Crises and Cycles in Economic Dictionaries and Encyclopaedias 0415499038, 9780415499033

This book investigates from the perspective of the major economic dictionaries the notions of economic crisis and cycles

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Crises and Cycles in Economic Dictionaries and Encyclopaedias
 0415499038, 9780415499033

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Crises and Cycles in Economic Dictionaries and Encyclopaedias

Economic dictionaries have a long history, dating back to Chomel’s Dictionnaire oeconomique, the first edition of which was published in 1709. Some of these dictionaries offer ponderous articles that have been widely influential, or were used as reference material, or marked important turning points in the development of their writer’s ideas. Some dictionaries aimed at systematizing knowledge, others at supplying materials for conversation (Konversationslexikon), others still at registering the most recent advances in the discipline. Accordingly, some entries expounded new ideas, others summarized their author’s thoughts, others still were brilliant surveys of the field at their time. The history of a notion (or set of notions) as expounded in dictionary entries (or in encyclopaedias of a broader scope) thus offers a very peculiar perspective. Editors can be expected to choose the best writers from among those they know and with whose ideas they feel some affinity to discuss each particular subject. On the other hand, dictionaries (especially the most ambitious ones) almost guarantee a respectable and influential outlet for an author’s view, as they are likely to become reference texts for some time. This book aims at investigating from the perspective of the major economic dictionaries notions related to economic crises and cycles. The project consists of giving an extensive summary of a number of significant entries on this subject, with an introductory essay to each entry, placing them (and the dictionary to which they belong) in their context, giving some details of the author of the dictionary entry, and assessing the entry’s (and its author’s) contribution. The broad picture, including the history of these encyclopaedic tools, is examined in the introductory essays. Daniele Besomi is an independent researcher in the history of economic thought and a research fellow of the Centre d’Études Interdisciplinaires Walras Pareto, University of Lausanne, Switzerland.

Routledge Studies in the History of Economics

1. Economics as Literature Willie Henderson

11. Equilibrium and Economic Theory Edited by Giovanni Caravale

2. Socialism and Marginalism in Economics 1870–1930 Edited by Ian Steedman

12. Austrian Economics in Debate Edited by Willem Keizer, Bert Tieben and Rudy van Zijp

3. Hayek’s Political Economy The socio-economics of order Steve Fleetwood

13. Ancient Economic Thought Edited by B. B. Price

4. On the Origins of Classical Economics Distribution and value from William Petty to Adam Smith Tony Aspromourgos 5. The Economics of Joan Robinson Edited by Maria Cristina Marcuzzo, Luigi Pasinetti and Alesandro Roncaglia 6. The Evolutionist Economics of Léon Walras Albert Jolink 7. Keynes and the ‘Classics’ A study in language, epistemology and mistaken identities Michel Verdon 8. The History of Game Theory, Volume 1 From the beginnings to 1945 Robert W. Dimand and Mary Ann Dimand 9. The Economics of W. S. Jevons Sandra Peart 10. Gandhi’s Economic Thought Ajit K. Dasgupta

14. The Political Economy of Social Credit and Guild Socialism Frances Hutchinson and Brian Burkitt 15. Economic Careers Economics and economists in Britain 1930–1970 Keith Tribe 16. Understanding ‘Classical’ Economics Studies in the long-period theory Heinz Kurz and Neri Salvadori 17. History of Environmental Economic Thought E. Kula 18. Economic Thought in Communist and Post-Communist Europe Edited by Hans-Jürgen Wagener 19. Studies in the History of French Political Economy From Bodin to Walras Edited by Gilbert Faccarello 20. The Economics of John Rae Edited by O. F. Hamouda, C. Lee and D. Mair

21. Keynes and the Neoclassical Synthesis Einsteinian versus Newtonian macroeconomics Teodoro Dario Togati

33. Contributions to the History of Economic Thought Essays in honour of R. D. C. Black Edited by Antoin E. Murphy and Renee Prendergast

22. Historical Perspectives on Macroeconomics Sixty years after the ‘General Theory’ Edited by Philippe Fontaine and Albert Jolink

34. Towards an Unknown Marx A commentary on the manuscripts of 1861–63 Enrique Dussel

23. The Founding of Institutional Economics The leisure class and sovereignty Edited by Warren J. Samuels 24. Evolution of Austrian Economics From Menger to Lachmann Sandye Gloria 25. Marx’s Concept of Money The God of commodities Anitra Nelson 26. The Economics of James Steuart Edited by Ramón Tortajada 27. The Development of Economics in Europe since 1945 Edited by A. W. Bob Coats 28. The Canon in the History of Economics Critical essays Edited by Michalis Psalidopoulos 29. Money and Growth Selected papers of Allyn Abbott Young Edited by Perry G. Mehrling and Roger J. Sandilands 30. The Social Economics of Jean-Baptiste Say Markets and virtue Evelyn L. Forget 31. The Foundations of Laissez-Faire The economics of Pierre de Boisguilbert Gilbert Faccarello 32. John Ruskin’s Political Economy Willie Henderson

35. Economics and Interdisciplinary Exchange Edited by Guido Erreygers 36. Economics as the Art of Thought Essays in memory of G. L. S. Shackle Edited by Stephen F. Frowen and Peter Earl 37. The Decline of Ricardian Economics Politics and economics in post-Ricardian theory Susan Pashkoff 38. Piero Sraffa His life, thought and cultural heritage Alessandro Roncaglia 39. Equilibrium and Disequilibrium in Economic Theory The Marshall–Walras divide Michel de Vroey 40. The German Historical School The historical and ethical approach to economics Edited by Yuichi Shionoya 41. Reflections on the Classical Canon in Economics Essays in honour of Samuel Hollander Edited by Sandra Peart and Evelyn Forget 42. Piero Sraffa’s Political Economy A centenary estimate Edited by Terenzio Cozzi and Roberto Marchionatti 43. The Contribution of Joseph Schumpeter to Economics Economic development and institutional change Richard Arena and Cecile Dangel

44. On the Development of Long-run Neo-Classical Theory Tom Kompas 45. F. A. Hayek as a Political Economist Economic analysis and values Edited by Jack Birner, Pierre Garrouste and Thierry Aimar 46. Pareto, Economics and Society The mechanical analogy Michael McLure 47. The Cambridge Controversies in Capital Theory A study in the logic of theory development Jack Birner 48. Economics Broadly Considered Essays in honour of Warren J. Samuels Edited by Steven G. Medema, Jeff Biddle and John B. Davis 49. Physicians and Political Economy Six studies of the work of doctoreconomists Edited by Peter Groenewegen 50. The Spread of Political Economy and the Professionalisation of Economists Economic societies in Europe, America and Japan in the nineteenth century Massimo Augello and Marco Guidi 51. Historians of Economics and Economic Thought The construction of disciplinary memory Steven G. Medema and Warren J. Samuels 52. Competing Economic Theories Essays in memory of Giovanni Caravale Sergio Nisticò and Domenico Tosato 53. Economic Thought and Policy in Less Developed Europe The nineteenth century Edited by Michalis Psalidopoulos and Maria-Eugenia Almedia Mata 54. Family Fictions and Family Facts Harriet Martineau, Adolphe Quetelet and the population question in England 1798–1859 Brian Cooper

55. Eighteeth-Century Economics Peter Groenewegen 56. The Rise of Political Economy in the Scottish Enlightenment Edited by Tatsuya Sakamoto and Hideo Tanaka 57. Classics and Moderns in Economics, Volume I Essays on nineteenth and twentieth century economic thought Peter Groenewegen 58. Classics and Moderns in Economics, Volume II Essays on nineteenth and twentieth century economic thought Peter Groenewegen 59. Marshall’s Evolutionary Economics Tiziano Raffaelli 60. Money, Time and Rationality in Max Weber Austrian connections Stephen D. Parsons 61. Classical Macroeconomics Some modern variations and distortions James C. W. Ahiakpor 62. The Historical School of Economics in England and Japan Tamotsu Nishizawa 63. Classical Economics and Modern Theory Studies in long-period analysis Heinz D. Kurz and Neri Salvadori 64. A Bibliography of Female Economic Thought to 1940 Kirsten K. Madden, Janet A. Sietz and Michele Pujol 65. Economics, Economists and Expectations From microfoundations to macroeconomics Warren Young, Robert Leeson and William Darity Jnr.

66. The Political Economy of Public Finance in Britain, 1767–1873 Takuo Dome 67. Essays in the History of Economics Warren J. Samuels, Willie Henderson, Kirk D. Johnson and Marianne Johnson 68. History and Political Economy Essays in honour of P. D. Groenewegen Edited by Tony Aspromourgos and John Lodewijks 69. The Tradition of Free Trade Lars Magnusson

78. Economic Development and Social Change Historical roots and modern perspectives George Stathakis and Gianni Vaggi 79. Ethical Codes and Income Distribution A study of John Bates Clark and Thorstein Veblen Guglielmo Forges Davanzati 80. Evaluating Adam Smith Creating the wealth of nations Willie Henderson

70. Evolution of the Market Process Austrian and Swedish economics Edited by Michel Bellet, Sandye Gloria-Palermo and Abdallah Zouache

81. Civil Happiness Economics and human flourishing in historical perspective Luigino Bruni

71. Consumption as an Investment The fear of goods from Hesiod to Adam Smith Cosimo Perrotta

82. New Voices on Adam Smith Edited by Leonidas Montes and Eric Schliesser

72. Jean-Baptiste Say and the Classical Canon in Economics The British connection in French classicism Samuel Hollander 73. Knut Wicksell on Poverty No place is too exalted Knut Wicksell 74. Economists in Cambridge A study through their correspondence 1907–1946 Edited by M. C. Marcuzzo and A. Rosselli 75. The Experiment in the History of Economics Edited by Philippe Fontaine and Robert Leonard 76. At the Origins of Mathematical Economics The economics of A. N. Isnard (1748–1803) Richard van den Berg 77. Money and Exchange Folktales and reality Sasan Fayazmanesh

83. Making Chicago Price Theory Milton Friedman–George Stigler correspondence, 1945–1957 Edited by J. Daniel Hammond and Claire H. Hammond 84. William Stanley Jevons and the Cutting Edge of Economics Bert Mosselmans 85. A History of Econometrics in France From nature to models Philippe Le Gall 86. Money and Markets A doctrinal approach Edited by Alberto Giacomin and Maria Cristina Marcuzzo 87. Considerations on the Fundamental Principles of Pure Political Economy Vilfredo Pareto (Edited by Roberto Marchionatti and Fiorenzo Mornati) 88. The Years of High Econometrics A short history of the generation that reinvented economics Francisco Louçã

89. David Hume’s Political Economy Edited by Carl Wennerlind and Margaret Schabas 90. Interpreting Classical Economics Studies in long-period analysis Heinz D. Kurz and Neri Salvadori 91. Keynes’s Vision Why the Great Depression did not return John Philip Jones 92. Monetary Theory in Retrospect The selected essays of Filippo Cesarano Filippo Cesarano 93. Keynes’s Theoretical Development From the tract to the general theory Toshiaki Hirai 94. Leading Contemporary Economists Economics at the cutting edge Edited by Steven Pressman 95. The Science of Wealth Adam Smith and the framing of political economy Tony Aspromourgos 96. Capital, Time and Transitional Dynamics Edited by Harald Hagemann and Roberto Scazzieri 97. New Essays on Pareto’s Economic Theory Edited by Luigino Bruni and Aldo Montesano 98. Frank Knight and the Chicago School in American Economics Ross B. Emmett 99. A History of Economic Theory Essays in honour of Takashi Negishi Edited by Aiko Ikeo and Heinz D. Kurz 100. Open Economics Economics in relation to other disciplines Edited by Richard Arena, Sheila Dow and Matthias Klaes 101. Rosa Luxemburg and the Critique of Political Economy Edited by Riccardo Bellofiore

102. Problems and Methods of Econometrics The Poincaré lectures of Ragnar Frisch 1933 Edited by Olav Bjerkholt and Ariane Dupont-Keiffer 103. Criticisms of Classical Political Economy Menger, Austrian economics and the German historical school Gilles Campagnolo 104. A History of Entrepreneurship Robert F. Hébert and Albert N. link 105. Keynes on Monetary Policy, Finance and Uncertainty Liquidity preference theory and the global financial crisis Jorg Bibow 106. Kalecki’s Principle of Increasing Risk and Keynesian Economics Tracy Mott 107. Economic Theory and Economic Thought Essays in honour of Ian Steedman John Vint, J. Stanley Metcalfe, Heinz D. Kurz, Neri Salvadori and Paul Samuelson 108. Political Economy, Public Policy and Monetary Economics Ludwig von Mises and the Austrian tradition Richard M. Ebeling 109. Keynes and the British Humanist Tradition The moral purpose of the market David R. Andrews 110. Political Economy and Industrialism Banks in Saint-Simonian economic thought Gilles Jacoud 111. Studies in Social Economics Léon Walras Translated by Jan van Daal and Donald Walker

112. The Making of the Classical Theory of Economic Growth Anthony Brewer

122. Marshall, Marshallians and Industrial Economics Edited by Tiziano Raffaelli

113. The Origins of David Hume’s Economics Willie Henderson

123. Austrian and German Economic Thought Kiichiro Yagi

114. Production, Distribution and Trade Edited by Adriano Birolo, Duncan Foley, Heinz D. Kurz, Bertram Schefold and Ian Steedman

124. The Evolution of Economic Theory Edited by Volker Caspari

115. The Essential Writings of Thorstein Veblen Edited by Charles Camic and Geoffrey Hodgson 116. Adam Smith and the Economy of the Passions Jan Horst Keppler 117. The Analysis of Linear Economic Systems Father Maurice Potron’s pioneering works Translated by Christian Bidard and Guido Erreygers 118. A Dynamic Approach to Economic Theory: Frisch Edited by Olav Bjerkholt and Duo Qin 119. Henry A. Abbati: Keynes’ Forgotten Precursor Serena Di Gaspare 120. Generations of Economists David Collard 121. Hayek, Mill and the Liberal Tradition Edited by Andrew Farrant

125. Thomas Tooke and the Monetary Thought of Classical Economics Matthew Smith 126. Political Economy and Liberalism in France The contributions of Frédéric Bastiat Robert Leroux 127. Stalin’s Economist The economic contributions of Jenö Varga André Mommen 128. E. E. Slutsky as Economist and Mathematician Crossing the limits of knowledge Vincent Barnett 129. Keynes, Sraffa, and the Criticism of Neoclassical Theory Essays in honour of Heinz Kurz Neri Salvadori and Christian Gehrke 130. Crises and Cycles in Economic Dictionaries and Encyclopaedias Edited by Daniele Besomi

Crises and Cycles in Economic Dictionaries and Encyclopaedias

Edited by Daniele Besomi

First published 2012 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN Simultaneously published in the USA and Canada by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2012 Selection and editorial matter, Daniele Besomi; individual chapters, the contributors The right of Daniele Besomi to be identified as the author of the editorial matter and of the authors for their individual chapters of this work has been asserted in accordance with the Copyright, Designs and Patent Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data A catalog record has been requested for this book ISBN: 978-0-415-49903-3 (hbk) ISBN: 978-0-203-81654-7 (ebk) Typeset in Times New Roman by Keystroke, Station Road, Codsall, Wolverhampton

Contents

List of figures and tables List of contributors Symbols and conventions

xxi xxiii xxv

PART I

Introductory 1 Introduction Daniele Besomi

1 3

1.1 Dictionaries as a literary genre 4 1.1.1 Encyclopaedias, dictionaries, lexica and glossaries 4 1.1.2 The fragmentation of knowledge 6 1.1.3 Dictionary architecture 8 1.1.4 The encyclopaedic goal 12 1.1.5 The elected audience 13 1.1.6 Dictionaries and textbooks 16 1.1.7 A literary genre 16 1.2 Dictionary articles and the history of economic thought 17 1.3 Structure and limits of this project 20 2 A brief history of economic dictionaries: an essay in bibliography Daniele Besomi 2.1 2.2 2.3 2.4

Introduction 27 Economics and practical arts 27 Commercial, business and financial dictionaries 28 Political economy and economics 31 2.4.1 The nineteenth century 31 2.4.2 The twentieth century 34 2.4.3 Internet publications 38 2.5 The encyclopaedias of the social sciences 39 2.5.1 The nineteenth century 39 2.5.2 The twentieth century 41

27

xii Contents 2.6 From general to particular: hyperspecialized dictionaries 42 2.7 Biographical dictionaries 43 2.8 The chronological, spatial and dimensional distribution of dictionaries 44 3 Naming crises: a note on semantics and chronology Daniele Besomi

54

3.1 Introduction 54 3.1.1 Words in prominent position 54 3.1.2 ‘Panics produce texts’ 55 3.2 Semantics and chronology 57 3.2.1 Glut 57 3.2.2 Distress 59 3.2.3 Embarrassment 60 3.2.4 Stagnation 62 3.2.5 Panic 66 3.2.6 Bubble 70 3.2.7 Depression 74 3.2.8 Crisis 78 3.2.9 Cycle 89 3.2.10 Fluctuations 102 3.2.11 Recession 108 3.3 Concluding note on the choice of terms 111 4 Dictionary reconstructions of the history of the theories of crises and cycles: a meta-taxonomy Daniele Besomi 4.1 4.2 4.3 4.4 4.5 4.6

Categorizing business cycle theories 133 Early surveys of the literature 134 Say’s Law and overproduction 135 Optimist liberals and pessimist socialists 138 Old vs. new theories 139 The aetiological approach 141 4.6.1 The origins of the causal taxonomy 141 4.6.2 The aetiological approach in dictionaries 145 4.7 Abandoning the causal representation 146 4.8 The formal properties of models 147 4.9 Digging rather than skating: the quest for a fundamental line of division 149 4.9.1 Say’s law (again) 150 4.9.2 Schools of thought and chronological narrations 151 4.9.3 Exogenous vs. endogenous approaches 154 4.9.4 Stability vs. instability 156

133

Contents xiii 4.10 Miscellaneous approaches 159 4.10.1 A chronosophical approach 161 PART II

The classic dictionaries 5 Between progress and decline: crises in early French dictionaries and encyclopaedias (1830–1840) Ludovic Frobert

165

167

5.1 French dictionaries c. 1830 167 5.2 French Liberals before 1848: progress punctuated by crises 168 5.3 The French Republicans: the possibility of progress without crisis 169 5.4 The Saint-Simonians and their dissident movements: progress through the alternation of periods 171 5.5 The Fourierists: crises as indicators of the corruption and decomposition of ‘civilization’ 173 5.6 Conclusion 174 6 The analysis of crises in early French dictionaries and encyclopaedias Daniele Besomi

177

6.1 6.2 6.3 6.4 6.5

Entries on crises in early French dictionaries 177 The definition of crises 178 The phenomenology and the causes of crises 179 The function of crises 182 Dictionaries and the literature on crises in the first half of the nineteenth century 183 6.5.1 The definitions 184 6.5.2 On causality 186 6.6 Summing up: Garnier’s entry on commercial crisis 190 7 Wilhelm Roscher’s crises theory: from production crises to sales crises Harald Hagemann 7.1 7.2 7.3 7.4

The Brockhaus encyclopaedia 197 Wilhelm Roscher 198 Roscher on crises 200 Assessment 205

197

xiv Contents 8 Charles Coquelin: banking monopoly and commercial crises Daniele Besomi

209

8.1 The Dictionnaire de l’économie politique 209 8.1.1 History and revisions 211 8.1.2 Influence 211 8.2 Charles Coquelin 211 8.3 Crises in the Dictionnaire de l’économie politique 212 8.3.1 The entries relating to crises 212 8.3.2 Summary of Coquelin’s entry on commercial crises 213 8.4 Assessment 216 9 Commercial crisis and credit in the first Spanish general encyclopaedia (1851–1855) Jesús Astigarraga and Juan Zabalza

225

9.1 Introduction 225 9.2 The Enciclopedia moderna (1851–1855) 226 9.3 José Joaquín Mora as author of the entries for credit and commercial crisis in Enciclopedia moderna 227 9.4 Credit and commercial crises in Enciclopedia moderna 229 9.4.1 CRISIS COMERCIAL in Enciclopedia moderna 230 9.4.2 CRÉDITO in Enciclopedia moderna 231 9.5 Concluding assessment of the entries on credit and crisis in Enciclopedia moderna 233 10 Expectations and crises in Auguste Ott’s Dictionnaire des sciences politiques et sociales Daniele Besomi 10.1 10.2 10.3 10.4

238

Ott’s dictionary and the Encyclopédie théologique 238 Auguste Ott 240 Crises in Ott’s Dictionnaire 241 Assessment 244

11 Gerolamo Boccardo on internally generated commercial crises Daniele Besomi 11.1 The Dizionario della economia politica 249 11.1.1 Editorial history 251 11.1.2 Reception 252 11.2 Gerolamo Boccardo 253 11.3 Crises in Boccardo’s dictionary 255 11.3.1 The first edition 255 11.3.2 The later editions 258 11.4 Assessment 260

249

Contents xv 12 Clément Juglar (1863–1891): tracking and interpreting the periodic return of crises Cécile Dangel-Hagnauer

265

12.1 The dictionaries 265 12.1.1 The Dictionnaire général de la politique 267 12.1.2 The Nouveau dictionnaire d’économie politique 269 12.2 Joseph Clément Juglar 272 12.3 The entries 273 12.3.1 CRISES COMMERCIALES in the Dictionnaire général de la politique 274 12.3.2 CRISES COMMERCIALES in the Nouveau dictionnaire d’économie politique 279 12.4 Concluding remarks 281 13 Henry D. Macleod’s Dictionary of political economy: Britain’s first, aborted attempt Cécile Dangel-Hagnauer

286

13.1 A biographical, bibliographical, historical and practical dictionary of political economy 286 13.2 Henry Dunning Macleod 288 13.2.1 Presumptuousness and innovativeness 289 13.2.2 Macleod’s particular brand of political economy 291 13.2.3 Wasting opportunities and leaving one’s mark 292 13.3 CRISIS, COMMERCIAL 292 13.3.1 The origin and the causes of crises 293 13.3.2 The history of commercial catastrophes 295 13.3.3 The opinions of ‘authorities’ on the subject of crises 299 13.3.4 On the course of action to pursue in the event of commercial crises 300 13.4 Concluding remarks 302 14 Adolf Wagner: economic crises, capitalism and human nature Vitantonio Gioia 14.1 14.2 14.3 14.4 14.5

307

The Handwörterbuch der Volkswirthschaftslehre 307 Adolf Heinrich Gotthilf Wagner 308 The German debate on crises and Wagner’s contribution 311 The mechanics of crises and their explanation 314 Capitalism, crises and economic motives 317

15 Émile de Laveleye: economic crises, Christianity and socialism Ludovic Frobert 15.1 La Grande encyclopédie 320 15.1.1 A positivist encyclopaedia 320

320

xvi Contents 15.1.2 Laveleye and the Grande Encyclopédie 322 15.2 Émile de Laveleye 322 15.3 Crises 326 15.4 A sower of ideas 329 16 Of the ‘old’ Palgrave entries on crises Pascal Bridel

332

16.1 The ‘old’ Palgrave 332 16.2 The authors 334 16.3 The entries 336 17 From crises to cycles: Tugan-Baranovsky and the Brockhaus–Efron 343 (1895–1915) François Allisson 17.1 The Brockhaus–Efron encyclopaedic dictionary 343 17.2 Mikhail Ivanovich Tugan-Baranovsky 345 17.3 Summary of Tugan’s ECONOMIC CRISES 346 17.3.1 Brockhaus–Efron (1895) 347 17.3.2 Small Brockhaus–Efron (1909) 350 17.3.3 New Brockhaus–Efron (1915) 351 17.4 Assessment 352 17.4.1 From the book to the entry: writing for an encyclopaedia 353 17.4.2 The terminology: from crises to cycles 353 17.4.3 Rewriting history: the status of encyclopaedic knowledge 354 17.4.4 A Western theory in a Russian encyclopaedia? 355 17.5 Tugan’s original references 355 17.5.1 Tugan’s bibliography (1895) 355 17.5.2 Tugan’s bibliography (1909) 357 17.5.3 Tugan’s bibliography (1915) 357 18 Heinrich Herkner: inequality of income distribution, overcapitalization and underconsumption Harald Hagemann 18.1 18.2 18.3 18.4

361

Conrad’s Handwörterbuch der Staatswissenschaften 361 Heinrich Herkner 362 Herkner on crises 366 Assessment 371

19 Wilhelm Lexis: crises and overproduction Harald Hagemann 19.1 Elster’s Wörterbuch der Volkswirtschaft 374 19.2 Wilhelm Lexis 376

374

Contents xvii 19.3 Lexis on crises and overproduction 378 19.4 Assessment 381 20 Arthur Spiethoff: from economic crises to business cycle theory Vitantonio Gioia 20.1 20.2 20.3 20.4 20.5

The Handwörterbuch der Staatswissenschaften 385 Arthur Spiethoff 387 Krisen 388 Overproduction and business cycles 392 Concluding remarks 396

21 Konyus’s ‘Economic conjuncture’ in the Granat encyclopaedia Vincent Barnett 21.1 21.2 21.3 21.4

401

The encyclopaedia 401 The author 402 The entry 404 Assessment 408

22 Wesley Mitchell, Arthur Burns and Trygve Haavelmo on business cycles: the two Encyclopaedia of the social sciences (1930–1935 and 1968) Pier Francesco Asso and Luca Fiorito 22.1 22.2 22.3 22.4 22.5

385

411

The Encyclopaedia of the social sciences, 1930–1935 411 Wesley C. Mitchell on business cycles 414 The International encyclopaedia of the social sciences 418 Arthur Burns on business cycles 420 Haavelmo’s entry on business cycles 423

23 Tinbergen on dynamics and conjuncture in Stridiron’s Bedrijfseconomische encyclopedie Peter Rodenburg 23.1 The encyclopaedia 427 23.1.1 History and revisions 428 23.1.2 Influence 428 23.2 The author 429 23.3 Business cycles in the Bedrijfseconomische encyclopedie 430 23.3.1 The entries relating to business cycles 430 23.3.2 Tinbergen’s entry on business cycle theory 431 23.4 Assessment 434

427

xviii Contents PART III

The recent dictionaries

441

24 Nikolai Kondratiev and long waves in recent dictionaries and encyclopaedias Francisco Louçã

443

24.1 Introduction 443 24.2 Predecessors and long waves of debates 444 24.3 Nikolai Kondratiev 446 24.3.1 The reception of Kondratiev’s ideas 446 24.3.2 Kondratiev’s analysis of long waves 447 24.4 The assessment of the contemporary polemic on Kondratiev’s contribution to the dictionaries 451 24.5 The impact of Kondratiev’s writings 452 24.5.1 Schumpeter 453 24.5.2 Frisch and Tinbergen 454 24.5.3 Other contributions 455 24.6 The assessment of the modern debate by the recent dictionaries 456 24.7 Conclusion 458 25 Political business cycles Jan-Peter Olters

463

25.1 Introduction 463 25.2 Modelling political business cycles 466 25.2.1 Precursory studies 466 25.2.2 Strategic politicians and myopic voters 467 25.2.3 Politics in a rational world 469 25.2.4 Recent innovations 472 25.3 Concluding remarks 475 26 Nonlinear business cycles in recent dictionaries Giorgio Colacchio 26.1 Introduction 485 26.2 Nonlinear business cycle in business cycle entries: escaping from the linear world 487 26.3 Nonlinear business cycles in entries related to economic dynamics: into the mysterious realm of nonlinear dynamics 493 26.4 Nonlinear business cycles in dictionaries of the social sciences: towards other lands? 494 26.5 Concluding remarks 495

485

Contents xix 27 An assessment of real business cycles in recent dictionaries Marc Pilkington

501

27.1 Introductory remarks 501 27.2 The emergence of RBC theory 503 27.2.1 The ill-suited use of ‘real business cycles’ 503 27.2.2 Linking the RBC approach with new classical macroeconomics 504 27.3 Why ‘real’ theories? 505 27.4 Business cycles and stylized facts 509 27.4.1 Characterization of business cycles 509 27.4.2 Stylized facts and methodological choices 510 27.5 The integration of growth and fluctuations 513 27.5.1 Going beyond the dichotomy between growth and business cycles 513 27.5.2 Random walks and the non-deterministic nature of growth 514 27.6 The calibration method and the construction of general equilibrium models 515 27.7 Real business cycle theory under criticism 517 27.7.1 Predicting the turning points 517 27.7.2 The role of technological shocks 517 27.7.3 Cyclical variations in employment 519 27.7.4 New econometric challenges 519 27.7.5 Money neutrality 520 27.7.6 The evaluation of counter-cyclical fiscal policies 521 27.8 Concluding remarks 522 28 Back to crises: post-war dictionaries and the resilience of an old category Daniele Besomi and Giorgio Colacchio 28.1 Introduction 526 28.2 Crises as the turning point of the cycle: French language dictionaries 527 28.3 Crises as a branch of Marxian theory vs. the business cycle as bourgeois economics: the case of German dictionaries 531 28.4 Crises as a pathology 533 28.5 Crises in the history of ideas 535 28.6 Crises and cycles as distinct logical categories 538 28.7 The epistemics of crises and cycles theories 539 28.8 Crises vs. cycles 544

526

xx Contents 29 A bibliography of specialized dictionaries of economics and related 549 subjects Daniele Besomi 29.1 29.2 29.3 29.4

Introductory remarks 549 Economic dictionaries, by compiler 550 Economic dictionaries, by title 590 General encyclopaedias cited in the text, by title 613

Name and subject index Index of dictionaries and dictionary entries cited

618 665

Figures and tables

Figures 2.1 2.2 2.3 2.4 2.5 2.6 3.1 3.2 3.3 3.4 3.5 25.1

Number of specifically economic dictionaries, by size Number of specifically economic dictionaries, by language Number of social sciences dictionaries, by size Number of social sciences dictionaries, by language Number of dictionaries concerned with economics, by language and size Number of dictionaries concerned with economics, by size and language Frequency of occurrences of specific terms in titles of writings on crises and cycles, 1815–1860 Frequency of occurrences of specific terms in titles of writings on crises and cycles, 1861–1905 Frequency of occurrences of specific terms in titles of writings on crises and cycles, 1906–1945 Frequency of occurrences of specific terms in titles of writings on crises and cycles, 1928–1975 Frequency of occurrences of specific terms in titles of writings on crises and cycles, 1969–2009 Stylized development of the PBC literature

46 47 48 49 50 51 113 114 115 116 117 465

Tables 25.1 The PBC literature according to the cycle’s length 25.2 PBCs in economic dictionaries, encyclopaedias and handbooks

476 477

Contributors

François Allisson is a PhD student in History of Economic Thought at the Centre d’Études Interdisciplinaires Walras Pareto, University of Lausanne, Switzerland. Pier Francesco Asso is Professor of History of Economics at the University of Palermo, Italy. Jesús Astigarraga is Associate Professor of Political Economy and History of Economic Thought at the University of Zaragoza, Spain. Vincent Barnett is an independent researcher with interests in Russian history, the history of economic thought and the economic history of the film industry. Daniele Besomi is an independent researcher and a Research Fellow at the Centre d’Études Interdisciplinaires Walras Pareto, University of Lausanne, Switzerland. Pascal Bridel is Professor of Economics at the Centre d’Études Interdisciplinaires Walras Pareto, University of Lausanne, Switzerland. Giorgio Colacchio is Associate Professor of Economics at the University of Salento in Lecce, Italy. Cécile Dangel-Hagnauer is Associate Professor of Economics at the University of Nice-Sophia Antipolis and member of GREDEG/CNRS, France. Luca Fiorito is Associate Professor of History of Economic Thought at the University of Palermo, Italy. Ludovic Frobert is Senior Researcher at the Centre National de la Recherche Scientifique (CNRS), TRIANGLE/ENS-Lyon, France. Vitantonio Gioia is Professor of History of Economic Thought at the University Salento, Italy. Harald Hagemann is Professor of Economic Theory at the University Hohenheim, Stuttgart, Germany. Francisco Louçã is Professor of Economics at ISEG, Technical University of Lisbon, Portugal.

xxiv Contributors Jan-Peter Olters is Head of the World Bank Office in Podgorica, Montenegro. Marc Pilkington is a Lecturer at Nice Sophia Antipolis University, France, where he holds the position of Professeur Agrégé. Peter Rodenburg is Assistant Professor in the History of Economic Thought at the Department of European Studies, University of Amsterdam, the Netherlands. Juan Zabalza is Associate Professor of History of Economic Thought at the University of Alicante, Spain.

Symbols and conventions

While each chapter carries its own reference list, dictionaries and encyclopaedias are listed (by compiler and by title) in a general bibliography at the end of the volume (Chapter 29); citations are preceded by the symbol →. In references, attributed authorship or publication dates of anonymous or unpublished writings are cited between square brackets. Unless otherwise specified, translations from languages other than English are by the author of the chapter concerned, and citations reproduce the original emphasis. The titles of entries are cited in small capitals in the original language; nonobvious translations are supplied on the first occurrence in each chapter.

Part I

Introductory

1

Introduction Daniele Besomi*

Les dictionnaires sont les meilleurs moyens de propager les sciences, d’accélérer leurs progrès, et de les faire arriver rapidement au plus haut degré qu’elles puissent atteindre. Le plus grand perfectionnement de la pensée humaine est dans sa diffusion. (PRÉFACE, →Ganilh, Dictionnaire analytique d’économie politique, 1826, p. xxvii) Crises, cycles and other distressful phenomena intrinsic to the dynamics of capitalist economies have been, and still are, the subject of a vast literature, often topical (coming in waves following the events themselves: see Chapter 3) but sometimes also dedicated. There are therefore multiple viewpoints from which the subject can be studied historically. In this volume we examine how these phenomena have been and are discussed in encyclopaedias and specialized dictionaries. These reference works played an important role in the popularization but also in the systematization of knowledge during the nineteenth century and the early twentieth century, and – judging from the continuing exponential increase in their publication – are still widely used in the support of teaching and, to a lesser extent, research. What is recorded in dictionaries is therefore rather influential, in particular for those works recognized by contemporaries to be authoritative. Yet the choice of this perspective is perhaps unnatural enough to require an explanation. Encyclopaedia writings, in fact, nowadays can hardly claim to lie at the cutting edge of research, the outcome of which is normally housed in dedicated treatises and articles, and their purpose is related much more to the diffusion of

* I am grateful to the participants and especially the discussants (Marco Guidi and Michael Trautwein) of the session on crises in economic dictionaries held at the 2008 ESHET conference in Prague. The project behind this book is one of the outcomes of a Research network on business cycle and crises theories. Some of the participants have contributed chapters (Pascal Bridel, Cécile Dangel-Hagnauer, Ludovic Frobert, Harald Hagemann); others contributed to the preliminary discussions (Muriel DalPont Legrand and Alain Raibaut). My gratitude extends to all. The contributors have sometimes commented on each other’s chapters; these discussions are collectively acknowledged here.

4 Daniele Besomi knowledge than to its conception. Nevertheless, dictionary articles have not always been rearguard materials, while the peculiar nature and style of such writings define a literary genre offering, individually and as a class, a precious vantage point for assessing the state of the reflections on specific topics such as crises and cycles, and on their perception by the scholarly community (both qualified academics and those being trained) and laypeople. The texts so produced, in fact, carry some features that make them particularly interesting for historians of thought due to the selection of materials they discuss, the structure of the argument and their expert authorship. Most of these articles – in particular, those incorporated in large encyclopaedic works, thus having enough space to expound their argument in full – place the subject in the context of contemporary debates on crises, and thus reveal the perspective their prominent authors deemed to be noteworthy. This introductory chapter begins by characterizing the scientific–literary genre of dictionary and the structure and purpose of this project.

1.1 DICTIONARIES AS A LITERARY GENRE

1.1.1 Encyclopaedias, dictionaries, lexica and glossaries Before entering into a characterization of dictionaries as a literary genre, it is necessary to delimit the nature of such works considered in this volume. Lexicographic works concerning economics (exclusively or not) are a motley set of objects. As we shall see below (Section 1.2), they include a wide range of sizes, purposes, languages, editorial histories and intended audiences. And they have different names: we have dictionaries, encyclopaedias, encyclopaedic dictionaries, lexica, vocabularies and glossaries, which correspond to different kinds of reference works. The distinction between these kinds of works in practice is rather fuzzy. Several of them – both of general scope and specifically addressed to economics or the social sciences – actually carry more than one of these denominations in their title. Famously, Diderot and d’Alembert’s Encyclopedia (1751–1780) was titled Encyclopédie ou dictionnaire raisonné des sciences, des arts et des métiers. Similarly, Chambers’s Cyclopædia (1728) and the first edition of the Encyclopædia Britannica (1768–1781) were both subtitled Universal dictionary of arts and sciences. Whitelaw combined three terms as follows: The popular encyclopaedia: or, ‘Conversations lexicon’: being a general dictionary of arts, sciences, literature, biography, history, ethics, and political economy (1834–1842). Several specifically economic and commercial works were equally generous in qualifying themselves, as for instance →Macardy’s Commercial cyclopaedia: or, Dictionary of practical commerce (1833), →Rotteck’s Staats-Lexikon. Encyklopädie der sämmtlichen Staatswissenschaften für alle Stände (1834–1843), →Guillaumin’s Encyclopédie du commerçant, the main title of which was Dictionnaire du commerce et des marchandises (1837–1839), →Antonelli’s Enciclopedia del negoziante ossia Gran dizionario del commercio, dell’industria, del banco e delle manifatture (1839–1843), →Pitman’s commercial encyclopædia and dictionary of business

Introduction 5 (Slater 1912–1913), →Müller and Löffelholz’s Bank-Lexikon: Handwörterbuch für das Bank- und Sparkassenwesen (1953), or →Mori’s Nuovo dizionario di economia: la prima enciclopedia dei termini economici (1989).1 Although dictionaries and encyclopaedias are complex objects, difficult to pin down to an exhaustive and mutually exclusive list of features, they can be usefully distinguished on the ground of the nature of their entries. The basic function of ‘dictionaries’ is to define the words of a language, or a subset of them, to which dictionaries may add information as to the etymology, use, pronunciation, variants, history, grammatical forms and functions, and synonyms, occasionally supplemented by citations illustrating the use of the various sense of words. ‘Encyclopaedias’ provide instead information on all or some branches of knowledge. Dictionaries thus relate linguistic knowledge about words, aiming at clarifying their meaning and their usage in speech within the cultural organization to which they belong, while encyclopaedias relate to knowledge about facts, objects or theories, thereby providing extra-linguistic information.2 Dictionaries thus define terms, while encyclopaedias deal with concepts. Encyclopaedias can, and do, carry entries on people, while proper names are excluded from dictionaries.3 Encyclopaedic dictionaries perform both functions. The designation of ‘lexicon’, in English, is usually associated with sectorial rather than general dictionaries, that is, dictionaries covering one or a few disciplines.4 ‘Vocabularies’, commonly termed ‘glossaries’, often have a more limited scope, as they list a selection of words or phrases relating to a discipline or a special subject and are sometimes appended to treatises, although some are printed as autonomous volumes.5 In practice, the spectrum of the reference works concerning economics and related disciplines listed in the bibliography of specialized dictionaries in Chapter 29 (more than 650 titles, a number of which went through several editions) forms a continuum, as scarcely any specialized dictionary can avoid incorporating some encyclopaedic ingredients. Yet its extremes are easily discernible. On one side, we have the writings sharing the features of specialized encyclopaedias, carrying more or less detailed entries not only defining the concept under discussion but also reporting the economic understanding concerning it, supplying essential (occasionally rich) bibliographies and offering a systematization of the subject within the corpus of economic knowledge. On the other side, there are the writings limiting themselves to a definition of the word under examination, or very little more. The latter naturally offer short entries for each heading, so that the former kind of works result in much larger numbers of pages; the length of these volumes6 (indicated in the bibliography) offers a rough proxy for their position in the spectrum. In this book we are essentially concerned with encyclopaedic entries on crises, cycles and related topics in general and specialized encyclopaedias, the length of which range from a few pages to small treatises of more than 80 pages7 – without, of course, disdaining information on the etymology and usage of these notions (on which, see Chapter 3).

6 Daniele Besomi

1.1.2 The fragmentation of knowledge Dictionaries and encyclopaedias are reference works, devised to be consulted rather than read from cover to cover. Accordingly, what characterizes these works as a literary genre, and distinguishes them from the remainder of the specialized and educational literature, is their breaking down of knowledge into a number of semimonographic articles, usually presented in alphabetical order and connected with other relevant articles by means of a system of cross-references. This feature has a number of implications. In the early days of specialized dictionaries, the fragmentation of knowledge was perceived as a problem. Boccardo, for instance, opened the preface to his →Dizionario della economia politica (1857–1863) with a defence of dictionaries as a useful quick reference tool (see Chapter 11). He conceded, however, that ‘if the purpose of scientific dictionaries were to teach methodically the science, as intended by the French encyclopedists, and to substitute treatises in presenting doctrines as logically connected between each other, the critics would be justified in their anathemas’ (p. vii).8 In reviewing Boccardo’s Dizionario, Rosa – defending dictionaries and other forms of popularization against the ‘aristocracy of knowledge’ that disdained them in the name of the purity of form and expression – also admitted that the breaking down of knowledge hinders ‘that orderly, logical and magnificent treatment that elevates science by mean of eloquence and gives it the power of the arts’, but maintained that the growth of knowledge requires the creation of dictionaries as convenient and economical repositories of science: ‘to many treatises, as they grew more and more vast and complex, alphabetical subject index have been added at the end. It was thus found to be expedient to start with the alphabetical order at the outset, and to write dictionaries instead of compiling treatises governed by arbitrary classification’ (Rosa, 1857, pp. 114–116). Two further potential dangers were pointed out by Chailley, in the INTRODUCTION to his and Say’s →Nouveau dictionnaire d’économie politique (1891–1892). The first concerns the homogeneity of the articles: A dictionary is rarely the accomplishment of one person alone. Normally it is the result of the collaboration of several people, and it seems preferable that this is so. Although these people may have wide agreement on the fundamental traits of the discipline, they are bound to differ on one aspect or another. This gives rise to disagreements and inconsistencies that may mislead the reader. (p. vi) At the time of writing, Chailley had already (unknowingly) witnessed the extinction of the major one-man dictionaries: in particular →Ganilh’s Dictionnaire analytique d’économie politique (1826), quoted as an example to be superseded by →Coquelin and Guillaumin’s Dictionnaire de l’économie politique (see Chapter 8), of which Say and Chailley purported to be a new edition (see Chapter 12); →McCulloch’s Dictionary, practical, theoretical, and historical, of commerce and commercial navigation (1832–1839, and various subsequent editions); →Ott’s

Introduction 7 Dictionnaire des sciences politiques et sociales, 1854–1855 (see Chapter 10); →Macleod’s Dictionary of political economy, 1863 (aborted at letter C: see Chapter 13); and finally →Boccardo’s Dizionario (Boccardo, as we have seen, had criticized Guillaumin and Coquelin precisely on the ground of the danger of inconsistency pointed out by Chailley). The second of Chailley’s concerns pertains to the quasi-monographic character of the articles: Each article forms a unity. It is a small self-contained and self-standing treatise on its chosen subject. But in life as in science there is no such thing as a selfstanding and self-contained subject. Isolating it is an expedient for studying it. Phenomena are chained to other phenomena which alter their original physiognomy and meaning. Questions are coupled to other questions which modify their original position and correct their scope. The dictionary form, with its separate articles, is itself a [. . .] cause of errors. (p. vi) Say and Chailley’s dictionary, like most others at the time, used a system of cross-references that partly remedied the problem. →Seligman’s Encyclopaedia of the social sciences (1930–1935) attempted to offset the atomizing effect of this fragmentation by means of special surveys of social sciences, of long general articles of an historical character, and of ‘symposium treatment’ offering different perspectives on special problems (Lasswell, 1936, p. 388; Lentini, 1999, pp. 262–263). Yet the problem of the fragmentation of knowledge leading to a partial understanding of problems not only remains, but grows worse with the increased specialization of scientific disciplines. This leads to further breaking down of the main topics into subentries, so that Chailley’s two problems merge into one, as the potential lack of homogeneity affects not only the dictionary as a whole, but even a specific topic. The subject matter of this book, crises and cycles, offers a neat example. While up to the Second World War most dictionaries carried one or two entries on cycles or crises, in recent dictionaries we find a plethora of articles discussing one or another special aspects of the problem.9 While there are crossreferences to some (but by no means all) cognate entries, it is generally not remarked in the apparatus that crises pertain as essentially as does ‘equilibrium’ (and related concepts) to the discussion of the ‘normal’ behaviour of the economic system; but crises are usually discussed separately from their antithesis and rarely (if at all) do the corresponding entries cross-refer to each other. Moreover, it happens that entries within the same dictionary go as far as incorporating, without discussion, views that are antithetic to each other – such as, for example, TRADE CYCLE by Medio and BUSINESS CYCLES by Dotsey and King in →The new Palgrave (1987).10 This problematic situation is still unresolved. As neatly summed up by the Encyclopædia Britannica, Those who favoured this more fragmented approach argued that by focussing on the smaller part of the whole, the editors could facilitate the user’s search

8 Daniele Besomi for specific information and that the liberal provision of cross-references would facilitate a recombination of the fragments by those interested in the bigger picture. Against this practice, it was argued that most cross-references are not followed up by most readers, that the shorter fragmented pieces work against a correct understanding of the larger subject, and that fragmentation inevitably involved a great amount of repetition of basic information throughout all of the related articles. (ENCYCLOPÆDIA, online version, June 2010)

1.1.3 Dictionary architecture The breaking down of information into separate monographic articles implies that dictionaries and encyclopaedias have a double structure, to which correspond specific editorial decisions by the compilers. The microstructure consists in the organization of the information given by each individual entry; it must be fairly homogeneous throughout the dictionary or encyclopaedia, normally more in the former than in the latter. Editors have ample margin as to the kind, amount and presentation of knowledge that may be planned for each entry. This can range from mere definition of terms, devised for quick consultation, to properly monographic articles. The presentation may systematically emphasize, for instance, the historical development of the discipline,11 or stress instead the latest laws, theorems and analytical results; again, it may focus on theoretical or policy issues; or the choice can be left to each individual contributor. The amplitude of the bibliography is also a matter on which preliminary and systematic decisions can be made.12 Some encyclopaedic works allow for variants in the microstructure, with entries devised for quick consultation or essential information as opposed to more complex and elaborate articles.13 The macrostructure, or nomenclature, consists in the general organization of the work, and includes the word-list and the arrangement of articles. While the fractionization of knowledge into distinct fragments involves some problems for the unity of the whole, the compilation of the list of articles and the choice of contributors offers ground for the deployment of the editor’s strategy.14 This applies particularly to encyclopaedic dictionaries: first, one must choose which topics are to be included, on the basis of a judgement of relevance and pertinence. Thus, for example, the notion of ‘crisis’ has not been always present in economic dictionaries: it first appeared in the 1830s, and about a century later it made room for the notion of ‘cycle’ (see more details in Section 1.2 below and in Chapter 3). Second, being concerned with concepts rather than with terms, an encyclopaedia can use any of a family of words belonging to the same semantic field as a gateway to discuss the field itself (and, as we shall see in Chapter 3, the choice of the representative term is not neutral). For instance, an encyclopaedia discussing ‘business cycles’ (or, not equivalently, ‘business fluctuations’) does not need to carry entries on ‘recovery’ or ‘recession’; these terms should instead feature in a dictionary.15 Encyclopaedic works can also include in their word-list some complex concepts in the form of multi-word concepts. →O’Hara’s Encyclopaedia of political economy (1999),

Introduction 9 for instance, includes entries such as GOODWIN CYCLE AND PREDATOR–PREY or NUTCRACKER THEORY OF THE BUSINESS CYCLE. Paradoxically, in spite of being ordered alphabetically, such works need an index for navigation, and they often carry both a thematic and an alphabetical one. Having decided the word-list, dictionary compilers must make a second decision concerning the most suitable contributors to discuss the chosen terms. Here, the breaking down of knowledge typical of the dictionary approach can produce its best result, as each topic can be assigned for discussion to an authority in the specific field. Indeed, some dictionary entries have become classics in their field, and the subject of crises and cycles is no exception. Among the authors of such entries we have, in fact, some of the best writers on the subject, even by today’s standards, such as Jugular, who was in high demand, as he wrote three entries on crises: CRISES COMMERCIALES for →Block’s Dictionnaire général de la politique (1863, revised 1873), CRISES COMMERCIALES for →Say and Chailley’s Nouveau dictionnaire d’économie politique (1891, 2nd edition 1900), and CRISES FINANCIÈRES ET COMMERCIALES (with Des Essars) for →Say’s Dictionnaire des finances (1889) (see Chapter 12); Tugan-Baranovsky, who contributed entries on ECONOMIC CRISES for the three editions of the Russian Brockhaus–Efron (1895, 1909, 1915) (see Chapter 17); Spiethoff, who contributed a very long entry on KRISEN for →Elster’s Handwörterbuch der Staatswissenschaften, 1925 (see Chapter 20), Mitchell (BUSINESS CYCLES), Hawtrey (CREDIT), again Spiethoff (OVERPRODUCTION), Kuznets (CONJUNCTURE) and Lescure (CRISES) for →Seligman’s Encyclopaedia of the Social Sciences (1930–1935) (see Chapter 22 on Mitchell’s entry); and Tinbergen, who wrote CONJUNCTUURTHEORIE (business cycle theory), CONJUNCTUURSTATISTIEK (business cycle statistics), BEWEGINGSTYPEN (types of motion) and DYNAMICA (dynamics) for →Stridiron’s Bedrijfseconomische encyclopedie (1947) (Chapter 22). A number of other entries, while not being authored by world authorities in the field, were at any rate drafted by clearly competent and knowledgeable writers. The choice of the ‘best’ author for an entry16 is far from a matter of course, but reflects a number of constraints, and takes place compatibly with the dictionary’s chosen aim such as the belonging to one or another school of thought (on this, see Section 1.1.4 below). Apart from the potential writers’ availability to contribute on request, language is probably the main constraint. English is nowadays the scientific lingua franca, so that encyclopaedic works in that language can easily draw from a worldwide choice of potential contributors. For other languages things are not so easy, as translations involve additional costs that only a limited number of projects can afford. This constraint has the straightforward implication that any pre-existing national tradition concerning the approach to a subject is consolidated by its recording in dictionaries. Again, crises and cycles offer a good case in point, with some national approaches being crystallized in dictionary entries, in particular concerning terminology, the history of the discipline, and the very definition of the subject matter (see Chapters 3, 4 and 28). A further constraint in the choice of contributors relates to the editors’ understanding of the various issues at stake in the various fields covered by the dictionary

MODELS

10 Daniele Besomi or encyclopaedia and on their acquaintance with the writers in each of these subfields. As disciplinary knowledge becomes more and more specialized, hardly anyone can master the entire spectrum; this is all the more true for broader scope encyclopaedias, such as works covering the whole of the social sciences. The choice of collaborators thus becomes the subject of a complex strategic approach. This is exemplified in the contrast between Seligman, the editor of the first edition of the →Encyclopaedia of the social sciences (1930–1935), and his assistant, Alvin Johnson. Seligman argued that special sections of the encyclopaedia should be sub-edited by eminent collaborators who would in turn assign each specific article to other writers of their choice. Johnson feared that this approach would bring each field under the control of some schools or academic ‘clusters’, and suggested instead that the supervision should be handed down to a number of competent assistant editors with a solid interdisciplinary background who would select, upon consultation with a number of advisers, the topics to be discussed, while the final decision as to the assignment of the articles should be retained by the encyclopaedia’s editors. The latter was the procedure eventually adopted (Gemelli, 1999, pp. 154–155). While the involvement of eminent writers in the encyclopaedic project contributes to its overall authority, by tying the reference work to the personality and the research of its authors it also contributes to its caducity: ‘the encyclopedia becomes a living organism, thereby precarious’ (Rey, 1982, p. 107), condemned to continuously renovate itself in order to survive. Prestigious contributors are bound to leave their mark on the entries they author. They obviously privilege their own perspectives on the topic they are discussing and on the literature about it. Again, cycles and crises offer a clear example of this. In most entries written in the nineteenth century and in the first part of the twentieth century, the recognized authorities were plainly expounding their own view on crises (see in particular Chapters 7, 8, 10, 12, 14, 15, 17, 19, 20, 22, 23); indeed, they were selected precisely for the views they were upholding. During the twentieth century, especially in the second part, encyclopaedic articles apparently offer less personal perspectives, in particular by taking into account alternative views. But the problem of crises and cycles is so intrinsically connected with one’s beliefs as to the working of the capitalist system that one can hardly avoid taking sides – often the very definition of concepts characterizes a specific perspective. The third ingredient of the macrostructure is the ordering of the entries. The overwhelming majority of encyclopaedic works choose the alphabetical arrangement. Some use mixed systems. One consists in alphabetically ordered articles within methodically arranged volumes, beginning from Panckoucke’s Encyclopédie méthodique par ordre des matières (Methodical encyclopaedia by order of subject matter), an update and rearrangement by subject matter of Diderot and d’Alembert’s Encyclopédie (with volumes on commerce, edited by Baudeau under the title →Encyclopédie méthodique. Commerce, three volumes, 1783–1784; on →Économie politique et diplomatique, edited by Démeunier, 1784–1788, four volumes; and on finance, edited by Surgy under the title →Dictionnaire

Introduction 11 encyclopédique des finances, 1784–1787, three volumes). An example examined in this volume is →Ott’s Dictionnaire des sciences politiques et sociales (1854), part of Migne’s Encyclopédie théologique (see Chapter 10), while a more recent instance is the breaking down of →Eatwell, Milgate and Newman’s The new Palgrave: A dictionary of economics (1987) into a number of thematic volumes.17 Another mixed alphabetical and methodic order is that worked out by the Encyclopædia Britannica through its various editions, where large general treatises on each distinct science were combined with smaller entries on specific terms;18 a similar scheme was followed by the Granat Encyclopaedic dictionary (1910–1948) (see Chapter 21). There are also a few examples of encyclopaedic dictionaries specialized in economics that have chosen a fully methodical arrangement, such as Perroux’s →L’univers économique et social, 1960, vol. 9 of the Encyclopédie française,19 or Brémond and Gélédan’s →Dictionnaire des théories et mécanismes économiques, 1984;20 both carry chapters or sections, rather than entries, related to cycles. In Brémond and Gélédan there is an article titled CROISSANCE ET CRISES, while in Perroux the discussion of LE CYCLE DANS LE DÉVELOPPEMENT (cycles as part of the development process) is articulated in two chapters, with sections written by four contributors, on cycles after the Second World War, and on national and international stabilization policies. The pure alphabetical order is apparently paradoxical. Encyclopaedias, in their etymology, are meant to be ‘instruction in a cycle’. As Coleridge complained, ‘a strange abuse has been made of the word encyclopaedia! It signifies, properly, grammar, logic, rhetoric, and ethics and metaphysics, which . . . formed a circle of knowledge. . . To call a huge unconnected miscellany of the omne scibile, in an arrangement determined by the accident of initial letters, an encyclopaedia, is the impudent ignorance of your Presbyterian book-makers’.21 Editors of encyclopaedias have been painfully aware of this problem since (at least) Chambers’s Cyclopædia (1728), and have sought to minimize the disruptive effect of the alphabetical order–disorder by means of methodic indexes, cross-references,22 differentiated micro-structures allotting more space to main entries, by using mixed methodic and alphabetical arrangements or by offering an historical presentation of knowledge (see Yeo, 1991). An alphabetized text breaks the linear and closed classificatory structure of a systematic presentation of knowledge, and substitutes it with an open structure (Rey, 1982, pp. 32–33). This implies a loss of coherence as related terms are dispersed throughout the entire encyclopaedia, and notions that should be understood in order to comprehend a term may happen to be placed in a different volume.23 The alphabetical order itself, however, contributes to hiding this lack of coherence (Rey, 1982, p. 104), as well as making it more difficult to grasp the choices and priorities of the editors, and rendering less obvious any gaps and inconsistencies. The list of entries, however, being freed from a more rigid structure, can be revised and expanded – which is precisely what happened to the entries on crises and cycles (see Section 1.1.2), and specific information can be more easily retrieved. By abandoning the linear structure of the argument, encyclopaedias ask

12 Daniele Besomi readers to construct their own reading path, in an active and critical way. Crossreferences and thematic indexes do not reinstate linearity, but supply some guidance in a web-like structure (Kilcher, 2007, pp. 79–80). Notably, the alphabetical structure may itself be rendered obsolete by the increasing diffusion of electronic reference works (Landau, 2001, p. 19).24

1.1.4 The encyclopaedic goal Dictionaries and encyclopaedias are planned from the outset with some purposes of rather different nature in mind. All have the explicit purpose of transmitting and making readily accessible knowledge, although there is a difference between informing (making known) and teaching (making comprehensible). Also, depending on the target readership (on which, see Section 1.1.5), the choice between the informative and the educational approaches will produce different kinds of articles – e.g. more attentive to the details or to a general perspective, respectively (Van Doren, 1962, pp. 23–24). Encyclopaedias also have an epistemological project – although this is often not explicitly expounded to the reader – guiding the way in which knowledge is organized. Some encyclopaedias of the Enlightenment were concerned not only with collecting knowledge and making it accessible, but also with organizing and systematizing it, in parallel with the attempts by philosophers such as Bacon, Leibnitz, Kant and Descartes to draw out the relationships between different branches of knowledge, and the taxonomic efforts of Linnaeus.25 Later attempts were not so ambitious,26 yet all encyclopaedic projects must lie on some epistemological premise. This is not the place to attempt a classification of the views guiding general-purpose or even economic encyclopaedias, but among the latter, two opposite stances are worth recording as an example of how different premises may shape form and contents of the articles they contain. On the one hand we have →Coquelin and Guillaumin’s Dictionnaire de l’économie politique (1852–1854), the very title of which was meant to indicate that there is one ‘true’ doctrine of economics, which admits of some shades of opinion but is clearly distinguishable from fallacious reasoning, and which is immutable and not subject to evolution except in some minor details (see Chapter 8). The implication of such a view is that each article depicts the conclusive (or virtually conclusive) doctrine on each subject. On the opposite side of the spectrum we find Lunghini’s Dizionario di economia politica (1982–1990), which starts instead from the opposite assumption that rather different, often not mutually compatible, economic doctrines coexist, each being the product of a history consisting in the development not only of analytical methods but also of worldviews, and that the concepts they develop, even if often designated with the same term, may have completely different premises, meaning and implications, so that dictionary entries must be essentially historical in their treatment.27 One may naively assume that encyclopaedias and dictionaries are essentially scholarly in their attitude, and therefore have no bias in favour of or against any philosophical perspective, ideology or school of thought (see e.g. Stover, 1962, p. 35). Although this is the case for most renowned reference works, the history of

Introduction 13 both general-purpose works and those especially devoted to economics or the social sciences proves that this is a delusion. Diderot and d’Alembert’s Encyclopédie criticized the government, satirized the Calvinist clergy and supported an atheistic materialism. Larousse’s Grand dictionnaire universel du XIXe siècle (1865–1890) was anti-clerical, the German Brockhaus was Protestant, while Herder’s Konversations-Lexikon (1854–1857) was Catholic.28 Some encyclopaedic works have even been directly commissioned by governments, such as the →Dizionario di politica (1940), edited by the Italian Fascist Party (see Lentini, 1999, pp. 258 and 270). Among social sciences dictionaries, some make explicit their standpoint in the title (→Klose’s Katholisches Soziallexikon, 1964, 2nd edition 1980, and →Herzog et al.’s Evangelisches Staatslexikon, 1987). Others do so in the prefaces. →Coquelin and Guillaumin’s Dictionnaire (1852–1854), for instance, upheld the viewpoint of the French Liberal school, as did its successor →Nouveau dictionnaire d’économie politique, edited by Say and Chailley (1891, p. vii) (see Chapters 8 and 12). Another example is the contrast between →Rotteck and Welcker’s Staats-Lexikon, which was inspired by liberal ideas (see Chapter 14), and the →Görres-Gesellschafts Staatslexikon, which was edited precisely with the intent of counterbalancing Rotteck’s. Elster, on the contrary, explicitly specified in the introduction that his →Wörterbuch der Volkswirtschaft was not partisan (Höhmann, 2001, pp. 190–191; see Chapter 19). The dictionaries dedicated to specific schools of thought, such as Marxism, Keynesian economics, social market economy and free-market economics (see Chapter 2, Section 2.6), are presumably sympathetic to their respective subjects. Other dictionaries do not explicitly declare their stance, and readers must seek (if they have the instruments for doing so) to understand it themselves. Two examples will suffice. →Napoleoni’s Dizionario di economia politica (1956), which uses throughout the Marxist method of criticism of political economy without needing to explain it explicitly in the PREFAZIONE, could be translated into Spanish under Franco’s regime with a reviewer emphasizing the ‘ecletic and liberal tendency’ (Ruiz Damiel, 1964, p. 128). The first edition of → The new Palgrave (1987) claimed to respect the multiplicity of economic views by means of multiple entries on the same subject under different titles, but was nonetheless found to be ‘tendentious’ and biased, in particular in favour of the Sraffian school (Stigler, 1988, pp. 1732–1733 and especially Blaug, 1988, dismissed as unfair by Milgate, 1992; for a discussion, see Bailey, 1994). Finally, being the product of commercial enterprises, most encyclopaedic works are subject to market constraints. All preliminary decisions concerning the size of the dictionary and target audience are a function of the expected marketability of the product, in turn depending on national conditions and on the times. Needless to say, this affects the possible length and the shaping of the contents of each individual entry, and is a factor to be evaluated when consulting an article.

1.1.5 The elected audience The aims of encyclopaedic enterprises are intimately related to the public to which the work is addressed. Their modern history begins with the Enlightenment, when

14 Daniele Besomi science was becoming increasingly important but still out of reach (most scientific works were still written in Latin) of a general reading public that was rapidly increasing in size. Scientific contributions, moreover, were also becoming more numerous, and it became progressively more difficult to keep track of all developments. So, on the one hand there developed dictionaries explaining the technical jargon (Layton, 1965), and encyclopaedias with an explicitly systematic educational aim. Science and technology were at the core of these enterprises, as witnessed by the subtitles of most of them in words such as ‘dictionary of science and art’ (among those already cited here, Chambers’s Cyclopaedia, the Britannica, Diderot and d’Alembert’s Encyclopédie). At first, these works were concerned with collecting and presenting knowledge in a manageable form, with the purpose of offering connections between subjects to make the starting point for further inquiries. They were thus primarily addressed to savants. In the early nineteenth century, a kind of reference work aimed at the general educated public became vastly diffused throughout Europe. The format of the ‘conversation-lexicon’,29 consisting in short anonymous articles written in a simple style, aimed at providing arguments for after-dinner conversations for the consolidating bourgeoisie, was made popular by the →Conversations-Lexikon published by Brockhaus (who acquired it from Löbel) under different titles from the first edition in 1796–1808. Quickly, similar works were published throughout Europe and beyond (either autonomously or adapted from the Brockhaus); in the English version, they often carried the adjective ‘popular’ (as distinct from ‘learned’, not as suitable to everybody), such as →Whitelaw’s Popular encyclopaedia: or, ‘Conversations lexicon’: being a general dictionary of arts, sciences, literature, biography, history, ethics, and political economy (1834–1842) or →Lieber’s Encyclopaedia Americana. A popular dictionary of arts, sciences, literature, history, politics and biography (1829–1835), based upon the 7th edition of the Brockhaus. Here, the choice of the public was explicit. The →Encyclopédie des gens du monde (1833–1844), for example, also written in the spirit of the Brockhaus, declares that it is addressed to the gens du monde (the bourgeois aspiring to knowledge), as distinct from the lower classes (le peuple) and from the savants who look to other encyclopaedias for a different kind of knowledge; it is aimed to a public with some time to spare, more numerous than the savants and less ignorant than the ordinary people (DISCOURS PRÉLIMINAIRE, pp. vi–vii). Meanwhile, some cheap encyclopaedias, aiming at a still wider audience, were also published, such as a number of elementary encyclopaedias in France, for instance Vanderest’s Encyclopédie élémentaire du XIXe siècle, ou Résumé des connaissances humaines . . . exposées dans un ordre qui fait ressortir essentiellement la philosophie des faits littéraires, historiques et scientifiques (Paris: L. Hachette, 1843, 1 vol. in 16°, p. 580) and the Penny Cyclopaedia (London: Knight, 1833–1846, 27 volumes and 2 supplements) – from which the articles on constitution, political economy, trade and commerce, administration and law which constituted →Long’s Political dictionary (1845–1846) were extracted. Specialized dictionaries had a specific kind of public. The earliest dictionaries of economics were dedicated to traders, merchants and occasionally to bankers and

Introduction 15 industrialists (see Chapter 2, Section 2.3). Social sciences dictionaries (Chapter 2, Section 2.5) were dedicated to a general public, such as ‘statesmen and citizens’, to take the subtitle of one of the first works of this kind, →Robinet’s Dictionnaire universel des sciences morales, économique, politique et diplomatique; ou bibliothèque de l’homme d’État et du citoyen (1777–1783). Before the institutionalization of economics, the public of dictionaries of political economy could not consist only of the few specialists on the subject, who could hardly have constituted a sufficiently solid market. Most works of this kind were thus also addressed to other categories of readers: those in charge of public or collective interests, who have no time for the methodical study of economics, and those who have occasionally studied economics and need handy replies to any problem that they may face (INTRODUCTION, →Coquelin and Guillaumin, Dictionnaire de l’économie politique, 1852, p. xiii; see Chapter 8); civil servants, merchants and capitalists (GLI EDITORI A CHI LEGGE, in →Boccardo’s Dizionario della economia politica e del commercio, 1857, vol. 1; see Chapter 11); the educated Germans who want to get rapidly acquainted with the basic views on the subject and want to form their own opinion, but also commerce chambers and economic associations (VORWORT, →Rentzsch, Handwörterbuch der Volkswirthschaftslehre, 1866, p. iv; see Chapter 14). Towards the end of the century, when the studies of economics were being institutionalized, a new kind of reader appeared on the scene: students. The first dictionary explicitly aimed to them seems to have been Piernas y Hurtado’s thin Vocabulario de la economía (1877, 192 pages), aimed at redefining terms for the classroom in order to attack the prevalent liberal optimism (Astigarraga et al., 2001, pp. 38–40). More ponderous was Palgrave’s Dictionary of political economy (1894– 1899; see Chapter 16), shortly followed by Elster’s Wörterbuch der Volkswirtschaft (1898; see Chapter 19). Soon students became a large and appetizable market; this, combined with the exponential growth of the literature, made it interesting to publish ready-made reference books for students. Indeed, they have become the main target of economic lexicography, at least in terms of the number of works published. The larger (and more expensive) of these works are meant to be bought by libraries; those meant to be sold to students are much smaller in size, and are therefore much more limited in scope. Similar to the latter are quick reference works addressed to the general public, such as newspaper readers. This specific genre has enjoyed a long and glorious tradition, beginning at least from Hübner’s Zeitungslexikon, first published in 1704 as Reales Staats- und ZeitungsLexikon (Leipzig: Gleditsch, p. 1284), renamed Reales Staats-, Zeitungs- und Conversations-Lexikon in the 4th edition, 1709, thus becoming the first work to explicitly denote itself as a conversations-lexicon, and going through 31 editions until 1828. During the twentieth century, some such dictionaries specialized in economics and a few of them were published by the economic editors of large newspapers. The first of these was explicitly addressed to newspaper readers and students (→Bower, A Dictionary of economic terms for the use of newspaper readers and students, 1905). In terms of effort, the major editorial enterprises are still the scholarly works addressed to academics and graduate students (such as →The new Palgrave (1987,

16 Daniele Besomi 2008), even if it nominally targets students) or, if addressed to a generalist public, the large works seeking contributions from well-known experts in their fields (such as the →International encyclopedia of the social sciences, 200830). This is the kind of work in which we are primarily interested in this volume.

1.1.6 Dictionaries and textbooks Ideally, ‘Dictionaries are instruments of self-teaching and they have all the characteristics of all didactic books: they contain definitions, they give information which is presented as the knowledge and the opinion of the community in general – as opposed to the knowledge and opinions of the lexicographer, and they give this information in an “objective”, undisputable way’ (Béjoint, 1994, p. 18). Although this expectation of objectivity is rather unwarranted, both for encyclopaedic works (see Section 1.1.4) and for textbooks and other teaching materials, there are indeed obvious similarities but also specific differences between these kinds of books. First, textbooks are by definition aimed at students, while dictionaries can, and often do, address a different readership, which may, or may not, include students. Second, while both dictionaries and textbooks are instruments of learning, textbooks are meant to guide the student through one or more courses, while dictionaries are works of reference on special subjects. This results in a different arrangement of the materials: while most encyclopaedic works are alphabetically ordered, textbooks have a linear structure, and are far more systematic in the presentation. Third, dictionaries’ fragmentation of knowledge is in contrast with textbooks’ effort to present an overall picture of the discipline’s problems, methods and results. This is amplified by the fact that textbooks are usually written by a single author, or a small group of authors, while the numerous collaborators of encyclopaedic enterprises only interact via the mediation of the editors.

1.1.7 A literary genre The features of specialized dictionaries and encyclopaedias outlined above deeply affect the style of articles included in such works, characterizing a specific genre of scientific literature. To begin with, articles are monographic and self-contained, meant to be read independently of the rest of the work; they are connected to the rest of the body of knowledge by the dictionary’s architecture by means of crossreferences. They normally include a definition of the concept to which they refer (we thus find, in the earliest entries on ‘crises’ in encyclopaedias, the very first tentative definitions of the term: see Chapter 6), sometimes also its etymology and more rarely the history of use of the term. Authorship of articles is normally expert and often authoritative – a feature which encyclopaedia makers started advertising by the early nineteenth century (see Yeo, 1991, p. 46), continuing until the most recent encyclopaedic productions, which highlight the presence of Nobel laureates among their contributors. Nowadays, we expect encyclopaedic articles to depict the state of consolidated knowledge at the time of writing, thus to lie in the rearguard rather than illustrating

Introduction 17 the latest tendencies of thought. But during most of the nineteenth century and also in the early part of the twentieth, encyclopaedias occasionally housed original pieces of research in many fields, including some articles later developed into textbooks or treatises (Yeo, 1991, p. 46) – Nassau Senior’s Outline of the science of political economy (1836), to cite an example from economics, consists in the article on POLITICAL ECONOMY for the Encyclopaedia metropolitana (1817–1845). Also, some articles on crises were either fully original (for instance, Ott’s, Chapter 10, or Roscher’s, Chapter 7), or contained innovative and interesting additions (for instance, Coquelin: Chapter 8), brought together the results of years of research (Spiethoff: Chapter 20) or summed up results recently published elsewhere in a much expanded form (Tugan-Baranovsky: Chapter 17), occasionally producing much clearer versions by eliminating unnecessary redundancies and improving the organization of the presentation (Juglar: see Chapter 12 and Dangel-Hagnauer, 2010). The latter feature reflects the fact that articles are assigned a limited number of pages, within a range depending on the dictionary’s overall planned size (which translates, for the entries on crises and cycles, from one or two paragraphs in the smallest dictionaries to several dozen pages in the largest ones). The author is thus compelled to be selective, focus only on the essential features, and supply within this space all the necessary information. This produces concise, systematic and synthetic expositions of the subject – whether an original piece of research or a compendium of the facts and shared knowledge about a topic.

