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Expectations and full employment. Hansen, Samuelson and Lange

Author

Listed:
  • Michaël Assous
  • Olivier Bruno
  • Vincent Carret
  • Muriel Dal-Pont Legrand

Abstract

From the outset, expectations were a central part of the first business cycles and early growth models. In the 1940s, a third line of research emerged which questioned the capacity of an economy to reach full-employment equilibrium. Starting with Alvin Hansen [1938] and culminating with Oskar Lange [1944], the crux of the debate evolved from the existence of full employment equilibrium to the analysis of its stability, suggesting an increased role of expectations and finally challenging the economic system?s global stability. The present paper traces those debates through the contributions of Hansen, Paul Samuelson and Lange. Using archive materials, we show that while Samuelson?s analysis of instability remained implicit, his correspondence reveals that he encouraged Lange to examine it more carefully. Lange?s results are presented in his 1944 Monograph published by the Cowles Commission for Research in Economics. We point out that his contribution cannot be understood in isolation either from his exchanges with Samuelson or the way that Keynesian ideas were being interpreted in the United States. Finally, we emphasize the ambiguity of Samuelson?s view on instability and expectations. JEL Codes: B2, B22, B3, D5

Suggested Citation

  • Michaël Assous & Olivier Bruno & Vincent Carret & Muriel Dal-Pont Legrand, 2021. "Expectations and full employment. Hansen, Samuelson and Lange," Revue d'économie politique, Dalloz, vol. 131(3), pages 511-530.
    • Handle: RePEc:cai:repdal:redp_313_0193
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    References listed on IDEAS

    as
    1. Michaël Assous & Muriel Dal Pont Legrand, 2020. "Growth Without Expectations: The Original Sin of Neoclassical Growth Models," Springer Studies in the History of Economic Thought, in: Arie Arnon & Warren Young & Karine van der Beek (ed.), Expectations, pages 121-130, Springer.
    2. Backhouse, Roger E., 2017. "Founder of Modern Economics: Paul A. Samuelson: Volume 1: Becoming Samuelson, 1915-1948," OUP Catalogue, Oxford University Press, number 9780190664091.
    3. Michaël Assous & Muriel Dal Pont Legrand & Sonia Manseri, 2020. "Samuelson's Neoclassical Synthesis in the Context of Growth Economics, 1956-1967," GREDEG Working Papers 2020-12, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    4. Daniele Besomi, 2003. "Harrod, Hansen, and Samuelson on the Multiplier-Acceleration Model: A Further Note," History of Political Economy, Duke University Press, vol. 35(2), pages 305-322, Summer.
    5. Roger E. Backhouse & Mauro Boianovsky, 2016. "Theories of stagnation in historical perspective," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 13(2), pages 147-159, September.
    6. Jonung,Lars (ed.), 2006. "The Stockholm School of Economics Revisited," Cambridge Books, Cambridge University Press, number 9780521026161, September.
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    More about this item

    Keywords

    expectations; (in-)stability; full-employment; wages dynamics; Hansen; Samuelson; Lange;
    All these keywords.

    JEL classification:

    • B2 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B3 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium

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