Joseph Kitchin, 1861-1932, was a British statistician and businessman. In his “Cycles and Trends in Economic Factors”, 1923, he carried out a study on business cycles, in Britain and in the United States, between 1890-1922. Kitchin was able to identify evidences of the existence of very short business cycle, the so-called Kitchin cycle. These cycles have a duration of approximately 40 months, and he explained them as a result of psychological reactions to capitalistic production, and time lags in information, which affect the firms’ decision making process on commercial affairs. In other words, this cycle responded to the adjustment between supply and demand in terms of market necessity and firms response.
Joseph Kitchin
Clément Juglar
Joseph Clemént Juglar, 1819-1905, was, as his compatriot François Quesnay, a physician turned economist. In 1862 he published his masterpiece “Des crises commerciales et leur retour périodique en France, en Angleterre, et aux États-Unis” in which he analysed economic crises in France, England and the United States from a monetary perspective. He explained that periods of inflation and expansion are concluded when the central banking system contracts money supply. Although he was not the first to analyse and explain crises from such a point of view, he provided new ideas and perspectives.
Juglar was able to identify economic cyclical trends that helped develop the business cycle theory. He identified a medium economic cycle of between 7 and 11 years of duration, the so-called Juglar cycle. In this cycle one can identify trends in the investment levels and in unemployment.
Marcus Fleming
John Marcus Fleming, 1911-1976, was a Scottish economist and public servant who worked in many well-known international organizations, including the International Monetary Fund and the United Nations.
His contributions to Economics are mostly in the field of welfare economics, trade and exchange policies. Fleming and Robert Mundell both presented researches on stabilization policy in open economies, and about at the same time, which would end up forming the Mundell-Fleming model. Fleming´s model, depicted in his article “Domestic Financial Policies under Fixed and under Floating Exchange Rates”, 1962, was more realistic as it assumed imperfect capital mobility, and thus made this one a more rigorous and comprehensive model. However, nowadays, his model has lost cogency, as the actual world situation has more resemblance with total capital mobility, which corresponds better to Mundell’s view.
Eugen Slutsky
Eugen Slutsky, 1880-1948, was a Russian mathematician, statistician and economist. In economics he is best known for his formulation of the Slutsky’s equation. Slutsky found an equation that splits income and substitution effects based on Hicksian and Marshallian demand curves. He developed this equation on his “On the Theory of the Budget of the Consumer”, 1915.
Slutsky did not produce any other significant contribution to economics, but he did produce fruitful works regarding mathematical statistics and probability theory. He took special interest in the concept of asymptotic convergence in probability.
Video – Income and substitution effects:
Étienne Laspeyres
Ernst Louis Étienne Laspeyres, 1834-1913, was a German economist, statistician and Professor in various universities. His most notable contribution to economics was the development of the Laspeyres index, used for the formulation of weighted indexes, so that each product that are included in them, have their own weight according to their real importance in the production, consumption, etc. He wrote about it in his “Die Berechnung einer mittleren Warenpreissteigerung”, 1871.
Laspeyres also wrote quite an amount of papers in the fields of economic history, the history of economic thought and on economic issues concerning his time.
Video – Laspeyres index:
Say’s law
Say´s Law is a classical economics‘ principle attributed to the French economist Jean-Baptiste Say, and it holds the apparently simple statement that “products are paid for with products”, as Say puts it in his “Traité d’économie politique”, 1803. One of the implications of this statement is that there can be neither overproduction nor unemployment. Later, in 1808, Scottish economist James Mill (father of the renowned John Stuart Mill), rephrased it as “production of commodities creates […] a market for the commodities produced”, and J. M. Keynes would rephrase it (although whilst making a point against it) in his “General Theory”, 1936, as “supply creates its own demand”, which is the better known restatement.
This law became a central piece of the classical economics doctrine and even more important in neoclassical economics. However, Say’s Law was criticized by many. One of the first to refute this law was Robert Malthus, who found that capitalists did not reinvest all their profits, but instead tend to keep them. Keynes thoroughly criticized it during 1930s when it was clear that the law was not being satisfied, indicating that a preference for hoarding money on consumption could occur, in what was called as liquidity preference. This law would then be retaken by monetarism and in the New Classical Macroeconomics.
Jean-Baptiste Say
Jean Baptiste Say, 1767-1832, was a French economist and businessman, and considered as the French disciple of Adam Smith and one of the exponents of mercantilism and classical economics.
Say’s chief work “Traité d’économie politique”, 1803, gathered up many of the ideas of his French predecessors and Adam Smiths, systematizing this masterful treatise, which nevertheless includes many original contributions. Thanks to it he gained recognition in Europe and at the other side of the Atlantic.
However, Say’s most important contribution to Economics was his apparently simple formulation of the Say’s Law (1803) that states, “products are paid for with products”. Later, in 1808, Scottish economist James Mill (father of the renowned John Stuart Mill), rephrased it as “production of commodities creates […] a market for the commodities produced”, and J. M. Keynes would rephrase it (although whilst making a point against it) in his “General Theory”, 1936, as “supply creates its own demand”, which is the better known restatement.
Jean-Baptiste Say was in touch with many economists of his era and carried out moderate debates with them, he distinguished himself as a more policy-oriented economist rather than a model-builder like David Ricardo.
Joan Robinson
Joan Violet Robinson, 1903-1983, was a British economist and Professor at Cambridge University, and belonged to the Post-Keynesian doctrine. She was recognized as a contributor to Keynes‘ famous “The General Theory of Employment, Interest and Money”, 1936.
One of her first and most notorious contributions to economics was in the field of imperfect competition, which can be seen in her book “The Economics of Imperfect Competition”. Along with Chamberlin’s work, Robinson’s book is considered to be the foundations of market structure analysis.
Robinson is well known for her heterodox economic thoughts; especially for her receptivity for certain Marxist approaches. Her top work “The Accumulation of Capital”, 1956, extended Keynesianism by going ahead of the issues in the short-run and analysing the long-run issues of development, economic growth and capital accumulation.
Fiscal policy
Fiscal policies are demand-side economic policies through which the government acts over its income and expenditure in order to influence the levels of income, output and unemployment of the economy. The government may do this via income taxes and unemployment benefits, or by discretionary measures, such as taxes on spending and increasing public spending. By increasing demand, firms are incentivized to produce more and therefore to hire more workers.
Keynesianism believed fiscal policies as the best tool to control the economy of a country, especially to reduce cyclical unemployment. Monetarism and following economic doctrines as New Classical Macroeconomics and New Keynesian Economics consider them to be ineffective in the long run, as demand cannot be increased continually.
Monetary policy
Monetary policies are demand-side economic policies through which the central bank of a country acts on the amount of money and interest rates in order to influence on the income levels, output and unemployment in the economy, being the interest rate the link binding money and income. The main tools used by monetary policies are open market operations, loans to commercial banks, and the use of reserve requirements. Ceteris paribus, an increase (decrease) in the money supply or a decrease (increase) in interest rates will have a positive (negative) ripple effect on private spending (consumption and investment). This will finally increase (decrease) production and employment. However, this will increase prices, which may lead to rapidly increasing inflation.
Monetarism is the main economic doctrine that defended this kind of policy. However, Keynesianism, New Classical Macroeconomics and New Keynesian Economics, criticize it and do not believe in their effectiveness as it has been demonstrated that increasing money supply will result in inflation and counteracting the positive effects of this policy. As Milton Friedman said, “inflation is always and everywhere a monetary phenomenon”.