1.2 DICTIONARY ARTICLES AND THE HISTORY OF ECONOMIC THOUGHT The features of the dictionary genre described above, joined with the production of both a myriad of smaller dictionaries aimed at students and laypeople – thus, highly influential in the diffusion of knowledge – and especially of a smaller but significant number of monumental reference works depicting the state of the art at their time, and sometimes even offering glimpses of research in the making (for a brief history of economic dictionaries, see Chapter 2), make encyclopaedic articles a particularly interesting source of documents for the history of economic thought. In general terms, the very fact that well-qualified (and sometimes excellent) authors agree to distil in a few self-contained pages aimed not only at specialists but also at a more generalist public everything they deem to be important concerning a subject is itself a sufficient reason of interest, even though the treatment is bound to be somewhat disconnected from the remainder of the body of knowledge. One can reasonably expect to find authoritative statements and good guides to the relevant literature, although perhaps not fully up to date and sometimes espousing one or another special viewpoint. More specifically concerning the subject of this book, crises and cycles, the features of the dictionary genre are productive of consequences. Some lie in the nature of each specific encyclopaedic article, and are explored in Part II of this volume,

18 Daniele Besomi where 30 such entries are discussed, summarized and analysed, and the dictionaries or encyclopaedias that house them and the author who wrote them are presented. Some of these – in particular Juglar, Tugan-Baranovsky, Mitchell, Spiethoff, Tinbergen – were undisputedly among the best authorities in the field at the time, and their entries clearly show it; some entries have been widely cited by contemporaries – Coquelin’s (as witnessed by Boccardo’s entries), Roscher’s, Wagner’s, Herkner’s and Spiethoff’s; some have so far remained unknown, in spite of their high quality, outside their country of origin, due to obvious language barriers – Tugan’s, Tinbergen’s, Konyus’s; one (Ott) remained unknown due to the outsider character of its author, but anticipates theoretical developments that took place only six decades later; and some are retrospectively rather disappointing, denying the systematic character and the relevance of the phenomenon at a time when major lines of research into it were developing – Macleod, Laveleye, and the entries in Palgrave’s Dictionary of political economy – their interest lying more in what they fail to say or explicitly deny than in what they affirm. While the merits of each of these entries will be discussed in their respective chapters, it is important to stress here that these articles, together with those that it has not been possible to discuss individually in this volume, also have a collective significance. The very first macro-structural decision of dictionary compilers (Section 1.1.3) concerns the choice of the concepts entering the word-list, which involves decisions as to both the inclusion or exclusion of a concept, and the appropriate name for it.31 There is nothing ‘natural’ and objective in such a decision, as the case of crises and cycles illustrates. Although crises have repeatedly affected the mercantile world at least since the early eighteenth century and have accordingly been discussed in the contemporary literature, the notion of ‘crisis’ – under any of the alternative names used to indicate troubled states of the economy, such as ‘distress’, ‘embarrassment’, ‘panic’, ‘mercantile delusion’, ‘glut’, ‘pressure’, ‘commercial revulsion’ or ‘convulsion’ – did not make it to any dictionary heading until the mid-1830s,32 when a number of dictionaries and encyclopaedias started carrying entries on ‘commercial crises’ or, more often, ‘commercial crisis’ in the singular (see Chapters 5 and 6). Although most crises had hitherto affected Britain and, to a lesser extent, the United States, these reference works were all French, while this notion was conspicuous for its absence in English-language dictionaries – including in particular →McCulloch’s 1832 Dictionary . . . of commerce and commercial navigation, notwithstanding the author’s numerous writings on the subject (e.g. McCulloch, 1826). This is not to say that there was no room for crises in dictionaries; they were, however, discussed parenthetically under different headings, such as BANK OF ENGLAND (in →Montefiore’s Commercial dictionary, 1803), CORN LAWS AND CORN TRADE and BANKS (ENGLISH PRIVATE AND PROVINCIAL) (in →McCulloch’s 1832 Dictionary), PAPER-MONEY – BANKS (McCulloch, in →Encyclopædia Britannica, 7th edition, 1838) or CREDIT (in Lieber’s →Encyclopaedia Americana, 1830). The recording of commercial crises as dedicated entries in dictionaries and encyclopaedias sanctions the acknowledgement of the importance of such phenomena, which at some point were recognized to be frequent and relevant enough to deserve

Introduction 19 a proper definition and contextualization within the body of economic knowledge – first in France, Germany and Italy, and at long last (slowly and timidly) also in the English language (see Chapter 6). At the time the first encyclopaedic entries on crises were published, the term ‘crisis’ itself was already predominant in the French literature to describe the phenomenon, and was therefore the natural and undisputed choice. After the 1837 crisis, it became the dominant term also in English, so that most entries published up to the 1920s were headed ‘crisis’ – often accompanied by the qualifier ‘commercial’, occasionally alone, or with the attribute ‘production’ (Roscher: see Chapter 7), ‘financial’ (Juglar and Des Essars, CRISES FINANCIÈRES ET COMMERCIALES, in →Say, Dictionnaire des finances, 1889) or ‘industrial’ (CRISE COMMERCIALE ET INDUSTRIELLE, in →Monbrion’s Dictionnaire universel du commerce, de la banque et des manufactures, 1838: see Chapter 6). As the focus on crises was progressively substituted by an emphasis on the entire cycle at the beginning of the twentieth century, dictionaries and encyclopaedias slowly adapted. At first they carried entries on ‘crises’ but explained that the ‘new theories of crises’ saw them as part of a cycle; then they started carrying entries on both crises and cycles; and finally, after the Second World War, most entries were titled ‘business cycles’ or ‘trade cycle’ (see Chapter 3, Sections 3.3.8–9 and Chapter 4, Section 4.5). The term ‘crisis’, however, persisted in the French language, where it was used more or less interchangeably with ‘cycle’, and has had a resurgence since the 1970s, when some dictionaries chose to reintroduce it in the word-list with the intent of emphasizing a distinction between crises and cycles (see Chapter 28). The issues at stake here are not purely terminological, but conceptual, theoretical, and to some extent involve worldview switches not devoid of political implications. Incorporating ‘crises’ as a distinct entry in encyclopaedias implies the recognition that such phenomena are not marginal and occasional, but affect the economic system at its core; this questions the idea that the economic system is self-adjusting – even if some writers of dictionary entries did their best to prove the opposite, the very fact of doing so revealing that the proposition denied was elsewhere being affirmed with sufficient insistence to call for a rejection. Substituting ‘crises’ with ‘cycles’ involves again a different kind of understanding of the working of the economic system, no longer in terms of sudden and violent cessation of an overspeculative phases, bringing the system back to ‘normal’ (as the prevalent explanation of crises during the nineteenth-century ran), but in terms of fairly gentle, regular and somewhat mechanical alternation of general ups and downs. Besides the inclusion or exclusion of ‘crises’ or of ‘cycles’ in the word-list, the very definitions of these phenomena add further specification to their understanding. As it turns out, these definitions show some variability through time and space, but tend to be characterized by national traditions.33 For instance, most French dictionaries during the nineteenth century defined crises as a generic disturbance to the smooth flow of affairs, while German dictionaries emphasized instead the disruption of the equilibrium of supply and demand – thus pointing at different potential culprits, and involving different theoretical relationships among the

20 Daniele Besomi various components of the economic system (see Chapter 3, Section 3.2.8.3 and Chapter 4, Section 4.3). The chronological unfolding of dictionary entries on crises and cycles naturally reflects, perhaps with some delay, the developments in the field and the attitude towards the subject, and is therefore broadly illustrative of its history. The very multiplying of entries concerned with these phenomena under different headings epitomizes the growing complexity of the subject and the increasing richness of its treatment. The appearance of some subheadings, such as ‘remedies to the cycle’, political business cycles (Chapter 25) or cycles of different length (Chapter 24), and the increased focus on mathematical approaches, or again the emphasis given to the history of the discipline (Chapter 4), show that research has firmly taken certain turns that after some point become non-renounceable. This is not to say that dictionaries capture everything. What they leave out is retrospectively also interesting, as indicating what, at the time, was not thought to be of sufficient relevance to be included. Whether by inclusion or by exclusion, dictionaries are perceived, by authors and readers alike, as a repository (or perhaps the repository, when talking of major dictionaries) in which to record, systematize and assess what should be known on the subject for contemporary (and perhaps also future) users – be they laypeople, students or scholars. And it is precisely as readers interested in such a legacy that in this volume we look at these dictionary entries, examining both the knowledge they want to transmit and what they fail to capture or decide not to convey.

1.3 STRUCTURE AND LIMITS OF THIS PROJECT As described in the preceding section, the bulk of this book (Part II) consists of 19 chapters, each devoted to one significant entry on cycles or crises in specialized dictionaries or encyclopaedias (or occasionally a small set of them), mostly written before the Second World War. Each chapter devoted to a single entry has a section explaining the features, scope and purpose of the dictionary or encyclopaedia; one presenting the author and the merits that led him34 to be selected for the task; one describing the entry; and one assessing its historical relevance and impact. As explained in Section 1.1.2, recent dictionaries have multiplied the number of cycle-related entries, sometimes juxtaposing inconsistent entries without placing them in context. For these works, a structuring of chapters as described above would not be appropriate. We have instead selected five recurring themes and surveyed their treatment across post-war dictionaries: long waves, political business cycles, real and equilibrium business cycles, non-linear business cycles, and crises. Significantly, there is no chapter dedicated to business cycles in general. Major dictionaries, in fact, either do not carry entries for this term and discuss instead cycles with one or more of the above qualifications, or camouflage specific business cycle approaches under one of the above headings; the definitions of ‘business cycles’ in recent dictionaries, whether major works or quick reference

Introduction 21 tools, are discussed in Chapter 3, Section 3.2.9, while the historical approaches to the subject are surveyed in Chapter 4. The first part of this book includes a brief history of dictionaries of economics and related subjects, a chapter on the semantics of cycles and crises, focusing in particular on the usage in encyclopaedic entries, and a general survey of the dictionary treatment of the history of doctrines of crises and cycles. Besides their obvious purpose of clarifying terminological issues in historical terms and, respectively, of examining and classifying the various readings of the history of the subject, these chapters are also designed to partially remedy an obvious limitation of this project. Space constraints have made it necessary to be selective in the choice of dictionary entries to be analysed in Part II, thus creating some regrettable gaps. In Chapter 3, the definitions of crises, cycles and other related terms given in the neglected dictionaries have also been considered, in order to reconstruct a full panoramic view of how the related notions have changed through time and across nations. This chapter also finds a place for the general notion of ‘business cycle’ (without specific qualifiers) emerging from post-war dictionaries and not otherwise surveyed in Part III. Equally important is the way in which dictionary contributors have dealt with the previous history of the subject (Chapter 4): while often not really illuminating the alleged subject of such reconstructions, the history of doctrines offered by a particular author is normally very informative on the author himself or herself, on the contributor’s perspective on the previous developments, and on the place in it where the writer believes his or her contribution belongs.

NOTES 1 For a list of titles of reference works concerning economics, see the general bibliography (Chapter 29, Section 29.2). 2 Encyclopaedias can thus be translated into other languages, while linguistic dictionaries cannot (Lara, 1989, p. 284; Béjoint, 1994, pp. 23 and 30). 3 ‘Dictionaries of proper names’, strictly speaking, supply encyclopaedic information, and belong therefore to the category of encyclopaedic dictionaries. 4 Some, however, characterize a lexicon as a dictionary with words arranged semantically rather than alphabetically (Béjoint, 1994, p. 15). 5 See, for instance, DICTIONARY and ENCYCLOPÆDIA in Encyclopædia Britannica, 2010; Lara, 1989; Rey, 1982, pp. 17–24; Béjoint, 1994, pp. 21–23; GLOSSARY, DICTIONARY, ENCYCLOPEDIA, LEXICON in Hartmann and James, 1998; Van Hoof, 1994, pp. 9–11; Green, 1996, pp. 1016 and passim. For a rejection of this (and any other) distinction between dictionaries and encyclopaedias, see Haimann, 1980 and 1982, contra Frawley, 1981. 6 The size of general dictionaries is normally measured by the number of entries (see e.g. Landau, 2001, pp. 28–32). Here we are interested in both depth and extension. 7 In Chapter 3 on the semantics of crises and cycles, however, reference is occasionally made also to the definitions given in ‘minor’ dictionaries. 8 Although Boccardo was referring to the fact that knowledge broken down to special articles cannot claim to represent (and therefore substitute for) the whole, his admission points to a recognized contradiction between the unifying methodological intent of general encyclopaedias and the disciplinary specialization of sectorial dictionaries (Gemelli, 1999, p. 135).

22 Daniele Besomi 9 The 2nd edition (2008) of the →New Palgrave features the following: CREDIT CYCLE; TRADE CYCLE; REAL BUSINESS CYCLES; KONDRATIEFF CYCLES; BUSINESS CYCLE MEASUREMENT; MONETARY BUSINESS CYCLE MODELS (STICKY PRICES AND WAGES); KUZNETS SWINGS; POLITICAL BUDGET CYCLES; POLITICAL BUSINESS CYCLES; GROWTH AND CYCLES; MONETARY BUSINESS CYCLES (IMPERFECT INFORMATION); CHAOTIC DYNAMICS IN ECONOMICS; CURRENCY CRISES; BANKING CRISES; CURRENCY CRISES MODELS; UNDERCONSUMPTIONISM; COBWEB THEOREM; GREAT DEPRESSION (MECHANISMS); GREAT DEPRESSION, MONETARY AND FINANCIAL FORCES IN; GREAT DEPRESSION; BANKRUPTCY, ECONOMICS OF; MULTIPLIER–ACCELERATOR INTERACTION. The 2nd edition of the International encyclopedia of the social sciences (2008) also carries several entries on the topic, including BUBBLES; BULL AND BEAR MARKETS; BUSINESS CYCLES, THEORIES; BUSINESS CYCLES, EMPIRICAL LITERATURE; BUSINESS CYCLE, REAL; BUSINESS CYCLE, POLITICAL; COBWEB CYCLES; ECONOMIC CRISES; DEPRESSION, ECONOMIC; RECESSION; GREAT TULIP MANIA; INTERNET BUBBLE; LONG WAVES; NONLINEAR SYSTEMS; OVERPRODUCTION; PANIC; PANICS; PONZI SCHEME; SOUTH SEA BUBBLE; STAGNATION; UNDERCONSUMPTION. 10 While carrying multiple entries under different titles on the same subject was part of the strategy of The new Palgrave for taking into account different views, the result often strikes one as inconsistent rather than catholic, due to the lack of contextualization. The same problem of contradictory entries failing to cross-refer to each other was pointed out by Blaug (1988, pp. 15–16) regarding other topics in The new Palgrave. 11 In the PRESENTAZIONE of his →Dizionario di economia politica (1982–1990), Lunghini explains that it is based on the premise that economics is a science that does not progress in a linear and cumulative way, with the newest contributions superseding the older theoretical approaches; each concept incorporates instead its own history. The microstructure reflects this approach: ‘The introduction to each entry supplies a preliminary definition of the concept. The first Part highlights its changing contents, its position and its momentum within each major epoch of the history of economic analysis: the classical economists, Marx, the neoclassical economists, Keynes, and the postKeynesians. Part 2 describes the current state of the art’ (vol. 1, pp. 10–11). The wordlist consists of only 40 subjects (ordered following a thematic rather than alphabetical arrangement), but each concept is discussed at great length – around 80 pages each. 12 Coquelin and Guillaumin (→Dictionnaire de l’économie politique, 1852–1854) seem to have been the first compilers to have decided to include in all entries a bibliography of the relevant writings on each subject matter (see Chapter 8). 13 Some reference works explicitly emphasize this distinction. Most famously, the Encyclopædia Britannica physically separated general treatises, large articles and short entries into distinct volumes – a methodic part, one dedicated to knowledge in depth, and one for quick reference (see below in this section, in particular note 18). Among economic dictionaries, →Brémond and Gélédan’s Dictionnaire économique et social (1981) announces in the title that it offers 100 thematic articles and 1,200 definitions. Without physically separating different kinds of entries, several (if not most) recent economic dictionaries allot different numbers of words for different typologies of entries. As the PREFACE to the first edition of →The new Palgrave (1987) explains, ‘there is obviously a rough and ready correlation between the size of entry and the importance which the editors attach to the person or subject concerned, but the correlation is very far from perfect’. 14 Occasionally, encyclopaedic works lack such structure. Wikipedia is an obvious case in point: although there are portals (with subportals) for specific disciplines (some, such as mathematics, are highly structured, while others, such as economics, more poorly so), ‘Each page in Wikipedia can be annotated with multiple categories, organized into a loose ontology of topics. However, any user can add or change a category assignment to any article or category. The resulting category structure is noisy, ill-

Introduction 23

15 16

17 18

19

20

21

22

formed, and difficult to make sense of’ (Kittur et al., 2009, p. 1509 and passim). The case of →Krünitz’s Ökonomisch-technologische Enzyklopädie is equally interesting. In spite of its title, this is the largest general-purpose encyclopaedia ever printed: 242 volumes, published between 1773 and 1858. The project grew inordinately, especially after Krünitz’s death, as new entries were added to the original word-list to update previously published entries with the new scientific discoveries. This lack of coherence induced the editors of the digital edition (www.kruenitz.uni-trier.de) to reorganize the materials, superimposing an extraneous system of classification: they used the Dewey decimal library classification system (Seifert, 2007). The time between planning and completion of an encyclopaedic work is likely to undermine the consistency of all large editorial projects, and not only in extreme cases such as Krünitz’s. See e.g. Béjoint, 1994, p. 30; Rey, 1982, p. 19. With the advent of the internet and the extreme facilitation of communications, authors often have chances to offer their services to compilers of encyclopaedias. Circular messages posted on mailing lists asking for contributors and suggestions of topics to be discussed are not exceptional. The editors normally make the final choice. In the Wikipedia experiment, however, articles are the result of anonymous collaborative (or competitive) writing. As a reaction, the editor of the 2nd edition of the →International encyclopedia of the social sciences (2008) emphasizes that all its articles are signed and include the identification of authors – the ‘experts’, as opposed to ‘popular’ authorship – as part of the vision of the new edition (Darity, INTRODUCTION, pp. xi, xiii, xv). General equilibrium, 1989; Finance, 1989; The invisible hand, 1989; Capital theory, 1990; Marxian economics, 1990; Money, 1989; Problems of the planned economy, 1990; Time series and statistics, 1990; Social economics, 1989; The world of economics, 1991. This feature was introduced since the first edition (1768–1771). Since its 15th edition (1952, revised 1985, currently under revision), the Encyclopædia Britannica is physically divided into three sections: the methodic Propædia, or Outline of knowledge; the Micropædia, or Ready reference and index; and the Macropædia, or Knowledge in depth. In the AVANT-PROPOS to Perroux’s volume, Gaston Berger explains that the encyclopaedia ‘is not a juxtaposition of monographs where each author has written his small part without caring much of the others. The encyclopaedia aims at making the reader understand; for this, it engages in choosing the viewpoints from which one may grasp the entirety and take hold of the unity [of knowledge]’ (pp. 902–908). In their presentation of the dictionary, the authors explain that ‘each article constitutes a whole, collecting elements of information often dispersed in traditional works. Historical data and economic analysis are often compared. Microeconomic and macroeconomic approaches are discussed together. . . . All the elements that contribute to the understanding of a phenomenon are reunited within the same article. This approach enables us to unify knowledge and better understand the connections. It corresponds to the natural movement of thought which suggests that one looks for information in the perspective of the problem to be solved. The grouping together by themes enables the reader to perceive more immediately the problems related to those themes, and the comparison of different problems invites the reader to ponder more actively on the consistency of each current of thought’ (PRÉSENTATION, in Brémond and Gélédan, →Dictionnaire des théories et mécanismes économiques, 1984, p. 6). Coleridge, letter to Robert Southey, July 1803, in Coleridge, 2000, p. 956. Coleridge authored in 1817 the (no longer extant) prospectus of the Encyclopaedia metropolitana, which aimed at reintroducing a rational arrangement of the articles in a ‘methodical compendium of human knowledge. See e.g. Yeo, 1991, pp. 34–39. Cross-references are part of the codes of all dictionaries. They lie both at the micro level, as they connect words used in the text of the entry to the article discussing them, and at the macro level, as they connect the entry heading with other concepts related to it (Rey-Debove, 1971, p. 59, and more in detail, 1989).

24 Daniele Besomi 23 On these and other difficulties, noted by Coleridge, see Yeo, 1991, pp. 39–40. 24 While electronic editing offers the chance of structuring the materials at hand along multiple dimensions, one of the two dictionaries available online (The new Palgrave) is rather disappointing, while the other, the Gablers Wirtschaftslexikon, has opted for a structure emerging from the network of links between entries: see Section 2.4.3. 25 Scholarship diverges on the relative importance of this issue. Cernuschi (1996), for instance, places the ‘tree of knowledge’ at the centre of Diderot’s organizing effort, while Yeo maintains that the systematic classification of the sciences ‘was not the dominant impetus or the central organizing element of the encyclopaedic project’ (1991, p. 27). 26 See, however, among the encyclopaedias discussed in this volume, Berthelot’s Grande encyclopédie, 1885–1892 (Chapter 15). 27 See note 11 for the implications of this assumption for the microstructure of the entries. An historical approach (though not as systematically pursued) is also explicitly sought by The new Palgrave (PREFACE to the first edition, 1987). 28 ENCYCLOPÆDIA, in Encyclopædia Britannica, online version June 2010; see Green, 1996, pp. 14–15 and Chapter 15, for different biases affecting dictionaries, in the form e.g. of the exclusion of words, or prescriptivism, in particular in deference to political correctedness. 29 The first work of this kind, however, was published early in the eighteenth century by the publisher Johann Friedrich Gleditsch in Leipzig with a preface by Johann Hübner, under the title Reales Staats- und Zeitungs-Lexicon Worinnen sowohl die Religionen und Orden, die Reiche und Staaten, Meere, Seen, Flüsse, Städte, Vestungen, Schlösser, Häfen, Berge, Vorgebürge, Pässe, Wälder und Unterschieder der Meilen, die Linien deutscher Häuser, die in verschiedenen Ländern üblichen Ritter-Orden, ReichsTäge, Gerichte Civil und Militair-Chargen zu Wasser und Lande, Müntzen, Maß und Gewichte, die zu der Kriegs-Bau-Kunst, Artillerie, Feld Lägern, Schlacht-Ordnungen, Schiffahrten, Unterschied der Schiffe, und derer darzu gehörigen Sachen gebräuchlichen Benennungen, als auch Andere in Zeitungen und taglicher Conversation aus allerhand Sprachen bestehende Termini Artis, denen Gelehrten und Ungelehrten zu sonderbarem Nutzen klar und deutlich beschrieben werden (1704). It went through 31 editions by Gleditsch, the latest of which was published in 1824–1828, and through a number of republications and translations by other publishers. 30 The previous edition of the →International encyclopedia of the social sciences (edited by Sills, 1968) was addressed to ‘serious scholars’ (most likely to look up articles in fields other than their own) and students (expected to look up topics in their own field) (Sills, 1962, pp. 31–32). 31 For a generous sample of the crises-related entries in dictionaries, surely including most of the articles of some length in the main European languages, see the Index of entries cited in this volume. 32 The medical meaning of ‘crisis’ was, of course, previously recorded by general encyclopaedias and medical dictionaries. 33 National traditions in the understanding and in the way of approach to the subject thus overlap with national traditions in the use and diffusion of the dictionary literature (Section 1.2), and with the national tradition in the making of encyclopaedias (Meschonnic, 1996, p. 22). 34 Among writers on this subject, women seem to be represented even worse than in economics generally; it seems that none authored encyclopaedia articles on crises before the Second World War.

Introduction 25 REFERENCES Astigarraga, J., Zabalza, J. and Almodovar, A., 2001, Dictionaries and encyclopaedias on political economy in the Iberian Peninsula (18th, 19th and 20th centuries), Storia del Pensiero Economico, 41, pp. 25–63. Bailey, R. E., 1994, A voyage round economics: the new Palgrave dictionaries of economics, and money and finance, Economic Journal, 104: 424, May, pp. 660–677. Béjoint, H., 1994, Tradition and innovation in modern English dictionaries (Oxford: Clarendon Press). Blaug, M., 1988, Economics through the looking glass. The distorted perspective of the new Palgrave dictionary of economics (London: Institute of Economic Affairs). Cernuschi, A., 1996, L’arbre encyclopédique des connaissances. Figures, opérations, métamorphoses. In R. Schaer (ed.), Tous les savoirs du monde. Encyclopédies et bibliotèques, de Sumer au XXIe siècle (Paris: Bibliothèque Nationale de France / Flammarion), pp. 377–382. Coleridge, S. T., 2000, Collected letters of Samuel Taylor Coleridge, edited by L. Griggs, Vol. 2, 1801–1806 (Oxford: Oxford University Press). Dangel-Hagnauer, C., 2010, Clément Juglar on commercial crises: the dictionary articles, Research in the history of economic thought and methodology, 28A, pp. 97–113. Frawley, W., 1981, In defense of the dictionary: a response to Haiman, Lingua, 55, pp. 53–61. Gemelli, G., 1999, Enciclopedie ed enciclopedisti d’oltre Oceano tra l’età di Hoover e la guerra fredda. In G. Gemelli (ed.), Enciclopedie e scienze sociali nel XX secolo (Milan: FrancoAngeli), pp. 135–186. Green, J., 1996, Chasing the sun. Dictionary makers and the dictionaries they made (New York: Holt). Haimann, J., 1980, Dictionaries and encyclopedias, Lingua, 50, pp. 329–357. Haimann, J., 1982, Dictionaries and encyclopedias again, Lingua, 56, pp. 353–355. Hartmann, R. R. and James, G., 1998, Dictionary of Lexicography (London: Routledge). Höhmann, D., 2001, Opere enciclopediche e dizionari specialistici in campo economico nell’area di lingua e cultura tedesca (dal Settecento ad oggi), Storia del Pensiero Economico, 41, pp. 181–212. Kilcher, A. B., 2007, Theorie der alphabetisierten Textes. In P. Michel, M. Herren and M. Rüesch (eds), Allgemeinwissen und Gesellschaft. Akten des internationalen Kongresses über Wissenstransfer und enzyklopädische Ordnungssysteme, vom 18. bis 21. September 2003 in Pragins (Aachen: Shaker Verlag), pp. 75–94. Kittur, A., Chi, E. H., and Suh, B., 2009, What’s in Wikipedia? Mapping topics and conflict using socially annotated category structure. In Proceedings of the 27th international Conference on Human Factors in Computing Systems (Boston, MA, USA, 4–9 April, 2009) (New York: ACM), pp. 1509–1512. Landau, S. I., 2001, Dictionaries: the art and craft of lexicography (Cambridge: Cambridge University Press, 2nd edition). Lara, L. F., 1989, Dictionnaire de langue, encyclopédie et dictionnaire encyclopédique: le sens de leur distinction. In F. J. Hausmann, O. Reichmann, H. E. Wiegard and L. Zgusta (eds), Dictionaries. An international encyclopedia of lexicography (Berlin, New York: Walter de Gruyter), pp. 280–287. Lasswell, D. D., 1936, The Encyclopaedia of the Social Sciences in review, International Journal of Ethics, 46: 3, April, pp. 388–396. Layton, D., 1965, Diction and dictionaries in the diffusion of scientific knowledge: an aspect

26 Daniele Besomi of the history of the popularization of science in Great Britain, British Journal for the History of Science, 2: 7, pp. 221–234. Lentini, O., 1999, L’Encyclopaedia of the social sciences e il Dizionario di politica. In G. Gemelli (ed.), Enciclopedie e scienze sociali nel XX secolo (Milan: FrancoAngeli), pp. 253–287. McCulloch, J. R., 1826, Commercial revulsions, Edinburgh Review, LXXXVII, June, pp. 70–93. Meschonnic, H., 1996, L’encyclopédie sortant de son mot pour se voir. In R. Schaer (ed.), Tous les savoirs du monde. Encyclopédies et bibliothèques, de Sumer au XXI e siècle (Paris: Bibliothèque Nationale de France/Flammarion), pp. 19–23. Milgate, M., 1992, Reviewing the reviews of the New Palgrave, Revue Européenne des Science Sociales, XXX, pp. 279–312. Rey, A., 1982, Encyclopédie et dictionnaires (Paris: PUF). Rey-Debove, J., 1971, Étude linguistique et sémiotique des dictionnaires Français contemporains (Le Hague and Paris: Mouton). Rey-Debove, J., 1989, Les systèmes de renvois dans le dictionnaire monolingue. In H. E. Wiegard and L. Zgusta (eds), Dictionaries. An international encyclopedia of lexicography, Vol. 1 (Berlin and New York: de Gruyter), pp. 931–937. Rosa, G., 1857, Dizionario della economia politica e del commercio tanto teorico come pratico del Professor Gerolamo Boccardo, Archivio storico italiano, N.S. V: 2, pp. 114–132. Ruiz Damiel, S., 1964, [Review of] Napoleoni (Claudio) Diccionario de economía política, Moneda y crédito, 88, March, pp. 128–130. Seifert, H.-U., 2007, Dewey meets Krünitz. A classificatory approach to lexicographic material. In P. Michel, M. Herren and M. Rüesch (eds), Allgemeinwissen und Gesellschaft. Akten des internationalen Kongresses über Wissenstransfer und enzyklopädische Ordnungssysteme, vom 18. bis 21. September 2003 in Pragins (Aachen: Shaker Verlag), pp. 95–104. Sills, D. L., 1962, The New Encyclopedia of the Social Sciences, American Behavioral Scientist, 6: 1, September, pp. 31–34. Stigler, G. J., 1988, Palgrave’s Dictionary of Economics, Journal of Economic Literature, 26: 4, December, pp. 1729–1736. Stover, C. F., 1962, Change and rationality in encyclopedism, American Behavioral Scientist, 6: 1, September, pp. 35–38. Van Doren, C., 1962, The idea of an encyclopedia, American Behavioral Scientist, 6: 1, September, pp. 23–26. Van Hoof, H., 1994, Petite histoire des dictionnaires (Louvain-la-Neuve: Peeters). Yeo, R., 1991, Reading encyclopedias: science and the organization of knowledge in British dictionaries of arts and sciences, 1730–1850, Isis, 82: 1 March, pp. 24–49.

2

A brief history of economic dictionaries An essay in bibliography Daniele Besomi

2.1 INTRODUCTION So far, no complete and detailed history of economic dictionaries has been compiled, in spite of the pervasive usage of such reference tools by laypeople, students and researchers. While the large number of such publications in different languages may make the picture appear confused, it is nonetheless possible to recognize some patterns and attempt a preliminary classification. This is the aim of the present chapter. It relies on the extensive bibliography of economic dictionaries given in Chapter 29, compiled through a systematic search of the catalogues of the national libraries and collective OPACs of several countries, which has led to the listing of the full bibliographic information concerning some 1,160 editions of 650 titles.1 This does not guarantee completeness: in the languages of which I do not have any understanding I have almost surely missed much more than I could find; on the other hand, for German, Italian, French and English, and perhaps also Spanish and Portuguese, I am fairly confident that I have captured by far the largest part of the items. The following Sections 2.2 to 2.7 offer a systematization of these materials, describing the major dictionaries classified by their scope, presented in chronological order. Within the two largest groups of dictionaries considered – those concerned with economics and with the social sciences – it has been possible to recognize different traditions related to their languages. Section 2.8 briefly illustrates these features by means of diagrams constructed using the data concerning size, date of publication and language drawn from the Bibliography.

2.2 ECONOMICS AND PRACTICAL ARTS The first dictionary qualifying itself as ‘economic’ was →Chomel’s Dictionnaire oeconomique, first published in 1709 as a folio volume of 1,040 pages. The abbreviated title, however, is deceptive. The Dictionnaire was concerned with all the means of increasing one’s wealth, health and well-being, the best way of breeding all sorts of domestic animals from sheep to silkworms, gardening, botany, the

28 Daniele Besomi fabrication of soap and the weaving of cotton, the trade of horses and other animals, and, in brief, everything that a merchant, manufacturer, banker, magistrate and gentilhomme should know to become richer – all arranged in alphabetical order. Dictionaries like Chomel’s, focusing on practical arts, enjoyed some popularity during the eighteenth and early nineteenth centuries. Chomel’s went through five augmented editions, the last of which was published in 1767, witnessing its perceived usefulness. Similarly, →Zincke’s Allgemeines oeconomisches Lexicon, a 3,000-page work, was re-edited six times between 1731 and 1800. Of much larger size was →de Félice’s Encyclopédie oeconomique ou système général I° d’oeconomie rustique, . . . II°. d’oeconomie domestique. . . III°. d’oeconomie politique, published in 1770–1771 in 16 volumes; this is the first work explicitly containing ‘political economy’ in its title, but it was also mainly concerned with agriculture and home economics. The last work of this kind was →Lübeck’s Allgemeines ökonomisches Lexikon, published in 1812. Equally deceptive in its title is →Krünitz’s Oekonomische Encyklopädie. Published in 242 volumes between 1773 and 1858, notwithstanding its subtitle allgemeines System der Staats- Stadt- Haus- und Landwirthschaft (general system of state, city, home and agrarian economics), it was a general-purpose encyclopaedia – the largest ever published. An excerpt in 34 volumes, titled Auszug aus des J. G. Krünitz ökonomisch-technologischer Encyklopädie, was edited by →Schütz and others between 1786 and 1830.

2.3 COMMERCIAL, BUSINESS AND FINANCIAL DICTIONARIES Also in the eighteenth century there began the publication of a number of commercial dictionaries, which continued throughout the nineteenth century. The first of the kind was →Savary’s successful Dictionnaire universel de commerce. First published posthumously in 1723 (2 volumes, almost 4,000 columns, plus a supplement of about 1,300 columns), it went through a reprint (1726), a second edition incorporating the supplement in 1741, a third enlarged edition in 1741–1742, a fourth edition incorporating materials from Diderot’s Encyclopédie in 1759–1765, and a ‘portable’ version of the latter in 1761–1762. It was translated into German as Allgemeine Schatz-Kammer der Kaufmannschafft (1741–1743), and into Italian as Dizionario di commercio dei signori Fratelli Savary (1770). Postlethwayt prepared an expanded English translation under the title →Universal dictionary of trade and commerce, translated from the French of the celebrated Monsieur Savary, inspector general of the manufactures for the King, at the Custom-house of Paris: with large additions and improvements, incorporated throughout the whole works; which more particularly accommodate the fame to the trade and navigation of these Kingdoms, and the laws, customs, and usage, to which all traders are subject, first published in two volumes in 1751–1755 and further re-edited until 1774. In the eighteenth century we also have →Ludovici’s Eröffnete Akademie der Kaufleute, oder vollständiges Kaufmanns-Lexicon (1752–1756, 2nd edition

A brief history of economic dictionaries 29 1767–1768) in Germany; in Britain there were published →Rolt’s New dictionary of trade and commerce (1756; 2nd edition 1761; 3rd edition by Schedel in 1797– 1801) and →Mortimer’s New and complete dictionary of trade and commerce (1766–1767); while in France we have →Lacombe’s Dictionnaire du citoyen, ou Abrégé historique, théorique et pratique du commerce (1761), →Baudeau’s Encyclopédie méthodique: Commerce (1783–1784) – part of Pancoucke’s Encyclopédie méthodique, a thematic rearrangement of Diderot and d’Alembert’s Encyclopédie – and →Peuchet’s Dictionnaire universel de la géographie commerçante (1798–1799). In the first three decades of the nineteenth century a few more commercial dictionaries were published, among them the first explicitly pocket dictionary related to economics (→Crosby’s merchant’s and tradesman’s pocket dictionary, 1808; 2nd edition 1810) and also → [Buisson]’s Dictionnaire universel de commerce, banque, manufactures, douanes, pêche, navigation marchande (1805) and →Mortimer’s General dictionary of commerce, trade and manufactures2 (1810; 2nd updated and enlarged edition 1819 by Dickinson; 3rd edition, 1823). Later, →Monbrion’s Dictionnaire universel du commerce, de la banque et des manufactures (1838–1839), →Fort’s Neuestes Universal-Lexicon der gesammten kaufmännischen Wissenschaften, für Kaufleute, Fabrikanten u. überhaupt jeden Geschäftsmann (1852; 4th edition, 1864–1865) and →Cerboni’s Enciclopedia di amministrazione, industria e commercio (1891–1905, five volumes) started enlarging the scope of these dictionaries by including other sorts of entrepreneurial activities, in particular business and banking, witnessing with some delay the transition from a mercantile to an industrial economy. In the middle part of the nineteenth century a few more titles were published, but the scene was mainly occupied by →McCulloch’s Dictionary, practical, theoretical, and historical, of commerce and commercial navigation: illustrated with maps and plans, first published in 1832 and subsequently updated, reprinted, supplemented, translated and adapted many times in several countries and languages, including after the author’s death – the last time in 1882. McCulloch’s dictionary inspired the French publisher Guillaumin to produce his own →Encyclopédie du commerçant. Dictionnaire du commerce et des marchandises (1837–1839; 1841; augmented edition by Granges, 1855). Although it incorporated a hundred or so articles translated from McCulloch, Guillaumin attempted to produce an original work. This was successful enough to establish his publishing house on solid foundations and enable him to become the most important publisher of economic writings in nineteenth-century France. Although commercial in its title, this dictionary also contained a number of entries clearly denoted as belonging to ‘économie politique’. The discipline was explicitly referred to in the title of another commercial dictionary later published by Guillaumin, the →Dictionnaire universel théorique et pratique du commerce et de la navigation, marchandises: produits naturels et produits fabriqués . . . Géographie commerciale: état, nature et mouvement du commerce de chaque place . . . Droit commercial terrestre et maritime . . . Navigation . . . Marine marchande . . . Douanes . . . Economie politique appliquée (1859–1861; 1863). Although not explicitly mentioned in the title or

30 Daniele Besomi explicitly demarcated, some entries included by McCulloch had a similar scope. In CORN LAWS AND CORN TRADE, for instance, McCulloch aimed at ascertaining ‘the principles which ought to pervade this department of commercial legislation’ (1832, 377 pages). These commercial dictionaries thus partly overlapped in scope the first dictionaries specifically dedicated to political economy, which were being published more or less at the same time (see Section 2.4.1 below). Towards the end of the nineteenth century, commercial dictionaries eventually gave way to business dictionaries of a more general scope. The first to drop altogether the reference to ‘commerce’ was →Pitman’s business man’s guide: a handbook for all engaged in business, a small reference work of about 300 pages, which went through 14 editions from 1903 to 1967. Its first compiler, Slater, also edited a larger work for the same publisher, →Pitman’s commercial encyclopædia and dictionary of business: a reliable and comprehensive work of reference on all commercial subjects, specially designed and written for the busy merchant, the commercial student and the modern man of affairs, in four volumes, which first appeared in 1912–1913 (4th edition in two volumes in 1930). Most business dictionaries, however, especially those published after the Second World War are small – less than 600 pages (and often less than 300). Only in recent years have a few major multi-volume reference books been produced: →Malonis’s Encyclopedia of business (2000), →Kaliski’s Encyclopedia of business and finance (2001; 2nd edition, 2007), →Hillstrom’s Encyclopedia of small business (2002; 3rd edition, 2007) and →Wankel’s Encyclopedia of business in today’s world (2009). Meanwhile, banking and finance dictionaries followed a history parallel to, and occasionally intersecting with, that of commercial and business dictionaries. It began in the eighteenth century, with three enterprises in French. The first specimen was a small (421 pages) →Dictionnaire des finances, published in 1727 by Jones in Paris. It was followed by the successful →La banque rendue facile aux principales nations de l’Europe, compiled by Pierre Giraudeau, which contained a short glossary of banking terms: Recueil en forme de dictionnaire contenant l’explication de plusieurs termes de commerce, de terre, de mer & de banque. The first two editions (1741 and 1754) were published in Geneva, the later ones (from 1769 to 1799) in Lyon. Much more ponderous was the →Dictionnaire encyclopédique des finances, compiled in three volumes by Rousselot de Surgy (1784–1787) as part of Panckoucke’s Encyclopédie méthodique. The next work specifically dedicated to finance, and the first in English, came almost a century later: →A counting-house dictionary compiled by Bithell (a small volume of about 300 pages, in three editions between 1882 and 1903), while the subsequent →Dictionnaire des finances, edited by Léon Say and published in two volumes in 1889–1894, was surely more scholarly. In the early twentieth century there followed →Weston and Crew’s Dictionary of economic and banking terms (four editions between 1913 and 1937, about 250 pages) and →Munn’s Encyclopedia of banking and finance in English (1st edition, 1924, 600 pages; 9th edition under the title The St. James encyclopedia of banking and finance in 1993 in three volumes); in Italian there were →Monetti’s Enciclopedia di

A brief history of economic dictionaries 31 amministrazione, ragioneria, commercio, banca, borsa (1933–1944, in five volumes), →D’Andrea’s Piccola enciclopedia di banca e borsa (1934, 350 pages), and the →Enciclopedia bancaria, edited by the Confederazione Fascista delle Aziende del Credito e della Assicurazione (two volumes, 1942); →FrançoisMarsal’s Encyclopédie de banque et de bourse (five volumes, 1928–1930) in French; and →Palyi and Quittner’s Handwörterbuch des Bankwesens in German (four editions between 1933 and 1999, increased from 600 to 1,700 pages). In the post-war years, financial dictionaries multiplied, as did all other works of this kind (see Section 2.8, Figures 2.1–2.4). A number of them are small, but some are worth citing. The →Bank-Lexikon was first published in 1953 under the editorship of Müller and Löffelholz as a volume of just under 1,000 pages. Eventually, it had more than doubled by the 10th edition in 1988, titled GablerBank-Lexikon, but shrank again in subsequent editions, the latest of which (the 13th) was published in 2002. →Bernard and Colli’s Dictionnaire économique et financier was also revised several times, from the 1,100 pages of the 1st edition in 1975 to the 1,500 pages of the 6th edition in 1996; an abridged edition also exists, titled →Vocabulaire économique et financier (1976, 415 pages). →Büschgen’s Handwörterbuch der Finanzwirtschaft (1976; 1990) was resumed as →Gerke’s Handwörterbuch des Bank- und Finanzwesens, which had two editions, 1995 (2,122 pages) and 2001 (2,444 pages). Also voluminous, but not re-edited, was the →The new Palgrave dictionary of money and finance edited by Newman, Milgate and Eatwell (three volumes, 2,500 pages, 1992; corrected reprint, 1994). Smaller, but regularly updated, is →Villeneuve’s Dictionnaire technique de la bourse et des marchés financiers, which started publication in 1990 with 233 pages and has grown to the 876 pages of the 8th edition in 2010.

2.4 POLITICAL ECONOMY AND ECONOMICS The production of specialized dictionaries of economics (or dictionaries of political economy, following the terminology current during most of the nineteenth century 3) began in the mid-1820s. During the nineteenth century an abundant handful of highquality works were published – a small enough crop to permit a full description in Section 2.4.1. Section 2.4.2 illustrates how the production of dictionaries slowed down in the first half of the twentieth century to explode after the 1960s with a myriad books of this kind aimed at students and laypeople; the publication of some extensive and high-quality reference works also resumed in the second half of the century (see Section 2.8, Figure 2.1).

2.4.1 The nineteenth century The first dictionary fully dedicated to political economy was →Ganilh’s Dictionnaire analytique d’économie politique (1826; Spanish translation, 1827; 1834), the work of one man. One of its purposes was educational. Ganilh argued that while treatises can scare off most readers, intelligent laypeople may be introduced to the discipline

32 Daniele Besomi by dictionary articles presenting each subject with clarity and simplicity while showing the connections between topics by means of cross-references. ‘Books have made dictionaries, and dictionaries induce the study of books’ (1826, p. xxv). The second purpose echoes the encyclopaedic project of Diderot and d’Alembert. As the Encyclopédie showed how sciences are related to each other and illustrated their analytical and synthetic relationships, thus presenting them in their systematic relationship, the special encyclopaedic dictionaries ‘are for each science what the universal dictionary has been for the universality of sciences’. Dictionaries are therefore not only the best way of propagating a science, but also the best way of accelerating their progress and helping them to reach their highest degree of perfection (pp. xxvi–xxvii). Ganilh’s work was followed by →Sandelin’s Répertoire général d’économie politique ancienne et moderne, published in six volumes between 1846 and 1848. Strictly speaking, this is not a pure dictionary, but rather a collection of extracts from various writings of economists on specific subjects alphabetically organized in the form of a dictionary; the articles thus lack the self-containment that characterizes the genre. The first economic dictionary compiled with modern criteria is →Coquelin and Guillaumin’s Dictionnare de l’économie politique. First published in two volumes in 1852–1853, and reprinted almost identically in 1854, 1864 and 1873, this work was very influential. Some articles were translated into Italian by Francesco Ferrara for his Biblioteca dell’economista, almost 40 entries of the original dictionary were translated and incorporated into Lalor’s Cyclopaedia of political science; other dictionaries frequently cited it; contemporaries expressed positive judgements (Jevons, for instance, described ‘Guillaumin’s excellent Dictionnaire de l’économie politique’ as ‘on the whole the best work of reference in the literature of the science’, although he criticized it for not mentioning Cournot: Jevons, 1879); and it is found to be ‘still useful today’ (De Vivo, 2006, p. 121). Indeed, a cursory internet search shows several hundred citations of entries from the dictionary. Its purpose was ambitious: systematizing the ultimate truths that emerged from the ‘ocean of contradictory doctrines’, taking care that in spite of the shades of opinion ‘the same general doctrine prevailed’ so that the dictionary ‘could serve as a guide to the reader’. For this reason, the title Dictionnaire de l’économie politique was chosen, in contrast to Ganilh’s Dictionnaire d’économie politique, with the article indicating uniqueness. Particular care was devoted to the biographical and bibliographical part, with the explicit aim of providing a complete bibliography of the subject (Guillaumin, PRÉFACE to the Dictionnaire, 1853; see Chapter 8). Next came →Boccardo’s Dizionario della economia politica e del commercio, first published in four volumes in 1857–1863, and later updated in two larger volumes in 1875–1877 and 1881–1882. Meanwhile, Boccardo also edited the 6th edition of the Nuova enciclopedia italiana, a general-purpose encyclopaedia in 25 volumes, 1875–1888. Boccardo’s purpose was similar to Ganilh’s, as he saw dictionaries as ‘the most efficacious means for propagating knowledge’ to practical, busy people who needed a guide to their business and at the same time wanted to

A brief history of economic dictionaries 33 learn about some aspects of the subject without being forced to read entire treatises. He seems to have found a hostile environment for such an enterprise, as he had to defend it from the criticism levelled against the presentation of a parcelled (and by its nature disordered) view of the knowledge of the subject (pp. vii–ix). Reviewing other dictionaries, Boccardo found McCulloch’s lacking in theoretical depth, and Coquelin and Gillaumin’s as suffering an excessive focus on theoretical principles (entry DIZIONARI ECONOMICI E COMMERCIALI). The latter, moreover, being written by several authors, incorporated some inconsistencies, to avoid which Boccardo wrote his Dizionario single-handedly. Nevertheless, he borrowed heavily from Coquelin and Guillaumin (see Chapter 11). The first English →Dictionary of political economy was initiated, and entirely written, by Macleod, but publication was aborted at letter C (1863). The publication of an English dictionary was welcomed with interest and appreciation in Britain. It carried several biographical and bibliographical entries, while the remainder of the articles focused mainly on currency and banking issues (see Chapter 13). Next in line was the German →Handwörterbuch der Volkswirthschaftslehre, edited by Rentzsch (1866, 2nd edition, 1870). Explicitly missionary, it aimed at spreading Manchester liberalism in Germany. It was addressed to scholars, to whom it offered a comprehensive view of economic theories as a means towards problem-solving; to economic corporations; and to social scientists, for whom the Handwörterbuch would be a reference work (see Chapter 14). Spain also had a dedicated dictionary: the thin →Vocabulario de la economía (192 pages), an attack on liberal optimism aimed at the classroom (the first of this kind), compiled by Piernas y Hurtado in 1877 (Astigarraga et al., 2001, pp. 38–40). The next major dictionary of political economy was →Say and Chailley-Bert’s Nouveau dictionnaire d’économie politique, first published in two volumes in 1891–1992, enlarged with a supplementary volume in 1897 and re-edited in 1896– 1900. It was intended to supersede the outdated Coquelin and Guillaumin, and to remedy some problems affecting it, in particular the lack of cross-references, which isolated the various entries, and the excessive number of collaborators, which opened the dictionary to contradictory statements. Say and Chailley thus reduced the number of contributors, assigned homogeneous groups of entries to the same writer, and insisted that matters of doctrine (‘our doctrines are those of the Liberal school’) were cleared in advance with the editors (Chailley, INTRODUCTION, pp. vi–vii; see Chapter 12, Section 12.1.2). The first economics dictionary in English to reach completion was →Palgrave’s three-volume Dictionary of political economy (1894–1899). It was explicitly aimed at students, reflecting the institutionalization that economics had gone through in recent years. Its primary purpose (as declared in the Introduction to Volume 1) was, in fact, ‘to provide the student with such assistance as may enable him to understand the position of economic thought at the present time, and to pursue such branches of inquiry as may be necessary for that end’. The Dictionary was reprinted in full in 1899–1901; an appendix was added in 1908; the three volumes were reprinted separately and repeatedly with corrections in 1906–1915, and reprinted again in 1976. The 2nd edition, with revised and new materials printed from corrections of

34 Daniele Besomi the old plates, was compiled by Higgs as Palgrave’s dictionary of political economy, 1925–1926. In the words of one of the reviewers of the second edition, summing up well the reception and influence of the Dictionary, ‘no book on our shelves is so well-thumbed. Like McCulloch’s Commercial Dictionary in another day, we do not quote Palgrave – we use it’ (Hollander, 1926, p. 666; see Chapter 16). A difference in style between the latter two dictionaries, well depicted by the French editor when asked to review the British work, is worth noting. Chailley noted that while the articles in the Nouveau dictionnaire were essentially concerned with theory and fundamental principles, leaving in the background data or specific applications, Palgrave followed the opposite approach, detailing first and very precisely facts and figures, only hinting at the doctrinal aspects and leaving the reader to find his way in the maze of the abundant references supplied (good and mediocre together). Chailley also noted that Palgrave was more like an encyclopaedia because it gave a better account of men, facts and institutions. Finally, while the Palgrave assumes that its readers were to some extent informed on the subjects dealt with and showed ‘only a modicum of desire for reform and for crusade’, the Nouveau dictionnaire presupposed instead that it had to teach the reader everything, and its authors often advocated reform (in a liberal sense) (Chailley-Bert, 1897). The last economic dictionary of the nineteenth century was →Elster’s Wörterbuch der Volkswirtschaft, a two-volume work first published in 1898 (there were revised editions in 1906–1907 and 1910–1911). In the absence of a comprehensive textbook in German, the Wörterbuch was primarily conceived for students – and accordingly the price was kept as low as possible – and subordinately for those who followed with interest the contemporary economic and social issues. The dictionary aimed at being ‘popular’ in the best sense of the word, while giving a strictly scientific account of the current economic knowledge, thus not serving any one party, in contrast to the explicitly partisan approach of some of the German social sciences encyclopaedias, and also to some general-purpose encyclopaedias written more or less at the same time (see Section 2.5.1), but reflecting a scientific view of social and economic development (Elster, VORWORT to the 1st edition; see Chapter 19).

2.4.2 The twentieth century The first part of the twentieth century was characterized by the scarcity of economic dictionaries. Other than later editions of works initiated at the end of the previous century, the production of new major reference works was altogether suspended, with the only exception being two Japanese dictionaries, the →Keizai-Daijisho [Comprehensive dictionary of the economy] by the Tokyo publisher Do¯bun-Kwan (nine volumes, appeared between 1910 and 1916; 2nd edition in five volumes in ¯ saka 1916) and the →Keizaigaku jiten [Dictionary of economics], edited by the O Sho¯ka Daigaku Keizai Kenkyu¯jo (Economic Institute of Osaka University of Commerce) and published in seven volumes in Tokyo between 1930 and 1936 (2nd edition, 1954, 1,750 pages; 3rd edition, 1992, 1,500 pages).

A brief history of economic dictionaries 35 These years saw, however, the appearance of small dictionaries devised as quick reference works for students, newspaper readers and the lay public. The pioneer was a British →Dictionary of economic terms for the use of newspaper readers and students, edited by Bower, first published in 1905 (166 pages), subsequently revised up to the 10th edition in 1936 and taken up under different titles up to 1974. Nevertheless, most of these economic dictionaries published by the Second World War were German or Japanese. In German we have →Heller’s Nationalökonomie (four editions between 1926 and 1933, between 190 and 330 pages; translated and frequently updated in Spanish as Diccionario de economía política between 1937 and 1969); →Thalheim’s Das ABC der Volkswirtschaft (1934, 325 pages); →Bülow’s Wörterbuch der Wirtschaft (1936, 455 pages; five more editions by Bülow and Langen, 1954–1970; 7th to 11th edition by Recktenwald, 1975–1990; 12th and 13th editions by Grüske and others, 1994, 2003, the latter 623 pages), and →Feldmann’s ABC der Wirtschaft (1940, 149 pages). In Japanese there are →Takahashi’s Kokumin keizai jiten (1933, 635 pages), the →Shinshu¯ Keizaigo jiten [New economic terms dictionary], by the economic department of the Osaka Mainichi newspaper (1933, 500 pages; 2nd edition, 1938; 3rd edition, 1940, both under new titles), and →Ichikawa’s Saikin keizai mondai kaisetsu [Reviews of modern economic problems] (1939, 242 pages). In other countries we only have the American →Handbook of economic terms by Horton (1935, 137 pages) and the Brazilian →Dicionário econômico-comercial e financeiro, edited by Gomes (1942). Since the war, and in particular beginning from the 1960s, there has been an exponential increase in the number of small and very small economic dictionaries, which are now too numerous to be listed here, and a resumption of the compilation of ‘fair-sized’ (let us say, above 1,000 pages or in two volumes) and, less frequently, large reference works (see Section 2.8). Let us present them by language,4 beginning with French. The first economic dictionary published after the 2nd edition of Say’s (1900–1901) is due to →Romeuf et al., who produced a 1,200-page work titled Dictionnaire des sciences économiques (1956–1958). There followed (chronologically) about 50 small or very small dictionaries, until in 1990 Greffe et al. produced an →Encyclopédie économique (2,188 pages in two volumes). Aimed at undergraduate students and laypeople with a general background in economics but without specific knowledge of specialized issues, the Encyclopédie was organized thematically rather than alphabetically.5 The 58 articles are grouped in three parts: ‘Perspective and methods’, ‘Analysis’ and ‘Organization and structures’. After that, apart from the →Dictionnaire des sciences économiques by Jessua et al. (2001, 1,069 pages), all the other economic reference works in French (about 60) were again of small size. Italy also had to wait a long time from the publication of Boccardo’s latest edition in 1881–1882 to the next specialized dictionary, which was →Napoleoni’s Dizionario di economia politica. Published in 1956, it numbered 60 long articles (29 of which were written by the editor), for a total of 1,722 pages. In the Preface, Napoleoni argues that while normally dictionaries are compiled when a discipline

36 Daniele Besomi has reached a solid organization of its materials, this was not the case for economics. Definitions were not agreed upon, the relationships between different parts of the discipline were not clear, and the very nature of economics was still the subject of controversies. The Dizionario accordingly aimed not at defining concepts once and for all, but at delineating the main problems of contemporary economics; it was not an arriving point, but a starting point for future research and systematization. The next major dictionary was produced (almost) single-handedly by →G. U. Papi: Dizionario di economia (1967, 1,511 pages), with an educational intent but also reversing Napoleoni’s perspective. In the Preface, in fact, Papi pointed out that he only expounded the ‘receptum’ of economics, that is, the consolidated system of knowledge that lies at its foundations, while omitting approaches in their becoming, which would better be considered in due time by the history of economic thought. Explicitly taking as its starting point, like Napoleoni, the idea that economic concepts are not given once and for all but are the product of their own history, the next major Italian economic dictionary (→Dizionario di economia politica, edited by Lunghini, 1982–1990) is constructed along historical lines. Each of the 40 long entries (approximately averaging 60 pages, spread over 16 volumes, ordered not alphabetically but by the proximity of their subjects) discusses the approach to the subject of the classical economists, Marx, the neoclassical economists, Keynes and the post-Keynesians, before examining the current state of the theory. The remaining 30 or so Italian post-war dictionaries are much smaller than these, except for →Stefanelli’s Capire l’economia: dizionario critico del capitalismo contemporaneo (1977, 1,000 pages), or intended for students and laypeople. Up to the demise of the Francoist regime, most of the economic dictionaries published in Spain were translations of foreign work, including a surprising title such as Napoleoni’s Dizionario di economia politica. Thereafter, some reference works were produced at home, two of which were outstanding for their size. The →Economía Planeta: diccionario enciclopédico, edited by Martínez Cortina, does not seem to have been reviewed in any listed journal. It consisted, however, of eight volumes with a total of about 4,000 pages, published in 1988. →Prado’s Enciclopedia práctica de economía was first published in eight thematic volumes in 1983–1984, followed by a second edition in 20 volumes in 1987–1988 dedicated to topics such as ‘wealth and money’, ‘aggregate demand’, ‘crisis and business cycles’. The work is suitable for undergraduate students and laypeople, with its long articles written in a simple style and its magazine-like layout. In post-war years, about 100 economics dictionaries have been published in English.6 Most of these are small works addressed to students or laypeople. A handful are fair-sized: →Magill’s International encyclopedia of economics, two volumes, 1,735 pages, 1997, which, judging from the lack of reviews, does not seem to have attracted the attention of the profession; →Greenwald’s7 Encyclopedia of economics, first published in 1982, 2nd edition 1994, also translated into French, totalling 306 articles (no biographies) spread over 1,070 pages. It was aimed at practitioners, teachers, and graduate and undergraduate students in economics, econometrics, statistics and marketing. It was welcomed for offering articles of an intermediate size between mere definitions and lengthy articles (and thus difficult

A brief history of economic dictionaries 37 to digest) in specialized encyclopaedias (Lachmann, 1983). And finally, →O’Hara’s Encyclopedia of political economy, 1999, approximately 450 entries discussed over 1,300 pages. The title explicitly refers to ‘political economy’ (and it is the first English language dictionary to have done so since the latest edition of Palgrave’s Dictionary, followed only by →Jones’s Routledge encyclopedia of international political economy, 20018), to indicate interest in the work of those who revive this tradition as opposed to the ‘economics’ focusing on rational choices and the maximization of utility and profits functions, with the purpose of reducing fragmentation among different schools of political economy. Outstanding among English language dictionaries of economics is naturally the →The new Palgrave dictionary of economics, first published in four volumes (about 4,000 pages) in 1987 (Eatwell et al.) with a second edition by Durlauf and Blume in eight volumes, published in 2008 (7,356 pages). Although it nominally targets students, most reviewers find it too advanced for undergraduates, but its utility for graduate students and for researchers is undoubted. It offers multiple entries on each topic, in order to take into account the diversity of views in economics, but has been nonetheless charged with bias in favour of Marxist and Sraffian economics, an imputation denied by the editors (Stigler, 1988, pp. 1732–1733 and Blaug, 1988, dismissed as unfair by Milgate, 1992; for a discussion, see Bailey, 1994). The largest number of economics dictionaries are written in German (see Section 2.8, Figures 2.2 and 2.5). In the post-war years, at least 63 titles for a total of 220 editions have been published. Again, a large share of these are small or very small works; there are, however, some fair-sized dictionaries, most of which are characterized by their extension to a large number of headings rather than depth of treatment, and two larger works. →Preuss and Bachert’s Meyers Handbuch über die Wirtschaft was first published in 1966, and revised and updated in 1970 and 1974. It consisted of a systematic part with essays discussing wide themes such as ‘production, ‘demand’, ‘money and credit’, and a lexicon of about 10,000 words. It spanned about 1,100 pages, so that the dictionary entries were necessarily short: KONJUNKTURTHEORIES (business cycle theories), for instance, occupies half a column. →Bader’s Ökonomisches Lexikon (1967, 1970–1971, 1978–1980) is an East German reference work. It numbers 15,000 entries over 2,400 pages on political economy from the perspective of a socialist country, thus also including planning and management, economic cybernetics, mathematics and computing, as well as other disciplines to the extent that these priorities affect the economy. →Geigant et al.’s Lexikon der Volkswirtschaft was first published in 1975. The original 580 pages grew in leaps to over 1,200 by the 7th edition of 2000. This dictionary contains numerous short entries which attempt nonetheless to cover a wide spectrum of perspectives on each subject; yet the references are reduced to two or three for each entry, which effectively neutralizes the effort. →Rittershofer’s Wirtschafts-Lexikon: über 4000 Stichwörter für Studium und Praxis (2000, 2002, 2005, 2009) targets, as the title explains, students and practical people, defining 4,000 terms in little more than 1,000 small pages in a relatively large typeface. →Dichtl and Issing’s Vahlens grosses Wirtschaftslexikon (1987, 14,000 entries in 2,164 pages; 1993, 11,000 entries in 2,471 pages) was aimed not at theoretical

38 Daniele Besomi economists but at those who, in their everyday work, encounter economic terms that require an explanation. The entries are short but rigorous and to the point, and terminologically related entries are kept separate but spatially brought together (the German construction of composite words around a main term naturally helps), so that several facets of the same problem can be examined (e.g. next to KONJUNKTUR, the state of an economy, we have a constellation of entries concerning business cycles: theory (KONJUNKTURTHEORIE), policy, forecast, indicators, models, phases, etc.). A different approach was taken by →Glastetter’s Handwörterbuch der Volkswirtschaft (1978, 2nd edition, 1980). In the intention of the editor, this Handwörterbuch was to stand between a textbook and a reference work. Written by a team of young collaborators, it contains 112 long articles in 1,746 columns, 25 of which are on economic theory, the others on institutions, economic and social policy, and finance. Numerous other key words cross-refer to these main articles – for example, the first article for the letter K is KONJUNKTURTHEORIE, which is preceded by 25 key words referring to other articles, such as KOMPARATIVE KOSTEN, referring to ‘theory of international trade’. As to the two larger dictionaries, the →Wirtschafts-Lexikon compiled for the Wiesbaden-based publisher Gabler was first published under the editorship of Sellien and others in 1956 as a 3,476-column work in two volumes. It is presently in its 17th edition (2010, edited by Roberts), and has more than doubled in size, being printed in eight volumes for a total of 3,614 pages. Like most of the dictionaries cited above, this also divides knowledge into a large number of entries, as it aimed from the outset to supply fast and reliable information to students, scientists and working people. Far more extensive was the →Handwörterbuch der Wirtschaftswissenschaft, edited by Albers and Zottmann, and published in ten volumes (the tenth being an index) from 1976 to 1983. With its 7,000 pages, it was surely the largest enterprise of its time specifically devoted to economics, now surpassed only by the 2nd edition of The new Palgrave. It is the successor of the even more extensive social sciences encyclopedia →Handwörterbuch der Sozialwissenschaften, which in turn succeeded the →Handwörterbuch der Staatswissenschaften (see Section 2.5); it was, however, judged that social sciences had so much extended their scope beyond economics that the task of covering the entire field was hopeless. It was also decided not to include articles on specific institutions or biographical materials (included instead in the New Palgrave). Topics are grouped into major problem areas, and discussed very extensively and in depth with good bibliographies, giving the dictionary some thematic arrangement within the alphabetical organization of the materials.

2.4.3 Internet publications This survey would not be complete without a reference to internet publications. Wikipedia carries (in various languages) numerous entries on economics, some of which are extensive, while others are reduced to a bare minimum. It suffers the disadvantage of being an editorless publication, made worse by the fact that some topics are perceived more as an ideological battleground than a field for scientific inquiry.

A brief history of economic dictionaries 39 Two of the above-mentioned dictionaries have an internet version. The New Palgrave dictionary of economics online (www.dictionaryofeconomics.com), accessed by subscription only, gives the full text of both the 1st and 2nd editions. Essentially, it only uses two of the facilities of an electronic version of text: the possibility of searching through the text, and the possibility of constantly updating and upgrading its entries. Having rendered obsolete the alphabetical order, the electronic edition of The new Palgrave fails, however, to suggest a different arrangement. The only feeble attempt to give the entries a structure is based on the Journal of Economic Literature (JEL) classification scheme (developed more than half a century earlier for printed materials), which has not been implemented systematically.9 Far more interesting in this respect is Gablers Wirtschaftslexikon (available free of charge at http://wirtschaftslexikon.gabler.de). Each entry is accompanied by a graph depicting the links between the chosen topic and the related subjects. This graph is constructed by an undisclosed algorithm picking the five ‘most important’ cross-references of the main article, and the five most important cross-references of each of the latter, and shows the network of mutual connections between these topics; each of the topics can be placed in turn at the centre of its own network, so that in principle the entire surrounding field can be explored and the entry be placed in context – at least, in the context chosen by the algorithm. The structure thus emerging is not directly planned by the editors, but is constructed by starting from the entries themselves.

2.5 THE ENCYCLOPAEDIAS OF THE SOCIAL SCIENCES Almost at the same time as economic dictionaries were blooming in the nineteenth century, a number of ponderous encyclopaedias of the social sciences – also including economic information, and sometimes giving it pride of place – were being published, in particular in Germany. They were, however, preceded in the eighteenth century by the anonymous →The Politician’s dictionary; or, A summary of political knowledge containing remarks on the interests, connections, forces, revenues, wealth, credit, debts, taxes, commerce, and manufactures of the different states of Europe. Alphabetically digested for the use of those who would wish to understand whatever occurs in the science of politics ([Allen] 1775, two volumes, 847 pages), and the monumental →Dictionnaire universel des sciences morales, économique, politique et diplomatique by Robinet, a 30-volume in quarto, alphabetically organized work dedicated to the ‘homme d’État’ and the ‘citoyen’ (1777–1783), containing extremely long essays (COMMERCE, for instance, begins in Volume 12 and ends in Volume 13 after 645 pages).

2.5.1 The nineteenth century During the nineteenth century, most of what we nowadays call ‘social science’ fell under the heading of ‘politics’ (in English and French) and ‘Staat’ in German (meaning country, state or nation).

40 Daniele Besomi In English, the first such work was →Long’s Political dictionary (1845–1846), soon reprinted as The standard library cyclopædia of political, constitutional, statistical, and forensic knowledge (1848–1849, 1853–1860 and 1893), 1,826 pages, with articles drawn or adapted from the Penny cyclopedia, a general low-cost reference work. This was followed by two American works, →Lalor’s three-volume Cyclopædia of political science, political economy, and of the political history of the United States (1881–1884 and 1888–1890) and, with a different emphasis, →Bliss’s Encyclopedia of social reform: including political economy, political science, sociology and statistics (1897, 2nd edition, 1908, about 1,400 pages). In France, there were →Block’s Dictionnaire général de la politique (1863– 1864, two volumes, 2,300 pages; 2nd edition, 1873–1874. See Chapter 12), from which a smaller version was extracted (→Block, Petit dictionnaire politique et social, 1896, 800 pages), and the remarkable →Dictionnaire des sciences politiques et sociales, a one-man work by Auguste Ott, 1854, three volumes, 2,000 pages, part of the 171-volume thematic Encyclopédie théologique organized by Migne (Chapter 10). While these works were small relative to the task at hand, in Germany social scientists not only began earlier than French and English colleagues, but they thought and wrote at large. →Rotteck and Welcker’s Staats-Lexikon. Encyklopädie der sämmtlichen Staatswissenschaften für alle Stände, an encyclopaedic work ‘for all ranks’ which supported liberal ideas, took 12 volumes when first published in 1834–1835, and grew to 14 by the 3rd edition of 1856–1866. →Bluntschli and Brater’s Deutsches Staats-Wörterbuch was originally published in 11 volumes (1857–1870), and soon republished in a reduced form in three volumes as →Bluntschli’s Staatswörterbuch in drei Bänden (1869–1872). →Wagener’s Staats- und Gesellschafts-Lexikon took 23 volumes for a total of 18,624 pages (1859–1867). The →Staatslexikon, edited by Bruder and Bachem for the GörresGesellschaft zur Pflege der Wissenschaft im katholischen Deutschland (society for the cultivation of science in Catholic Germany), was an encyclopaedia founded on Catholic principles, stressing moral and religious viewpoints over material interests and explicitly written to counterbalance Rotteck and Welcker’s StaatsLexikon. When first published in 1889–1897, and up to the 5th edition in 1929, it spanned five volumes. Finally, the →Handwörterbuch der Staatswissenschaften, edited by Conrad, Elster, Lexis and Loening between 1890 and 1895, was produced in six volumes and two supplements, which grew to seven volumes at the 2nd edition (1898–1901) and to eight volumes by the 3rd and 4th editions (1909–1911 and 1923–1929) (see Chapters 18 and 20). Also, there was room in Germany for smaller dictionaries: besides the reduced Bluntschli, there were also →Baumstark’s Staatslexicon in einem Bande; staatswissenschaftliches Handbuch der politischen Aufklärung für die Gebildeten aller Stände (for the educated people of all ranks), published in 1852, 2,844 columns in one volume, as advertised in the title itself; →Mohl’s Encyklopädie der Staatswissenschaften, published in 1859, 760 pages; and two smaller volumes with the same title as Mohl’s, one edited by →Bülau in 1832 (287 pages) and the other by →Rinne in 1846 (111 pages).

A brief history of economic dictionaries 41

2.5.2 The twentieth century Similarly to the unfolding of purely economic dictionaries, in the twentieth century the production of small social sciences dictionaries devised as quick reference books for students and laypeople multiplied, in particular from the 1960s and with a second leap in the 1990s, although not to the same extent. Again, I will only describe the major works, but it is worth noting that such an increase is due in large part to French publishers, as in the post-war years they produced more than 60 such dictionaries (separately counting different editions), often citing in the title both social sciences and economics. This is more than half of the total of such reference works, of which only one totals more than 1,000 pages – namely, the →Dictionnaire des sciences humaines by Mesure and Savidan (2006, 1,264 pages). With regard to German language works, two of the nineteenth-century social sciences encyclopaedias were continued, under new editorship and revised titles, in the second half of the twentieth century. →Conrad and Elster’s Handwörterbuch der Staatswissenschaften was entirely recast, and its title modernized into →Handwörterbuch der Sozialwissenschaften. It was published between 1956 and 1966 under Beckerath’s editorship; it totalled 12 volumes with over 9,000 pages (the general social sciences entries were dropped when the dictionary evolved into a dictionary of economics – the Handwörterbuch der Wirtschaftswissenschaft discussed above in Section 2.4.2). →Bruder’s Staatslexikon was taken over by the Görres-Gesellschaft and continued as the 6th edition during 1957–1963 under the title →Staatslexikon: Recht, Wirtschaft, Gesellschaft; it grew to 8 volumes plus 3 supplements, which was reduced to a total of 7 by the 7th edition in 1985–1993. An entirely new work of a different kind was →Brunner, Conze and Koselleck’s Geschichtliche Grundbegriffe. Historisches Lexikon zur politisch-sozialen Sprache in Deutschland (Dictionary of socio-political language in Germany), 1972–1997, 8 volumes in 9 (2nd edition, 2004, 9,000 pages). This dictionary contains 120 very long essays, ordered alphabetically, each concerning the evolving usage and semantics of some key concepts in political and social language, often analysing the concepts that were discussed in previous specialized dictionaries. In Italy, only one major work was published: →Bedeschi’s Enciclopedia delle scienze sociali, 1991–2001, 9 volumes. Like all other lexicographical works of this extension, it also offers articles discussing their topic in reasonable detail and with essential bibliographies. In English there are two major titles. The first work of large extension was Seligman’s Encyclopaedia of the social sciences, published in 1930–1935 in 15 volumes. The project was continued under the editorship of Sills: the International encyclopedia of the social sciences, published in 1968, totalling 18 volumes (see Chapter 22 on both Sills and Seligman). Its 2nd edition (2008) by Darity totals nine volumes. In all versions there is a large share of economic entries. There are fewer such entries in →Smelser and Baltes’s International encyclopedia of the social & behavioral sciences, published in 26 volumes in 2001.

42 Daniele Besomi 2.6 FROM GENERAL TO PARTICULAR: HYPERSPECIALIZED DICTIONARIES As economics becomes specialized into more and more distant subdisciplines, and different schools of thought become more and more restricted in their language and schemes, and are increasingly incapable of communicating with each other, dictionaries explicitly dedicated to specific fields or schools are being published, a phenomenon that started in the 1960s. This new wave of dictionaries has some predecessors. The first seems to be the →Dictionnaire d’économie charitable, four volumes (1855–1864), by MartinDoisy, part of Migne’s Encyclopédie théologique. In the 1920s, a four-volume →Handwörterbuch der Arbeitswissenschaft, edited by Giese (1927–1930), discussed various aspects of labour economics; on the same subject was the much slimmer →Land, labor, and wealth: a handbook of economic terms, edited by Winsor and Winsor Evans in 1942 (117 pages). Among the specific subfields, the one better mapped out is banking and finance, as discussed in Section 2.3 above. Environmental economics also has three dictionaries: →Grafton et al., Dictionary of environmental economics, science, and policy, 2001, 362 pages; →Markandya’s Dictionary of environmental economics, 2001, 196 pages; and →Olsson and Piekenbrock’s Kompakt-Lexikon Umweltund Wirtschaftspolitik, 1993, 1996 and 1998, c. 400 pages. There are two dictionaries of international economics: →Voloshin et al., Spravochnik ekonomistamezhdunarodnika [Dictionary of international economics] (1990, 397 pages) and →Hinkelman’s Dictionary of international trade (1994, 279 pages). Three dictionaries are devoted to macro- and micro-economics: →Snowdon and Vane, An encyclopedia of macroeconomics, 2002, 720 pages; and, respectively, →Sluchaj’s Dovidnyk bazovych terminiv ta ponjat z mikroekonomiky (Dictionary of the basic terms of microeconomics) (1998, 254 pages), and →Oberender’s Grundbegriffe der Mikroökonomie (1985, 187 pages; 8th edition, 2003, 299 pages). International political economy has its own dictionary: →Routledge encyclopedia of international political economy, edited by Jones, 1991, 1,864 pages in three volumes, and there are two for law and economics: →Newman’s The new Palgrave dictionary of economics and the law, 1998, three volumes; and the →Encyclopedia of law and economics, edited by Bouckaert and de Geest, the first edition of which consisted of five thematic volumes (2000), to which eight further volumes have been added between 2008 and 2010. Mathematical economics is discussed in →Beckmann et al., Handwörterbuch der mathematischen Wirtschaftswissenschaften, 1979, with volumes on economic theory, econometrics and statistics, and operations research. Four more dictionaries are devoted to econometrics: the first was the brief →Lexique du calcul économique et de l’économétrie, edited by Olmi and July (1970, 183 pages), followed by →Darnell’s Dictionary of econometrics (1994, 485 pages) and by two reissues of the 2nd edition of →The new Palgrave, namely, Microeconometrics and Macroeconometrics and time-series analysis, 2010. Cycles and crises have also stimulated the production of some dictionaries. Two are concerned with a particular event:

A brief history of economic dictionaries 43 →McElvaine, Encyclopedia of the Great Depression (2004, 1,194 pages), and →Leab’s The Great Depression and the New Deal: a thematic encyclopedia (2010, c. 800 pages). Others are more general: →Mayberry’s ABCs of the financial crisis: a dictionary of terms, 2008, is a slim glossary of 24 pages. Much more ponderous are →Ciment’s Booms and busts: an encyclopedia of economic history from tulipmania of the 1630s to the global financial crisis of the 21st century (2010, 1,000 pages) and →Glasner’s Business cycles and depressions: an encyclopedia (1997, 779 pages), both describing historical events and theoretical aspects. The first, and most abundant, stream of dictionaries specialized in specific schools of thought concerned Marxist and socialist economics. They flourished from the mid-1960s to the end of the 1980s. The first of this kind was →Miyakawa’s Marukusu keizaigaku jiten (Dictionary of Marxist economics, 1965, 326 pages), followed by →Luchterhand et al.’s Wörterbuch der Ökonomie: Sozialismus (1967, 539 pages, 6th edition in 1984, edited by Ehlert), →Kuruma’s Marx-Lexikon zur politischen Ökonomie (1973, 468 pages, original in Japanese) and several others, most of them in German except the →Dizionario Marx Engels edited by Papi (1983, 415 pages) and on the French side the →Livre de Poche on Le marxisme (1976, 212 pages, also translated into Italian) and more recently →Bidet’s Dictionnaire Marx contemporain (2001, 589 pages). These are counterbalanced on the opposite side by a →Mises made easier: a glossary for Ludwig von Mises’ Human action (P. L. Greaves, 1974, 157 pages) and →Foldvary’s Dictionary of free-market economics (1998, 307 pages, German translation, 2000), while in the middle ground there is a →Lexikon soziale Marktwirtschaft by Hasse (2002, 527 pages). Keynesian economics also has its dictionaries: →Cate’s Encyclopedia of Keynesian economics (1997, 638 pages, 2nd edition in preparation) and →The Elgar companion to post Keynesian economics, edited by King (2003, 405 pages).

