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Chapter 13: Models in Economics
13 Models in economics Marcel Boumans In general, I believe that one who claims to understand the principles of ﬂight can reasonably be expected to be able to make a ﬂying machine, and that understanding business cycles means the ability to make them too, in roughly the same sense. (Lucas 1981, p. 8) Introduction At the ﬁfth European meeting of the Econometric Society held in Namur, Belgium, 1935, Jan Tinbergen (1903–1994) read a paper on ‘A mathematical theory of business cycle policy’. As usual, a report of this meeting appeared in Econometrica, the society’s journal. This time the report was written by Hans Staehle and published in 1937. The report noted that Tinbergen’s paper consisted of three parts: 1. the presentation of a simpliﬁed business cycle ‘mechanism’, 2. an analysis of its various ‘inﬂuencing coefﬁcients’ (Beeinﬂussingskoefﬁzienten), with a view to discovering those which might be modiﬁed by policy, and 3. an analysis of the conditions which would have to be satisﬁed in order to achieve the aims set by various types of policy. (Staehle 1937, p. 87) The paper appeared as part of Tinbergen’s article ‘Quantitative Fragen der Konjunkturpolitik’ in Weltwirtschaftliches Archiv, published in 1935. At the end of the article, there were summaries in three different languages, English, French and Spanish, in which the word ‘mechanism’ was replaced with ‘scheme’, ‘schéma’ and ‘esquema’ respectively. However, in the article itself, Tinbergen used the term ‘Modell’. This was perhaps the ﬁrst time...
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