 6th edn, 1996, 1,515 pp.
Bernard, Y. and Colli, J.-C., 1976, Vocabulaire économique et financier (Paris: Éditions du
Seuil), 415 pp., 18 cm (abridged version of Dictionnaire économique et financier,
Bernard, Colli and Lewandowski, 1975).
[Berstein, S. et al.], 1987, Dictionnaire d’histoire économique: de 1800 à nos jours: les
grands thèmes, les grandes puissances (Paris: Hatier), 616 pp.; 2nd edn, 1989, 638 pp.,
19 cm; 3rd edn, 1991, 683 pp.
Bessa, A., 1912, Enciclopédia do comerciante e do industrial (Lisbon: Livraria Central de
Gomes Carvalho), 690 pp., 19 cm.
Bevir, M., 2007, Encyclopedia of governance (Thousand Oaks, CA: Sage Publications), 2
vols, 1,027 pp., 29 cm.
Beynon, R., 1999, The Routledge critical dictionary of global economics (New York:
Routledge; New York: Icon), 374 pp., 23 cm.
Bezbakh, P. and Gherardi, S., 2000, Dictionnaire de l’économie A–Z (Paris: Larousse, Le
Monde), 638 pp., 24 cm. Cover notes: 15 questions de base sur l’économie, 750 entrées,
31 dossiers, 11 grands thèmes pratiques, statistiques de tous les pays du monde. Reprinted
2001.
Bialès, C., Bialès, M. and Leurion, R., 1996, Dictionnaire d’économie et des faits
économiques et sociaux contemporains (Paris: Foucher), 638 pp., 20 cm; 2nd edn, 1999,
633 pp.
Bidet, J. and Kouvélakis, E., 2001, Dictionnaire Marx contemporain (Paris: Presses
universitaires de France), 589 pp., 23 cm.
Binggeli, A., 1968, Wirtschafts-Lexikon für alle: Ein Nachschlagewerk über Wörter und
Begriffe in der Volkswirtschaft, deren Bedeutung und Zusammenhang für jedermann in
verständlicher Form dargestellt ist; Geld, Kapital, Währung, Wirtschaft (Schwarzenburg:
GBS-Verlag), 95 pp. Alternative title: Geld, Kapital, Währung, Wirtschaft: Wirtschafts-
Lexikon für alle; ein Nachschlagewerk über Wörter und Begriffe in der Volkswirtschaft,
deren Bedeutung und Zusammenhang für jedermann in verständlicher Form dargestellt
ist.
Birchall, J., 2001, Dictionary of economics (Teddington: Peter Collin), 220 pp., 22 cm.
Birou, A., 1966, Vocabulaire pratique des sciences sociales (Paris: Éditions Économie et
Humanisme, le éditions ouvrières), 314 pp., 22 cm; 2nd edn, 1969, 382 pp., 22 cm.
554 Daniele Besomi
Portuguese translation, 1975: Dicionário popular de economia (Lisbon: Assírio &
Alvim).
Bithell, R., 1882, A counting-house dictionary: containing an explanation of the technical
terms used by merchants and bankers in the money market and on the Stock Exchange
. . . (London, New York: G. Routledge), 319 pp., 19 cm; 2nd edn, revised: 1893,
326 pp., 19 cm; 3rd edn, 1903.
Black, J., 1997, A dictionary of economics (Oxford, New York: Oxford University Press),
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longue et heureuse vieillesse: quantité de moyens pour élever, nourrir, guérir, et faire
profiter toutes sortes d’animaux domestiques, comme brebis, moutons, boeufs, chevaux,
mulets, poules, abeilles et vers à soye: différents filets pour la pêche et la chasse de toutes
sortes de poissons, oiseaux et animaux, etc.: une infinité de secrets découverts dans
le jardinage, la botanique, l’agriculture, les terres, les vignes, les arbres, comme aussi
la connoissance des plantes des païs étrangers, et leurs qualitez spécifiques, etc.: arbres
les moyens de tirer tout l’avantage des fabriques de savon, d’amidon, filer le cotton, et
558 Daniele Besomi
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nouvellement en ce royaume, pour l’usage de ce païs, et pour l’Espagne, etc.: les moyens
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Anglois et les Hollandois se sont enrichis, en trafiquant des chevaux, des chèvres, et des
brebis, etc.: tout ce que doivent faire les artisans, jardiniers, vignerons, marchands,
négocians, banquiers, commissionnaires, magistrats, officiers de justice, gentils-hommes,
et autres d’une qualité et d’un emploi plus relevé, pour s’enrichir, etc.: chacun se pourra
convaincre de toutes ces véritez, en cherchant ce qui lui peut convenir, chaque chose
étant rangée par ordre alphabétique comme les autres dictionnaires, par Mr Noel
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Lozano Irueste, J. M., 1994, Breve diccionario de economía (Madrid: Ediciones Pirámide),
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Frauenzimmergeschäften . . . vorkommen (Pesth: Hartleben), 2 vols, 454 and 432 pp.; 2nd
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Luchterhand, W., Joswig, H. and Ehlert, W., 1967, Wörterbuch der Ökonomie: Sozialismus
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576 Daniele Besomi
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Pass, C. L, Davies, L. and Lowes, B., 1988, Collins dictionary of economics (London:
Collins), 557 pp., 20; also titled Dictionary of economics or Collins reference dictionary
of economics. 2nd edn, 1993 (Glasgow: HarperCollins), 59 pp.; 3rd edn, 2000, 555 pp.;
4th edn, 2005, 560 pp.; electronic reproduction, 2007 (London: Credo Reference).
Paul, O. E., and Claussen, W., 1938, Großdeutschland und die Welt; ein Wirtschafts-ABC
in Zahlen (Berlin: Deutsche Verlagsgesellschaft m.b.h.), 480 pp., 25 cm.
Paulet, J.-P., 1992, Dictionnaire d’économie (Paris: Eyrolles), 265 pp., 24 cm.
Paxson, D. and Wood, D., 1997, The Blackwell encyclopedic dictionary of finance
(Cambridge, MA: Blackwell Business), 225 pp., 26 cm.
Pearce, D. W., 1981, Macmillan dictionary of modern economics (London: Macmillan),
473 pp., 25cm. 2nd edn as Dictionary of modern economics, 1983, 481 pp.; 3rd edn
as Macmillan dictionary of modern economics, 1986, 540 pp.; 4th edn, 1992, 474 pp.
Ukrainian translation: Slovnyk suchasnoi ekonomiky Makmillana (Kiev: ArtEk, Macmillan,
2000). American editions as The dictionary of modern economics (Cambridge, MA: MIT
Press), 1981; 2nd edn, 1983 (1st MIT paperback edn); 3rd edn, 1986 as The MIT dictionary
of modern economics; 4th edn, 1992 (same number of pages as Macmillan editions).
Spanish translation: Diccionario Akal de economía moderna (Madrid: Akal).
Pennant-Rea, R. and Emmott, B., 1983, The pocket economist (Oxford: Robertson; The
Economist; Cambridge, New York: Cambridge University Press), 194 pp., 23 cm; 2nd
edn, 1987 (Oxford: Blackwell). Italian translation: Tutta l’economia in 600 parole:
dizionario aggiornato dei termini economici che non potete permettervi di ignorare,
1992 (Milan: Sperling & Kupfer; also supplement to Espansione, May and June 1992,
2 vols; 2nd edn, 1996, Milan: Sperling & Kupfer); Portuguese edition, 1990: Dicionário
de economia (Lisbon: Silabao).
Percebois, J., Aben, J. and Euzéby, A., 1995, Dictionnaire de finances publiques (Paris: A.
Colin), 207 pp., 21 cm.
Perdices de Blas, L. and Reeder, J., 2000, Diccionario de pensamiento económico en España
(1500–1812) (Madrid: Ed. Síntesis), 415 pp.
Perroux, F., 1960, L’univers économique et social. Vol. 9 of L. Febvre and G. Berger,
Encyclopédie française (Paris: Société nouvelle de l’Encyclopédie française), 567 pp.,
32 cm.
Peuchet, J., 1798–1799, Dictionnaire universel de la géographie commerçante, contenant
tout ce qui a raport à la situation et à l’étendue de chaque état commerçant; aux
productions de l’agriculture, et au commerce qui s’en fait; aux manufactures, pêches,
mines, et au commerce qui se fait de leurs produits; aux lois, usages, tribunaux et
administrations du commerce (Paris: Blanchon), 5 vols, about 4,000 pp.
Phélizon, J.-F., 1970, Lexique des termes économiques (Paris (2e): La Documentation
pratique), 182 pp., 21 cm. 2nd edn, 1975 (Paris: Technique et vulgarisation), 184 pp.;
3rd edn, 1977, 287 pp.; 4th edn, 1985, as Dictionnaire de l’économie (Paris: Économica),
352 pp., 19 cm.
580 Daniele Besomi
Phin, J., 1896, A pocket dictionary of monetary and coinage terms, explaining in simple
language the meaning of the words used by writers on these subjects, and giving data,
statistics, etc. Facts and figures for both sides (New York: Industrial Publishing Co.),
52 pp., 8º.
Piekenbrock, D., 2002, Gabler-Kompakt-Lexikon Volkswirtschaft: 3500 Begriffe nach-
schlagen, verstehen, anwenden (Wiesbaden: Gabler), 490 pp.; 2nd updated edn, 2003,
490 pp.
Piel, M., 1980, Wirtschaftssprache kurz erklärt (Bonn: Osang-Verlag), 143 pp.
Piernas y Hurtado, J. M., 1877, Vocabulario de la economía, ensayo para fijar la
nomenclatura y los principales conceptos de esa ciencia (Madrid: Imprenta Central a
cargo de V. Saiz), 192 pp., 19 cm. 2nd edn, 1882, 253 pp.
Piriou, J.-P., 1996, Lexique de sciences économiques et sociales (Paris: Éd. la Découverte),
120 pp., 18 cm; 2nd edn, 1997, 122 pp.; 4th edn, 2001, 121 pp.; 5th edn, 2002, 123 pp.;
6th edn, 2003; 7th edn, 2004; 8th edn, by Piriou and D. Clerc, 2007.
[Pitman], 1931, Pitman’s business man’s guide: a comprehensive dictionary of commercial
information (London, New York [etc.] Pitman & Sons); 9th edn (previous editions were
compiled by Slater, 1903–1924, under the title Pitman’s business man’s guide: a
handbook for all engaged in business), 539 pp., 8°; 10th edn, 1933; 11th edn, 1935;
12th edn, 1949; 13th edn, 1957; 14th edn, Nelson, 1967.