2.7 BIOGRAPHICAL DICTIONARIES Biographical dictionaries of economists are a recent genre. While already in the nineteenth century some dictionaries advertised the biographical part in their title (e.g. →Macleod’s Dictionary of political economy: biographical, bibliographical, historical, and practical, 1863), the first specifically biographical dictionary was →Mai’s Men and ideas in economics: a dictionary of world economists, past and present, a 270-page work published in 1975, presenting not only economists but also philosophers, statesmen and others who have contributed to the shaping of economic ideas. It was followed by a Biographical supplement to →Sills’s International encyclopedia of the social sciences, published in 1979. →Blaug’s Who’s who in economics. A biographical dictionary of major economists started publication in 1983 (435 pages) and is regularly updated; the latest edition so far is the fourth (2003, 1,235 pages). Other similar works with the same scope do not reach the same extension: →Brémond and Salort’s Dictionnaire des grands économistes (1992, 2nd edition 1997) only numbers 180 pages; →Beaud and Dostaler’s La pensée économique depuis Keynes: historique et dictionnaire des

44 Daniele Besomi principaux auteurs (1993, English translation 1995) totals 598 pages; →Deubel and Montoussé’s Dictionnaire des auteurs en sciences économiques et sociales (2003) has 350 pages dedicated to ‘165 authors in economics, sociology and political sciences’; →Hesse’s Ökonomen-Lexikon (2003) numbers 464 pages, with 600 entries on entrepreneurs, thinkers and politicians of the economic world; and →Teulon’s Dictionnaire des grands économistes: 2500 ans d’histoire de la pensée économique (2009) has 416 pages. There are also some specializations within the specialization, with biographical dictionaries referring to economists of certain categories or nationality. We thus have →Dimand, Dimand and Forget’s Biographical dictionary of women economists (2000, 520 pages), →Katz’s Nobel laureates in economic sciences: a biographical dictionary (1989) and →Arestis and Sawyer’s Biographical dictionary of dissenting economists (1992, 2000, c. 700 pages), and some geographically defined works: →Rutherford’s Biographical dictionary of British economists (2004, 1,330 pages), →Emmett’s Biographical dictionary of American economists (2006, 921 pages), →King’s Biographical dictionary of Australian and New Zealand economists (2007, 337 pages) and the →Biographical dictionary of European economists, in preparation by Gehrke and Kurz.

2.8 THE CHRONOLOGICAL, SPATIAL AND DIMENSIONAL DISTRIBUTION OF DICTIONARIES The verbal description of the preceding sections has already given some idea of the distribution of encyclopaedic dictionaries over time, language and size. This can be made more precise by means of a few diagrams illustrating the size and language distribution of specifically economics dictionaries and of social sciences encyclopaedias per decade of publication, and giving an overall picture of how the total of the dictionaries related to economics (not only the two categories above, but also commercial, financial, biographical and hyperspecialized dictionaries, and works concerned with economics and administration, economics and statistics, and economics and law, of which there are a few) are distributed per size and per language. Some observations additional to those expressed in previous sections are in order. The first is that the modal language of dictionaries is German, followed by English and French (Figure 2.5). Given the relative size of the markets, it is apparent that German and, to a larger degree, French readers are supplied with a much larger choice of dictionaries than English readers. It would be interesting to complement these data with the respective print runs to ascertain the density of the distribution, but the data so far suggest that there is a better market – and thus a wider usage – of dictionaries in German- and French-speaking countries. The second observation is that the vast majority of economics dictionaries are small (the favourite format lies somewhere between 300 and 600 pages) (Figure 2.6), especially those published since the 1960s (Figures 2.1 and 2.3). Thus, they are likely to be of a ‘popular’ kind (often in the best sense of the word) or thought

A brief history of economic dictionaries 45 of as an aid for study. This applies to all languages, the share of works shorter than 1,000 pages being between 65 per cent (Italian) and 75 per cent (French) in all cases (Figure 2.5). This suggests that in Germany and France dictionaries are used more often than in English-speaking countries as a teaching and learning aid, and the habit so learned is possibly continued into adult age. Thirdly, the explosion of the number of dictionaries published in the last part of the twentieth century is due almost exclusively to small reference works, which were practically absent in the nineteenth century. The publication of medium-sized dictionaries increased a little, while the output of major reference works has remained more or less constant since the middle of the nineteenth century (with the exception of the early part of the twentieth century), notwithstanding the large increase in their potential users (Figures 2.1 and 2.3). Fourthly, it may be observed that not only have the Germans produced more dictionaries, but also they have produced a large share of voluminous reference works. While about one-third of the small and medium-sized dictionaries are written in German, the German share of dictionaries producing four or more volumes is 46 per cent of the total of such works. In contrast, French dictionaries are prevalently small, and large works are scarce. While in the nineteenth century France had produced some high-quality works of medium to large size, the large output of dictionaries published in the second half of the twentieth century consisted mostly of small reference books. English works take a larger than average share of mediumsized dictionaries (two to three volumes, or over 1,000 pages). The Italians lean slightly more than average towards large dictionaries (Figures 2.2 and 2.6). These monumental works, with long articles discussing the matter in depth, are dedicated more to researchers and teachers than to students; this in turn suggests that German language countries see dictionaries as a way of diffusing knowledge not only among students, but also among educators and scientists, so far as economics and the social sciences are concerned, at any rate. Finally, while in purely numerical terms the century of dictionaries is not the nineteenth, as is commonly maintained, but the twentieth, the nineteenth century is surely an epoch when economic and social sciences dictionaries and encyclopaedias were all first-rate, not only in size but also in terms of quality. These features indicate that as the production of economics and social sciences dictionaries is subject to very different national traditions which evolve over time, their usage in learning, teaching and research is also likely to differ substantially. This suggests that perhaps it is not only the specific contents of economic dictionaries that are of interest: the usage that is made of these references works should perhaps also be subject to investigation.

46 Daniele Besomi 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10

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Figure 2.4 Number of social sciences dictionaries, by language.

50 Daniele Besomi 375 350 325 300 275 250 225 200 175 150 125 100 75 50 25 0 German

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601–1000 pp.

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Figure 2.5 Number of dictionaries concerned with economics, by language and size.

A brief history of economic dictionaries 51 325 300 275 250 225 200 175 150 125 100 75 50 25

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Figure 2.6 Number of dictionaries concerned with economics, by size and language.

52 Daniele Besomi NOTES 1 While sometimes different editions only incorporate a few corrections and updates, on other occasions they are major revisions and constitute an altogether different work, usually not in its inspiration but in its contents. Whether or not this is the case, reeditions are a measure of the commercial success of a dictionary, thus of its perceived usefulness. 2 This work is similar to, but not identical with, the above-cited →New and complete dictionary of trade and commerce compiled by the same author in 1766–1767. 3 Although the term ‘economics’ was introduced in 1875 by Macleod, readily accepted by Marshall and Jevons, and generally in use by the 1920s instead of ‘political economy’ (see Groenewegen, POLITICAL ECONOMY, →The new Palgrave dictionary of economics, 1987), the first dictionary carrying the term ‘economics’ in its title was published only in 1948, namely, Horton and Schnappen’s Dictionary of modern economics (if we do not count →Janzen’s Everyday terms in economics, 1941, and →Wilson’s Helping yourself to understand economics, 1947, which amount to just over 100 pages between them). 4 Among the dictionaries written in languages I do not understand, the bibliographic data suggest that the following dictionaries deserve a reference, if their contents match their size in quality: in Japanese there are the already mentioned post-war editions of the →O¯saka Sho¯ka Daigaku Keizai Kenkyu¯jo’s Keizaigaku jiten; and in Russian there is the →Ekonomicheskaya entsiklopediya: politicheskaya ekonomiya, edited by Rumyantsev in 1972–1980, four volumes totalling about 2,400 pages. 5 Like →Perroux’s 1960 L’univers économique et social, part of the thematic Encyclopédie française by L. Febvre and G. Berger. 6 Bibliographic data suggest that dictionaries published in India may deserve a separate treatment, but I have not had direct access to them (one excepted). There are at least six works titled Encyclopaedic dictionary of economics; two of them are fair-sized: →Dinakar, 2009, 1,424 pages, and →Ghodke, published in 1985–1986 in five volumes totalling 1,162 pages for 3,258 entries, where the definitions consist of citations of relevant writers on each subject. One, edited by →Pande and Mithani (1994), is definitely to be ranked among the major dictionaries, as it counts 3,932 pages in 11 volumes. 7 Greenwald is also the editor of a →Dictionary of modern economics, first published in 1965, later editions 1973 and 1983, with a concise version in 1984. 8 The expression was also used to translate in 1985 the title of →Volkov’s Politicheskaya ekonomiya: slovar’ (1981). 9 The JEL scheme only works, and not even very well, up to the first digit (a search for E32, for instance, ‘Business fluctuations and cycles’, only gives three hits, from which the main entry TRADE CYCLE, as well as all but one of the other 20 or so entries on this subject in The new Palgrave (for a list see note 9 to Chapter 1), is missing. The higher level E3, ‘Prices, business fluctuations and cycles’, returns 19 hits but still only captures 3 of the above-mentioned list).

REFERENCES Astigarraga, J., Zabalza, J. and Almodovar, A., 2001, Dictionaries and encyclopaedias on political economy in the Iberian Peninsula (18th, 19th and 20th centuries), Storia del Pensiero Economico, 41, pp. 25–63. Bailey, R. E., 1994, A voyage round economics: the new Palgrave dictionaries of economics, and money and finance, Economic Journal, 104: 424, May, pp. 660–677. Blaug, M., 1988, Economics through the looking glass: the distorted perspective of the new Palgrave dictionary of economics (London: Institute of Economic Affairs).

A brief history of economic dictionaries 53 Chailley-Bert, J., 1897, [Review of Palgrave’s Dictionary of political economy], Economic Journal, 7: 26, June, pp. 260–264. De Vivo, G., 2006. [Review of] The biographical dictionary of British economists. Contributions to Political Economy, 25: 1, pp. 121–126. Hollander, J. H., 1926, [Review of Palgrave’s Dictionary of political economy], American Economic Review, 16: 4, December, pp. 666–668. Jevons, W. S., 1879. Preface to the 2nd edition. The theory of political economy (London: Macmillan). Lachmann, W., 1983, [Review of] Greenwald, D. (ed.), Encyclopedia of economics, Kyklos, 36: 2, pp. 325–326. Milgate, M., 1992, Reviewing the reviews of the New Palgrave, Revue Éuropéenne des Science Sociales, XXX, pp. 279–312. Stigler, G. J., 1988, Palgrave’s Dictionary of economics, Journal of Economic Literature, 26: 4, December, pp. 1729–1736.

3

Naming crises A note on semantics and chronology Daniele Besomi

3.1 INTRODUCTION The terms used by writers who described or theorized economic troubles have shown a notable variety over time and space, and several of these terms have themselves undergone changes of meaning and of implications. At first the process was tentative and somehow varied: some terms fell into disuse and were never resurrected; others were coined only after some decades to reflect a different perception of the phenomenon; at different times, one term or another dominated the scene, to which often a specific interpretation of the phenomenon corresponded. This chapter aims at chronologically mapping the terminological and conceptual changes having taken place in the literature, even though only a very limited number of terms eventually became dictionary entries – the main ones being ‘crisis’ or ‘crises’ and ‘business (or trade) cycle’, with occasional appearances of ‘panics’, ‘bubbles’, ‘fluctuations’ and a few others. It will proceed by examining the etymology of a number of such terms – with the invaluable help of the Oxford English dictionary (OED) – and describing and tracing the evolution of their meaning in the economic literature, with particular care as regards their treatment in dictionaries. These are given pride of place not only because they are the subject of this book, but also because they often offer explicit and precise definitions of terms, which is not always the case in the general literature (see, for instance, Chapter 6, Section 6.5.1, on the first definitions of ‘crisis’ offered by dictionaries).

3.1.1 Words in prominent position Tracking down, for the purpose of establishing the chronology of the usage of words, all the occurrences of such terms in the body of a massive and still largely uncharted literature would, of course, be an impossible task. Some words, however, are placed in more important and visible positions than others. The title of a book, a pamphlet, an article in the specialized or popular press, and even more so the heading of a dictionary entry, is chosen to represent in a condensed form the gist of the message of the entire writing. The terms used in titles are thus carefully selected by the authors or editors as representative and immediately understandable

Naming crises 55 by the potential readership, and thus offer a fairly good sample of the concepts and expressions in use at any time. This will be the starting point of this chapter. Titles of writings are indexed by various means, and numerous searchable databases exist, in particular specialized and general periodical contents indexes and library catalogues. Econlit covers the relevant economic literature since 1969; JSTOR covers well the economic literature in well-established and time-honoured periodicals – that is, beginning from the end of the nineteenth century; both sources suffer from being biased towards English language texts, but jointly provide a meaningful basis of analysis for writings in this language since the 1930s. For earlier times, things are a bit more complicated. Only since the end of the nineteenth century has the literature been hosted in periodicals; most of the earlier materials took the form of treatises or, more frequently, pamphlets, which by their nature are scattered in various libraries in the world, and can only be accessed via the corresponding catalogues. Through the years, I have been compiling and continuously updating my own catalogue of writings on crises, cycles and various forms of economic distress, from the sixteenth century up to the present time, by browsing catalogues and indexes, and following references given in the literature itself. This database includes overall about 8,500 titles in various languages, 2,700 of them relating to the nineteenth century and 3,000 to the first four decades of the twentieth century. Although it is not complete and it is biased towards my own research interests,1 I am confident it represents a fairly good share of the relevant literature up to and including the inter-war years, and I will thus use it (compiling references in English, French, German and Italian) as a basis for the analysis of this period. Writings on these subjects take many forms: articles in professional journals, books, reviews, dictionary entries, pamphlets, newspapers articles, proceedings of round tables, etc. All are counted,2 not because their contents are thought of as having the same relevance, but for the simple fact of having used one term instead of another.3 The results are presented in the Appendix to this chapter in the form of bar diagrams representing the number of occurrences of some terms, selected on the basis of my own judgement – formed while compiling my database and refined in the course of the writing of this chapter – on their relevance and frequency of occurrence.

3.1.2 ‘Panics produce texts’ Such diagrams show at once the relative frequency of appearance of each term, and the cumulative number of writings on cycles and crises year after year. Before entering into the study of the terminology, a first observation concerning the fluctuations in the number of writings is in order. It has frequently been observed that output of writings on cycles is itself cyclical: economic distress naturally induces professional economists, but also (especially in the nineteenth century, when the profession did not count many practitioners) laypeople, to investigate the causes of the phenomenon and suggest remedies. As aptly summarized by Ann Fabian, ‘panics produce texts’ (1989, p. 128). Contemporary writers on crises have themselves noted the phenomenon. Marx, for instance, wrote to Lassalle that

56 Daniele Besomi the time of crises, in England, is also the time of theoretical research (letter of 23 January 1855, in Marx and Engels, 1967). Mills noted that ‘It is scarcely a matter for surprise, and still less for regret, that every commercial crisis occurring in this country is promptly followed by a literature of pamphlets, discussing the phenomena and their supposed causes, while they are yet a matter of painful interest to the public mind’ (1868, p. 11). Similarly, Aftalion remarked that ‘in the financial and industrial chronicles of the specialised press or of daily papers [there appear] articles on the occasion of each crisis – countless instances could be cited’ (1913, Vol. 1, pp. 289–290), and Richter confirmed that ‘One of the clear results of the severe depression of 1921 was the output of a large volume of literature on the subject of business cycles in their economic and social aspects’ (1923, p. 153). Durbin agreed on the phenomenon, but was sceptical on the quality of such writings: ‘One of the most dangerous by-products of a period of depression is the crop of false economic theories which win popular credence and gain political support’ (1933, p. 17). So far, however, there was no measure of this supposed correlation between the outburst of crises and the production of literature on the subject. The diagrams reproduced in the Appendix to this chapter clearly illustrate4 the phenomenon. The number of writings on crises and cycles clearly peaks immediately after the outbreak of each crisis (nowadays, due to the lengthening of waiting lists for publication, the delay can be relevant). The first two notable peaks in my series (not represented in the diagrams as they only number a few items, which however jump to the eye as compared to the absence of such writing in the adjacent years) are dated 1793, corresponding to the commercial and financial crisis, and 1800, when a scarcity of wheat caused a rise in its price, resulting in riots between August and October. The next peak, in 1816–1817, follows the depression (1815–1817) at the end of the Napoleonic Wars. In 1819 the United States witnessed its first major crisis, duly recorded in a number of commentaries. The following peaks closely correspond to the panics of 1825 and 1837, the crises of 1847 (which must have very much impressed contemporaries, as the number of writings on record would not be equalled until the 1929–1932 great slump) and 1857, and the Guernsey crisis of 1866. The crisis of 1873 does not seem to have much upset writers, whereas 1879 and 1885–1886 witnessed a large amount of literature on the ‘great depression’ (1873–1896). The following peaks correspond to the panic of 1893 and the crises of 1907 and 1914. The amount of literature rose sharply after the First World War; after an intermediate peak in 1923 (corresponding to the 1921–1923 period of sharp deflation), there followed an outpouring of literature on the great slump, which peaked in 1931–1933. The 1937 recession scared commentators into writing almost as much as on the previous occasion. After the first post-war peak in 1950, literature on the subject petered out for two decades, when the business cycle was about to be declared dead. Up to the early 1980s, writings on this subject accounted for about 0.5 per cent of the total of items listed in Econlit. Since the recession of the early 1980s, the entries on this subject have continued to increase, progressing more by leaps than in a wavelike fashion. From about 60 entries per year in 1978–1982 there was a jump to around 150 (1983–1985), then 250 (1986–1990),

Naming crises 57 350 (1991–1993), 410 (1994–1997), up to around 680 (1998–2005, with a first leap forward corresponding to the Asian (1997) and Russian (1998) financial crises, and a peak with the internet bubble in 2000), and temporarily down to 560 in 2006–2007. Although data concerning 2008 and 2009 are still very partial, they already show a clear hike in the proportion of writings devoted to the recent financial crisis.

3.2 SEMANTICS AND CHRONOLOGY The recurrence of specific terms to denote the events related to crises shows clearly recognizable patterns, which will help to characterize the context in which these words are (or have been) used. This is what will be done in the rest of this chapter, where the meanings and usages of the various terms are presented more or less in the chronological order of their first application to economic crises or related phenomena.5

3.2.1 Glut The first term associated with an imperfect working of the market is ‘glut’. According to the OED, it was first used in the sense of ‘A supply of any mercantile commodity which is greatly in excess of the demand; freq. a glut in the market’ in 1594, when Plat suggested that one should buy a ‘store of Roses [for the distillation of rose water] when you finde a glut of them in the market’ (p. 31). Its usage as a verb, meaning ‘To overstock with mercantile goods. Chiefly, to glut the market’ (OED) goes back to 1624: after some ships loaded with fish came to the ports and made a good profit, when the others ‘came to the same ports, that were all ready furnished, so glutted the market, that the price was abated’ (Smith, 1624, 1907 reprint, Vol. 2, p. 68). The term frequently recurs in the literature of the seventeenth to nineteenth centuries. An interesting example is the following passage by Defoe: It is very unjust and unfair Dealing by the Publick, first to glut the Market, and over-run it with Goods, and then complain that the Market is dull: How should the Respiration of Trade be preserved, when ’tis choak’d and suffocated with Goods? When Blackwell Hall is empty, the Trade breathes; but when we see it piled up to the Ceilings; the Yards, the Passages and Staircases throng’d, Trade suffers, it is oppress’d with Quantity, and must die if not relieved. (1728, p. 267) As John Stuart Mill noted, the term belonged to mercantile language and was equivalent to over-supply (Mill, 1848, Bk. III, Ch. 14, § 1). This sense of the term is indeed not found in early general-purpose encyclopaedias or dictionaries, such as →Chambers’s Cyclopædia (1728) or →Johnson’s Dictionary (1755). Mercantile dictionaries do not carry an entry on gluts, although the term is occasionally found in the text. Under the heading ASSIENTO (an obsolete contract

58 Daniele Besomi relating to the slave trade), for instance, Mortimer (→New and complete dictionary of trade and commerce, 1766) and the anonymous compiler of the →Politician’s dictionary ([Allen] 1775) both reported that the French ‘at length over-glutted the market, and became sufferers’. The term frequently appears in →McCulloch’s Dictionary . . . of commerce and commercial navigation (1832); for instance, discussing the amplifying effect of corn laws upon the natural fluctuations of crops, he stressed that this system ‘forces up prices in years when the harvest is deficient, while it leaves the market to be glutted when it is abundant’ (CORN LAWS AND CORN TRADE, p. 891). The diffusion of the term does not seem to have made it necessary to define it, until the very notion of glut became the subject of a controversy.6 In his Definitions, Malthus thus specified as follows its meaning: according to the best authorities in books and conversation, what is meant by the glut of a particular commodity is such an abundant supply of it compared with the demand as to make its price fall below the costs of production; and what is meant by a general glut, is such an abundance of a large mass of commodities of different kinds, as to make them all fall below the natural price, or the ordinary costs of production, without any proportionate rise of price in any other equally large mass of commodities. (1827, p. 46) The term ‘glut’ was occasionally used in the title of writings in the classical era, e.g. in an anonymous pamphlet with A few remarks upon the true origin of rent, gluts, a corn trade, and the new issue of gold (1826) and in Thompson’s Exposition of fallacies on rent, tithes, &c. containing an examination of Mr. Ricardo’s . . . doctrine of the impossibility of a general glut (1826), while recent usage is mostly limited to historical examinations of the classical debate, beginning from Sowell’s article ‘The general glut controversy reconsidered’ (1963). ‘Glut’ only seems to have made it to the word-list of dictionaries on two occasions. In →[Long]’s Political dictionary (1845–1846) the term merely crossrefers to the unsigned entry on DEMAND AND SUPPLY, where it is argued that production creates not only goods but also an effective demand for commodities so ‘that a universal glut of all commodities is impossible’ (p. 731). The term is used interchangeably with ‘overproduction’, for which there is no entry (not even as a simple cross-reference) in the dictionary. In →Palgrave’s Dictionary of political economy, the short entry on the subject is signed by Cannan, who did not hide his contempt for the very usage of this term: ‘GLUT is a name (cp. glutton) given to abundance by those who, for any reason good or bad, look on it as pernicious’. Thus sellers ‘say that there is a glut, or that the market is glutted, whenever there is so much of the commodity they sell that it cannot be disposed of at prices fairly remunerative to them. Purchasers on the other hand merely say that the commodity is plentiful and cheap’. Cannan cites Malthus’s definition above, briefly refers to the Ricardo–Say–Mill vs. Malthus–Sismondi controversy, but refers to the entries on DÉBOUCHÉS, THÉORIE DES and OVER-PRODUCTION (see Chapter 16).

Naming crises 59

3.2.2 Distress ‘Distress’ is defined by the Oxford English dictionary as ‘The sore pressure or strain of adversity, trouble, sickness, pain, or sorrow; anguish or affliction affecting the body, spirit, or community’ (OED, 2a); this is the passive sense of ‘The action or fact of straining or pressing tightly, strain, stress, pressure; fig. pressure employed to produce action, constraint, compulsion; less usually, pressure applied to prevent action, restraint’ (OED, 1a). The term has been applied to conditions of economic suffering since at least the 1720s, when an anonymous writer addressed the electors of Members of Parliament, pointing out that the way they used the power, the trust and the property they possessed ‘will always have the most universal and affecting Influence on the Success or Prosperity, the Distress or Misery, of this [. . .] Renown’d Native Country’ (Anonymous, 1722, p. 1). The first systematic occurrences associated distress with poverty, in particular following a scarcity of food, such as in Hustler’s pamphlet The occasion of the dearness of provisions, and the distress of the poor (1767) or in Brooke’s The true causes of our present distress for provisions (1800). The extension to banking and finance seems to be due to the French. Their term ‘détresse’ indicates either the sentiment of powerlessness, neglect and solitude experienced in a difficult and anguishing situation, or the difficult and anguishing situation itself, in particular with reference to the dramatic lack of material resources (Le Grand Robert). In the Étrennes financières of 1789 we find the expression ‘throwing banking and finance into distress’ (‘jetter dans la détresse la banque et la finance’: Martin, 1789, p. 121); in the following year Boislandry wrote some Observations sur les dangers du papier-monnoie & sur l’insuffisance de cette ressource: pour remédier a la détresse actuelle des finances (Boislandry, 1790); and Clavière thought that the assignats were a consequence, not the cause, of the distress of public finance (‘il faudroit ne pas oublier que c’est la détresse des finances qui conduit aux assignats, et ne pas attribuer à ceux-ci l’effet de la détresse’: 1790, p. 99). With the 1793 crisis ‘distress’ began to be associated with commerce, manufacture and credit also in English. Patrick Colquhoun produced some Reflections on the causes which have produced the present distress in commercial credit (1793), and James Currie wrote of the ‘general distress in the commercial and manufacturing interests’ (1793, p. 17) and made it clear that that he understood ‘distress’ as the opposite of ‘prosperity’ (p. 1). Not only must such terms have been widely perceived as antonymous, but the view that prosperity is, in some way, the cause of distress was held by enough people to induce Richard Brinsley Sheridan to openly dispute it during a debate before the House of Commons: ‘To assert that the distress of commercial credit was owing to the great prosperity of the country might make a very sonorous period, but would not be much relished in the city. It would be considered as but a poor compliment to congratulate a man on his having proved himself one of the most industrious manufacturers, or enterprising merchants, by getting into the Gazette as a bankrupt’ (Great Britain, Parliament, 1793, p. 31). The opposite view was reasserted during the same debate by Mr Rose, who said, ‘That the time of the greatest prosperity of a country might be the time of the greatest

60 Daniele Besomi distress to commercial credit, appeared from what happened in this country in 1772’ (ibid, p. 33). ‘Distress’ is a fairly elastic term. It can refer to individuals (The precipitation and fall of Mess. Douglas, Heron, and Company, late bankers in Air, with the causes of their distress and ruin, Anonymous, 1778), to classes (for instance Suggestions for producing public improvements, and affording employment for the distressed manufacturers and the labouring poor, Phillips, 1816, or Letters addressed to the Earl of Liverpool . . . on the distress of the mercantile, shipping, agricultural, and manufacturing interests, Pinsent, 1820, or A letter to the . . . Earl of Liverpool, . . . on the means of relieving the present distress of the farmer, Torrens, 1816), or more frequently to the entire nation (for instance, Exposition of one principal cause of the national distress, particularly in manufacturing districts, Anonymous, 1817; Letters . . . on the pecuniary distresses of the country, Sinclair, 1797; or ‘Commercial distress of the country’, McCulloch, 1816). Although rarely, it has also been used in the plural – suggesting awareness that such phenomena are recurrent – the first time as early as 1796 when Mr Swanwick, in a debate before the Congress of the United States, disputed the view that ‘our late commercial calamities were no proof of our want of prosperity’ by referring to ‘commercial distresses’ (Carpenter, 1796, p. 49); similarly, Sinclair wrote of ‘pecuniary embarrassments’ (1797, p. 61 and passim) and ‘pecuniary distresses’ (p. 61); Anderson maintained ‘there is no doubt that, while this nefarious system [the possibility of issuing paper money] is continued, as no bounds can be set to speculation, distresses and embarrassments will be felt at irregular periods’ (1797, p. 39); later, Joplin wrote that ‘our national distresses proceed from a destruction of income, . . . and that our distresses arise from this species of derangement, or limitation of the national industry, . . . originally produced by pressures or scarcities of money in the London Money Market’ (1844, p. 85). Notwithstanding this variety of usages, a common feature needs to be stressed. The term ‘distress’ is used in a passive and subjective sense, as a condition suffered by people. The term thus refers to the consequences of the crisis, rather than characterizing the event itself or identifying its causes. It is therefore scarcely useful in theoretical terms. Indeed, its usage was characteristic of the first attempts to discuss the phenomenon, but was soon substituted by more suitable concepts (see Figure 3.1). It was the prevalent descriptor until the 1837 panic, remained in use (although only among a minority of writers) during the 1847 crisis, and rapidly fell into disuse afterwards. No dictionaries record its meaning in association with crises; there are, however, two entries on its connotation in jurisprudence in →[Long]’s Political dictionary (1845–1846) and in →[Knight]’s Standard library cyclopaedia (1853–1860).

3.2.3 Embarrassment An ‘embarrassment’ is defined by the OED as ‘1. embarrassed state or condition: a. of (or with reference to) affairs, circumstances, etc.; often in pecuniary sense. 2. Something which embarrasses; an impediment, obstruction, encumbrance. In pl.

Naming crises 61 often = “pecuniary difficulties”’. The term is also used in French (‘embarras’), also meaning impediment, obstruction, in general and in the medical sense with reference to digestion; the idiom ‘embarras d’argent’ means poverty, lack or scarcity of money (Le Grand Robert de la langue française). The earliest occurrence I have been able to find was expressly used in the sense of ‘pecuniary difficulties’, which appeared in the same passage as ‘pecuniary embarrassments’ in a 1797 pamphlet by Sinclair (p. 11). In 1801, Boyd and Francis Baring used the expression ‘general embarrassment’ to indicate a state of obstructed monetary circulation. Boyd wrote of the ‘notorious embarrassment of the general circulation of the metropolis’ (1801, p. 5), and disputed Barings’s claim (1801, p. 8) that the ‘general embarrassment’ was caused by a reduction of banknotes (Boyd, 1801, p. xxii). A few years later the expression ‘commercial embarrassments’ became a shorthand descriptive for a situation of general commercial difficulty. We find it in the body of text and in the title of a number of writings. Among these, an anonymous merchant expounded some Considerations on the causes which have produced our present commercial embarrassments (1811); McCulloch, in a review also using several other expressions for crises, discussed ‘Commercial embarrassments and trade with France’ (1819); an anonymous writer produced a pamphlet titled An enquiry into the causes of the present commercial embarrassments in the United States (Anonymous 1, 1819); Joplin discussed The cause and cure of our commercial embarrassments (1841), and [Duncan] discussed Mercantile embarrassments, and the present state of the banking system (1842). The expression, however, is more easily found in the popular press, both in Britain and the United States, and must therefore have exerted some appeal (for example, see Orleans Gazette, 1819; Raleigh Register, 1819; Bristol Mercury, 1819; Providence Patriot, 1822; Hampshire Telegraph and Sussex Chronicle, 1825; The Times, 1826a and 1826b; New York Spectator, 1837; The Economist, 1846; Bankers’ Magazine (Anonymous 1, 1850)). It occasionally appeared in the body of text of some later publications (mostly magazines). There are no dictionaries carrying dedicated entries to ‘embarrassment’. The term, however, is occasionally used in dictionaries. The first occurrence is in the entry BANK OF ENGLAND of →Montefiore’s Commercial dictionary: ‘As the public attention was particularly drawn to the imperial loan at the time, and as it formed the prominent feature in the remonstrances from the bank, it has been considered as the sole cause of the general embarrassment. But it was the magnitude of the sum, not the description of service, which created the difficulty’ (1803, n.p.). The term is used a few times in James Mill’s entry on BANKING in the 1824 supplement of the →Encyclopædia Britannica with reference to the business of central banks: ‘the embarrassments to which the Bank of England has been occasionally exposed from the fluctuations of commerce, and from the effects of political alarms’ (p. 78); and ‘the Bank of France was considerably embarrassed by the drain of its specie’ (p. 89; see also pp. 83 and 84). Ganilh estimated that ‘paper [money] embarrasses internal circulation, while gold and silver coins facilitate and encourage it’ (CRÉDIT, in →Dictionnaire analytique d’économie politique, 1826, p. 185). Juglar used the term as a descriptive of the state of affairs

62 Daniele Besomi during a crisis or its successive liquidation, or even as synonymous with both, as for example in the following passages: ‘the excesses of domestic and foreign trade, at prices inflated by speculation rather than at their natural level. This is the main cause of all embarrassments’ (CRISES COMMERCIALES, in →Block’s Dictionnaire général de la politique, 1863, p. 621: see Chapter 12); ‘in December, in the midst of the embarrassments of a painful liquidation . . .’ (p. 620); or ‘whereas commercial embarrassments last a fairly short time, at most one or two years, prosperous times extend over several years, six to seven on average’ (p. 621). Macleod also used the expression ‘embarrassments in the mercantile world’ (CRISIS, COMMERCIAL, in his →Dictionary of political economy, 1863, p. 631; see Chapter 13). Much later, a couple of entries used the term ‘embarrassment’ in relation to economic difficulties pertaining to individuals. In the entry CRÉDIT MOBILIER in →Bliss’s Encyclopedia of social reform, for instance, it is reported that a seller of the shares of Crédit Mobilier asserted that from them no embarrassment could follow (1897, p. 396); Mitchell also used the term in this sense: ‘In the face of threatened bankruptcy an embarrassed house may sacrifice accumulated stocks for what can be had’ (BUSINESS CYCLES, in →Seligman’s Encyclopaedia of the social sciences, 1933, p. 106; see Chapter 22).

3.2.4 Stagnation The Oxford English dictionary defines ‘stagnation’ as follows: ‘1. The condition of being stagnant; an instance of this. a. of water, ice or air. b. Phys. of blood, sap, etc. in a living body. 2. fig. Unhealthy absence of activity, energy, etc. Also spec. in Econ., an absence or low rate of growth’. Economic usage through history, however, is actually more varied. While indeed generally indicating the absence (or, rather, a low level) of economic activity, the term has been used in at least five distinct ways. The precise definition offered by the OED has been employed only recently, and features in some dictionary entries. For instance, in Géhanne’s CRISES ET FLUCTUATIONS ÉCONOMIQUES, ‘stagnation’ is used as follows: the downwards phase of the business cycle can be characterized by a non-negative slope of the GDP curve, ‘a simple stagnation of the rate of growth rather than a depression’ (1995, →Dictionnaire thématique des sciences économiques et sociales, Vol. 2, p. 99). Similarly, in the entry on ECONOMIC CYCLES for →Kaliski’s Encyclopedia of business and finance, it is stated that during the contracting phase of the cycle ‘There might be a period of stagnation during which there is no growth or even a decline in economic activity’ (P. Luft, 2001, p. 262). Two dedicated entries explicitly define the term consistently with the OED definition: Penrose’s STAGNATION for →Sills’s International encyclopedia of the social sciences (1968, p. 137), and Dutt’s entry under the same title for the second edition of the same encyclopaedia (2008, p. 83). As we shall see below, the adoption of this definition is somehow problematic as it is inconsistent with the usage of classical economists, to whom, however, a reflection on ‘stagnation’ is attributed. The earliest usage of the term was more generically applied to any situation in which trade (whether in individual branches, or generally) or credit take place at

Naming crises 63 a very slow pace. An anonymous writer, inquiring into the effects of the introduction of copper money, argued that the subsequent inflation would halt domestic trade: ‘All domestick Commodities being raised [in price], there must either follow an entire Stagnation of Trade, or a proportionable Rise of all foreign Commodities’ (Anonymous, 1724, p. 29). The following example illustrates the metaphorical transfer of the verbal form from medicine, and opposes ‘paralysis’ and ‘stagnation’ to ‘prosperity’, while pointing out that trade is only stalled to a degree: ‘War to a Trading Nation is a Degree of Death; it is a strong Paralytick, it stagnates the Blood; and, in a word, is fatal, if not to the Trade itself in general, yet to the Prosperity and Health of it’ (Anonymous 2, 1729, p. 24).7 Similarly, Madden writes that the preference for ‘coin money’ over paper money ‘stagnates our Affairs and Business to a great Degree’ (1738, p. 180). Analogous examples are scattered through eighteenth- and nineteenth-century literature, also in French, German and Italian. The term first appeared in titles in 1819 (an anonymous Friendly Address to the Manufacturers in those districts which are now suffering from the stagnation of trade) and 1820 (J.-B. Say’s Lettres à M. Malthus sur différens sujets d’économie politique, notamment sur les causes de la stagnation générale du commerce, promptly translated into English). ‘Stagnation’ in this sense is naturally also used in dictionaries. The first appearance seems to be in the entry on COMMERCE in →Ganilh’s Dictionnaire analytique d’économie politique, where it is argued that if a country limits the imports of foreign products, it is hindered in producing its own goods, and eventually ‘will become stationary, or rather reduced to a stagnation8 from which it will never be able to emerge’ (1826, p. 145). McCulloch used the term in reporting of the diminished consumption caused by ‘the loss of a great part of our colonial possessions, the stagnation of commerce, and difficulty of obtaining employment, occasioned by the American war’ (CORN LAWS AND CORN TRADE, →McCulloch’s Dictionary of . . . commerce and commercial navigation, 1834, p. 405). Occasionally, such generic usage reappears in later writings, including contemporary dictionaries. A common feature to this usage of ‘stagnation’ as a slowing down of trade is that how slow is not defined with precision: surely, trade never comes to a complete stoppage, but a slowdown (with respect to some unspecified standard) will produce noticeable effects, giving the impression that everything is stalled. In spite of the fuzziness on this precise point, even this generic usage of ‘stagnation’ has some advantages with respect to the notion of ‘distress’ (see Section 3.2.2). While the latter is referred to a condition subjectively felt by individuals or by collectivities, the idea of ‘stagnation’ refers to a state of trade. ‘Distress’ thus refers to the consequences of the economic difficulties, while ‘stagnation’ tries to characterize them. When crises started to be explicitly discussed, ‘stagnation’ in the sense of languishing trade was mentioned (in particular in French dictionaries) as one of the features of crises. The following considerations are offered in the entry on CRISE COMMERCIALE ET INDUSTRIELLE in →Monbrion’s Dictionnaire universel du commerce, de la banque, et des manufactures. The author argues that unforeseen excesses of production cause a reduction of prices and a complete stagnation in manufacture and trade, and that ‘such a stagnation becomes in a way necessary to

64 Daniele Besomi give time for the excess of products to be absorbed by the daily consumption and exportation. For this reason after a crisis, as a natural reaction, one should expect that activity in general increases, because industry must satisfy the arrears of demand for consumption that were left in suspense during the stagnation’ (1838, p. 637; see Chapter 6). Ott also discussed the role of the stagnation of trade in the generation of a crisis: ‘Eventually the market will be glutted insomuch as only a small number of products can be sold, and at a considerable loss. Sales, purchases and production will then stop. And if this phenomenon affects important goods, those involving large masses of capital and occupying a large number of workers, or if it affects a large number of goods at once, then the stagnation in these branches will spread to all others, and there will be a full commercial crisis’ (CRISE, in →Ott’s Dictionnaire des sciences politiques et sociales, 1854, p. 1389; see Chapter 10). Garnier thought instead of stagnation as one of the consequences of a crisis: ‘in most cases social and political shocks, revolutions and all sorts of unrests produce a general crisis, the effects of which . . . are, in brief, uncertainty about the future, shrinkage of consumption, of exchanges and of production by means of a general stagnation, which is synonymous with diminution of wages and profits, that is, with straits and misery’ (CRISES COMMERCIALES, →Guillaumin’s Dictionnaire universel, théorique et pratique du commerce et de la navigation, 1859, p. 921; see Chapter 6, Section 6.6). This introduces the third usage of ‘stagnation’. Sometimes the term was used (often in opposition to ‘prosperity’) to indicate either periods of bad times generally, or a specific phase of the cycle. This usage is already found in early writings, such as in the following passages: ‘as Plenty is the constant Attendant of Peace, so Poverty is the never-failing Companion of War; which proceeds, entirely, from the certain Stagnation of Trade under the latter, and its prosperous and flourishing Condition under the former’ (Anonymous, 1743, p. 5), and ‘panics, runs for gold, fluctuations in the currency, and all the old vicissitudes of periods of high prosperity, alternating with seasons of extreme scarcity and stagnation of trade, recurred with as deplorable a frequency and intense severity as ever’ ([Page] 1842, p. 97). As to the term being used referring to a phase of the cycle, there are examples in dictionaries. The entry on CREDIT in →Lieber’s Encyclopaedia Americana was among the first writings to describe the circular and periodic path (the ‘ebbs and flows’) through which credit passes, at one point of which ‘the acceleration of industry, and the extension of credit, go on until a surplus and stagnation are again produced’ (1830, p. 9). The most famous early description of such a circle, in ten phases, one of which is ‘stagnation’, is due to Overstone, and naturally we find it occasionally cited in dictionary entries – for instance, Herkner’s KRISEN for →Conrad’s Handwörterbuch der Staatswissenschaften (1890, p. 891; see Chapter 18) and much later in Vosgerau’s KONJUNKTURTHEORIE, in →Albers et al.’s Handwörterbuch der Wirtschaftswissenschaften (1978, p. 479). A fourth usage of the term ‘stagnation’ is associated with Hansen’s thesis of the maturity of capitalism (1938), further elaborated by Kalecki, Steindl and others. Dictionaries began to incorporate a discussion of this theme in business cycle entries two decades after the first publication, beginning with Johr’s KONJUNKTUR (II)

Naming crises 65 POLITIK for the →Handwörterbuch der Sozialwissenschaften. John was, however, more interested in discussing the permanent character of the suggested remedies, as opposed to the more time-specific interventions implied, for example, by the Keynesian approach (1959, p. 118). Other dictionaries classified the ‘secular stagnation’ approach among the theories of underconsumption and oversaving (W. Weber, KONJUNKTUR UND KRISE, in →Klose’s Katholisches Soziallexikon, 1964, p. 555; and Ciocca, CRISI ECONOMICHE: IL NOVECENTO, in →Carmagnani and Vercelli, Economia e storia, 1978, p. 146; King also cites Steindl in this context: UNDERCONSUMPTION, →Elgar companion to post Keynesian economics, 2003, p. 372). A Marxist dictionary reported Joan Robinson’s benevolent but critical reinterpretation of Rosa Luxemburg as an early version of the secular stagnation thesis (V. Holesovsky, KONJUNKTUR UND KRISE, in →Frenzel’s Ökonomie (Marxismus in Systemvergleich), 1973, p. 305). The few dictionary entries dedicated to ‘stagnation’ all discuss (some nonexclusively) the term in this connection. The first was →Hanson’s Dictionary of economics and commerce (1965), which defined the STAGNATION THESIS as ‘the belief that in advanced economies saving might be so great as to make the maintenance of full employment difficult’, adding that ‘few people now hold this view’. →Taylor’s New dictionary of economics also carried a short entry on STAGNATION, THEORY OF, explaining that mature economies are characterized by a much lower schedule of the marginal efficiency of capital than was the case in the nineteenth century, so that investment opportunities have declined (1966, p. 274). These entries were followed by a short sceptical entry on SECULAR-STAGNATION THESIS (MATURE-ECONOMY THESIS) in the →McGraw-Hill dictionary of modern economics (1983), where Hansen’s original interpretation of the US having reached maturity in the 1930s is rejected as the events after 1939 proved ‘that the depression of the 1930s was, in fact, only a deep cyclical contraction which ushered in decades of economic growth in even the most mature industrial economies. Nevertheless, fears of secular stagnation are revived during each downturn. In the early 1960s, secular stagnationists pointed to the prevailing high unemployment rate in the United States as a confirmation of the stagnation thesis’. →The new Palgrave carried a long and detailed entry on STAGNATION by Josef Steindl (1987; the entry was not retained in the 2nd edition, 2008), where the origin of various strains of the idea of secular stagnation is traced to the recognition of historical patterns of stagnation and decadence of society, to the biological analogy with maturity and ageing, and to the dogmatic belief that all class systems must sooner or later decay. Steindl refers to long waves as an alternative interpretation of the stagnation of the 1930s, but dismisses it as being based on little theories and carries on by reviewing the ideas of Hansen, Sweezy, Kalecki, Sylos-Labini and his own. The two entries titled STAGNATION for the first and second editions of the →International encyclopedia of the social sciences (Penrose, 1968, and Dutt, 2008) start with a definition of the term based on the rate of growth of output being close to zero (Dutt adds, and Penrose implicitly maintains, that such a condition relates

66 Daniele Besomi to a relatively long period of time). On the basis of this notion, they examine the economists’ discussions of the various possible occurrences of such circumstances. Their examination in this context of the classical economists’ notion that the system will eventually tend to a ‘stationary state’ seems to suggest that the classics used the term in this sense, while this does not seem to be the case: the few occurrences of the term in the writings of Smith, Ricardo and Malthus are all consistent with the idea of temporarily languishing trade. Both these entries also discuss the idea of stagnation developed in the framework of Keynesian economics, and the issue of the stagnation in less-developed countries. The fifth usage of the term ‘stagnation’ is associated with the declining phase of long waves (on which, see Chapter 24), or at least with the long-run trend. Medio, for instance, in the entry on TRADE CYCLE for the 2nd edition of →The new Palgrave (2008), remarked that ‘There also exists an inverse causal relation running from trend to cycle; that is, the characteristics of a cycle, in particular its amplitude and duration, are markedly different according to whether the economy is in a phase of stagnation or prosperity’. In the same dictionary, Solomou uses the word in passing in the same sense, with reference to the years preceding and following the Second World War: ‘the most significant long-run growth variations are associated with the growth stagnation of the 1930s and the resurgence of growth in the 1940s’ (Solomou, KONDRATIEFF CYCLES, →The new Palgrave, 2008). Similarly, J. N. Cohen characterized the lowest phase of the long wave as follows: ‘When the leading sector’s life cycle reaches maturity and declines, the economy will have lost its underlying engine of growth. Stagnation will begin and it will continue until a new technology is found’ (LONG-WAVE THEORY, in Clegg and Bailey, 2008, p. 832).

3.2.5 Panic The Oxford English dictionary defines ‘panic’ as follows: ‘1.a. A sudden feeling of alarm or fear of sufficient intensity or uncontrollableness as to lead to extravagant or wildly unthinking behaviour, such as that which may spread through a crowd of people; the state of experiencing such a feeling. Also: an instance or episode of such feeling; a scare. 1.b. A condition of widespread apprehension in relation to financial and commercial matters, leading to hasty measures to secure against possible loss.’ The general meaning 1a predates in usage the specific meaning relating to financial matters. Examples of the former, in fact, can be noted in the first half of the seventeenth century, while the first occurrence of the latter I have been able to find dates from exactly a century later. In 1742, an anonymous Member of Parliament, discussing the flood of bank bills issued by the Royal Bank of France, eventually leading to the bursting of the Mississippi bubble, pointed out that ‘the immense Sum which was emitted in Bank-Bills, was more than the Cash or Specie in the Bank was sufficient to circulate; especially upon any extraordinary Draught; so that the Bank, being unable to stand the Shock of the least Panic, was suddenly broke’ (Anonymous 1, 1742, p. 15). The same passage is cited in full, in a pamphlet critical of the view that the Regent was not responsible for defrauding his citizens,

Naming crises 67 with the added question: ‘Sir, whence did that Panic arise, but from the Suspicion of the Regent’s Conduct? (Anonymous 2, 1742, p. 14). The term ‘Panic’ reappears indicating a ‘Time of Danger, [with] People’s running for their Money’ in a 1756 pamphlet attributed to [Magens] (p. 27). In the following year, Harris explained that debasing the standard of money ‘would make a havoc alike of all property, and create universal panics and distrust, not easily to be afterwards repaired’ (1757,Vol. 2, pp. 108–109), and that ‘No alteration can be made in the standard of money without an opprobrious breach of the public faith with all the world; . . . without the risk of producing infinite disorders, distrusts and panics among ourselves’ (ibid., p. 31). In the following six decades the term was used only occasionally. In 1816 it was endorsed by Ricardo. He argued that even the best scheme to prevent fluctuations of the value of the currency other than those to which the standard itself is subject would fail and generate an embarrassment on those extraordinary occasions, when a general panic seizes the country, and when everyone is desirous of possessing the precious metals as the most convenient mode of realizing or concealing his property. Against such panics, Banks have no security, on any system; from their very nature they are subject to them, as at no time can there be in a Bank, or in a country, so much specie or bullion as the monied individuals of such country have a right to demand. Should every man withdraw his balance from his banker on the same day, many times the quantity of bank notes now in circulation would be insufficient to answer such a demand. A panic of this kind was the cause of the crisis in 1797. (Ricardo, 1816, pp. 28–29) At the outburst of the November 1825 crisis the term made it first to the title of an anonymous pamphlet, A brief sketch of the causes and consequences of the present panic ([Hart] 1825), and again appeared in the title and text of a number of writings in the following year; thereafter it was used frequently, in particular on the occasion of the 1847, 1857, 1866, 1873 and especially 1907 crises. The usage quickly petered out from the titles of writings, to reappear occasionally from the 1990s. Few dictionaries carry entries on panics, although naturally some use the term in discussing related subjects. The early encyclopaedias only record the general meaning. In the first edition of →Chambers’s Cyclopædia (1728), for instance, PANIC, or Panic-Fear, is defined as ‘a Term used for a needless, or ill-grounded Fright’. The origin of the expression is indicated as being either in a trick played by the god Pan, whose soldiers were in large minority but scared the enemy without engaging in battle by producing a lot of noise in an echoing valley, or by the same god scaring the Titans by means of a shell used as a trumpet. A similar entry is found in →Johnson’s Dictionary of the English language (1755).9 The first dictionary referring to financial panics seems to be →Montefiore’s Commercial dictionary (1803). The consequences of a fear caused by a noneconomic event are outlined: ‘the general rumour of a French invasion, which was

68 Daniele Besomi confirmed in the minds of many, by the landing of a handful of French troops in Wales . . . occasioned a panic, which gave rise to an immediate demand for money, to which neither gold nor silver bullion could be applied, as nothing would be accepted but the circulating coin of the kingdom’; again, a few pages below: ‘suppose that a general panic or discredit rose to such a height, as to incline all those who could, to realize their notes in gold . . .’ (BANK OF ENGLAND, not paginated; references are from the 12th and 15th pages of the article). For the rest of the century, ‘panics’ featured in dictionaries as mainly indicating ‘run on the banks’. For instance, in the entry on BANQUES in →Ott’s Dictionnaire des sciences politiques et sociales, the general panic referring to the same episode of the fear of a French invasion in 1797 is described as follows: ‘panic became general. The immoderate demand for money, after having caused the cracking of several country banks, placed in serious difficulties the Bank of England, which was authorized to suspend payments in species until the end of the war’ (p. 640). More generally in the same entry, Ott commented that independently of the paper money system, whether John Law’s or Proudhon’s, whenever a commercial disturbance occurs, a panic will follow. The rumour spreads that some traders have gone bankrupt, that discounts will not be paid for on the due date; the holders of banknotes, then, upon realizing that guarantees are failing, want to change their money into some visible and concrete value. People run to buy precious metals, or even any commodity. The sellers of goods in turn are scared, raise their prices, and soon refuse to accept paper money. The entire system collapses, only a few speculators resist amidst universal ruin (p. 647). Similarly, Macleod, in the entry on CRISIS, COMMERCIAL for his own →Dictionary of political economy (1863; see Chapter 13), writes: In ordinary times, raising the rate of discount checks the undue expansion of credit and the demand for notes, and prevents the efflux of gold. But in times of panic, though of course the rate of discount ought to be raised to attract gold from abroad, and to prevent its export, it has no effect whatever in checking the demand for notes. It is then not a question of profit, but of existence. When the power and the resources of the Bank are visibly diminishing before the eyes of the commercial public, every one thinks only of his own security. In such circumstances, raising the rate of discount has only the effect of making the demand for notes stronger. Every one will rush to over-provide himself, and then hoard away the notes. (p. 646) In the last two decades of the century, some dictionaries started reflecting on the relationship of panics and crises.10 Raffalovich saw panics as one of the possible features of crises (‘sudden accidents, which often have the features of a panic’: CRISE, in →Guyot and Raffalovich, Dictionnaire du commerce, de l’industrie et de la banque, 1898, p. 1127). White saw panics as the first phase of the crisis: Each period of abnormal and exciting prosperity is followed by a violent collapse, whose phases are a money panic, a sudden rise in the rate of interest,

Naming crises 69 a run on the banks, and most frequently a suspension of cash payments; then a fall of prices of commodities, securities and real property; failures of mercantile and manufacturing houses and corporations, a partial suspension of industry, a fall of wages and the enforced idleness of great numbers of laborers, often culminating in riots and social anarchy. The money panic is generally of short duration, but the crisis is frequently protracted through a series of years. (COMMERCIAL CRISES, in →Lalor’s Cyclopædia of political science, p. 524) Hadley, in the entry on COMMERCIAL CRISES for the 3rd edition of →Johnson’s new universal cyclopædia (1893), shifted the emphasis from bank runs onto financial panics more generally. He pointed out that Crises are often confounded with panics. There is almost always a connection between the two; but a crisis really means something much wider and longer than a panic. A panic starts among a group of speculators – perhaps in Wall Street, perhaps in the Chicago Produce Exchange, perhaps in the London money market. There are many failures, with much forced liquidation; but when the liquidation is accomplished the matter may be soon over. The panic is purely financial; the crisis which may follow is industrial. It affects not merely the speculators, but the producers; not merely the dealers in securities, but the laborers; not merely the bankers, but the community as a whole. Panics are possible under any system, but the chance for crises, affecting all industry for such a long time, is peculiar to modern industry, and forms perhaps the gravest charge which the socialists can make against the existing industrial system. (pp. 423–424) Similarly, in the unsigned entry on CRISES (COMMERCIAL AND MONETARY), in →Bliss’s New encyclopedia of social reform (1908) it is maintained that ‘A crisis . . . must not be confused with a panic. A panic starts with a group of speculators, perhaps occasioned by some disastrous event or report of a disastrous effect. The market is upset. Weaker firms fail; yet there is no general crisis and the market soon recovers. A crisis lasts longer and is general, tho it is often connected with panics’ (p. 341). The entry on PANICS in →Pitman’s business man’s guide (1907, p. 329) – one of the two dedicated articles – also includes any financial panic in its short definition, but does not discuss their relationship to crises, for which there is no entry. The word ‘panic’ occasionally recurs in dictionaries published throughout the twentieth century, but less frequently than before. This reflects the general usage of the term. As this shows a revival of occurrences since the late 1980s, recent dictionaries have again started featuring the word. Some dictionaries (e.g. the →Gale encyclopedia of U.S. economic history, 1999, and →Glasner’s Business cycles and depressions, 1997) carry entries on various historical panics without,

70 Daniele Besomi however, devoting a specific theoretical article to the general subject. →The new Palgrave, 2nd edition (2008), carries an entry by Calomiris on BANKING CRISES, in which panics are considered as one of the possible sources of banking distress, the other being exogenous shocks. O’Hara, in the entry on ECONOMIC CRISES for the →International encyclopedia of the social sciences (2008), states that crises typically lead to, or are associated with, financial crises taking place in the early phase of the recession; the term ‘panic’ is used as essentially synonymous with ‘financial crisis’, described as runs on the banking and financial systems. The same →International encyclopedia of the social sciences (2008) carries an interesting dedicated entry on PANICS by Spotton Visano. Following Friedman and Schwartz, the possibility that financial panics precede crises is considered, although the opposite can happen; the historical evidence is said to be sufficiently ambiguous to leave scope for debate. The sociological and psychological interpretations of panic phenomena are then related to economic interpretation. The view that a collective mind is formed through contagion, that is, the transmission of behaviour from one individual to another, is related to the views in the tradition of Friedman and Schwartz. The interpretation of crowds phenomena as a simple sum of individual behaviours (convergence among like-minded people) is the basis of the explanations of panics as a rational behaviour of individuals who have fears about the solvency of the banking system. The view of the emergence of a distinctive collective behaviour when the existing norms and conventions are challenged by unusual circumstances is the basis of the historical interpretations (such as Spotton Visano’s own, or Kindleberger’s) that explain financial instability on the grounds of the appearance of unusual conduct in conditions of financial distress and sudden loss of liquidity.

3.2.6 Bubble The Oxford English dictionary reports the following figurative meaning of ‘bubble’: ‘3. Anything fragile, unsubstantial, empty, or worthless; a deceptive show. From 17th c. onwards often applied to delusive commercial or financial schemes, as the Mississippi bubble, the South Sea bubble’; correspondingly, used as an adjective, it means ‘Unsubstantial, fragile, delusive; often with reference to fraudulent commercial undertakings, as in bubble company, scheme’. The dating for the reference to delusive financial schemes, however, is unsubstantiated.11 The earliest example cited by the OED is Swift’s humorous poem ‘The bubble’ (1721). There are some earlier occurrences, but none going as far back as the seventeenth century. A piece titled Credit restored satirized the establishment of the South Sea Company in 1711 as a means of financing Britain’s war debt. ‘Bubble’ premonitorily rhymed with ‘trouble’: ‘Those extravagant Rogues would have spent in a trice, / What they gain’d with much Danger and Trouble; / But our Governors prudent have found this Device, / That they might not their Families bubble’ (Maynwaring, 1711). Humorous writings were the cradle for most of the early occurrences of the term ‘bubble’ as applied to financial matters and, needless to say, the events related to the South Sea bubble were the first target. No less than eight pieces employing the

Naming crises 71 term ‘bubble’ were published in 1720 and 1721. Some of them, carrying the term in their title, were of a burlesque character (among these, there is a set of South Sea bubble playing cards), while only a few writings that were trying more seriously to make sense of the events used the term ‘bubble’. An essential ingredient of the usage of the term ‘bubble’ at the time was the fraudulent character of the schemes involved, made more apparent in its use as a verb; before 1720, this was indeed the main implication of the usage as adjective (‘bubble company’) or as a noun and a verb, as in the following example: ‘it is all a Trick, a Juggle, to bubble and cheat a deluded Nation, and make them take a glittering Bauble for true Gold, and make the Trade appear with a Face different from what it ought to wear’ (Anonymous, [1713]). The first dedicated dictionary entry, in →Mortimer’s New and complete dictionary of trade and commerce (1766), is fully centred around the theme of deception: BUBBLES, by which the public have been tricked and deceived, are of two kinds, viz., 1. Those which we may properly enough term trading-bubbles. And, 2. Stock, or funds-bubbles. The former have been of various kinds, and the latter at different times; as in France and England in 1719 and 1720, and when any remarkable alterations have been made, with regard to the property of our monied corporations. (n.p.) Trading-bubbles concern projects for which subscriptions are obtained beforehand, often on the basis of undue magnification of the prospective profits. The author of the entry suggests as a ‘way to prevent the public being made a bubble of ’ the periodic publication of faithful balance sheets, following the accounting methods adopted by private merchants, and certified by ‘gentlemen of the best education, and of the most knowledge of the world’. Stock-bubbles refer instead to the trading of titles relating to the public debt. Such schemes should be directed on behalf of the public by some ‘among these who are of the best abilities without doors . . . before schemes can be formed and executed to the public detriment. This vigilant inspection, this constant scrutiny of the most judicious proprietors, who have no share in the direction of public companies, is certainly the way to prevent those calamities, which have been so often experienced’. Another source of deception lies in stock-jobbing, ‘or stock-bubbling, if you please’, which ‘seems, at present, to be brought to a kind of science’: Those who make stock-dealing their employment, and lie in wait to take advantage of the innocent, the unwary, and ignorant, make it their business to get such intelligence, and will answer their end, either by buying or selling stocks; and, if such can obtain no real intelligence, to occasion a fluctuation in the stocks, they make no great difficulty to invent such as will answer their purpose. To which end, it is common to propagate one thing in the city, and whisper another at St. James’s, and write different from either both at home and abroad. Have we not known at critical conjunctures, that letters have been

72 Daniele Besomi forged as coming from foreign correspondents, with intelligence only to raise or fall stocks, according to the intention of the forgers? An interesting observation is that dealing in stocks not only fails to produce any wealth, but distracts people from engaging in the activities that really enrich the nation: ‘while men’s minds are engaged in shuffling of property from hand to hand among ourselves only, which makes us never the richer, with all the bustle of these transactions, they neglect solid and useful commerce, which alone can make the nation really richer’. The term ‘bubble’ retained the connotation of fraudulent scheme through most of the nineteenth century. In 1824, for instance, in his Treatise on the laws of commerce and manufacture, the barrister Joseph Chitty still describes Bubbles as ‘deceitful enterprizes’ which, ‘by holding out a prospect of sudden wealth, introduce into the minds of the commercial classes a spirit of gambling, and a contempt for the slow profits of regular industry, while their failure involved all, who were even remotely connected with them, in beggary and ruin’ (p. 253). In describing what later became known as the ‘Bubble Act’,12 passed in 1720 and repealed in 1825, Chitty explicitly refers to the ‘false pretense of public good’ and ‘mischievous projects’, and qualifies the South Sea scheme as a ‘fraudulent design’ (pp. 254–255). An even stronger identification of bubbles with fraud is found after the railways speculations of 1847, when criminal law was invoked to deal with those ‘who perverted . . . the Stock Exchange . . . so openly as to “rig” bubble schemes, concocted to rob the public, up to bubble premiums, and who received large bribes for so openly rigging the market’ (Anonymous, from the Railway Gazette, 25 November 1848, cited in Salt, 1850, p. 82). Similarly, but less strongly, towards the end of the century we find in a newspaper that the ‘Union [Générale] was a bubble company of the ordinary kind, a vulgar swindle’ (Anonymous, 1882). In two entries on bubbles in →Palgrave’s Dictionary of political economy (1894), the overtly fraudulent implication of bubbles was set aside to focus on the inflated value of stocks. Bubbles were defined as follows: ‘joint-stock undertakings the shares of which were “blown up by the air13 of great words”’ (J. Bonar, BUBBLE ACT, Vol. 1, p. 182); and ‘term . . . commonly applied since the 17th century to any unsound commercial undertaking accompanied by a high degree of speculation’ (Nicholson, BUBBLES, HISTORY OF, p. 182). Note that while it is made clear that the object of speculation is an ‘unsound undertaking’, it is not specified what a ‘sound undertaking’ would be. The following dictionary entry dedicated to bubbles was published in →Seligman’s Encyclopaedia of the social sciences. W. L. Thorp correctly traced the first usage to early in the eighteenth century, reported William Blackstone’s narrow definition (in the commentary on a statute enacted in 1721: Blackstone, 1822, Book 4, p. 116) as ‘unwarrantable undertakings by unlawful subscription’, and noted: ‘But the term has since acquired a more general application, and is used with reference to any situation in which the cumulative effects of widespread speculation has been to enhance prices to a point of having no apparent relation to the object of speculation’ (BUBBLES, SPECULATIVE, 1931, p. 24). After tracing the

Naming crises 73 history of some famous bubbles, Thorp added that ‘the bubble is fundamentally a psychological phenomenon. It is based on the principle of projection. The speculator . . . sees only the anticipated profit. The character of his position, emotional rather than rational, makes him extremely susceptible to rumor, and assures a severe crisis when the reaction sets in’ (p. 27). The theme of rationality returned with force in the 1980s, when rational expectations theory brought a new perspective on bubbles and opened a lively discussion on the phenomenon – more precisely, on whether such a phenomenon exists. The dividing line passes through the very definition of the term. Those who admit the existence of the phenomenon incorporate in their definition a cumulative mechanism in which a price rise is driven by expectations of further price rises, and explicitly stress that such phenomena are intrinsically fragile. In the entry INTERNET BUBBLE for →Darity’s International encyclopedia of the social sciences (2008), for instance, R. J. Klotz defines a bubble as ‘an unsustainable increase in the price of an asset type driven by the expectation of further price increases rather than fundamental characteristics. Bubbles are a concern of social science since they result from individual calculations about the behavior of others in society’ (p. 109). Similarly, the →VNR Dictionary of business and finance (1980) defines a BUBBLE as an ‘investment that may or may not be intrinsically and dangerously speculative, but which becomes so as irrational buying pushes it higher and higher, far beyond the real value of its underlying assets’. Spotton and O’Hara write that ‘Speculative bubbles describe a process denoting movements in asset prices that cannot be justified on any reasonable economic grounds, and are not sustainable’, and explain that they ‘occur when competitive bidding, motivated by repetitive and selffulfilling expectations of capital gains, drives up asset prices in excess of any reasonable value for the asset’ (SPECULATIVE BUBBLES AND FUNDAMENTAL VALUES, in →O’Hara’s Encyclopedia of political economy, 1999, pp. 1079–1080). Kindleberger writes of bubbles as a condition in which ‘Rising prices [lead] to further price increases’ (FINANCIAL CRISES, in →Deane and Kuper, A lexikon of economics, 1988, p. 138), and in →The new Palgrave loosely defines them ‘as a sharp rise in price of an asset or a range of assets in a continuous process, with the initial rise generating expectations of further rises and attracting new buyers – generally speculators interested in profits from trading in the asset rather than its use or earning capacity. The rise is usually followed by a reversal of expectations and a sharp decline in price often resulting in financial crisis’ (BUBBLES, in 1st edition 1987; and BUBBLES IN HISTORY, in 2nd edition, 2008). In the entry on BUBBLE in →Dobson’s Bulls, bears, boom, and bust, it is explained that ‘when prices for a commodity rise far beyond the intrinsic value of that commodity, a bubble can occur. Speculators continue bidding the price up until, quite abruptly, demand or interest in the commodity evaporates’ (2007, p. 4). In the entry BUBBLE THEORY (OF SPECULATIVE MARKETS) in →Lee and Lee, Encyclopedia of finance (2006, p. 40), bubbles are defined as referring ‘to security prices that move wildly above their true values and eventually burst’. In the entry on BUBBLES for →Darity’s International encyclopedia of the social sciences (2008), J. E. Leightner writes of the phenomenon taking place ‘when there is excessive investment in

74 Daniele Besomi financial assets, such as stocks, or in real assets, such as housing. The bubble “bursts” when the value of the investment plummets’ (p. 378). These definitions are characterized by the absence of a precise reference as to what the ‘true value’ is, or when speculation becomes ‘excessive’. The alternative approach to bubbles takes instead as a starting point the notion of ‘fundamental value’ of an asset, defined as ‘the present value of the stream of cash flows that its holder expects to receive. These cash flows include the series of dividends that the asset is expected to generate and the expected price of the asset when sold’ (S. S. C. Steimetz, BUBBLES, in →Henderson’s Concise encyclopedia of economics, 2007). Bubbles are said to occur ‘when an asset’s price movements do not reflect changes in the asset’s fundamental value’ (Baddeley, SPECULATIVE BUBBLES, in →Snowdon and Vane, An encyclopedia of macroeconomics, 2002, p. 668; similarly, Iraola and Santos, SPECULATIVE BUBBLES, in →The new Palgrave, 2008) or ‘if the price exceeds the asset’s fundamental value’ (Brunnermeier, BUBBLES, in →The new Palgrave, 2008); similarly, if ‘an asset is persistently trading at a price higher than its fundamental value, we would say that its price exhibits a bubble and that the asset is overvalued by an amount equal to the bubble – the difference between the asset’s trading price and its fundamental value’ (Steimetz, BUBBLES, cited). If investors are subject to rational expectations, however, such a situation is impossible, as markets are by definition bound to be efficient. ‘Bubbles’ are thus defined in such a way as not to exist in a rational world, and thus to be interpreted – if observed ex post, as the ‘fundamental value’ taken as a reference point is not an intrinsic feature of the asset but the unobservable result of expectations concerning its future value – as irrational phenomena.14

3.2.7 Depression The earliest occurrences of the term ‘depression’, or more frequently of the corresponding verb ‘to depress’, in relation to economic matters, refer to the old-fashioned figurative meaning reported in the Oxford English dictionary as follows: ‘4. Fig. The action of putting down or bringing low, or the fact or condition of being brought low (in station, fortunes, etc.). Now rare’. The earliest occurrences date from the late seventeenth century, and further examples are found throughout the eighteenth century. A few instances will suffice. A writer argued that high interest discourages trade and wholly depresses land (Anonymous, 1692, pp. 60–61). Ferguson reckons that the constitution of the India Company by an act of the Scottish Parliament would ‘encrease the Trade, and raise the grandeur of the Dutch, and [. . .] depress and lessen the Trade of England’ (1695, p. 58). In Paxton, 1704 we find: ‘this . . . must naturally depress the Value of our Goods’ (p. 64). Bath laments that ‘heavy Taxes [. . .] impoverish the People, and depress our Trade (1734, p. 52). Towards the end of the eighteenth century, we find the first occurrences of the term used in the sense of ‘5. a. A lowering in quality, vigour, or amount; the state of being lowered or reduced in force, activity, intensity, etc. In mod. use esp. of trade; spec. the Depression, the financial and industrial ‘slump’ of 1929 and subsequent years. Also attrib.’ (OED). Interestingly, among the first occurrences

Naming crises 75 we find ‘depression’ used in contraposition to ‘prosperity’, both referring to the economic state of the country as a whole. In The wealth of nations, for instance, Smith writes that ‘statuaries and painters are not likely to be worse rewarded in times of wealth and prosperity, than in times of poverty and depression’ (1776, 1979 ed., p. 208). After the term ‘depression’ in this sense became widespread enough to make it to the title of a publication (Brand’s pamphlet A determination of the average depression of the price of wheat in war, 1800), Francis Randolph suggests the parameters by which prosperity and depression are to be measured: ‘the return of the Customs, the price of Stock, the facility of negociating loans, and the favourable terms on which they are borrowed, compose a sort of state barometer, which we are told to consult, if we would ascertain the height of Britain’s prosperity. Should these indicate no depression,15 we assume a lofty attitude’ (1808, pp. 71–72). By 1823, the pair ‘prosperity and depression’ made it to the title of a book by Mathew Carey, The crisis: A solemn appeal . . . on the destructive effects of the present policy of this country, on its agriculture, manufactures, commerce, and finances. With a comparison between the extraordinary prosperity of Great Britain, and the general depression in the United States. Although the early usage of ‘prosperity’ and ‘depression’ as antonymous indicates that writers were already aware of the alternation of good and bad states of affairs, the emphasis soon shifted to crises and the causes of their outbreaks. The terminology in use from the 1837 crisis onwards is characterized by the predominance of the words ‘crisis’ and ‘panic’ (see Sections 3.2.8 and 3.2.5 respectively). Towards the middle of the nineteenth century, the term ‘depression’ indicated a low or very low level of, say, prices, as in the following examples: ‘when the price is ruinously depressed’ (Macleod, CREDIT, in his own →Dictionary of political economy, 1863, p. 588); or: when, in the case of abundant crops, ‘the surplus is thrown upon the market, it cannot fail . . . to cause a ruinous depression. Now, this was the precise situation of this country at the end of the war. . . . The first luxuriant crop must have occasioned a ruinous decline of prices’ (McCulloch, CORN LAWS AND CORN TRADE, in his own →Dictionary of . . . commerce and commercial navigation, 1834, p. 412). The notion of ‘depression’ as a specific state of affairs was not really explored, witnessing that the idea of a ‘cycle’ characterized by the alternation and chained causation of prosperity and depression was not yet ripe (see Section 3.2.9). By the late 1870s, however, the term ‘depression’ became predominantly applied to the new economic situation, and was consistently used to describe economic disturbances in the last two decades of the century. Its meaning, however, changed again. The new notion of ‘depression’ arose from the necessity of distinguishing the sudden and violent character of crises, as they had occurred from the second to the sixth decades of the century, from the sluggish and persistent character of the depressions of the mid-1870s, the mid-1880s and the mid-1990s. While on previous occasions the recovery from crises was relatively quick, the effects of the crisis of 1873 were still felt in 1879. By 1876, the question became (as aptly titled by The Economist) ‘Why the commercial depression is so protracted’ (Anonymous 2, 1877), and within three years the word ‘depression’ was being used more frequently than the word ‘crisis’ in the titles of writings (see Figure 3.3). The

76 Daniele Besomi terminological switch, however, was not accompanied by a reflection on the precise meaning of terms. There seems to have been a sentiment that the state of trade differed from the old crises, and there were indeed some attempts to compare them,16 but without explicitly codifying the outcome of the inquiry into definitional statements. The few attempts at defining the depression did not distinguish this concept from the old notion of glut. Price, for instance, wrote as follows: ‘What is the meaning of the expression – commercial depression? Want of buyers, deficiency of buying power, markets unable to take off the goods made and repay their cost of production. Makers and sellers are depressed; they cannot find the indispensable buyers’ (1879, p. 270); similarly, Millington: ‘“Depression of Trade,” simplified, means a limitation upon the part of the community to purchase the various commodities for subsistence which have been produced; hence the various markets are glutted with valuable goods for which purchasers are not forthcoming, from which cause the whole commercial community are injuriously affected and workmen thrown out of employment’ ([1885], p. 3). Dictionary writers attempted instead to distinguish between crises and depressions, precisely focusing on the sudden and violent character of the former as opposed to the chronic and creeping features of the latter. This is exemplified by the entry on CRISES (COMMERCIAL AND MONETARY) for →Bliss’s Encyclopedia of social reform, 1897: ‘A time of general difficulty and pressure in commercial and monetary circles, if acute, is called a crisis; if prolonged it is usually called a period of depression’ (p. 430). Notably, some of the first of such entries were in French (Laveleye’s CRISE in the →Grande encyclopédie, 1886–1902 (see Chapter 15), and Raffalovich’s CRISE, in →Guyot and Raffalovich, Dictionnaire du commerce, de l’industrie et de la banque, 1898) and German (Herkner’s KRISEN, in →Conrad, Handwörterbuch de Staatswissenschaften, 1892 (see Chapter 18) and Wellstein’s KRISEN, in →Bruder’s Staatslexikon, 1911, p. 525), and all referred to the English term ‘depression’ (the corresponding passages are cited in Section 3.2.8.4). When the notion of ‘cycle’ had firmly taken over the emphasis on ‘crises’ in the theoretical discussion on economic disturbances, the term ‘depression’ changed meaning again. In most twentieth-century dictionaries the term is associated either with the descending phase of the cycle generally, or with a specific phase of the cycle. The former of these meanings echoes the opposition of ‘prosperity’ and ‘depression’ in use in the early nineteenth century. The setting, however, is new, as the reference is not to generic states of good and bad trade but to a systematic alternation, and mutual causation, of phases of intensification and regression of economic activity. An early example is found in White’s entry on COMMERCIAL CRISES in →Lalor’s Cyclopædia of political science, which is remarkable for the first appearance of the pendulum analogy for describing the cycle: ‘These undulations of trade, of alternately high and low prices, of alternate activity and depression in business, have their root in the mental and moral constitution of mankind’ (1882, p. 524). ‘The pendulum has now (1881) begun to swing back, and there are many signs that the country has started on a new career of prosperity, to be succeeded by another crisis, another period of commercial depression, revulsion, stagnation’ (p. 525). Similarly, →Pitman’s business man’s encyclopedia

Naming crises 77 uses the term as follows: ‘Just as a period of industrial activity leads to a period of depression and sooner or later to a commercial crisis, so a period of depression leads up to another spell at industrial activity’ (COMMERCIAL CRISIS, 1927). Similarly, F. Vinci, in the entry CRISI ECONOMICA for →the Dizionario di politica by the Partito Nazionale Fascista, describes a cycle based on the excess of investment characterizing prosperity and the supervening of pessimism during depression, and explains that a new cycle will follow this phase (1940, p. 690). More recently, C. D. Romer’s entry on BUSINESS CYCLES in the →Fortune encyclopedia of economics also writes in similar terms, but in an interpretative framework resembling more the early nineteenth century’s than the one prevailing a century later. The definition runs as follows: ‘Periods of economic expansion are typically called booms; periods of economic decline are called recessions or depressions. The combination of booms and recessions, the ebb and flow of economic activity, is called the business cycle’ (1993, p. 173). The business cycle, however, is not seen as a necessity: the alternation of booms and depressions is chronological but not causal, precisely as a succession of heads is bound to alternate with a succession of tails in the throwing of a coin. Indeed, as the author herself suggests, the term ‘fluctuation’ would better represent the phenomenon than the term ‘cycle’ (see Sections 3.2.9 and 3.2.10 on cycles and on fluctuations). Most dictionary entries in the twentieth century referred to ‘depressions’ as a specific phase of the cycle: ‘The typical business cycle is usually divided into four successive stages: recovery, prosperity, recession, and depression’ (BUSINESS CYCLES, in →Horton et al., Dictionary of modern economics, 1948), or ‘The fluctuation is from a period of prosperity, or boom, down through a recession, to depression, or slump, then a recovery to prosperity through a period known as revival’ (TRADE CYCLE, in →Taylor, A new dictionary of economics, 1966). Medio stresses that the name of the four traditionally recognized phases may vary, and suggests that the two main phases – expansion and contraction – are divided as follows: the recovery, during which the system begins raising from the lowest point; the prosperity, or boom, when the system raises above the normal level to reach the peak; during the recession the system returns down towards its normal level, while during the depression it keeps falling below that point until the movement is reversed again at the trough (CICLO, in →Lunghini, Dizionario di economia politica, 1983, Vol. 10, p. 12). There are also, however, divisions in stages in a different number of phases. Weinberger, for instance, reported the five phases listed by the Harvard Institute: ‘Depression, Recovery, Prosperity, Financial Strain, Industrial Crisis’ (KONJUNKTUR U. KRISEN, 1929, in the 5th edn of the →Staatslexikon, edited by Sacher – English in the original). →Munn’s Encyclopedia of banking and finance distinguished instead seven phases: crisis, emergency liquidation, depression, readjustment, revival, prosperity, and overextension and speculation. The depression is described as follows: ‘This is a period of “hard times” in which the disturbance in the normal equilibrium between supply and demand is still felt. Prices are low and efforts are made to work off the excess of goods. There is a drastic curtailment of production, resulting in wide-spread unemployment, reduction or elimination of profits, accumulation of money supply

78 Daniele Besomi through the deflation of credit, and a general practice of economy. There is a constant “feeling for the bottom” in the price movement’ (BUSINESS CYCLE, in all editions from 1924 to 1993). Finally, some writers reserve the name ‘depression’ for particularly deep contractions of economic activity. In dictionaries this distinction seems to date from Burns’s entry on BUSINESS CYCLES: GENERAL in →Sills’s International encyclopedia of the social sciences, which used ‘recession’ to indicate moderate downturns lasting about a year and ‘depressions’ to indicate longer and deeper contractions (1968, p. 229).17 Mullineux takes up the emphasis on the severity of the contraction, and distinguishes recessions from depressions on the grounds of whether the contracting phase of the economy shows a ‘slower than average growth (a recession), or a period of negative growth (a depression)’ (BUSINESS CYCLES, in →Kuper and Kuper, The social science encyclopedia, 1985, p. 83). Similarly, we find in →Hillstrom’s Encyclopedia of small business that ‘A particularly severe recession is known as a depression’ (BUSINESS CYCLES, 2007, p. 114); Géhanne also contrasts the mild character of a recession with the ‘brutal’ downturn and the cumulative process associated to a depression (CRISES ET FLUCTUATIONS ÉCONOMIQUES, in →Géhanne, Dictionnaire thématique des sciences économiques et sociales, 1995, Vol. 2, p. 84). Pollard emphasizes instead the duration aspect. He explains that ‘By general consent’, the declining phases of none of the shortand medium-length cycles are normally termed depressions. ‘That term is reserved for longer periods of more serious adversity on an international scale, in particular the Great Depressions of c. 1873–1896 and of the 1930s. By analogy, the distressed years following the Napoleonic wars and the years since the downturn of 1973 have also been included in that category. In view of the fact that these seem to have occurred at fairly regular intervals, attempts have not been lacking to explain them as part of an alternating movement also.’ Pollard thus discusses depressions in the context of long waves (DEPRESSIONS, in →Eatwell et al., The new Palgrave, 1987). Keen points out that while ‘There is an accepted statistical definition of a recession, developed by the National Bureau of Economic Research, as the period from the peak to the trough of a range of cyclical economic data’, ‘No such accepted statistical definition exists for the much more severe and infrequent phenomenon of a depression. At the minimum, depressions are recessions extended in either severity or duration; symptomatically, they are marked by financial crises and falling prices’ (DEPRESSION, ECONOMIC, in →Darity, International encyclopedia of the social sciences, 2008, Vol. 2, p. 302).

