Early Metrics

1. Early Metrics Session 4

2. Mary Morgan:Economics as Engineering To understand twentieth-century economic as a science in the mold of engineering is to see that the economics profession came to rely on a certain precision of representation of the economic world, along with techniques of quantitative investigation and exact analysis that were alien to the experience of nineteenth-century economics, when the extent of such technologies of representation, analysis, and intervention were extremely limited. The engineering metaphor also suggest that twentieth-century economics is best characterized as a science of applications and implies a technical art, one that relies on tacit knowledge and decidedly human input as in the eighteenth-century term “art of manufactures.”

3. Tool-based science “From the late nineteenth century, economics gradually became a more technocratic, tool-based, science, using mathematics and statistics embedded in various kinds of analytical techniques.”

4. Tool-based discipline In the first half of the twentieth century, a massive growth in the collection of economic data and associated empirical investigations built a detailed knowledge base in economics, leading to the development of specialized statistical tools under the label of econometrics. Concurrently, but more slowly, mathematics was adopted, both to express economic theories and to formalize arguments. During the 1930s, the technology of modeling was introduced into theoretical and econometric work. The full dominance of these technologies – measurement methods, mathematics, statistics, and modeling – occurred only after 1940, but by the end of the century economics had become a modeling science in both theoretical and applied work. Economics became in effect, a tool-based discipline.

5. Historiographic question How to write a history of economics as a history of mathematical, statistical, computational tools and techniques? How to write a history of mathematical economics? How to write a history of econometrics?

6. 1900s (Early) - 1930s (Interwar) - 1980s (Postwar) Close interaction of history of economics, philosophy of science and econo-metrics “Crisis” in econom(etr)ics Is econom(etr)ics a science?

7. Forerunners (dd. 1930s) Emile Borel Augustin Cournot Francis Ysidro Edgeworth Francesco Fuoco William Stanley Jevons Hans vonMangoldt Johann Heinrich Von Thünen Vilfredo Pareto Léon Walras Knut Wicksell

8. Founding fathers (dd. 1950s) Oskar Anderson Bernard Chait Clément Colson Georges Darmois François Divisia Luigi Einaudi Irving Fisher Eraldo Fossati Ragnar Frisch Yehuda Grunfeld Leif Johansen John Maynard Keynes Oskar Ryszard Lange Ta-Chung Liu Henry L. Moore Hans Peter Charles Frederick Roos Henry Schultz Joseph A. Schumpeter Eugen Slutsky Abraham Wald Frederik Zeuthen

9. History written by econometricians • Carl F. Christ (Cowles Commission) • Clifford Hildreth (1986) The Cowles Commission in Chicago, 1939-1955 • Roy Epstein (1987) A History of Econometrics (supervisor: Peter Phillips) • Qin, Duo (1993) Formation of Econometrics: A historical perspective (supervisor David Hendry)

10. Delineation of Econometrics Define its boundaries and identify the proper scientific approach. This delineation is closely related to the images of science adhered in each period of interest. Around 1900 the image of science prescribed a mathematical science. The interwar image of science can be identified as the scientific worldview of (Logical) Positivism. The science images playing a role in the methodological debates of the 1980s were those of Karl Popper, ImreLakatos and Thomas Kuhn. These images played an important role and cannot be detached from the simultaneously written histories.

11. Antoine AugustinCournot • 1801 – 1877 • Researches into the Mathematical Principles of the Theory of Wealth (1927) • Translation of 1838

12. Scientific language = Mathematics The employment of mathematical symbols … are able to facilitate the exposition of problems, to render it more concise, to open the way to more extended developments, and to avoid the digressions of vague argumentation. (pp. 3-4)

13. William Stanley Jevons • 1835 – 1882 • General Mathematical Theory of Political Economy (1866 [1862])

14. Book of Economy • Galileo: “The book of nature is written in mathematics.” • Jevons: Not without reason did Pythagoras represent the world as ruled by number (1883) • A World Ruled by Number. William Stanley Jevons and the Rise of Mathematical Economics, by Margaret Schabas (1990) • “Economy, indeed, being concerned with quantities, has always of necessity been mathematical in its subject” (p. 282)

15. Exact science John Stuart Mill: “Its phenomena have been brought under laws comprehending the whole of the causes by which the phenomena are influenced, whether in a great or only in a trifling degree, whether in all or only in some cases, and assigning to each of those causes the share of effect which really belongs to it.”

16. Science of Tides Scientists know the laws of the great causes, the gravitational attraction of the sun and the moon, but they are ignorant of “circumstances of a local or casual nature, such as the configuration of the bottom of the ocean, the degree of confinement from shores, the direction of the wind, &c.”

17. Economic Laws “Its mathematical principles may become formal and certain, while its individual data remain as in exact as ever.” (p. 282) “We must think under the forms of these laws in their theoretic perfection and complication; in practice we must be content with approximate and empirical laws.” (p. 285) Because: statistics: exactness achieved by taking averages.

18. Irving Fisher (1867-1947) Inventor • the desk opening-and-closing device • piano apparatus • a tent for the treatment of tuberculosis • a mechanical diet indicator • an icosahedral world map • a portable stool

19. Visible Card Index File System • Patent 1912 • Remington Rand (type machines and guns) • Crash 1929 not predicted!

20. Mathematical Investigations (1892) The introduction of mathematical method marks a stage of growth – perhaps it is not too extravagant to say, the entrance of political economy on a scientific era. (p. 109) I believe ... that mathematical method has made several real contributions to economics, and that it is destined to make more. (p. 112)

21. Allies (p. 110) • Jules Dupuit (French civil engineer, 1804-1866) • HermannHeinrichGossen (German economist 1810-1858) • W.S. Jevons • Carl Menger ! • LéonWalras (French economist, 1834-1910)

22. surveys of mathematico-economic writings • Jevons (1878) “bibliography of works on the mathematical theory of political economy,” Journal of the Statistical Society of London, for two reasons: first, “with the purpose of discovering such forgotten works and memoirs,” and second, “in the hope that suggestions may be thereby elicited for its extension and correction.” 71 publ. • Walras (1878) translation of Jevons’ call in Journal des économistes. 98 publ. • Jevons (1879) Theory of Political Economy. 146 publ. • Fisher (1892) Appendix • Fisher ‘s (1927) in Cournot’sResearches into the Mathematical Principles of the Theory of Wealth. Appendix. 327 publ.

23. To see more clearly The effort of the economist is to see, to picture the interplay of economic elements. The more clearly cut these elements appear in his vision, the better; the more elements he can grasp and hold in mind at once, the better. The economic world is a misty region. The first explorers used unaided vision. Mathematics is the lantern by which what before was dimly visible now looms up in firm, bold outlines. The old phantasmagoria disappear. We see better. We see also further. (p. 119)

24. Hydraulics Irving Fisher 24

25. Simple mechanismbalance 25

26. Simple machines Galileo: The Mechanization of the World Picture (Dijksterhuis) by simple machines • inclined plane • pendulum • balance • screw Because: • understanding • mathematization • control

27. Quantity theory of money MV = PT V P M T

28. The Purchasing Power of Money Gb gold bullion Gm gold money Not a simple machine!