Pjani, Z., 1975, Ekonomski leksikon (Belgrade: Savremena administracija), 1,531 pp.
Pollert, A., Kirchner, B. and Polzin, J. M., 2001, Duden – das Lexikon der Wirtschaft:
grundlegendes Wissen von A bis Z (Mannheim etc.: Dudenverl.), 512 pp. 2nd edn, 2004
as Duden – Wirtschaft von A bis Z: Grundlagenwissen für Schule und Studium, Beruf
und Alltag, 512 pp., 24 cm; also as Das Lexikon der Wirtschaft: grundlegendes Wissen
von A bis Z (Bonn: Bundeszentrale für politische Bildung). 3rd edn, 2008 (both titles
and publishers), 499 pp.
Postlethwayt, M., 1751–1755, Universal dictionary of trade and commerce, translated from
the French of the celebrated Monsieur Savary, inspector general of the manufactures
for the King, at the Custom-house of Paris: with large additions and improvements,
incorporated throughout the whole work; which more particularly accommodate the
fame to the trade and navigation of these Kingdoms, and the laws, customs, and usage,
to which all traders are subject (London: J. & P. Knapton). 2 vols, 42 cm. 2nd edn,
1757; 3rd edn, 1766, 2 vols, 41 cm; 4th edn, 1774 (London: printed for W. Strahan, J.
and F. Rivington, J. Hinton), 2 vols, 43 cm.
Prado, J. M., with Argandoña, A. et al., 1983–1984, Enciclopedia práctica de economía
(Barcelona: Orbis), 8 vols, 30 cm. Vol. 1: Economía para una época de crisis; Vol. 2: El
dinero en la economía; Vol. 3: La economía real; Vol. 4: La economía internacional;
Vol. 5: Microeconomía; Vol. 6: La empresa; Vol. 7: Los rectores económicos; Vol. 8:
Economía, sociedad y el hombre. 2nd edn, 1987–1988, 20 vols, 30 cm. Vol. 1: La riqueza
y el dinero; Vol. 2: La financiación de la economía; Vol. 3: La demanda agregada; Vol.
4: El sector público; Vol. 5: El desempleo y el estancamiento económico; Vol. 6: La
inflación; Vol. 7: El sector exterior y la balanza de pagos; Vol. 8: Crisis y ciclos económi-
cos; Vol. 9: El Estado y la política económica; Vol. 10: Los sistemas económicos; Vol.
11: Las decisiones de los consumidores; Vol. 12: La producción; Vol. 13: La empresa;
Vol. 14: Los mercados; Vol. 15: La competencia; Vol. 16: Recursos naturales y fallos del
mercado; Vol. 17: Nivel y calidad de vida; Vol. 18: Los grandes sectores económicos;
Vol. 19: La dimensión geográfica de la actividad económica; Vol. 20: La ciencia
económica.
Preuss, G. and Bachert, U., 1966, Meyers Handbuch über die Wirtschaft (Mannheim:
Bibliography of specialized dictionaries 581
Bibiographisches Institut), 1,148 pp., 20 cm; 2nd edn, Preuss, 1970, 1,171 pp., 23 cm;
3rd edn, 1974, compiled by Eifert et al.
Pujol, R., 1967, Petit dictionnaire de l’économie (Paris: Denoël-Gonthier), 331 pp., 21 cm;
reprinted 1968; 2nd edn, 1970, 251 pp., 18 cm.
Qari, M. A., 1978, Encyclopaedic dictionary of economics & commerce for accountants,
businessmen, bankers, lawyers, students of economics and commerce (Lahore: Naeem
Tariq Law Associates), 323 pp., 23 cm.
Rachlin, H., 1984, The money encyclopedia (Cambridge, PA: Harper & Row), 669 pp., 25 cm.
Recktenwald, H. C., 1975, Wörterbuch der Wirtschaft (Leipzig: A. Kröner), 7th edn, 555
pp., 18 cm (the first 6 edns were compiled by Bülow, 1936, and Bülow and Langen,
1954–1970). 8th edn 1978, 558 pp.; 9th edn, 1981, 667 pp.; 10th edn, 1987, 686 pp.;
11th edn, 1990, 707 pp. 12th edn compiled by Grüske and Recktenwald, 1994.
Recktenwald, H. C., 1983, Lexikon der Staats- und Geldwirtschaft: ein Lehr- und
Nachschlagewerk (Munich: Vahlen), 759 pp.
Reichesberg, N., 1903–1911, Handwörterbuch der schweizerischen Volkswirtschaft,
Sozialpolitik und Verwaltung (Berne: Verlag Encyklopädie), 3 vols in 6.
Rentzsch, H, 1866, Handwörterbuch der Volkswirthschaftslehre: Unter Mitwirkung von
namhaften deutschen Gelehrten und Fachmännern (Leipzig: G. Mayer), 1,148 pp., 25
cm; 2nd edn, 1870 (Leipzig: J. Klinkhardt), 1,148 pp., 24 cm.
[Reuters, Senior staff], 1982, Reuters glossary of international economic and financial terms
(London: Heinemann; New York: Coward-McCann), 215 pp., 23 cm; 2nd edn, 1988, as
Reuters glossary: international economic and financial terms (Harlow: Longman),
208 pp., 22 cm; 3rd edn, 1994, compiled by Nunnay-Elam, F. and Shaw, T. (Reuters
Senior staff), 138 pp., 26 cm; 4th edn, 2000, as The Reuters financial glossary (London:
Pearson Education), 164 pp., 26 cm.
Revol, R. with Bourdis, I., Dontaine, A., Flacher, B. et al., 2002, Dictionnaire des sciences
économiques et sociales (Paris: Hachette Éducation), 508 pp., 22 cm. The cover indicates
‘Plus de 1200 entrées, 30 articles thématiques, 85 biographies commentées’.
Reyes, R., 1988, Terminologia científico-social: aproximación crítica (Barcelona: Anthropos),
1,051 pp., 24 cm; supplement, 1991, 528 pp.
Ribeiro, S., 1972–1978, Pequeno dicionário de economia (Lisbon: Prelo Editora (Biblioteca
Popular, 6, 18, 20, 31, 33)), 5 vols, 316 pp.
Ricossa, S., 1982, Dizionario di economia (Turin: UTET), 547 pp., 27 cm; 2nd edn, 1988,
553 pp., 27 cm; 3rd edn, 1998, 581 pp.
Rinne, J. C., 1846, Encyklopädie der Staatswissenschaften für Deutsche (Breslau: s.l),
111 p.
Riolfo Marengo, S., 1992, Enciclopedia dell’economia (Milan: Garzanti), 1,296 pp.,
19 cm. Cover subtitle: In uno strumento nuovo, autorevole e completo: i soggetti, i fatti,
le idee; reprinted 1996, 1999; 2nd edn, 2001, 1,393 pp., 21 cm.
Rittershausen, H., 1958, Wirtschaft (Vol. 8 of Das Fischer Lexikon, 1957–) (Hamburg:
Fischer Bücherei), 364 pp. Reprinted almost every year to 1980, with revisions in 1973,
1976, 1977, 1980. Italian translation, 1968 as Economia (Milan: Feltrinelli).
Rittershofer, W., 1975, Das Lexikon Wirtschaft, Gesellschaft, Gewerkschaften (Cologne:
Bund-Verlag), 379 pp., 17 cm; 3rd edn, revised, 1975, 379 pp.; 4th edn, 1981, 415 pp.;
5th edn, 1987, as Das Lexikon Wirtschaft, Umwelt, Gewerkschaften, 485 pp.; 6th edn,
1991, as Das Lexikon Wirtschaft, Arbeit, Umwelt: mit aktuellen Stichworten zu deutsche
Einigung und Europa, 542 pp.; 7th edn, 1994, as Das Lexikon Wirtschaft, Arbeit, Umwelt,
Europa: mit aktuellen Stichworten zum europäischen Binnenmarkt und zur deutschen
Einigung, 624 pp.; 8th edn, 1997, as Lexikon Wirtschaft, Arbeit, Umwelt, 639 pp.
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Rittershofer, W., 2000, Wirtschafts-Lexikon: über 4000 Stichwörter für Studium und Praxis
(Munich: Dt. Taschenbuch-Verl.), 1,074 pp. 2nd edn, 2002, as Wirtschafts-Lexikon: über
4200 Stichwörter für Studium und Praxis, 1,097 pp.; 3rd edn, 2005, as Wirtschafts-
Lexikon: über 4000 Stichwörter für Studium und Praxis, 1,149 pp.; 4th edn, 2009,
1,136 pp., 20 cm.
Roberts, L., Mosena, R. G. and Winter, E., 2010, Gabler Wirtschaftslexikon (Wiesbaden:
Gabler), 17th edn, 8 vols, 3,614 pp. (previous edn as Gabler Wirtschafts-Lexikon: Alish,
2004).
Robinet, J. B., 1777–1783, Dictionnaire universel des sciences morales, économique,
politique et diplomatique; ou bibliothèque de l’homme d’État et du citoyen (London:
Chez les libraires associés), 30 vols, 4°. From Vol. 5, the title also indicates ‘par M.
Robinet’.
Rolt, R., 1756, A new dictionary of trade and commerce: compiled from the information of
the most eminent merchants, and from the works of the best writers on commercial subjects,
in all languages. Containing, among other things, I. An account of all the natural
productions, which are conducive to trade, throughout the World. II. The different
manufactures established in each particular Country. III. Explanations of all the terms
used in commerce. IV. Explanations of the principal terms of geography, astronomy, and
navigation, so far as they are connected with trade. V. An exact account of the coins,
weights, and measures in use throughout the World, reduced to the English standard. VI.
A description of the established banks, trading companies, and staple commodities, of
different Countries. Vii. The state of the British trade, national debt, funds, customs, excise,
and other taxes. Viii. The laws relative to trade and commerce. For the use of the merchants
and tradesmen of Great Britain, as well as of private gentlemen. By Mr. Rolt, with the
assistance of several eminent merchants (London: T. Osborne and J. Shipton), 908 non-
numbered pp., 2°. 2nd edn, 1761 as A new dictionary of trade and commerce, compiled
from the information of the most eminent merchants, and from the works of the best writers
on commercial subjects, in all languages, with the assistance of several eminent merchants.
The second edition, with the addition of a new and accurate set of maps of the world,
Europe, Asia, Africa, and North and South America, by Mr. Bowen, 2 vols.
Romeuf, J. with Pasqualaggi, G. et al., 1956–1958, Dictionnaire des sciences économiques
(Paris: Presse universitaires de France), 2 vols, 1,198 pp., 25 cm. Italian translation, 1963,
as Dizionario delle scienze economiche e commerciali (Rome: Edizioni Paoline). Spanish
translation, 1966, as Diccionario de ciencias económicas (Barcelona: Labor).