3.2.8 Crisis 3.2.8.1 Etymology The term ‘crisis’ originates from a Greek term meaning ‘discrimination’, ‘decision’, and from the corresponding verb meaning ‘to decide’. The original usage in English, dating from the sixteenth century, was in the field of medicine; the term indicates ‘The point in the progress of a disease when an important development or change

Naming crises 79 takes place which is decisive of recovery or death; the turning-point of a disease for better or worse; also applied to any marked or sudden variation occurring in the progress of a disease and to the phenomena accompanying it’. Later, it was also used in a figurative sense as ‘A vitally important or decisive stage in the progress of anything; a turning-point; also, a state of affairs in which a decisive change for better or worse is imminent; now applied esp. to times of difficulty, insecurity, and suspense in politics or commerce’ (OED). 3.2.8.2 Usage The first, isolated occurrence on record of the use of the term to indicate a financial crisis is found in the dedication of a pamphlet with some Reflections on the late alarming bankruptcies in Scotland, published in the wake of the June 1772 financial crisis (Boswell, 1772). It was ‘Addressed to all ranks: But particularly to the different classes of men from whom payments may soon be demanded. With advice to such, how to conduct themselves at this crisis.’ The term ‘crisis’ was occasionally used in an economic sense at the time of the 1793 and 1797 crises, and in correspondence with the high price of provisions of 1800, but it was only with the panic of 1825 that it began to recur with some frequency, mostly within the text. Its final consecration took place with the 1837 crisis, on which occasion it became the most used catchword in titles, and so it remained from the 1847 panic until the mid-1870s, when the situation was better described by means of the term ‘depression’ (see Section 3.2.8.4). ‘Crisis’ was normally accompanied by the qualifier ‘commercial’, occasionally by ‘monetary’, ‘financial’ and more rarely by ‘industrial’. Later, the adjective ‘economic’ encompassed the previous qualifiers to stress the pervasive character of crises. As Huart (1911) explained, ‘we prefer to use the qualifier “economic” rather than “commercial” as used by Juglar. A commercial crisis, in fact, is but one of the forms of the crisis, and as such it does not sufficiently characterize the universality of modern crises. Economic crisis – a term already used by Yves Guyot (Le commerce et les commerçants, Ch. XI, p. 180) and by W. G. LangworthyTaylor, La théorie cinématique des crises économiques (Lincoln, Nebraska, 1904) – indicates instead that all branches of the national economy are affected – not only trade, but also industry, finance, agriculture, the banking system, etc.’.18 The relatively late use of the term ‘crisis’ applies to both Britain and the United States. In French, the expression ‘crise commerciale’ came into common use a few years earlier than in English. It is found in an article in Mercure de France, where it is remarked that ‘the political crisis is not less severe than the commercial crisis’ (Anonymous, 1810), and most famously by Sismondi in his detailed discussion of the phenomenon in 1819 (p. iv). It is thus in this language that the term was first recorded in dictionaries, beginning with Lemonnier’s CRISES COMMERCIALES in Duckett’s →Dictionnaire de la conversation et de la lecture (1835). The first such entry in English is due to Macleod in 1863; meanwhile, eight more French entries were published,19 two of which translated into Italian;20 an original Italian entry was published in 1857 by Boccardo (see Chapter 11), and three German dictionaries also preceded Macleod, beginning with Roscher’s entry dated 1849.21

80 Daniele Besomi The term ‘crisis’ returned to prominence in the titles of writings on these phenomena with the panics of 1893 and 1904, and remained predominant until the First World War. After the war, the term ‘cycle’, which had already been preferred by a few occasional writers in the previous decades, fully conquered the field. By the mid-1920s, the notion of ‘cycle’ had successfully replaced that of ‘crises’ (dictionaries, however, have been slow to catch up22), except for a temporary resurgence in 1931–1932. Since the late 1990s, however, there has been a strong resurgence in the use of the word ‘crisis’. In the 1960s and 1970s, writings with ‘crisis’ or ‘crises’ in the title accounted for about 10 per cent of the total writings listed in Econlit on economic troubled times. This percentage rose to about 20 per cent after the depression of the early 1980s and suddenly jumped to about 50 per cent in 2000, remaining well over 30 per cent even in the prosperous years after 2004, apparently rising again (but data are not yet final) with the 2008 financial crisis (see the Appendix to this chapter). 3.2.8.3 Dictionary definitions in the nineteenth century Throughout the nineteenth century, ‘crises’ were defined in dedicated dictionary entries (before this was done in the general literature: see Chapter 6, Section 6.5.1) in one of the following ways. (1) Most writers characterized crises as disturbances or perturbations, or more often as the effect of such disturbances. A frequent variant of this view resorted to the metaphor of crises as a pathological state. (2) Some writers instead defined ‘crises’ with reference to some essential phenomenon characterizing them. The notion of ‘crisis’ as a disruption was articulated in two different ways. Some writers offered a generic version, simply stating that crises are (the effect of) a disturbance, without, however, specifying precisely what is disturbed. Most French entries fall in this category, as well as the only two Italian and Spanish dictionaries of the nineteenth century offering dedicated entries on crises. This is partly explained by the fact that the word ‘crise’ in French, and also in Italian, admits of a looser and more varied meaning than in German and English. The first known dedicated entry on commercial crises falls into this category. Lemonnier wrote that ‘A commercial crisis occurs every time that the regularity of the movements of exchange of which trade consists is destroyed, suspended or restrained’ (CRISES COMMERCIALES, in →Duckett’s Dictionnaire de la conversation et de la lecture, 1835, p. 216). According to Blanqui, ‘the term CRISE COMMERCIALE applies to the disturbances which, from time to time, affect trade and industry, under the influence of different causes, internal or external’ (→Encyclopédie des gens du monde, 1836, p. 257). The latter qualification is important. Most authors of dictionary entries acknowledged that the source of disruption can be exogenous or endogenous; so far as the definition of crisis is concerned, only the perturbation matters. Coquelin also defined CRISES COMMERCIALES as ‘a sudden disturbance of business, which perturbs its progress and to a certain extent suspends its course’ (→Dictionnaire de l’économie politique, 1852, p. 526). Boccardo reminded his readers of the medical origin of the term CRISI, which he defined as ‘any

Naming crises 81 perturbation of the social interests, intense or not so deep; it must be temporary and ephemeral, otherwise it would not be a crisis but a chronic disease that would lead to the ruin of society’ (→Dizionario della economia politica e del commercio, 1857, p. 731). Garnier was very explicit in defining a crisis as ‘a disruption (“perturbation”) of the natural state, an anomalous situation in which the nature of [the system] struggles against the morbid cause in order to return to a better situation. The CRISES COMMERCIALES are sudden disruptions of the natural economic state; more precisely, they are disruptions in the general function of exchange, which is as necessary to social life as blood circulation is necessary to animal life’ (→Dictionnaire universel théorique et pratique du commerce et de la navigation, 1859, p. 920). Similarly, a Spanish writer defined CRÍSIS ECONÓMICAS as ‘upheavals affecting the production or exchange and, as a consequence, the consumption of wealth’ (→Piernas y Urtado, Vocabulario de la economía, 1877). White defined COMMERCIAL CRISES as ‘disturbances of the course of trade at given times, arising from the necessity of readjusting its conditions to the common standard and measure of value’ (→Lalor, Cyclopædia of political science, 1882, p. 523). The →Brockhaus Conversations-Lexikon stated that ‘HANDELSKRISEN are disruptions and disturbances of the working life’, normally taking place via over-speculation, sinking of prices, extravagant credit, discovery of new land, etc. (Vol. 8, 1884, p. 784). The 7th edition of →Pierers Universal-KonversationsLexikon reported that the word HANDELSKRISIS is used in several senses. In the strictest sense, it indicates a diseased condition of the economy, concerning goods or stocks (‘speculation crisis’). More generally, such events can be called ‘economic crises’, while other special names are available to indicate ‘supply crises’, ‘industrial crises’ or ‘credit crises’ (1890, p. 68). Lexis also saw crises as a disruption, but specified that by an economic crisis in a general sense, we designate any temporary disruption of economic life which causes a larger circle of people to suffer serious disadvantages (KRISEN, in →Elster’s Wörterbuch der Volkswirtschaft, 1898, p. 119), while crises in the strict sense again are disturbances in economic life which, however, determine a turning point, a reversal from one situation to another, namely, from an ascending but not sustainable movement to a collapse (p. 120; see Chapter 19). Raffalovich also defined CRISE as ‘a disruption disturbing the regular progress of business’ (→Guyot and Raffalovich, Dictionnaire du commerce, de l’industrie et de la banque, 1898, p. 1127). All these definitions of crises as disturbances or pathological conditions imply a comparison with some ‘normal’ or ‘healthy’ state of the system. At that time, however, such states were not qualified with precision, thus leaving the definition in some way incomplete if not even circular (for ‘normal’ was often conceived as absence of anomalies, just as ‘health’ was defined as absence of ‘disease’23). Lemonnier and Raffalovich referred to the regularity of trade, Blanqui to the ‘usual course of business’ (p. 257) but also to the necessity that each producer ‘proportions his supply to [the existing] demand’ (p. 258); but that was about it. A second group of writers conceiving crises as a perturbation were more precise in defining the problem, as they referred to disturbances to the equilibrium of supply and demand. All writers in this group are German. This choice is not merely

82 Daniele Besomi terminological, but reflects a specific view as to the working of the economic system. Most writers at the time did not dispute Say’s law24 and in particular its implication that general overproduction is impossible. Some explicitly accepted it and accordingly could only think of crises as originating from political interferences, exogenous shocks such as wars or bad crops, or from miscalculations on the part of some entrepreneurs, leading to overproduction in some branches, the counterpart of which was underproduction in other branches of the economy. Other writers circumvented Say’s law by moving the problem to difficulties arising in the monetary and credit system, and accordingly emphasized perturbations arising from the banking system or redefined crises as a time of suspension of payments (more on this below). In Germany, some writers were openly critical of Say’s law, and their definition of crises directly focused on this issue. The earliest instance among dictionary contributors is offered by Roscher, who pointed out that the disturbances known as commercial or monetary crises (Handelskrisen and Geldkrisen, respectively) affect the equilibrium of production and consumption, which is one of the most important conditions of prosperity. These disturbances can be compared to a disease affecting the entire economic body. Yet he preferred the term PRODUKTIONSKRISEN as better capturing the essence of the disease, because only on occasion is the blame exclusively on the commercial or on the monetary side of the economy (→Die Gegenwart, 1849, pp. 723–724; see Chapter 7). Schäffle, in the entry on trade policy in →Bluntschli’s Deutsches Staats-Wörterbuch, also treated commercial crises as the result of periodically recurring disturbances in the equilibrium between production and consumption (HANDEL, HANDELSPOLITIK, 1859, p. 638). The anonymous author (perhaps Ernst von Hallen?) of the entry HANDELSKRISIS for the 4th edition of →Meyers Konversationslexikon reported that all deeply intervening illnesses of the economic system, causing intense disturbances of the equilibrium between production and consumption, are denoted as commercial crises. The term, however, is incorrect: the disturbance does not necessarily arise in trade, but pre-eminently in consumption and production; the expression ‘production crisis’ is better, but ‘economic crisis’ would be even more suitable. Moreover, production and consumption never actually balance in full in the course of economic advance; not all imbalances, however, deserve the name of crisis. This is only applied when the suffering they cause reaches a certain spreading and severity (1888, Vol. 8, p. 87). Herkner maintained that the word KRISEN indicates economic disturbances of various nature – normally disturbances in the equilibrium between production and demand (→Conrad, Handwörterbuch de Staatswissenschaften, 1892, p. 891; see Chapter 18). TuganBaranovsky also defined crises as ‘different types of economic shocks, related to a disruption of the balance between demand and supply on the market of goods or capital’ (ECONOMIC CRISES, in→Brockhaus–Efron Encyclopedic dictionary, 1895, 1909, 1915: see Chapter 17).25 The second class of definitions of ‘crisis’ picks some characteristic feature of the phenomenon and places it at the centre of the description. Some, rather trivially, simply rely on the idea of hard times. Dupin, for instance, defined commercial crises as ‘the difficult and transitory situations in which the trade of a nation is sometimes

Naming crises 83 thrown’ (note the verb in the passive. CRISE COMMERCIALE, →Encyclopédie du dix-neuvième siècle, 1846, p. 308). Similarly, →Meyers Konversationslexikon defines HANDELSKRISIS as an ‘unfortunate condition in the commercial relationships of a nation, caused by a meeting of circumstances unfavourable to trade, such as wars and similar’ (1849, Vol. 14, p. 1030). The same term is defined in →Pierer’s Universal-Lexikon, 1857, as ‘a confluence of circumstances important for commerce that bring some business close to ruin or to a complete standstill, while enriching others’. Laveleye defined economic crises as ‘the serious troubles of a system of exchange based on credit’; he divided them into commercial and monetary, industrial, and speculative, without, however, supplying a precise definition of either of them (CRISE, in →Berthelot’s Grande encyclopédie, Vol. 13, p. 380; see Chapter 15). Fowler defined CRISES, COMMERCIAL AND FINANCIAL for →Palgrave’s Dictionary of political economy as ‘times of difficulty in commercial matters, when pressure becomes acute’ (1894, Vol. 1, p. 455; see Chapter 16). Some writers defined crises as an interruption of business. Ott, for instance, defined a commercial CRISE as ‘a more or less complete stoppage of business, that is, of buying and selling and, as a consequence, of production’ (in →Dictionnaire des sciences politiques et sociales, 1854, p. 1388). The absence of a reference to disturbances is meaningful, as Ott finds the general cause of crises in a persistent rather than intermittent factor (see Chapter 10). In →Wagener’s Staats- und Gesellschafts-Lexikon (1862), KRISEN are generally qualified as political or economic diseases, while commercial crises are defined as ‘sudden disturbances of the circulation of goods and paper money, which block the regularity of the business routine and bring it to a virtual standstill’ (p. 585). Juglar defined a commercial crisis as ‘a disruption to the course of business, [a failure of mercantile paper to clear across the various world markets – which require the intervention of metallic specie] followed by the downgrading and the depreciation of commodities, and by the suspension, the bankruptcies, and the collapse of imprudently engaged commercial firms’.26 He pointed that it is the sudden interruption of the course of business that causes a general disruption of the economic system, rather than the other way around (CRISES COMMERCIALES, in →Block, Dictionnaire général de la politique, 1863, p. 615; see Chapter 12). Others focused on another feature associated with crises, namely, the suspension of payments. A certain Michel reported that the term CRISE COMMERCIALE designates ‘those times of general discredit which suspend for some time the regular course of business’ (→Encyclopédie du commerçant, 1839, p. 757). Although the causes of crises were presented as disruptions or perturbations (whether of external origin or pertaining to the commercial and industrial organization), the reference to ‘discredit’ (discrédit) indicates a state of widespread lack of confidence, implying the suspension of credit and the breaking down of the chain of payments, so that one merchant’s ruin affects all his creditors and their creditors in turn. CourcelleSeneuil observed that the term CRISE in general indicates a state of uncertainty, and in this sense it was much used in the periodical press; as to the crises affecting commerce and industry, he specified that they are states ‘in which business is suspended and a large number of traders and entrepreneurs do not face their

84 Daniele Besomi engagements’ (→Duclerc and Pagnerre, Dictionnaire politique, 1842). Wagner stressed that the term KRISEN carries multiple meanings in economics, and does not easily lend itself to a precise definition. Nevertheless, he singled out as its main feature the diffuse and overwhelming incapacity of entrepreneurs to pay their debts, and suggests that the term ‘credit crisis’ should be preferred to Roscher’s ‘sales crises’ (‘Absatzkrisen’, a term which substituted the earlier ‘production crises’, used by Roscher in the dictionary entry cited above: see Hagemann, 1995, p. 178 and Chapter 7) (→Rentzch, Handwörterbuch der Volkswirthschaftslehre, 1866; see Chapter 14). Finally, a special definition of crises was given by Juglar and Des Essars in →Say’s Dictionnaire des finances, as ‘the stoppage in the rise of prices’ (CRISES FINANCIÈRES ET COMMERCIALES, 1889, p. 1348), to which Juglar added that CRISES COMMERCIALES are the ‘stoppage of all business (→Say’s Nouveau dictionnaire d’économie politique, 1891, p. 642; see Chapter 12). The weak point of most of the definitions in the second group is that they boil down the crisis to one of its features, elevating the subjectively perceived, most prominent appearance to the status of the essence of the phenomenon. Crises as ‘hard times’ is open to the charge of being too general, and indeed some writers soon pointed out that it is necessary to distinguish violent from sluggish kinds of hard times (see Section 3.2.8.4). The notion of crises as suspension of payments is in turn open to the charge of mistaking the cause for the effect.27 Juglar is running in circles, as on the one hand he defined crises in terms of the stoppage in the rise of prices and on the other hand made the cessation of price rises the cause of crises (Tugan-Baranovsky, 1913, pp. 241–244, and Minnie England, 1913, p. 346). There is instead some merit in the idea that a crisis is the stoppage of production and trade, because it highlights that the crisis is a breaking point, a neat and violent rupture between what precedes and what follows it. The characterization of the adjacent phases, the causal nexuses, and the role of such a break in the capitalistic process of production are, of course, to be discussed separately, and need further interpretation; but for the time being, this view goes back to the etymon of the term, as the crisis is again understood as a time of decision at which something relevant happens, and the outcome of which is not inscribed in the definition itself. 3.2.8.4 Dictionary definitions at the turn of the twentieth century: crises vs. depressions In spite of having started with a panic in Austria and in the US, the crisis that began in 1873 eventually proved to differ from the preceding ones. Instead of proceeding quickly and violently, it was sluggish and prolonged. Recovery only began in 1879, but was followed by another slowdown between 1882 and 1885. Overall, the last quarter of the nineteenth century showed a marked increase of bad years with respect to the previous decades. The vocabulary associated with this phenomenon changed accordingly. Contemporary writers preferred the word ‘depression’ to the word ‘crisis’ to describe it (see Section 3.2.7). Dictionaries, however, were slow to pick up the change. The first suggestion that a distinction

Naming crises 85 would be pertinent is found in Laveleye’s entry in the →Grande encyclopédie, where it was pointed out that some crises are acute while others, such as those of 1874 and 1888 in France, are prolonged, the former being more similar to an inflammation and the latter to anaemia (Vol. 13, p. 380; see Chapter 15). Herkner also resorted, although with some reticence, to the medical analogy. He maintained that the quick crises of the first half of the nineteenth century could be seen as a turning point, at which it becomes apparent which entrepreneurs will survive and which will not, while the new crises (1873–1879, 1881–1887) have more the appearance of creeping, long and chronic disturbances, and therefore better deserve the expression ‘depression’ (English in original) (KRISEN, in →Conrad, Handwörterbuch de Staatswissenschaften, 1892, p. 891; see Chapter 18). Raffalovich maintained that the analogy implied by the medical notion of ‘crisis’ is only suitable if one conceives of crises as the outbreak and acute point of a previously existing disease, as distinct from a state of prolonged languor and slump (marasme) or of chronic disease, for which the word ‘depression’ is better used in English; in that language, the word ‘crisis’ is employed with reference to a sudden occurrence, often having the character of a panic (CRISE, in →Guyot and Raffalovich, Dictionnaire du commerce, de l’industrie et de la banque, 1898, p. 1127). Lexis also stressed that the economic disturbance of the latest decades of the century had a chronic character, and should therefore be named ‘depressions’ rather than ‘crises’ (KRISEN, in →Elster’s Wörterbuch, 1898, p. 120; see Chapter 19). 3.2.8.5 Dictionary definitions in the inter-war years While in the general literature cycles had already supplanted crises by the eve of the First World War (see Section 3.2.9), dictionaries again had been slow to catch up. Throughout the 1920s most dictionaries carried entries on both ‘crises’ and ‘cycles’, but the former were clearly written with the latter in mind.28 There was an early start in this direction at the end of the nineteenth century. The unsigned entry on CRISES (COMMERCIAL AND MONETARY) for →Bliss’s Encyclopedia of social reform takes up the distinction between acute and prolonged events, and inserts the word ‘cycle’ in the definitional part of the article: ‘A time of general difficulty and pressure in commercial and monetary circles, if acute, is called a crisis. [. . .] Crises, whatever be their cause, usually follow a certain course, which it is asserted by some writers, Jevons prominently among them, follow a certain cycle’ (1897, p. 430). Similarly, but without using the word ‘cycle’, Hadley had already discussed COMMERCIAL CRISES in terms of the ‘recurring seasons of general prosperity and general adversity’. After speculation drives prices up, prices increase, employment is steady and wages are high, a shock shakes credit; ‘confidence is destroyed, prices begin to fall, business men contract their operations, wages are reduced, and working time reduced still more. General adversity for merchants, capitalists, and laborers alike succeeds the general prosperity of the former period. To this condition of things the name commercial crisis is applied’ (→Johnson’s new universal cyclopædia, 1893, vol. 2, p. 423).

86 Daniele Besomi The first full-blown entry on ‘crises’ really dedicated to the cycle29 was Spiethoff ’s KRISEN for the fourth edition of →Elster’s Handwörterbuch der Staatswissenschaften (in the previous edition of the same dictionary, however, Herkner – probably under the influence of Spiethoff – had adapted the terminology he used in the first and second editions of his KRISEN article and updated the title of a crucial section from ‘the causes of crises’ to ‘theory of conjunctural changes’: see Chapter 18, section 18.3). Although Spiethoff describes crises in connection with the overall cyclical development of the economy (‘the evolutionary forms of the highly developed capitalist economy’: 1925, English translation, p. 78), their definition still emphasizes some intrinsic features of these events, thereby justifying the separate heading. ‘The crisis is that period during which an unhealthy economic state of affairs is suddenly and violently transformed. This unhealthy state is overspeculation linked with overexpansion of credit; the violence manifests itself in the collapse of credit and in the multiplication of bankruptcies. Complete lack of credit does not usually last longer than one or two weeks, while bankruptcies may often continue to pile up for months’ (p. 80). Spiethoff indeed stressed that there is no indissoluble bond between crises and cycles, as crises used to occur independently of cycles before they started to accompany them in the 1820s, and on the contrary have been increasingly avoided since the end of the nineteenth century (p. 104; see Chapter 20). Arndt, who authored the entries on both KONJUNKTUR (business cycle) and KRISEN (crises) for the →Handwörterbuch des Kaufmanns (1925–1926), introduced the first germs of a distinction that was to acquire some popularity in later dictionary entries. KRISEN are still seen as serious disturbances of economic life (mild disturbances are called depressions); no longer, however, with respect to equilibrium, but with respect to the cycle. Arndt saw them as a specially unfavourable phase of the cycle, not originating from the ‘organic’ nature of the economic system but arising from external circumstances. Although they presuppose a preliminary expansion, they do not necessarily follow each expansion, depending on whether or not the unfortunate circumstances are present. Their explanation is, at any rate, to be sought in the theory of the cycle (1926, pp. 527–528). A similar position is held in the entry KONJUNKTUR UND KRISE in →Thalheim’s ABC der Volkswirtschaft. Crises, namely, ‘the direct endangering and destruction of numerous undertakings’, take place within the wave-like behaviour of economic life. As such, they do not require a specific explanation (although some are caused by specific, exogenous events, such as wars etc.); they simply are a consequence of the previous upswing, and are not a necessary phase of the cycle (1934, p. 166). Opposite to this view and more in line with Spiethoff, Felden placed crises within the cycle but at the same time vindicated an autonomous role for them. His entry titled KONJUNKTUR UND KRISEN began with the assertion that the regular alternation of upwards and downwards movement, of prosperity and depression, is the ‘normal’ state of our economy (in →Nicklisch, Handwörterbuch der Betriebswirtschaft, Vol. 3, 1927, p. 694). The upswing phase ends through a crisis, which is a sudden and massive panic outbreak which paralyses all economic forces.

Naming crises 87 It lasts only a few days or weeks (pp. 694–695). Felden specifies, by means of a quotation from Lexis, that ‘by “crisis” we do not simply understand the transition from economic prosperity to a depression, but an acute disturbance of the economic process’. Lexis continues (but Felden does not take him up) by explaining that although the turning point often takes the form of a crisis, this is not a necessary outcome (Lexis, 1913, p. 189). Diehl also stressed, and more forcefully than the writers just examined, the autonomy of the notion of crisis. In the entry on KONJUNKTUR, KONJUNKTURTHEORIE he acknowledged that the newest theory of the cycle claims to have encompassed the old theory of crises as a partial appearance of the overall general movement, but argued that the two phenomena must be investigated separately, as crises arise from recurring special causes (→Elster, Wörterbuch der Volkswirtschaft, Vol. 2, 1932, p. 600). In the entry on KRISEN in the same dictionary he defined economic crises in the strict sense as ‘profound and lasting general disturbances of the economy, which shake in all directions the foundations of the economic life’, and argued that such phenomena must be distinguished from other disturbances of economic life, in particular those affecting only some branches of the economy; those affecting money, credit, speculation and the stock exchange; and depressions, which are the other side of the coin of the prosperous times (‘Hochkonjunktur’) that precede them (pp. 685–687). The distinction between old and new theoretical approaches to the problem had already been drawn by Weinberger.30 Traditionally, ‘Konjunktur’ used to designate the conditions independent of the economy itself (such as harvest fluctuations, changes in technology, etc.) affecting the general economic situation, while ‘crises’ indicated a persistent unbalanced relationship between supply and demand. The new approach interprets crises in the light of the rhythmical changes of the economy, so that the theory of crises has evolved into a theory of the cycle. The latter tries to identify the certain laws underlying the cyclical course of economic dynamics, as opposed to the subjective perception of the market conditions. In this context ‘the terms “business cycle” (Konjunktur) and “crisis” are used for economic transitions and accompanying structural adjustments towards new equilibria, thereby employing the term crisis as a special case of a disequilibrium, i.e. a serious and permanent shock to a prior equilibrium’ (KONJUNKTUR UND KRISEN, in →Sacher’s Staatslexikon, Vol. 3, 1929, p. 512). A similar position was held by Müller-Armack. He stressed that in the old approach, the theory of crises was essentially a residual area for economic theory, while the dynamic theory of the cycle tackles fundamental issues in economic theory, both as matter of fact and methodologically. Crises, in so far as they result from purely exogenous circumstances, appear theoretically irrelevant. They only make theoretical sense as a turning point of a general overall movement. In the old approach, crises eclipsed the overall movement; now the research on cycles enables us to bring to light further movements of the markets: expansions and contractions (KONJUNKTURFORSCHUNG UND KONJUNKTURPOLITIK, in →Elster’s Handwörterbuch der Staatswissenschaften, Vol. 4, 1929, p. 646). The reference to a ‘dynamic’ understanding of crises is also briefly taken up by Uhl in an entry explicitly titled KRISE UND ARBEIT (DYNAMISCH DARGESTELLT) (Crisis and labour (dynamically depicted)), who

88 Daniele Besomi defined crises as ‘the most obvious manifestation of the complex phenomenon known as cyclical change’ (Konjunkturwechsel) (→Giese, Handwörterbuch der Arbeitswissenschaft, 1930, p. 2972). Although most major economic dictionaries in the inter-war years were written in German, a few dedicated entries on crises can also be found in other languages. In →Munn’s Encyclopedia of banking and finance, CRISIS was defined as ‘the collapse of a period of prosperity, i.e., the termination of a rising price trend, general optimism, inflation and speculation. It is a turning point or decisive moment at the crest of the business cycle when it becomes clear that the price structure has become top heavy and that the next movement must be downward’ (1924, p. 141). Crisis, then, is reduced to a phase of the cycle, more precisely the upper turning point, a view that gained support in particular in the second half of the twentieth century. The Frenchman Lescure, contributing to →Seligman’s Encyclopaedia of the social sciences, defined CRISES as grave and sudden disturbances of economic equilibrium. He pointed out that ‘in a dynamic society the equilibrium between supply and demand of capital is necessarily unstable, and hence price movements occur’ (the word ‘unstable’ here is not used in the technical sense developed by dynamics, but simply to indicate that equilibrium is not given once and for all). We have crises when disturbances are grave and sudden. Lescure added that ‘Scientific research at the end of the nineteenth and the beginning of the twentieth century established the fact that the crisis occurs at the point of transition from expansion to contraction.’31 This has induced some to speak of cycles; this term, however, exaggerates the regularity of the phenomenon. It would thus be ‘more correct to speak of fluctuations, or of alternation of expansion and contraction’ (1931, p. 595). In Italy, Bachi wrote of CRISI ECONOMICHE as a sudden transition from euphoria to lack of business. They are a transition from a position of equilibrium to a completely different one. They have some specific features, but they are only one of the parts of a cyclical wave; their causes are thus part of the causal system determining the cycle (→Enciclopedia italiana, 1931, p. 913). Momigliano took a different approach. He maintained that production is subject to laws that tend to adapt it to the needs of consumption. Yet the dynamics of capitalistic production is constantly subject to small oscillations. Crises occur when such oscillations, in one direction or another, happen to be particularly intense and of long duration. They are thus nothing else than particularly acute manifestations of a normal, physiological phenomenon, rather than a pathology (CRISI ECONOMICHE, →Grande dizionario enciclopedico UTET, Vol. 3, 1934, pp. 830–831). Meanwhile, however, Wesley Mitchell set the ground for the elimination of ‘crises’ from business cycle terminology. He argued that the term carries the implication that some organic difficulty affects the economic system, and suggested substituting it with the more neutral ‘recession’ to indicate the turning point (see Section 3.2.11), retaining ‘crises’ only to indicate the degree of intensity of the phenomenon: ‘Every business cycle includes a phase of recession; this recession may or may not be marked by a crisis’ (Mitchell, 1926, p. 37; 1927, p. 381).

Naming crises 89 3.2.8.6 Dictionary definitions in the late twentieth century The contrast that emerged in the inter-war definitions of crises, between those who saw them as a phase of the cycle and those who tried to recognize some autonomy to the concept while admitting that crises take place with a cyclical rhythm, also characterizes the relatively small share of dedicated entries in post-war dictionaries, most of which have fully embraced the ‘cycle’ perspective and do not carry entries on ‘crises’. Chapter 28 specifically surveys the treatment of crises in recent dictionaries; here a quick overview will suffice. Some writers dispensed with the notion of crisis altogether. This applies to German language dictionaries in particular, where ‘crises’ are seldom given specific entries. The few exceptions attribute the notion of crisis, and the corresponding theory of crises, to Marxist approaches, as distinct from the mainstream emphasis on ‘cycles’. Other writers accepted, without much ado, the view that crises are a phase of the cycle. For linguistic reasons – the term ‘crise’ having a more general and flexible meaning in French than in English – French dictionaries often espouse this perspective. While there seems to have been a perception that crises are, in some way, ‘special’ and cannot be simply subsumed within the cycle, authors of dictionary entries could not easily pinpoint the specificity of cycles with respect to crises. Some writers reconnected to the nineteenth-century view that crises are pathological conditions. But rather than considering them as an anomaly with respect to a path of growth, they saw them as abnormally violent downturns within a normally cyclical pattern. The authors of entries for dictionaries in the history of ideas, or at any rate not strictly economic lexica, stressed that crises imply some qualitative change between what preceded them and what followed, and as a concept they have an historiographical connotation. Such views, however, do not seem to have had any echo among economic dictionary writers. There are, however, two original attempts at placing crises on truly different grounds than cycles. Ciocca argues that the instability characterizing crises is logically independent from other forms of instability, including those giving rise to cyclical movements (CRISI ECONOMICA E FINANZIARIA, in →Bedeschi, Enciclopedia delle scienze sociali, 1991). De Vecchi argues instead that crises and cycle theories differ on epistemic grounds: while the notion of ‘cycle’ implies some regularity, which economists expressed by making their laws mechanistic and subject to calculability and predictability, economists stressing the role and importance of crises in the capitalistic process have incorporated in an essential way the action of social classes (Marx), or uncertainty (Keynes), or some other ingredient that escaped the constraints of formal economics in a traditional sense (CRISI, in →Lunghini, Dizionario di economia politica, 1983).

3.2.9 Cycle 3.2.9.1 Etymology and early uses of the term The term ‘cycle’ (deriving from the Latin ‘cyclus’, in turn deriving from the Greek word meaning ‘circle’ and ‘wheel’) carries different meanings in various

90 Daniele Besomi disciplines, in particular in astronomy, physics, chronology,32 medicine, botany, zoology, geology, literature. Three of these usages recur in the economic literature on the issues we are discussing here. The most common usage in the last eight decades of the nineteenth centuryt with some occasional occurrences also in the twentieth century, is that of ‘cycle’ as ‘an interval of time during which a characteristic, often regularly repeated event or sequence of events occurs’ (American Heritage 1), or ‘A period in which a certain round of events or phenomena is completed, recurring in the same order in succeeding periods of the same length’ (OED, 2b). For example, Petty referred to the average duration of the ‘Cycle, within which Dearths and Plenties make their revolution’ as the time unit to evaluate ‘the ordinary rent of land in corn’ (Petty, 1662, pp. 24–25), and to the ‘Cycle of time, as within which all contingencies of Land revolve’ as a time unit for assessing taxation on land (p. 31). Similarly, Burke wrote that the Government ought ‘seriously to consider that years of scarcity or plenty, do not come alternately or at short intervals, but in pretty long cycles and irregularly’ (1800, p. 32), and Cooke referred to ‘cycles of favourable and unfavourable seasons for the production of grain’ (1842, p. 8). More commonly, however, the word was loosely used to indicate an interval in time in expressions such as ‘cycle of prosperity’ or ‘cycle of depression’, as, for instance, in this passage: ‘cycles of abundance which are supposed to alternate with cycles of dearth every five years’ (Anonymous 1, 1849, p. 573). An interesting example of this usage is found in an article in the Morning Chronicle: ‘after another cycle of prosperity, renewed speculation springs up, a fresh revulsion occurs, a drain of gold follows, to curtail their issues, a commercial epidemic ensues, which, after a repetition of the calamities which happened in 1825, were repeated in 1836–37, were seriously threatened in 1838–9, broke out with more intense mischief in 1847–48’ (Anonymous, 1855). Although the passage refers to a repeating pattern of events, the word ‘cycle’ is only used to refer to an unspecified period of time during which business was prosperous. The other two notions of ‘cycle’ both refer to recurring events following the same pattern. One of them, however, focuses on what happens within a single cycle, while the other refers to the succession of cycles. The former of these is defined as follows: ‘A single complete execution of a periodically repeated phenomenon’ (American Heritage: 2a; see also OED: 4 or Grand Robert: 2). This usage of the term ‘cycle’ stresses the order in which events occur within each cycle; as an example, one may consider the cycle of a washing machine which goes through a number of phases, from pre-washing to spinning, following a constant order, but which stops after the last one, and only resumes when the button is pushed again. The other notion focuses more on the repetition of the sequence than on the sequence itself within a single course; this is somehow taken for granted. It is defined as follows: ‘A recurrent round or course (of successive events, phenomena, etc.); a regular order or succession in which things recur; a round or series which returns upon itself ’ (Oxford English dictionary: 3a; see also American Heritage: 2b or Grand Robert: 2). An example is the working of a piston in a combustion engine.

Naming crises 91 A clear example of the usage of ‘cycle’ in the sense of one single course of events is found in a pamphlet by Cargill, describing how the British economy between 1822 and 1825 ran through ‘a cycle of enterprise, prosperity, speculation, madness, and ruin’ (Cargill, 1845, p. 27). The most famous instance of this usage of the world ‘cycle’ is surely Overstone’s characterization of the ten phases through which the general state of trade runs: The history of what we are in the habit of calling the ‘state of trade’ is an instructive lesson. We find it subject to various conditions which are periodically returning; it revolves apparently in an established cycle. First, we find it in a state of quiescence, – next improvement, – growing confidence, – prosperity, – excitement, – overtrading, – convulsion, – pressure, – stagnation, – distress, – ending again in quiescence. (Loyd, 1837, p. 31) This passage was often cited by Overstone’s contemporaries, and is still referred to nowadays as an early example of a cyclical description of the economy. It should be noted, however, that this is the only reference in the entire pamphlet to such a circular course of events. The description has a definite starting and arriving point, quiescence, and there is nothing to suggest how and why after reaching quiescence the cycle should resume its course. Thus, three of such cycles later, the Liverpool Mercury could note that ‘Overstone has described accurately the cycle which we, to our sorrow, see has made another turn’ (Harvey, 1867). This is no accident, but reflects the prevalent state of the theory of crises prevalent throughout most of the nineteenth century, based on the credit–speculation–overtrading–collapse mechanism. These writers clearly understood how a state of prosperity could easily tempt traders into new and hazardous speculations, and that bankers could in turn be tempted to finance such speculations, which would at some point become excessive, until the entire cumulative mechanism suddenly broke down. But they considered in some way that prosperity was the ‘normal’ state of trade, which would establish itself as a matter of course, and accordingly felt no need to explain how and why after the liquidation improvement would take place and the cycle resume – except perhaps noting that the ‘liquidation’ of bad debts set the conditions for the resumption of credit. On the other hand, these writers had the analytical problem of characterizing the common features of these events, and the naming of a number of phases was an important step in the description of their morphology. The usage of the term ‘cycle’ as a succession of stages in one round of the phenomenon simply reflected its theoretical understanding and the analytical necessities of the time. Most of the writers using ‘cycle’ with reference to a single course of events were aware of their periodical recurring; when they wanted to stress this fact, they added a specific remark, e.g. stressing the beginning of one of those cycles (‘. . . a new glut and a new panic shall come to complete the now regularly recurring commercial cycle’: Anonymous 2, 1850, p. 113; ‘many of the [American] States [. . .] have gone through all the vicissitudes attending the creation, culmination, and

92 Daniele Besomi final liquidation of an immense amount of bank capital. They have now commenced a new commercial cycle, with the experience of the past for their guide and caution: Anonymous 1, 1843, p. 659; ‘the new commercial cycle which we may consider as now beginning [after the recent shock]’: Anonymous 1, 1857) or by stressing their periodical character (‘From the time of the South Sea Bubble, or even earlier, the public have passed through Periodical cycles, very similar in their characters’: Anonymous 2, 1857). The following extract is illustrative of the usage of ‘cycle’ in the sense of a single course of events but also of the repetition of such cycles: those periods . . . called commercial cycles [appear] at nearly regularly recurring periods when lassitude succeeds to excitement and reaction to speculation. . . . There have been four periods in English history since the peace of 1788 that may be said to form commercial cycles, namely, from 1792 to 1816, at the close of the general war in Europe, from 1825 to 1837; from 1847 to 1857. At each of these periods there had been a large accumulation of capital, a restlessness of the public mind under a fall of general profits, an increase of speculation and its invariabley attendant, reaction. It is rather a remarkable fact, that between each of these periods what is denominated a crisis, has occurred with intervals of about ten years between them. (Anonymous, 1866) As a last example of this usage let us consider this definition offered by Baker: Explanation of terms. – The periods of about ten years each which have been so constantly marked by undue extension of Trade beyond the natural growth of the means to sustain them, resulting in an inflation and relative collapse of Credit, are repeatedly referred to by the use of the words cycle and credit cycle. (Baker, 1876, p. 203) The sense in which the word ‘cycle’ was used by most writers in the first half of the twentieth century, and by some schools of thought in the later part of the century, in expressions such as ‘business cycle’ or ‘trade cycle’, implies not only the idea that each complete course of events follows a path similar to the others, but also that such paths are chained to each other, chronologically and causally. This idea goes beyond the awareness of the fairly regular recurrence of crises through similar steps. Reflections on periodicity date back to the end of the eighteenth century, were fairly common by the 1830s, and by the 1850s most writers were convinced that crises returned with decennial regularity – so much that soon some felt the need to deny that this was the case (Besomi, 2010a); the recognition of specific phases is as old as the attempts at explaining the phenomenon by means of endogenous mechanisms.33 The notion that all the various phases of the cycle are chained to each other required that one renounced the idea that prosperity is the normal state of the economy and as such does not require an explicit explanation, and identify instead a turning point actively engendering a reversal of the movement. This step was theorized by Juglar in 1889 (implicitly recognizing that it was lacking

Naming crises 93 in his previous work: pp. xvi, 4, 21), but there are earlier – albeit occasional – instances of writers incorporating complete cyclical mechanisms. The first seems to be due to Wade, who produced two cobweb-like models in 1826 and 1833;34 Corbet also explained how ‘one excess, like the high and low or hot and cold fits of a fever, always [gives] birth to and [generates] another’ (1841, pp. 105–106). The associated use of the term ‘cycle’ is illustrated by this passage, where the concept, remarkably is likened to a ‘natural law’: From past experience, we may learn, that the commercial world has its cycle of events, so fixed and invariable as to seem almost like a natural law. When trade is bad, and has reached a certain point of depression, it takes a turn for the better: little by little it improves: it becomes good – very good – madly good, and then a change, often an abrupt one, takes place, and it again becomes bad – again to run the same appointed course. This uniform cycle, I am sorry to say, has just brought to us the melancholy vicissitude of a paralyzed trade, and, along with it, its usual incidents of extravagant theories, bold promises, thoughtless credulity, discontent with the present condition of things, and an angry impatience for some change. (Anonymous, 1848, p. 3) Several other examples are available. The following passage closes the circle of Overstone’s description cited above by stating explicitly that the cycle recommences from where it ended: We find Lord John [Overstone] likewise laying down a dreary theory of trade cycles – first, the growth of trade – then the prosperity of trade – then the inflation of trade – then distress and distrust – then the bursting of the trade bubble – and then the beginning of the cycle anew again. In fact his Lordship seems to hold this periodicity of fortune and misfortune, of extravagance and ruin, necessary to the maintenance of circulation in a healthy state, and to preserve its convertibility and par. . . . Mr Disraeli holds Lord John’s cycle theory in as little respect as he does his ancient instances of commercial distress. (Anonymous 3, 1857) Bagehot, in an anonymous leader in The Economist, also observed that ‘There is unquestionably a tendency of commercial periods to recur in cycles. Periods of high price are followed by periods of low price; periods of inflation by periods of collapse’ ([Bagehot] 1873, p. 1). Another writer emphasized the regularity of the recurrence of panics: There is a general impression that panics recur at regular intervals of about ten years each; nor can this be wondered at, seeing that the years 1825, 1837, 1847, 1857, and 1866 have, from various causes, been marked by the catastrophes so named. Judging by this recurrence of disasters at an apparently fixed period, it certainly seems as if there were a cycle, and this of but short

94 Daniele Besomi duration, fated to bring in its train ruin to the monetary world and to millions outside of it. ([Gilbart] 1873, p 937) This aspect is probably what irritated the critics of the emerging notion, who found the term ‘cycle’ convenient for summarizing the target of their attacks. Laveleye, for instance, disputing the ‘received theory, more or less clearly devised and very firmly held, that periods of commercial prosperity and adversity recur as regularly as the tides’, used the expressions ‘economic cycles’ (cycles économiques) and ‘theory of cycles’ (1865, pp. 293 and 297). Cardoza also denied the existence of cycles, maintaining that the course of events leading to the seemingly periodic crises is not uniform; yet he uses the word ‘cycles’ as the title of the corresponding section of his article (1869, pp. 693–694). Particularly important for this usage of the word ‘cycle’ is a seminal paper by John Mills, where he depicted the periodical ‘waves’ through which commerce fluctuates, described the typical phases of a ‘normal’ cycle of credit, their ‘successional order’ and causal chaining, represented them graphically (with Jevons’s help), and characterized the whole phenomenon as ‘facts of a new order’. So far as he described the ‘type-cycle of credit’, the term ‘cycle’ was used in the singular (so to speak). The title of the paper, however, uses the term with references to the succession of cycles: ‘On credit cycles, and the origin of commercial panics’ (1868). The terminology was approved by Jevons (1878, 1884 reprint, p. 224), who obviously had in mind the astronomical meaning of cycle. So did Jevons’s commentators, both approving and critical towards the sunspots theory or towards Jevons’s rigid notion of periodicity, and this use of the term definitely won acceptance in the profession. 3.2.9.2 Compounds: trade cycle and business cycle In its first appearances in the literature, the word ‘cycle’ was often accompanied by the qualifier ‘commercial’.35 A number of instances have already been cited in the previous section; perhaps we can add that it was used by Fullarton (1844, p. 96). It appeared with some frequency in The Economist in the early 1870s (perhaps on Bagehot’s instigation or inspiration), and also in the daily press. An alternative expression was ‘cycle of trade’, which later evolved into ‘trade cycle’. An early, interesting instance is an article initialled J. H., taking up Overstone’s description of the ten phases, graphically representing them as a closed circuit called ‘the cycle of trade’, in which he positioned the current situation ([Harvey] 1849). The same diagram under the same name, but with a repositioning of the current situation, was taken up by the Liverpool Currency Reform Association (1849). The expression reappears in an article for the Red Republican (‘the cycle of trade recommences’: Anonymous 3, 1850), and as the title of an article for the Independent, again starting from Overstone’s cycle (Anonymous, 1874). The expression ‘trade cycle’ seems to have first occurred in an anonymous report of parliamentary opinions on currency and credit, again taking up Overstone,

Naming crises 95 already cited in the previous section (Anonymous 3, 1857). Later, it was used by The Economist (‘the turn towards depression in the last trade cycle’: Anonymous 1, 1877, p. 154), in two unsigned pieces in the Journal of the Statistical Society of London (‘the prosperous half of a trade cycle’, Anonymous 2, 1879, p. 735; ‘because of the position of the trade cycle’, Anonymous 1, 1879, p. 291), by Ellis in the subtitle (but not in the text) of a chapter where he described the phenomenon – only, however, starting with the 4th edition of the book (1879, p. 159) – and by several newspapers and magazines beginning from the late 1870s, including a piece on ‘Cycles of trade’, explaining that ‘trades cycles fall about once in eleven years, corresponding to the time of Jupiter’s revolution in his orbit, and the reappearance of the spots on the sun’ – with explicit reference to Jevons (Anonymous, 1884). In a more academic setting, it figures in the title of an article in the Quarterly Journal of Economics (Selden, 1902), and especially as the title of Lavington’s The trade cycle (1922). This book established the expression as standard British terminology; soon after publication, it appeared in the titles of writings by Pigou and Hawtrey, then by Robbins, Harrod, Hicks, Robertson, Henderson, Beveridge, Kaldor, and the translation of various writings, including Hayek’s, to name only a few. Meanwhile, on the other side of the ocean, the favoured expression was ‘business cycle’. The origin is late: it seems to have been used first by Johnson, who argued parenthetically that in order to evaluate the results of a business ‘a period long enough to include a business cycle must be covered’ (1887, p. 474). A few years later The Bristol Mercury wondered ‘how can this apparently inevitable sequence of business cycles be avoided?’ (Anonymous, 1892). Vanderlip addressed the Bankers’ Association of the State of Illinois, noting that ‘We have grown used to cycles in business; to regular periods of expansion followed by years of depression. These cycles have been of varying length, but, generally speaking, a decade would measure the time from one upturn to the next’, and wondered whether the present depression would ‘be of shorter duration than in former business cycles’ (1904, p. 818). The expression quickly gained acceptance in the US following its adoption by Mitchell, first in an article for the Quarterly Journal of Economics (1909), then as the title of his 1913 book. Nowadays, it is the most widely used expression to designate economic fluctuations; some dispute, but retain for convenience, the use of the term ‘cycle’, arguing that fluctuations do not have the features of rhythmic regularity implied by this term (e.g. Romer, BUSINESS CYCLES, in →Fortune encyclopedia of economics, 1993; see below, Section 3.2.10, for further discussion). There is something ironic in the continuous use of the qualifier ‘business’, as it incorporates Mitchell’s institutionalist belief that the oscillations in prices and economic activity are intrinsically and inextricably tied to our present business organization, rather than being accidental or primarily deriving from external shocks. The compound expression ‘economic cycle’ has gained less support in English, yet it was used by writers such as Moore (in particular in the title of his 1914 and 1923 books) and J. M. Clark in the title of his accelerator article (1917). Later, it was used among others by Goodwin (1946), Åkerman (1947) and Samuelson (1991), and in articles in English summarizing the views of Aftalion (1927) and

96 Daniele Besomi Bouniatian (1928). In French, ‘cycle économique’ is an expression still in use (in the singular and in the plural), as is ‘ciclo economico’ in Italy and Spain. 3.2.9.3 ‘Konjunktur’ and ‘Conjuncture’ The German expression ‘Konjunktur’, used for ‘trade cycle’, has instead a completely different origin. It derives from the Latin verb conjungere, indicating the action of joining together. In this sense, the English word is obsolete, and even the only current meaning is not very much in use: ‘A meeting of circumstances or events; a particular state of affairs, esp. of a critical nature; a juncture, crisis’ (OED). In its original economic use in German, the word means essentially ‘state of affairs’. In itself, it does not incorporate any reference to cyclical events; on the contrary, it refers to a specific moment of time. While it was noted that the state of affairs changes continuously, the idea of a rhythmical change has to be superimposed, by means of some qualifier or additional specification, on the term indicating the circumstances at one point of time. So, on the one hand we have the expressions ‘good conjuncture’ and ‘bad conjuncture’ as generic locutions roughly equivalent to prosperity36 and depression, or to the ascending and descending phase of the cycle.37 On the other hand, to indicate the overall movement writers added specific qualifiers to that effect. Felden thus specified: ‘the succeeding change between prosperity and depression is denoted oscillation in the conjuncture’ (KONJUNKTUR UND KRISEN, in →Nicklisch’s Handwörterbuch der Betriebswirtschaft, 1927, p. 693); others compounded the term with expressions indicating oscillations, such as ‘Konjunkturschwankungen’ (conjunctural fluctuations),38 ‘Konjunkturwellen’ (conjunctural waves),39 ‘Konjunkturzyklus’ (conjuncture cycle)40 or, more generally, ‘Konjunkturbewegung’ (conjunctural movement).41 Later, the term ‘Konjunktur’ was taken to incorporate the entire wavelike movement: ‘KONJUNKTUR: Oscillations in modern economic life, caused by disturbances in the equilibrium of economic progress’ (Müller and Löffelholz, →Bank-Lexikon, 1953, p. 840); the change in the meaning is specifically recorded in the entry KONJUNKTUR for the 1988 edition of the →Bank-Lexikon: ‘The term does not refer to a specific economic situation (for example, Konjunktur = economic growth, in contrast to a crisis), but more generally to the cyclical process’ (p. 1267). In an interesting entry on CONJUNCTURE for →Seligman’s Encyclopaedia of the social sciences, Kuznets explains that the term ‘Konjunktur’ as introduced by Lassalle and adopted by Schäffle and Wagner was meant to emphasize the independence of the totality of market conditions from the actions and aspirations of the economic agents. The assertion of the dependence of business men upon conditions not of their making involved a criticism of the atomism of classical economics, for the latter ignored the organic interdependence of economic processes and maintained that all profits are earned gains. (p. 204) Later,

Naming crises 97 With the spread of the historical descriptive method of economic study and an increase in the number of monographic studies of the various aspects of conjuncture in Germany, the concept suffered a slight but significant change in meaning. The emphasis now was not on the independence of the market from the individual but on the incalculable variability of market conditions, which in the simultaneous oscillations of supply and demand presented a puzzling problem from the point of view of equilibrium economics. (ibid., p. 204) More empirically and less historically oriented was the discussion of ECONOMIC written by Konyus for the Russian →Granat Encyclopedic dictionary (1933), on which see Chapter 21, Section 21.3. The term also has equivalents in French and Italian. In →Romeuf’s Dictionnaire des sciences économiques (1956), Sauvy wrote of CONJONCTURE that ‘the term is still used with a flavour relating to its origin, medieval astrology. It was used in the 18th century [presumably in France] in the sense of “movement of business, of the economic situation” (in a non-static meaning of “situation”); then it disappeared, to return from the Russian and German languages’, where the term designates both the science and its object. The author of the entry on CONJONCTURE in →Suavet’s Dictionnaire économique et social (1962) explains that up to a few decades earlier the word was used to designate ‘a combination of circumstances’ (Larousse) while ‘Recently it has acquired a new meaning in economics: it designates on the one hand the economic situation at a given time; on the other, it designates the science studying this situation and its evolution’ (p. 103). Similarly, in Italian, Cipolletta reports that CONGIUNTURA ECONOMICA is the combination of socio-economic factors determining, at different times, a specific evolution of economic systems. But while the previous entry referred the term to ‘a given time’, here it is stressed that it does not give a picture, but a ‘movie’ which indicates shorttime tendencies (12 to 18 months) (in →Bedeschi, Enciclopedia delle scienze sociali, Vol. 2, 1991). CONJUNCTURE

3.2.9.4 Cycles in dictionaries The first dictionary entry specifically dedicated to the BUSINESS CYCLE appeared in →Munn’s Encyclopedia of banking and finance in 1924. Crises and cycles happily cohabited in most dictionaries throughout the inter-war years, while entries on crises became more and more rare after the war (see Section 3.2.8.2), when most dictionaries carried instead entries on cycles. Such entries are thus very numerous, but can be categorized in a limited number of types. A few dictionaries referred to the chronological notion of cycle, and defined it as the interval necessary for covering a whole round of events. The contribution in →Munn’s Encyclopedia of banking and finance, cited above, for instance, defined it ‘an interval which embraces alternating periods of business prosperity and depression’ (1924, p. 76). Guitton also defined the cycle as ‘a continuous period, lasting a number of years, during which certain phenomena

98 Daniele Besomi reproduce themselves in a certain order’ (CYCLES, in →Romeuf, Dictionnaire des sciences économiques, 1956, Vol. 1, p. 365). An interesting variant, the implications of which are unfortunately not pursued by its authors, conceives the cycle as ‘the time-unit for economic time’ (Portier, CYCLES ÉCONOMIQUES, in →Jessua et al., Dictionnaire des sciences économiques, 2001, p. 248) or ‘a unit of time in American history’ (B. Kte’pi, BUSINESS CYCLES, in →Wankel, Encyclopedia of business in today’s world, 2009, p. 197). A second (rather miscellaneous) type of entry relies on some specific features or causes of the cycle. During the inter-war years, some economists in Germany stressed that the cycle consists in the unbalanced relationship of supply and demand; this view relates to those who understood crises as a disturbance to equilibrium (see Section 3.2.8.3). Bülow described KONJUNKTURBEWEGUNGEN as ‘the fluctuations of the economy derived from an unsatisfactory counterbalancing of demand and supply’ (→Wörterbuch der Wirtschaft, 1936, p. 214), and Maier wrote that ‘by “Konjunktur” in the economic sense one understands the continually changing relationship between supply and demand on a market’ (KONJUNKTUR UND KONJUNKTURFORSCHUNG, in →Giese, Handwörterbuch der Arbeitswissenschaft, 1930, p. 2864). On a different line, another writer incorporated a causal relationship in the definition: ‘The instability of the economic system finds an expression in its wavelike behaviour. The ups and downs in demand for investment and consumption goods are denoted with the term Konjunkturschwankungen’ (Weber, KONJUNKTUR UND KRISE, in →Klose, Katholisches Soziallexikon, 1964, p. 553). Finally, some writers defined the cycle in terms of fluctuations in the degree of utilization of productive capacity. The first instance in a dictionary seems to be due to Besters: The term ‘Konjunktur’ indicates fluctuations of national income around the level required to maintain the full employment of the national productive capacity. If national income exceeds that level, there results a surplus of aggregate demand that leads to prosperity; if it falls below that level, there results a deficit of demand that leads to a depression. There is equilibrium, in the sense of a non-fluctuating economy, when the national income corresponds to the full employment income, that is, when there is neither excess or deficit of capacity. (WIRTSCHAFTLICHE KONJUNKTUREN, in Görres-Gesellschaft’s Staatslexikon, 1963, p. 738) The issue was taken up in the following edition (the 7th) of the same dictionary, specifying that the new growth theory understands that there is an equilibrium growth rate at which there is normal utilization of capacity, so that the cycle can be defined in terms of deviations from such level (Mälich, KONJUNKTUREN, 1987, p. 614). More recently, a short entry in →Hohlstein et al., Lexikon der Volkswirtschaft, defined KONJUNKTUR as ‘cyclical fluctuations in the degree of utilization of the overall production potential. The whole oscillation process of economic development through certain economic phases is called Konjunkturzyklus’ (2003, p. 418). The only non-German entry carrying this notion is found in Bullock

Naming crises 99 and Stallybrass’s Fontana dictionary of modern thought: TRADE OR BUSINESS consists in ‘cyclical fluctuations in the level of economic activity, where activity is defined with reference to the degree of utilization of productive resources’ (1988, p. 867). By far the most crowded group of definitions offered in specialized dictionaries are purely descriptive in character. They list the most remarkable features of the phenomenon, with some difference of emphasis, the simplest ones only referring to the alternation of good and bad times, the most complex ones adding remarks on their regularity, duration, amplitude, co-existence with other kinds of fluctuations, and so on. The archetype of such definitions was offered by Mitchell – both chronologically and in terms of explicit reference:42

CYCLE

BUSINESS CYCLES are a type of fluctuation characteristic of economic activities organized in the form of ‘business economy’ or ‘high capitalism,’ to use the German term. They have a wavelike pattern – each cycle includes a phase of revival, expansion, recession and contraction. These successive changes in activity spread more or less promptly over a large part, seldom over all, of the economic processes of a country. The cycles are recurrent, but not periodic. Their average duration varies in communities at different stages of economic development from about three to about six or seven years. (In →Seligman, Encyclopaedia of the social sciences, 1933, p. 92; see Chapter 22, Section 22.2 of this book) As Mitchell stressed, this definition was operational. It is – as Mitchell later explained – ‘a working definition that tells where to look or for what to look. It must list observable characteristics, particularly such as differentiate business cycles from other movements with which they may be confused’ (Burns and Mitchell, 1946, pp. 4–5). This definition thus responded to Mitchell’s specific epistemological approach, primarily based on induction. Not that he rejected theoretical assumptions. But upon examination of the existing, widely diverging theories of the cycle, he came to the conclusion that none of them was fully adequate or, on the contrary, demonstrably wrong (1913, pp. 19 and 579). He refused, however, to organize the investigation in terms of testing these theories; he believed such an approach would distort the inquiry, which should instead begin by observing, analysing and systematizing the phenomenon directly rather than by reference to the theories. The results of previous workers in the field, nevertheless, suggested facts to be examined and connections to be studied, so that Mitchell’s attitude brought him to a syncretistic approach towards rival theories (p. 20). Most dictionary writers who took up Mitchell’s definition or produced similar ones43 did not, of course, start off from the same epistemological stance. Yet such descriptive definitions, uncommitted as they are so far as the interpretation of the phenomenon is concerned, enable writers to satisfy the need for uncontroversial statements suitable for dictionaries, whether aimed at laypeople or at specialists. The latter, of course, would realize that such definitions do not go to the core of the problem of the nature of the cycle but only capture its appearance. The interpretative part is thus offered at a later

100 Daniele Besomi stage, often – when space permits – in the form of a survey of business cycle theories (as did also Mitchell, BUSINESS CYCLES, pp. 98–100).44 These descriptive definitions omit, in particular, to express any opinion as to the role of these fluctuations in the working of an economic system. Yet this is a problem on which economists can hardly abstain from taking a precise stand: either one believes that the economic system is in some sense self-adjusting, and accordingly maintains that fluctuations are due to frictions or miscalculations, or result from the system’s response to exogenous accidents; or, on the contrary, one does not rely on the existence of automatic self-correcting mechanisms and sees the cause of fluctuations in some destabilizing factor working within the economic system itself. These views are mutually exclusive, and cannot be recomposed in empirical ways; one can determine whether or not a model is stable, but not whether the real world is stable.45 An element of interpretation here is unavoidable, as data are consistent both with the view that fluctuations are irregular because they are entirely random, and with the view that they are accidental deviations from a systematic underlying oscillation in the system’s proper dynamics. While the descriptive definitions of the cycle largely eschew the issue, some dictionary writers took a precise stand, on one side or the other of the gulf. Among the supporters of the first view, the clearest formulation is due to Dotsey and King, who define BUSINESS CYCLES as the stochastic components of macroeconomic time series (in →Eatwell et al., The new Palgrave, 1987). Slightly more relaxed, but still within the tradition of the Real Business Cycle, are the definitions in terms of percentage deviation from the trend line, as, for instance, in the following: ‘BUSINESS CYCLE: Periodic, but irregular, fluctuations in the pattern of aggregate economic activity. Usually defined as deviations of output (real GDP) from its secular or long-term trend’ (in →Snowdon and Vane, An encyclopedia of macroeconomics, 2002, p. 64; see also Mälich’s 1987 definition cited above, and Portier, CYCLES ÉCONOMIQUES, in Dictionnaire des sciences économiques, 2001, p. 250. On the Real Business Cycle approach in dictionaries, see Chapter 27). Such definitions are incompatible with Mitchell’s on two counts. First, Mitchell’s emphasis on the cycle being a characteristic phenomenon of capitalist economies (hence his use of the qualifier ‘business’) excludes statistically similar phenomena taking place in different economic systems; but there is hardly a reason to suppose these are free of stochastic disturbances. Second, Mitchell stressed the similarity in the morphology of the successive ‘waves’, which he summarized in the succession of phases. Stochastic shocks may have any shape, and accordingly writers belonging to this tradition only distinguish the ups and downs, and explicitly neglect the turning points (Cooley, BUSINESS CYCLES, in →Kuper and Kuper, Social science encyclopedia, 2004, p. 79), thus going back to the eighteenth- and early nineteenth-century distinction of good and bad times only (see note 33). Other entries, on the contrary, particularly stress the rhythmic character of the economic process46 and emphasize that the use of the term ‘cycle’ implies the repetition of the same process in its stages, and a new beginning of the sequence at the end of the preceding one. Guitton, for instance, after having defined the cycle as the period during which certain phenomena reproduce in a certain order, specified

Naming crises 101 that the term expresses the idea of a return to the starting point, in a circle. Once the starting point is reached, it starts all over again. It thus involves the idea of repetition (CYCLES, in →Romeuf’s Dictionnaire, 1956, Vol. 1, p. 365); or Gallarotti defined BUSINESS CYCLES as ‘the systematic path that the overall economic activity of a nation takes over a certain time-period’. The systematic aspect consists not in regularity, steadiness or uniformity, but in the recurrence of phases of expansion and contraction, via a peak and a trough (in →Jones, Routledge encyclopedia of international political economy, 2001, p. 112). Some entries go further, and stress that the cycle is the form taken by the economic process in the capitalist era. Cozzi indeed opens his article with a quotation from Schumpeter’s Business cycles to this effect (1939, p. v), and specifies that this implies not only acknowledging that historically the development of capitalism has proceeded in an oscillatory way, but affirming that ‘the cyclic pattern is the very essence of the capitalistic development process, it is one of its characteristic and non-removable constitutive parts’ (CICLI ECONOMICI, in →Bedeschi, Enciclopedia delle scienze sociali, 1991, vol. 1, p. 720). Giannetti also stressed the need to push the analysis beyond the mere chronological recording of the facts, and espouses the view of the cycle as the norm of the general evolution of capitalism. He explains that it was born at the end of the nineteenth century, after the prolonged depression of 1873–1896. It captured both the delusion of the optimism of classical economists, and the delusion of the Marxist belief in crises as leading towards the breakdown of capitalism (CRISI ECONOMICHE: L’OTTOCENTO, in →Carmagnani and Vercelli, Economia e storia, 1978, Vol. 1, pp. 111–112). Whether one views the role of cycles in the working of capitalistic economies as essential or purely stochastic, everybody acknowledges that the oscillations are far from regular in their timing and amplitude. Mitchell, in the passage cited above, suggested that they are recurrent rather than periodic;47 Guitton pointed out that while there are physical cycles that are strictly periodical, economic ones are almost periodical. Strictly speaking, then, one should not speak of ‘cycles’; yet the term dominates in English, while in French the more general word ‘fluctuation’ is preferred (Guitton’s already cited 1956 entry is nevertheless titled CYCLES). Birou, after defining cycles in general as ‘evolution through periodical repetition’, stressed that, as opposed to the fairly periodic natue of past crises, ‘nowadays fluctuations much less regular than before are observed’ (CYCLES ÉCONOMIQUES, in →Birou, Vocabulaire pratique des sciences sociales, 1966, p. 68). Brandis, in an entry aptly titled BUSINESS CYCLES AND BUSINESS FLUCTUATIONS, pointed out that ‘Cycle implies significant regularity of the movement but neither periodicity with respect to calendar time nor equal amplitude of successive movements. Fluctuation does not imply periodicity, equal amplitude, or regularity in movement’ (in →Gould and Kolb, Dictionary of the social sciences, 1964, p. 62). Medio explained that ‘the term “cycle” suggests, beside the alternation of high and low, the idea of regularity. In physics, one distinguishes between oscillations (cycles) and fluctuations, the former implying regularity, the latter not. Yet economic cycles do not require absolute regularity, as they depend on many mechanisms and are subject to several erratic shocks’ (CICLO, in →Lunghini, Dizionario di economia politica, Vol. 10, 1985, p. 11).

