Thursday, July 17, 2014

Demand Analysis, Henry Schultz and the Rediscovery of Slutsky

Empirical demand analysis played a central role in the early history of econometrics. For instance, studies relating to this topic laid the groundwork for our understanding of simultaneous equations systems, identification, and instrumental variables estimation.

Throughout the 1950's, 1960's, and 1970's, empirical demand analysis loomed large in the empirical econometrics literature. So, any new insights relating to the history of the theory of demand are of considerable interest to applied econometricians.

Olav Bjerkholt, of the Department of Economics at the University of Oslo, has recently released a paper titled, "Henry Schultz and the Rediscovery of Slutsky (1915)". Here's the abstract:

"The paper discusses the circumstances surrounding the rediscovery in the mid-1930s of the famous “lost” contribution to demand theory by Eugen Slutsky, published 1915 in Giornale degli economisti. The rediscovery is often asserted to have been done independently several authors, foremost by Valentino Domined√≥, Henry Schultz, and Roy G. D. Allen with John R. Hicks also frequently mentioned. Slutsky reasoned within Pareto’s demand theoretic framework and completed its construction by his decomposition of the demand elasticity in income and substitution effects and the related symmetry results. The circumstances of the rediscovery have been impressively studied by Chipman and Lenfant (2002) whose conjectures and remaining loose ends have been attempted resolved by help of information which has come to light since then. The article tries to shed light on the mystery of the Slutsky (1915) being “lost”, and then “found”. In addition we offer at some length glimpses from Schultz’ experiences in Europe in 1933/34 in pursuit of material for Schultz (1938) based on Schultz’ diary notes during his visit to Europe in 1933/34. The article concludes with some observations on the aftermath of Schultz’ death in 1938."
I've referred to some of Olav's other recent contributions to the history of econometrics in previous posts (e.g., here, and here). This most recent paper is definitely a "must read" item!

© 2014, David E. Giles

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