Rotteck, K. W. R. V. and Welcker, K. T., 1834–1843, Das Staats-Lexikon. Encyklopädie
der sämmtlichen Staatswissenschaften für alle Stände (Altona: J. F. Hammerich), 12
vols, 23 cm; 2nd edn, 1845–1848; 3rd edn 1856–1866 (Leipzig: Brockhaus), 14 vols,
25 cm (reprinted LaVergne, TN: Nabu Press, 2010).
Rowley, C. K. and Schneider, F., 2004, Encyclopedia of public choice (Dordrecht: Kluwer
Academic Publishers), 2 vols, 29 cm.
Ruffino, E. D., 1998, Dizionario di economia & sanità (Turin: BLU editoriale), 527 pp., 25
cm.
Rumyantsev, A. M., 1972–1980, Ekonomicheskaya entsiklopediya: politicheskaya
ekonomiya (Moscow: Sovetskaya entsiklopediya), 4 vols (559 + 560 + 623 + 672 pp.),
27 cm.
Rumyantsev, E. E., 2006, Novaya ekonomicheskaya entsiklopediya [New economic
encyclopedia] (Moscow: Infra-M), 2nd edn (perhaps of Rumyantsev 1972–1980?),
806 pp.
Rürup, B. with Pampel, R. and Sesselmeier, W., 1993, Fischer-Wirtschaftslexikon (Frankfurt
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2002, compiled by Rürup, B., Sesselmeier, W. and Enke, M., 313 pp.; also under the
title Fischer-Wirtschaftslexikon: Zahlen, Fakten, Zusammenhänge. Revised edn under
the latter title, 2003.
Rutherford, D., 1992, Dictionary of economics (London, New York: Routledge), 539 pp.,
24 cm. Continued in 1995 (indicated as ‘new edition’) as Routledge dictionary of
economics; 2nd edn, 2002, 671 pp., 24 cm.
Rutherford, D., 2004, The biographical dictionary of British economists (Bristol:
Thoemmes), 2 vols, 1,330 pp., 24 cm.
Salzmann, F., 1969, ABC der Volkswirtschaft (Bern: Liberalsozialistische Partei der
Schweiz), 16 pp., 21 cm; later edition, 1970; 5th edn, 1973.
Sandelin, A., 1846–1848, Répertoire général d’économie politique ancienne et moderne
(The Hague: P. H. Noordendorp), 6 vols, 28 cm.
Sandroni, P, 1989, Dicionário de economia (São Paulo: Editora Best Seller), 331 pp., 24
cm; 2nd edn, 1994, as Novo dicionário de economia, 380 pp., 25 cm; 3rd edn, 1999 as
Novissimo dicionário de economia, 649 pp., 25 cm; 4th edn 2005, Dicionário de
Economia do século XXI (Rio de Janeiro: Record), 905 pp.
Sansalvadó, M., 1987, Diccionari d’economia (Barcelona: Universitat Politècnica de
Catalunya, Institut de Ciències de l’Educació), 114 pp.
Santos, M. D. dos, 1990, Dicionário comercial e administrativo: direiro, economia,
metrologia, informática, comércio externo, administração pública (Porto: Porto Editora),
192 pp., 19 cm; 2nd edn, 1991, 216 pp.
Sareen, T., 2001, Encyclopaedic dictionary of economics (New Delhi: Sarup & Sons), 3
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Savary Des Bruslons, J., 1723, Dictionnaire universel de commerce: contenant tout ce qui
concerne le commerce qui se fait dans les quatre parties du monde, par terre, par mer,
de proche en proche, et par des voyages de long cours, tant en gros qu’en détail.
L’explication de tous les termes qui ont rapport au négoce . . . Les monnoyes reélles d’or,
d’argent de billon, de cuivre, d’estain, &c . . . Le détail du commerce de la France en
général . . . Les édits, déclarations, ordonnances, arrests, et reglements donnez en matiere
de Commerce. Ouvrage posthume du Sieur Jacques Savary Des Bruslons, . . . Continué
sur les memoires de l’auteur, et donné au public par M. Philemon Louis Savary (Paris:
Chez J. Etienne), 2 vols, 2,002 + 1,955 cols, folio (39 cm). Supplement, 1930, 1,316
cols. Reprinted 1726 (the supplement in 1732): (Amsterdam: Chez les Jansons à
Waesberge). German translation 1741–1743 as Allgemeine Schatz-Kammer der
Kaufmannschafft: oder vollständiges Lexicon aller Handlungen und Gewerbe, so wohl
in Deutschland als auswaertigen Königreichen und Laendern; darinnen . . .; Nebst einem
Anhange derer jetzt florirenden Kauff- und Handels-Leute Namen, Contoirs, Fabriquen,
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& des arts & metiers: contenant tout ce qui concerne le commerce qui se fait dans des
quatre parties du monde . . . l’explication de tous les termes qui ont rapport au negoce
. . . les edits, declarations, ordonnances, arrets, et reglemens donnés en matiére de
commerce (Geneva: chez les héritiers Cramer & Freres Philibert), 3 vols (1,236 + 1,280
+ 1,588 cols), folio; reprinted 1748 and 1750 (Paris: la Veuve Estienne et fils). 4th enlarged
edn, incorporating materials of Diderot’s Encyclopédie, 1759–1765 (Copenhagen: les
frères C. et A. Philibert), 5 vols; ‘édition portatif ’ of the 4th edn, 1761–1762, 7 vols,
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584 Daniele Besomi
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riguardanti il commercio, l’economia rurale, le finanze, le arti, le manifatture, le
fabbriche, la mineralogia, le droghe, le piante, le gemme ec. ec., accresciuto di varj
importantissimi articoli, tratti dall’Enciclopedia, e dalle Memorie dell’accuratissimo Mr.
Garcin, ecc. (Venice: presso Giambatista Pasquali), 1770 (4 vols in 2, 27 cm.). English
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Guillaumin), 2 vols, 1,148 + 1,345 pp., 28 cm; reprinted 1893. Supplement published in
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Verrichtungen im Hause, Küche und Keller vorkommt, zu finden ist; Sondern auch die
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ABC der modernen Wirtschaft (Stein, 1972) thinking in the Netherlands 428, 437;
KONJUNKTUR 121 GRONDSTOFFSTANDAARD 436; INTRODUC-
ABC der Volkswirtschaft (Thalheim and TION 435; not very influential 428, 434;
Grosse, 1934) 35 PREFACE 428
KONJUNKTUR UND KRISE 86, 122, 140, 145 Berkshire encyclopaedia of world history
ABC der Wirtschaft (Feldmann, 1940) 35 (McNeill, 2005)
ABCs of the financial crisis (Mayberry, 2008) LONG CYCLES 443
43 Biographical dictionary of American economists
Allgemeine Schatz-Kammer der Kaufmann- (Emmett, 2006) 44
schafft (Savary, 1741–43) 28 Biographical dictionary of Australian and New
Allgemeines öconomisches Lexicon (Zincke, Zealand economists (King, 2007) 44
1731) 28 Biographical dictionary of British economists
Allgemeines ökonomisches Lexikon (Lübeck, (Rutherford, 2004) 44
1812) Biographical dictionary of dissenting economists
a practical arts dictionary 28 (Arestis and Sawyers, 1992) 44
American heritage dictionary Biographical dictionary of European economists
CYCLE 90 (Gehrke and Kurz, 2012) 44
Auszug aus des J. G. Krünitz ökonomisch-tech- Biographical dictionary of women economists
nologischer Encyklopädie (Schütz et al., (Dimand, Dimand and Forget, 2000) 44
1786–1830) 28 Blackwell dictionary of modern social thought
(Outhwaite, 2006)
Bank-Lexikon (Grosjean and Loeffelholz, BUSINESS CYCLES 146; CRISIS 537
1988) Bluntschli’s Staatswörterbuch in drei Bänden
KONJUNKTUR 96 (Bluntschli and Löning, 1869–1872) 40
Bank-Lexikon (Müller and Löffelholz, 1953) 5, HANDELSKRISEN 136
31 Bolshaya sovetskaya entsiklopediya (1926–
KONJUNKTUR 96 1947) 344
Bank-Lexikon (Müssig, 1988) Booms and busts. An encyclopedia of economic
KRISE 531 history from tulipmania of the 1630s to the
Banque rendue facile aux principales Nations global financial crisis of the 21st century
de l’Europe (Giraudeau, 1741) 30 (Ciment, 2010) 43
Bedrijfseconomische encyclopedie (Stridiron et Brockhaus-Efron encyclopedic dictionary
al., 1947–52) 427–428 see Enciklopedicheskii slovar’
a popular business dictionary 427; aimed at Brockhaus-Konversationslexikon (1796–1808)
providing businessmen with knowledge of the- 14, 197
ory and understanding of ‘tools of observation’ explicitly Protestant 13
for business 428; BEWEGINGSTYPEN 9, Brockhaus-Konversationslexikon (1843–48) 219
430–431; CONJUNCTUURTHEORIE 9, 430, Brockhaus-Konversationslexikon (1882–87) 343
431–434; CONJUNTUURSTATISTIEK 9, 430, HANDELSKRISEN 81
431; DYNAMICA 9, 430, 435; entries on statis- Brockhaus-Konversationslexikon (Grösse Brock-
tics marked the advancement of statistical haus, 1928–35)
666 Index of dictionaries and dictionary entries cited
KRISE 140 Diccionario de hacienda, con aplicación a
Bulls, bears, boom and bust (Dobson, 2007) España (Canga Argüelles, 1833–34) 236
BUBBLE 73 Diccionario enciclopédico Hispanoamericano
Business cycles and depressions (Glasner, (1887–99) 225
1997) 43, 481 entries related to economic crisis focused on
ÅKERMAN, JOHAN HENRIK 467; CHAOS AND the social consequences of depressions 225
BIFURCATIONS 493; CONTINUOUS-TIME Dicionário ecônomico-comercial e financeiro
MODELS 493; COQUELIN, CHARLES 221; (Gomes, 1942) 35