102 Daniele Besomi

3.2.10 Fluctuations According to the Oxford English dictionary, although the noun ‘fluctuation’ and the corresponding verb originate from the Latin fluctus, ‘wave’, fluctuation is only rarely used in the sense of ‘wavelike motion’ and normally means ‘2. The action or condition of passing more or less rapidly and suddenly from one state to another; an instance of this; repeated variation, vicissitude. In pl. ‘ups and downs’. b. An alternate rise and fall in amount or degree, price or value, temperature, etc.’ The verb indicates ‘2. fig. (Now chiefly without allusion to the literal sense.) a. Of things, conditions, etc.: To vary irregularly, undergo alternating changes in level, position, form, constituent elements, etc.: to be unstable or unsettled’. The term featured with reference to economic data in several writings beginning from the third decade of the eighteenth century. An anonymous author wrote of silver as ‘continually fluctuating in its Price according to the Quantity of Demand of it’, like any other goods (1728, p. 18); another writer discussed those who had fallen into poverty ‘owing to the fluctuation of Trade from one Species to another, and from one Place to another’ (Anonymous 1, 1729, p. 16); and Madden associated fluctuations and stagnation of trade when he maintained that the want of ‘Coin Money’ ‘produces many Grievances here, and stagnates our Affairs and Business to a great Degree; and is the great source that occasions the Perpetual Fluctuation of the Value of the little Money we have’ (1738, p. 180). The term was used in the title of a pamphlet by Lawn published in 1800, The corn trade investigated, and the shocking system exposed which principally causes the amazing fluctuations in the prices of corn and flour; and a proposition . . . which will effectually remedy the alarming fluctuating price of bread corn. Thereafter it featured with some regularity in the title of writings. Occurrences were intermittent but not infrequent and evenly spread throughout the nineteenth century; during the inter-war years the frequency of occurrence oscillated around 10 per cent of the titles (data from my own database); between 1945 and 1974 they accounted for 30–40 per cent of the titles recorded in JSTOR; in the two following decades the frequency recorded in Econlit titles diminished to around 20 per cent, to fall further to about 15 per cent between 1998 and 2008 (see Figures 3.1–3.5 in the Appendix).48 The word ‘fluctuation’ is rather flexible in meaning and allows for a wide range of usages. The early occurrences seem to use the term as more or less equivalent to ‘non-unidirectional change’ and as opposite to ‘stationary’ or ‘stable’ (the latter in a non-technical sense, of course), as in the following example: Wilson argued that if gold ‘can be shewn to have remained itself stationary in value, it will, in consequence, for the time, have been a perfect criterion by which to measure the fluctuations of other things. Though gold should really be the least fluctuating of articles, yet if it is not, absolutely, in strictness, stationary, no act of Parliament can make its fixture rank otherwise than as a relative and temporary assumption of our own’ (1811, p. 12). This is how the term was used in most dictionaries of the nineteenth century. McCulloch, for instance, in the entry CORN LAWS AND CORN TRADE in his own →Dictionary of . . . commerce and commercial navigation wrote as follows: ‘A free corn trade is the only system that can give them [agriculturalists] that security

Naming crises 103 against fluctuations that is so indispensable’ (412, 1834). In the unsigned entry on CRISE COMMERCIALE ET INDUSTRIELLE in →Monbrion’s Dictionnaire universel du commerce, de la banque, et des manufactures it is explained that ‘it is obvious that the movement of commerce and industry of a country cannot be uniform, and that some fluctuations at shorter or longer intervals are almost inevitable in consequence of causes difficult to foresee’ (1838, p. 637). The entry on MONEY in →[Long]’s Political dictionary clarifies the opposition with constant values on the one hand, and permanent alterations on the other: gold and silver are liable to fluctuations in their value by reason of variations in the demand for them in particular countries. Though fashioned into coins, they retain all their properties as articles of commerce: they are readily fused into other forms, and rendered available for all purposes of use and ornament; and the occasions of commerce often withdraw them from one country and attract them elsewhere. From these causes their value, instead of being always the same, is liable to permanent alterations, and also to occasional fluctuation. (1846, p. 349) This usage of the term is rather loose and neutral, and so far free of an ‘ideological’ commitment to affirm or reject a thesis, as it only involves alternating ups and downs. The relationship of ‘fluctuations’ and crises during the nineteenth century was thus rather varied. Fluctuations were sometimes seen as the cause or as the consequence of crises or panics, or simply accompanying them, or sometimes (in the case of ample fluctuations) as being the essence of crises, or on the contrary they were denied to constitute panics. Perhaps the most common position was that fluctuations are one of the causes of distress – in particular fluctuations in the value of money. Huskisson, for instance, noted: ‘Nor is the distress occasioned by a fluctuating value of the currency limited to the proprietors of land. Much of the commercial distress, which at frequent intervals has prevailed in this country since the period of the French revolution, must be ascribed to the same cause’ ([Huskisson], 1830, p. 144); similarly, the chairman of the Bank of Liverpool stated that ‘rapid change and fluctuations are always productive of distress somewhere’ (Brown, 1834, p. 289); and W. Anderson maintained that ‘every great fluctuation in the distribution of property is necessarily productive of great calamity, and nothing has evidently a greater tendency to produce such fluctuations, than alterations in the amount of the currency’ (1821, pp. 48–49). ‘Fluctuations’ were rarely conceived as the prime mover: they normally reflected some other phenomenon, and contributed to the generation of crises by transmitting further its consequences. Speculation and over-trading, in particular, were often indicated as the culprit: the ‘excess of speculation . . . produces violent fluctuations, bringing to crises and disaster’ (Bartholony, 1839, p. 91). Macleod, in the entry on CREDIT in his own →Dictionary of political economy, expounds in detail the causation chain: In times of great speculation and great fluctuations of prices, there is an exceeding danger of over production by means of Credit, especially by that

104 Daniele Besomi abuse of it called Accommodation Paper, which we have described. A new channel of trade is opened, perhaps, and the first to take advantage of it make great profits. Multitudes of others, hearing of these great profits, rush in, all dealing on credit. The market is overstocked, and prices tumble down, and the credit created to carry on these operations cannot be redeemed. Not only are the speculators in many cases ruined, but also frequently the banks which created credit by discounting these bills. (1863, p. 604) With regard to over-trading, the argument is expounded in the following passage from the evidence of John Irving before the Parliamentary Committee inquiring on the resumption of convertibility: Does not over-trading tend to produce corresponding stagnation in trade? – I think over-trading does, and the remedy is a fall of price. Does not such over-trading and corresponding stagnation tend to produce fluctuation in prices? – There can be no doubt of that. Does not frequent fluctuation in prices tend to produce distress in the commercial, manufacturing, agricultural, and labouring classes of the community? – I think a fluctuation of prices certainly does create distress, and consequently that level and equal prices would be more desirable. (House of Commons, 1819, p. 144) Some writers insisted that panics are phenomena intrinsically different from the normal fluctuations of trade. In James Mill’s entry on BANKING in the Supplement to the 4th, 5th and 6th editions of the →Encyclopædia Britannica, it is stated that The drain of specie to which a great national bank may be subjected from the prevalence of a general alarm, is in all respects different from that which may be produced by a great foreign expenditure, or by the fluctuations of trade. The impulse given by panic is, in its very nature, sudden and instantaneous. It generally terminates also, and that speedily, in some violent crisis. (1824, p. 86) Other writers, on the contrary, interpreted crises and panics as the summation of fluctuations of different kinds. Jevons, for instance, is cited as follows in the entry on CRISES (COMMERCIAL AND MONETARY) in →Bliss’s Encyclopedia of social reform: Jevons explained crises in part by bad crops, and these by sun-spot periods. He says, in a communication to the British Association (1862): ‘There is a periodic tendency to commercial distress and difficulty during these months (October and November). It is when great irregular fluctuations aggravate this distress, as in the years 1836–39, 1847, 1857, that disastrous breaches of commercial credit occur.’ (1897, p. 431)

Naming crises 105 Another writer maintained that crises are nothing but very bad and concentrated fluctuations: To some such system we must come before we can hope for the permanent prevention of such crises as the present. The unavoidable fluctuations of commerce, which would break harmlessly upon a wide surface, tear down every thing in their course when they come to be concentrated, as they are at present, upon a single point, of strength and stability wholly unequal to resist them! These fluctuations, on the present extended scale of our transactions, actually exceed the narrow limits of the Bank’s solvency, or, which is practically the same thing, of the public belief in it. (Knowles, 1837, p. 77) The latter passage provides an early instance of an interpretation that has often been contrasted with the view that crises first, and cycles later, are a specific phenomenon that should be inquired into for its own merits, and as such deserve a proper name. By 1837 a number of writers had already devoted specific inquiries to the occurrence and the recurrence of crises,49 but this approach was still adopted by a small minority of writers, although it was gaining ground. Sceptical comments, however, were formulated as soon as the proposition that the conditions for crises are rooted in the previous prosperity was expounded. One of the lines of counterargument that recur throughout the entire history of crises and cycle theories is based precisely on Knowles’s argument that the ‘normal’ fluctuations accompanying trade, and actually constituting its essence, occasionally cumulate into major and sudden disruptions of trade and industry. Knowles was only contributing his own interpretation and was not confrontational with the ‘crisis’ theory. Towards the end of the twentieth century, however, this argument was couched into an analytically more refined form, and the term ‘fluctuation’ – with emphasis on its feature of irregularity – was used in direct contraposition to ‘cycle’, not only to stress the lack of regularity of economic fluctuations, but also to reject the very idea that capitalist economies are subject to a cyclical dynamics. The quasi-regularity of the cycle, then, is disputed not so much as an empirical feature, but rather for its implication that the phenomenon is subject to some more or less strict economic law implying the recurrence of bad times. Some recent dictionary entries accordingly place the terminological choice between ‘cycles’ and ‘fluctuations’ right on the line separating two incongruent views on the nature of capitalistic dynamics, one which sees a rhythmical course of economic development admitting the possibility of the occurrence of deep depressions and crises, as the product of the lack of a mechanism of adjustment capable of bringing the system back to equilibrium once it is disturbed; and the other believing instead in the existence of powerful equilibrating forces, interpreting fluctuations precisely as the result of the system’s response to external shocks. The following example, extracted from C. Romer’s entry on BUSINESS CYCLES in →Henderson’s Concise encyclopedia of economics, makes this clear:

106 Daniele Besomi In many ways, the term ‘business cycle’ is misleading. ‘Cycle’ seems to imply that there is some regularity in the timing and duration of upswings and downswings in economic activity. Most economists, however, do not think there is. [. . .] [E]xpansions and recessions occur at irregular intervals and last for varying lengths of time. For example, there were three recessions between 1973 and 1982, but, then the 1982 trough was followed by eight years of uninterrupted expansion. The 1980 recession lasted just six months, while the 1981 recession lasted sixteen months. For describing the swings in economic activity, therefore, many modern economists prefer the term ‘short-run economic fluctuations’ to ‘business cycle.’ [. . .] Just as there is no regularity in the timing of business cycles, there is no reason why cycles have to occur at all. The prevailing view among economists is that there is a level of economic activity, often referred to as full employment, at which the economy could stay forever. (2007) (See also the same entry in the previous edition, 1993, where the expression ‘economic fluctuations’ was used in place of ‘short-run economic fluctuations’.) On the other side of the gulf we have Mullineux’s entry on BUSINESS CYCLES for →Deane and Kuper’s Lexikon of economics: There has been some debate about whether business cycles are systematic economic fluctuations, or whether they are instead purely random fluctuations in economic activity. It is certainly true that business cycles are not regular, in the sense of a sine wave with constant period and amplitude. But the weight of evidence, largely due to the accumulated studies produced through the National Bureau of Economic Research, indicates that business cycles are sufficiently uniform to warrant serious study. (1988, p. 31) Before the advent of the theories of business fluctuations associated with rational expectations, the word ‘fluctuations’ had been used for decades as more or less equivalent to ‘cycles’,50 as witnessed by Burns and Mitchell’s definition of business cycle as ‘a type of fluctuation found in the aggregate economic activity of nations’ (Burns and Mitchell, 1946; a similar passage is cited in full in Section 3.2.9.4), and by the use of the term ‘fluctuation’ in the title of a number of landmarks in the literature on cycles written throughout the twentieth century, such as Hawtrey’s Good and bad trade. An inquiry into the causes of trade fluctuations (1913), Robertson’s Study of industrial fluctuations (1915), Pigou’s Industrial fluctuations (1927; the expressions ‘wave movements’ and ‘cyclical fluctuations’ are treated as equivalent to ‘industrial fluctuations’: pp. 3–4), Kalecki’s Essays in the theory of economic fluctuations (1939), and Tinbergen and Polak’s The dynamics of business cycles. A study in economic fluctuations (1950). Accordingly, most of the recent dictionary entries are content with associating the usage of ‘cycles’ and ‘fluctuations’ with the more or less regular character of the alternation between

Naming crises 107 prosperity and depression. There are several examples besides those already cited in the last paragraph of Section 3.2.9.4. French dictionaries often stress that ‘cycles’ implies relatively constant periodicity and amplitude, which is not the case for ‘fluctuations’ (Géhanne, CRISES ET FLUCTUATIONS ÉCONOMIQUES, in his own →Dictionnaire thématique des sciences économiques et sociales, 1995, Vol. 2, p. 84; FLUCTUATION, in →Lakehal, Dictionnaire d’économie contemporaine, 2001; Portier, CYCLES ÉCONOMIQUES, in →Jessua et al., Dictionnaire des sciences économiques, 2001, p. 248; and CRISES ÉCONOMIQUES ET SOCIALES, in →Bremond and Gélédan, Dictionnaire économique et social, 1992, p. 109. Similarly, Guitton, in the entry on BUSINESS CYCLE for the Encyclopædia Britannica, online edition, 6 May 2010). Among entries in English, we find similar observations to this effect in the →Fontana dictionary of modern thought (‘TRADE OR BUSINESS CYCLE. . . . The term applied to fluctuations in growth that have some uniformity in the cyclical pattern, as distinct from more random changes in the economy’: [Matthews] 1988, p. 867) and in →O’Hara’s Encyclopedia of political economy (‘Business cycles are recurrent, relatively periodic fluctuations in the level of economic activity. The word “cycle” implies persistent patterns, but because the periodicity or timing of oscillations in the economy is often irregular, many economists prefer the term “economic fluctuations.” The term “trade cycle” has also been used. For our purposes, the three terms are synonyms’: C. J. Niggle, BUSINESS CYCLE THEORIES, 1999, p. 50). Other dictionaries do not even inquire on any difference in meaning, and use ‘fluctuations’ in a way roughly interchangeable with ‘cycle’, as in the following examples: ‘The limit cycle can thus be thought of as fluctuation around a steadystate growth path’ (E. A. Thompson, GOODWIN, RICHARD MURPHEY (1913–), in →Glasner’s Business cycles and depressions: an encyclopedia, 1997). In Dimand’s entry on MACROECONOMICS, ORIGINS AND HISTORY OF for the 2nd edition of →The new Palgrave dictionary of economics (2008), the term ‘fluctuations’ is used (but not defined) as equivalent to ‘cycles’. And in P. Skott’s entry on BUSINESS CYCLES in King’s →Elgar companion to post Keynesian economics (2003), the term is used as follows: The time path of aggregate output and its main components exhibits significant fluctuations around trend values, as do other important variables, including employment, productivity, prices, wages, interest rates and stock prices. These fluctuations are recurrent but not regular. The pattern of comovements between the different variables, the amplitudes of the fluctuations and the length of the cycle vary over time. In fact, the delineation of cycle from trend raises many problems, and cycles of different length may coexist in the data; short-run fluctuations may take place with reference to a long-run cycle, rather than around a constant exponential trend. The term ‘business cycles’ usually refers to relatively short cycles. (2003, p. 38)

108 Daniele Besomi

3.2.11 Recession The term ‘recession’ originally applied to medical conditions: ‘2. a. Chiefly Med. The relief or remission of (a disease, symptoms, etc.); the diminution or decline of (a faculty, function, etc.). Also: an instance of this. Later occas. in extended use’, with the first instances dating from the early seventeenth century (Oxford English dictionary). The meanings in which we are interested originated much later: ‘5. a. orig. and chiefly Econ. A reduction or decrease in value or amount. b. Econ. A period of economic decline during which trade and industrial activity are reduced. According to one commonly used economic indicator, identified by a fall in a country’s gross domestic product for two consecutive quarters’. To these connotations identified by the OED, we should add a third one: ‘recession’ as the upper turning point of the business cycle. Chronologically, the earliest occurrences of the term are in the sense 5.a. of the OED. Several instances are found from 1826 throughout the entire nineteenth century, usually accompanied by a qualification of the magnitude being reduced in value – e.g. ‘recession in value’, ‘in price(s)’, or ‘in rates’. The earliest instances seem to be these: ‘Veal was dull of sale at a recession of 4d. to 6d. per stone from Friday’s quotations’ (Anonymous 1 (Bristol Mercury), 1826); and ‘Prime small beasts, owing to their increase in numbers, . . . sold heavily at a recession of about 4d. per stone from Friday’s quotation’ (Anonymous 2 (Morning Chronicle), 1826); they were followed by other occurrences in the Bristol Mercury, also taken up by other papers. Later examples further illustrate this usage of the word: ‘. . . we endeavoured to prepare the mind of the Era readers, on the first recession of the market from the price to which the stock had been forced’ (Anonymous 2 (The Era), 1843); ‘Churnet valley Railway – A great sensation has been created by the recession in the prices of these shares . . .’ (Anonymous (Liverpool Mercury), 1845). The term was used in this sense also by J. S. Mill: ‘In addition, therefore, to the original diminution of one-tenth in the cost of production, there will be a further diminution, corresponding with the recession of the “margin” of agriculture to land of greater fertility. There will thus be a twofold fall of price’ (1848, book 4.III.20). With the beginning of the new century, rather than referring to a single price, ‘recession’ became associated with the condition of the entire economy. The earliest example quoted by the OED is dated 1905: ‘The year of 1903 was one of recession in the business world. The bottom was knocked out of the speculative craze which had seized the country’ (from the Iowa Recorder, 18 January). Next we find it used by the president of the Commercial National Bank in Chicago: ‘no recession in business was observable up to the date of the panic’ (Roberts, 1908, p. 345). Its usage by Irving Fisher may have helped to make it acceptable to the profession: ‘in spite of the apparently impending recession, we are still in a period of incubation for a future crisis’ (1911, p. 304). Mitchell also used it in this sense in 1916: ‘To the depressing influence of these non-business factors there was added the recession of business activity in Europe’ (p. 127). To Mitchell we owe the elevation of ‘recession’ to a phase of the cycle, in substitution of the old ‘crisis’. As we have seen in Section 3.2.8.5, in the first two

Naming crises 109 decades of the twentieth century ‘crisis’ had turned from the central concept in the theories of crises dominating in the nineteenth century to a phase of the cycle – the upper turning point, marking the transition from prosperity to depression. Mitchell was still not satisfied, as the notion of ‘crisis’ carries the implication that there is some ‘organic disturbance’ of business life, and possibly also some grave financial strain or panic. He thus found the term inappropriate to describe the downturns, as sometimes these are rather mild, and accordingly suggested that it be substituted in the naming of the phases of the cycle by ‘recession’ (‘business cycles are treated as having four phases – depression, revival, prosperity and recession’), and that the word ‘crisis’ as well as ‘panic’ be used to indicate the degree of intensity (1926, p. 37; 1927, p. 381). Mitchell’s suggestion was immediately taken up by Persons (1926, p. 94), who a few years later specified that ‘“crisis” and “depression” are descriptive of a state of business, while we need terms descriptive of the direction of business: “business expansion” and “business recession”’ (as reported by King, 1930, p. 208). The first dictionary entry to take up the term, with explicit reference to Mitchell and Persons, was an Italian one: ‘In the United States from 1790 to date cycles have an average length of 40 months. The most recent inductive inquiries on economic dynamics give much emphasis to the cycles we can call “minor”, which culminate not in major and very apparent crises but in a slowdown of economic activity. This is denominated “recession” by English-American writers’ (Bachi, CRISI ECONOMICHE, in →Enciclopedia italiana, 1931, p. 917). Mitchell himself, of course, used the term in this sense in the entry for →Seligman’s Encyclopedia of the social sciences: ‘BUSINESS CYCLES [. . .] have a wavelike pattern – each cycle includes a phase of revival, expansion, recession and contraction’ (p. 92; note the substitution of ‘depression’ by ‘contraction’ and of ‘prosperity’ by ‘expansion’, tacitly following Persons’s suggestion). Further terminological specifications along this line are given by Burns, in the entry on BUSINESS CYCLES. I. GENERAL for →Sills’s International encyclopedia of the social sciences: The terms used by economists to describe the phases of business cycles are rich in diversity but are gradually becoming standardized. The ‘peak’ of a business cycle marks the end of ‘expansion’ and the beginning of ‘contraction.’ The ‘trough’ marks the end of contraction and the beginning of expansion. Frequently, ‘prosperity’ is used interchangeably with ‘expansion,’ although it is better practice to restrict terms such as ‘prosperity’ or ‘boom’ to the higher reaches of particular expansions when full employment is closely approximated. The term ‘recession’ does double duty. It is widely used to refer to the transition from expansion to contraction, just as ‘recovery’ or ‘revival’ is used to refer to the transition from contraction to expansion. Contractions of varying intensity are also commonly distinguished by the terms ‘recession’ and ‘depression’; the former refers to a moderate contraction of aggregate activity that lasts in the neighborhood of a year, while the latter refers to a severe contraction or to one which, while moderate, lasts distinctly longer than a year. The term ‘crisis’ originally was used to denote the financial disturbances

110 Daniele Besomi that frequently occurred during the transition from expansion to contraction, but later it came to be applied to any transition from expansion to contraction. Nowadays, the term ‘crisis’ is usually reserved for a violent disruption of financial markets without regard to the stage of the business cycle in which such a disturbance occurs. (1968, p. 229) As Mitchell himself had noted (1926, pp. 34–37; 1927, pp. 378–381), this terminological shift was not devoid of consequences as to the establishment of a chronology of cycles, and ultimately as to the notion of ‘cycle’ itself. The business rhythm is cadenced not by major and significant crises, nor even by severe depressions,51 but by any downturn bringing a decrease of significant duration.52 While writers of the early twentieth century still emphasized the violence of crises, and therefore only discussed those events having that feature (Lescure including less than Aftalion, Bouniatian less than Lescure, and Tugan-Baranovsky restricting the field even more), in the hand of Mitchell cycles thus became more frequent and, on average, less severe. Crises and depressions returned to be exceptions to the norm, as they were in the view of most commentators of the nineteenth century, after having been, in the hands of the pioneers of business cycle research, an essential component of the ‘normal’ business cycle.53 After Mitchell, the difference between one of the frequent setbacks and an extraordinary crisis is only one of degree, while it used to be a difference between a minor adjustment and the true rhythmical nature of the explosion of the instability of capitalistic productive relationships. Mitchell’s notion of ‘recession’ is taken up, without further discussion on the meaning of the term, in most dictionary entries on business cycles. There seem to be only two dedicated entries. The first, brief one is in →Carson’s Gale encyclopedia of U.S. economic history. RECESSION is defined as a downturn in the business cycle that occurs when the real gross national product (GNP) – the total output of goods and services produced by the U.S. population – declines for two consecutive quarters, or six months. Recessions are usually characterized by a general decrease in output, income, employment, and trade lasting from six months to a year. A more severe and long-lasting economic crisis is known as a depression. (2000, p. 866) The second entry, by T. Mayer for the second edition of the →International encyclopedia of the social sciences, is far more precise. The definition runs as follows: A recession is the declining phase of a business cycle, when seasonally adjusted output falls significantly and unemployment increases, though by no means in every industry. A recession should not be confused with periods of low output and high unemployment. Early in a recession output, though falling, is still above its trend value. Similarly, shortly after the recession ends, output

Naming crises 111 is still below its prerecession level. Recessions should not be confused with depressions. While economic historians sometimes use this term to refer to conditions in the early 1890s, most American economists use it only in connection with the Great Depression, which started in August 1929 and encompassed one catastrophic recession until March 1933. This was followed by a recovery that was succeeded by another sharp recession from May 1937 to June 1938. The idea that recessions are characterized by two consecutive quarters of GDP decrease is thought to be naive; two alternative procedures are better. One is based on the following definition of ‘recession’ produced by the National Bureau of Economic Research (NBER): ‘a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale–retail sales’; it thus rests on different series of data, monthly GDP being the most important. This method, however, has been criticized for containing subjective or arbitrary elements, and the determination of turning points can only be done with some delay. Other procedures (not dealt with in detail) have thus been developed, based on the growth rate of GDP in successive quarters, that overcome these limits (Mayer, RECESSION, 2008, pp. 103–105).

3.3 CONCLUDING NOTE ON THE CHOICE OF TERMS The decision to use one term instead of another is never free of consequences. Some of the implications of the choice of words are purely technical. Yet most of them also carry a vision of the working of the economic system and, as such, the terminology becomes an ideological battleground. In a world where crises are seen as disconnected accidents temporarily and unsystematically disturbing an otherwise serenely fluid state of affairs, the phenomenon can either be ignored (thus dismissed as irrelevant) or discussed under the heading ‘crisis’ in the singular. This view was prevalent in the first half of the nineteenth century. Dictionaries accordingly opted for titling their entries ‘crisis’, when they carried one. When the recurring character of crises was recognized, in view of their periodical returning and thanks to a conceptual switch, making it possible to understand their role in the working of the economic system, the use of the word in the singular was no longer appropriate to account for the phenomenon. Dictionaries thus switched, as they did in the second half of the nineteenth century and up to the interwar years, to entries titled ‘crises’ in the plural. Early in the nineteenth century cycles supplanted crises not only by subsuming them as a phase of the overall movement, but also by substituting the view of a movement periodically broken by a violent discontinuity with an understanding of a rhythmical and much smoother form of development. Dictionaries thus started carrying entries on ‘cycles’ (prefixed by the adjective ‘business’, ‘trade’ or ‘economic’), fostering the tranquillizing view that after ‘bad times’ better times would

112 Daniele Besomi mechanically follow. The soothing effect of the transition was again completed on terminological grounds, with the substitution of ‘crises’ with the much tamer ‘recessions’. The dissent from such a view once more relied on terminological change, eventually recorded in dictionaries. On one side, those who reject the idea of an in-built mechanism periodically bringing downturns and revive instead the idea that these are caused by disconnected external events to which the economic system reacts, prefer to speak of ‘fluctuations’, a term that expurgates the oscillations from the inevitability implicit in the term ‘cycle’. On the other side, those who reject the idea that the system operates smoothly and emphasize instead the violent and sudden character of the downturn – thus disputing another implication of the mechanistic character of ‘cycles’ – resurrect instead the term ‘crisis’, which indeed re-emerges in the literature, both popular and academic, on the occasion of a major disruption of economic life. Dictionaries are the linguistic repository and propagators of the tradition of thought to which they belong and which they represent, and their editors are therefore very careful in the choice of their word-list, as they are in the choice of their contributors. Dictionaries are, therefore, a privileged place for logomachy, and crises and cycles are no exception – indeed, they are probably one of the main loci of doctrinal clashes. It is precisely in this respect that the following chapters of this book will look not only at the contents of the entries on crises and cycles, but also at the general purpose and choices of dictionaries themselves.

APPENDIX: DIAGRAMS DEPICTING THE FREQUENCY OF OCCURRENCES OF TERMS RELATING TO CRISES AND RELATED PHENOMENA

Naming crises 113

1859 1857 1855 1853 1851 1849 1847 1845 1843 1841 1839 1837 1835 1833 1831 1829 1828 1825 1823 1821 1819 1817 1815 0

5

10

15

20

Depression

Crisis

Fluctuation

Other

25

30

35

Distress

40

45

Panic

50

55

60

Cycle

Figure 3.1 Frequency of occurrences of specific terms in titles of writings on crises and cycles, taken from Besomi’s database, 1815–1860 (see Section 3.1 for details). ‘Other’ consists of ‘convulsion’, ‘revulsion’, ‘stagnation’, ‘embarrassment’, ‘pressure’, ‘bubble’.

114 Daniele Besomi 1905 1903 1901 1899 1897 1895 1893 1891 1889 1887 1885 1883 1881 1879 1877 1875 1873 1871 1869 1867 1865 1863 1861 0

10

20

Depression

Crisis

Fluctuation

Other

30 Distress

40 Panic

50 Cycle

Figure 3.2 Frequency of occurrences of specific terms in titles of writings on crises and cycles, taken from Besomi’s database, 1861–1905 (see Section 3.1 for details). ‘Other’ consists of ‘convulsion’, ‘revulsion’, ‘stagnation’, ‘embarrassment’, ‘pressure’, ‘bubble’.

Naming crises 115

1944 1942 1940 1938 1944 1934 1932 1930 1928 1926 1924 1922 1920 1918 1916 1914 1912 1910 1908 1906 0

10

20

30

40

Depression

Crisis

Fluctuation

Other

50

60

Distress

70

80 Panic

90

100

110

Cycle

Figure 3.3 Frequency of occurrences of specific terms in titles of writings on crises and cycles, taken from Besomi’s database, 1906–1945 (see Section 3.1 for details). ‘Other’ consists of ‘convulsion’, ‘revulsion’, ‘stagnation’, ‘embarrassment’, ‘pressure’, ‘bubble’.

116 Daniele Besomi

1974 1972 1970 1968 1966 1964 1962 1960 1958 1956 1954 1952 1950 1948 1946 1944 1942 1940 1938 1936 1934 1932 1930 1928 0

10

20

30

40

50

60

70

80

Business, trade or economic cycle Depression and recession Crisis (economic, financial, monetary, currency) and panics Fluctuations

Figure 3.4 Frequency of occurrences of specific terms in titles of writing on crises and cycles, taken from the JSTOR database, 1928–1975 (see Section 3.1 for details).

Naming crises 117 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 1975 1974 1973 1972 1971 1970 1969 0

100

200

300

400

500

600

700

800

Business, trade or economic cycle Depression and recession Crisis (economic, financial, monetary, currency) and panics Fluctuations Bubble

Figure 3.5 Frequency of occurrences of specific terms in titles of writings on crises and cycles, taken from the Econlit database, 1969–2009 (see Section 3.1 for details).

118 Daniele Besomi NOTES 1 For instance, the term ‘depression’ appears with unusually high frequency in 1937–1939. This finding is due to my work in progress on Haberler’s Prosperity and depression (1937), which induced me to list in the database all the reviews and commentaries I have been able to find. 2 Occasionally, some titles are counted more than once, when they include more than one of the terms under examination. 3 Reviews do naturally repeat the title of the reviewed book; its multiple occurrences are in a way a reflection of its perceived importance. 4 These diagrams are not meant to substitute for serious statistical analysis. Their only purpose is to illustrate when the terms examined in this chapter made their appearance in such a prominent position as the title of published writings, and the fluctuations of such appearances over time. Different kinds of writings are grouped together, notwithstanding the obvious differences in their relevance and influence, the discussion of which would require an analysis of the diffusion and reception of each different contribution. 5 It is expedient, however, to discuss ‘fluctuations’ after ‘cycle’, in spite of the much longer history of the former. 6 The expression ‘glut debate’ is of much later invention. JSTOR first records it in a 1946 article by Hla Myint (p. 126); the second appearance is in a review of a book by this author (Smith, 1949). 7 The earliest instance of the reference to the ‘stagnation of blood’ cited in the OED is dated 1707. The reference to prosperity as ‘health’, also a frequent medical metaphor, is illustrative of the difficulties in making precise the degree at which trade is dead. In most medical dictionaries up to the middle of the nineteenth century, the definitions of ‘health’ and ‘disease’ referred to each other in a circular way. For a discussion, see Besomi, 2011, Section 4.1. 8 In the →Spanish translation of the dictionary, the term is rendered as ‘estagnacion’ (1827, p. 250). 9 The legend of the echo is also reported in a discussion of the panics of 1857 and 1866 (Anonymous, 1873, p. 938). 10 Without using the term ‘panic’, Juglar had already denied in 1863 that ‘monetary crises’ are, in most cases, independent phenomena, but are nothing but one of the possible manifestations of commercial crises (Crises commerciales, in →Block’s Dictionnaire général de la politique). 11 Nicholson’s entry BUBBLES (HISTORY OF) in →Palgrave’s Dictionary of political economy also states that ‘the term bubble has been commonly applied since the 17th century’ without, however, supplying any examples (1894, p. 182). 12 ‘An Act to Restrain the Extravagant and Unwarrantable Practice of Raising Money by Voluntary Subscription for Carrying on Projects Dangerous to the Trade and Subjects of the Kingdom’. The name ‘Bubble Act’ seems to originate in the second half of the eighteenth century; the earliest occurrence may be due to Richard Price, who wrote of the ‘act against Bubbles’ (1772). 13 An accompanying verb for bubbles is, indeed, ‘to inflate’. 14 A number of dictionary entries discuss in some detail the debate between ‘believers’ and ‘sceptics’, from both the theoretical and the empirical viewpoint – e.g. Spotton Visano, SPECULATION, in →Darity’s International encyclopedia of the social sciences (2008); Brunnermeier, BUBBLES, in →The new Palgrave, 2008; and Leightner, BUBBLES, in →Darity’s International encyclopedia of the social sciences (2008). 15 Although this occurrence may suggest that ‘depression’ is borrowed from meteorology, this does not seem to be the case, as the first instance of such usage listed by the OED dates from 1881.

Naming crises 119 16 Frewen, writing in 1885, maintained that the current depression responded to the same ‘laws of Nature’ as the regular periodic crises of the previous two centuries. ‘The present depression is only peculiar because of its unusual accessories: because it is accompanied by a very low range of prices and an abundance of the necessaries of life; because of its extreme protraction; and because it has antedated by several years the normal period of its return’ (p. 593). Jamieson wrote that ‘in two very notable respects the present depression is distinguishable from most of those similarly unhappy periods which have preceded it; the depression which commenced in 1875 has been more protracted, and it has been more universal, than any of its predecessors’ (1885, pp. 3–4). Similarly, Wallace (the biologist, who submitted a paper for the Pears prize for the best essay on the depression of trade) noted that the ‘present Depression of Trade is remarkable, not so much for its intensity or for its extent in both of which respects it has been equalled or surpassed on previous occasions, but for its persistence during the long period of eleven years . . . its remarkable persistence has been commented on by politicians and public writers. Usually a period of depression is quickly followed by one of comparative prosperity. Such a reaction has been again and again predicted in this case; but up to the present time there are no satisfactory indications that the evil days are passing away’ (1885, pp. 1–2). Giffen also found that the depression he was witnessing was not substantially different from previous occurrences, and actually was fairly mild on most standards except for an abnormal fall in prices, which he saw as the only cause of the deep gloom of which the country suffered (1885, pp. 800–807). 17 The passage is cited in full in Section 3.2.11, where it is placed in the context of Mitchell’s redefinition of terms leading to the elimination of ‘crises’ and ‘depressions’ from business cycle terminology to incorporate milder downturns, and reduce them as an indication of the degree of intensity of the phenomenon. 18 1911, p. 284; references are to Guyot, 1909 and Taylor, 1904. Much earlier instances in various languages are an anonymous reporter of a French debate on ‘economic crises’, 1861, p. 593 and, among others, Ferrara’s ‘delle crisi economiche’, 1864; Pierna y Hurtado’s entry on CRÍSIS ECONÓMICAS in the →Vocabulario de la economía, 1877; Öchelhäuser, Die wirtschaftliche Krisis, 1876; Della Bona, Delle crisi economiche, 1888, followed by several other Italian writings; Frewen, The economic crisis, 1888; Issaïev, ‘Les principales causes des crises économiques’, 1893; and of course Jones’s Economic crises, 1900. 19 Blanqui, CRISE COMMERCIALE, in →Encyclopédie des gens du monde (1836), Michel, CRISE COMMERCIALE, in Guillaumin’s →Encyclopédie du commerçant (1839), Monbrion, CRISE COMMERCIALE ET INDUSTRIELLE in his →Dictionnaire universel du commerce, de la banque et des manufactures (1838), Dupin, CRISE COMMERCIALE, in the →Encyclopédie du dix-neuvième siècle (1846), Courcelle-Seneuil, CRISE, in the →Dictionnaire politique (1842; on all these see Chapters 5 and 6), Coquelin, CRISES COMMERCIALES, in the →Dictionnaire de l’économie politique (1852; see Chapter 8), Ott, CRISE, in his own →Dictionnaire des sciences politiques et sociales (1854; see Chapter 10), Garnier, CRISES COMMERCIALES, in the →Dictionnaire universel théorique et pratique du commerce et de la navigation (1859; see Chapter 6). 20 Monbrion’s, in →Antonelli’s Enciclopedia del negoziante, 1841; Blanqui’s, in six editions of the →Nuova enciclopedia popolare italiana, 1841 to 1875, and also in the general purpose →Enciclopedia economica, 1860. 21 Roscher, DIE PRODUKTIONKRISEN MIT BESONDERER RÜCKSICHT AUF DIE LETZTEN JAHRZEHNTE, in →Die Gegenwart, 1849 (see Chapter 7); the other two entries on HANDELSKRISIS appeared in Meyers Konversations-lexikon, 1849, and in →Pierers Universal-Lexikon, 1857. 22 The American Economic Review was also slow in adapting: from Vol. 1, 1911, to Vol. 31, 1941, it carried a review section titled ‘Trade, commerce, and commercial crises’. 23 Medical dictionaries of the time suffered of the same problem. For a discussion of the medical metaphor for crises in the early nineteenth century, see Besomi (2011).

120 Daniele Besomi 24 The terminology associated to Say’s law, ‘loi des débouchés’ in the French original, deserves a comment. This expression, used by Say, his supporters and his critics, is often translated as ‘the law of markets’, but this is not fully satisfactory. The etymon includes ‘bouche’, mouth, and indicates a passage from a closed or narrow space or channel into a larger space, such as a river’s mouth. It thus conveys the idea of a flux and of a release, both particularly important for the critics of Say’s law who stressed the pressure on the supply side and pointed out that continuity is essential to the smooth working of the system. This meaning is well caught by the Italian ‘sbocco’, also based on the root ‘bocca’, mouth (Say’s law is translated as ‘legge degli sbocchi’). In English the sense of escape or release seems to be better caught by the word ‘outlet’, which is instead absent in the word ‘market’; it was used in this sense in the entry OUTLET in →Lalor’s Cyclopædia of political science (1881–1884), which translated the entry DÉBOUCHÉS in →Coquelin and Guillaumin, Dictionnaire de l’économie politique, 1852, in turn consisting of the transcription of large excerpts from Say’s own discussion. Higgs, in the entry DÉBOUCHÉS, THÉORIE DES for →Palgrave’s Dictionary of political economy (1894), translated the expression as ‘theory of outlets or of vents’. Unfortunately, ‘outlet’ is also associated with a specific market point, in particular a store or a shop. The verbal phrase ‘find a vent’ can indeed be a valid alternative. 25 There are echoes of this notion of crisis also in the early twentieth century. For instance, the →Encyclopédie pratique du commerce, 1907, stressed that all CRISES are characterized by a break of equilibrium, a stoppage in all current operations and of exchanges (p. 457); the →Vocabulaire économique et social defined CRISE as the tremor that arises when the relationships which should equilibrate production and consumption, or the various elements of production with respect to each other, are disturbed (1909, p. 52); Jahn defined WIRTSCHAFTSKRISEN (economic crises) as disturbances of the equilibrium between demand and supply, noting that these can go out of gear for different reasons (→Politisches Handwörterbuch, 1923, p. 986). 26 Translation by Cécile Dangel-Hagnauer, in Juglar, 2010, p. 116; the passage in brackets was added to the second edition, 1873. 27 Schäffle criticised J. S. Mill for not being capable of going further than characterizing crises by the incapacity of a large share of traders to fulfill their obligations (reference is to Mill, 1848: ‘There is said to be a commercial crisis, when a great number of merchants and traders at once, either have, or apprehend that they shall have, a difficulty in meeting their engagements’: III.12.12); on the same ground, he also rejected Coquelin’s remark that ‘crises are generally nothing else than a temporary disappearance of credit’ (p. 527). This view, however, is not part of Coquelin’s definition, but is an implication he drew; Coquelin’s emphasis in this passage is not on the disappearance of credit, but on its temporariness: as the existence of a credit system is a necessary condition for crises, Coquelin set out to dispute the view that crises undo all the advantages brought by credit in terms of the possibility of progress, arguing that the consequences of the stoppage actually serve to measure the benefits of the presence of credit). Schäffle’s view was taken up by Jones (1900, p. 4n), who sarcastically reported John Stuart Mills’s similitude of the man who died for ‘want of breath’. 28 There naturally remained a few entries offering a typical nineteenth-century treatment of crises. The 3rd edition of →Pitman’s business man’s encyclopaedia, for instance, characterized a COMMERCIAL CRISIS as ‘the glut or slump succeeding a boom’. Most of the discussion is based on the cumulative process of advance and its breaking down, while it almost parenthetically observes that ‘just as a period of industrial activity leads to a period of depression and sooner or later to a commercial crisis, so a period of depression leads up to another spell at industrial activity’ (1927, pp. 414–415). 29 The partial translation of Spiethoff’s entry – approved by the author – is titled ‘Business cycles’ (Spiethoff, 1953). 30 The writers who stressed the distinction between ‘old’ and ‘new’ approaches to the

Naming crises 121

31

32

33

34

35

36

37

problem of crises also offered a classification of crises theories along this line: see for a discussion Chapter 4, Section 4.5. This interpretation of the position of the crisis at the intersection point as a fact is at odds with Lescure’s definitional approach in his treatise on crises: ‘The general overproduction crisis is the intersection point of a period of expansion lasting three to five years, and of a period of depression of similar duration. Moreover, the crisis is periodical’ (Lescure, 1907, pp. 9 and 19; 1932 edition, pp. 2–3). This definition had at the time provided the terminological basis for the interpretation of crises as a phase of the cycle, soon taken up by Aftalion, 1913 (Vol. 1, p. vi; the passage is cited in Chapter 28, Section 28.1) and eventually largely accepted in the literature (see Chapter 28). The sense of ‘A recurrent period of a definite number of years adopted for purposes of chronology’ (OED 2a) is the one referred to in →Chomel’s Dictionnaire oeconomique, citing in particular the solar, lunar and Roman indiction cycles (2nd edition, 1718, p. 776) and →Félice’s Encyclopédie oeconomique (1770, Vol. VI, p. 226); more extensively, also →Chambers’s Cyclopædia (1728, Vol. 1, p. 364), Diderot’s Encyclopédie (1754, Vol. IV, pp. 586–590), and the New and complete dictionary of arts and sciences (1763, Vol. 1, pp. 833–834) all under the heading of CYCLE. Besides the trivial denoting based on the alternation of ‘prosperity’ and ‘distress’, which goes back at least to 1722 (Anonymous, p. 1) and itself carries no more meaning than observing that tossing a coin gives rise to an alternation of heads and tails, we have more precise division into periods beginning from the 1830s. Among the early writers we have Huskisson, who supplied a fairly clear-cut description of the various phases of the cycle, beginning from a state where ‘supply and demand would continue in the same relation to each other’, followed by ‘speculative purchases’ causing an advance of prices at an accelerated rate, after which demand becomes languid and a pause ensues while goods continue to be offered for sale; in such conditions, ‘a glut or superabundance of goods is said to exist’. This begins a time of distress, during which prices fall and the bills of exchange are reduced in amount, until the goods in excess of demand are eventually sold (Huskisson, 1830, pp. 446–452). Briaune suggested a three-phases division: crisis, recovery, commercial development (1840, p. 13); Longfield suggested, like the already cited Overstone, a cycle of ten phases, which he described in much detail and graphically represented as a circle (1840, pp. 222–223); Corbet noted that overproduction (or overtrading) ‘is necessarily followed by exhaustion, relaxation, depression, and distress – which again, after a time, are succeeded by a period of unusual briskness and activity’ (1841, p. 105). For a discussion, see Besomi, 2008. Wade still used the word ‘cycle’ in the sense of a singular round course of events: ‘The commercial cycle is ordinarily completed in five or seven years, within which terms it will be found, by reference to our commercial history during the last seventy years, alternate periods of prosperity and depression been experienced’ (1833, p. 211). We shall not be concerned with the usage of this and similar expressions for purposes of chronology (‘A year is but a portion of time consisting of 365 days; it is no fixed commercial cycle into which, bodies wandering in eccentric and anomalous orbits periodically return. The revolution of the earth does not affect the tide of pecuniary traffic’: Gilmer, 1820, p. 65) or to indicate the series of successive operations involved by the trading process (e.g. as in the following: ‘the circuit of the world is carried on, and the commercial cycle kept in continual gyration’, Thompson, 1832, p. 44 of the 1842 reprint). Some writers report that in popular parlance, the term ‘Konjunktur’ used to refer to prosperity alone (e.g. Diehl, KONJUNKTUR, KONJUNKTURTHEORIE, in →Elster’s Wörterbuch der Volkswirtschaft, 1932, p. 600; KONJUNKTUR, in →Sellien and Sellien’s Gablers Wirtschafts-Lexikon, 1956, p. 1600; Besters, WIRTSCHAFTLICHE KONJUNKTUREN, in →Görres Staatslexikon, 1963, p. 737; KONJUNKTUR, in →Stein’s ABC der modernen Wirtschaft, 1972, p. 210). The term can be interpreted in a dynamic sense: the state of the system at one point of

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39 40

41 42

43

44

45

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time is defined not only by its position at that point, but also by its rate of change (and higher order differentials). If the laws determining the state of the system at one instant are known, its rates of change determine its state at the following instant. The study of conjuncture and its determinants thus embraces the overall movement of the system. When some authors emphasized the dynamic character of Konjunkturtheorie as opposed to the punctual character of the theories of crises (see Section 3.2.15.5), they probably had in mind some such interpretation. Arndt, KONJUNKTUR, in →Handwörterbuch des Kaufmanns, 1926, p. 395; Weinberger, KONJUNKTUR UND KRISEN, in →Sacher’s Staatslexikon, Vol. 3, 1929, p. 512; Diehl, KONJUNKTUR, KONJUNKTURTHEORIE, in →Elster, Wörterbuch der Volkswirtschaft, Vol. 2, 1932, p. 601; Ruberg, WIRTSCHAFTSSCHWANKUNGEN, in →Nicklisch, Handwörterbuch der Betriebswirtschaft, 1939, p. 2417; Weber, KONJUNKTUR UND KRISE, in →Klose, Katholisches Soziallexikon, 1964, p. 553. KONJUNKTURWELLEN, in Sellien and Sellien’s Gablers Wirtschafts-Lexikon, 1956. The entry on KONJUNKTURZYKLUS in →Palyi and Quittner, Handwörterbuch des Bankwesens, 1933, cross-referring to KONJUNKTURTHEORIE. →Geigant’s Lexikon der Volkswirtschaft defines KONJUNKTURZYKLUS as ‘wave-like oscillating movement of economic activity’ of various frequency, from Kitchin to Kondratiev cycles (1975, p. 275). →Sellien and Sellien’s Gablers Wirtschaftslexikon defined the KONJUNKTURZYKLUS as the period between the beginning of the first and the end of the last phases of the cycle (1956, p. 1611). Diehl, KONJUNKTUR, KONJUNKTURTHEORIE, p. 600; KONJUNKTURBEWEGUNG, in →Bülow’s Wörterbuch der Wirtschaft, 1936. Several dictionaries later cited Mitchell’s definition in the modified form incorporated in Burns and Mitchell, 1946, p. 3. The difference with the dictionary entry lies in the estimate of the duration (in the later version, one to 10 or 12 years), and in the addition that cycles so defined are not divisible into shorter cycles of similar character and amplitude. An example will suffice. ‘TRADE CYCLE (or business cycle) is a general fluctuation in the economic activity of a society where the means of production are mainly privately owned. The fluctuation is from a period of prosperity, or boom, down through a recession, to depression, or slump, then a recovery to prosperity through a period known as revival’ (→Taylor, A new dictionary of economics, 1966, pp. 288–289). The necessity of complementing the descriptive definition with an historical-theoretical part in order to fill the empty box with an interpretation (or interpretations) is only acknowledged in one of the dictionary entries I have seen: Drahokupil, BUSINESS CYCLE, in →Encyclopedia of governance, 2007, p. 63). In this paragraph I have summarized the issue more or less as stated by Keynes in 1934, who ranged himself among the ‘heretics’ who did not believe in the stability of the system. That this is the fundamental problem in business cycle theory, and also the key point for classifying the theories on the subject, was nevertheless also agreed by a representative writer taking the opposite side, Hayek. For references and a detailed discussion, see Besomi, 2006, and for a discussion of the dictionary treatment, see Chapter 4, Section 4.9.4. An unsigned entry in →Thalheim’s ABC der Volkswirtschaft, for instance, stressed that in the capitalistic era favourable and unfavourable times ‘have taken a rhythmical form, so that one can speak of “wave-like behaviour of economic life”’ (KONJUNKTUR UND KRISE, 1934, p. 166); similarly, Horton defined BUSINESS CYCLES as ‘rhythmic fluctuations in general business activities, characterized by a tendency of prices, profits, production wages and employment to move more or less together in a complete cycle from peak to peak over several years’ (in →Dictionary of modern economics, 1948). In the first three-quarters of the nineteenth century, writers often characterized crises as ‘periodic’, but they had in mind the meaning of ‘recurring, or appearing intermittently’ (OED) rather than stressing the regularity of the interval (Besomi, 2010a). The intro-

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duction of the ‘astronomical’ sense of the term is due to Jevons; the debates towards the turn of the century were polarized between the few who espoused Jevons’s view, and those who argued instead against an absolute regularity of occurrence. Among dictionary entries, I am aware of only one defining theoretically cycles as ‘Regular fluctuation of economic activity, of fixed periodicity and amplitude; theoretically they can be represented by sinusoidal waves’; the author admits, however, that ‘the observed cycles do not always correspond to the theoretical definition’ (CYCLE, in →Albertini et al., Lexique d’économie, 1992, pp. 182–183). The heading of the review section of the American Economic Review (not included in the counting mentioned in the text) is consistent with the prevalent usage. From the first volume (1911) to December 1941 the section was titled ‘Trade, commerce and commercial crises’; then it became ‘Business cycles and fluctuations’; and from March 1949 to December 1968 it dropped the ‘cycles’ and reduced to ‘Business fluctuations’. From the first issue in 1969 to 1990, the Journal of Economic Literature reviews were classified under the heading ‘Economic growth; development; planning; fluctuations’; reference to fluctuations disappeared from the main headings in 1991, and articles on the subject are now classified under ‘Macroeconomics and monetary economics’, subheading on ‘Prices, business fluctuations, and cycles’. The earliest formulation of a complete theory of crises of which I am aware, explaining their premises and the necessity of their outburst, is due to William Huskisson and was published in 1810: see Besomi, 2010b. Persons used the expression ‘business fluctuations’ as a wider concept than ‘business cycles’, as it covered: ‘A. Irregular movements (non-recurrent): 1. Plus and minus deviations from some chosen basis of measurement which do not reveal definite characteristic phases and do not recur. 2. A series of plus and minus deviations which pass through definite phases but do not recur. B. Business cycles (recurrent): 1. Non-periodic cycles of which the wave lengths and amplitudes are variable. 2. Periodic cycles of which the wave lengths are approximately uniform’. He explicitly excluded, however, monthly variations (1926, pp. 95–96). Burns and Mitchell commented that Mitchell’s previous emphasis on ‘depressions’ led to overlook milder, but nonetheless important, recessions: 1946, p. vii. Fluctuations within a cycle are admittedly a problem for Mitchell’s definition, and the presence of multiple peaks required that additional criteria be set for deciding which downturns are significant. One requires that business cycles cover more than one year, the other that the amplitude of minor fluctuations is not of the same order of amplitude as the cycle itself (Burns and Mitchell, 1946, pp. 7–8). These conditions, however, do not seem to warrant an unambiguous breaking down of intervals within major crises: if the intermediate fluctuations had the same order of amplitude of major crises, they would indeed be major crises themselves. For a discussion of ‘normality’ of the cycle, see Besomi 2006 and 2010c.

REFERENCES Aftalion, A., 1913, Les crises périodiques de surproduction. Tome I: Les variations périodiques des prix et des revenus. Les théories dominantes. Tome II. Les mouvements périodiques de la production. Essai d’une théorie (Paris: Marcel Rivière). Aftalion, A., 1927, The theory of economic cycles based on the capitalistic technique of production, Review of Economic Statistics, 9: 4, October, pp. 165–170. Åkerman, J. H., 1947, Political economic cycles, Kyklos, 1, pp. 107–117. Anderson, W., 1797, The iniquity of banking: or, bank notes proved to be injurious to the public, and the real cause of the present exorbitant price of provisions (London: Jordan).

124 Daniele Besomi Anderson, W., 1821, Notices on political economy: or, An inquiry concerning the effects of debts and taxes, of the state of the currency and exchange, and of the balance of trade, as they operate on the community considered as a whole (London: Richardson). Anonymous (E. H.), 1692, Reasons for the abatement of interest to four in the hundred. And the objections against it fairly stated, and briefly and fully answer’d. By E. H. (London: D. Brown & M. Gillyflower). Anonymous, [1713], A Letter to the Mercator; proving that to offer a scheme of the French trade from the custom-house books, is an errant piece of knavery to cheat and amuse the nation (London: Tooke and Barber, n.d.). Anonymous, 1722, The nature and weight of the taxes of the nation: shewing, that, by the continuance of heavy taxes and impositions, . . . (London: Peele). Anonymous, 1724, A defence of the conduct of the people of Ireland in their unanimous refusal of Mr. Wood’s copper-money (Dublin: Ewing). Anonymous, 1728, Some considerations on the nature and importance of the East-India trade (London: John Clarke). Anonymous 1 (Philantropos), 1729, A Letter to my Lord S—-, concerning the prisons for debts. With an hint or two of a method for securing the creditor’s property, without touching the person of the debtor (London: W. Meadows). Anonymous 2, 1729, The advantages of peace and commerce; with some remarks on the East-India trade (London: Brotherton). Anonymous 1, 1742, A Letter to the author of An enquiry into the revenue, credit, and commerce of France. Wherein the former and present state of the power and commerce of that kingdom are fully consider’d, and deduced from authentic accounts. By a member of Parliament (London: Roberts). Anonymous 2, 1742, Remarks upon letter to the author of the Inquiry into the revenue, credit, and commerce of France. Address’d to the letter-writer by C. P. Esq; F.R.S. (London: Roberts). Anonymous, 1743, Britons awake, and look about you; or, ruin the inevitable consequence of a land-war, whether successful, or not. . . . By a lover of his country (London: Lion). Anonymous, 1778, The precipitation and fall of Mess. Douglas, Heron, and Company, late bankers in Air, with the causes of their distress and ruin, investigated and considered, by a committee of inquiry appointed by the proprietors (Edinburgh: s.n.). Anonymous, 1810, Politique, Mercure de France, 45, December, pp. 383–389. Anonymous, 1811, Considerations on the causes which have produced our present commercial embarrassments (London: Rutt). Anonymous, 1817, Exposition of one principal cause of the national distress, particularly in manufacturing districts: with some suggestions for its removal (London: printed for the author). Anonymous 1, 1819, An enquiry into the causes of the present commercial embarrassments in the United States with a plan of reform of the circulating medium (n.p.). Anonymous 2, 1819, A friendly address to the manufacturers in those districts which are now suffering from the stagnation of trade (London: Rivington). Anonymous 1, 1826, The markets, The Bristol Mercury, issue 1846, 5 June. Anonymous 2, 1826, The markets, The Morning Chronicle, issue 17830, 7 November (also in The Bristol Mercury, issue 1909, 13 November). Anonymous 1, 1843, Monthly financial and commercial article, The United States Magazine, and Democratic Review, 12: 60, June, pp. 653–660. Anonymous 2 (The Era), 1843, Latest intelligence, The Era, 17 September. Anonymous, 1845, Railway intelligence, Liverpool Mercury, issue 1765, 7 March.

Naming crises 125 Anonymous, 1848, Mr. Muntz & the currency: an address to the people of Birmingham on Mr. Muntz and the currency, by no friend to the new way of paying old debts (Birmingham: [s.n.]) Anonymous 1, 1849, Marriages and abundance, The Economist, 7: 300, 26 May, pp. 573–574. Anonymous 1, 1850, The causes of commercial crises. Causes of commercial embarrassments; speculations; California trade; money market, &c., The Bankers’ Magazine and Statistical Register, 5: 1, July, pp. 1–4. Anonymous 2, 1850, The rich and the poor, The Red Republican, 20 September. Anonymous 3, 1850, The alleged ‘prosperity’ and ‘immorality’ of the working classes, The Red Republican, 5 October. Anonymous, 1855, The morning chronicle, The Morning Chronicle, 27704, 11 October. Anonymous 1, 1857, The currency. – Causes of mercantile distress, The Leeds Mercury, 6728, 12 December. Anonymous 2, 1857, High dividends inconsistent with security, The Economist, 15: 733, 12 September, pp. 1–2. Anonymous 3, 1857, Parliamentary opinions on currency and credit, The Aberdeen Journal, 5735, 9 December. Anonymous, 1861, Bank of France, October, 1861, its position and policy, Journal of the Statistical Society of London, 24: 4, December, pp. 593–615. Anonymous, 1866, Commercial cycles, Savannah Daily Herald, 28, 10 February. Anonymous, 1873, The history and principles of banking. Chapter fifteenth: The panics of 1857 and of 1866, The Bankers’ Magazine and Statistical Register, 7: 12, June, pp. 937–967. Anonymous, 1874, The cycle of trade, The Independent . . . Devoted to the Consideration of Politics, Social and Economic Tendencies, History, Literature, and the Arts, 26: 1321, 26 March, p. 26. Anonymous 1, 1877, Board of Trade tables for January, The Economist, XXXV: 1746, 10 February, pp. 154–155. Anonymous 2, 1877, Why the commercial depression is so protracted, The Economist, XXXV: 1758, 5 May 1877, pp. 505–506. Anonymous 1, 1879, Financial and commercial history of 1878, Journal of the Statistical Society of London, 42: 1, March, pp. 276–305. Anonymous 2, 1879, Notes on economical and statistical works, Journal of the Statistical Society of London, 42: 3, September, pp. 727–736. Anonymous, 1882, Occasional notes, Pall Mall Gazette, issue 5557, 21 December. Anonymous, 1884, Cycles of trade, Frank Leslie’s Illustrated Newspaper, 1516, 11 October, p. 114. Anonymous, 1892, The commercial congress, The Bristol Mercury and Daily Post, 13841, 21 September. [Bagehot, W.], 1873, The very peculiar position of the year 1873, The Economist, XXXI: 1532, 4 January, pp. 1–2. Baker, H., 1876, Observations on a continuation table and Chart, shewing the ‘Balance of accounts between the mercantile public and the bank of England, 1844–75, with special reference to its course in the years 1866–75’, Transactions of the Manchester Statistical Society, session 1875–76, pp. 203–221. Baring, F., 1801, Observations on the publication of Walter Boyd, Esq. M.P. (London: J. Sewell and J. Debrett). Bartholony, F., 1839, Du meilleur système à adopter pour l’exécution des travaux publics en France, et notamment des grandes lignes de chemins de fer. 2nd ed. (Paris : A. Blondeau).

126 Daniele Besomi Bath, W. P., (1734), An enquiry into the conduct of our domestick affairs, from the year 1721, to the present time. In which the case of our national debts, the Sinking fund, and all extraordinary grants of money are particularly consider’d. Being a sequel to Politicks on both sides (London: H. Haines). Besomi, D., 2006, Tendency to equilibrium, the possibility of crisis, and the history of business cycle theories, History of Economic Ideas, XIV: 2, pp. 53–104. Besomi, D., 2008, John Wade’s early endogenous dynamic model: ‘Commercial cycle’ and theories of crises, European Journal of the History of Economic Thought, 15: 4, December, pp. 611–639. Besomi, D., 2010a, The periodicity of crises. A survey of the literature, Journal of the History of Economic Thought, 32: 1, March, pp. 85–132. Besomi, D., 2010b, Paper money and national distress. William Huskisson and the early theories of credit, speculation and crises, European Journal of the History of Economic Thought, 17: 1, March, pp. 1–37. Besomi, D., 2010c, ‘Periodic crises’: Clément Juglar between theories of crises and theories of business cycles, Research in the History of Economic Thought and Methodology, 28A, pp. 169–238. Besomi, D., 2011, Crises as a disease of the body politick. A metaphor in the history of nineteenth century economics, Journal of the History of Economic Thought, 33: 1, March, pp. 67–118. Blackstone, W., 1822, Commentaries on the Laws of England (New York: Duyckinck, ong, Collins & Co.). Boislandry, F. L. L. de, 1790, Observations sur les dangers du papier-monnoie & sur l’insuffisance de cette ressource: pour remédier à la détresse actuelle des finances (Paris: Imprimerie nationale). Boswell, J., 1772, Reflections on the late alarming bankruptcies in Scotland. Addressed to all ranks: But particularly to the different classes of men from whom payments may soon be demanded. With advice to such, how to conduct themselves at this crisis (Edinburgh: s.n.). Bouniatian, M., 1928, The theory of economic cycles based on the tendency toward excessive capitalization, Review of Economic Statistics, 10: 2, May, pp. 67–79. Boyd, W., 1801, A letter to the Right Honourable William Pitt: on the influence of the stoppage of issues in specie at the Bank of England, on the prices of provisions, and other commodities. The second edition, with additional notes; and a Preface, containing remarks on the publication of Sir Francis Baring, Bart. (London: Wright). Brand, F. J., 1800, A determination of the average depression of the price of wheat in war, below that of the preceding peace and of its readvance in the following; according to its yearly rates from the Revolution to the end of the last peace: with remarks on their greater variations in that period (London: F. & C. Rivington). Briaune, J.-E., 1840, Des crises commerciales, de leur causes et de leur remèdes (Paris: Bouchard-Huzard; reprinted New York: Burt Franklin, 1971). Bristol Mercury, 1819, Causes of commercial embarrassment, The Bristol Mercury (Bristol, England), November 1, issue 1544. Brooke, W., 1800, The true causes of our present distress for provisions; with a natural, easy, and effectual plan for the future prevention of so great a calamity. With some hints respecting the absolute necessity of an encreased population (London: H. D. Symonds). Brown, W., 1834, To our subscribers, Bankers’ Circular and Monetary Times, 297, 28 March, pp. 289–291. Burke, E., 1800, Thoughts and details on scarcity: originally presented to the Right Hon. William Pitt, in the month of November, 1795 (London: Rivington).

Naming crises 127 Burns, A. F. and Mitchell, W. C., 1946, Measuring business cycles, New York: National Bureau of Economic Research. Cardoza, J. N., 1869, Essays on banking and currency, The Bankers’ Magazine and Statistical Register, 3: 9, March, pp. 673–697. Carey, M., 1823, The crisis: A solemn appeal . . . on the destructive effects of the present policy of this country, on its agriculture, manufacturers, commerce, and finances. With a comparison between the extraordinary prosperity of Great Britain, and the general depression in the United States (Philadelphia: Carey and Lee). Cargill, W., 1845, The currency, showing how a fixed gold standard places England in permanent disadvantage and produces periodical domestic convulsion (London: Ollivier). Carpenter, T., 1796, The American senator, or A copious and impartial report of the debates in the Congress of the United States: including all treaties, addresses, . . ., Vol. 1 (Philadelphia: Page). Chitty, J., 1824, A treatise on the laws of commerce and manufactures and the contracts relating thereto: with an appendix of treaties, statutes, and precedents (London: Butterworth). Clark, J. M., 1917, Business acceleration and the law of demand: A technical factor in economic cycles, Journal of Political Economy, 25, March, pp. 217–235. Clavière, É., 1790, Réponse au mémoire de M. Necker, concernant les assignats, et à d’autres objections contre une création qui les porte à deux milliards . . . Première partie (Paris: Imprimérie du Patriote françois). Clegg, S. R. and Bailey, J. R., 2008, International encyclopedia of organizational studies (Thousand Oaks, CA: Sage Publications), 4 vols. Colquhoun, P., 1793, Reflections on the causes which have produced the present distress in commercial credit: with suggestions relative to the means of remedying the evil in future and of granting immediate and effectual relief to the merchants and manufacturers (London: J. Sewell, J. Debrett, J. Downes). Cooke, L., 1842, Observations upon the construction and operation of duties on the importation of foreign corn, and suggestions for lessening fluctuations in the price of wheat: addressed to the Right Honourable Sir Robert Peel, Bart. (London: Ollivier). Corbet, T., 1841, An inquiry into the causes and modes of the wealth of individuals: or, The principles of trade and speculation explained (London: Smith, Elder & Co.). Currie, J., 1793, A letter, commercial and political, addressed to the Rt. Hon. William Pitt: in which the real interests of Britain in the present crisis are considered and some observations are offered on the general state of Europe, by Jasper Wilson (Dublin: P. Byrne and J. Moore). Defoe, D., 1728, A plan of the English commerce. Being a compleat prospect of the trade of this nation, as well the home trade as the foreign. . . . (London: Rivington). Della Bona, G., 1888, Delle crisi economiche (Turin: Bocca). [Duncan, W. B.], 1842, Mercantile embarrassments, and the present state of the banking system (Edinburgh: John Johnstone). Durbin, E. F. M., 1933, Purchasing power and trade depression. A critique of underconsumption theories (London: Cape). Economist, 1846, Commercial embarrassment – Railway liabilities and railway schemes, The Economist, 4: 135, 28 March 1846, pp. 1–4. Ellis, A., 1876, The rationale of market fluctuations (London: E. Wilson; 4th edition, 1879). England, M. T., 1913, Economic crises, Journal of Political Economy, 21: 4, April, pp. 345–354. Fabian, A., 1989, Speculation on distress: the popular discourse of the panics of 1837 and 1857, Yale Journal of Criticism, 3 (Fall), pp. 127–142.

128 Daniele Besomi Ferguson, R., [1695], A brief account of some of the late incroachments and depredations of the D[utch]. upon the English, and of a few of those many advantages which by fraud and violence they have made of the British Nations since the Revolution, etc. (n.p.) Ferrara, F., 1864, Delle crisi economiche. Preface to Biblioteca dell’Economista, Vol. IV (Turin: UTET). Fisher, I., 1911, ‘The equations of exchange’, 1896–1910, American Economic Review, 1: 2, June, pp. 296–305. Frewen, M., 1885, Gold scarcity and the depression of trade, Nineteenth Century, 18: 104, October, pp. 593–613. Frewen, M., 1888, The economic crisis (London: Kegan Paul). Fullarton, J., 1844, On the regulation of currencies, being an examination of the principles, on wich it is proposed to restrict, within certain fixed limits, the future issues on credit of the Bank of England, and of the other banking establishments throughout the country (London: Murray). Giffen, R., 1885, Trade depression and low prices, Contemporary Review, XLVII, June, pp. 800–822. [Gilbart, J. W.], 1873, The history and principles of banking, Chapter 15, The panics of 1857 and 1866, The Bankers’ Magazine and Statistical Register, 12 June, pp. 937–967. Gilmer, F. W., 1820, Vindication of the laws, limiting the rate of interest on loans; from the objections of Jeremy Bentham, and the Edinburgh Reviewers (Richmond: N. Pollard). Goodwin, R. M., 1946, Innovations and the irregularity of economic cycles, Review of Economic Statistics, 28: 2, May, pp. 95–104. Great Britain, Parliament, 1793, Jordan’s Parliamentary Journal for the year MDCCXCIII being an accurate and impartial history of the debates and proceedings of both Houses of Parliament, Vol. III (London: J. S. Jordan). Guyot, Y., 1909, Le commerce et les commerçants (Paris: O. Doin). Haberler, G. von, 1937, Prosperity and depression (Geneva: League of Nations). Hagemann, H., 1995, Roscher and the theory of crisis, Journal of Economic Studies, 22: 3–5, pp. 171–186. Hampshire Telegraph, 1825, Commercial embarrassments, Hampshire Telegraph and Sussex Chronicle etc. (Portsmouth, England), 19 December 1825, issue 1367. Hansen, A. H., 1938, Full recovery or stagnation? (New York: Norton). Harris, J., 1757, An essay upon money and coins (2 volumes in one) (London: G. Hawkins). [Hart, G.], 1825, A brief sketch of the causes and consequences of the present panic, and the system and conduct of the Bank and bankers vindicated. By Publicola (London: Wilson). [Harvey, J.], 1849, The great question for discussion – The currency. Jones Loyd’s cycle of trade, or the effect of gold money, Liverpool Mercury, 2055, 9 January. Harvey, J., 1867, The Bank of England [letter to the editors], Liverpool Mercury, 5934, 4 February. Hawtrey, R. G., 1913, Good and bad trade. An inquiry into the causes of trade fluctuations (London: Constable). House of Commons. Secret Committee on the Expediency of the Bank Resuming Cash Payments, 1819, Report from the Secret committee on the expediency of the Bank resuming cash payments, with the minutes of evidence (London: C. Clement). [Huskisson, W.], 1830, Essays in political economy: in which are illustrated the principal causes of the present national distress; with appropriate remedies (London: Longman, Rees, Orme, Brown, & Green).

Naming crises 129 Huart, A., 1911, Le mouvement de la population depuis 1800 en Europe dans ses rapports avec les crises économiques, Revue économique internationale, III: 2, August, pp. 283–305. Hustler, J., 1767, The occasion of the dearness of provisions, and the distress of the poor, with proposals for remedying the calamity . . . wherein the policy of the bounty given upon the exportation of corn . . . and enlarging of farms, are impartially considered: with some remarks on a late pamphlet, intituled, A letter to a member of Parliament, on the present distresses of the poor, by a manufacturer (London: Owen). Issaïev, A., 1893, Les principales causes des crises économiques, Revue d’Économie Politique, 7, pp. 654–692 and 98–1011. Jamieson, G. A., 1885, The present agricultural and financial depression: some of its causes, influences and effects (Edinburgh: Blackwood & Sons). Jevons, W. S., 1878, Commercial crises and sun-spots, Pt. 1, Nature, XIX, 14 November, pp. 33–37. Reprinted in Jevons, Investigations in currency and finance (London: Macmillan, 1984), pp. 221–235. Johnson, D. N., 1887, Can wages be raised by vote?, The Universalist Quarterly and General Review, 24, October, pp. 472–477. Jones, E. D., 1900, Economic crises (New York: Macmillan). Joplin, T., 1841, The cause and cure of our commercial embarrassments (London: Ridgway). Joplin, T., 1844, Currency reform: Improvement not depreciation (London: Richardson). Juglar, C., 1889, Des crises commerciales et de leur retour périodique en France, en Angleterre et aux États-Unis, 2nd edition (Paris: Alcan). Juglar, C., 2010, Commercial crises (1863/1973). Translation by C. Dangel-Hagnauer of CRISES COMMERCIALES, in →Block, Dictionnaire Général de la Politique (1863, 1873), Research in the History of Economic Thought and Methodology, 28A, pp. 115–147. Kalecki, M., 1939, Essays in the theory of economic fluctuations (London: Allen & Unwin). King, W. I., 1930, Is there a business cycle?, Journal of the American Statistical Association, 25: 170, June, pp. 207–209. Knowles, F. C., 1837, The monetary crisis considered: being incidentally a reply to Mr. Horsley Palmer’s pamphlet ‘On the action of the Bank of England, &c.’ and a defence of the joint-stock banks against his accusations (London: Richardson). Laveleye, E. de, 1865, Le marché monetaire et ses crises depuis cinquante ans (Paris: Guillaumin). Lavington, F., 1922, The trade cycle. An account of the causes producing rhythmical changes in the activity of business (London: King). Lawn, B., 1800, The corn trade investigated, and the shocking system exposed which principally causes the amazing fluctuations in the prices of corn and flour; and a proposition . . . which will effectually remedy the alarming fluctuating price of bread corn; with an investigation of the Rev. J. Malham’s attacks on the landed interest and agriculture of this kingdom . . . (Bath: Meyler). Lescure, J., 1907, Des crises génerales et périodiques de surproduction (Paris: DomatMontchrestien; 4th ed., 1932). Lexis, W. H. R. A., 1913, Allgemeine Volkswirtschaftslehre (2nd edition) (Leipzig: Teubner). [Liverpool Currency Reform Association], 1849, Suggestions for a new system of currency by which monetary panics will be rendered impossible: submitted to the trading community of Liverpool, by a committee of gentlemen who believe that the permanent prosperity of the country depends upon a proper settlement of the money question (Liverpool: Lace and Addison). Longfield, S. M., 1840, Banking and currency, Dublin University Magazine, 15, pp. 1–15, 218–233; 16, pp. 371–389, 611–620. Loyd, S. J. (later Lord Overstone), 1837, Reflections suggested by a perusal of Mr. J. Horsley

130 Daniele Besomi Palmer’s pamphlet on the causes and consequences of the pressure on the money market (London: Richardson). Madden, S., 1738, Reflections and resolutions proper for the gentlemen of Ireland, as to their conduct for the service of their country, as landlords, as masters of families, as Protestants, as descended from British ancestors, as country gentlemen and farmers, as justices of the peace, as merchants, as members of Parliament (Dublin: G. Ewing). [Magens, N.], 1756, Farther explanations of some particular subjects, relating to trade, coin, and exchanges, contained in the universal merchant (London: J. Haberkorn). Malthus, T. R., 1827, Definitions in political economy: preceded by an inquiry into the rules which ought to guide political economists in the definition and use of their terms: with remarks on the deviation from these rules in their writings (London: Murray). Martin, M.-J.-D., 1789, Étrennes financières; ou, Recueil des matières les plus importantes en finance, banque, commerce . . . etc., première année (Paris: s.n.). Marx, K. and Engels, F., 1967, Werke, Vol. 29, Berlin: Dietz. Maynwaring, A., 1711, An Excellent new song, called, Credit restored, in the year of our Lord God, 1711. To the tune of, Come prithee, Horace, hold up thy head (n.p.). [McCulloch, J. R.], 1816, Commercial distress of the country, Edinburgh Review, XXVII, December, pp. 373–391. [McCulloch, J. R.], 1819, Commercial embarrassments and trade with France, Edinburgh Review, LXIII, July, pp. 48–74. Mill, J. S., 1848, Principles of political economy (London: John W. Parker). Millington, T. T., [1885], Our trade depression explained, and showing how far it is affected by our land laws (London: Watts). Mills, J. 1868. On credit cycles and the origin of commercial panics, Transactions of the Manchester Statistical Society, Session 1867–1868, pp. 5–40. Mitchell, W. C., 1909, The decline in the ratio of banking capital to liabilities, Quarterly Journal of Economics, 23: 4, August, pp. 697–713. Mitchell, W. C., 1913, The business cycle (Berkeley, CA: University of California Press). Mitchell, W. C., 1916, American security prices and interest rates, Journal of Political Economy, 24: 2, February, pp. 126–157. Mitchell, W. C., 1926, Business cycles as revealed by business annals. Introduction to W. L. Thorp, Business annals (New York: NBER), pp. 15–100. Mitchell, W. C., 1927, Business cycles. The problem and its settings (New York: NBER). Moore, H. L., 1914, Economic cycles: Their law and cause (New York: Macmillan). Moore, H. L., 1923, Generating economic cycles (New York: Macmillan). Myint, H., 1946, The classical view of the economic problem, Economica, NS, 13: 50, May, pp. 119–130. New-York Spectator, 1837, Reflections on the causes of commercial embarrassments in the United States, New-York Spectator, 13 April, col. A. Öchelhäuser, W., 1876, Die wirtschaftliche Krisis (Berlin: Springer). Orleans Gazette, 1819, Commercial fluctuations and embarrassments, Orleans Gazette and Commercial Advertiser (New Orleans, LA), 27 July, col E. [Page, R.], 1842, Banks and bankers by Daniel Hardcastle (London: Whittaker). Paxton, P., (1704), A discourse concerning the nature, advantage, and improvement of trade with some considerations why the charges of the poor do and will increase (London: R. Wilkin). Persons, W. M., 1926, Theories of business fluctuations, Quarterly Journal of Economics, 41: 1, November, pp. 94–128. Petty, W., 1662, Treatise of taxes & contributions. Shewing the nature and measures of

Naming crises 131 crown-lands, assessements, customs, pollmoneys, lotteries, benevolence, penalties, monopolies, offices, tythes, raising of coins, harth-money, excise, &c. (London: Brooke). Phillips, M., 1816, Suggestions for producing public improvements, and affording employment for the distressed manufacturers and the labouring poor (Stroud: F. Vigurs). Pigou, A. C., 1927, Industrial fluctuations (London: Macmillan). Pinsent, J., 1820, Letters addressed to the Earl of Liverpool . . . on the distress of the mercantile, shipping, agricultural, and manufacturing interests: with the several remedies proposed: the whole earnestly addressed to the Ministry and both Houses of Legislation, at this momentous crisis (London: Evans & Ruffy). Plat, H., 1594, The jewell house of art and nature. Conteining divers rare and profitable inventions, together with sundry new experimentes in the art of husbandry, distillation, and moulding (London: Peter Short). Price, B., 1879, Commercial depression and reciprocity, Contemporary Review, XXXV, May, pp. 269–288. Price, R., 1772, To the Society of London Annuitants, Morning Chronicle and London Advertiser, 1055, 9 October. Providence Patriot, 1822, The commercial pressure and failures in Boston, for some time past, have been unprecedented in former periods of commercial embarrassment, Providence Patriot, Columbian Phenix, (Providence, RI), 31 July, issue 61, col. B. Raleigh Register, 1819, Commercial embarrassment, Raleigh Register and North-Carolina Gazette (Raleigh, NC), 12 February, issue 1012, col. a. Randolph, F. (1808) A few observations on the present state of the nation; in a letter to His Grace the Duke of Bedford (Bath: R. Cruttwell). Ricardo, D., 1816, Proposals for an economical and secure currency; with observations on the profits of the Bank of England, as they regard the public and the proprietors of Bank stock (London: Murray). Richter, F. L., 1923, Recent books on business cycles, Quarterly Journal of Economics, 38: 1, November, pp. 153–168. Roberts, G. E., 1908, The need of a central bank, Annals of the American Academy of Political and Social Science, 31, March, pp. 45–54. Robertson, D. H., 1915, A study of industrial fluctuation. An enquiry into the character and causes of the so-called cyclical movement of trade (London: King). Salt, S., 1850, Railway and commercial information (London: W. H. Smith). Samuelson, P. A., 1991, A personal view on crises and economic cycles. In M. Feldstein, editor, The risk of economic crisis. A National Bureau of Economic Research Conference Report (Chicago and London: University of Chicago Press). Say, J.-B., 1820, Lettres à M. Malthus sur différens sujets d’économie politique, notamment sur les causes de la stagnation générale du commerce (Paris: Bossange; English translation as Letters to Mr. Malthus on several Subjects of Political Economy, and on the Cause of the Stagnation of Commerce, in The Pamphleteer, 1820; reprinted: London: Sherwood, 1821). Schumpeter, J. A., 1939, Business cycles: a theoretical, historical, and statistical analysis of the capitalistic process (New York: McGraw-Hill). Selden, G. C., 1902, Trade cycles and the effort to anticipate, Quarterly Journal of Economics, 16: 2, February, pp. 293–310. Sinclair, J., 1797, Letters written to the governor and directors of the Bank of England, in September, 1796, on the pecuniary distresses of the country, and the means of preventing them; with some additional observations . . . and the means of speedily reestablishing the public and commercial credit of the country (London: W. Bulmer and Co.).

