Illustrated Past

We know economists sometimes like to use past economists to construct a lineage to the current practice. They like the idea of progress and appreciate triumphal histories. In reading Schmitt-Grohé and Uribe’s paper, “What’s News In Business Cycles,” I came across the following sentence (p.1, but the paper does have a page 0):

The idea that changes in expectations about the future path of exogenous economic fundamentals may represent an important source of aggregate fluctuations has a long history in economics, going back at least to Pigou (1927). Recently, these ideas have been revived in an important paper by Beaudry and Portier (2006).

Arthur Cecil Pigou (1877-1959)
Arthur Cecil Pigou (1877-1959)

The book by Pigou referred here is his “Industrial Fluctuations”.

Depite any rethorical device the authors may have employed, I keep wondering about the usefulness (for their audience of economists—sorry fellows, no way to avoid coming back to audience…) of such superficial “historical” claims. Why is it useful to have Pigou as one entry in a reference list of 14 items, most of them dated from the mid 1990s onward? Is it a way of showing one is “well educated”? Is Pigou a “giant” on whose shoulder one can stand? It will be interesting to see whether or not this sentence will be kept in the published version of the paper.

7 thoughts on “Illustrated Past

  1. I think Pigou maybe some kind of landmark economist, since you have the Pigou tax. Hence, when you cite his name everybody relates it to 1. old economist (they do not know anything about him except that his name has been tagged to a peculiar kind of tax), 2. important (he’s got his name tagged after all) 3. Not that well-known (which gives a slight boost to the “see how learned I am”).
    The authors might have said instead “…going back at least to Galiani (1770) and Forbonnais (1755)”, but in that case they would have looked nerdy rather than learned, which is a big difference when you want to be published in the mainstream journal. On the other hand, such a reference will makes you learned in a HOPE journal.
    Philippe Fontaine wrote a short article in the EJHET on the comparison of the use of reference to past texts/authors by economists and History or economics scholars a few years ago, which answers this kind of issue.

    1. Loïc, I agree with the point you nicely made. It would surely be “too much” to cite Galiani or Forbonnais, while Pigou seems ok.
      Nonetheless, despite the attachment of Pigou to certain kind of taxes, macroeconomists don’t seem to have higher opinion about him–you can have opinion on someone even not knowing what he did…
      The other day I came across a similar reference to Pigou’s Industrial Fluctuations by Mankiw or some other eminent figure, in a paper discussing the crisis or something like that. I suspect there is a lot of fashion and herding in this kind of citations among economists in a given field.
      Thanks for the reference to Philippe’s paper, which I surely will read.

  2. not wanting to ruin the let’s-bash-economists-that-quote-other-dead-economists party but I’m missing the point here.

    it comes off as authoritative -when apparently no one here is actually an expert on Pigou- cynical and dismissive of economists. All this in holier than thou tone :”don’t mess with dead economists, they are ours, you don’t know what you’re talking about”.

    In fact, Pigou’s book IS about the “the wave-like swings in the minds of the business world between errors of optimism and errors of pessimism” and building a theory of the trade cycle founded on swings in the expectations of future profits. (see the book review in QJE, 1928). Now, from what I know of Beaudry and Portier (2006), there seems to be something like this same mechanism at work there. Pigou “seems ok” to quote because he was indeed emphasizing the same thing (expectations of future profitability) and its effects on the same object (aggregate/business cycle phenomena).

    1. I didn’t mean to throw a let’s-bash-economists-that-quote-other-dead-economists party at all. Believe me! Present-day economists do cite dead economists for whatever reason, and I’m not necessarily a gate keeper or archaeologist to teach them how to treat the past. Given such reason, I was just wondering that, according to my narrow perception, Pigou does not have a very high reputation as economist among macroeconomists; so why choose Pigou among other economists who, in one way or another, dealt with such broad notion that changes in expectations may cause business cycle fluctuations? However, a deeper question I would like to ask is why these authors felt that adding almost a footnote on the past use of such notion by Pigou (not Keynes or Samuelson or Lucas…) is “useful” for their theoretical enterprise.

  3. JB, you should definitely read Philippe’s paper. You will find out that your Phd supervisor contradicted you a few years ago, which spares me with doing it again today. Moreover, I have enough experience as author of peer-reviewed articles to know that pertinence is not the only criteria for citing an author, fashion, strategical reasons and so on are also of consideration.
    On another plan, the reference to Pigou on business cycle expectations might be linked in some ways to the Keynes’ resurgence linked to the actual economic crisis, but that is a pure guess.

    1. oops, Loic “Poirot” Charles attributed the wrong identity to that man of mystery the “chicago boy”.

      To me the point of anonymous/cryptic nicks is to converse without reference to one’s identity.

  4. Pedro,

    I’m not sure of the motivation for this particular quote but I’m wary of reading too much into strategizing over audience type motives.

    In this particular case, there seems to be a clear explanation. This particular research agenda has been reinvigorated by Beaudry and Portier’s JME paper (2004) under the title “An exploration into Pigou’s theory of cycles” (the Abstract also reads: “The idea has a long history in the macroeconomic literature, as reflected by the work of Pigou (Industrial Fluctuation, MacMillan, London, 1926)”.

    Thus, the story for this particular quote seems to date to B&P original work recasting Pigou’s hypothesis in modern equilibrium models. Lucas is indeed quoted there and its limitations discussed in a footnote. I’m not sure why Samuelson would figure in there but in general this literature seems to be aware of a larger tradition. See for example Jaimovich and Rebelo JEEA (2007) opening paragraph:

    “In his book Prosperity and Depression published in 1937, Gottfried Haberler emphasizes the role of behavioral biases and shocks to expectations in generating and amplifying business cycles. His discussion draws on a large body of work, including contributions by Taussig (1911), Lavington (1922), Pigou (1926), and Keynes (1936). This emphasis on behavioral biases and expectation shocks, which
    has vanished from business cycle research, is making a comeback in microeconomics and in finance but remains very controversial in macroeconomics.”

    Again the overall motivation seems to be: here’s an idea that’s been around for a long time. we’re proposing that it should make a comeback in face of some persistent failures of current theories.


    Who’s JB? Me? If so please understand that my advisors are old enough to defend themselves. I don’t really know what he said regarding this question (yet) but, if he’s contradicting me I’ll assume he’s wrong. I’ll have a read at Fontaine’s paper though (title?).

    The point here is not to deny there are herding or strategic reasons for citations (it happens everywhere that I know of). Rather the point is that there seems to be a very good reason for the Pigou quote.

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