GOODWIN, RICHARD MURPHEY 107; Dictionary . . . of commerce and commercial
KONDRATIEFF CYCLES 453; KONDRATIEFF, navigation (McCulloch, 1832) 18, 167, 251
NIKOLAI DMITRIYEVICH 444, 459; LONG- a reference point in mid-19th century Britain
WAVE THEORIES 445; MONETARY EQUILIB- and abroad 29, 34, 288; BANKS (ENGLISH
RIUM THEORIES OF THE BUSINESS CYCLE PRIVATE AND PROVINCIAL) 18; CORN LAWS
520–521; NONLINEAR BUSINESS-CYCLE AND CORN TRADE 18, 30, 58, 63, 75; fully
THEORIES 493; PANIC OF 1825 69; PANIC OF authored by the compiler 6; lacks theoretical
1837 69; PANIC OF 1893 69; POLITICAL BUSI- depth (Boccardo) 33, 250; no entry on crises
NESS CYCLE 468, 477; REAL BUSINESS 193
CYCLE THEORIES 503–504, 518 Dictionary of econometrics (Darnell, 1994) 42
Dictionary of economic and banking terms
Capire l’economia, dizionario critico del capital- (Weston and Crew, 1913) 30
ismo contemporaneo (Stefanelli, 1977) 36 Dictionary of economic terms for the use of
Commercial cyclopaedia (Macardy, 1833) 4 newspaper readers and students (Bowers,
Commercial dictionary (Montefiore, 1803) 1905) 15, 35
BANK OF ENGLAND 18, 61, 67 Dictionary of economics and commerce (Hanson
Concise encyclopedia of economics (Henderson, 1965)
2008) STAGNATION THESIS 65
BUBBLES 74; BUSINESS CYCLES 105, 508, Dictionary of environmental economics
509–510, 524 (Markandya, 2001) 42
Counting-house dictionary (Bithell, 1882) 30 Dictionary of environmental economics, science,
Crosby’s merchant’s and tradesman’s pocket and policy (Grafton et al., 2001) 42
dictionary (1808) 29 Dictionary of free-market economics (Foldvary,
Cyclopaedia of political science (Lalor, 1881–84) 1998) 43
40 Dictionary of international trade (Hinkelman,
COMMERCIAL CRISES 69, 76, 81, 220; 1994) 42
incorporates 40 entries from the Dictionnaire Dictionary of lexicography (Hartmann and
de l’économie politique (Coquelin and James, 1998)
Guillaumin, 1852–53) 32, 211; OUTLET 120, DICTIONARY 21; ENCYCLOPEDIA 21; GLOS-
220; OVER-PRODUCTION 137 SARY 21; LEXICON 21
Cyclopaedia of political science (Lalor, 1888–90) Dictionary of modern economics (Greenwald,
211 1965) 52
Cyclopædia, or, an Universal dictionary of arts Dictionary of modern economics (Horton et al.,
and sciences (Chambers, 1728) 4, 11, 14, 1948) 52
57, 251 BUSINESS CYCLES 77, 122; BUSINESS
CYCLE 121; PANIC 67 CYCLES, THEORY OF 146
Dictionary of national biography 342
Deutsches Staats-Wörterbuch (Bluntschli and Dictionary of political economy (Macleod, 1863)
Brater, 1857) 43, 253, 286–288
HANDEL, HANDELSPOLITIK 82, 136 ACCUMULATION 304; AESCHINES 287; BANK
Diccionario analítico de economía política 286, 287, 290; BOCCARDO, GEROLAMO 262;
(Ganilh, 1827) 118 BULLION REPORT 288, 295; CAPITAL 286,
Diccionario de economia politica (Heller, 1937) 288, 291; COINAGE 286; CONSUMPTION 286;
35 COQUELIN, CHARLES 211, 303; COST OF
Diccionario de economía política (Napoleoni, PRODUCTION 286; CREDIT 75, 103, 286, 288,
1962) 36 291; CRISIS, COMMERCIAL 62, 68, 135, 177,
Diccionario de hacienda para el uso de los 286, 288, 292–304; CURRENCY 286, 288, 295,
encargados de la suprema dirección de ella 297; CZÖRNIG, C. F. VON 304; first dictionary
(Canga Argüelles, 1826–27) 225, 236 of political economy in the English language
Index of dictionaries and dictionary entries cited 667
286; fully authored by the compiler 7, 33, 288; bibliographies 22, 32, 210 (sources 219; the
mostly concerned with credit and banking, in entry on crises is excepted 217); INTRODUC-
particular with historical and legal aspects 287; TION 15, 209, 210, 219; lacks cross-references
well received 287–288, but ignored by the 251; outdated, and revised into Nouveau
devotees of John Stuart Mill 288 dictionnaire d’économie politique (Say and
Dictionary of political economy (Palgrave, Chailley, 1891–92) 33, 211, 269; PRÉFACE DE
1894–99) 15, 18, 271, 286, 332–334 L’EDITEUR 32, 210, 219; PRODUCTION 213;
aimed at students 33, 332; BUBBLE ACT 72; PROGRÈS INDUSTRIEL 193; SISMONDI (JEAN-
BUBBLES (HISTORY OF) 72, 118; COQUELIN, CHARLES-LÉONARD SIMONDE DE) 213;
CHARLES 221; CRISES 1857–1866–1890 333, upheld and propagated the viewpoint of the
334, 337–340; CRISES, COMMERCIAL AND French Liberal school 13, 210, 220; very
FINANCIAL 83, 334, 337–340; CRISES, PERIO- influential 32, 211
DICITY OF 332, 334, 340–341; DÉBOUCHÉS, Dictionnaire de la conversation et de la lecture
THÉORIE DES 58, 120; entries on crises fail to (1832–55) 167
account for the richness of theory in England CRISES COMMERCIALES 79, 80, 172, 177–189,
at the time 332; GLUT 58, 334, 336; INTRO- 218
DUCTION 332, 335; OVER-PRODUCTION 58, Dictionnaire de science économique (Cotta,
137, 333, 334, 336; reflects state-of-the-art 1968)
economics at the end of the 19th century 332; FLUCTUATION 443
several entries written by practitioners 335, Dictionnaire des auteurs en sciences
341 économiques et sociales (Deubel and
Dictionary of the English language (Johnson, Montoussé, 2003) 44
1755) 57, 67 Dictionnaire des finances (Jones, 1727) 30
Dictionary of the history of ideas (Winer, 1968) Dictionnaire des finances (Say, 1889–94) 30, 386
CRISIS IN HISTORY 536 BANQUES 266; CRISES FINANCIÈRES ET
Dictionary of the social science (Gould and COMMERCIALES 9, 19, 84, 266
Kolb, 1964) Dictionnaire des grands économistes (Brémond
BUSINESS CYCLES AND BUSINESS FLUC- and Salort, 1992) 43
TUATIONS 101 Dictionnaire des grands économistes. 2500 ans
Dictionnaire analytique d’économie politique d’histoire de la pensée économique (Teulon,
(Ganilh, 1826) 6, 32 2009) 44
COMMERCE 63; CONSOMMATION 193; Dictionnaire des sciences économiques (Cotta,
CRÉDIT 61; fully authored by Ganilh 31; 1969)
incomplete, according to Guillaumin 209; often CRISE 528; FLUCTUATION 528
superficial and too narrow in the choice of Dictionnaire des sciences économiques (Jessua
entries (Boccardo) 250; PRÉFACE 3; PRO- et al., 1991)
DUCTION 193 CYCLES ÉCONOMIQUES 492, 505
Dictionnaire d’analyse économique (Guerrien, Dictionnaire des sciences économiques (Jessua
2002) et al., 2001) 35
CYCLE (THÉORIES DU) 160 CRISE ÉCONOMIQUE 506, 530; CYCLES
Dictionnaire d’économie charitable (Martin- ÉCONOMIQUES 98, 100, 107, 156, 505, 511,
Doisy, 1855–64) 42 512
Dictionnaire d’économie contemporaine Dictionnaire des sciences économiques
(Lakehal, 2001) (Romeuf, 1956–58) 35
FLUCTUATION 107 CONJONCTURE 97; CRISES 527–528; CYCLES
Dictionnaire de l’administration française 98, 101
(Block, 1856) 267 Dictionnaire des sciences humaines (Mesure
Dictionnaire de l’économie politique (Coquelin and Savidan, 2006) 41
and Guillaumin, 1852–53) 6, 209–211, 219, Dictionnaire des sciences politiques et sociales
230, 233, 283, 386 (Ott, 1854) 11, 40, 241, 246
BANQUE 211, 212, 215; CONSOMMATION alphabetically organized, but with a methodical
213; CRÉDIT 212; CRISES COMMERCIALES 80, index 239; BANQUES 68; CONCURRENCE 243;
119, 135, 154, 169, 188, 190, 211, 212–219, CRISE 64, 83, 119, 135, 172, 190, 238, 240,
234, 256; DÉBOUCHÉS 120, 193, 213, 220; 241, 243–246; DÉBOUCHÉS 135, 241–242;
epistemological perspective 12, 32, 210–211; fully authored by the compiler 7, 40, 239; its
excessively theoretical (Boccardo) 33, 250; first microstructure 239; PRÉFACE 239
dictionary to systematically incorporate Dictionnaire des théories et mécanismes éco-
668 Index of dictionaries and dictionary entries cited
nomiques (Brémond and Gélédan, CRISES ET FLUCTUATIONS ÉCONOMIQUES 62,
1984) 78, 107, 529; CRISES ET THÉORIES ÉCO-
CROISSANCE ET CRISES 11, 153; methodically NOMIQUES 529
arranged 11, 23; PRÉSENTATION 23 Dictionnaire universel … du commerce et de
Dictionnaire du citoyen, ou Abrégé historique, la navigation (Guillaumin, 1859–61) 29,
théorique et pratique du commerce 209
(Lacombe, 1761) 29 CRISES COMMERCIALES 64, 81, 119, 136, 169,
Dictionnaire du commerce, de l’industrie et de 190–192
la banque (Guyot and Raffalovich, 1898) Dictionnaire universel de commerce (Savary,
CRISE 68, 76, 81, 85, 135; SURPRODUCTION 1723) 250
135 very successful, translated in various languages
Dictionnaire économique et financier (Bernard 28
and Colli, 1975) 31 Dictionnaire universel de commerce, banque,
CRISE (ÉCONOMIQUE) 162, 529; CYCLE 529 manufactures, douanes, pêche, navigation
Dictionnaire économique et financier (Bernard marchande (Buisson, 1805) 29
and Colli, 1996) 31 Dictionnaire universel de la géographie
CRISE (ÉCONOMIQUE) 529 commerçante (Peuchet, 1798–99) 29
Dictionnaire économique et social (Brémond Dictionnaire universel des sciences morales,