132 Daniele Besomi Sismondi, J.-C. S. de, 1819, Nouveaux principes d’économie politique; ou, De la richesse dans ses rapports avec la population (Paris: Delaunay). Smith, A., 1776, An inquiry into the nature and causes of the wealth of nations (London: Strahan and Cadell; cited from R. H. Campbell, A. S. Skinner and W. B. Todd, The Glasgow edition of the works and correspondence of Adam Smith, Oxford: Clarendon Press, 1979). Smith, J., 1624, The generall historie of Virginia, New England and the Summer Isles ([S.l.]: [s.n.]; reprinted Glasgow: James MacLehose and Sons, 1907). Smith, V. E., 1949, [Review of] Theories of welfare economics, by Hla Myint, Journal of Farm Economics, 31: 4 (Part 1), November, pp. 753–754. Sowell, T., 1963, The general glut controversy reconsidered, Oxford Economic Papers, 15: 3, November, pp. 193–203. Spiethoff, A., 1953, Business cycles, International Economic Papers, 3, pp. 75–171. Partial translation of KRISEN, →Handwörterbuch der Staatswissenschaften, 4th edn., Jena, 1925. Swift, J., 1721, The bubble: a poem (London: Tooke). Taylor, W. G. L., 1904, The kinetic theory of economic crises, University Studies of the University of Nebraska, 4: 1, pp. 1–77. [Thompson, T. P.], 1826, An exposition of fallacies on rent, tithes, &c., containing an examination of Mr. Ricardo’s theory of rent and of the arguments brought against the conclusion that tithes and taxes on the land are paid by landlords, the doctrine of the impossibility of a general glut, and other propositions of the modern school: with an inquiry into the comparative consequences of taxes on agriculture and manufactured produced: being in the form of a review of the 3d. ed. of Mr. Mill’s Elements of political economy, by a member of the University of Cambridge (London: Hatchard). Thompson, T. P., 1832, Programme, Westminster Review, 1 April 1832; reprinted in Thompson, Exercises, political and others: consisting of matter previously published with and without the author’s name, and of some not published before (London: E. Wilson, 1842). Times, The, 1826a, Commercial embarrassments, The Times, 26 January, p. 3, col C. Times, The, 1826b, We have always asserted, that the present commercial embarrassments, severe as they may be, will have . . ., The Times, 20 February, p. 2, col E. Tinbergen, J. and Polak, J. J., 1950, The dynamics of business cycles. A study in economic fluctuations (London: Routledge & Kegan Paul). Torrens, R., 1816, A letter to the Right Honourable The Earl of Liverpool, on the state of the agriculture of the United Kingdom, and on the means of relieving the present distress of the farmer, and of securing him against the recurrence of similar embarrassment (London: J. Hatchard). Tugan-Baranovsky, M. I., 1913, Les crises industrielles en Angleterre (Paris: Giard & Brière). Vanderlip, F. A., 1904, Bankers’ Association of the State of Illinois, Bankers’ Magazine, 69: 5, November, pp. 816–828. Wade, J., 1826, Digest of facts and principles, on banking and commerce: with a plan for preventing future re-actions (London: Thomas Ward). Wade, J., 1833, History of the middle and working classes (London: Effingham Wilson). Wallace, A. R., 1885, Bad times. An essay on the present depression of trade, tracing it to its sources in enormous foreign loans, excessive war expenditure, the increase of speculation and of milionaires, and the depopulation of rural districts; with suggested remedies (London: Macmillan). Wilson, G., 1811, Defence of abstract currencies: in reply to the Bullion report and Mr. Huskisson (London: Murray).

4

Dictionary reconstructions of the history of the theories of crises and cycles A meta-taxonomy Daniele Besomi

4.1 CATEGORIZING BUSINESS CYCLE THEORIES If there is one proposition on which all students of business cycle may agree, it is that classifying business cycle theories is an awkward task. The number of different theories and models,1 the variety of causal factors influencing one aspect or another of the cyclical development, the different views on the working of a capitalist economy held by those who have written on crises and cycles, the variety of analytical approaches with the implications of each specific tool, the prevailing problems (practical and theoretical) and outlooks at the time of writing, as well as a number of other variables, all contribute to ensure that whatever classificatory scheme is adopted, it is bound to be too rigid to accommodate some of the opinions on the subject. In spite of this difficulty, there are a number of attempted categorizations. Not only did the few existing fully fledged histories of cycles and crises theories endeavour to classify business cycle theories, but so did numerous writers as an introductory chapter to their business cycle treatises. Dictionaries also house a number of such attempts, which are completely suited to the educational purpose of dictionaries and scarcely avoidable in entries of suitable length. Although the entries are naturally inhomogeneous as to the level of detail, they all share the need to compress the argument into a very limited number of pages. When a categorization is offered at all – more often than not without justifying the criteria followed in constructing the taxonomy – the dividing lines are thus often sharply defined, offering the reader a clear viewpoint. This chapter surveys such taxonomic endeavours by dictionaries. If we except a small number of oddballs, such classifications turn out to be of a surprisingly small number of kinds. At first, dictionary writers only referred to a handful of theories of particular interest to them – mostly with a critical purpose in mind. Then, especially in Germany in the third quarter of the nineteenth century but later also in the US, the discriminating factor was Say’s law vs. overproduction. Towards the end of the nineteenth century, when there finally was a reasonable number and variety of theories to be classified, we have first a classification in political terms (1880–1910), then a number of entries broadly separating the ‘old’ theories of crises

134 Daniele Besomi from the ‘new’ theories of the cycle (during the inter-war years). There followed some categorizations based on the kind of causal factors involved in the explanation, in particular between the 1920s and the 1960s. Such an approach was later abandoned in favour of a search for a deeper and more fundamental line of division, which was sought in the premises characterizing various schools of thought, in the adherence to or rejection of Say’s law, in the adoption of an exogenous or an endogenous approach, or in the belief (or lack thereof) in the self-adjusting capacity of the economic system.

4.2 EARLY SURVEYS OF THE LITERATURE The entries on crises in most early dictionaries were not so much compilations of theoretical knowledge, but mostly reports of the author’s own reflections on the subject. Two of them, however, already identified the main issues at stake at the time. The first such entry – MONEY, in →[Long]’s Political dictionary, 1846 – referred to the opposition between the Banking and Currency schools on the causes of crises, and adopted Overstone’s moderate currency position: There are some political reasoners who have ascribed every commercial convulsion to an ill-regulated currency; while others deny its influence upon prices and upon the general arrangements of commerce. The opinions of both these parties are probably extreme, and their facts somewhat exaggerated; but the temperate view taken by Mr. S. Jones Loyd may be adopted with less hesitation. He says, ‘The currency in which all transactions are adjusted has the same reference to the healthy state of trade, which the atmosphere in which we all live has to the physical constitution of our bodies; irregularities and disorders may arise from a variety of causes, but the duration and virulence of them will materially depend upon the pure, healthy, and well-regulated condition of the medium in which they exist. A well-managed currency cannot prevent the occurrence of periods of excitement and overtrading, nor of their necessary consequences, commercial pressure and distress; but it may tend very powerfully to diminish the frequency of their return, to restrain the suddenness of their outbreak, and to limit the extent of their mischief.’ (MONEY, p. 359; reference is to Loyd, 1940, pp. 90–91) Charles Coquelin also offered a schematization of the current views on crises, if only to criticize them. He noted that there have been frequent attempts at explaining these ‘singular catastrophes . . . often occurring in the midst of the most significant symptoms of prosperity’. Having observed that crises are related to the development of industry and to the establishment of large credit institutes, previous writers had ‘summarized as follows the ordinary causes of proper commercial crises: excessive development or misdirection of the productive forces in manufactures; and abuse of credit, favoured by banking institutes. To these two causes, often related to each other, a third is added: the excess of commercial speculation.

Dictionary histories of crises theories 135 The latter, however, is so strictly linked to the abuse of credit – even in the supporters of this theory – that it is difficult to interpret it as a special and distinct cause’ (CRISES COMMERCIALES, in →Coquelin and Guillaumin, Dictionnaire de l’économie politique, 1852, p. 528). As to the first cause, it is notable that Coquelin did not even consider the possibility of a general glut, and implicitly dismissed (by not discussing it further) the partial overproduction case. The second and third causes are discussed by means of a critical discussion of two writers considering them, J.-B. Say and J. Wilson, as a means for launching Coquelin’s own explanation of crises as a consequence of the monopoly of the bank of issue (see Chapter 8). A few entries in those years carried extensive, albeit unsystematic, references to the literature. The first bibliography of writings on crises was offered by Juglar in 1863. His entry on CRISES COMMERCIALES for →Block’s Dictionnaire général de la politique had a section on ‘the opinion of the main economists’ critically examining (in no particular order) the views of Say, Senior, Wilson, Tooke, Coquelin and Puynode (he decided not to ‘mention the rasher and more unscientific opinions’: p. 625), showing that they were not adherent to the facts, and added a list of a dozen other writings on the subject (see Chapter 12, also for a reference to the translation used). Macleod also produced an unsystematic discussion of the literature, with a passing reference to the debate between the Currency and the Banking schools (CRISIS, COMMERCIAL, in →Macleod’s Dictionary of political economy, 1863 (see Chapter 13).

4.3 SAY’S LAW AND OVERPRODUCTION In France and Britain, Say’s law was largely accepted as a matter of course (or at least not disputed) by most writers (among dictionary writers, Auguste Ott’s entries on CRISE and DÉBOUCHÉS for his own →Dictionnaire des sciences politiques et sociales (1854) is a relevant exception; see Chapter 10). In spite of the various possible interpretations of the law of markets, there was general agreement that it ruled out general overproductions, or general gluts, as logically impossible. Accordingly, most theories of crises either sought for external causes (for example, Blanqui, CRISE COMMERCIALE, in →Encyclopédie des gens du monde, 1836), institutional impediments (Coquelin, CRISES COMMERCIALES, in →Coquelin and Guillaumin, Dictionnaire de l’économie politique, 1852) or miscalculations on the part of entrepreneurs (Raffalovich, CRISE, in →Guyot’s Dictionnaire du commerce, de l’industrie et de la banque, 1898), or only considered partial overproductions (Guyot, SURPRODUCTION, in →Guyot’s Dictionnaire du commerce, de l’industrie et de la banque, 19012), or circumvented Say’s law by explaining crises as difficulties arising in the monetary domain, in particular in the issue of paper money (this was debated by the Currency and Banking schools) or in overtrading and speculation fostered by easy credit (Juglar, CRISES COMMERCIALES, in →Block’s Dictionnaire général de la politique, 1863; Macleod, CRISIS, COMMERCIAL, in his own →Dictionary of political economy, 1863; see respectively Chapters 12 and 13). In these entries, there could be hardly any references to the

136 Daniele Besomi gluts debate: Sismondi’s name, for instance, is only cited by Garnier when commenting that ‘Say had proved against Sismondi that there can be no general overproduction’ (CRISES COMMERCIALES, in →Guillaumin’s Dictionnaire universel théorique et pratique du commerce et de la navigation, 1859, p. 923). In Germany, on the contrary, Say’s law was not treated with deferential respect and was instead an openly debated matter (see Chapters 7 on Roscher, 14 on Wagner, 18 on Herkner, 19 on Lexis and 20 on Spiethoff). Referring to the gluts debate and relating it to the credit and overtrading strain of theories was not, therefore, taboo.3 Schäffle introduced the problem by way of a survey of the notion itself of ‘commercial crisis’. He thought of crises as periodically returning disturbances to the equilibrium of production and use. He argued that these phenomena had not yet been given an exhaustive scientific treatment, and that they were mostly described on the basis of their symptoms rather than accounted for. In Schäffle’s view, J. S. Mill did not go further than defining them as taking place when a large share of traders cannot fulfil their obligations; Coquelin argued that crises are nothing else but the sudden disappearance of credit; Juglar, as well as Max Wirth, followed the development of crises in the banking statistics, but did not attempt a theorization. In Schäffle’s view, only Roscher started instead from the right point of view, by considering the organic regularity in the development of production and consumption. The cause of the crisis can then be sought among the factors disturbing either production or consumption (HANDEL, HANDELSPOLITIK, in →Bluntschli’s Deutsches Staats-Wörterbuch, Vol. 4, 1859, p. 638). More explicitly, Wagner examined the gluts debate, comparing the positions of Say, Ricardo, James Mill and John Stuart Mill on one side and Malthus and Sismondi on the other, espousing the view of the former, treating the idea of general overproduction as a contradiction in terms, while admitting the possibility of partial overproduction, with the purpose of rejecting the view of Roscher. He compared this approach with the writings emphasizing instead the excesses of speculation and credit – Juglar’s, Gilbart’s, Schäffle’s and his own (KRISEN, in →Rentzsch’s Handwörterbuch der Volkswirthschaftslehre, 1866, pp. 131–133; see Chapter 14). Similarly, Adolf Held, in the entry on HANDELSKRISEN for →Löning’s Bluntschli’s Staatswörterbuch, divided the field between those writers who see the nature of the crisis as a disequilibrium between supply and demand, and accordingly see credit and money as subordinate, and the writers who, on the contrary, deny that a general overproduction is possible, and thus see money and credit as the main villain of the piece (1871, p. 173). Even if, apart from in Germany, overproduction lived only furtively in the underworld of heretics,4 it never died out. Indeed, by the end of the century the argument that overproduction is a feature of crises had gained enough weight (for example, by its being recognized as a partial explanation of the depression by the Royal Commission on the Depression of Trade and Industry (Northcote, 1886, p. xvii) and by the US Commissioner of Labor in his first Report (Wright, 1886, pp. 88–89)) that some dictionaries carried entries on ‘overproduction’ to disprove the case. The first is due to Hadley, who argued that Sismondi, Chalmers and to some extent

Dictionary histories of crises theories 137 Malthus confused three issues: (1) overproduction as disproportionate production of one particular article; (2) overproduction as a hindrance, preventing placement of goods in the most advantageous market; and (3) a general fall of prices. From the first argument, they inferred that overproduction is general, but failed to realize that this is the result, not the cause, of the crisis (OVER-PRODUCTION, in →Lalor’s Cyclopædia of political science, 1882). Hadley was followed by Edgeworth, who rejected OVERPRODUCTION theories for →Palgrave’s Dictionary of economics. He opened by quoting J. S. Mill’s dictum that ‘The theory of general overproduction implies an absurdity’, and continued by reporting that ‘the impossibility of a “general glut” has been demonstrated by almost all authoritative writers of last century’, while ‘on the other side are the weighty names of Malthus, T. Chalmers, and Sismondi; followed by a crowd of inferior writers’ (Vol. 3, 1899, p. 45; see Chapter 16). Other entries took the opposite side. The anonymous entry on OVERPRODUCTION in →Bliss’s Encyclopedia of social reform (1897) sympathetically surveys the overproduction argument of A. D. Wells and especially of Hobson, and criticizes the views of the socialist writers who deny the idea of overproduction based on the existence of the unsatisfied needs of the workers. Lexis, who also held an overproduction thesis (see Chapter 19), discussed the views maintaining (against Say’s and Mill’s view that general overproductions are impossible) that overproduction and production crises (Produktionskrisen) are necessary and periodical occurrences even in the absence of excessive speculation. The earlier literature (Owen, Malthus, Chalmers, Sismondi) pointed at the increased productivity of machinery, eventually generating unemployment and insufficiency of purchasing power. Later, Rodbertus and Proudhon too argued that workers cannot buy back their product. Marx and Engels in their Manifesto argued that the development of the productive forces that is a condition for the orderly progress of society at the same time menaces bourgeois property relationships and has to be restrained, thereby upsetting the entire social order. J. S. Mill emphasized instead the fall in the profit rate (KRISEN, in →Elster’s Wörterbuch der Volkswirtschaft, 1911, Vol. 2, p. 209). Spiethoff, in the entry on OVERPRODUCTION for →Seligman’s Encyclopaedia of the social sciences, classified the approaches to overproduction under two headings, contrasting ‘old’ and ‘new’ theories (see Section 4.5). Classical economists (that is, Say and the followers of his law of markets) were concerned with the issues of the possibility of overproduction and with the distinction between partial and general overproduction; curiously, Spiethoff does not mention any contemporary critics of Say. Modern overproduction theory could only arise with a fully developed capitalistic system, where a particular kind of overproduction is present with a clearly defined pattern through all periodically recurring depressions, and is an integral part of the explanation of the transition from prosperity to depression (1933, pp. 515–516; see Chapter 20).

138 Daniele Besomi 4.4 OPTIMIST LIBERALS AND PESSIMIST SOCIALISTS The first dictionary entry (and probably the first writing in absolute terms) with a full and articulated section surveying the history of the doctrines on crises and attempting a classification within a taxonomic scheme is due to Heinrich Herkner. Titled KRISEN and included in the first edition of Conrad et al.’s →Handwörterbuch der Staatswissenschaften (1890), the entry also contains a rich bibliography – though biased towards the German literature – to which several later dictionary entries referred (see Chapter 18). Herkner found that the easiest grouping of the theories of crises is between optimistic free traders and pessimistic socialists. The former see crises as an evil, but an evil also bringing some advantages that could not be eliminated without worsening the situation. As an illustration, Herkner quotes Wirth writing of crises being as destructive as storms but eventually bringing the feverish system back to health,5 Roscher noting that those who climb higher fall harder than those staying on the ground, and Brentano stating that crises are inseparable from the individuality of consumption, without which, however, life is not worth living. The pessimists see instead in the crisis the striking proof that capitalism is rotten to its core and that it is ripe for its demise (1882, p. 902). The list of optimists begins with Say and Ricardo, who denied the possibility of a general overproduction; they are followed by J. S. Mill, who emphasized the tendency of the profit rate to fall; the Currency school related crises to the issuing policy of the Central Bank; Bagehot and Jevons emphasized the failure of crops; Morier Evans, Wirth and others wrote on fluctuations in the stock exchange; the German and French literature emphasized the role of world markets; and Juglar wrote on monetary crises. Lexis is the link between these writers and the socialists; he recognizes the ‘blatant economic contradictions’ of overproduction coupled with underconsumption by the masses, but believes that the resulting oscillations are intrinsically part of the nature of capitalistic production without implying that capitalism should be replaced by another system. Under the heading of ‘pessimist socialists’, who have the merit of having initiated a deeper inquiry into the specific fundamental conditions under which the capitalistic system shows signs of decline or economic disorder, Herkner has assembled a motley body. Their father is Robert Owen, with his emphasis on machinery increasing productivity and thus reducing purchasing power for consumption. A similar argument is found in Malthus, Lauderdale, Chalmers and Sismondi, who had to challenge Say’s law. This diatribe on the equilibrium between production and consumption was later taken up by Rodbertus and Kirchmann. The position of Marx and Engels is represented with a long quotation from their Manifesto, and among later Marxists Kautsky and Lassalle are cited. In France we have Fourier and Proudhon, in the US Henry George. The positions of Michael Flürscheim and Otto Wittelshöfer are represented by means of long quotations. In the second and third editions of the dictionary (1900 and 1910), Herkner modified his approach. The categorization was tripartite. First he described the debate on crises between Malthus, Sismondi and Say, concluding that today it is

Dictionary histories of crises theories 139 difficult to understand how a theory, recognized as a tautology by its own author, could survive so long and have such an echo in economics, and even find adherents among Marxists such as Tugan-Baranovsky. The second group included, as before, the socialists. The list is updated to include Hobson and J. M. Robertson. Notably, from the second edition Marx’s Capital is cited instead of the Manifesto, for the first time in dictionaries. The third subsection is devoted to recent German economics, occupying a middle stance between liberals and socialists.6 The second edition discusses the ‘classical’ Wagner, Schäffle and Roscher and refers to Brentano, Neuraths and Philippovich, and the Marxists E. Bernstein and C. Schmidt, while the third updates the discussion (and the bibliography) to H. Cohn, Spiethoff, and the new theorists: Eulenburg, Pohle, Sombart, Bouniatian. The implication of the recognition of this middle stance is worth noting. The contradictions of capitalism take the form of oscillations (in the words of Lexis cited in the first edition) – i.e. the cycle; this is an idea expressed more explicitly a few years later by Kalecki, when the notion of ‘cycle’ had acquired a solidity which was totally lacking at the time of Herkner’s writing of this entry in 1882, but which began to be apparent in the German-speaking countries by the second and especially the third edition of the Handwörterbuch. This form is describing a new kind of ‘normality’, which is not as smooth as the steady progress the optimistic free-traders took to be the normal state of the economy, but neither is destructive like the violent crises and the breakdown envisaged by socialists.7 A new theoretical approach was superseding the old one, which seemed to be making obsolete the old ideological division between socialists and liberals, between pessimists and optimists.8 And it is precisely the old being subsumed by the new that provided the guidance for a new schematization of the theories of crises and cycles.

4.5 OLD VS. NEW THEORIES During the inter-war years, when dictionaries (especially in the German-speaking area) started recording the encompassing of the notion on ‘crisis’ under the heading of the notion of ‘cycle’, the Dogmengeschichte accordingly saw the distinction between an ‘old’ and a ‘new’ approach to the problem of crises as a convenient thread for dividing the narration into two parts – each of which was naturally suited to further systematization. Needless to say, the objective was that of emphasizing the generality of the ‘cycle’ approach, of which the crisis has become a phase after having been for a century the main focus of the analysis.9 The first and most detailed dictionary discussion along these lines is due to Spiethoff. He argues that the doctrine of economic fluctuations (wirtschaftlichen Wechsellagen) must explain the various phases of the cycle in their sequential chaining, a task that had been undertaken only in the last few decades. Most of the older theories of crises focused on the recurring stoppage of trade. The economic literature on the subject failed to provide a satisfactory theoretical outlook, still less a practical solution, as the factual evidence on which they were based bore the mark of not having been collected in response to the correct question. On the other hand,

140 Daniele Besomi there was a host of inquiry in the history of trade, banking and stock exchanges, which had recognized both the factual data and the causal relationships. The lines of research of the theorists and of these practical people remained severed, however, and a unifying understanding of the problem was lacking. However, no inquiry needs a unifying approach more than the theory of crises, as aptly expressed by Böhm-Bawerk’s dictum that the theory of crises must always be reserved for the last, or next-to-last, chapter in a system of economic theory. Spiethoff accordingly considers separately the ‘old’ and ‘new’ theories of crises. He classified the ‘old’ theories roughly following von Bergmann’s (1895) categorization10 (theories based on money supply, on crops and weather fluctuations, on the tendency of the yield of capital to fall to a minimum, on the law of markets or, on the contrary, on the possibility of general overactivity (Übererzeugung) beginning from the classical overproduction theories of Malthus etc., to the disproportionality type and as due to the unequal distribution of income), while a separate category is reserved for the ‘new’ doctrine of endogenous cycles (inkräftige Wechsellagenlehre) where the writings of Juglar, Tugan, Pohle, Sombart, Bouniatian, Aftalion and Schumpeter are discussed (Spiethoff, KRISEN, in →Elster et al., Handwörterbuch der Staatswissenschaften, 1925, Section 5; see Chapter 20). The same line of approach was adopted (in much less detail) in the entry on KRISE in the →Größe Brockhaus (→Brockhaus-Konversationslexicon, 15th edn, Vol. 10, 1931, p. 632). The author noted that while the regular return of crises induced even early writers to explain their original cause by means of laws of the economic system, these initial attempts – whether based on underconsumption or falling profit rates – failed to produce a satisfactory explanation of crises as part of the general cyclical movement. The modern theory of crises, beginning with Tugan-Baranovsky, Aftalion and Spiethoff, sees crises as part of the cycle, and rebuilds the theory of crises upon the theory of the cycle. K. Diehl, in the section on ‘the most important theories of crises’ of his entry on KRISEN for →Elster’s Wörterbuch der Volkswirtschaft, divided the field into two categories: the theorists belonging to the old generation, who focused on crises and tried to explain them in themselves by finding their causal factors; and the newest generation of theorists, who considered crises as part of the general movement of business (1932, p. 687). Within each group, the classification is strictly parallel to Spiethoff’s. Thalheim’s dictionary started from the premise that crises are a phase of the cycle, and as such do not need a specific cause but are rooted in the previous upswing (KONJUNKTUR UND KRISE, in →Das ABC der Volkswirtschaft, 1934, p. 166). Before this was recognized, the theories of crises were classified in terms of the causes of crises; the newest approach focuses instead on the cycle in its entirety. Old and new theories, however, fall into three main categories: (1) monetary theories: from the debate between the Currency and Banking schools to Hawtrey, Mises and Hahn; (2) overproduction (or, more precisely, overcapitalization) theories: from the gluts debate to Tugan, Spiethoff, Cassel, Sombart; (3) underconsumption: Malthus, Sismondi, Rodbertus, Marx (pp. 168–169).

Dictionary histories of crises theories 141 4.6 THE AETIOLOGICAL APPROACH The classificatory approach used by the vast majority of dictionary writers is based on the cataloguing of the dominant factors invoked in the explanation of the cycle. Even a number of entries using different criteria as the main approach (e.g. old vs. new theories, exogenous vs. endogenous, etc.) further subdivide their primary categories into classes based on the leading causal factor involved in the explanation of the phenomenon. This approach (if not the classificatory schemes themselves) was borrowed (sometimes explicitly, sometimes tacitly) and adapted from illustrious predecessors, in particular von Bergmann’s still unsurpassed history of the theories of crises, Jones’s alternative classification of the same materials, and the classifications of business cycle theories offered by Patterson, Persons, Mitchell, Hansen and Haberler.

4.6.1 The origins of the causal taxonomy Eugen von Bergmann produced at the end of the nineteenth century the first (and still one of the very few) book-sized dedicated history of the theories of crises. He explicitly excluded from his survey the theories primarily based on money and credit factors – not because they are unimportant, but because they can be examined at a later stage of the inquiry on the processes at work in the real economy (1895, p. vi) – but what remains is still so abundant that the exposition requires some grouping. Bergmann discards the classification propounded by Herkner in terms of the political premises of the theories of crises (see Section 4.4), arguing that the differences between various explanations go far beyond that, to the very essence of the theories – namely, their aetiological views. Yet, also by trying to systematize the opinions on crises on the basis of their purely theoretical content, one cannot reach a rigorous descriptive or genetic classification without doing violence to the theories themselves or resorting to artificial and very ample – therefore useless – categories. He thus concluded that the best method of classification is to class theories in large groups based on their general affinities and taking into account their stages of development (pp. 431–432). Accordingly, he examines first the oldest and simplest overproduction theories, still having a foot in pre-Smithian economics. There follows the counterposing of those who believe in the necessary equalization of production and demand on one side, with their partial over-production theories, and the supporters of a more elaborate overproduction theory on the other. The advances produced by the latter were ignored by a host of writers who focused instead on the process of circulation of capital. At the same time, however, a number of powerful critics of the existing economic order started focusing on the mismatch between the purchasing power and the productivity of the population, while still others demonstrated that the difficulties can arise because of the capitalistic method of production. Bergman concludes from his survey that two main lines of thought have emerged. One focuses on the relationship between the profitability of private enterprises and the growth of social productive forces; the other is concerned instead with the relationship between income distribution and effective

142 Daniele Besomi demand. These two issues, however, are intimately linked to each other, as stressed by writers such as Rodbertus, Marx and Lexis, and point at the problem of the conditions of the development of the social productive forces within our economic order and of the further effects this development will have on the processes and structure of the economic system (pp. 432–434). While Bergmann identified the core of the theories with their aetiological view (p. 432) and accordingly suggested that a categorization should focus on the causal mechanisms (p. 431), he nonetheless concentrated more on the problems concerning the relationship of production and demand. His successors, however, focused precisely and explicitly on the causal relationships. Edward Jones, writing shortly after Bergmann, divided the theories of crises into two classes: ‘First are those which assign some specific, immediate, and actuating cause, of such a character that no law can be formulated as to its recurrence. Second, we may group together all those explanations of crises pointing out an inherent tendency of industry which, when not counteracted, leads to recurring periods of distress’ (1900, p. 22). The writers belonging to the first class (Roscher is among the most prominent of them) believe that ‘the present industrial system tends to preserve a stable equilibrium, and that there are no persistent or recurrent tendencies operating to break down the adjustment which normally prevails between demand and supply’ (ibid.). However, due to the expansion of the use of credit the situation can be upset: ‘Under some circumstances the industrial system may be said to be in unstable equilibrium, as when a country possesses a system of unsound banks or an unregulated paper currency. The course of foreign commerce is usually recognized as less stable and reliable than that of home trade’ (p. 24). Unpredictable changes, superimposed onto this instability, may thus produce crises. Although Jones presents these causes in some order (those affecting production, exchange, consumption, and miscellaneous), they are innumerable, and therefore ‘no important classification can be made among them’, as ‘all true causes are equally important’ (p. 35). The second class of writings considers instead steadily operating causes, intermittently (or even periodically) erupting into crises when their cumulated effects disturbs the equilibrium between supply and demand. These can be classified depending on whether they pertain to (a) lack of organs of industrial control; (b) capital: unused capital, or improperly used capital; (c) distribution of wealth; (d) money, banks, corporation laws; (e) credit and speculation; (f) psychology. An alternative classification, based on whether the causes disrupting the equilibrium between supply and demand affect one side or the other, is considered as ‘helpful, if not . . . very penetrating’ (p. 219). Patterson’s starting point is similar to Jones’s (upon which he probably elaborates). But while Jones stressed the distinction between intermittent and persistent causes, Patterson distinguishes between the old theories of crises (somehow caricatured) based on some unpredictable cause, and the theories of periodical cycles. Explanations of crises may be divided conveniently into two general groups. The first includes those which find that each disturbance is due to some special

Dictionary histories of crises theories 143 cause. Modern industry is viewed as in a state of stable equilibrium. This condition is ‘normal’ and tends to continue, but numerous influences, which are for the most part unpredictable, are apt to disturb it and bring about an ‘abnormal’ situation. Crises thus have little or nothing in common except their abnormality. They are pathological phenomena and each has its special, unpredictable cause. [. . .] To others, and in fact to most writers in recent years, there seems to be a distinct uniformity in the intervals between crises and in certain of the accompanying phenomena. This has led to the suggestion that there may perhaps be formulated a law of their periodicity. It is said that crises tend to recur and that prosperity, crisis, and depression succeed each other with such regularity as to warrant the use of the word ‘cycle’. Explanations of this second sort may be called cycle theories and may be divided into three classes. These classes are by no means mutually exclusive but represent differences of emphasis rather than entirely distinct opinions. First are those that find the explanation in the human mind. The ebb and flow of business is due to psychological causes. Second are the theories that find a regularity of recurrence in the operation of some of the forces of nature which determine the crop yield and thus affect values. Third and last in our classification are the theories that place their emphasis upon the structure of our modern economic life. (Patterson, 1915, pp. 136–138) Patterson’s classification was adopted and refined by Wesley Mitchell, who ignored altogether the old theories of crises and further divided Patterson’s third class of theories of the cycle into theories tracing the cycle to changes of institutions (change in pace of social progress, waves of innovations) and theories focusing on the functioning of existing institutions (technical exigencies of money-making; lack of equilibrium in the process of disbursing and spending incomes and producing values, or in the process of producing and consuming goods; from lack of equilibrium in consumption, saving and investment; from the process of banking) (Mitchell, 1927, pp. 49–53). Meanwhile, Persons (1926) also produced a classification based on causal mechanisms. He described his attempts as follows: Helpful classifications of theories of business fluctuations might be made on the basis of various criteria; such as the nature of the fluctuation, periodic or nonperiodic, the origin (that is, the beginning) of the fluctuation, the cause assigned to the lapse from prosperity to depression, the remedies offered, or the element in the author’s explanation which he emphasizes most in his discussion of the causes. It has been found by the present writer, after various criteria were tried, that the most workable one was the last one mentioned; and hence the classification has been made according to the elements in each explanation most emphasized by the author himself. These elements may be specific events from which arise a train of sequences, or economic institutions which condition a train of sequences, or inherent human qualities which are

144 Daniele Besomi held to be real origins, or the inevitable development of society which, given our economic institutions, causes fluctuations; but in any case the ‘elements emphasized’ was the basis used for the present classification. (p. 99) As Mitchell stressed, his classification and Persons’s are similar. But while Persons is primarily concerned with a survey of theories, Mitchell is classifying theories with a view to singling out the working hypotheses he could use for his own constructive study of the cycle. Some writers are thus pigeon-holed in different categories (Mitchell, 1927, p. 49n). Alvin Hansen (1927), citing Mitchell (1927) but none of the other classifications mentioned above, also starts with the observation that most explanations are multicausal and are in most cases not mutually exclusive, so that authors could contribute to more than one category. He distinguishes three broad types of categories. The first is concerned with the features of a capitalist economy: some believe that the problem resides with the distribution of income, others with some technical features of production (inventions disturbing equilibrium, or fluctuations in demand affecting investment). The second group comprises the theories focusing on the competitive exchange economy. The theories in the third group attribute the cycle to the monetary economy (‘the interrelations of the rate of interest, the prospective rate of profits, and the price level’ and ‘the interrelations of costs and prices, profit margins, and capitalization’). The most celebrated (and cited and imitated) survey of business cycle theories is due to Haberler. He aimed at proving that in most cases different theories of the cycle are not incompatible after all, so that they can be synthesized into a comprehensive explanation of the phenomenon. The discrepancies between the various theories, in spite of being often overemphasized by their authors, can sometimes be accounted for by differences in their terminology, or they can result from differences in emphasis. The phenomenon of the cycle, in fact, is so complex that hardly any inquirer believes it can be ascribable to a single cause. But each writer tends to emphasize one or a few of these causes, taking the others as data or as conditions defining the institutional setting of the problem. Conflicts between writers, then, are more apparent than real, and can often be ascribed to different choices as to what is a cause and what is a condition.11 It could thus be helpful to distinguish between causes and conditions, between controllable and uncontrollable factors, between exogenous and endogenous causes, but the dividing lines are blurred. Having observed that cycles have shown a remarkable persistence even in the absence of external causes, Haberler thus starts from the assumption that the system is intrinsically unstable. This allows him to focus on the economic factors and relegate external disturbances to the role of the originators or disturbers of the endogenous process (Haberler, 1937, pp. 5–12). There results the following taxonomy (from the less complicated to the more complicated): purely monetary theories; overinvestment theories (monetary, non-monetary and resulting from changes in the demand for finished goods); changes in costs, maladjustments, and over-indebtedness; under-consumption theories; psychological theories; harvest theories.

Dictionary histories of crises theories 145

4.6.2 The aetiological approach in dictionaries The common feature of the aetiological approaches is the mechanical principle that causes can be taken apart and analysed in isolation (and, if necessary, recombined into a new explanation). In principle, none of the causes is privileged: they all contribute to the comprehensive picture, in one role or another, and can be recombined into ‘new’ comprehensive explanations as deemed suitable. As the archetypes summarized above illustrate, there is no unique way of dismantling and pigeonholing the resulting pieces. The recognition of the places where something can go wrong (e.g. by disrupting equilibrium) essentially depends on the classifier’s theoretical approach and view of the working of the capitalist system, which therefore also guides the construction of the taxonomy of the causes of the cyclical movement. The same condition is found in the classifications attempted in dictionary entries – the most recent of which also had to deal with additional theories to be placed. The aetiological classificatory approach in dictionary entries was particularly popular between the late 1920s (in correspondence with the similar attempts in the general literature on cycles) and the 1960s, with some later instances. Tugan-Baranovsky has already distinguished three groups of theories of crises according to whether the cause of the phenomenon belonged to the domains of production, exchange or distribution (ECONOMIC CRISES, in the →Brockhaus– Efron Encyclopedic dictionary, 1895: see Chapter 17). Bergmann inspired Spiethoff’s 1925 categorizations of the ‘old’ theories of crises (see Section 4.5) as well as W. Heller’s cursory list, including general overproduction, underconsumption, socialist explanation of underconsumption due to income distribution, and disproportions, to which – like Spiethoff – he added the theories focusing on the entire cycle (KRISENTHEORIE, in →Nationalökonomie (Theorie und Geschichte), 1926, pp. 100–101). Within the main division of ‘old’ vs. ‘new’ theories, Diehl similarly constructed a causal taxonomy in six categories for the old theories of crises (KRISEN, in →Elster’s Wörterbuch der Volkswirtschaft, 1932, Vol. 2, pp. 687–689), while Thalheim’s dictionary – also as a subdivision of the ‘old’ vs. ‘new’ approaches – divides the theories of crises into only three categories: monetary, overproduction and underconsumption (KONJUNKTUR UND KRISE, in →Das ABC der Volkswirtschaft, 1934). Mitchell, in the entry on BUSINESS CYCLES for →Seligman’s Encyclopaedia of the social sciences (1933), naturally takes up his own 1927 classification scheme (see Chapter 22, Section 22.2 for further discussion). Bachi, in the entry on CRISI ECONOMICHE for →Treccani’s Enciclopedia italiana (1931), discusses the difficulty of logically isolating and separating the various causes at work (p. 913), maintains that the eclecticism of all discussions of crises defies any attempt at classification, although Mitchell’s and Persons’s attempts are noteworthy, and produces his own list of remarkable causal families of theories (pp. 917–918). Another Italian, Masci, a few years later also remarked that none of the classificatory schemes is completely satisfactory. Yet he sketched a categorization similar to Mitchell’s, to which he added the group focusing on the saving–investment

146 Daniele Besomi relationship – an explanation to which he himself adhered (CICLO ECONOMICO, in →Confederazione Fascista delle Aziende del Credito e della Assicurazione, Enciclopedia bancaria, 1942). The first dictionary to introduce a category representing Keynesian economics was →Horton’s Dictionary of modern economics: in the entry BUSINESS CYCLES, THEORY OF, next to overinvestment theories there appears the class of underinvestment theories. The proposed classification is admittedly ‘somewhat artificial, depending more on a matter of emphasis than upon unique explanations’ (1948, pp. 40–41). The entry on KONJUNKTURTHEORIEN in →Sellien et al., Gablers Wirtschafts-Lexikon (1956) takes up (without giving explicit reference to) Haberler’s scheme and preliminary reflections on causation. Haberler’s categories are instead expressly cited, but only briefly, in the entry on BUSINESS CYCLE in →Munn’s encyclopedia of banking and finance (Garcia, 1962 and later editions). Taylor also offers a very cursory causal schematization, nevertheless inserting a class for ‘Keynesian economics’ (TRADE CYCLE, in →A new dictionary of economics, 1966). Much later, M. F. Foss took up Haberler’s classification, to which he added a summary of the monetarist, equilibrium and real business cycle theories, and of the empirical approach of Mitchell and the NBER (BUSINESS CYCLES, in →Outhwaite’s Blackwell dictionary of modern social thought, 2006).

4.7 ABANDONING THE CAUSAL REPRESENTATION Even at the acme of its success, the causal scheme of classification was not universally adopted. Before it was substituted by other preferred approaches, a few alternatives had been articulated. Müller-Armack explained in 1929 that he would classify theories according to the models of thought (Denkmodelles) used to explain the development of economic conditions rather than according to the concrete descriptions of their cyclical evolution. These descriptions, in fact, lack an unambiguous ascription to a certain basic model, be it the equilibrium theorem or a specific view of economic dynamics. The explanatory value of causal descriptions can only be ascertained by connecting the concrete phenomena to the general theoretical scheme; to different schemes, different explanatory values are associated. Accordingly, he produced a threefold classification of business cycle theories. First, those relating to the equilibrium theorem. If the production and exchange processes bring about an optimal economic condition, no genuine crises or cycles can really exist. Any fluctuations must therefore be attributed to chance movements, such as fluctuations in crops, speculation etc., which spread to the entire system due to the solidarity between its parts. To this family belong theories emphasizing maladjustments on the goods side, such as changes in fashion on the side of demand or changes in productivity on the side of supply, and the explanations in terms of monetary or credit phenomena. A second category of theories is made up of those accounting for economic development in terms of the accumulation of capital. Socialist theories see the impetus to capitalist expansion in the circulation process. Because of the continuity of technological progress, entrepreneurs, instead of

Dictionary histories of crises theories 147 consuming their surplus, accumulate it. From this, two disproportions follow in Marx’s theory, namely, the tendency of profit rates to fall and underconsumption by the workers. Some – e.g. Rosa Luxemburg – here link theory of crisis and theory of imperialism. To this category also belong the old underconsumption theories, such as Sismondi’s, or the new ones, such as the liberal-socialist Oppenheimer’s (based on the pressure on wages due to the monopoly of land), or Lederer’s (based on the rigidity of consumers’ incomes). Finally, the third category includes the theories maintaining that the capitalistic process itself generates the forms of its growth and the means of sustaining the demand for its products; this is nothing else than a new formulation of Say’s law. To this group belong writers such as Schumpeter, Hahn, Pigou, Hayek, Mises, Lavington (KONJUNKTURFORSCHUNG UND KONJUNKTURPOLITIK, in →Elster’s Handwörterbuch der Staatswissenschaften, Vol. 4, 1929, pp. 649–655). H. Besters, in the entry on WIRTSCHAFTLICHE KONJUNKTUREN for the →Staatslexikon of the Görres-Gesellschaft (Vol. 8, 1963), described the theories of the cycle according to some general views concerning the working of the economic system. Besides the old purely exogenous theories, which he thought to be unsatisfactory as they failed to give a clear account of how the external causes exerted their effects on the economic processes, Besters considers the explanations assuming a barter economy (the naive overproduction and underconsumption theories of the mercantilists, and the classics and Say’s law); those assuming instead a monetary economy and focusing on the mismatch between circulations of goods and of money (the disproportionality theories, those focusing on overinvestment); the mechanistic explanations (the multiplier–acceleration mechanism); those focusing on the mechanisms giving rise to cycles when disturbances of equilibrium are corrected; and the theories considering the interrelation of cycles and growth (the pre-war theories interpreting the cycle as part of the growth process, and pessimistic post-war theories considering instead the hypothesis of a tendency to stagnation) (pp. 740–747). It should be noted that while this choice of perspective enabled Besters to tidy up the field somewhat, it is rather arbitrary and omits a number of approaches.

4.8 THE FORMAL PROPERTIES OF MODELS When mathematical modelling of the cycle became ripe enough to make it to dictionaries, the possibility of classifying models according to the principles involved by certain mathematical properties offered itself to entry writers. The first to take advantage of it was Haavelmo (see Chapter 22, Section 22.5): First, we consider whether the principal active forces responsible for motion are assumed to come from the outside or are assumed to be endogenous parts of the economic system itself. The first type of model is sometimes called an open model, and the second type is called closed. Second, for each of these two types of models, we consider whether the cycles are produced because

148 Daniele Besomi the driving force is itself cyclical (‘forced oscillations’) or because of the particular way in which the economic system responds to the stimulating forces (‘free oscillations’). (BUSINESS CYCLES: MATHEMATICAL MODELS, in →Sills, International encyclopedia of the social sciences, 1968, p. 247) Haavelmo was aware that a model could fall into more than one of his four categories, and that therefore this taxonomy does not offer a unique categorization. Both the exogenous/endogenous and the free/forced oscillations distinctions were also considered, or at least implied, by some of the aetiological taxonomists – indeed, in Haavelmo’s mechanistic framework, ‘forces’ are nothing but ‘causes’. The advances in mathematical modelling, however, made it possible to conceive of the possibility (which would have seemed at least very unlikely to Jones in 1900) of exogenous models giving rise to periodical free oscillations. The latter point is further discussed by Medio, who pointed out that between the purely exogenous interpretation of cycles sustained by periodical external shocks, or the purely endogenous interpretations of persistence based on non-linear models, it is also possible to adopt a middle way consisting in fairly regular fluctuations resulting from exogenous a-periodic shocks superimposed upon a system predisposed to oscillate (CICLO, in →Lunghini’s Dizionario di economia politica, 1983, pp. 11–12). The presentation of the theories (in line with the Dizionario’s approach; see Chapter 1, note 11) is chronological, but with an eye on the state of modelling: classical economists did not have a proper theory of the cycle, but had discussed the equilibrium conditions of the economic system and whether or not it was inclined to crises; crises, however, were not yet seen as a part of a general phenomenon. Towards the end of the nineteenth century there began the modern phase of business cycle research: the cycle became the focus of analysis, and writers sought to identify the causes of the phenomenon and frame them into theories. No models, however, were produced at this stage. During the ‘contemporary’ phase of the history of business cycle analysis we witness instead attempts to give a rigorous couching in mathematical terms to the previous intuitively formulated theories (pp. 17–18). The survey, examining a number of representative writers for each epoch, concludes by taking up the issue of the persistence of fluctuations in terms of the properties of linear vs. non-linear modelling (pp. 53–55; see Chapter 26, Section 26.2). Some of these themes are taken up by Mullineux, although more as a list of contrasting approaches than as a proper classification of theories. Besides the issues of systematic vs. random fluctuations, shocks vs. non-linear models and the in/stability of equilibrium, he also mentions the issue of the separation of cycles and trends (BUSINESS CYCLES, in →Kuper and Kuper, The social science encyclopedia, 1985).

Dictionary histories of crises theories 149 4.9 DIGGING RATHER THAN SKATING: THE QUEST FOR A FUNDAMENTAL LINE OF DIVISION Upon reading the first draft of Haberler’s classification of business cycle theories, Keynes commented as follows in a letter to Felkin: [Haberler] is attempting something which is not worth while. Working within such narrow limits of space he is condemned to producing an account which is very far from clear of theories which are themselves confused. On a plane so near the surface as that which he is deliberately occupying there is obviously nothing useful to be said. Obviously the truth must lie somewhere much deeper down and the source of so much confusion could only be found by clearing up the terms and concepts involved right from the beginning. There is hardly a phrase of which the meaning is unambiguously clear. Moreover, in order to get his authors into his schematism he has had to make some of them appear sillier, others less silly, than they really are. I doubt if many of them would recognise themselves as they are here presented, with their bodies cut up into small cubes which are then made up into lb packages and put into pigeonholes. Two trunk murders were bad enough, but here are dozens with an assorted collection of limbs in each trunk. (Keynes, 1934a) A few months later, he returned to the point in a letter to Haberler: My essential point is that the method you have adopted forces you to a high degree of superficiality. As I said before, I cannot believe that the solution can be reached by bringing together in selected packets excerpts from the views of a large number of writers, each differing from the other more or less in fundamentals. The answer must lie somewhere much deeper down; yet your method tempts you to skating rather than digging. (Keynes, 1934b)12 Although Haberler’s approach was widely acclaimed at the time (Keynes himself later admitted that the final result ‘is all very skilful and clever’ (Keynes, 1939)), and was adopted by several writers in the following three decades, the artificial character of the classification in terms of causes at some point became apparent, and the need for a taxonomy focusing on more fundamental features of business cycle theories made itself felt. Several solutions have been explored, which share the idea that the theories of crises and cycles should be grouped according to the general perspective on the working of the economic system. An interesting implication of this shift of approach is that the distinction between the old theory of crises and the new theories of the cycle becomes secondary with respect to the emphasis on the significance of crises and cycles for the working of the economic system. Accordingly, the theories advanced in the nineteenth century are treated on an equal footing with the more recent contributions, after having been treated for almost half a century (if not ignored altogether) as rather ‘primitive’.

150 Daniele Besomi

4.9.1 Say’s law (again) In 1956, →Napoleoni’s Dizionario di economia politica included a long entry (38 pages) on FLUTTUAZIONI ECONOMICHE by Thomas Balogh. Although Balogh does not seem to have written anything else on the subject, the result is an able essay (some inaccuracies notwithstanding) reconstructing the history of the theories of crises and cycles as seen from a precise (though far from unbiased) perspective, namely, how Say’s law had hindered the development both of theoretical advances in the field and of appropriate economic policies, until this ‘colossal deception’ (p. 645) was eventually dismantled and several strains of theories could flourish in a heterogeneous yet consistent way. Equivocally as it was formulated, it is difficult to pin down Say’s law to a precise proposition. Balogh sees its roots not so much in a sociological desire to give a rational foundation and justification to the liberal principles of individual freedom in economic matters, but in the economists’ objective of founding an ‘objective’ science modelled on Newtonian physics. The law of markets has been one of the most tenacious cornerstones of economics as a static science of equilibrium, as it postulated that any divergence between supply and demand (whether it be of goods, as in early classical economics, or of capital, as in post-Ricardian classical and neoclassical economics) is automatically corrected thanks to the elasticity of both demand and supply with respect to prices and interest (pp. 645–648). Crises and cycles were accordingly treated as secondary and residual phenomena, rather than as facts that required a reconceptualization of the entire theoretical approach in order to be incorporated within the general theory (p. 649). Balogh’s survey of pre-Keynesian theories of crises and cycles thus examines how Say’s law either constrained crises theories or, on the contrary, how writers challenged it. On the latter point, however, his conclusion is rather drastic:13 ‘after Malthus no academic economist, up to after Keynes, has attempted to insert the recurrent and insistent phenomenon of economic crises within a general and accepted theoretical scheme. The body of economic theory – whether based on the theory of labour-value or on the system developed by the various marginalist and mathematical schools – was more or less based on the doctrine of continuous full employment of available resources, since any deviation from this condition was quickly and automatically corrected, unless there were frictions due to an imperfect working of the price mechanism’ (p. 647). Balogh’s emphasis is on the place of equilibrium and of its stability (an issue he seems to consider as more or less equivalent to Say’s law, or at any rate implied by it) in the theoretical construction. I will not follow the details of Balogh’s reconstruction from the overtrading theories of the early nineteenth century14 to the empirical researches of the inter-war years, via the theories based on crop fluctuations, credit, monetary theories of underconsumption, the monetary theories (pure, and of overinvestment), those based on the character of capitalistic production. The point to note, for the purpose of this chapter, is that Balogh identifies the mechanisms deployed by each of these strains of theory to explain how the action of Say’s law is counteracted or temporarily suspended, thereby permitting the occurrence of crises (pp. 651–663).

Dictionary histories of crises theories 151 An article by Löwe published in 1926 radically questioned the compatibility of the kind of movement observed during business cycles with the existing static theoretical system, and postulated that a dynamic system should be erected in its place. Balogh argues that although Löwe was not able to propound such a system, he laid the ingredients for the solution of the problem (FLUTTUAZIONI ECONOMICHE, pp. 650–651). This was eventually built upon two foundations. The first was Sraffa’s 1926 criticism of neoclassical theory, questioning the ceteris paribus assumption and the postulate of independence of variations and thereby opening up the possibility that small changes in one sector feed back further changes, and accordingly cannot be relegated to the realm of the second order of magnitude. The second, due to Kahn (1931), was the economics of production as a whole, so that income could be treated as the result of the interaction of aggregate demand and supply rather than being given by some long-term factors. This ‘broke the incredible and unintelligible spell’ of Say’s law, and opened the door to the formulation of an entirely new and consistent system – Keynes’s General theory. Here comes the notable historiographical point of Balogh’s entry. He argues that, after Keynes, a true and complete synthesis of business cycle theories has become possible. Löwe had shown that previous theories were contradicting each other and failed to give a consistent explanation of the cycle (p. 650). He could thus distinguish between various schools of thought, and associate the ‘monetary’ theories mainly with an Anglo-Saxon approach, while the ‘real’ theories were mainly of Continental origin (pp. 665–666). The same method of presentation was followed by Haberler (1937), who was not aware that Keynes made uniforming possible (p. 666).15 This lies in the proposition that saving and investment decisions are independent of each other, and that there is no automatic adjustment mechanism ensuring that they balance each other at the level of full employment. Combining saving and investment functions, various models are possible and, especially if no assumption as to the rigidity of parameters is made, they can accommodate all the most important elements of the old theories, which can then be synthesized in a consistent and satisfactory way. The differences between various theories and schools have become a matter of detail, often concerning the mathematical method rather than the essence of the theory (pp. 667–669).

4.9.2 Schools of thought and chronological narrations From the late 1970s, a different approach to classification emerged and gained some popularity. Rather than taking theories apart, a number of surveys offered by dictionaries grouped them by schools of thought. The unstated but rather obvious premise is that if schools of thought can be recognized as sharing some strong and fundamental principles, this also holds for their interpretation of crises and cycles. The first such typologies were presented by Paolo Guerrieri and Pierluigi Ciocca in Italy, and by Hans-Jürgen Vosgerau in Germany, all in 1978. Focusing on the cycle (in a long and detailed entry titled FLUTTUAZIONI ECONOMICHE, devoted to the history of the theories of the cycle; see Chapter 3, Section 3.2.10 on the implications of the usage of the terms ‘cycles’ and ‘fluctuations’), Guerrieri considers

152 Daniele Besomi the analysis of the classics (where an analysis of the cycle was lacking, for crises were considered as episodic) and Marx (the first real scholar of the cycle: Guerrieri interprets Marx’s crises as turning points of the cycle), of neoclassical economics (which, having accepted Say’s law, describes a system capable of growing uninterruptedly, where cycles are a theoretical anomaly requiring special explanations based on non-economic or monetary factors), of Schumpeter (who thought of capitalistic growth as a discontinuous phenomenon), and of Keynes (who rejected Say’s law and focused on the fluctuations of investment decisions, opening the way to a new stream of inquiries on the endogenous determinants of the cycle). Post-war theories are grouped in families (probably as the strict identification with specific schools of thought was not that easy): the multiplier–accelerator models, those examining the interrelations of cycles and growth, Kalecki, monetary theory (from Hawtrey and Hayek to Friedman), the theories based on inventories and econometric models (in →Carmagnani and Vercelli, Il mondo contemporaneo, 1978). Ciocca, focusing on the problem of the persistence of the cycle, considers four typologies of business cycle theories, stressing that one of the few points of agreement between them is that cyclical fluctuations are a feature of capitalist economies that will be difficult to eradicate. Marxist theories attribute the resilience of the recurrence of crises to the tendency of the profit rate to fall, to the necessity of keeping under control the number of workers, to the difficulty in keeping the correct balance (qualitatively and quantitatively) between supply and demand, and to the anarchy of production. Monetary theories blame instead mistaken policies by the monetary authority and the instability of credit supply, without which the system would be stable and tend towards a position of full employment. The theories focusing on phenomena taking place on the supply side emphasize the delays with which costs adapt to prices, determining undue fluctuations in the profit rates. Finally, the composite family of Keynesian theories stress the instability of investment decisions (CRISI ECONOMICHE: IL NOVECENTO, in →Carmagnani and Vercelli, Il mondo contemporaneo, 1978, pp. 139–142). Vosgerau devotes a section of his entry on KONJUNKTURTHEORIE for →Albers and Zottmann’s Handwörterbuch der Wirtschaftswissenschaft to the epochs of business cycle research. This is more a chronological approach, complementing the Haberler classification scheme (applicable to neoclassical and pre-Keynesian approaches) with an account of the classical approach and with developments subsequent to Keynes. In the classical world there was no room for business cycle theories, which were ruled out by Say’s law. There was some reaction in the first part of the century – Malthus and Sismondi – while later the phenomenon was increasingly recognized, as witnessed by Overstone’s description of the cycle, and some suggestions that we now recognize as anticipations of monetary, crops and investment theories of the cycle were formulated, but they really were not integrated within the theoretical scheme of the classics. An exception was Marx, who probably formulated the first account of the cycle as being intrinsic to a growing economy. After Keynes, business cycle research has mainly elaborated upon Frisch’s distinction of impulse and propagation problems, in particular within his notion of ‘dynamics’. There are four main lines of inquiry. First, the cycle is subsumed under

Dictionary histories of crises theories 153 the more general heading of the movement of output and employment, mostly in macroeconomic terms but also within microeconomic disequilibrium analysis. The second approach consists in formal mathematical modelling, starting from Samuelson’s multiplier–accelerator model up to the recent formulation in cybernetic and system theoretical languages. Third, the development of national accounting and statistics after the war has given new scope to econometric modelling. And finally, following the increased economic control, political business cycle theories have received a new boost (1978, pp. 486–489). This systematization is followed by an account of some business cycle models, including the first dictionary report of non-linear modelling (for a discussion, see Chapter 26, Section 26.2). Brémond and Gélédan survey the theories of growth and cycles in classical economics (also stressing Say’s law and its critics), neoclassical economics (believing in the spontaneous regulation of markets and accordingly interpreting crises as the violation of the laws of competition), Keynesian analysis (disputing that there exists an automatic tendency to adjustment to equilibrium, with some post-Keynesians emphasizing the role of income distribution), and the Marxist regulations approach (according to which crises break out when the determinants of the reproduction of the general law of society are seriously challenged in their working) (CROISSANCE ET CRISES, in →Dictionnaire des théories et mécanismes économiques, 1984, pp. 81–95). De Luca also offers a (very sketchy) catalogue of views on the cycle divided by schools of thought. As periodic fluctuations are incompatible with Say’s law, classical and neoclassical economists do not have an explanation of this phenomenon and therefore rely on exogenous factors; the first theory of cyclical fluctuation is due to Schumpeter, while after him the assumption of a rigid regularity in the cycle was substituted by an analysis of the phases of expansion and contraction. Post-Keynesian explanations are based on endogenous forces, in particular by way of the multiplier–accelerator mechanism; monetarists, on the contrary, explain the phenomenon by focusing on changes in the supply of money; finally, the theories of the electoral cycle and those based on sunspot equilibria are also listed (CICLO ECONOMICO, in →Nuovo dizionario di economia, 2000, pp. 112–113). →Snowdon and Vane’s Encyclopedia of macroeconomics (2002) also offers an overview of business cycle theories in terms of schools of thought, but rather than having a unified entry discussing and comparing these schools, it carries separate entries for each approach: BUSINESS CYCLES: AUSTRIAN APPROACH, by R. W. Garrison; BUSINESS CYCLES: KEYNESIAN APPROACH, by A. B. Trigg; BUSINESS CYCLES: MARXIAN APPROACH, by G. Reuteen; BUSINESS CYCLES: MONETARIST APPROACH, by J. D. Hammond; BUSINESS CYCLES: NEW CLASSICAL APPROACH, by B. Snowdon and H. R. Vane; BUSINESS CYCLES: POLITICAL BUSINESS CYCLE APPROACH, by B. S. Frey and M. Benz; and BUSINESS CYCLES: REAL BUSINESS CYCLE APPROACH, by C. Ryan. Much more briefly, the →Encyclopedia of governance distinguishes between the neoclassical approaches and the proper business cycle approach. The former ‘conceive of recessions as the result of external interventions or disturbances leading an economy to deviate from a normal path of steady growth, continuous optimization of economic actors, and adjustment of

154 Daniele Besomi prices to supply and demand’. The theories of business cycles – propounded in particular by (post-)Keynesians and (post-)Marxists – claim instead that ‘the succession of economic expansion and downturn is an intrinsic feature of the capitalist economy’ (J. Drahokoupil, BUSINESS CYCLE, p. 63). Alquier, in the entry on CRISE in his own →Dictionnaire encyclopédique économique et social (1985, 1990) argues that the reflections on crises lie at the very heart of economic theory, at the point where it is made clear how the economic system is geared with the working of the entire society. The key to the understanding of the theories of crises is the theory of growth, which on the one hand examines the conditions of ‘normality’ of development – that is, the internal logic of the economic system – and, conversely, reveals the conditions of its pathology; the crisis is then the test for the ‘truth’ of a theory. There is a main division line between approaches: most schools of thought discuss crises in terms of their possibility, whether to admit or to deny it; on the other side, there are the Marxists, who focus instead on the necessity of crises. From this interesting premise, no actual survey of theories follows, except a very cursory overview of the position of the main schools. Classical and neoclassical writers postulate that equilibrium is a real configuration, an actual state of things, and deny – on the basis of Say’s law – the possibility of persistent and deep disequilibria. The classical dissidents, Malthus and Sismondi, argued that general crises of underconsumption are a concrete possibility, as did Keynes in his confrontation with the ‘classics’ on Say’s law. None of them, however, envisaged that capitalism itself is in danger. Marx’s theory of crises starts from a discussion of its possibility (but only the most general determination is considered, namely, the fact that the use of money, which is not only an intermediary of exchanges but also a reserve of value, opens the possibility that sales are not immediately followed by a purchase), followed by a discussion of its nature consisting in the contradiction by the development of productive forces and the valorization of capital, and finally of its necessity, due to the need to resolve the contradiction (pp. 113–116).

4.9.3 Exogenous vs. endogenous approaches The recognition (implicit at least) that there is a deep difference between explaining crises by means of exogenous and endogenous causes dates back at least to Blanqui in 1836, Michel in 1839 (on both, see Chapter 6, Section 6.2), Coquelin (see Chapter 8) and Boccardo (see Chapter 11) in the 1850s. Naturally, the taxonomies of cycles and crises theories have taken the distinction into due account; the aetiological approach, for instance, placed the ‘astronomical’ theories in a different category from the other (directly economic) causes. Beginning from the 1990s, some dictionary writers centred their taxonomies precisely along the line separating exogenous and endogenous theories. Wilfried Fuhrmann, in the entry KONJUNKTURTHEORIEN for →Dichtl and Issing’s Vahlens grosses Wirtschaftslexikon (1993), divides the theories of the cycle into two groups: the explanations in terms of non-economic factors, and the economic theories. The theories relying on exogenous causes include the cosmic

Dictionary histories of crises theories 155 theories of Jevons and Moore, Slutsky on random processes, the modern stochastic theories of Frisch and Lucas, but also the political business cycle approaches. Among proper economic theories, the following categories are cited: first, the historic–economic ones, emphasizing the role of the specific economic order and constitution. This includes the Marxists, but also the theories emphasizing overinvestment (Schumpeter, Wicksell), income distribution (Lederer, Preiser), money and credit (Friedman, Hawtrey), or psychology (Jöhr, Keynes). Second, the theories emphasizing the adjustment processes following monetary shocks (equilibrium business cycles), real shocks (real business cycles), overlapping generations and sunspot theories. Third, the theories of Keynesian descent, including the multiplier–acceleration models and the models emphasizing the distribution of income and wealth (Goodwin, Kalecki, Kaldor). These are particularly interesting for the explanation of the persistence of fluctuations and of hysteresis. R. Boyer’s long entry on FLUCTUATIONS ET CROISSANCE (fluctuations and growth) in →Greffe et al.’s Encyclopédie économique (1990) surveys and schematizes a dozen models of business cycles (crises theories are not considered). The starting point is the observation that there are two dilemmas recurring in the entire literature on fluctuations: the first is whether the alternation of expansions and contractions is an endogenous phenomenon – that is, the result of the system’s intrinsic dynamics – or whether it is instead the result of external impulses superimposed on a propagation mechanism sustaining them and turning them into a cyclical behaviour. The second dilemma is whether fluctuations are due to monetary mismanagement, or whether real phenomena are involved in an essential way (pp. 624–626). A scheme in tabular form is offered based on the characterization of their impulse factors and propagation mechanisms (pp. 648–649). Two observations are in order concerning this scheme. The first is that although the (mainly) exogenous and (mainly) endogenous theories are separated in distinct groups, the real/monetary distinction does not play a part in the schematism but is confined to the list of impulse factors or (more rarely) propagation mechanisms. This reveals that the two above-mentioned dilemmas are not on the same footing in terms of the construction of a taxonomy. The second remark concerns the adoption throughout the table of the impulse/propagation distinction. As Boyer himself observed, this concept is based on Frisch’s methodology for incorporating external shocks into the basic economic mechanism. It is doubtful that it is sensible to transfer it to endogenous approaches. In fact, if the cycle is self-sustained, in the sense that there are forces dragging the system’s dynamics along a cyclical trajectory, whether and how the trajectory is disturbed is highly irrelevant for the persistence of the cycle. The statute of the ‘impulse’ is completely different in endogenous and exogenous models. In exogenous models, external shocks are the necessary source of energy, keeping fluctuations alive against the system’s tendency to return to an equilibrium state; in endogenous models, where fluctuations are persistent, exogenous shocks can determine shifts in the system’s initial conditions or alterations in the system’s parameters, implying quantitative or even qualitative changes in the system’s dynamics (e.g. temporary deviations from the ‘normal’ cyclical behaviour, in the simplest case of the system’s dynamics being described by a stable limit cycle).

156 Daniele Besomi Franck Portier also traces the history of the subject along the endogenous/ exogenous distinction. He correctly applies the impulse/propagation approach only to the exogenous models, but argues that there is no discontinuity between exogenous and endogenous theories. The history of the impulse–propagation models begins with Frisch and Slutsky, and includes the modern approaches à la Lucas and the real business cycle. They share the assumption that the economy tends towards a stable equilibrium and that oscillations are kept alive by random shocks, with the propagation mechanism transforming a white noise into a quasicyclical movement. Endogenous theories assume instead that equilibrium is unstable, but nonetheless the system’s dynamics is constrained and does not explode. Their history begins with Hicks and Goodwin, and is given microeconomic foundations by Benhabib and Day, and Grandmont. In Portier’s view, the discontinuity is bridged by the theories of sunspot equilibria (following Azariadis), where at the origin of the cycle there is the uncertainty linked to the observation of exogenous signals, not related to the fundamentals of the economy (‘sunspots’). This obviously differs from the endogenous approaches, as the persistence of the cycle in a stable system with rational expectations needs these exogenous signals; but it also differs from the impulse–propagation models, where the shocks are intrinsic as they affect the fundamentals (CYCLES ÉCONOMIQUES, in →Jessua et al., Dictionnaire des sciences économiques, 2001).

4.9.4 Stability vs. instability An issue related to, but not identical with, that of the exogeneity or endogeneity of the causes of the cycle concerns the stability of equilibrium. As the previous subsection has made clear, there is general agreement in the literature that exogenous shocks have been relied on to supply energy to sustain oscillations in stable systems, while endogenous oscillators presuppose an unstable equilibrium, so that the system will not settle there. The two notions, however, do not fully overlap. Some believers in the stability of equilibrium did not rely on exogenous shocks but on other mechanisms to sustain oscillations. Aftalion, for instance, was a firm believer in Say’s law and in the idea that the system tends towards a position of equilibrium, but maintained that the existence of reaction lags prevents it from settling there and condemns it to perpetual oscillations around it; or the sunspots equilibria models, with their ambiguous statute as to endogeneity and exogeneity, are nevertheless firmly planted in a stable world. While these approaches, like those underlying other cobweb-like mechanisms based on lags, errors or calculation and frictions, produce technically endogenous (or semi-endogenous) mechanisms, they differ from other endogenous models such as Goodwin’s, Hicks’s and Harrod’s on a very fundamental level, concerning the general view of the working of the economic system. Keynes characterized the positions as follows: On the one side are those who believe that the existing economic system is, in the long-run, a self-adjusting system, though with creaks and groans and jerks, and interrupted by time lags, outside interference and mistakes [. . .].

Dictionary histories of crises theories 157 These authorities do not, of course, believe that the system is automatically or immediately self-adjusting. But they do believe that it has an inherent tendency towards self-adjustment, if it is not interfered with and if the action of change is not too rapid. On the other side of the gulf are those who reject the idea that the existing economic system is, in any significant sense, self-adjusting. They believe that the failure of effective demand to reach the full potentialities of supply, in spite of human psychological demand being immensely far from satisfied for the vast majority of individuals, is due to much more fundamental causes. (Keynes, 1934c, pp. 486–487)16 If there is a relationship between the distinction of stability/instability and exogenous/endogenous, it is not on the ontological level of the origin of causes, but on the epistemic level. Stable systems do not incorporate in themselves the possibility of persistent oscillations, unless they are caused by external influences or malfunctioning of some part of the system; those who refer to such systems therefore have to explain the cycle in terms of something extraneous to their inner nature. On the contrary, incorporating the possibility of motion requires postulating at the outset that the system is not attracted towards a stable stationary point; explaining the cycle from within the logic of the system thus requires the insertion of some destabilizing factor among its premises.17 One early and two recent dictionary entries focus on the stability issue in working out a taxonomy of the theories of crises. In 1933, Eugen Altschul expounded the problem of the business cycle as follows. A disturbance in the equilibrium between supply and demand should be compensated by price changes, inducing a movement in the opposite direction. Why is it that an initial deviation from equilibrium breaks this powerful barrier and amplifies instead of becoming smaller? The classical economists faced the contradiction between their belief that a disturbance should self-correct and the fact that crises actually happened in the real world by interpreting them (this was Say’s contribution) as partial overproduction crises. This argument presupposed a barter economy. When it is admitted that money is used as a means of exchange, there result two main groups of monetary theories: one focuses on the general price level, which may vary, depending on changes in the value of money (Fisher); the other relies on the separation of natural and market interest rates (Wicksell). Their argument aims at showing how monetary causes can temporarily prevent market forces from bringing the system back to equilibrium. Another approach considers that the dynamics of goods production may itself cause changes in the state of the economy, thereby effecting further changes. If the system were in equilibrium, there it would remain; but as there is an underlying expansion, equilibrium is continually upset (Schumpeter). Finally, underconsumption and overproduction (overaccumulation) theories deal with goods rather than focusing on money. The former maintains that purchasing power cannot keep pace with production, the latter that investment is pushed to a degree beyond what can be maintained (KONJUNKTURTHEORIE, in →Palyi and Quittner, Handwörterbuch des Bankswesens, 1933).

158 Daniele Besomi In 1999, C. J. Niggle presented three historical phases of BUSINESS

CYCLE

THEORIES; he discussed the position of various theorists with respect to the stability

issue: All business cycle theories are based upon one of two sharply distinct Schumpeterian ‘pre-analytic visions.’ One approach sees the economy as being essentially stable, with its normal state being one of relatively full utilization of resources, and growth in the level of output resulting from supply-side factors. Expansions or contractions in economic activity are due to exogenous shocks to the system such as technological change, fluctuations in the prices of imported goods, changes in the quantity of money in circulation, or war. If disturbed, powerful equilibriating forces, coordinated through changing price levels in competitive markets, quickly return the economy to its normal, highemployment growth path. Most of the classical economists appear to have held this vision, and it reappears in contemporary orthodox economics as part of the new classical economics. In sharp contrast is the vision shared by dissenting heterodox economists, including Marx, Kalecki, Mitchell and Keynes. They saw the economy as being potentially unstable, with growth and full utilization of resources a possible but no more likely state than recession, depression or boom. Fluctuations in economic activity are seen as being due to inherent endogenous processes that take place during expansions. Furthermore, the equilibriating, stabilizing power of markets is weak and the processes slow. Although the various theories sharing this vision differ with respect to the specific disturbance variables seen as the most important proximate cause of fluctuations, most of them emphasize aggregate demand factors. In addition, many heterodox theories treat demand-side fluctuations as dialectically connected with the process of supply-side economic growth. (In →O’Hara’s Encyclopedia of political economy, 1999, p. 51) In the first epoch of business cycle theorizing – classical economists and Marx – the watershed is Say’s law’s condemnation of general gluts as absurd, against the opposition of Malthus’s underconsumptionism and the early cycle theories of Tooke, J. S. Mill and Marx. In the second phase, covering the time between Marx and Keynes, business cycle theories flourished as a separate line of inquiry, accompanied by the spreading of the perception that the instability of capitalism was increasing. The theories of Tugan-Baranovsky, Hawtrey and Robertson are mentioned, Schumpeter and Keynes summarized at some length. The third phase of the development of business cycle theories sees the opposition of the investigations of Mitchell, the multiplier–accelerator models, and the post-Keynesian theories of Minsky and modern Marxists on one side, and the monetarist approach and of real business cycle theories on the other. Besomi’s entry on BUSINESS CYCLES, THEORIES for →Darity’s International encyclopedia of the social sciences (2008) reports how the epistemic implications of the stability issue became apparent in the reflections on the nature of the business cycle in the inter-war years (in particular due to Löwe, Hayek and Harrod) and how

Dictionary histories of crises theories 159 the subsequent theoretical developments dealt with the issue, on one side or the other of the divide between the ‘orthodox’ who believed that the system eventually tends towards a state of equilibrium, and the ‘heretics’ who disputed such assumption. The development of ‘formal dynamics’ was particularly affected by this issue: it was explicitly discussed in the debate between Frisch and Kalecki, and taken up by Kaldor and then Goodwin when they introduced non-linear modelling precisely to account for the persistence of the cycle, while the equilibrium and real business cycle theories revived instead the orthodox approach.

4.10 MISCELLANEOUS APPROACHES The taxonomy of taxonomies offered in these pages unavoidably suffers the same limit as the original attempts at classifying business cycle theories: due to the richness and complexity of the materials at hand, any categorization is bound to be unable to fit all contributions into one and only one pigeon-hole. Indeed, some dictionary entries could also fit into sections other than those used here, while some do not fit at all. Among these, some are of scant interest (e.g. Dietzel’s distinction between crises of agricultural and non-agricultural origin in the entry on ERNTEN (ERNTZYKLUS UND WIRTSCHAFTSZYKLUS) (Harvests (harvest cycle and economic cycle)), in →Conrad et al., Handwörterbuch der Staatswissenschaften, 1909), but others are more intriguing.18 Jöhr offers an articulated, mixed-approach survey of business cycle theories. He categorizes the various contributions in the field by the direction of research. The first, ‘theoretical business cycle research before Keynes’, is a mixed bag referring to the classical debate between Say and Ricardo on one side, and Malthus and Sismondi on the other; Marx; and business cycle theory before the First World War, from which Haberler’s schematism is explicitly borrowed. Jöhr’s second category is ‘Empirical business cycle research’, including the descriptive approach of the German historical school and the statistical approach pioneered by Juglar and later pursued by Mitchell and the various business barometers institutes. The next categories include the writers linking theoretical and empirical research, in particular Tugan-Baranovsky, Aftalion, Lescure and Schumpeter. There follow Keynes and the Keynesian dynamic models; the econometric business cycle research, ‘the second stage of the synthesis between theory and empiricism’; and finally the research into psychological and political business cycles. Jöhr also discusses, with reference to a number of authors, the main problems of business cycle research, namely, the relationship of causal explanations and empirical research, of statics and dynamics, and of exogenous and endogenous explanatory factors (KONJUNKTUR. I. THEORIE, in →Beckerath, Handwörterbuch der Sozialwissenschaften, Vol. VI, 1959, pp. 97–105). Manfred Neumann, starting from the principle that the problem of business cycle theory is to explain the disequilibrium between production and aggregate demand, and taking for granted that no such thing can take place in a barter economy, lists the following kinds of explanation: first, endogenous theories, of which he discusses

160 Daniele Besomi the multiplier–accelerator models, the insertion of ceilings and floors, and the approaches stressing the intrinsic instability of growth. Second, the theories focusing on distributive conflicts, in particular Marx and Goodwin (on Neumann’s account of Goodwin’s non-linear model, see Chapter 26, Section 26.2). Third, the theories relying on accidental causes: econometric models and models incorporating exogenous shocks (KONJUNKTURTHEORIE, in →Glastetter, Handwörterbuch der Volkswirtschaft, 1978). Weinberger briefly lists the categories suggested by Heinrich’s taxonomy (1928), namely, the disproportionality theories that try to explain crises from the side of goods; the monetary theories, focusing instead on the monetary side; and the natural and psychological theories, relying on crop fluctuations, weather cycles, demographic changes, and on shifts of moods (KONJUNKTUR UND KRISEN, in →Sacher’s Staatslexikon, 1929, p. 514). Eric Streissler classifies business cycle theories according to their position with respect to three opposing viewpoints. The first contrasts monetary and real theories, with Wicksell, Hayek and later Lucas on one side, and the multiplier–accelerator theories on the other. The second opposes psychological theories (Pigou and Jöhr) to physical theories (for instance, those based on disproportionalities). The last contrasts underconsumption and overinvestment approaches, represented respectively by Keynes, and by Hayek and Spiethoff (KONJUNKTURTHEORIE, in →Herzog et al., 1987, Evangelisches Staatslexikon). The latter opposition is also found in Ricossa’s otherwise unsystematic survey, which lists a number of important theories, but especially pauses on underconsumption and overinvestment theories, which he, like Streissler, considers as the complementary side of the same issue. Emphasis on lack of consumption is qualified as ‘leftwing’, while emphasis on excess of accumulation is qualified as ‘rightwing’ (CICLO, in →Ricossa, Dizionario di economia, 1982, p. 65). Guerrien suggests (without, however, elaborating further) that ‘practically all theories of the cycle can be grouped into two broad categories: those attributing a decisive role to monetary and financial phenomena, and those looking for the causes of crises at the level of production and exchange’ (CYCLE (THÉORIES DU), in →Guerrien, Dictionnaire d’analyse économique, 2002, p. 136) De Vecchi’s very long entry on CRISI for →Lunghini’s Dizionario di economia politica (Vol. 7, 1983) is entirely devoted to the history of the subject. The presentation is chronological and by schools of thought (as required by the dictionary’s layout; see note 11, Chapter 1). The author, however, is particularly interested in the epistemic distinction between mechanistic approaches and approaches incorporating instead into their core non-predictable and non-calculable elements, which he follows through the history he reconstructs (for a more detailed description, see Chapter 28, Section 28.7). In his brief reconstruction of the usage of the term CONJUNCTURE, Kuznets also focuses on an epistemic issue, namely, the shift from the atomistic approach of the classical economists towards the emphasis on organic interdependence by the first German users of the term (Lassalle, Schäffle and Wagner) and finally towards the emphasis on the incalculability of market conditions by the later German users (in →Seligman’s Encyclopaedia of the social sciences, 1931).

Dictionary histories of crises theories 161

4.10.1 A chronosophical approach One of the most intriguing schematizations of crises and cycle theories is offered by Krzysztof Pomian in the entry on CICLO for the →Enciclopedia Einaudi (Vol. 2, 1977). The author is interested in the notion of time in relation to history, and in the relationship between past, present and future, which he calls ‘chronosophy’. The entry is concerned with the philosophical and historical aspects of these issues, but several pages (1164–1174) are dedicated to the idea of progress and cyclical recourse in economics. During the first half of the nineteenth century, most economists shared the view that the development of capitalism is of a linear and cumulative kind. They had no theoretical interest in crises, and were assisted in their belief by Say’s law, which guaranteed that disruptions of the harmony between supply and demand could only be caused by desultory accidents. As a consequence of the work of Clément Juglar, who supplied statistical evidence of the periodicity of crises,19 the general perspective started to change and new questions were asked – in particular, whether the development of the economy must necessarily follow a cyclical course. The cycle, however, was no substitute for progress: the new chronosophy combined the traditional faith in progress with the new oscillatory behaviour. This, however, in the view of Juglar and his contemporaries during the second half of the nineteenth century, was still due to causes essentially alien to the ‘normal’ working of the economy: the speculative ‘human nature’ for Juglar, Jevons’s sunspots, the oscillations of crops or in the value of gold for other economists. ‘All these attempts are based on the conviction that linear growth is the normal evolution of capitalist economy. The mechanisms governing it cannot be deemed responsible for the recurrence of crises. Their causes must therefore be sought outside it. Thanks to this duality between internal perturbations and external factors it was possible to reconcile economic cycles and linear time. The latter characterizes history, the former depend on nature.’ Only Marx was an exception. He thought that the disequilibria of capitalist economies – disequilibria not between supply and demand, but in the relationship between capital and work, both taken as a totality – would grow in size as production progressed, so that deeper and deeper crises would succeed each other at shorter intervals. Up to the world crisis in 1929, the study of cycles focused on the endogenous causes of their periodical return. At first – in Pomian’s reconstruction – writers tried to recognize the common elements in all cycles and to identify their common cause. Soon, however, explanations combined several causes, also because meanwhile cycles of different lengths were described, and the nature itself of ‘the’ cycle became much less clear-cut than it was in Juglar’s time. Yet this line of research remained anchored to a static approach until the early 1930s, when the new ‘dynamic’ theories emerged emphasizing the role of time. The lag between cause and effect was called upon to explain the chaining of events, capable of determining cumulative consequences. While these theories were well suited to explaining the causes of oscillations, they left out the long-term development. Schumpeter tried instead to account for both cycles and growth, and for cycles of different length. In Pomian’s view, only the theories of Marx and Schumpeter are open to chronosophical problems. They incorporate reflections on issues that are not strictly

162 Daniele Besomi economic; they focus on the relationships between the present and future of capitalism, and of the present and the past modes of production. The ‘time’ incorporated in their analys not only is linear and cyclical at the same time, but also is a global time, the time of the history of capitalism, rather than the local time of its economic domain only.

NOTES 1 Duncan’s observation in 1842 that to almost every writer discussing crises there corresponds a different explanation is still largely applicable nowadays (‘According to Hudibras, and other learned authorities, “every why has a wherefore”; and so various are the theories which have been formed on this subject, that it might almost be added, that “every man has a wherefore”’ ([Duncan] 1842, p. 5). 2 In the German-speaking area this view was held by Wagner, KRISEN, in →Rentzsch, Handwörterbuch der Volkswirthschaftslehre, 1866 (see Chapter 14). 3 This is reflected in the definition of ‘crisis’: while mid-nineteenth-century dictionaries in other languages defined crises in terms of ‘disturbances’, German dictionaries could specify that the disturbances referred to the equilibrium between supply and demand (see Chapter 3.3.8.3). 4 I use Keynes’s convenient expression, but I must point out that these writers were far more numerous than the three listed by Keynes: Marx, Gesell and Douglas. Keynes’s modern critics and supporters of Say’s law (see e.g. Kates, 2003) also underestimate the number and variety of criticisms of the law of markets. 5 These – especially the medical one – were frequently used metaphors at the time. For a discussion, see Besomi, 2011. 6 This intermediate category may have been introduced as a partial response to von Bergmann’s criticism, who pointed out that writers such as Wagner, Schäffle and Lexis occupied a middle ground, which he described as ‘social’. Bergmann also observed that Herkner found particularly easy the classification in terms of the economic consequences as these normally show sharper contours than the real theories, and that he was led to include – rather oddly – Malthus with the socialists (Bergmann, 1895, p. 432). More on Bergmann on the taxonomy of crises theories below, Section 4.6.1. 7 A political taxonomy based on the opposition between liberals (classical and neoliberals) and Marxists was also offered much later by Bernard and Colli. Classical liberals saw crises as abnormal incidents resulting from interferences (whether individual or political) with the self-regulatory action of the market; this intention of such a view is more apologetic than explanatory. While the classical liberals based their interpretation on a static view of equilibrium, the new-liberal approach moves from a dynamic analysis seeing crises as the result of some objective friction or delay of reaction; this analysis has been progressively integrated within the study of cycles. Marxist analysis, based on causal dialectics, sees the origin of overproduction crises in the discordant development of production means and demand, the latter depending on income distributon and the tendency of profit rates to fall (CRISE (ÉCONOMIQUE), in →Dictionnaire économique et financier, 1996, pp. 494–495). 8 In 1978, Giannetti also stressed that the cycle was a form that could substitute for both the optimism of classical economists and the Marxist faith in the final breakdown of capitalism, equally shattered by the prolonged depression of the last quarter of the nineteenth century (CRISI ECONOMICHE: L’OTTOCENTO, in →Carmagnani and Vercelli, Il mondo contemporaneo, pp. 111–112). 9 For a detailed discussion of the terminological issues implied by this change, see Chapter 3, Section 3.2.9.

Dictionary histories of crises theories 163 10 On which more below, in Section 4.6.1. 11 Haberler’s successor at the League of Nations, Tinbergen, also believed in the necessity of unifying conflicting theories: see Chapter 23, Section 23.4. 12 I am grateful to the Provost and Fellows of King’s College, Cambridge, copyright owners, for permission to cite these passages from unpublished manuscripts by Keynes. 13 This conclusion is consistent both with Keynes’s own and, ironically, with that maintained by the modern supporters (against Keynes) of Say’s law; see Section 4.3.4 above. 14 It is worth emphasizing that Balogh was the first and only contributor to dictionaries in the twentieth century to mention these theories, by far the richest class of explanations throughout most of the nineteenth century. 15 It is only fair to say here that Haberler’s aim was precisely that of synthesizing the elements of truth of various theories once freed of the seeming differences between them generated by their peculiar languages. 16 This is the transcript of a radio conversation, which explains Keynes’s loose language. That this problem was fundamental, however, was an opinion shared by other authorities, such as Hayek and Löwe. For a detailed discussion, see Besomi, 2006a. 17 Although this epistemic distinction was already clear to some writers in the inter-war years (in particular Löwe, 1926 and Harrod, 1934; see Besomi, 2002, and Besomi, HARROD’S INSTABILITY PRINCIPLE AND TRADE CYCLES, in →O’Hara’s Encyclopedia of political economy, 1999), the mathematical formalism available at the time did not permit the early ‘econometricians’ to explore the requirements for endogenous models of the cycle. Linear functional equations, in fact, admit persistent oscillations only with a specific set of parameters, at which the system becomes structurally unstable (strictly speaking, this is not true of lagged differential equations, but these properties were discovered only later). Writers could thus find themselves in the odd situation of wanting to express a system the nature of which was intrinsically oscillatory by means of an instrument that did not allow them to do so. A case in point is Kalecki: see Besomi, 2006b. 18 The recognition of three theoretical scenarios offered by Pierluigi Ciocca in the entry on CRISI ECONOMICA E FINANZIARIA for →Bedeschi’s Enciclopedia delle scienze sociali (1991) – a Thornton–Bagehot line, the explanations based on the theories of credit and speculation, and the approaches falling in the Marx–Keynes–Schumpeter line – also does not fit in any of the above typologies. It is summarized in Chapter 28, Section 28.6. 19 Pomian stresses that this was itself a novelty, as previous chronosophies were based on projections into the future of evaluations of the present and past conditions mostly on ideological grounds. After Juglar, the presence of the repetitiveness of the cycle becomes an observable fact (pending the judgement on the pertinence of the chosen indexes).

REFERENCES Bergmann, E. von, 1895, Die Wirtschaftskrisen. Geschichte der nationalökonomischen Krisentheorien (Stuttgart: W. Kohlhammer). Besomi, D., 2002, Löwe’s and Hayek’s influence on Harrod’s trade cycle theory, European Journal of the History of Economic Thought, 9: 1, Spring, pp. 42–56. Besomi, D., 2006a, Tendency to equilibrium, the possibility of crisis, and the history of business cycle theories, History of Economic Ideas, XIV: 2, pp. 53–104. Besomi, D., 2006b, Formal modelling vs. insight in Kalecki’s theory of the business cycle, Research in the History of Economic Thought and Methodology, 24A, pp. 1–48. Besomi, D., 2011, Crises as a disease of the body politick. A metaphor in the history of nineteenth century economics, Journal of the History of Economic Thought, 33: 1, March, pp. 67–118.

164 Daniele Besomi [Duncan, W. B.], 1842, Mercantile embarrassments, and the present state of the banking system (Edinburgh: John Johnstone). Haberler, G. von, 1937, Prosperity and depression. A theoretical analysis of cyclical movements (Geneva: League of Nations). Hansen, A. H., 1927, Business-cycle theory. Its development and present status (Boston: Ginn). Harrod, R. F., 1934, Doctrines of imperfect competition, Quarterly Journal of Economics, 48, May, pp. 442–470. Heinrich, W., 1928, Grundlagen einer universalistischen Krisenlehre (Jena: Gustav Fisher). Jones, E. D., 1900, Economic crises (New York and London: Macmillan). Kates, S., (ed.), 2003, Two hundred years of Say’s Law. Essays on economic theory’s most controversial principle (Cheltenham and Northampton: Edward Elgar). Keynes, J. M., 1934a, typed letter to Elliott Felkin at the League of Nations, Geneva, 30 August 1934 (carbon copies in Keynes papers, King’s College, Cambridge, CO/3/33; and in Haberler Papers, Hoover Institution, Stanford, Box 66: Correspondence/Memoranda, 1934–1935). Keynes, J. M., 1934b, typed letter to Gottfried Haberler, Geneva (in Haberler Papers, Hoover Institution, Stanford, Box 66 (Correspondence/Memoranda, 1934–1935); carbon copies in Keynes papers, King’s College, Cambridge, CO/3/37). Keynes, J. M., 1934c, Poverty in plenty: is the economic system self-adjusting?, The Listener, 21 November. Reprinted in The collected writings of John Maynard Keynes, D. Moggridge (ed.) (London, Macmillan, 1973), pp. 485–492. Keynes, J. M., 1939, Letter to E. A. G. Robinson, 28 August. In The collected writings of John Maynard Keynes, D. Moggridge (ed.) (London: Macmillan, 1979), XXIX, pp. 273–274. Löwe, A., 1926, Wie ist Konjunkturtheorie überhaupt möglich?, Weltwirtschaftliches Archiv, 24. English translation: How is business cycle theory possible at all?, Structural Change and Economic Dynamics, 8, 1997, pp. 245–270. Loyd, S. J., 1840, Remarks on the management of the circulation and on the condition and conduct of the Bank of England and of the country issuers, during the year 1839 (London: P. Richardson). Mitchell, W. C., 1927, Business cycles: the problem and its settings (New York: NBER). Northcote, S. E., 1886, Depression of trade and industry. Final report of the Royal Commission appointed to inquire into the depression of trade and industry; with minutes of evidence and appendices (Great Britain, Parliament. Command paper C. 4893, Session 1886). Patterson, E. M., 1915, The theories advanced in explanation of economic crises, Annals of the American Academy of Political and Social Science, LIX, May, pp. 133–147. Persons, W. M., 1926, Theories of business fluctuations, Quarterly Journal of Economics, 41: 1, November, pp. 94–128. Wright, C. D., 1886, Industrial depressions: the first annual report of the Commissioner of Labor (Washington, DC: Government Printing Office).

Part II

The classic dictionaries

5

Between progress and decline Crises in early French dictionaries and encyclopaedias (1830–1840) Ludovic Frobert

5.1 FRENCH DICTIONARIES c. 1830 If we envisage the nineteenth century in France, from the →Encyclopédie méthodique (1782–1832) by Charles-Joseph Panckoucke to the →Grande encyclopédie (1886–1902) by Marcelin Berthelot, as the century of dictionaries and encyclopaedias, then the 1830s constitute a crucial moment. The decisive technological and commercial innovations of the 1800–1830 period enabled the blossoming of the book and printing industry, and the real birth of the modern press. In 1832, →William Duckett’s Dictionnaire de la conversation et de la lecture capitalized on these various innovations, revitalizing the dictionary and encyclopaedia sector. In the following years, Duckett’s initiative was rapidly imitated, giving rise to a multiplication of publications of this sort. The years following the 1830 Revolution were both a period of technological upheaval in printing and a period of radical political, moral and religious change, while, at the same time, the first effects of the Industrial Revolution were being felt in France. During the 1830s several dictionaries specializing in commercial, industrial and financial subjects were published. In 1837–1839 the publishing house Guillaumin published the →Encyclopédie du commerçant. Dictionnaire du commerce et des marchandises, an adaptation (and not simply the French translation) of →John Ramsey McCulloch’s A dictionary, practical, theoretical and historical, of commerce and commercial navigation (1832, 2nd edn 1841). In the same epoch Joseph Monbrion published his Dictionnaire universel du commerce, de la banque et des manufactures (1838–1841). In the 1830s there also appeared general dictionaries and encyclopaedias. The dictionaries published at the time were of two sorts: on the one hand, there were the general, neutral dictionaries, which, for economic and strategic reasons, each publishing house had to have in its catalogue: such was the case for →L’encyclopédie moderne (1824–1832) or for →L’encyclopédie des gens du monde (1833–1844); on the other hand, there were the more militant dictionaries or encyclopaedias which were ‘more directly concerned with the propagation of knowledge considered as the privileged means to [effect] political, social or moral change’ (Mollier, 2000, p. 95). The period, which was characterized by the assertion of positivism, witnessed the reaction expressed in the rise of

168 Ludovic Frobert Catholic encyclopaedias, the →Encyclopédie catholique (1839–1849) or the →Encyclopédie du dix-neuvième siècle (1839–1848) published shortly before Abbé Migne’s Encyclopédie théologique (see Chapter 10). Yet these very same 1830s were marked by the rebirth of the republican movement and the first steps of socialism. They thus witnessed the first appearance of ‘democratic’ encyclopaedias; at the end of 1833, Pierre Leroux and Jean Reynaud published the first instalments of the Encyclopédie pittoresque à deux sous, which quickly became the →Encyclopédie nouvelle, quickly considered as the general survey of the new socialist doctrines. And several years later, the French Republican editor LaurentAntoine Pagnerre (1805–1854) published his →Dictionnaire politique: encyclopédie du langage et de la science politiques (1842). These new dictionaries and encyclopaedias of the 1830s could not avoid the theme of economic crises. Indeed, shortly after 1815 there was a series of economic crises in France. The crises of 1825–1826, 1828–1832 and 1836–1839 drew attention to the regular repetition of these phenomena within nascent industrial societies: contemporaries talked of ‘commercial crises’ or ‘industrial crises’. Two famous texts, both published in 1840, bear witness to the acclimatization to this notion of crisis. In his pamphlet Qu’est ce que la propriété? Pierre-Joseph Proudhon noted the ‘frequency and intensity of commercial crises’ in industry and linked the phenomenon to competition and the property regime (Proudhon, 1840). On the other hand, Alexis de Tocqueville wrote of the American situation, ‘I believe that the return of industrial crises is an endemic illness in the democratic nations of our time’ (Tocqueville, 1840). We thus find ourselves at the dawning of precise analysis and observation of the phenomenon and, as R. Koselleck (1997) so brilliantly demonstrated, in a period in which political and social concepts incessantly changed meaning and acquired a normative dimension, relinquishing claims to merely describe social phenomena and assuming the vocation of influencing them. This structuring power enabled them to look not only towards the past, but also towards the future. In this context, four different conceptions of the crises and their links with progress emerged. These will be presented here, while a more specific examination of the analytical contents of the corresponding entries will be found in Chapter 6.

5.2 FRENCH LIBERALS BEFORE 1848: PROGRESS PUNCTUATED BY CRISES Before its definite conservative turn following the events of 1848 (Le Van-Lemesle, 2004), the French Liberal School put forward an original neo-Smithian economic analysis, which was embedded in a doctrinal programme which, in more or less radical versions, dominated liberal industrialism (Béraud et al., 2004). Although a part of the Liberal School with Charles Dunoyer had already developed an intransigent economic liberalism, other movements within the School had more balanced views. One such case is represented by Adolphe Blanqui, who succeeded JeanBaptiste Say at the Conservatoire National des Arts et Métiers, while remaining

Crises in early French dictionaries 169 both an attentive and a critical reader of the Saint-Simonians, Fourierists and their related dissident movements (Arena, 1991). In 1848, his report on the working classes banished him from the Liberal School (Des classes ouvrières en France pendant l’année 1848, 1849). Towards 1840, a moderate liberal such as Blanqui opposed, first and foremost, the rebirth of an economic nationalism supported by the Orleanist power and perfectly expressed in the speeches of Baron Charles Dupin (Todd, 2008). In 1839, the Baron observed ‘the alternation of convulsive progress and sudden convulsion’ suffered ‘by national industry’ (Dupin, 1839, p. 5), linked the phenomenon to the excess of individualism and competition, and took up the defence of a capitalism of large units in constant relationship to the state, the only system capable of ensuring the coordinated development of national industry (Charles Dupin, CRISE COMMERCIALE, in →Encyclopédie du dix-neuvième siècle, 1846, Vol. 9, pp. 308–311). In contrast, Blanqui developed a conception which relativized the gravity and periodicity of the crises, a conception in which the linearity of progress depends upon the healthy cohabitation of industry and liberty, a liberty controlled by the Saint-Simonian imperative of attending to the improvement ‘of the most numerous and poorest class’. Progress globally represents a growing trend; industrial growth, however, constitutes a complex process and it is thus not surprising that it can be troubled from time to time by accidents and crises.1 Confronted with this dynamic, complex process, the error lies in the constant temptation of an ‘excess of protection’; the control of industry by the state is possible, the regulation or organization of competition in certain areas such as credit is necessary, but these interventions must not become excessive. In this context, crises are thus ‘disruptions which commerce or industry undergo from time to time under the influence of often very diverse causes, internal or external . . . they are temporary accidents, storms which momentarily trouble the serenity of the industrial horizon and after which, apart from a little damage, business returns to its usual course’ (A. Blanqui, CRISE COMMERCIALE, →Encyclopédie des gens du monde, 1836, Vol. 7, pp. 257–259). With a few variations, the ‘commercial crisis’ entries of the later liberal dictionaries used this general outline (Charles Coquelin, CRISES COMMERCIALES, →Dictionnaire de l’économie politique, 1852–1853, Joseph Garnier, CRISES COMMERCIALES, →Dictionnaire universel théorique et pratique du commerce et de la navigation, 1859). During the years 1830–1848, the French Liberal view on crises and progress consisted of three propositions: regular growth is a characteristic feature of industrial society; this growth may be temporarily and irregularly disturbed by crises of mainly exogenous origins; and social progress is the natural destiny of industry.

5.3 THE FRENCH REPUBLICANS: THE POSSIBILITY OF PROGRESS WITHOUT CRISIS Under the July monarchy, the Republican party remained mainly prohibited and clandestine. However, during the 1830s, clubs and associations broadly developed and diffused the republican ideas and doctrines (Tchernoff, 1901; Weill, 1928;

170 Ludovic Frobert Gilmore, 1997). In the autumn of 1833, Jean Reynaud and Pierre Leroux were entrusted with the publication of a manifesto, a synthetic text for the republicans gathered together in the Société des Droits de l’Homme, of which they were to write, ‘this party unanimously conceives liberty to be its goal, the assistance of the proletariat to be its first duty, the republican to be its agent and the sovereignty of the people to be its principle; finally it considers the right to [free] association to be the consequence of this principle and the means to bring about its execution’ (Leroux and Reynaud, 1833, p. 6). After several defeats (most notably in June 1832 and April 1834), the republican movement recomposed its moderate branch under the direction of men such as Armand Marrast, Étienne Garnier-Pagès and younger zealots who wrote in their paper Le National. One of the main problems confronting these authors was to study the parallel and paradoxical growth of industry and exchange, on the one hand, and of pauperism, on the other, and to show how the Republic could solve this problem, which had appeared even more complex since the recent investigations carried out by Louis-René Villermé (Tableau de l’état physique et moral des ouvriers des manufactures de coton, de laine et de soie, 1840) and Étienne Buret (De la misère des classes laborieuses en Angleterre et en France, 1840). In his study, Buret explained that ‘destitution is morally felt poverty’ (Buret, 1840), an expression which bears witness to the fact that the evils of the nascent industrial system were not only material, but also moral and political, since the workers were constantly threatened by domination. In 1842 this republican movement published its own general survey, →Duclerc and Pagnerre’s Dictionnaire politique. Within the group writing the Dictionnaire, tensions already existed between, on the one hand, those who believed that suffrage reform and the advent of republican power would suffice to resolve the social issue through strictly political means and, on the other hand, those who already thought that, as well as the political dimension, reform should also lead to profound modification of the workings of the economy. The main contributor for the economic entries of the Dictionnaire politique was Jean-Gustave Courcelle-Seneuil. Courcelle-Seneuil explained that the crisis manifests itself in industry and commerce as a suspension of business. Thus, ‘the principal character of these crises is the weakening of credit’ (CRISES, Dictionnaire politique, pp. 298–299). The origins of such a phenomenon are numerous: ‘disturbances’, ‘surplus of commerce or unfortunate speculations’, ‘sudden variations in the prices of merchandise’; in his 1840 work, Le crédit et la banque, Courcelle-Seneuil noted that ‘these alternatives of rise or fall are generally caused by the vicissitudes of war, the alternatives of war or peace, and, above all, production surpluses’ (1840, p. 17). What must be seen in this list of disparate causes is, above all, the extreme vulnerability of the present economic system, which spontaneously and without doubt produces wealth, but which also creates cumulated disorder and disturbances (here Courcelle-Seneuil is insisting on the propagation of crises) and thus requires regulation. So the author does not condemn the economic or financial system but, rather, the absence of adequate political regulation of this system. Thus, in 1840–1842 these reasons led him to ultimately place at the origin of crises a sum of individual errors, erroneous economic choices made without any element of

Crises in early French dictionaries 171 collective guidance: ‘commercial crises are but the multiplication of particular disasters that the lack of foresight or unexpected accidents inflict daily on commerce’ (CRISES, p. 299). Significantly, the entry on CRISES ends in an examination of the possibility of preventing crises by balancing production and consumption, and curbing the excessive anticipations of agents. However, Courcelle-Seneuil notes that, at present, this prevention is as yet impossible, given the ‘powerlessness’ of ‘political economy’. But at this time, Courcelle-Seneuil and the other authors (such as, for example, Louis Blanc, who wrote the entry BANQUE in the Dictionnaire politique) were confident concerning the progress of a republican political economy. They thought that democratic regulation of a market economy was possible and they favoured state intervention and the development of a property-owning democracy (Frobert, 2010). In consequence, around 1840 the Republicans presented their own vision of crisis and progress. They favoured the development of commercial societies, but they were also aware of their new pathologies and, notably, the crisis. Commercial crises were not of exogenous causes but a consequence of growth and thus they must be regulated, even if this regulation seemed complex. Finally, this regulation could only be conducted by a future democratic regime with the power and the will to conduct welfare politics.

5.4 THE SAINT-SIMONIANS AND THEIR DISSIDENT MOVEMENTS: PROGRESS THROUGH THE ALTERNATION OF PERIODS Shortly after the publication of Nouveau christianisme and the death of the Comte de Saint-Simon (1825), the Saint-Simonian School was founded around such figures as Barthélémy-Prosper Enfantin, Saint-Amand Bazard, the Pereire brothers, Philippe-Joseph Buchez and Pierre Leroux. The school was soon shaken by schisms, with, among others, Buchez and Leroux becoming dissidents and each creating their own school around 1830. Although they differed on numerous points concerning the doctrine which should prevail for the new world of industry, orthodox Saint-Simonians and the dissident Saint-Simonians who followed Buchez or Leroux had a relatively similar common vision of the relationships between crisis and progress. The notion of progress through alternating ‘critical’ and ‘organic’ periods is central to the original vision of the Saint-Simonians (see [Barrault], Doctrine de Saint-Simon. Exposition, 1829, Vol. 1), whose intention was to construct a mathematical science of history (Picon, 2002). The critical periods constitute the phases of dissolution and dispersion, whereas the organic periods are dominated by unity and a single direction in industry, science and religion. In this alternation which punctuates the evolution of humanity, good dominates over evil and leads to progress. The 1830s should therefore close the critical period dominated by the Enlightenment, 1789 and the French Revolution, and inaugurate a new organic period dominated by industrialism. Moreover, this industrial society, in which the

172 Ludovic Frobert major obstacle that individual property constitutes would have been removed, undoubtedly represents for the Saint-Simonians a sort of end to history: once industry and association have established themselves, and the ‘administration of things’ has replaced the ‘government of men’, there will be progress but ‘without interruption, without crises, continuously, regularly and at every instant’ ([Barrault], Doctrine de Saint-Simon. Exposition, 1829). The Saint-Simonian point of view on the articulation of crisis and progress is perfectly expressed by Charles Lemonnier in the entry on CRISES COMMERCIALES (commercial crises) for the →Dictionnaire de la conversation et de la lecture (1835, Vol. 18, pp. 216–218). The crisis is an alteration of the commercial movement leading to a ‘momentary’ paralysis of the economy. Wars and revolutions and the bellicose past of Europe constitute one of the principal causes of economic disruptions. Innovation or technological change which produces creative imbalance constitutes the other cause since it is organically linked to the future blossoming of the world of industry. Given this, if ‘a commercial crisis is nothing more than a pause in the industrial development of a people’, it is often the condition of ‘future progress’ (CRISES COMMERCIALES, p. 216). Lemonnier continued to affirm that in a state in which all the industrialists are associated, it would be necessary to attenuate the crises, to control their impact on the most vulnerable working populations, and to equitably distribute their transitory negative consequences while still preserving the role they play as a stimulus to industrial progress. The link between alternation and progress can be found in the principal dissident Saint-Simonian movements. Pierre Leroux, however, is more inclined to insist on the notion of ‘continuous progress’ and to relativize the theme of alternation. Significantly, in the →Encyclopédie nouvelle (the work by Jean Reynaud and Pierre Leroux, the first fascicles of which were published in 1833–1834), no ‘commercial crisis’ entry is to be found, even if Jules Leroux (Pierre’s younger brother and author of the principal economic articles of the Encyclopédie) evoked the ‘alternation of progress and collapse’ experienced by commerce (COMMERCE, in Encyclopédie nouvelle, Vol. 2, p. 708). In this Saint-Simonian dissident movement, the alternation of periods of rise and fall is not truly a condition of progress. From this perspective, Pierre Leroux would later write, ‘A crisis which bears all its fruit is not followed by other crises’ (Lettre au Docteur Deville, 1859). Pierre-Joseph Buchez represents another major Saint-Simonian dissident movement which is interesting in that it extends the Saint-Simonian philosophy of history accentuating the link between progress and alternation: ‘Until now, the development of humanity has occurred through a succession of alternating movements which sometimes presents an organic character and sometimes a critical character’ (Introduction aux questions sur les sciences et les savants, 1828, MS quoted in Isambert, 1967). In the work of Buchez, even more than in that of the orthodox Saint-Simonians, one finds a complex cyclical theory of social evolution in which progress is again the consequence of alternation. It is thus no surprise to see the Buchez School taking an interest in commercial crises and their periodicity: the example provided by Auguste Ott is undoubtedly revealing (A. Ott, CRISE, →Dictionnaire des sciences politiques et sociales, 1854; see Chapter 10).

Crises in early French dictionaries 173 In brief, despite obvious differences, the vision of the Saint-Simonians, be they orthodox or dissident, presents three characteristics: the modern history of humanity, that of the new world of industry, achieves progress and this progress operates in the present through the alternation of critical and organic phases; the alternation of major phases has, in part, an equivalence at the level of crises and economic fluctuations (these fluctuations constitute an important element of the explanation of general alternations); and in a future state to be achieved by humanity, that is, the global association of all the industrialists, alternation will disappear and progress, driven by technological innovation, will be linear.

5.5 THE FOURIERISTS: CRISES AS INDICATORS OF THE CORRUPTION AND DECOMPOSITION OF ‘CIVILIZATION’ Charles Fourier and his school provided a radical demystification of the idea of progress. Fourier ceaselessly denounced the ‘vices of civilized industry’ (‘industrialism is the collection of all the vices, falsification, monopoly, bankruptcy, speculation, cornering [of markets] and usury’ (Fourier, 1829). Moreover, he found it frankly obscene to talk of progress when one observed the misery and precariousness that affected nine out of ten people at the time. Thus, he put forward the idea that, in its contemporary form, industrial civilization was heading straight for disaster. In this conception we cannot find the idea of a naturally ascending series whether it be with or without rhythm. Capitalism and the continuation of its destructive logic lead not to progress but to catastrophe. This vision integrates a reflection on crises and even if the Fourierists did not publish any dictionaries, their singular view on crisis/progress must be mentioned here. For Fourier and his disciples the crisis and its repetitions are vectors of decline. This reflection can be found in Fourier’s work, which uses the 1826 crisis as an example. Here, as elsewhere, he creates his own vocabulary, coining the expressions of ‘plethoric reversal’ (refoulement pléthorique) and ‘repercussions of abortive failure’ (contre-coup d’avortement) to designate two harmful commercial phenomena: poor anticipation of outcomes and attempted monopolization, the only aim of which is to cause a rise in prices. He wrote, ‘reversal is a periodic effect of the blind cupidity of merchants’, while ceaselessly denouncing the ‘anarchic commerce called free competition’ (Fourier, 1829). In 1833–1834, in La Réforme industrielle ou Le Phalanstère, the first journal of the Fourierist School led by Victor Considérant, Jules Lechevalier and Abel Transon, this articulation between crisis/decline or progress was taken up: Leroux’s idea of ‘continuous progress’ is rejected and the writers consider that social movement, in whichever direction, occurs through what Lechevalier calls ‘alternation’ of contrary movements (‘this alternation [. . .] constitutes the movement and life’ (Lechevalier, 1832, p. 131). Yet, in ‘civilization’ (French society of the 1830s, in Fourierist vocabulary) these alternations work for the decline and fall of this social system, with Abel Transon observing ‘descending vibrations’ in contemporary economic crises (Transon, 1833, p 16).

174 Ludovic Frobert Finally, when Fourier analysed the entire ‘social movement’ and drew a ladder representing the ages of humanity, he took great care to distinguish between the ‘false state’ and the ‘true state’. After a veritable overthrow or reversal, the three stages of the false state – patriarchy, barbarism and civilization (civilization being the contemporary period of liberal industrialism) – are followed by the stages of the true state – guarantism, socialism and harmonism. Thus, there is revolution and a change of system between the false and true states of humanity. The Fourierist vision is therefore structured by three themes: industrial civilization is fundamentally rotten and the idea of progress associated with this economic system is a fraud; in the present system, crises and their recurrence constitute an indicator of decomposition; and the appearance and repetition of these crises will constitute vectors for a change of system and for the transition towards an economic and social regime which is radically different from liberal industrialism (‘guarantism’).

5.6 CONCLUSION In this short survey, we have tried to make a rough sketch of the main different visions of the relationship between crisis and progress presented in dictionaries and encyclopaedias in France in the 1830s. A table can serve to summarize this intellectual hilly landscape: Liberals

Saint-Simonians Republicans

Fourierists

Progress or decay

Progress

Progress

Progress

Decay

Crisis or cycles

Crisis (exogenous)

Cycles

Crisis (endogenous)

Crisis/cycles

Capitalism or socialism

Market capitalism

Big corporation capitalism

Welfare-state capitalism

Socialism

In this essay it was possible merely to outline these different movements of thought – Saint-Simonians, republicans, Fourierists, Liberals – and to stress their differences. A more complete study would now have to balance these rough interpretations, but also to study them in detail and to understand whether and how these different positions communicated with each other during this period (approximatively the times of the constitutional monarchies in France, 1815–1848) in order to provide a better understanding of the complex past of the theory of economic crisis and business cycles in France in the first half of the nineteenth century.

Crises in early French dictionaries 175 NOTES 1 In the specialized dictionaries of the time, one also finds a general interpretation underlining the view that the period is one of political, economic and technological transition and that the institutions responsible for credit, especially financial and banking institutions, are not adapted to the ongoing evolutions and cannot cope with these impacts and changes. This interpretation, nevertheless, leads to the diagnosis of the subsiding of the crises based on, first, a more peaceful economic development and, second, a maturing of financial regulation (Monbrion, CRISE COMMERCIALE ET INDUSTRIELLE, →Dictionnaire universel du commerce, de la banque et des manufactures (1838), Vol. 1, pp. 636–637; Michel, CRISE COMMERCIALE, in →Guillaumin’s Dictionnaire du commerce et des marchandises (1839), Vol. 1, pp. 757– 758).

REFERENCES Arena, R., 1991, Adolphe-Jérôme Blanqui, un historien de l’économie aux préoccupations sociales. In Y. Breton and M. Lutfalla, L’économie politique en France au 19e siècle (Paris: Economica). [Barrault, E.], 1830, Doctrine de Saint-Simon: première année: exposition 1829 (Paris: Au bureau de l’Organisateur: chaz A. Mesmer). Béraud, A., Gislain, J. J. and Steiner, P., 2004, L’économie politique néo-smithienne en France (1803–1848), Oeconomia, Économie et Sociétés, 38 (2), pp. 325–418. Blanqui, A., 1849, Des classes ouvrières en France pendant l’année 1848 (Paris: Pagnerre). Buret, E., 1840, De la misère des classes laborieuses en Angleterre et en France, 2 vols (Paris: Paulin). Courcelle-Seneuil, J. G., 1840, Le crédit et la banque. Études sur les réformes à introduire dans l’organisation de la Banque de France et des banques départementales (Paris: Pagnerre). Dupin, C., 1839, Crise commerciale de 1839, examinée dans ses causes, son étendue et les moyens d’y mettre un terme (Paris: Aux bureaux du mémorial du commerce), Fourier, C., 1829, Le nouveau monde industriel et sociétaire (Paris: Bossange). Frobert, L., 2010. Republicanism and political economy in Pagnerre’s Dictionnaire politique (1842), Working-Paper Triangle. Gilmore, J., 1997, La république clandestine 1818–1848 (Paris: Aubier). Isambert, F. A., 1967, Buchez ou l’âge théologique de la sociologie (Paris: Cujas). Koselleck, R., 1997, L’expérience de l’histoire (Paris: Gallimard). Lechevalier, J., 1832, École de M. Charles Fourier, La réforme industrielle ou Le phalanstère, Journal des intérêts généraux, de l’industrie et de la propriété, 30 August. Leroux, P. 1859, Lettre au Docteur Deville, reprinted in Abensour, M., 2000, Le procès des maîtres rêveurs (Arles: Sulliver). Leroux, P. and Reynaud, J., 1833, Exposé des principes républicains de la Société des Droits de l’Homme et du Citoyen (Paris: Herhnan). Le Van-Lemesle, L., 2004, Le juste ou le riche. L’enseignement de l’économie politique en France 1815–1850 (Paris: Comité pour l’histoire économique et financière de la France). Mollier, J. Y., 2000, Diffuser les connaissances au XIXe siècle, un exercice délicat, Romantisme, 30: 108, pp. 91–101. Picon, A., 2002, Les saint-simoniens. Raison, imaginaire et utopie (Paris: Belin). Proudhon, P. J., 1840, Qu’est-ce que la propriété? ou Recherche sur le principe du droit et du gouvernement (Paris: J.-F. Brocard).

176 Ludovic Frobert Saint-Simon, C.-H., 1825, Nouveau christianisme: dialogues entre un conservateur et un novateur (Paris: Bossange père). Tchernoff, I., 1901, Le parti républicain sous la Monarchie de Juillet (Paris: A. Pedone). Tocqueville, A., 1840, De la démocratie en Amérique (Paris: Charles Gosselin). Todd, D., 2008, L’identité économique de la France (1814–1851) (Paris: Grasset). Transon, A. de, 1833, Politique industrielle. Formule de civilisation, La réforme industrielle ou Le phalanstère, journal des intérêts généraux, de l’industrie et de la propriété, 11 January. Villermé, L. R., 1840, Tableau de l’état physique et moral des ouvriers des manufactures de coton, de laine et de soie, 2 vols (Paris: J. Renouard). Weill, G., 1928, Histoire du parti républicain en France 1814–1870 (Paris: Alcan).

6

The analysis of crises in early French dictionaries and encyclopaedias Daniele Besomi

6.1 ENTRIES ON CRISES IN EARLY FRENCH DICTIONARIES French encyclopaedias and specialized dictionaries in the early part of the nineteenth century are remarkable not only for their number, but also for the fact that they started to carry dedicated entries on crises well before dictionaries in other languages. By the time the first German entry was published (Roscher’s DIE PRODUKTIONKRISEN MIT BESONDERER RÜCKSICHT AUF DIE LETZTEN JAHRZEHNTE in [Brockhaus’s] Die Gegenwart, 1849; see Chapter 7), France had already seen six such articles, the first being published in 1835; two of these were also translated into Italian before the first original entry in that language was published (Boccardo’s CRISI, in his own →Dizionario della economia politica e del commercio, 1857; see Chapter 11); meanwhile, two more French entries were included in dictionaries. By the time English-speaking countries saw their first entry on crises in 1863 (Macleod’s CRISIS, COMMERCIAL, in his own →Dictionary of political economy, 1863; see Chapter 13), France had two more, and a number of reprints and re-editions. As the previous chapter has demonstrated, this quantitative abundance reflects different perspectives on the role of crises in economic and social development. In spite of this variety of interpretations, however, the explanations of the phenomenon offered by the entries published in the first half of the century were rather similar to each other and fairly poor if compared to the best contemporary writings on the subject – a situation that only changed with the contributions by Coquelin, Ott and Juglar in the 1850s and early 1860s (see respectively Chapters 8, 10 and 12). As a whole, however, these entries fairly reflect the state of the understanding of crises just before the middle of the nineteenth century. This chapter aims at presenting the entries published in the 1830s and 1840s in the light of the overall development of the theories of crises; it relies on Chapter 5 for the political an ideological context in which they were written. The entries are, in chronological order: Lemonnier, CRISES COMMERCIALES, in →Dictionnaire de la conversation et de la lecture, 1835, Vol. XVIII (reprinted unchanged in the 2nd edition, Vol. XVI, 1859); Blanqui, CRISE COMMERCIALE, in →Encyclopédie des gens du monde, Vol. 7, 1836;1 [Monbrion], CRISE COMMERCIALE ET INDUSTRIELLE, in Monbrion’s

178 Daniele Besomi →Dictionnaire universel du commerce, 1838;2 Michel, CRISE COMMERCIALE, in Guillaumin’s →Encyclopédie du commerçant, 1839;3 Courcelle-Seneuil, CRISE, in →Duclerc and Pagnerre’s Dictionnaire politique, editions from 1842 to 1860; and Dupin, CRISE COMMERCIALE, in →Encyclopédie du dix-neuvième siècle, 1846.4 Hereafter, they will be cited in an abbreviated form.

6.2 THE DEFINITION OF CRISES A first common feature of these entries is a definition of ‘crisis’ as a disruption of the orderly course of trade. Lemonnier reported that ‘whenever the regularity of the exchange movements of which trade consists is broken, suspended or inhibited, there is a commercial crisis’ (1835, p. 216); according to Blanqui, ‘the term CRISE COMMERCIALE applies to the disturbances which, from time to time, affect trade and industry, under the influence of different causes, internal or external’ (1836, p. 257); Monbrion was the only one not to give an explicit definition of the term, while Michel defined ‘crises’ as ‘those times of general discredit which for some time suspend the regular course of trade’; Courcelle-Seneuil wrote that ‘Commerce and industry are in a state of crisis when business is interrupted and a large number of merchants and industries fail to meet their commitments’; a little off this line, Dupin defined commercial crises as ‘the difficult and transitory situations into which the trade of a nation is sometimes thrown’.5 Such a notion of crisis refers, explicitly or implicitly, to a ‘normal’ state of trade, during which payments, reimbursements of debts, and exchanges of goods take place smoothly and with continuity. The crisis is thus seen as an anomaly, a deviation from a norm the features of which, however, are rarely specified. Only Lemonnier describes the avoiding of crises as the challenge of ‘organizing industry, creating constant means for a relationship, equilibrium and harmony between consumption and production’ (p. 218), and Courcelle-Seneuil writes – also with reference to prevention – of ‘establishing a correct equilibrium between production and consumption, and of eliminating the errors from commercial speculations’. Surely the regularity of exchanges, the regular course of trade, the uninterrupted flow of business which are disrupted by some specific cause, refer to a prosperous condition, a state of more or less steady economic progress. The specific features of such a state, however, were not spelt out, nor were its conditions explicitly stated. The definition is indeed circular, and prosperity was implicitly conceived as the condition of trade in the absence of disturbances (none of the specialized dictionaries considered here includes entries on ‘progress’, ‘prosperity’ or ‘equilibrium’6). The ‘normal’ does not need to be characterized. It is just taken for granted, and it is the state towards which the system would tend if left undisturbed. This kind of definition thus immediately calls for, and cannot be dissociated from, a list of the possible causes of disruption, which indeed duly takes most of the space in all the entries under consideration.7 Before we examine these causes in Section 6.3, another feature associated with this notion of crisis should be mentioned. A crisis must be temporary. It can only

Analysis of crises in early French dictionaries 179 last while the disturbance lasts; even if the disturbance arises from a persistent change (e.g. the opening of a new market), the system eventually adjusts and finds a new viable balance. Some of the writers cited above incorporated the transitoriness in their definitions (Michel and Dupin). Lemonnier maintained that ‘the commercial movement restarts with new momentum when the perturbing cause ceases to exist’ (1835, p. 216), and trade returns to its ‘natural conditions of equilibrium’ (p. 217) when the disturbance is removed; crises are thus a momentary paralysis of the economic life of nations. Similarly, Blanqui characterizes crises as ‘transitory incidents, storms that temporarily trouble the good weather of the industrial horizon; after they have passed, notwithstanding some devastation trade resumes its usual course’ (1836, p. 257). Crises are short-lived, but they keep affecting trading and industrialized countries (as distinct from the pre-industrial crises cited by Monbrion, 1838, p. 636). Lemonnier – the only one of these writers to head his entry using the word ‘crises’ in the plural – and Blanqui seemed to believe that crises can recur at very short intervals. Lemonnier writes of the industrial crises that affected France between 1827 and 1830 (1835, p. 217); Blanqui described commercial crises as a ‘true periodical disease’ in all civilized nations – in the sense that ‘each day we see the outbreak of some [crises] or the petering out of some other’ (p. 258). Monbrion reported that ‘it has been remarked that in all the countries with a very lively industrial activity, commercial crises are roughly periodical’; he cites the English crises of 1819, 1823, 1826 and 1836, and the French ones of 1819, 1823, 1826 and 1831–1832 (Monbrion, 1838, p. 637). Michel similarly noted that ‘commercial crises . . . seem to recur periodically: 1811, 1819, 1825, 1830 mark times of fatality’ (1839, p. 758). Dupin did not comment on periodicity, but also noted that crises ‘only feature distinct characteristics and have considerable effects in countries where routine trade is well developed’ (1846, p. 308), and listed (while discussing their causes) the French crises of the nineteenth century: 1803, 1815, 1827, 183 and 1847. One can hardly fail to notice that there is scant agreement on the dating of crises.

6.3 THE PHENOMENOLOGY AND THE CAUSES OF CRISES Having defined crises as a perturbation of the regular course of business, our writers moved on to examine their causes and sometimes describe the train of events bringing to the crisis. Lemonnier’s entry (1835) is interesting for his effort at abstraction. He first described the ‘ordinary’ course of events beginning from the early symptoms of crises, namely, a depreciation of certain products, a rise in interest rates and difficulties in discounting, a stagnation or even a drop in consumption. At this point a number of firms are unable to continue their business, and failures ensue until a liquidation takes place, during which the losses of the largest numbers (and sometimes the appalling enrichment of a few) are consolidated. After that, business restarts with new impetus, if the perturbing cause is no longer present.

180 Daniele Besomi The ‘universal and general’ outcome of all crises is that both consumption and production are temporarily restrained. As to the sources of perturbation, Lemonnier noted that they can be of two kinds. Either they originate from a sudden and unforeseen change in the conditions of production or in the needs of consumption; or they are related to the general perturbations following political or social revolutions. Under the first heading there are technological changes in production. Although these cause misery to some people in the short term (for instance, the invention of the spinning jenny caused unemployment among hand spinners), such suspensions of industry in the long term are a form of progress and development. The perturbations arising from political or social revolutions act by displacing people and wealth, by creating hostility between neighbouring countries and between social classes within each country, and by channelling capitals towards unproductive usages. While Lemonnier stopped short of qualifying his two classes of causes as ‘internal’ and ‘external’, Blanqui (1836) placed such a distinction in his very definition (cited in Section 6.2). Among the external causes of crises, Blanqui considers political events. The internal ones, however, are far more important. They include the state of economic legislation, merchants’ mistakes and the lively competition among producers. Blanqui also refers to the difficulties generated by the internationalization of trade, as failures in one market may bring failures elsewhere; to the unreasonable speculation frenzies that sometimes capture a whole nation, as was the case in England in 1825; and to the difficulties caused by changes in the monetary system – with reference to the suspension and the subsequent resumption of convertibility in England. Moreover, with the introduction of more and more machines and the improvement of the division of labour, entrepreneurs have sometimes neglected to proportion their supply to demand. Blanqui concludes his entry by pointing out that the periodical return of crises has an ‘identical source’: protectionism, which turns some slight perturbations into major crises. ‘The excess of protection leads to a congestion [of the markets], which is followed by the disposal of goods at a low price. The bait of high returns available in the privileged industries attracts capitals, which are depreciated by the very competition they create, thus contributing to the falling of entrepreneurs’ (p. 259). The only possible remedy is the return to the liberty of industry and trade, for whenever governments tamper with the principles ruling the production and distribution of wealth, they multiply the already too numerous chances of commercial crises. Monbrion (1838) distinguishes between the causes of commercial and industrial crises. Among the former he lists wars, in particular those at sea, political events and the abuse of credit, with the corresponding bad use of capital. Monbrion does not explain how and why there is abuse of credit in the first place, but describes its breakdown as follows: at some point distrust replaces credit, circulation of wealth stops or slows down, prices fall because of the artificial scarcity of money, manufacturers can no longer employ the same number of workers, failures begin to spread. If central banks do not have sufficient reserves, they cannot contain the bankruptcies. As to the causes of industrial crises, Monbrion cited inventions giving strong impulses to the development of some branches of production which result

Analysis of crises in early French dictionaries 181 in overproduction, and the competition of foreign industries, unless the government protects the national manufacturers with tariffs. Similarly to Blanqui, Michel also explicitly distinguishes between the causes of crises external to the industrial economy and those pertaining to the very nature of commercial and industrial organization. The external causes include the calamities occasionally affecting mankind and political events. In spite of their exogenous origin, they propagate via an economic mechanism. As all commercial interests are interrelated, and traders are involved in a web of mutual indebtedness, an incident such as a war disrupting the chain of payments may cause the collapse of the entire system. Michel maintains that the importance of endogenous causes is generally underestimated. They consist in the abuse of credit and in the misdirection of productive forces – the latter being often caused by the former, as credit encourages excesses of production, although excessive credit is alone sufficient to cause a disruption of trade. The issue of a large number of notes enables entrepreneurs to purchase larger amounts of raw materials, raising their prices (often generating speculative enterprises) and thereby depreciating paper money. Gold will therefore leave the country and the banks will lack the specie necessary to convert paper money. When doubts arise as to their solvency, a run on the banks ensues. Banknotes are withdrawn from circulation, the price level drops, causing losses and the interruption of credit, and eventually a general crisis occurs. It is indeed observed that in France, crises had always been preceded by an exaggerated circulation of commercial bills. Michel supplies figures relating to the crises of 1811, 1819, 1825–1826 and 1830, in the first attempt in a dictionary entry to provide a quantitative argument. Courcelle-Seneuil explained that the catastrophic interruptions of business and breaks in the chain of payments in which crises consist ‘are ordinarily caused by turmoil, excesses of trade or unfortunate speculations, and finally by sudden changes in the price of goods’ (1842, p. 208). He does not elaborate (the entry occupies just over one column), except to examine as an example the effects of the tariff change in 1814. Dupin (1846) lists a number of possible causes of crises.8 Although there is no explicit hierarchy, he seems to give pride of place to overspeculation. Occasionally, trading peoples are driven by speculation fever,9 which at first accelerates trade, giving a false sense of prosperity – public and private stocks rise, everybody sees prosperous times and feels like spending and being generous. But as soon as it becomes necessary to face one’s debts, the results are disillusionment and bankruptcies, dragging into their vortex also those who have refrained from foolish speculation as their debtors are forced to default; also the trading houses that are financially sound but are just above the threshold of rentability are swept away. Overspeculation can also generate crises beginning abroad, when the prospects generated by the opening of new markets induce excess supply, with subsequent price falls and losses. Crises can also be caused by political and social troubles, by a transition from peace to war, or from war to peace, or by a period of bad crops following a series of years of abundant harvests. The latter is all the more damaging if the good years have been accompanied by intense speculation, as was the case in 1826 and 1847.

182 Daniele Besomi 6.4 THE FUNCTION OF CRISES The next issue tackled by the authors of these entries concerns the nature of crises and the function they perform in the working of the economic system. Lemonnier maintains that crises will inevitably be tied for a long time to our system of production, which will thus undergo every now and again interruptions in industrial development. These interruptions, however, are often favourable. ‘Considered as a whole and seen from a distance’, in fact, some crises are caused by technological progress, which temporarily disrupt the productive relations but in the long run accelerate production (1835, pp. 216–217). Contrary to Lemonnier, Blanqui does not seem to be seeing any silver lining in the recurrence of crises. As they originate in entrepreneurial mistakes, foolish speculations or wrong legislation, they cannot bring any good. Also, the increased competition between producers at home and abroad is not seen as a cause of possible progress overall but only of ruin. The only consolation is that they are of a temporary nature and, as storms do, can only momentarily trouble the clarity of the industrial horizon (1836, p. 257). Monbrion is surely more optimistic, as he feels that crises have a positive function to perform: they restart the economy at a quicker pace and are going to disappear in the near future. He believes that although crises have been subject to periodical recurrence in the past, this is no longer the case. The commercial and industrial movement of a country is naturally subject to fluctuations, due to the development of industry and commerce abroad, to changes in fashion and preferences, to tariffs, and to the overabundance of some products, which causes a reduction in their prices and therefore a complete stagnation of production and trade. In this case, this stoppage in production is necessary to give time to absorb the excess of production via normal consumption or exportation, and after the crisis economic activity restarts ‘by natural reaction’ at a faster pace, for it is necessary to satisfy the consumer demand that has remained unfulfilled during the stagnation. Well-directed speculations may take advantage of such fluctuations in the prices of products by calculating in advance the effect of the moderating laws governing industry and trade, always keeping them within the bounds of the true needs of consumption (1838, p. 637). Monbrion failed to observe, contrary to Lemonnier, that the industrial crises resulting from the introduction of new technologies will bring progress in the long run; this is all the more strange as he explicitly remarked that such inventions bring quick development to some branches of production, increase output at lower prices and improve quality (p. 637). In Michel’s account there is no explicit statement as to the function fulfilled by crises. Nevertheless, his description of the consequences of the excess of credit – that is, the main cause of crises – implicitly depicts crises as the outcome of the self-adjusting mechanism eliminating the excess of notes issued by banks (1839, pp. 757–758). Michel believes that the causes of perturbation are becoming weaker. With peace, public credit has strengthened its foundations, the intensity of innovation has diminished after the early era of the Industrial Revolution, so that changes in working conditions are not so dramatic; and the experience of the past

Analysis of crises in early French dictionaries 183 has induced the Bank of England to try to prevent a recurrence of circumstances similar to those of 1825 by increasing the discount rates; at the time of writing (November 1836), it seemed to Michel that the Bank was going to avert the crisis that had been menacing Britain for several months. Courcelle-Seneuil (1842) thought of crises as the cumulation of the fluctuations of individual businesses: Commercial crises are but the multiplication of the private disasters which trade experiences daily due to lack of foresight or unexpected events. Is there a way to prevent them, to establish an exact equilibrium between production and consumption, of expunging error from commercial speculations? To this serious problem, political economy has not yet been able to find a solution. (p. 209) Dupin (1846) does not express any opinions as to the nature and function of crises. With the sole exception of Monbrion, who mentioned the ‘moderating laws of industry’ (1838, p. 637), the other five authors considered here referred to the diffusion mechanisms propagating the disastrous effects of crises to the entire economy or internationally, or transmitting and amplifying the ‘fever of speculation’. Lemonnier explained how commercial crises first affect some industries and crush them, and how their immediate and total ruin gives rise to a series of falls and calamities, the extension of which depends on the forces and numbers of those swept away by this sort of avalanche (1835, p. 216). Blanqui (1836) stressed that failures in one market bring distress elsewhere, and that the frenzy of speculation sometimes captures entire nations. Michel discussed how exogenous shocks propagate to the entire economic system by means of an endogenous mechanism based on the interrelation of credit relationships (1839). Courcelle-Seneuil similarly noted how ‘Commercial crises spread from one country to another: when one trader goes bankrupt, his failure often affects his correspondents abroad. All commercial nations are interdependent: reciprocal needs and credit have created indissoluble links between them, and none of them can undergo notable losses without the others being hit as well’ (1842, p. 208). Dupin refers to the ‘speculation fever propagating between capitalists’ (1846, p. 310). These views of the working of capitalist economies, then, admitted at least some islands of instability capable of holding in check the system’s capacity to absorb shocks.

6.5 DICTIONARIES AND THE LITERATURE ON CRISES IN THE FIRST HALF OF THE NINETEENTH CENTURY Although the literature on various aspects of economic difficulties was already fairly abundant, before the 1837 crisis the term ‘crisis’ itself was only rarely used, both in English and in French (see Chapter 3, Section 3.2.8.2). It was, however, chosen (accompanied by the attribute ‘commercial’ or, on one occasion, ‘industrial’) as the best epithet for these phenomena by a number of French dictionary compilers

184 Daniele Besomi from 1835 on. The only serious competitor, in terms of frequency of usage, could have been the word détresse (the French equivalent of ‘distress’), which is, however, not appropriate as it describes the consequences of the phenomenon rather than the phenomenon itself.

6.5.1 The definitions The entries examined in this chapter offer the very first definitions of ‘crises’ available in the literature. While this is surely what readers expected to find in a dictionary or encyclopaedia, the reluctance of previous writers to provide precise definitions of their subject deserves a brief comment. Explicit definitions of crises are, in fact, rare in the early literature. The first example I have found dates from 1839, when Luigi Chitti defined as follows the crises that severely affect the national economy (indifferently qualified as industrial, commercial or financial, although Chitti himself preferred the latter attribute as better representing the intimate relationship between the fact the word represents and the cause that brings it about): The financial crisis is for a nation what bankruptcy is to an individual: it is the incapacity to meet contractual commitments. As a nation is only indebted to itself (abstracting from the relationship with other countries), the financial crisis is, in other words, a nation’s declaration of incapacity to complete the undertakings that have been initiated. (pp. 6–7) This is essentially the core of the definition later adopted by CourcelleSeneuil in his entry (1842). Other examples from the same epoch as our dictionary entries are worth citing. The best known of them is probably the one offered by John Stuart Mill, very much on the same lines as Chitti’s and Courcelle’s. Having qualified the crisis as a ‘great derangement’ (Mill, 1848, Book 2, Ch. 15, § 4), he defined the phenomenon as follows: ‘There is said to be a commercial crisis, when a great number of merchants and traders at once, either have, or apprehend that they shall have, a difficulty in meeting their engagements’ (Book 3, Ch. 12, § 3); he also spoke of ‘the collapse of credit called a commercial crisis’ (Book 3, Ch. 21). Eugène Buret stressed a completely different aspect. He noted that trade is a cause of perturbation of the most essential functions of society, as it disturbs production by introducing the uncertainty of speculation, price fluctuations and sometimes overall suspension of industry. The value of credit titles, including paper money, is at times unduly inflated. Crises are then ‘the times at which commercial values are brought to the test’ (Buret, 1840, Vol. 2, pp. 212–213). Richard Hilderth’s suggested definition resembles those advanced by the entries considered in this chapter: In addition to the ordinary, or what may be called the annual fluctuations of trade, there are fluctuations of a more serious and permanent kind, which grow

Analysis of crises in early French dictionaries 185 out of some great change in the relations of commerce and industry, and which are apt to produce what is called a commercial crisis. Changes from general peace to war, and from war again to peace, must necessarily be followed by a derangement of the previously existing state of business, by great fluctuations in commerce, and great changes in the value of property. The same effect is produced by civil disturbances; and sometimes even by revolutions taking place in foreign and distant countries. (Hilderth, 1840, pp. 160–161) Mary Hennell wrote in similar terms that ‘the balance of production and consumption is every moment disturbed; hence commercial catastrophes and crises’ (1844, p. 105). James Wilson also struck the same chord, but introduced the distinction between monetary and commercial crisis: ‘the panic of 1836–37 . . . was most strikingly a money crisis, and a money crisis only, a disturbance of the channels of connexion between producer and consumer, and not a disturbance in any general relative ability of consumption and production’ (Wilson, 1840, pp. 68–69). ‘[T]his crisis was a mere reaction to the unnatural abundance of money and excitement of commercial enterprise’ (p. 70). A descriptive definition is given by de La Farelle in 1842: ‘at almost periodical times, and more and more frequently, all the home markets become glutted, all the markets abroad close down at once, and shortly after that, all the workshops also go out of business. This is what is called a commercial crisis’ (pp. 93–94). The blockage of production is also taken up by Tooke (1848), who adds the stoppage of payments and insists that the terms ‘crisis’ should be applied only to cases of some severity: The course of commercial events, from the beginning of August to the week ending the 23d of October [1847], thus proceeded in an uninterrupted progression of disaster, discredit, and dismay. At the close of that week, all circumstances tended to what is termed a crisis; not such a crisis as, by profanation of the term, has been applied to comparatively slight cases, but to so critical a state of things as threatened to involve a total suspension of all business and of all payments. (p. 317) How can this scarcity of explicit definitions of ‘crisis’ be explained? A first reason may lie in the fact that crises are rather complex phenomena and are not easy to characterize in terms of a few essential features. A second reason is that most of the literature of the time was highly topical: it was stimulated by the occurrence of each crisis (see Chapter 3, Section 3.1.2), and was directly aimed at suggesting a remedy. Each crisis was then considered as an event in itself, with its own cause(s) and specific features, and to most writers at the time the abstract category of ‘crisis’ would not have made much sense. What different crises had in common, in the general perception, was their effects on individual and social well-being, as is witnessed by the prevalence up to that point of the term ‘distress’ to describe them.

186 Daniele Besomi There were naturally some exceptions, as some writers perceived and tentatively described the systematic aspects of the recurrence of crises. These dictionary entries are part of this still small minority of contributions. Their very existence, with their shift of emphasis from the consequences of crises to the phenomenon itself and with their attempts to convey the fundamental character of crises into an explicit definition, witnesses that the attitude towards crises was beginning to change. The inclusion of this topic in dictionaries not only reflects such a change in attitude, but contributed to strengthening it, in particular by institutionalizing the adoption (in French at least, for the time being) of the term ‘crisis’ as appropriate to characterize the phenomenon and by making crises a suitable topic of learned discussion. Having acknowledged the novelty of these early dictionary definitions, it is necessary to point out that the actual theoretical content of these entries was not particularly innovative. The definitions given, expressing the understanding of crises in terms of disturbances to the regular progress of trade, translate in clear words the widespread, but often implicit, viewpoint that crises are an anomaly with respect to the normal condition of prosperous times. There are also explicit statements to this effect; one dates back to 1810, when Erick Bollmann stated that ‘this regular course of business becomes interrupted by the approaching crisis of the closing bank’ (1810, p. 29). Also, the implication of this definition, that a disturbance must have a cause that can be recognized in order for a remedy to be suggested, was explicitly stated years before these dictionary entries were written. Mathew Carey, for instance, explained he was to ‘cast a retrospective glance on the course of affairs, which gradually led to and finally produced the present crisis’, because in order ‘to prescribe efficiently for any disorder, it is incumbent on us to investigate the predisposing causes’ (Carey, 1816, p. 17). Besides these unequivocal statements, this view of crises is apparent also in the analogies used by a large number of writers in substitution of proper definitions. The most frequent similes evoked for crises were storms and tempests, and especially diseases (Blanqui, in his 1836 entry, used them both). The former convey the idea of a fatality which one has to expect after a period of good summer weather, while the medical metaphor contrasts the normal, healthy state of the system to the disease, and suggests that the cause of the disturbance needs to be sought out and removed in order to restore health (for a detailed discussion of the medical metaphor in this context, see Besomi, 2011).

6.5.2 On causality A common feature of all these entries is their openness to multiple causal explanations of crises. They produced fairly similar lists of possible disturbances: wars and social or political unrest among the external perturbations, and changes in consumers’ preferences or in the technical conditions of production, competition and overspeculation among the internal causes. This approach was almost universal in the first half of the nineteenth century, and still very common in the following decades: if crises are seen as (the result of) a perturbation, any disturbance that is sufficiently intense can give rise to a crisis. Crises are then understood as individual events, disconnected from each other.

Analysis of crises in early French dictionaries 187 Shortly after the first entries on crises in French dictionaries were published, this approach was subject to attacks on epistemological grounds. Some writers in England, Ireland and France espoused the opposite interpretation of crises, rejecting the view that they are individual events and affirming instead that they are connected to each other within a broader pattern. These arguments were based on some form of the causal principle. Starting from the observation that crises tend to recur with some regularity and that they share common features, the critics of the ‘individualistic’ approach concluded that they must have a common cause. Naturally, they did not deny that external events and internal maladjustments or frictions played some part in the development of crises, but reinterpreted their causal role. While in the individualistic approach, these events were understood as the primary cause of each individual crisis, these same events or impediments were interpreted by the critics as subordinate causes or triggering events, possibly anticipating or amplifying or otherwise altering the actual course of each crisis, the primary and necessary cause of which, however, was common to the entire series of events. The kind of causal reasoning as applied to crises was thus turned on its head. Not only were the critics aware of their radical departure from the earlier tradition, but they attacked with some violence the alternative approach, charging its authors with ignoring the basic tenets of scientific reasoning. The first such assaults date from 1840. Robert Cockburn criticized the various explanations offered by other writers, observing that whatever the proximate cause evoked, it could only operate provided that the system was predisposed to suffering a crisis: ‘A very slight reflection must convince us that the causes enumerated could not produce the effect upon a sound system of trade. Infection is not easily communicated, where the body is not pre-disposed by weakness or ill-health’ ([Cockburn], 1840, pp. 1–2). In France, also in 1840 (some of our dictionary writers could thus have been aware of this contribution), Briaune rejected the predominant individual explanation of crises by mocking the adversaries and bringing home an epistemological point at once. He attacked the ‘popular preconceptions’ (préjugés populaires – shared, in reality, by renowned economists, including our dictionary writers) ascribing crises to ‘political causes’ by arguing that the political and institutional setting can only be a secondary cause, making things worse or better, while the fundamental cause must be sought elsewhere, on the ground of the ‘general principle that seeks the same cause for a series of similar effects’. The destructive part of Briaune’s argument consists of a long list of political causes that should have produced precisely the opposite effect to the one actually observed: for instance, one should profess that the prosperity from 1820 to 1827 was due to the changed electoral law, to the suspension of the freedom of the press and of individual freedom; to the riots in the schools, to the Paris, Saumur, Bedford and La Rochelle conspiracies that were its consequences; to the Spanish war, to the compensation laws, to the primogeniture rights, and to sacrilege, which were its continuation and complement. (Briaune, 1840, p. 3)

188 Daniele Besomi The constructive part states the positive principle that should guide the reflection on the causes of crises: If these were the true causes, they would have had impact on the crises of 1811, 1817 and 1827, for the periodical return of the same affliction necessarily implies the existence of identical and permanent causes. However, nobody would assign to past crises the supposed origin of the present crisis; it is indeed rather illogical that similar effects, obviously linked to each other, are always attributed to different accidents. Against the general principle that for a series of like effects the same cause must be sought, one should bring irrefutable evidence; but such a proof is still missing. (ibid., pp. 3–4) A third contribution along similar lines is due to Isaac Preston Cory (1842): A variety of causes has been assigned to account for this depression, and as many remedies have been proposed to obviate it. The national debt, taxation, the currency, the unlimited power of the Bank of England over its issue, the excess of population, the corn laws, the oppressions of the millowners, have each their advocates, who would fain persuade us, that an alteration of some one or more of these would give relief and restore prosperity. It is not my intention to deny, that each and every one of them have their effect, and may, in some degree, influence the state of trade: but in the following pages I propose to avoid, as much as possible, the discussion of any of these subjects which have been worn threadbare, and upon which every one has made up his mind; while I would direct attention to what I humbly conceive to be a preliminary evil, much more extensive than all of them put together – a canker in the very heart of our trading prosperity, which is ever and anon producing the same recurrences of distress – temporary they may seem, but which, I fear, are rather of a periodical nature, like the returns of the shivering fits which precede the dissolution of the body by an internal ulcer. (p. 3) A few years later similar arguments made their way into dictionary entries, in particular thanks to Coquelin (CRISES COMMERCIALES, in →Coquelin and Guillaumin’s Dictionnaire de l’économie politique, 1852; see Chapter 8) and Juglar (CRISES COMMERCIALES, in →Block’s Dictionnaire général de la politique, 1863; see Chapter 12). Notable contributions along these lines also came from James Anthony Lawson, John Mills and Stanley Jevons.10 Among the factual premises for the reversal of the causal interpretation, one was fully incorporated into our dictionary entries, the other less so. As noted above (Section 6.2), the entries under consideration acknowledged that crises tend to recur with some frequency, and most of them explicitly use the attribute ‘periodical’ to describe this fact. This was not exceptional, as by the mid-1830s the observation that crises are ‘periodical’ – that is, recurring, with little or no implication

Analysis of crises in early French dictionaries 189 as to a strict regularity in the timing – was already fairly frequent (see Besomi, 2010a). The second premise, that the shared features of crises are recognized and emphasized over their differences, was instead rather less common. Of our writers, only Lemonnier attempted a general (i.e. abstract) description of the phenomenon, while the other contributors emphasized instead the differences among individual crises. In the literature, by contrast, there are a number of detailed descriptions of the development of a crisis from its preparation during the previous prosperity to its outbreak and successive liquidation. William Huskisson, for instance, discussed how ‘the expansion of . . . paper circulation, combined with an unfavourable foreign Exchange, leads to overtrading, till overtrading again forces a contraction of the currency: thus, producing those alternations of extravagant excitement and of fearful depression, which this country has so often experienced of late years’ (Huskisson, 1826, p. 28); in 1830, he described the various phases of the cycle, beginning from a state where ‘supply and demand would continue in the same relation to each other’, followed by ‘speculative purchases’ causing an advance of prices at an accelerated rate, after which demand becomes languid and a pause ensues while goods continue to be offered for sale: in such conditions, ‘a glut or superabundance of goods is said to exist’. This begins a time of distress, during which prices fall and the bills of exchange are reduced in amount, until the goods in excess of demand are eventually sold ([Huskisson], 1830, pp. 446–452). A few years later, Overstone formulated a description of the cycle in ten phases, which was immediately and repeatedly cited in the literature (Loyd, 1837), echoed by another, much more detailed description by Longfield (also in ten phases, represented graphically as a circle) and by a characterization in only three phases by Briaune: crisis, recovery, commercial development (Longfield, 1840, p. 13). Of these developments, there is absolutely no trace in the entries under examination. Their views remain anchored to an understanding of crises as disconnected events, rather than as instances of the same phenomenon and thus subject to a common law, so that the periodical return of crises remained a matter of observation rather than being incorporated into a theory of crises. This is also revealed by the fact that most of the causes of crises suggested by our writers are of an unsystematic and avoidable nature – this surely applies to the external causes, but also to changes in fashion and entrepreneurial miscalculations. The relevant exceptions are Lemonnier’s technological progress, and Dupin’s and Michel’s excesses of credit and overspeculation. The explanation based on the idea of credit permitting overtrading which eventually degenerates into open overspeculation was surely the most popular at the time; but while some writers had already stressed the economic mechanisms that induced both traders and bankers to indulge in overtrading,11 in Dupin’s and Michel’s entries this is ascribed to a temporary and not clearly motivated insanity. More interesting is instead Lemonnier’s argument; he caught at once not only the perturbing role of innovations, but also the necessity of their occurrence as a key to progress. Coupled with his attempt to give an abstract description of the phenomenology of crises, this makes his entry the most intriguing one among the early contributions on the subject.

190 Daniele Besomi 6.6 SUMMING UP: GARNIER’S ENTRY ON COMMERCIAL CRISES The six early entries we have discussed above were all short and rather sketchy, but this was about to change. The general literature on crises was becoming more abundant and refined, and some book-sized discussions were being published. Dictionaries correspondingly started to carry more extensive entries, some of which also dedicated attention to the publications on the subject. In 1859, →Guillaumin’s Dictionnaire universel théorique et pratique du commerce et de la navigation carried an entry on CRISES COMMERCIALES by Joseph Garnier, which showed a remarkable immunity to the theoretical advances that were taking place in the literature and in other dictionaries (in particular in Coquelin’s entry on CRISES COMMERCIALES, 1852, and Ott’s entry on CRISE in his own →Dictionnaire des sciences politiques et sociales, 1854) and recast, in a much better articulated way, the essence of the argument we find in the early French dictionary entries. This entry is worth expounding in some detail not only because it is clear and very detailed, but also because it explicitly links to the theoretical scheme that lies behind the understanding of crises as disconnected events – namely, Say’s law of markets.12 Garnier opens his entry (1859) by defining a crisis in general terms as ‘a perturbation of the natural state, an anomalous condition during which the nature of things struggles against a morbid cause to return to a better condition’. With reference to our subject, commercial crises are a sudden disturbance of the natural economic state; specifically, they are perturbations in the general function of exchange, which is as necessary to social life as the circulation of blood is to the life of animals and individuals. The latter is compromised if the blood circulation is hindered, interrupted or simply slowed down; morbid symptoms then affect the living body. Similarly, social life is endangered and morbid symptoms appear in various branches of social production if the exchange is hindered, interrupted or simply slowed down. (p. 920) As all productive activities are interconnected, each of them being the market for another one, any obstruction or derangement has a chain effect, which eventually leads to the impossibility of selling at a price that covers the cost of production, with disastrous effects on producers and workers. Crises can be general or partial (affecting only certain industries) or local (affecting only certain regions), but they are all preceded, followed or accompanied by perturbations in the means of exchange, of circulation or of credit (specie, banknotes or commercial bills). Here, therefore, lies the key to the explanation of the general disorder in business. During generally prosperous times, when business grows and multiplies, the needs for transactions means increase accordingly, while the available amount of them, sufficient for ordinary circulation, proves to be too scarce. This causes an increase

Analysis of crises in early French dictionaries 191 in the rates of interest and of discount, and generally a monetary crisis. Conversely, during times of sluggish business and low confidence, if for any reason (e.g. a political event) people seek to hoard specie and the circulation of credit bills is slowed down, the opposite kind of monetary crisis ensues. Ultimately, the causes of this scarcity of money and of crises generally are numerous and varied in nature. They can all be classified under the following headings: Political and social agitations, causing worries about the future and lack of safety. Wars, and the consequent re-establishment of peace. Famines; the scarcity of crops of important raw materials; any catastrophe; abundance. A slowing down of consumption, with its consequences for exchange and production. A rapid increase in production due to excitement in the spirit of enterprise and to speculation fevers, which incite the undertaking of badly conceived operations. The diversion of capital due to the development of public works or to new large enterprises. The development of credit and the monopoly of credit institutions. A rapid increase in the quantity of precious metals, gold or silver. A sudden increase in tariffs, national or foreign. The backlash of foreign crises. (ibid. p. 921) Most of these causes affect consumption, but an over-excited productive activity due, for instance, to feverish commercial speculation leading to unsound enterprises can have a similar effect: an excess of goods on the market cannot be absorbed by a circulation system suited to a normal flux of goods, and markets become glutted. This causes a fall in prices, which eventually brings production to a halt. Say (as opposed to Sismondi) has demonstrated that general overproduction is impossible, as products provide an outlet for each other and consumption is susceptible to growing without limits. Special and temporary overproduction, however, is possible, if the spirit of enterprise or speculation is misdirected and does not take into account the needs of consumption. The creation of new enterprises, while being the driving force of a country’s progress, can also be a cause of crises. New enterprises need capital. Part of it is supplied by private savings, but some draw on the mobile capital of industry and turn it into fixed capital. A certain proportion of circulating and fixed capital, however, should be preserved as it is necessary for the smooth working of the entire system. When a large number of large enterprises are created at once, this proportion is disturbed and a crisis can ensue – as in the case of the simultaneous construction of numerous railway lines in England, France and Belgium in 1845 and 1846. Such enterprises also misplace large masses of workers, concentrating riotous

192 Daniele Besomi people and causing a fall in their wages, and have worse effects when these works are not productive. The development of credit and the proliferation of banks and other credit institutes are another alleged cause of crises. The question is much debated and not yet decided, as some attribute the derangements of circulation to the excess of the regulation of banks, others to the lack of it. Garnier argues that banks’ monopoly over issues may be responsible for crises. In the absence of control over their actions by the forces of competition, they can sometimes fuel excesses of speculation and, on realizing their mistake, try to remedy it by suppressing credit altogether.13 The abundance of gold can also be a source of perceptible disturbance to circulation, as well as an increase in tariffs and protection, which deprive the national industry of the foreign supplies it needs and later also of their markets. In Garnier’s view, the belief that it is possible to remedy crises is mistaken. Intervention by means of prescriptions and regulations can only increase the effects of crises. Once the disturbance has taken place, its consequences must be deployed in full, as they eliminate unsound businesses and, by depressing prices, facilitate consumption and decongest the glutted markets; indeed, trade recommences with renovated vigour soon after the crisis. One can say that probably the consequences are less painful and lasting in countries where there is freedom of trade and industry. One can only remove the cause of the disturbance, if doing so is in any way possible. Some of these causes pertain to the nature of things, some are the result of climatic accidents, others seem to be intrinsic to the development of society. Only those occasioned by the latter are proper commercial crises – namely, those due to the overexcitement of the spirit of industry, to the development of new large enterprises, or to the development of credit. These crises are inevitable but short-lived and at any rate their consequences cannot match the immense advantages that people as a whole gain from economic progress, in spite of the losses by individuals. Garnier concludes that such crises are inherent in growth: it is better to be rich and active than poor and idle, and while rich countries undergo occasional crises, poor countries are in a state of permanent crisis.