and Gélédan, 1981) 22 économique, politique et diplomatique
Dictionnaire économique et social (Brémond (Robinet, 1777–83) 15, 39
and Gélédan, 1992) COMMERCE 39, 194
CRISES ÉCONOMIQUES ET SOCIALES 107, 529 Dictionnaire universel du commerce, de la
Dictionnaire économique et social (Suavet, banque, et des manufactures (Monbrion,
1962) 1838–41) 29, 167
CONJONCTURE 97 CRISE COMMERCIALE ET INDUSTRIELLE 19,
Dictionnaire encyclopédique (Le Bas, 1840–45) 63, 103, 119, 175, 177–189, 218, 260
236 Dizionario analitico di diritto e di economia
Dictionnaire encyclopédique économique et industriale e commerciale (da Portula,
social (Alquier, 1990) 1843) 249
CRISE 154, 530–531 Dizionario della economia politica e del
Dictionnaire général de la politique (Block, commercio (Boccardo, 1857–63) 249–253,
1863–64) 40, 266–268 261, 262
based on liberal principles, but aims at offering a mean for propagating knowledge 32; ABBON-
a neutral ground for contributors of different DANZA 252; ACCATTONAGGIO 252; ACQUE
opinions 268; CRISES COMMERCIALES 9, 62, 252; AFRICANO COMMERCIO 252; AGGIO-
83, 118, 135, 188, 262, 268, 273–278, 282–283; TAGGIO 252; AGRICOLTURA 253; aimed at
ÉGLISE CATHOLIQUE 246; encompasses the covering Italian doctrines 249; AMERICA 252,
science of government in a broad sense 268; 260; ANARCHIA 252; BANCA 220, 253, 255,
PRÉFACE 267 256, 258, 260, 262; BANCO 261; CINA 262;
Dictionnaire général de la politique (Block, CREDITO MOBILIARE 262; CRISI 80, 154, 177,
1873) 220, 255–258, 260–261; DIZIONARI ECO-
CRISES COMMERCIALES 274–278 NOMICI E COMMERCIALI 249, 250; ECONO-
Dictionnaire Marx contemporain (Bidet, 2001) MIA POLITICA 252; fully authored by the
43 compiler 7, 33, 251; GLI EDITORI A CHI LEGGE
Dictionnaire oeconomique (Chomel, 1709) 15; heavily borrowed from Dictionnaire de l’é-
a practical arts dictionary 27 conomie politique (Coquelin and Guillaumin,
Dictionnaire oeconomique (Chomel, 1732) 1852–53) 250; LIBERTÀ NELLE MATERIE ECO-
CYCLE 121 NOMICHE 252; MATEMATICA APPLICATA
Dictionnaire politique (Duclerc and Pagnerre, ALL’ECONOMIA POLITICA 254; MONETA 255,
1842) 170 256, 260; PEREIRE 262; PERIODICITÀ 258,
BANQUE 171; CRISE 84, 119, 170–171, 262; philological intent 251, 261; PREFAZIONE
178–189, 218; expression of the Republican 6, 249–253, 261; well received in Italy and
party 168, 170 abroad 252–253
Dictionnaire technique de la bourse et des Dizionario di commercio dei signori Fratelli
marchés financiers (Villeneuve, 1990) 31 Savary (1770) 28
Dictionnaire thématique de sciences éco- Dizionario di economia (Papi, 1967)
nomiques et sociales (Géhanne, 1995) aims at highlighting the consolidated system of
Index of dictionaries and dictionary entries cited 669
knowledge 36; FLUTTUAZIONE ECONOMICA Fascista delle Aziende del Credito e della
546 Assicurazione, 1942) 31
Dizionario di economia (Ricossa, 1982) CICLO ECONOMICO 146
CICLO 160 Enciclopedia del negoziante (Antonelli, 1841) 4
Dizionario di economia politica (de Luca et al., CRISI COMMERCIALI E INDUSTRIALI 119, 193,
2006) 260; superficial and lacking a treatment of
CRISI ECONOMICA 546 theoretical and practical economics (Boccardo)
Dizionario di economia politica (Lunghini, 249
1982–90) 497, 547 Enciclopedia delle scienze sociali (Bedeschi,
CICLO 77, 101, 148, 489; CRISI 89, 160, 391, 1991–2000) 41
539–544; on the historical nature of economic CICLI ECONOMICI 101, 490; CONGIUNTURA
knowledge 12 (reflected in the microstructure ECONOMICA 97; CRISI ECONOMICA E
22, 36); PRESENTAZIONE 22; word-list is FINANZIARIA 89, 163, 538–539
thematically arranged 22, 36 Enciclopedia di amministrazione, industria e
Dizionario di economia politica (Napoleoni, commercio (Cerboni, 1891–1905) 29
1956) 35 Enciclopedia di amministrazione, ragioneria,
aimed not at defining concepts once and for commercio, banca, borsa (Monetti,
all, but at delineating the main problems of 1933–44) 30
contemporary economics 36; FLUTTUAZIONI Enciclopedia economica (Predari, 1860)
ECONOMICHE 150–151, 163; uses the Marxis CRISI COMMERCIALE 119
method of criticism of political economy Enciclopedia Einaudi (Ruggiero, 1977–1984)
13 CICLO 161–162; CRISI 547
Dizionario di geografia universale (Marmocchi, Enciclopedia española del siglo XIX (1842–45)
1854–62) 249 236
Dizionario di Politica (Bobbio and Matteucci, Enciclopedia Espasa-Calpe (1908–30) 225
1976) entries related to economic crises focused on
CRISI 535 the social consequences of depressions 225
Dizionario di politica (Partito Nazionale Enciclopedia italiana di scienze, lettere ed arti
Fascista, 1940) (1929–39)
commissioned by the Italian fascist government CRISI ECONOMICHE 88, 109, 145
13; CRISI ECONOMICA 77 Enciclopedia moderna (1851–55) 225, 226–227,
Dizionario Marx Engels (Papi, 1976) 43 229
Dizionario universale di economia politica e di BANCOS 230, 234; BANCOS DE DESCUENTO
commercio (Boccardo, 1875–77) 251 230; BANCOS EXTRANJEROS 229; carries more
CRISI 259–260 than 100 anonymous economic entries
Dizionario universale di economia politica e di 226–227; CIRCULACIÓN 230; CRÉDITO 225,
commercio (Boccardo, 1881–82) 251 229, 231–236; CRISIS COMERCIAL 193, 225,
CRISI 259–260 229–236; ECONOMÍA POLÍTICA 233; ESPAÑA
Dovidnyk bazovych terminiv ta ponjat z 229; promotes the spreading of technical and
mikroekonomiky (Sluchaj, 1998) 42 ideological knowledge in order to strengthen
the liberal order 226; PUERTOS FRANCOS 229
Economia e storia: see Mondo contemporaneo, Enciclopedia práctica de economía (Prado,
Il. Enciclopedia di storia e scienze sociali 1983–84) 36
(Carmagnani and Vercelli, 1978) Enciklopedicheskii slovar’ (Brockhaus-Efron,
Economía Planeta. Diccionario enciclopédico 1890–1907) 343–345, 358
(Martínez Cortina, 1988) 36 ADAM SMITH 346; AGRICULTURAL SCIENCe
Economic thought since Keynes. A history and 345; an enduring and widely-used scientific and
dictionary of major economists (Beaud and historical source 344; BANKS 345; based on
Dostaler, 1995) 44 Brockhaus-Konversationslexikons, but adapted
Ekonomicheskaya entsiklopediya (Rumjancev, to the education needs of the Russian public
1972–80) 52 343; CARL MENGER 346; CARTEL 345;
KONYUS, A. A. 403 COMMUNAL LAND OWNERSHIP 345; COM-
Elgar companion to post Keynesian economics PETITION 345, 346; ECONOMIC CRISES 9, 82,
(King, 2003) 43 145, 345, 346, 346–350, 402; ECONOMIC
BUSINESS CYCLES 107; UNDERCON- GOOD 345; ECONOMIC SCIENCE 345, 346;
SUMPTION 65 FINANCIAL SCIENCE 345; FROM THE EDITORS
Enciclopedia bancaria (Confederazione 343–344; INTEREST 345; JEAN-FRANÇOIS
670 Index of dictionaries and dictionary entries cited
MELON 346; JOHN STUART MILL 346; separates a Propædia, a Micropædia and a
MERCIER DE LA RIVIÈRE 346; POLITICAL Macropædia 11, 22, 23
ECONOMY 345; political economy was well Encyclopædia Britannica (online edition, 2010)
represented 344; PREFACE 343; PRICES 345; 342
PROFIT 345; RENT 345; RUSSIA 345, 346; BUSINESS CYCLE 107; DICTIONARY 21;
STATISTICS 345; THOMAS MALTHUS 346; ENCYCLOPÆDIA 7, 21, 24; on the fragmen-
VALUE 345; WAGE 345 tation of knowledge 7
Enciklopedicheskii slovar’ (New Brockhaus- Encyclopedia of banking and finance (Munn et
Efron, 1911–16) 344 al., 1962)
ECONOMIC CRISES 9, 82, 345, 351–352 BUSINESS CYCLE 146
Enciklopedicheskii slovar’ (Small Brockhaus- Encyclopedia of banking and finance (Munn,
Efron, 1907–1909) 344, 358 1924) 30
ECONOMIC CRISES 9, 82, 345, 350 BUSINESS CYCLE 77, 97; CRISIS 88
Encyclopaedia Americana (Lieber, 1829–35) 14 Encyclopedia of banking and finance (Munn,
CREDIT 18, 64 1993)
Encyclopaedia Metropolitana (1817–45) BUSINESS CYCLE 97
Coleridge’s prospectus for a methodic Encyclopedia of business (Maloni, 2000) 30
arrangement 23; POLITICAL ECONOMY 17 Encyclopedia of business and finance (Bowers,
ENCYCLOPAEDIA OF THE SOCIAL SCIENCES 2001)
(Seligman, 1930–35) 41, 411–413 BUSINESS CYCLE 505, 507, 517, 519
ABSENTEE OWNERSHIP 413; BOOM 415, 416; Encyclopedia of business and finance (Kaliski,
BUBBLES, SPECULATIVE 72, 415, 416; 2001) 30
BUSINESS CYCLES 9, 62, 99–100, 109, 145, ECONOMIC CYCLES 62
414–418, 420; choice and supervision of Encyclopedia of business in today’s world
contributors 10; CONJUNCTURE 9, 96, 160, (Wankel, 2009) 30
404, 415, 416; COQUELIN, CHARLES 221; BUSINESS CYCLES 98
CREDIT 9; CRISES 9, 88, 415, 416, 530; Encyclopedia of economics (Greenwald, 1982)
ECONOMIC INCENTIVES 413; entries were 36
meant to cover the historical background of Encyclopedia of finance (Lee and Lee, 2006)
social phenomena rather than giving a definite BUBBLE THEORY (of speculative markets) 73
theoretical systematization 413; has a general Encyclopedia of governance (Bevir, 2007)
institutionalist tone 425; INSTITUTION 413; BUSINESS CYCLE 122, 154; POLITICAL
LEXIS, WILHELM 383; MACLEOD, HENRY BUSINESS CYCLE 480
DUNNING 289; offsets fragmentation of entries Encyclopedia of Keynesian economics (Cate,
by means of surveys and historical articles 7; 1998) 43
OVERHEAD COSTS 413; OVERPRODUCTION 9, Encyclopedia of law and economics (Bouckaert
137, 393; pluralistic approach 413; project and de Geest, 2000) 42
launched by seven leading American profes- Encyclopedia of law and society (Clark, 2007)
sional associations 411; prominent space to TAXES, SOCIOLOGY OF 475
biographical essays 413; reflects the growing Encyclopedia of macroeconomics (Snowdon
interest in interdisciplinary work and the and Vane, 2002) 42
increasing demand for social sciences 411; BUSINESS CYCLE 100; BUSINESS CYCLES—
soon became the standard reference source 413; AUSTRIAN APPROACH 153; BUSINESS
strong international bent, thematically and as CYCLES—KEYNESIAN APPROACH 153;
to the choice of contributors 413 BUSINESS CYCLES—MARXIAN APPROACH
Encyclopaedic dictionary of economics 153; BUSINESS CYCLES—MONETARIST
(Dinakar, 2009) 52 APPROACH 153; BUSINESS CYCLES—NEW
Encyclopaedic dictionary of economics CLASSICAL APPROACH 153, 504, 512;
(Ghodke, 1985–86) 52 BUSINESS CYCLES—POLITICAL BUSINESS
Encyclopaedic dictionary of economics (Pande CYCLE APPROACH 153, 467, 472, 477;
and Mithani, 1994) 52 BUSINESS CYCLES—REAL BUSINESS CYCLE
Encyclopædia Britannica (1768–1781) 4, 14 APPROACH 153, 516, 520, 521, 522;
Encyclopædia Britannica (1824 supplement) SPECULATIVE BUBBLES 74
BANKING 61, 104 Encyclopedia of political economy (O’Hara,
Encyclopædia Britannica (1838) 1999) 481
PAPER-MONEY, BANKS 18 aims at reviving the ‘political economy’
Encyclopædia Britannica (1952) tradition 37; BUSINESS CYCLE THEORIES 107,
Index of dictionaries and dictionary entries cited 671
158, 453; CYCLICAL CRISIS MODEL 534; Encyclopédie méthodique ou par ordre de
GOODWIN CYCLE AND PREDATOR-PREY matières (Panckoucke, 1782–1832) 10, 29,
MODELS 9; HARROD’S INSTABILITY PRIN- 30, 167, 239
CIPLE AND TRADE CYCLES 163; NUT- Encyclopédie méthodique. Commerce (Bau-
CRACKER THEORY OF THE BUSINESS CYCLE deau, 1783–84) 10, 29
9; POLITICAL BUSINESS CYCLES 468, 477, Encyclopédie méthodique. Economie politique
481 et diplomatique (Démeunier, 1784– 10
Encyclopedia of public choice (Rowley and Encyclopédie méthodique. Finances (Surgy,
Schneider, 2004) 1784–87) 10, 30
ARE VOTE AND POPULARITY FUNCTIONS Encyclopédie moderne (1824–32) 167
ECONOMICALLY CORRECT? 480; POLITICAL Encyclopédie moderne (1847–52) 227
BUSINESS CYCLES 468 Encyclopédie nouvelle (1835–42)
Encyclopedia of public relations (Heath, 2005) COMMERCE 172; considered a socialist
CHAOS AND COMPLEXITY THEORY 495 compendium 168
Encyclopedia of Russian history (Millar, 2004) Encyclopédie oeconomique (de Félice, 1770–71)
KONDRATIEV, NIKOLAI DMITRIEVICH 459 CYCLE OU CICLE 121; mainly concerned with
Encyclopedia of small business (Darnay and agriculture and home economics 28
Magee, 2007) Encyclopédie pittoresque à deux sous (1834) 168
BUSINESS CYCLES 506, 509 Encyclopédie pratique du commerce, de l’in-
Encyclopedia of small business (Hillstrom, dustrie et de la finance (Gilis, 1907–08)
2002) 30 CRISES 120
Encyclopedia of small business (Hillstrom, Encyclopédie théologique (Migne, 1845–66) 11,
2007) 40, 42, 168, 238–239, 246
BUSINESS CYCLES 78 aimed at harmonizing traditional religious
Encyclopedia of social reform (Bliss, 1897) 40 thinking with the recent growth of scientific
CRÉDIT MOBILIER 62; CRISES (COMMERCIAL knowledge 238; organized methodically 239
AND MONETARY) 76, 85, 104; OVER- Encyclopedie van de bedrijfseconomie (Mey et
PRODUCTION 137 al., 1969–1971) 427
Encyclopedia of the Great Depression Encyclopedie van de economie (Hartog and
(McElvaine, 2004) 43 Devreker, 1979) 437
Encyclopédie catholique (1839–1849) 168, 239 Encyclopedie voor de zakenman (Stridiron,
Encyclopédie de banque et de bourse (François- 1956) 427
Marsal, 1928–30) 31 aimed at the practical businessman 428
Encyclopédie des gens du monde (1833–44) 167 Encyclopédie, ou Dictionnaire raisonné des
CRISE COMMERCIALE 80, 119, 135, 154, 169, sciences, des arts et des métiers (Diderot
177–189, 218, 254, 261; DISCOURS PRÉ- and d’Alembert, 1751–72) 4, 10, 14, 28, 29,
LIMINAIRE 14 32
Encyclopédie du commerçant. Dictionnaire du CYCLE 121; supported atheistic materialism 13
Commerce et des marchandises Encyklopädie der Staatswissenschaften (Bülau,
(Guillaumin, 1837–39) 4, 167, 209, 230, 1832) 40
235, 236 Encyklopädie der Staatswissenschaften (Mohl,
CRÉDIT 232–233; CRISE COMMERCIALE 83, 1859)
119, 154, 175, 178–189, 218, 230–231, 261; interpreted economics and other social sciences
originally meant to adapt McCulloch’s as part of a broad disciplinary context including
Dictionary 29, 193 law, politics etc. 386
Encyclopédie du dix-neuvième siècle (1838–53) Encyklopädie der Staatswissenschaften (Mohl,
a Catholic encyclopedia 168, 239; CRISE 1872) 40
COMMERCIALE 83, 119, 169, 178–189, 218; Encyklopädie der Staatswissenschaften für
MALTHUS 246 Deutsche (Rinne, 1846) 40
Encyclopédie économique (Greffe et al., 1990) Entsiklopedicheskii slovar’ Russkogo Biblio-
aimed at undergraduate students, thematically graficheskogo Instituta Granat (1910–48)
arranged 35; FLUCTUATIONS ET CROISSANCE 344, 401–402
155 ECONOMIC CONJUNCTURE 97, 401, 404–408;
Encyclopédie élémentaire du XIXe siècle (1843) mixed methodic and alphabetical arrangement
14 11, 402; publication period encompassed both
Encyclopédie française (Febvre and Berger, the Tsarist and Soviet eras 401
1937–66) 11, 52 Eröffnete Akademie der Kaufleute, oder
672 Index of dictionaries and dictionary entries cited
vollständiges Kaufmanns-Lexicon (Ludo- Grande dizionario enciclopedico (1933–39)
vici, 1752–56) 28 CRISI ECONOMICHE 88
Europe since 1914. Encyclopedia of the age of Grande Encyclopédie (1886–1902) 167, 320–321
war and reconstruction (Merriman and a work of noble popularization 330; aimed at
Winter, 2006) systematizing knowledge 24, 321; BANQUE
KONDRATIEFF, NIKOLAI (1892–1938) 451, 322; CRÉDIT 322; CRISE 76, 83, 85, 327;
459 DREYFUS (FERDINAND-CAMILLE) 322;
Evangelisches Staatslexikon (Herzog et al., ÉCONOMIE POLITIQUE 322; LAVELEYE
1987) (EMILE) 322; positivist epistemological project
KONJUNKTURTHEORIE 160 320; PRÉFACE 320–321, 330
Everyday terms in economics (Janzen, 1941) 52 Great depression and the New Deal, a thematic
encyclopedia (Leab, 2010) 43
Fontana dictionary of modern thought (Bullock Great Soviet encyclopedia: see Bolshaya
and Trombley, 1988) sovetskaya entsiklopediya
TRADE OR BUSINESS CYCLE 99, 107 Grundbegriffe der Mikroökonomie (Oberender,
Fortune encyclopedia of economics (Henderson, 1985) 42
1993)
BUSINESS CYCLES 77, 95, 106 Handbook of economic terms (Horton, 1935) 35
Handwörterbuch der Arbeitswissenschaft
Gablers Wirtschaftslexikon (online edition) (Giese, 1927–30) 42
24 KONJUNKTUR UND KONJUNKTURFOR-
structure of cross-references depicted graphi- SCHUNG 98; KRISE UND ARBEIT (DYNA-
cally 39 MISCH DARGESTELLT) 88
Gablers Wirtschafts-Lexikon (Sellien and Handwörterbuch der Betriebswirtschaft
Sellien, 1956) 38 (Nicklisch, 1926–28)
KONJUNKTUR 121; KONJUNKTURTHEORIEN KONJUNKTUR UND KRISEN 86, 96
146; KONJUNKTURWELLEN 122; KONJUNK- Handwörterbuch der Betriebswirtschaft
TURZYKLUS 122 (Nicklisch, 1939)
Gale encyclopedia of U.S. economic history WIRTSCHAFTSSCHWANKUNGEN 122
(Carson and Bonk, 1999) Handwörterbuch der Finanzwirtschaft
FINANCIAL PANIC 69; PANIC OF 1837 69; (Büschgen, 1976) 31
PANIC OF 1907 69; PANIC OF 1919 69; PANICS Handwörterbuch der mathematischen Wirt-
OF THE LATE NINETEENTH CENTURY 69; schaftswissenschaften (Beckmann et al.,
RECESSION 110; STOCK MARKET CRASH OF 1979) 42
1929 69 Handwörterbuch der Sozialwissenschaften
Gegenwart. Eine encyklopädische Darstellung (Beckerath, 1956–68) 38, 41, 375, 386
der neuesten Zeitgeschichte für alle Stände for decades the leading handbook in Germany
(Brockhaus, 1848–56) 198 375; HERKNER, HEINRICH 372; KONJUNKTUR
DIE PRODUCTIONSKRISEN MIT BESONDERER (I) THEORIE 159; KONJUNKTUR (II) POLITIK
RÜCKSICHT AUF DIE LETZTEN JAHRZEHNTE 64; LEXIS, WILHELM 383
82, 84, 119, 177, 197, 200–206, 218, 312–313, Handwörterbuch der Staatswissenschaften
536 (Conrad et al., 1890–95) 40, 374
General dictionary of commerce, trade and aimed at contributing to the process of
manufactures (Mortimer, 1810) 29, 250 modernization of German society 386; belongs
Geschichtliche Grundbegriffe (Brunner 1982) to the context of classical liberalism, without
41 supporting any party 386; for decades the
KRISE 536–537 leading handbook in Germany 375; gave
Granat encyclopedic dictionary: see Entsiklo- economics and socials sciences pride of place
pedicheskii slovar’ Russkogo Bibliografi- among Staatswissenschaften 386; KRISEN 64,
cheskogo Instituta Granat 76, 82, 85, 86, 138, 361–362, 366–372, 375,
Grand dictionnaire universel du XIXe siècle 388; the highest point of economic studies in
(Larousse, 1865–90) 13 19th century Germany (Schmoller) 385;
anti-clerical 13; criticized as subversive by ÜBERPRODUKTION 361, 380; VORWORT 386
the editors of the Grande Encyclopédie Handwörterbuch der Staatswissenschaften
(1886–1902) 330 (Conrad et al., 1898–1901) 374, 386
Grand Robert de la langue française KRISEN 86, 138–139, 314, 361–362, 369,
CYCLE 90; DÉTRESSE 59; EMBARRAS 61 370–372, 388
Index of dictionaries and dictionary entries cited 673
Handwörterbuch der Staatswissenschaften 22; BUSINESS CYCLES, POLITICAL 22, 469,
(Conrad et al., 1909–11) 374, 386 473; BUSINESS CYCLES, REAL 22, 506, 513,
ERNTEN (ERNTZYKLUS UND WIRTSCHAFTS- 516, 517, 519, 522; BUSINESS CYCLES,
ZYKLUS) 159; KRISEN 86, 138–139, 361–362, THEORIES 22, 158; BUTTERFLY EFFECT 495;
370–372, 388 CHAOS THEORY 495, 498; COBWEB CYCLES
Handwörterbuch der Staatswissenschaften 22; ECONOMIC CRISES 22, 70; GREAT TULIP
(Elster, 1923–29) 38, 41, 375, 385–387 MANIA 22; INTERNET BUBBLE 22, 73;
IN MEMORIAM 383, 387; KONJUNKTUR- INTRODUCTION 23; LONG WAVES 22;
FORSCHUNG UND KONJUNKTURPOLITIK 87, NONLINEAR SYSTEMS 22, 494; OVER-
146–147; KRISEN 9, 86, 120, 140, 362, 371, PRODUCTION 22; PANIC 22; PANICS 22, 70;
375, 388–397; VORWORT 387 PONZI SCHEME 22; RECESSION 110; SOUTH
Handwörterbuch der Volkswirthschaftslehre SEA BUBBLE 22; SPECULATION 118; STAG-
(Rentzsch, 1866) 386 NATION 22, 62, 65; UNDERCONSUMPTION 22
committed to the making of the bourgeois International encyclopedia of the social sciences
society 307; its task and audience defined 33, (Sills, 1968) 24, 41, 418–420
307; KRISEN 84, 136, 162, 313–318, 371; a purely commercial enterprise 419;
viewpoint of the Manchester liberalism 33, Biographical supplement 43, 420; BUSINESS
307; VORWORT 15, 307–308 CYCLES, GENERAL 78, 109, 420–423, 547;
Handwörterbuch der Volkswirtschaft BUSINESS CYCLES, MATHEMATICAL MODELS
(Glastetter, 1978) 38 148, 420, 423–425; CRISIS 535; decentralized
KONJUNKTURTHEORIE 38 approach 419; emphasis on formalism,
Handwörterbuch der Volkswirtschaft mathematical methods and the methodological
(Glastetter, 1980) unification of all social sciences 419; epis-
KONJUNKTURTHEORIE 160, 488 temological project 419–420; KONDRATIEFF,
Handwörterbuch der Wirtschaftswissenschaft N. D. 445, 446, 447, 448, 450, 451, 452, 459;
(Albers and Zottmann, 1977–1983) 41, 386 LEXIS, WILHELM 383; more theoretical
KONJUNKTURTHEORIE 64, 152, 467, 477, 481, and analytical than the Encyclopaedia of the
487; thematic arrangement within the social sciences (Seligman, 1930–35) 419;
alphabetical organization of the materials 38; STAGNATION 62, 65
WIRTSCHAFTSKRISEN 531
Handwörterbuch des Bank- und Finanzwesens Johnson’s new universal cyclopædia (1893–97)
(Gerke, 1995) 31 COMMERCIAL CRISES 69, 85
Handwörterbuch des Bankwesens (Palyi and
Quittner, 1933) 31 Katholisches Soziallexikon (Klose, 1964)
KONJUNKTURTHEORIE 122, 157; KONJUNK- explicitly Catholic 13; KONJUNKTUR UND
TURZYKLUS 122 KRISE 65, 98, 122, 531
Handwörterbuch des Kaufmanns (Bott, Keizai-Daijisho (Dōbun-Kwan, 1910–16) 34
1925–26) Keizaigaku-Jiten (Ōsaka Shōka Daigaku Keizai
KONJUNKTUR 86, 122; KRISEN 86 Kenkyūjo, 1930–36) 34
Helping yourself to understand economics Keizaigaku-Jiten (Ōsaka Shōka Daigaku Keizai
(Wilson, 1947) 52 Kenkyūjo, 1954) 52
Herders Conversations-Lexikon (1854–57) Kokumin keizai jiten (Takahashi, 1933) 35
a Catholic encyclopedia 13 Kompakt-Lexikon Umwelt- und
Wirtschaftspolitik (Olsson and
International encyclopedia of economics Piekenbrock, 1993) 42
(Magill, 1997) 36
International encyclopedia of organizational Land, labor, and wealth, a handbook of eco-
studies (Clegg and Bailey, 2006) nomic terms (Winsor and Windsor Evans,
LONG-WAVE THEORY 66, 453 1942) 42
International encyclopedia of the social & Le marxisme (Livre de Poche, 1976) 43
behavioral sciences (Smelser and Baltes, Lexicon of economics (Deane and Kuper, 1988)
2001) 41 BUSINESS CYCLES 106, 492; ECONOMIC
International encyclopedia of the social sciences DYNAMICS 493; FINANCIAL CRISES 73, 547
(Darity, 2008) 16, 41, 481 Lexikon der Volkswirtschaft (Geigant et al.,
DEPRESSION, ECONOMIC 22, 78; BUBBLES 22, 1975) 37
73, 118; BULL AND BEAR MARKETS 22; KONJUNKTURZYKLUS 122
BUSINESS CYCLES, EMPIRICAL LITERATURE Lexikon der Volkswirtschaft, über 2000 Begriffe
674 Index of dictionaries and dictionary entries cited
für Studium und Beruf (Holstein et al., STAGNATION, THEORY OF 65; TRADE CYCLE
2000) 98 77, 122, 146
Lexikon soziale Marktwirtschaft (Hasse, 2002) New dictionary of the history of ideas (Horowitz,
43 2005)
Lexique d’économie (Albertini et al., 1992) CRISIS 547
CRISE. CRISE ÉCONOMIQUE 529; CYCLE 123, New dictionary of trade and commerce (Rolt,
530 1756) 29
Lexique du calcul économique et de New encyclopedia of social reform (Bliss, 1908)
l’économétrie (Olmi and July, 1970) 42 40
CRISES (COMMERCIAL AND MONETARY) 69
Malaia Sovetskaia Enziklopedia 443 New Palgrave dictionary of economics (Durlauf
Marukusu keizaigaku jiten (Miyakawa, 1965) and Blume, 2008) 15, 37, 42
43 BANKING CRISES 22, 70; BANKRUPTCY,
Marx-Lexikon zur politischen Ökonomie ECONOMICS OF 22; BUBBLES 74, 118;
(Kuruma, 1973) 43 BUBBLES IN HISTORY 73; BUSINESS CYCLE
McGraw-Hill dictionary of modern economics MEASUREMENT 22; CHAOTIC DYNAMICS IN
(Greenwald, 1983) 52 ECONOMICS 22; COBWEB THEOREM 22;
SECULAR-STAGNATION THESIS (MATURE- CREDIT CYCLE 22; CURRENCY CRISES 22;
ECONOMY THESIS) 65 CURRENCY CRISES MODELS 22; ECONOMIC
Men and ideas in economics. A dictionary of GROWTH NONLINEARITIES 498; GREAT
world economists, past and present (Mai, DEPRESSION 22, 534; GREAT DEPRESSION
1975) 43 (MECHANISMS) 22, 534; GREAT DEPRESSION,
Meyers Handbuch über die Wirtschaft (Eifert MONETARY AND FINANCIAL FORCES IN 22;
et al., 1974) GROWTH AND CYCLES 22; houses different
KRISE 531 views on some topics, sometimes incon-
Meyers Handbuch über die Wirtschaft (Preuss sistently 22; INTERNATIONAL REAL BUSINESS
and Bachert, 1966) 37 CYCLES 506, 507, 512; KONDRATIEFF CYCLES
KONJUNKTURTHEORIEN 37 22, 66, 444, 445, 448, 449, 450, 453, 457, 459;
Meyers Konversationslexikon (1839–52) KUZNETS SWINGS 22; MACROECONOMICS,
HANDELSKRISIS 83, 119, 218 ORIGINS AND HISTORY OF 107; MONETARY
Meyers Konversationslexikon (1885–92) BUSINESS CYCLE MODELS (STICKY PRICES
HANDELSKRISIS 82 AND WAGES) 22; MONETARY BUSINESS
Mises made easier. A glossary for Ludwig von CYCLES (IMPERFECT INFORMATION) 22;
Mises Human action (Greaves, 1974) 43 MULTIPLIER-ACCELERATOR INTERACTION
Mondo contemporaneo, Il. Enciclopedia di storia 22; PALGRAVE, ROBERT HARRY INGLIS
e scienze sociali. Vol. VIII, Economia e 341; POLITICAL BUDGET CYCLES 22, 471;
storia (Carmagnani and Vercelli, 1978) POLITICAL BUSINESS CYCLES 22, 469,
CRISI ECONOMICHE, IL NOVECENTO 65, 152, 470, 479; REAL BUSINESS CYCLES 22;
533; CRISI ECONOMICHE, L’OTTOCENTO SCHUMPETER, JOSEPH ALOIS (1883–1950)
101, 162, 446, 453, 546; FLUTTUAZIONI 453; SPECULATIVE BUBBLES 74; TRADE
ECONOMICHE 151 CYCLE 22, 66, 498; UNDERCONSUMPTIONISM
22
Nationalökonomie (Theorie u. Geschichte) New Palgrave dictionary of economics (Eatwell
(Heller, 1926) 35 et al., 1987) 11, 15, 221, 481
KRISENTHEORIE 145 DEPRESSIONS 78; broken down in 10 thematic
Neue deutsche Biographie (1985) volumes 23; BUBBLES 73; BUSINESS CYCLES
LEXIS, WILHELM 383 7, 100, 498, 501, 510, 513, 514, 518, 519, 520;
Neuestes Universal-Lexicon der gesammten CRISES 546; FINANCIAL CRISIS 533; GROWTH
Kaufmännischen Wissenschaften (Fort AND CYCLES 498, 514; houses different views
1852) 29 on some topics, sometimes inconsistently 22,
New and complete dictionary of arts and sciences yet found to be biased 13, 37; KONDRATIEFF
(1763–64) CYCLE 444, 445, 449, 450, 452; KONYUS, A.
CYCLE 121 A. 404; LEXIS, WILHELM 383; LONG CYCLES
New and complete dictionary of trade and 453, 456; LONG SWINGS IN ECONOMIC
commerce (Mortimer, 1766–67) 29, 52 GROWTH 445, 452, 454, 456, 457; POLITICAL
ASSIENTO 58; BUBBLES 71 BUSINESS CYCLE 466, 477, 479; POLITICAL
New dictionary of economics (Taylor, 1966) ECONOMY 52; PREDATOR-PREY MODELS 498;
Index of dictionaries and dictionary entries cited 675
PREFACE 22, 24; seeks an historical approach PERIODIC 122; RECESSION 108; STAGNATION
24; STAGNATION 65; TRADE CYCLE 7, 490 62, 118
New Palgrave dictionary of economics and the
law (Newman, 1998) 42 Penny cyclopaedia (1833–46) 14, 40
New Palgrave dictionary of economics online Pensée économique depuis Keynes. Historique
(2011) 24, 38 et dictionnaire des principaux auteurs
lacks an organized macrostructure 39, 52; (Beaud and Dostaler, 1993) 43
Trade cycle 52 Petit dictionnaire politique et social (Block,
New Palgrave dictionary of money and finance 1896) 40, 267
(Newman et al., 1992) 31 a more affordable version of the Dictionnaire
LENDER OF LAST RESORT 305 général de la politique (Block, 1863–64) 283;
Nobel laureates in economic sciences. A CRISES COMMERCIALES 283; PRÉFACE 283
biographical dictionary (Katz, 1989) 44 Piccola enciclopedia di banca e borsa
Nouveau dictionnaire d’économie politique (Say (D’Andrea, 1934) 31
and Chailley, 1891–92) 33, 211, 266, 267, Pierers Universal-conversations-lexikon
269–272 (1857–66)
CRISES COMMERCIALES 9, 84, 273–274, HANDELSKRISIS 83, 119
279–283, 443; favourably received 271; Pierers Universal-conversations-lexikon
INTRODUCTION 6–7, 269, 269–271; upheld (1888–93)
and propagated the viewpoint of the French HANDELSKRISIS 81
Liberal school 13, 270–271 Pitman’s Business Man’s Encyclopaedia and
Nouveau dictionnaire d’économie politique (Say dictionary of commerce (Cole 1927)
and Chailley, 1900) 35, 211 COMMERCIAL CRISIS 76, 120
Nouveau dictionnaire d’économie politique, Pitman’s business man’s guide (Slater, 1903) 30
Supplement (Say and Chailley, 1897) 269 Pitman’s businessman’s guide (Slater, 1907)
PRÉFACE 269; SAY (LÉON, JEAN-BAPTISTE) PANICS 69
269 Pitman’s commercial encyclopædia and dic-
Nuova enciclopedia italiana (1875–88) tionary of business (Slater 1912–13) 4, 30
BANCO 193; CREDITO 193; CRISI COM- Political dictionary (Long, 1845–46) 14, 40
MERCIALE 119, 192, 254 DEMAND AND SUPPLY 58; DISTRESS 60;
Nuova enciclopedia popolare italiana (1841–49) MONEY 103, 134
CRISI COMMERCIALE 119, 192, 254 Politicheskaya ekonomiya: slovar’ (Volkov,
Nuova enciclopedia popolare italiana (1856–75) 1981) 52
CRISI COMMERCIALE 192 Politician’s dictionary (Allen, 1775) 39
Nuovo dizionario di economia (De Luca, 2000) Politisches Handwörterbuch (Herre and Jagow,
CICLO ECONOMICO 153 1923)
Nuovo dizionario di economia (Mori, 1989) 5 WIRTSCHAFTSKRISEN 120
Popular encyclopaedia (Whitelaw, 1834–1842)
Ökonomen-Lexikon (Hesse, 2003) 44 4, 14
Ökonomie (Frenzel, 1973)
KONJUNKTUR UND KRISE 65, 531 Reales Staats- und Zeitungs-Lexicon (1704)
Ökonomisches Lexikon (Bader, 1967) dedicated to newspapers readers 15; the first
political economy from the perspective of a conversation-lexicon 24
socialist country 37 Répertoire général d’économie politique
Ökonomisches Lexikon (Bader, 1970–71) 533 ancienne et moderne (Sandelin, 1846–48)
KONJUNKTURTHEORIE 532; KRISE, a collection of articles already appeared in
ZYKLISCHE 532; KRISENZYKLUS 532; periodical publications 32, 209
PERIODIZITÄT DER KRISEN 532 Routledge encyclopedia of international political
Ökonomisch-Technologische Enzyklopädie economy (Jones, 2001) 37, 42
(Krünitz, 1773–1858) 23 BUSINESS CYCLES 101; CRISIS THEORY 546,
incoherent macrostructure 23; the largest ever 547; KONDRATIEFF WAVES 443; LONG
printed general purpose encyclopedia 23, 28 CYCLES 453, 456
Oxford English dictionary 54
DEPRESSION 74, 118; BUBBLE 70; Saikin keizai mondai kaisetsu (Ichikawa, 1939)
CONJUNCTURE 96; CRISIS 78; CYCLE 90, 121; 35
DISTRESS 59; EMBARRASSMENT 60; Shinshū Keizaigo jiten (Ōsaka Mainichi
FLUCTUATION 102; GLUT 57; PANIC 66; Shinbun Keizaibu, 1933) 35
676 Index of dictionaries and dictionary entries cited
Social science encyclopedia (Kuper and Kuper, MODELLE 531; KONJUNKTURTHEORIEN 38,
1985) 154, 508, 531; MARXISTISCHE KRISEN-
BUSINESS CYCLES 78, 148 THEORIEN 531
Social science encyclopedia (Kuper and Kuper, VNR dictionary of business and finance
2004) (Brownstone et al., 1980)
BUSINESS CYCLES 100 BUBBLE 73
Spravocnik ekonomista-mezdunarodnika Vocabulaire économique et financier (Bernard
(Volosin et al., 1990) 42 and Colli, 1976) 31
St. James Encyclopedia of Banking and Finance Vocabulaire économique et social (Action
(Munn et al., 1993) 30 populaire, 1909)
BUSINESS CYLE 77, 146 CRISE 120
Staats- und Gesellschafts-Lexikon (Wagener, Vocabulaire pratique des sciences sociales
1859–67) 40 (Birou, 1966)
KRISEN 83 CRISE 528; CRISE ÉCONOMIQUE 528; CYCLES
Staatslexicon in einem Bande (Baumstark, ÉCONOMIQUES 101, 528
1852) 40 Vocabulario de la economia (Piernas y Hurtado,
Staatslexikon (Bruder and Bachem, 1889–97) 1877)
KRISEN 76; meant to cunterbalance Rotteck’s attacks liberal views 15, 33; CRÍSIS
liberal Staatslexikon 13, 40 ECONÓMICAS 81, 119; first dictionary
Staatslexikon (Görres-Gesellschaft, 1957–63) addressed to students 15; MISERIA 236;
41 PAUPERISMO 236; POBREZA 236
WIRTSCHAFTLICHE KONJUNKTUREN 98, 121,
147 Who’s who in economics (Blaug, 1983) 43, 221
Staatslexikon (Görres-Gesellschaft, 1985–93) Wikipedia 23, 38
KONJUNKTUREN 98, 100 lacks a macrostructure 22
Staatslexikon (Sacher et al., 1929) Wirtschaftslexikon. Über 4000 Stichwörter für
KONJUNKTUR U. KRISEn 77, 87, 122, 160 Studium und Praxis (Rittershofer, 2000)
Staats-lexikon. Encyklopädie der sämmtlichen 37
Staatswissenschaften (Rotteck and Wörterbuch der Ökonomie-Sozialismus
Welcker, 1834–43) 4, 219 (Luchterhand et al., 1967) 43
inspired by liberal ideas 13, 40 Wörterbuch der Volkswirtschaft (Elster, 1898)
Standard library cyclopaedia of political, 15
constitutional, statistical & forensic exerted the function of a hitherto non-existing
knowledge (Knight, 1848–49, 1853–60) 40 compendium of economics 375; explicitly
DISTRESS 60 non-partisan 13, 34; KRISEN 81, 85, 376,
378–383; primarily conceived for students 34,
Univers économique et social (Perroux, 1960) 375; ÜBERPRODUKTION 376, 378–383; VOR-
52 WORT 13, 34
AVANT-PROPOS 23; LE CYCLE DANS LE Wörterbuch der Volkswirtschaft (Elster,
DÉVÉLOPPEMENT 11; methodically arranged 1909–11)
11, 23 KRISEN 137
Universal dictionary of trade and commerce Wörterbuch der Volkswirtschaft (Elster,
(Postlethwayt, 1751–55) 28, 250 1931–33)
KONJUNKTUR, KONJUNKTURTHEORIE 87,
Vahlens großes Wirtschaftslexikon (Dichtl and 121, 122, 376; KRISEN 87, 140, 145, 376
Issing, 1993) 37 Wörterbuch der Wirtschaft (Bülow, 1936) 35
KONJUNKTUR 38, 531; KONJUNKTUR- KONJUNKTURBEWEGUNG 98, 122