NOTES 1 There is a partial translation and adaptation of this entry under the title CRISI COMMERCIALE in the Nuova enciclopedia popolare italiana (without mentioning the source or the author). The first edition (1841–1849) translated it almost in full; only the last paragraph is slightly emended and abridged – in particular, it omits the remark that each day witnesses the outbreak of a new crisis or the end of an old one (Blanqui’s passage is cited in Section 6.2 below). The 4th edition (1858) adds, among the causes of crises, the extensive works of public utility, such as roads or railways, which absorb huge sums of capital not always proportionate to the nation’s savings (Vol. 6, p. 60); this cause is given pride of place. This edition omits entirely Blanqui’s concluding remarks on protectionism (see Section 6.3), and adds a reference to the crises of 1846–1847 and 1857. The 6th edition, titled Nuova enciclopedia italiana, is practically identical to the 4th, but adds at the end a reference to the crises of 1866, 1872 and

Analysis of crises in early French dictionaries 193

2 3

4 5

6 7

8 9

10 11 12

1876–1877, and cross-refers to the entries on BANCO (Bank) and CREDITO (Credit) for a discussion of the banking crises, which have become the most formidable and frequent crises in recent times (1878, Vol. 6, p. 847). This entry is translated into Italian as CRISI COMMERCIALI E INDUSTRIALI in →Antonelli’s Enciclopedia del negoziante, Vol. 3, 1841, without reference to the source or author. Michel (his complete name is nowhere indicated and nothing is known about him) dated the writing of his entry as November 1836 (p. 758), while the dictionary’s frontispiece indicates 1839. The volume’s date probably refers to the appearance of the last fascicle that composed it. Michel’s entry was taken up by Mora for his article on CRISIS COMERCIAL in the →Enciclopedia moderna (1851–1855); see Chapter 9. The Encyclopédie du commerçant. Dictionnaire du commerce et des marchandises, the success of which launched the Guillaumin editions, was originally meant to adapt →McCulloch’s Dictionary, practical, theoretical, and historical, of commerce and commercial navigation (1832). Guillaumin, however, soon found many shortcomings and decided to have it completely rewritten with the collaboration of Blanqui, Garnier and others (Garnier, 1865, p. 114). McCulloch’s Dictionary does not carry entries on crises. Here as well, the dating of the volume is not consistent with the time of writing of the entry on crises. As Dupin refers to the 1847 crisis, 1846 may refer to the publication date of the first fascicle of the volume. Although in his entry Dupin does not explicitly stress the role of disturbances to the regular course of business, except perhaps by implication of the passive tense of the verb in the expression ‘being thrown into a difficult situation’, he opened his book on the 1839 crisis with the following words: ‘If national industry only received, from people and from things, regular and constant impulsions, and if the same constancy and regularity governed the needs, the taste and the desires of consumers, then and only then could we hope that this industry would no longer be subject to the alternations of convulsive progress and sudden regression which characterize nowadays the phases of its existence’ (Dupin, 1839, p. 5). Only later did →Coquelin’s and Guillaumin’s Dictionnaire de l’économie politique (1852– 1853) carry a defence of PROGRÈS INDUSTRIEL and an entry on DÉBOUCHÉS (outlets), the latter being nothing else than a long quotation from J.-B. Say. The logical connection between the notion of crisis as disturbance and the quest for the cause of perturbation is clearly explained in Dupin’s book on the 1839 crisis: ‘As it is impossible to rely on an unshakeable continuity in the favourable circumstances perpetuating our commercial prosperity, without regrettable alternations, it is important to study with deep care the perturbing cause or causes which, from time to time, have exerted a disastrous influence on the useful arts and thus on the destiny of people’ (1839, p. 5; this passage immediately follows the one quoted in note 5). For a detailed account of Dupin’s view on crises, see Simonin, 2009. The image of the fever (as well as that of madness, also used by Dupin, p. 310) was widespread at the time to indicate the paroxysmal character of speculation, implying that the ‘diseased’ state of the economy was not the crisis but the ‘excesses’ of the previous prosperity, or, rather, ‘apparent prosperity’. See Besomi, 2011. Lawson, 1848; Mills, 1868; Jevons, 1878. For a discussion, see Besomi, 2008 and 2010b, pp. 208–217. A first instance is William Huskisson’s account of commercial delusions in 1810. For a discussion and context, see Besomi, 2010c. Say’s law is never cited in the other entries examined here. It was explicitly discussed only in →Ganilh’s Dictionnaire analytique d’économie politique, 1826. Although it does not carry a dedicated entry on crises, the entries on CONSOMMATION (Consumption) and PRODUCTION are of interest on the subject for their explicit rejection

194 Daniele Besomi of the thesis, recently advanced by ‘some writers’, that ‘production creates consumption, and that if consumption does not fully absorb production it is because too little is produced’ (PRODUCTION, p. 351). Ganilh dismissed this ‘revolting . . . paradox’ (p. 352), pointing out that while production increases the means for consumption, it does not at the same time increase the number of consumers and their desire to consume. Historically, the richest countries are not those producing more, but those having more markets. Beyond sophisms, the principle regulating production is that ‘the markets [débouchés] guarantee consumption, as consumption stimulates production’ (ibid.). In the entry on CONSOMMATION, Ganilh attacks Say’s law as ‘impossible and contrary to the law of exchange of products, or of their sale and purchase’. It is based, in fact, on the assumption that each producer can sell his products because with the proceeds he buys other products of the same value. Yet this requires that producers can find buyers who need their products and have the means to pay them. Producers as a whole do indeed consume the largest part of production. The rest must be sold to consumers, who do not give other products in exchange for them, but can only offer their services. But as soon as consumers have spent their income in buying the consumption goods they want to acquire, they have neither the will nor the means to buy any more. ‘The claim that the very fact of the creation of a product instantly opens a market (débouché) to other products is therefore incorrect; on the contrary, it is evident that consumption necessarily rules production’ (pp. 158–161). Ganilh does not directly relate this argument to crises, except for noting that overabundance of products ‘is a grave misfortune for a country’ (p. 351). It may be interesting to note that the law of markets found a formulation in a dictionary well before Say’s or Mill’s times. In the entry on COMMERCE in →Robinet’s Dictionnaire universel des sciences morale, économique, politique et diplomatique (Vol. 12, 1780) we find the following statement: ‘nobody can be a buyer unless he is also a seller; since buying implies paying, nobody can buy unless he sells, because only by selling can he procure the money to buy what he buys. From the fact that every buyer must be a seller and that he can buy only if he sells, a second axiom results, namely, that every seller must also be a buyer, and he cannot sell unless he buys. Therefore every vendor must, by way of the purchases he performs in turn, provide everybody else with the money for buying the goods the vendor wants to sell them.’ There may not be perfect matching between individual sales and purchases, but if someone becomes richer by selling more than he buys, someone else is ruined by buying more than he sells, so that ‘by the opposition between these two sorts of disorder, equilibrium is re-established in the general mass of sales and purchases (pp. 444–445). 13 It should be noted that Garnier’s view was different from Coquelin’s (on whom, see Chapter 8). The banks’ monopoly is not a constant and systematic cause of strain, but induces the monopoly bankers to make mistakes in their calculations.

REFERENCES Besomi, D., 2008, James Anthony Lawson on commercial panics and their recurrence, Structural Change and Economic Dynamics, 19: 4, December, pp. 330–341. Besomi, D., 2010a, The periodicity of crises. A survey of the literature before 1850, Journal of the History of Economic Thought, 32: 1, March, pp. 85–132. Besomi, D., 2010b, ‘Periodic crises’: Clément Juglar between theories of crises and theories of business cycles, Research in the History of Economic Thought and Methodology, 28A, pp. 169–283. Besomi, D., 2010c, Paper money and national distress. William Huskisson and the early theories of credit, speculation and crises, European Journal of the History of Economic Thought, 17: 1, March, pp. 1–37.

Analysis of crises in early French dictionaries 195 Besomi, D., 2011, Crises as a disease of the body politick. A metaphor in the history of nineteenth century economics, Journal of the History of Economic Thought, 33: 1, March, pp. 67–118. Bollmann, E., 1810, Paragraphs on banks (Philadelphia: C. & A. Conrad & Co.). Briaune, J.-E., 1840, Des crises commerciales. De leur causes et de leur remèdes (Paris: Bouchard-Huzard; reprinted New York: Burt Franklin, 1971). Buret, E., 1840, De la misère des classes laborieuses en Angleterre et en France: de la nature de la misère, de son existence, de ses effets, de ses causes, et de l’insuffisance des remèdes qu’on lui a opposés jusqu’ici: avec l’indication des moyens propres à en affranchir les sociétés (Paris: Paulin). Carey, M., 1816, Essays on banking (Philadelphia: Carey. Reprinted New York: Kelley, 1972). Chitti, L., 1839, Des crises financières et de le réforme du système monétaire (Brussels: Meline). [Cockburn, R.], 1840, Remarks suggested by the present state of trade and credit (London: E. Wilson). Cory, I. P., 1842, Competition: its abuse one of the chief causes of the present distress among the trading, manufacturing, and commercial classes: with suggestions for remedying it (London: Painter). Garnier, J., 1865, Guillaumin, ses funérailles, et ses oeuvres, Journal des Économistes, 45 (3rd series, 12th year): 133, January, pp. 108–121. [Hennell, M.], 1844, An outline of the various social systems & communities which have been founded on the principle of co-operation: with an introductory essay (London: Longman, Brown, Green and Longmans). Hilderth, R., 1840, Banks, banking, and paper currencies: in three parts: history of banking and paper money: argument for open competition in banking: apology for one-dollar notes (Boston, MA: Whipple & Damrell). Huskisson, W., 1810, The question concerning the depreciation of our currency stated and examined (London: John Murray). Huskisson, W., 1826, Free trade: speech of the Right Hon. W. Huskisson in the House of Commons, Thursday, the 23d of February, 1826, on Mr. Ellice’s motion for a select committee, to inquire into and examine the statements contained in the various petitions from persons engaged in the silk manufacture (London: J. Hatchard & Son). [Huskisson, W.], 1830, Essays in political economy: in which are illustrated the principal causes of the present national distress; with appropriate remedies. By George Robertson (London: Longman, Rees, Orme, Brown, & Green). Jevons, W. S., 1878, Commercial crises and sun-spots, Pt 1, Nature, XIX, 14 November, pp. 33–37. Reprinted in Jevons, Investigations in currency and finance, edited by H. S. Foxwell (London: Macmillan, 1884), pp. 221–235. La Farelle, F. F. de, 1842, Plan d’une réorganisation disciplinaire des classes industrielles en France: précédé et suivi d’études historiques sur les formes anciennes et modernes du travail humain (Paris: Guillaumin). Lawson, J. A., 1848, On commercial panics: a paper read before the Dublin Statistical Society (Dublin: Dublin Statistical Society). Longfield, S. M., 1840, Banking and currency, Dublin University Magazine, 15, pp. 1–15, 218–233; 16, pp. 371–389, 611–620. Loyd, S. J. (later Lord Overstone), 1837, Reflections suggested by a perusal of Mr. J. Horsley Palmer’s pamphlet on the causes and consequences of the pressure on the money market (London: Richardson).

196 Daniele Besomi Mill, J. S., 1848, Principles of political economy with some of their applications to social philosophy (London: John W. Parker). Mills, J., 1868, On credit cycles and the origin of commercial panics, Transactions of the Manchester Statistical Society, Session 1867–1868, pp. 5–40. Simonin, J.-P., 2009, L’analyse de la crise commerciale de 1839 par Charles Dupin. In C. Christen and F. Vatin (eds), Charles Dupin (1784–1873): ingénieur, savant, économiste, pédagogue et parlementaire du Premier au Second Empire (Rennes: Presses universitaires de Rennes). Tooke, T., 1848, A history of prices and of the state of the circulation, from 1839 to 1847 inclusive: with a general review of the currency question, and remarks on the operation of the act 7 & 8 Vict., c. 32 (London: Longman, Brown, Green and Longmans). Wilson, J., 1840, Fluctuations of currency, commerce, and manufactures; referable to the Corn Laws (London: Longman, Orme, Brown, Green and Longmans).

7

Wilhelm Roscher’s crises theory From production crises to sales crises Harald Hagemann

Die Gegenwart. Eine encyklopädische Darstellung der neuesten Zeitgeschichte für alle Stände (Leipzig: Brockhaus, 1848–1856), 12 volumes.

7.1 THE BROCKHAUS ENCYCLOPAEDIA Wilhelm Roscher’s essay DIE PRODUCTIONSKRISEN MIT BESONDERER RÜCKSICHT AUF DIE LETZTEN JAHRZEHNTE (‘Production crises with particular consideration

of recent decades’) was first published in 1849 by Brockhaus in Leipzig in Volume 3 (pp. 721–758) of a widely available encyclopaedia, Die Gegenwart. Eine encyklopädische Darstellung der neuesten Zeitgeschichte für alle Stände (The present time: an encyclopaedic presentation of the most recent contemporary history for all estates). It was republished fairly unchanged as Chapter VI, ‘On the theory of sales crises’ (Zur Lehre von den Absatzkrisen), in Roscher’s 1861 Ansichten der Volkswirtschaft aus dem geschichtlichen Standpunkte (Views of the economy from an historical perspective). This book is a collection of seven essays which had all been published before Die Grundlagen der Nationaloekonomie (Principles of political economy), Volume 1 of Roscher’s five-volume set System der Volkswirthschaft, first appeared in 1854. With a rearrangement of the material, several modifications and additions of references and historical details, but the core theoretical arguments unchanged, Roscher discusses the problem of sales crises also in the paragraphs on the proportional development of production and consumption in Chapter 1 of Book V of his Principles, and in § 169–177 of his Nationalökonomik des Handels- und Gewerbefleisses, Volume 3 of his System der Volkswirthschaft, which was first published in 1881. When the publication of the 20th revised and updated edition of Brockhaus. Die Enzyklopädie in 24 volumes started in 1996, it was exactly two centuries after R. G. Löbel had founded the Conversationslexicon mit vorzüglicher Rücksicht auf die gegenwärtigen Zeiten (Conversation-lexicon with special consideration of the present times), which in 1808 was taken over by F. A. Brockhaus. Although the

198 Harald Hagemann exact name changed over time, such as Die Gegenwart when Roscher’s essay was published in 1849, for a wider public it always was the →‘Brockhaus’, the leading encyclopaedia in the German language area. After the First World War, the Brockhaus encyclopaedia was published by the Biographical Institute in Mannheim, which also published the →‘Duden’, the leading work for German orthography, and was publishing another important encyclopaedia, →Meyers enzyklopädisches Lexikon. After German reunification, the headquarters of Brockhaus was transferred to Leipzig in 1991, and with the 20th edition of the Brockhaus encyclopaedia the ‘Meyer’ was integrated. Emphasis is placed here on the original Brockhaus essay and the slightly polished version of 1861. Whereas Roscher disliked the commonly used term ‘commercial crises’ because the malady in general is not limited to the circulation sphere and therefore in his 1849 essay preferred to speak of ‘production crises’ (Roscher, 1849, p. 724), from his 1854 Principles onwards he found it necessary to replace the term ‘production crises’ by the term ‘sales crises’ to characterize the essence of the disease – namely, a lack of effective demand. However, he kept ‘crises’ in the plural.

7.2 WILHELM ROSCHER Wilhelm Roscher was born in Hanover on 21 October 1817 and died in Leipzig on 4 June 1894. He was the youngest of five children of Conrad August Albrecht Roscher and his wife Wilhelmine von Rudloff, who both came from families of higher public servants and officers. After the early death of his father he developed even stronger ties to his mother, with whom he lived until her death in 1857. He finished secondary school in Hanover, where his teacher Ludwig Adolf Petri deepened Roscher’s religiousness. From 1836 Roscher studied history and political science at the universities of Göttingen, where he received his doctorate in September 1838, and Berlin, where he studied with Ranke. He started his academic career in Göttingen, where he made his habilitation and became Privatdozent in 1840 and extraordinary professor in 1843. In 1842 he published his book on Thucydides and in the following year his Outline to lectures on the state economy in accordance with the historical method (Roscher, 1843), in which he transferred the historical approach of the lawyer Savigny and his followers in a programmatic way. With this book Roscher established himself as the main founder of the ‘Older Historical School’, together with Bruno Hildebrand (1812–1878) and Carl (Karl) Knies (1821–1898). In January 1844 he was promoted to full professor of political economy at the University of Göttingen. Three months later he married. In 1848 Roscher moved to the University of Leipzig, where he taught until his death in 1894. Roscher felt at home in Leipzig and, also at the request of the King of Saxony, declined offers from the prestigious universities of Vienna, Munich and Berlin. While at Leipzig, Roscher wrote the five volumes of his textbook System der Volkswirthschaft, which were published between 1854 and 1894. The first volume,

Wilhelm Roscher’s crises theory 199 Grundlagen der Nationalökonomie, analysed mainly the same topics as classical economics: production, circulation, distribution and consumption. In contrast to classical authors, Roscher supplemented his theoretical analysis with long historical treatises, such as on the development of prices, rent, interest and wages. However, Roscher was much closer to the ideas of the classical economists than were Schmoller and other members of the younger Historical School, to whom Roscher was ‘too theoretical’. Like his admired ‘teacher’ Rau,1 with whom German economics started to specialize in a stronger subjective value mood or ‘protoneoclassical tradition’, making substantial contributions to the development of utility theory,2 Roscher had a stronger influence on Alfred Marshall, and particularly on Carl Menger, who dedicated his Grundsätze (1871) to Roscher (see Streissler, 1990). Roscher’s enormously successful textbook succeeded Rau’s Lehrbuch der politischen Ökonomie (Principles of political economy), which had been published between 1826 and 1837 and established the tripartite division of economics into economic theory, economic policy and public finance, as the bestselling textbook in Germany. The first volume of Roscher’s System der Volkswirthschaft went into 26 editions, the last five published posthumously. It was translated into many foreign languages. The English edition was a translation of the 13th German edition by J. J. Lalor and published in two volumes as Principles of political economy in 1878. The other four volumes dealt with issues of applied economics and were even more historically oriented. Roscher basically kept Rau’s tripartite division, with economic policy comprising three volumes: Volume 2 on the economics of agriculture (1859), Volume 3 on the economics of commerce (1881) and Volume 5 on social policy and poor relief (1894), which also reflected Roscher’s own practical experiences in Leipzig poorhouses. That Roscher found it necessary to add a special volume on social policy shows the growing importance of this problem in the second half of the nineteenth century. Social policy issues were also at the centre of many debates within the Verein für Sozialpolitik, which had been founded by a group of conservative social reformers, the ‘Kathedersozialisten’ (socialists of the chair), in 1872 (see Hagemann, 2001). Perhaps Roscher’s most valuable work is his Geschichte der NationalOekonomik in Deutschland (1874), which gives the first systematic treatment on the history of political economy in Germany. It is a remarkable achievement of professional learning. At the initiative of King Maximilian II of Bavaria, a great research project on the history of sciences in Germany had been started. It was directed by the Historical Commission of the Munich Academy. Roscher contributed his most outstanding work, which established him as the most eminent historian of early political economy in Germany. A closer look into the book reveals that Roscher’s historical viewpoint does not prevent him from engaging in theoretical considerations. His fairness and sense of judgement, for example, are illustrated in his examination of the importance of Thünen’s work (Roscher, 1874: pp. 879–902), although the latter’s exact mathematical method is distant from Roscher.

200 Harald Hagemann 7.3 ROSCHER ON CRISES Roscher bases his theoretical reflections primarily on the doctrines of the British classical economists, to whose ideas he was closer than were Hildebrand and Knies (the most eminent theorist of the three main representatives of the older historical school), albeit in an eclectic way and with emphasis on historical relativism. That Roscher’s historical viewpoint is not anti-theoretical comes out best in his important essay on crises. The controversy that had developed in the early nineteenth century around Say’s law, and the question of general gluts had also been taken up intensively by German economists before Roscher (Hagemann, 1995, pp. 176–178). The great majority joined company with the classical doctrine of savings and investment, as developed by Smith, Ricardo and Say. This comes out best in the careful investigation of the macroeconomic role of saving by Hermann, who emphasized the beneficial role of savings and came to the conclusion that ‘on no account is it to be feared that the application of savings will have a negative impact on the economy’ (1832, p. 372). In contrast to Hermann, Roscher’s admired teacher Rau had first attempted to mediate between the adherents to Say’s law and the dissenters in the general glut controversy. In his long postscript to the German edition of letters between Malthus and Say on the causes of the current sales stoppage, Rau (1821) agreed with Malthus that an increase in production does not necessarily lead to an equivalent increase in consumption. Five years later, however, in his Principles of political economy (Rau, 1826), the influence of Malthusian and Sismondian ideas had disappeared and Rau now considered equilibrium between production and consumption as a necessary condition of the wealth of nations and viewed a general overproduction as ‘unthinkable’ (ibid., p. 380). Like his role model Rau, Roscher in his analysis of the theory of crises first points to the necessity of an equilibrium between production and consumption. However, he soon continues to criticize Adam Smith and classical political economists for putting too much weight on production while neglecting consumption. On the other hand, the dissenters such as Lord Lauderdale, Malthus and Sismondi made the reverse error in one-sidedly emphasizing the role of consumption and demand. One should therefore take a balanced approach and pay equal attention to the problems caused by excess production and excess consumption.3 ‘The proportional development of production and consumption, of supply and demand, is one of the most important conditions for the prospering of the economy. All disturbances of this equilibrium belong to the most dangerous shocks, just like diseases of the great economic body, and it can hardly be said whether a temporary predominance of consumption or of production will have worse consequences’ (PRODUCTIONSKRISEN, p. 723; Roscher, 1861, pp. 288–289). Production only increases where there are growing wants. Entrepreneurs will only invest when they expect that demand for their products will increase. ‘Every expert will wish to increase productive capital only in so far as he expects also an increase in sales with the consequential increase of production’ (Roscher, 1861, p. 287).

Wilhelm Roscher’s crises theory 201 Roscher then distinguishes between partial overproduction and a general glut of commodities. He first discusses a partial crisis and points out that the commodity which happens to be in superabundance falls in price, which leads to a diminution of profits in that particular branch of production. The possibility of a glut of particular commodities did not seriously worry the classical economists because they believed that if any commodity is in greater quantity than the demand, some other commodity must be in less demand, and that there can be no glut of commodities in the aggregate. Moreover, the classical economists believed that the price level was highly flexible, so that an excess supply (excess demand) under the pressure of competition would quickly bring about an appropriate fall (rise) in the price level to restore equilibrium between the demand and supply of goods. The mobility of capital via gross investment plays an important role in the adjustment process. The lowness (highness) of the price in the good which is superabundant (scarce) invites a quantity of capital away from (into) that branch of production until the demand and supply are synchronized and the profit rates are equalized. Under conditions of competition there is always a tendency towards a uniform rate of profits at work. Ricardo, for example, had emphasized that it is ‘always a matter of choice in what way a capital shall be employed, and therefore there can never, for any length of time, be a surplus of any commodity; for if there were, it would fall below its natural price, and capital would be removed to some more profitable employment’ (Ricardo, 1951, p. 291). Roscher, on the other hand, regards perfect competition as a rather unrealistic case, but he does not rely on fixed prices.4 Instead, he points to the limited malleability of the fixed capital stock, which requires time and costs for the adjustment process, and he sketches a negative multiplier process without being able to work it out in greater detail (Roscher, 1861, pp. 289–290). He comes to the conclusion that ‘Without doubt most sales crises are special ones, i.e. supply exceeds demand only in single branches of commerce. However, there are also general crises where, with the exception of money, there is a lack of sales for all commodities at the same time’ (ibid, p. 293; PRODUCTIONSKRISEN, p. 724). The consequence of this statement is that Roscher has to get down to the general glut controversy or Say’s law debate in which the dominant side precisely denied the possibility of a general glut. Roscher therefore comes to grips with the argument of those ‘excellent economists’, like Ricardo, Say and the two Mills, who emphasized that demand is only limited by production, money is only the medium of exchange and that all sellers are ex definitione buyers. In particular, Roscher criticizes the limited view of reducing the role of money to its ‘means of exchange’ function and points out a decisive difference between a monetary economy and a barter economy. So, among other things, Say’s rigorous theory as it were is thwarted by the mere introduction of monetary transactions. When the original raw barter still dominated, supply and demand were directly confronted. But the mediation of money enables the seller to buy only after some time, i.e. to delay the second half of the exchange as much as he likes. Herewith in reality on

202 Harald Hagemann the markets, the supply will not always carry along an equivalent demand with it. (PRODUCTIONSKRISEN, p. 726; 1861, p. 297) Roscher here makes a very strong and important argument. The consequence of the role of money as a store of value is the separation of the act of purchase and the act of sale. Sellers now are not automatically buyers any more, as in the barter economy or in Ricardo’s monetary economy, where money only functions as a medium of exchange. This argument is in the centre of all later critique of Say’s law, as, for example, in Marx and Keynes. According to Roscher (1861, pp. 298–300), sales crises (Absatzkrisen) are generated because of commercial overspeculation. If traders expect a rise in prices they start to increase their stocks, thereby causing prices to rise. The whole process is promoted by the availability of credit and sooner or later will be corrected when circumstances occur which impair the ‘general hopefulness’.5 As a consequence, the following development will take place: ‘Everybody collects his claims and seeks to convert his stores into cash as soon as possible, i.e. everybody wants to sell, nobody wants to buy. How is this different from a general sales crisis?’ (Roscher, 1861, pp. 299–300). Roscher (PRODUCTIONSKRISEN, p. 726; 1861, pp. 300–301) also discusses the case of a sales crisis caused by the bankruptcy of the state which leads to a redistribution of national income. In Roscher’s example there are 300,000 families as creditors who lose the same amount of money per year as five million taxpayers will save. Every creditor family will lose £100 sterling per year, whereas the taxpayer families will gain only £6 per year. Roscher draws the following conclusion: ‘Whoever wins in such a case will not enlarge his consumption as quickly as the loser must reduce it, for the simple reason that the former generally cannot estimate his gain as precisely as the latter his loss’ (PRODUCTIONSKRISEN, p. 726; 1861, p. 301). It therefore could be concluded ‘with certainty’ that those creditors who have a high level of consumption will decrease their consumption strongly, whereas many taxpayers will not react at all or will increase their consumption only a little. Clearly, Roscher’s argument suffers from not taking into account that the many taxpayers with their lower income level will have a higher marginal propensity to consume than the creditors (who normally have a lower propensity to spend, which has made them creditors and which is the very essence of Fisher’s debt-deflation effect6), so that the impact on aggregate consumption demand in the short term might be exactly the opposite. The possibility of a sales crisis increases with the state of the development of an economy. The higher the degree of the division of labour, the more difficult it will become to keep supply in balance with future demand. According to Roscher, sales crises are a seamy side of the higher culture, which is inevitable (1861, p. 308). The more advanced economy is also characterized by more mechanized methods of production and the introduction of new types of machinery. Roscher discusses

Wilhelm Roscher’s crises theory 203 the economic importance of the machine industry in another chapter (see essay 5, Ueber die volkswirthschaftliche Bedeutung der Maschinenindustrie in Roscher, 1861, pp. 173–277) in which he also addresses the issue of technological unemployment and the conditions for compensation of those workers who have been displaced by the introduction of new machinery. Roscher makes it clear that the possibility of a temporary technological unemployment is the consequence of the sudden introduction of new technology on a large scale. He takes up this issue again in his Absatzkrisen essay in the section where he discusses various factors (such as fashion changes) which lead to a sudden and large discrepancy between production and consumption and thus cause a sales crisis. Here Roscher points to an important distinction between the long-run advantages and the short-run inconveniences of the sudden and large-scale introduction of new machinery (p. 315). He clearly identifies an aggregate demand condition for the advantages dominating in the longer run. Technical progress leads to cost and price reductions, thereby stimulating the demand for goods. In flourishing economies, consumption demand would increase more than production costs have been reduced, thus leading to an overall increase in employment. Roscher not only reproduces the classical compensation principle, i.e. the theory that technological unemployment is at best a ‘transient evil’, because innovations bring about price reductions and the expansion of output, as had been clearly stated for the first time by Say (1821, Ch. VII), but also struggles to grasp the notion of the elasticity of demand without elaborating on it.7 In a world with an uncertain future, information problems exist. In particular, producers have the problem of distinguishing transitory from permanent increases in demand. Temporary increases, although welcome in the short term, can turn out to be fatal in the long term if they are misinterpreted as permanent increases and stimulate producers to invest and enlarge productive capacities far beyond what is necessary (PRODUCTIONSKRISEN, p. 732; 1861, p. 328). This implies a misallocation of resources which will often lead to crises and thus painful corrections in the future. An allocation of resources not in line with the long-run comparative advantages of the economy and thus crisis-prone can also be the consequence of the outbreak of wars necessitating a structural change. A crisis can also arise with the restoration of the old production structure in the wake of subsequent peace settlements. Roscher’s essay is full of historical examples, especially from the Napoleonic wars. But sales crises do not only play a negative role, as Roscher added in his later version. An interesting element in Roscher’s view of the function of the economic crisis is that, seen from an evolutionary perspective of capitalist development, the downturn of the economy also has some positive aspects (Roscher, 1861, pp. 360–361). Superfluous luxury consumption will be eliminated and replaced by parsimony and new capital formation. The crisis teaches entrepreneurs a severe lesson which is beneficial for society as only the fittest entrepreneurs will survive, and will invest again and rationalize the production process. Quoting Marx and skilfully turning round Marx’s argument, Roscher perceives sales crises as great Weltmarktgewitter (‘world market thunderstorms’), in which the contradictions

204 Harald Hagemann between all the elements of the bourgeois production process burst, thus clearing the air and fertilizing the ground for further economic development (ibid., p. 361). Furthermore, he refers to Wagner’s excellent discussion on the three stages that follow in the process of overspeculation,8 and to Juglar’s empirical analysis, and emphasizes the cyclical character of economic crises, i.e. the quasi-rhythmical variations of upturns and downturns (ibid, p. 362). Finally, in a section called therapy, Roscher draws some policy conclusions. Using physicians’ language, Roscher distinguishes between preventive and mitigating means. There are three remedies which Roscher ascribes to the first category: a far more elaborated statistics to improve the information available to economic actors, liberating the economy from the fetters of guild regulations and all other kinds of trade barriers (including Rechtsunsicherheit – legal uncertainty – which he regarded as the worst fetter), and, most important, the reliability of economic policy. Roscher rightly diagnoses that a confidence problem is a major element of a sales crisis. Time and again he emphasizes trust and confidence as decisive preventive means. This becomes clear when he discusses the role of banks and the double-sided nature of credit, which in normal times will stimulate production and sales but can also lead to and worsen economic crises. As a representative of a theory of effective demand, Roscher naturally is in favour of the positions of the banking school emphasizing a certain amount of monetary control, not by discretionary measures of the government, but by a system of checks and balances with the decisive categories being discipline and confidence.9 Confidence is enhanced by an economic policy based on clear rules, including the growth of public debt. Roscher is very much concerned with the destabilizing tendencies caused by the burden of a high public debt, which gives an incentive to the government as well as to private actors to make risky and precarious speculations (PRODUCTIONSKRISEN, p. 743; 1861, p. 373). But what to do when the crisis has already occurred? Since the essence of a sales crisis consists in the preponderance of production over consumption, any therapy must bring into line the levels of supply and demand. The natural lapse of the disease would work in that direction although in a very painful manner (1861, p. 363). Any economic policy should not contradict this natural remedy. Roscher points to the limited possibilities of state interventions in open economies. But despite his plea against costly quackeries (PRODUCTIONSKRISEN, p. 740; 1861, p. 365) he proposes some anti-cyclical public investment programmes to fight unemployment, which may be called mildly Keynesian. Because of the cyclical character of sales crises the government should plan and preferably save such public works programmes for the next crisis. The impetus behind Roscher’s Keynesian recipes clearly was more of a conservative nature. Bearing in mind the revolutionary events in France and Germany in 1848, the year before his essay had originally been written, Roscher pointed out the political and moral dangers of mass unemployment, which therefore should be avoided.

Wilhelm Roscher’s crises theory 205 7.4 ASSESSMENT Wilhelm Roscher was the most influential German economist in the third quarter of the nineteenth century. Even for Schumpeter, who in general was very critical of the German literature of the time, ‘Roscher was the incarnation of professorial learning, mainly of a philosophico-historical nature, although ‘he conscientiously retailed, in ponderous tomes and in lifeless lectures, the orthodox – mainly English – doctrine of his time, simply illustrated by historical fact’ (Schumpeter, 1954, p. 809). He attested to the ‘honest scholarship and sound common sense’ of Roscher’s works, which ‘helped to make them perhaps more useful to many generations of students than would have been more original productions’ (ibid., p. 508). Schumpeter pointed this ambivalent assessment not only at Roscher in general, but also at his essay on the theory of sales crises in particular. He perceived Roscher as a leading representative of the view ‘that crises will occur when anything of sufficient importance goes wrong’, and stated that ‘Roscher presented what can only be described as a fricassee of most of the ideas that were current at the time he wrote’ (ibid., p. 741). A completely opposite assessment is given in Erich Streissler’s modern interpretation of Roscher’s essay. Streissler recognizes Roscher’s splendid article ‘Zur Lehre von den Absatzkrisen’ as ‘a climax of German economics in the nineteenth century’ (Streissler, 1995, p. 112) and goes so far as to say that ‘if Keynes had only read and borne in mind Roscher, it would have left little that was new for his General Theory’ (Streissler, 1994, p. 121). Once excited, Streissler perceives in the author of the most successful contemporary textbook, System der Volkswirthschaft, a ‘world-class economic theoretician’ (Streissler, 1994, p. 37): ‘the German Samuelson of his time’ (Streissler, 1995, p. 112). Which of these contradictory views is justified? It can be agreed with Streissler that Roscher’s historical view is not anti-theoretical, and that this can best be seen by looking at his crises essay from a modern perspective. We also agree with Streissler (1994, p. 46) and with Schumpeter (1954, p. 540) about the great similarity between Roscher and John Stuart Mill in their way of thinking, procedure and method, as comes out in a comparison of Roscher’s Grundlagen with Mill’s Principles (1848). Interestingly, it is Mill who, in his essay ‘Of the influence of consumption on production’, written in 1829 in reaction to the crisis in Britain of 1825–1826 but published only in 1844, was the first economist to clearly state that money not only is a medium of exchange, as pointed out by his teacher Ricardo, but enables the one act of interchange in a barter economy ‘to be divided into two separate acts or operations; one of which may be performed now, and the other a year hence, or whenever it shall be most convenient’ (Mill, 1844, p. 70).10 So it is clear that it was John Stuart Mill and not Roscher who was the first economist to emphasize the consequences of the store of value-function of money to allow the separation of sale and purchase. Roscher, who normally is reliable in his quotations and does not claim unwarranted originality, already in his 1849 crises essay is referring to Mill’s Principles (where Mill does not repeat his argument but adheres to the long-term implications of the quantity theory of money) but

206 Harald Hagemann nowhere to Mill’s 1844 essay. There remains a margin of doubt whether Mill’s essay ‘Of the influence of consumption on production’ was known to Roscher when he wrote the PRODUCTIONSKRISEN article in 1849. If it was, then Roscher was less innovative than believed by Streissler, but it once more clearly shows his pragmatic intelligence. A good cook has to buy the best and freshest ingredients available on the market to produce a tasty fricassee. This was certainly the case with Roscher, who then would have based his crises theory on ‘the freshest of Mill’s economic writings’ (Hicks, 1983, p. 61). Furthermore, Roscher put much more emphasis on the role of money as a store of value and the consequent separation of purchases from sales in a monetary economy than the later Mill, who nowhere made this argument in his early essay the regression line of his thought. However, neither Roscher nor Mill developed an assets or speculative motive regarding money demand. The potential separation of purchases and sales is not sufficient to refute Say’s law. Adam Smith had already pointed out that annual savings could be consumed productively by a different set of people, and later on orthodox economics relied on the interest rate mechanism to keep in line savings and investments for the economy as a whole. So a speculative-demand motive for holding money has to be added. Keynes therefore used the liquidity preference theory to score a debating point against the classical case of an equilibrium solution. Streissler (1994, p. 115) perceives in Roscher’s explanations an anticipation of Keynes’s speculative motive, albeit in an inverse and real rather than monetary form. In our view, Streissler’s excessively modernistic interpretation of Roscher goes too far. However, it cannot be denied that Roscher’s crises essay is an important one. The key argument has entered all later critiques of Say’s law as a necessary, albeit insufficient, element. This also holds for Marx, who was hostile to Roscher because of the latter’s refusal to acknowledge the labour theory of value and criticism of socialism. Marx called Roscher a ‘puny German plagiarist’ emitting ‘eclectic professorial twaddle (Marx, 1867, pp. 251, 295) His contemptuous remarks, however, cannot conceal that he had studied Roscher’s writings carefully and that some of his statements on economic crises, especially in Volume III of Capital, were influenced by Roscher (and Mill). This is a good indicator for the lasting importance of Roscher’s crises article.

NOTES 1 Roscher repeatedly called Rau his ‘teacher’, although in a formal sense Roscher never was a student of Rau, who taught at the University of Heidelberg from 1822 until 1870. 2 For greater detail, see Chipman, 2005. 3 Roscher (PRODUCTIONSKRISEN, p. 723, note 2) refers to Canard, who had compared the relationship between production and consumption in the economy with the relationship between arteries and veins. 4 Modern macroeconomic theory has shown that deficient price flexibility is not a necessary condition for the existence of underemployment equilibria. For a deeper analysis of this argument with regard to Roscher’s theory of crises, see the discussion in Streissler, 1994, pp. 110–11).

Wilhelm Roscher’s crises theory 207 5 Roscher did not work out all the consequences of a credit economy as, for example, Wicksell did later. For a critical evaluation of Roscher’s monetary theory, see Barkai, 1989. 6 See Fisher, 1933 and Tobin, 1980, Ch. 1. 7 On this point, see also Schefold, 1994, p. 18. 8 See Wagner, 1857 and the contribution by Gioia on Wagner in this volume, Chapter 14. 9 Roscher’s argument very much resembles the one made by Hicks in his last book, A Market Theory of Money, where Hicks (1989) emphasized the discipline and confidence requirements of the central country’s currency in a polycentric model of the international economy. 10 For a detailed assessment of Mill’s crises theory, see Hagemann, 2002.

REFERENCES Barkai, H., 1989, The old historical school: Roscher on money and monetary issues, History of Political Economy, 21: 2, pp. 179–199. Bergmann, E. von, 1895, Die Wirtschaftskrisen. Geschichte der Nationalökonomischen Krisentheorieen (Stuttgart: Kohlhammer). Chipman, J., 2005, Contributions of the older German schools to the development of utility theory. In C. Scheer (ed.), Studien zur Entwicklung der ökonomischen Theorie, Vol. XX: Die Ältere Historische Schule: Wirtschaftstheoretische Beiträge und wirtschaftspolitische Vorstellungen (Berlin: Duncker & Humblot), pp. 157–259. Fisher, I., 1933, The debt-deflation theory of great depressions, Econometrica, 1: 4, pp. 337–357. Hagemann, H., 1995, Roscher and the theory of crises, Journal of Economic Studies, 22: 3–5, pp. 171–186. Hagemann, H., 2001, The Verein für Sozialpolitik from its foundation (1872) until World War I. In M. M. Augello and M. E. L. Guidi (eds), The spread of political economy and the professionalisation of economists. Economic societies in Europe, America and Japan in the nineteenth century (London and New York: Routledge), pp. 152–175. Hagemann, H., 2002, Zur Debatte um das Saysche Gesetz: Mill als Krisentheoretiker. In E. W. Streissler (ed.), Studien zur Entwicklung der ökonomischen Theorie. Vol. XIX. John Stuart Mill (Berlin: Duncker & Humblot), pp. 191–214. Hermann, F. B. W., 1832, Staatswirthschaftliche Untersuchungen über Vermögen, Wirthschaft, Productivität der Arbeiten, Kapital, Preis, Gewinn, Einkommen und Verbrauch (Munich: Anton Weber’sche Buchhandlung). Hicks, J., 1983, From classical to post-classical: the work of J. S. Mill. In J. Hicks (ed.), Classics and moderns: collected essays on economic theory, Vol. III (Oxford: Basil Blackwell), pp. 60–70. Hicks, J., 1989, A market theory of money (Oxford: Clarendon Press). Marx, K., 1867, Capital: a critique of political economy, Vol. 1 (London: Lawrence & Wishart). Menger, C., 1871, Grundsätze der Volkswirthschaftslehre (Vienna: Wilhelm Braumüller). English translation as Principles of economics, with an Introduction by F. A. Hayek (New York and London: New York University Press, 1981). Mill, J. S., 1844, Essays on some unsettled questions of political economy, 2nd edn, 1874, reprint, Clifton, 1974 (New York: Augustus M. Kelley).

208 Harald Hagemann Mill, J. S., 1848, Principles of political economy, reprint, Fairfield, 1976 (New York: Augustus M. Kelley). Rau, K. H., 1821, Malthus und Say über die Ursachen der jetzigen Handelsstockung (Hamburg: Perthes und Besser). Rau, K. H., 1826–1837, Lehrbuch der politischen Ökonomie (Heidelberg: C. F. Winter): Vol. I: Grundsätze der Volkswirthschaftslehre (1826); Vol. II: Grundsätze der Volkswirthschaftspflege (1828); Vol. III: Grundsätze der Finanzwissenschaft (1832–1837). Ricardo, D., 1821, On the principles of political economy and taxation, 3rd edn, The works and correspondence of David Ricardo, Vol. I, Sraffa, P. (ed.), with the collaboration of M. H. Dobb (Cambridge, 1951: Cambridge University Press). Roscher, W., 1842, Leben, Werk und Zeitalter des Thukydides (Göttingen: Vandenhoeck & Ruprecht). Roscher, W., 1843, Grundriß zu Vorlesungen über die Staatswirthschaft. Nach geschichtlicher Methode (Göttingen: Dieterich). Roscher, W., 1854–1894, System der Volkswirthschaft (Stuttgart: Cotta). Vol. 1: Die Grundlagen der Nationalökonomie (1854, 26th edn, published in 1922; English translation from the 13th edn by J. J. Lalor as Principles of political economy, 2 vols., Chicago: Callaghan and Company, 1878); Vol. 2: Nationalökonomik des Ackerbaues und der verwandten Urproduktionen (1859; 14th edn, 1912); Vol. 3: Nationalökonomik des Handels und Gewerbefleißes (1881; 8th edn, 1912–1917); Vol. 4: System der Finanzwissenschaft (1886; 5th edn, 1901); Vol. 5: System der Armenpflege und der Armenpolitik (1894; 3rd edn, 1906). Roscher, W., 1861, Ansichten der Volkswirthschaft aus dem geschichtlichen Standpunkte (Leipzig and Heidelberg: C. F. Winter’sche Verlagshandlung). 3rd enlarged and corrected edn, 1878. Roscher, W., 1874, Geschichte der National-Oekonomik in Deutschland (Munich: R. Oldenbourg). Say, J.-B., 1803, Traité d’économie politique ou simple exposition de la manière dont se forment, se distribuent et se consomment les richesses (Paris: Rapilly); English translation from the 4th French edn, 1821: A treatise on political economy (reprint, New York, 1971: Augustus M. Kelley). Schefold, B. (ed.), 1994, Wilhelm Roscher’s Ansichten der Volkswirthschaft aus dem geschichtlichen Standpunkte (Düsseldorf: Verlag Wirtschaft und Finanzen). Schumpeter, J. A., 1954, A history of economic analysis (London: George Allen & Unwin). Streissler, E. W., 1990, The influence of German economics on the work of Menger and Marshall. In B. Caldwell (ed.), Carl Menger and his legacy in economics. Annual supplement to Vol. 22, History of political economy, pp. 31–68. Streissler, E. W., 1994, Wilhelm Roscher als führender Wirtschaftstheoretiker. In B. Schefold, (ed.), Wilhelm Roscher’s Ansichten der Volkswirthschaft aus dem geschichtlichen Standpunkte (Düsseldorf: Verlag Wirtschaft und Finanzen), pp. 37–121. Streissler, E. W., 1995, Wilhelm Roscher. Zur Lehre von den Absatzkrisen. Oder: Gibt es in der relevanten Konjunkturtheorie und -politik in den letzten 140 Jahren etwas Neues?. In E. Matzner and E. Nowotny (eds), Was ist relevante Ökonomie heute. Festschrift für Kurt W. Rothschild (Marburg: Metropolis), pp. 111–121. Tobin, J., 1980, Asset accumulation and economic activity (Oxford: Basil Blackwell). Wagner, A., 1857, Beitraege zur Lehre von den Banken, Leipzig: Voss.

8

Charles Coquelin Banking monopoly and commercial crises Daniele Besomi

C. Coquelin and G.-U. Guillaumin, Dictionnaire de l’économie politique, contenant l’exposition des principes de la science, l’opinion des écrivains qui ont le plus contribué à sa fondation et à ses progrès, la bibliographie générale de l’économie politique par noms d’auteurs et par ordre de matières avec des notices biographiques et une appréciation raisonnée des principaux ouvrages, Paris: Guillaumin, 1852–1853.1

8.1 THE DICTIONNAIRE DE L’ÉCONOMIE POLITIQUE The Dictionnaire de l’économie politique (Dictionary of political economy, containing the exposition of the principles of the science, the opinion of the writers who have significantly contributed to its foundation and its progress, the general bibliography of political economy organized by author’s names and by subjects, and a critical appreciation of the main writings) was published in Paris in two volumes (with a total of almost 1,900 pages) in 1852 and 1853 under the direction of Gilbert-Urbain Guillaumin (who was also the publisher), jointly with Ambroise Clément at first (he had to resign due to supervening duties after the letter B, but wrote the INTRODUCTION), then with Charles Coquelin, and finally alone after the death of Coquelin in 1852. Guillaumin was the publisher of a number of important economic writings, including the Journal des Économistes, the Annuaire de l’économie politique et de la statistique, and the Collection des principaux économistes, plus two other specialized dictionaries, the →Dictionnaire du commerce et des marchandises (1837–1839) and the →Dictionnaire universel théorique et pratique du commerce et de la navigation (1859–1861).2 He felt that while economic treatises covered their ground well, a dictionary enabling access to economic knowledge to people unaccustomed to technical writings or unable to devote a long time to the study of the subject was needed. →Ganilh’s Dictionnaire analytique d’économie politique (1826) and →Sandelin’s Répertoire général d’économie politique ancienne et moderne (1846–1848), in fact, were not up to the task, the former being incomplete

210 Daniele Besomi and the latter consisting of a collection of articles that had already appeared in periodical publications. Guillaumin started this project with a very ambitious purpose in mind: to systematize the ultimate truths that emerged from the ‘ocean of contradictory doctrines’, taking care that in spite of the shades of opinion ‘the same general doctrine prevailed’ so that the dictionary ‘could serve as a guide to the reader’. For this reason, the title Dictionnaire de l’économie politique was chosen, in contrast to Ganilh’s Dictionnaire d’économie politique, with the article indicating uniqueness. Particular care was devoted to the biographical and bibliographical parts, which had the explicit aim of providing a complete bibliography of the subject3 (Guillaumin, PRÉFACE DE L’ÉDITEUR to the Dictionnaire, 18534). The writing of the dictionary admittedly fitted in with the propaganda work of the economists belonging to the French liberal school, grouped together within the Société d’économie politique (of which Guillaumin was the president) and regularly writing in the Journal des Économistes (the oldest professional periodical devoted to political economy, founded in 1841) but without access to official teaching outlets in French universities.5 Most of the authors of the entries were indeed part of this group, more precisely of the second generation, engaged in consolidating the theoretical tradition stemming from Jean-Baptiste Say, but also in reinforcing its social and academic predominance (see e.g. Arena, 2001). The targets are made clear in Clément’s INTRODUCTION to the Dictionnaire. Ignorance of political economy has had pernicious effects, resulting in the adoption of ‘disastrous or absurd measures’ (such as protectionism and the issuing of the assignats) and encouraging governments to take over responsibilities and privileges which ought to pertain only to citizens, thereby themselves becoming the main cause of instability and insecurity and leading towards universal communism (pp. xi–xii). The educational system after the 1848 revolution attempted to have political economy taught from the viewpoint of the (false) organization of labour, while in 1850 teaching focused on French commercial legislation, that is, it incorporated the protectionist viewpoint. However, the only proper way of teaching political economy was to reflect the understanding of the nature of things as observed (p. xiii). The dictionary was seen as ‘the best means for the rapid propagation of the main notions’ and ‘the clearest truths’ of political economy (pp. xii–xii). Although the discipline was recognizably still a work in progress, it was deemed to be at a sufficiently advanced stage that ‘there could be no legitimate doubt on its essential principles, and that the truths based on these principles will not be disproved by further research or discoveries’. Dissidence existed, but its extent and importance were vastly exaggerated; most writers fully agreed on a vast number of propositions, while some dissenters did not really have the qualifications to be called economists6 (p. xiv). Economics still drew hostility deriving from particular and illegitimate interests it threatened. The diffusion of the doctrine would prove that legitimate interests are much vaster, and political economy would acquire an irresistible force, as had already happened in England and in the United States (p. xv). The dictionary was thus prepared in the hope that ‘those who know the truths of the science and are devoted to their diffusion will not be powerless for

Coquelin on bank monopoly and crises 211 much longer in their efforts and be relieved from having to repeat the dolorous protestation, E pur si muove’ (p. xxvii).

8.1.1 History and revisions The dictionary went through three further editions (1854, 1864 and 1873), but remained practically unaltered throughout; the entry on commercial crises, in particular, was not updated, not even by completing the list of crises with those that occurred in the intervening years – 1857 and 1866. The spirit of the Dictionnaire was partly retained in the entirely revised version edited by Léon Say and Joseph Chailley in 1891–1892, titled →Nouveau dictionnaire d’économie politique, when it was judged that the practical part of the dictionary7 had shown evident signs of ageing. The doctrinal part, however, was also revised, including the entry on crises, written by Juglar (1891; for a discussion, see Chapter 12).

8.1.2 Influence Yet almost 40 entries of the original dictionary had recently been translated and incorporated in →Lalor’s Cyclopædia of political science (19 of which were written by Coquelin, not including, however, his entry on crises 8), which went through a second edition (again incorporating those entries) at the same time as Chailley revised the Nouveau dictionnaire. Other articles had previously been translated into Italian by Francesco Ferrara for his Biblioteca dell’economista. Eight of these were written by Coquelin (again, neither BANQUE nor CRISES COMMERCIALES). The importance of the Dictionnaire was widely acknowledged abroad. Macleod, for instance, thought it ‘excellent’ (COQUELIN, CHARLES, in →Macleod’s Dictionary of political economy, 1863, p. 557). Jevons described ‘Guillaumin’s excellent Dictionnaire de l’Économie Politique’ as ‘on the whole the best work of reference in the literature of the science’ (but criticized it for not mentioning Cournot) (Jevons, 1879). The judgement was taken up and qualified as ‘just’ by Ingram (1888, p. xiv). De Vivo, in a quick list of economic dictionaries, describes it as ‘still useful today’ (2006, p. 121). Indeed, a cursory search on the internet shows several hundred citations of entries from the Dictionnaire.

8.2 CHARLES COQUELIN Charles Coquelin was born in Dunkirk on 25 November 1802. The son of a family of merchants, he had an inside knowledge of trade. However, he studied law in Paris, where he became acquainted with political economy. He practised law in Dunkirk until 1830, but his main interest seems to have been directed towards economics. In 1827 he founded a periodical titled Les Annales du Commerce, which lasted only one year. In a series of articles published in it, he already advocated freer banking, arguing that such a system would reduce commercial fluctuations

212 Daniele Besomi and increase prosperity (later, he radicalized this position and maintained that free banking would eliminate fluctuations altogether). He moved to Paris in 1832 and started writing economic articles for Le Monde, Le Droit and Le Temps (a journal linked to the liberal left). In the latter periodical, he published some articles on banking in the United States, where he lauded the freer banking practice but admitted that some regulations might be necessary and useful. There followed pieces on banking in England, where he opposed the views of both the Currency and the Banking schools, and argued that the privileges of the Bank of England had a destabilizing effect. Before deepening and radicalizing his views on banking, Coquelin acted as an adviser to the linen industry. He wrote some articles on the subject and a Nouveau traité complet de la filature du lin et du chanvre (1846), and meanwhile started collaborating with the prestigious periodical Revue des Deux Mondes, to which he contributed some articles on money and banking. In 1844 Coquelin took part in Bastiat’s movement for free trade, and in 1848 he took over from Bastiat the editorship of Le Libre-Échange. In 1848 he started writing for the Journal des Économistes. His eclecticism and erudition induced Guillaumin to choose him as editor of the Dictionnaire de l’économie politique. He died at the age of 50 on 12 August 1852.9 Coquelin’s main writings on crises are an article titled ‘Les crises commerciales et la liberté des banques’, published in the 1 November issue of the Revue des Deux Mondes (1848a, pp. 445–70), translated as ‘The causes of commercial crises’ in Hunt’s Merchants’ Magazine and Commercial Review (October, 1849, pp. 371–389) and abridged as ‘Restrictions on banking the cause of commercial crises’, Bankers’ Magazine (London) (1850); and the book Le crédit et les banques, published in 1848 by Guillaumin (2nd edition, 1859; 3rd edition, 1876) – the chapter on commercial crises takes up in its entirety the Revue des Deux Mondes article, with the addition of a supplementary section on the 1837 crisis in the United States. Coquelin’s entry for the Dictionnaire on CRISES COMMERCIALES takes up by and large the specific explanation of the phenomenon advanced in the Revue des Deux Mondes article, adding, however, special emphasis on the epistemic aspects of the causal interpretation of the phenomenon.

8.3 CRISES IN THE DICTIONNAIRE DE L’ÉCONOMIE POLITIQUE

8.3.1 The entries relating to crises Besides Coquelin’s CRISES COMMERCIALES, a few other entries of the Dictionnaire are relevant for this subject. BANQUE and CRÉDIT, also written by Coquelin, complement each other and the entry on crises. Each entry is, as one would expect, self-contained, but discusses some details useful for a full understanding of the others. BANQUE – a lengthy article, pp. 107–145 – thus examines in detail the role of banks in some of the past crises (1826, in particular). While in CRISES

Coquelin on bank monopoly and crises 213 COMMERCIALES the destabilizing role of credit is stressed, in CRÉDIT Coquelin emphasizes its function in the expansion of production. The alternative approach to crises, focusing on the gap between production and consumption rather than on credit, is barely mentioned. There is a brief reference to it in the entry on CONSOMMATION by Garnier (p. 469), cross-referring to the entries on production, outlets and Sismondi. PRODUCTION, by Dunoyer, does not, however, take up the problem; SISMONDI’s discussion of crises is described by M. Monjean as the product of a momentary lapse of reason (‘he lost the orthodoxy of his principles as well as the solidity of his reason . . . and became the incoherent adversary of economic freedom’, p. 619); the entry on outlets, DÉBOUCHÉS, entirely consists of long quotations from Say’s Cours d’économie politique (1832, Part III, Ch. 2, first half) – the entry is attributed to Say himself – stating the well-known law of markets, which denied that overproduction could happen at all except for temporary mismatches.

8.3.2 Summary of Coquelin’s entry on commercial crises Coquelin’s entry CRISES COMMERCIALES begins with a definition of a commercial crisis as ‘a sudden disturbance of business, which perturbs its progress and to a certain extent suspends its course’, and with a description of the typical phenomena occurring during a crisis, namely, general discredit and depreciation of commercial values, slowdown or interruption of discounts, glutted markets, followed by failures and bankruptcies, troubles on the stock exchange, cessation of production and unemployment.10 Although crises also occurred in the past as a consequence of wars, famines or other similar troubles, their suddenness, generality and frequency are a new phenomenon, related to the development and extension of credit. As most transactions are done on credit and require mutual confidence between traders, it is sufficient that at some point any derangement undermines this confidence, and induces doubt that contractual obligations will be fulfilled, to bring an immediate halt to transactions. In such a situation, it is not surprising that the disease spreads rapidly, like fire along a line of gunpowder, encompassing in little time the entire commercial system. Even though crises are related to credit, one should not conclude that credit is itself negative. During crises, there is indeed a temporary disappearance of credit. This can offset some of the advantages brought by credit, while all the relationships based on monetary exchanges remain unaffected. Crises, therefore, by recreating the conditions that characterize a credit-less economy, enable one to appreciate the former advantages of credit. Crises can thus occur without an obvious, external reason. This (so to speak) spontaneous character of crises is one of the most curious phenomena at the present time. The origin of such events must lie within the commercial system itself. ‘Spontaneous’ crises recurred frequently and ‘almost periodically’ (pp. 526, 528, 530, 533) during the nineteenth century: for France these occurred in 1811, 1819,

214 Daniele Besomi 1825, 1830–1831, 1837 and 1846, and more or less the same dates applied for England, the solidarity being due to the common interests shared by traders, who were subject to the same influences, good or bad. Only the intensity of crises varies, depending on the degree of the extension of credit. Such catastrophes are all the more surprising as they often happen in the midst of the most prosperous times. As the emergence of crises is contemporary to both the development of industry and the extension of credit, two kinds of explanations have been offered for the phenomenon. Some stressed the excessive or misdirected development of productive forces in manufacture,11 others stressed instead the abuse of credit, favoured by banking institutions. Excess of commercial speculation is also often mentioned, but this is normally so strictly associated with the abuse of credit that it can hardly be considered a distinct cause. J.-B. Say explained the English crisis of 1825 as a consequence of the banks’ capacity to issue money. He claimed that banks had over-issued banknotes, which they had used to discount an excessive amount of commercial papers. Correspondingly, traders and entrepreneurs could expand their firms well beyond their capital. At the same time, however, the over-issue of paper money had determined a fall in its value as compared to gold sterling, so that holders of paper currency ran to the banks to have their money converted into gold. The banks, being obliged to convert, thus had to buy gold at any price and coin money with it, at considerable expense. To avoid this, they started withdrawing banknotes from circulation, thereby ceasing to discount commercial papers and depriving traders of the resources on which they counted for creating and expanding their firms. To find the necessary cash to fulfil their obligations, merchants were forced to sell their goods at a loss; prices dropped, unemployment rose, and business failures and bankruptcies spread throughout the country (Say, 1832, p. 474 of the 1852 edition). According to Coquelin, there is some truth in this account, in particular regarding the excessive discounts given by the banks. These were much larger just before the crisis than in previous years, and these discounts undoubtedly fuelled speculation. Yet this explanation is not sufficient, as the primum mobile, namely, the first cause of this abuse and of the wild speculations, remains unaccounted for. Say ascribes the crisis to the run on the banks. However, if this were the case, the number of notes in circulation should have dropped at the critical time, while the opposite happened, with the number of notes being higher at the peak of the crisis early in 1826 than at its outbreak in 1825. What really caused the crisis was not requests for the conversion of notes, but the withdrawal of deposits on current accounts. The result is the same, but the principle is different. The other explanation of the 1825 crisis reported by Coquelin, which was as unsatisfactory as Say’s, was offered by J. Wilson, who attributed it to a speculation mania caused by the tempting appeal of some operations. According to him, in 1824 speculation was stimulated by the success of almost all the foreign lending undertaken in the previous five years, and by the high price of such foreign funds; mining abroad was also profitable. Moreover, and most importantly, imports of goods were quite small, barely covering demand, so that prices rose significantly. Fostered by these conditions, speculation became feverish in the early months of 1825 (Wilson, 1847, p. 172). Yet, as described by Wilson himself, speculation

Coquelin on bank monopoly and crises 215 affected many different kinds of enterprises and goods of all kinds, and it is hardly conceivable that ‘the same mood emerged at once in so many different directions, unless it was determined by a common cause. One must seek to identify this prime cause.’ However, Wilson does not offer any. Undoubtedly, admitted Coquelin, the abuse of credit was a common condition of all commercial crises since the beginning of the century, and is one of their determining causes. It is also beyond doubt that excessive speculation characterized all these events. But the origin of the abuse of credit and of speculation mania still has to be explained: ‘affirming that fevers are breaking out is purely playing with words. There is nothing natural in similar diseases breaking out without being induced by something. The almost periodical recurrence of these calamities proves instead that they have a hidden cause, steadily acting’ (p. 530). This cause lies in the existence of privileged banks (banques privilégiées) and in their way of operating. The facts of the crises are as follows. At the time of crises, a large number of individuals withdraw their deposits in current accounts. Accordingly, the total amount of deposits shrinks considerably. At the same time, the number of discounts increases. Both factors combine to reduce the banks’ balances in specie. Figures for both England (1825 and 1837 crises) and France (1846–1847 crisis) show that the circulation of banknotes does not diminish at the time of crises and even rises slightly, while deposits by both the public and the government decrease by a sizeable amount and the banks’ discounts visibly escalate. How can these facts be ascribed to their prime cause, the monopoly of the privileged banks? If no public banks were authorized to issue paper money, the placement of savings would be somewhat difficult: either they would be retained by the saver until enough were accumulated to be put to use, or they would be temporarily deposited in commercial banks that could in turn lend them out, or they would be lent directly to manufacturers or merchants. The interest rate associated with such operations would be fairly high, as it would have to compensate for the risk involved and enable the lender to retain his position. Such a situation is very inefficient, but the risk of gluts of savings is remote. Where instead there is a privileged bank entitled to issue banknotes, the situation is completely different. Apart from its own deposits, such a bank can lend out the paper currency it creates. A much lower interest rate can thus be charged to obtain the same yield on the bank’s capital. Issuing banks can therefore increase their profit rates and compete on an unequal footing with the commercial banks and private lenders. The latter tend to disappear, while commercial banks are reduced to the role of intermediaries between the public and the issuing bank. (The matter is discussed in more detail in Coquelin’s entry on BANQUE in the same Dictionnaire.) The savings previously managed by private lenders and commercial banks can no longer be placed on the capital market. They accumulate without being able to find a placement apart from the estate market, some Treasury bonds and a limited number of direct investments, and therefore are eventually temporarily deposited in commercial banks or even directly at the issuing bank for a very small interest rate. The issuing bank, in turn, can use these deposits to further expand its discounts. Such a situation, however, is rather dangerous, as the issuing bank is lending money

216 Daniele Besomi which it only has in temporary custody and which can be withdrawn at any time, and thus placing itself at risk of becoming overdrawn. The speculative frenzy described by Wilson originates precisely in the large amount of unused capital looking for an outlet. Any project, even the most risky, is more interesting than receiving a ridiculously low interest rate. Bank directors are also keen to engage in such business deals, as well as manufacturers and merchants, so that extended plans for absorbing the funds seeking placement are set up and quickly attract the floating capital. This is then withdrawn from the bank where it was temporarily deposited. The commercial banks, whose reserves quickly diminish, attempt to replenish them by withdrawing their own funds from the central bank or trying to convert more banknotes. As a consequence, the specie reserves of the central bank diminish very rapidly, accelerated by the Treasury also withdrawing its deposits to deal with the scarcity of specie prevailing everywhere.12 To avoid bankruptcy, the issuing bank is forced to tighten credit at once, thus bringing about the situation described by Say. This is the typical progression of the ‘unfortunate perturbations called commercial crises’, those occurring ‘spontaneously’. They all have the same features and the same origin, and are necessarily followed by a period of inactivity and lifelessness. The spirit of speculation lies dormant for a while, frightened by the recent disasters; capital remains somewhat distrustful, and at any rate the general state of depletion makes it easy to find alternative placements. However, as the same cause – the issuing bank’s monopoly – is constantly operating, sums of capital seeking placement slowly start to accumulate and become overabundant, and after some time produce the same effects. ‘This is how crises become almost periodical’ (p. 533). Excess and speculation are their determining cause, and are systematically accompanied by the abuse of credit. However, the first cause is the exclusive privilege of the issuing bank. Before such institutions existed, commercial crises were unknown, and they will disappear when banks are free to compete under the same conditions. In fact, if the central bank started to cause, as a consequence of its issuing of paper money, an excess of capital, the owners of these savings would reunite and start discounting commercial paper just as the central bank would normally do; if this second bank were not enough, a third or more would be founded. Not only would a glut of capital be impossible, but as banks would operate on their own deposits rather than on third-party capital, the risk of being overdrawn would be considerably reduced. The spirit of speculation would have far less reason to arise, and even if it did, its consequences would be far less dramatic.

8.4 ASSESSMENT Coquelin’s explanation of crises belongs to the family of theories which see them as the result of some systematic institutional friction or impediment preventing the correct working of economic laws. Like most of his contemporaries, Coquelin saw the culprit as being in the monetary field; he was, however, more radical than

Coquelin on bank monopoly and crises 217 most of them, as rather than blaming some special operation of the banking system, he pointed the finger at the very existence of a privileged bank.13 This view had a precedent, which Coquelin himself quoted in the 1848 article for the Revue des Deux Mondes (but not in the entry, disgracefully one of the few lacking a bibliography), namely, Carey’s The credit system in France, Great Britain and the United States (1838).14 His view on crises, however, failed to break through,15 although he is occasionally quoted for his views on free banking. Historically, the range of crises he considered is rather limited, as it only starts with the 1811 crisis (the same applies to the 1848 article), while some of his contemporaries were examining a longer series of events, going back to 1797 and occasionally also to the 1763 crisis. This is a natural consequence of the point he wanted to argue, as the Bank of France was only founded in 1800, and its privilege of issuing banknotes extended nationwide only in 1848. The Bank of England had indeed been privileged since the Bank Acts of 1708 and 1709, but only had a partial monopoly, within 65 miles of London, which became nationwide with the Bank Charter Act of 1844; notes above £5 were only made legal tender in 1833. Nevertheless, some parts of Coquelin’s argument are noteworthy. Although he certainly wasn’t the first writer to claim that crises recur almost periodically, he was among the first who actually attempted to explain periodicity. This phenomenon (more in the sense of the recurrence of crises, rather than as regularity in their rhythm) had been noted for a long time before Coquelin; there are observations dating from the end of the eighteenth century, growing in frequency as crisis succeeded crisis and becoming widespread enough to be quoted, by the time of Coquelin’s article in the Revue des Deux Mondes, in official documents such as the 1839 Report of the Secretary of the Treasury (Woodbury, 1840) and the House of Commons Secret Committee on Commercial Distress (1848), and to be recorded in Mill’s Principles (1848).16 Yet most of these writers were content to record the fact. Some took it as indicating that crises are not disconnected phenomena, but are related to each other, and are endogenously generated by the working of the economic system, possibly favoured or caused by the specific institutional setting. Coquelin reports that ‘As the establishment of [privileged] banks has so far almost everywhere been followed by commercial perturbations more or less serious, which have become in certain countries more or less periodical, it has generally been thought that these fatal accidents are the inevitable results of these institutions’ (1848a, p. 372). He went further than most of his contemporaries, however, and tried to explain the recurrence of crises. In the 1848 article, after reconstructing the ‘rigorous chain of consequences’ of privileged banks ending ‘in an inevitable crisis’, he argued that after the ‘explosion of the mine’ and the general break-up, the surviving capitalists – not trusting anyone else – deposit the money they have been able to save from the wreckage in the privileged bank: ‘the accumulation of deposits recommences, to end again, some years later, in the same results’ (ibid.; 1849 translation, pp. 377–379). The explanation is incomplete, but the attempt is interesting. Like most of his contemporaries, Coquelin implicitly takes for granted that after the crisis the productive system will automatically restart along a path of advance. While his thought as to what happens to the savings is clear, the origin of the growth out of

218 Daniele Besomi which these savings are coming from remains unexplained. The result is an account of the recurrence of crises, but not of a cyclical mechanism describing a proper alternation and mutual causation of periods of advance and depression. Nevertheless, the epistemic reflection leading to his statement, as recast in the dictionary entry, is interesting and – jointly with similar attempts – proved to be momentous in the transition from crises to cycle theories. Already in the 1848 article, Coquelin lamented that the existing literature on crises (the list of which he boiled down to Tooke, Torrens, Overstone and Wilson) focused on the difference between the various crises rather than on ‘their traits of resemblance’, dwelling ‘upon the particular circumstances of commercial crises, without studying sufficiently their general and dominating character’, ‘stopping almost always at the immediate or secondary causes by which they are determined, instead of going up to the primordial cause which engenders them’ (Coquelin, 1848a, 1849 translation, p. 384). This distinction between a primary and secondary cause was also not new in the literature, but it only had four antecedents. Two, due to Robert Cockburn (1840) and to Isaac Preston Cory (1842), were rather vague. The French agricultural economist Jean-Edmond Briaune had argued that similar effects must have similar causes, so that the proper approach for the explanation of crises is to focus on the common, primary cause while considering the specific determinants of each occurrence as secondary causes (Briaune, 1840; for a more detailed discussion of these three contributions, see Chapter 6, Section 6.5.2). A few months before Coquelin’s article was published, James Anthony Lawson referred to the causal principle, according to which similar causes must be followed by similar effects, and argued that the mechanism based on credit–overtrading– speculation destabilizing the system must be the primary cause, while the actual shocks toppling it are only secondary causes of the crises (Lawson, 1848; for a discussion, see Besomi, 2008). Several years later, the distinction was taken up, and placed at the very foundation of his argument, by Juglar (1862, Chapter 1), and later also by Mills (1868) and Jevons (1878). The common trait of these approaches is that they turned crises from individual, disconnected events into instances of the same class of events, thereby paving the way for their discussion in terms of a general law (for a discussion, see Besomi, 2010b, pp. 208–217). Accordingly, Coquelin’s entry is dedicated to ‘commercial crises’ in the plural; only Lemonnier (CRISES COMMERCIALES, in →Dictionnaire de la conversation et de la lecture, 1835; see Chapters 5 and 6) and Roscher (PRODUKTIONSKRISEN, in [Brockhaus’s] →Die Gegenwart, 1849; see Chapter 7) put it in the plural before him, while earlier entries had the title in the singular: Blanqui’s CRISE COMMERCIALE, in →Encyclopédie des gens du monde, Vol. 7, 1836; [Monbrion]’s CRISE COMMERCIALE ET INDUSTRIELLE, in Monbrion’s →Dictionnaire universel du commerce, 1838; Michel’s CRISE COMMERCIALE, in Guillaumin’s →Encyclopédie du commerçant, 1839; Courcelle-Seneuil’s CRISE, in →Duclerc and Pagnerre’s Dictionnaire politique, editions from 1842 to 1860; Dupin’s CRISE COMMERCIALE, in →Encyclopédie du dix-neuvième siècle, 1846 (see Chapters 5 and 6); and the anonymous HANDELSKRISE, in →Das große ConversationsLexikon für die gebildeten Stände (Meyers Konversationslexikon), 1849.17

Coquelin on bank monopoly and crises 219 The interesting addition introduced in the dictionary entry concerns the specific mode of operation of the causal factor. Having identified a common primary cause, Coquelin explained that it is its constant operation that determines the periodical recurrence of crises (p. 533). The system continuously accumulates tension, until after a time it explodes and relaxes. There were a number of explanations of crises relying on this principle, in particular those based on credit leading to overtrading, speculation and eventually abuse of credit until the system collapses. But there were also explanations relying instead on periodically operating causes: Briaune, for instance, attributed crises to the fluctuations in crops (1840), as later did Jevons (who attributed the cause of the latter to fluctuations in solar activity). Although Coquelin’s remark was not meant to be polemical with the alternative view, it is nonetheless interesting that he explicitly stressed this feature.18 Another aspect better emphasized in the dictionary entry than in the Revue article is that the outbreak of the crisis can be determined by any occasion, when the operation of the mechanism has been building up enough tension. The primary cause of the crisis is the factor generating this tension, while the occasioning event plays a subordinate part and is a secondary cause. Coquelin stopped short of reaching the conclusion to which similar arguments brought Lawson before him (1848) and Juglar later (1862) to argue that the system becomes unstable, and that it is precisely this instability that makes for the endogenity of crises. The expression used by Coquelin, a ‘débordement quelconque’ (p. 532), that is, ‘any overflow’, anticipates the metaphor later used by Juglar, who compared the accumulation of tension to the overfilling of a glass of water, when a single drop of water (the secondary cause) would determine the spillage (on Juglar, see Chapter 12).

NOTES 1 The entire dictionary is available on Gallica at http://gallica.bnf.fr. 2 On Guillaumin’s important role in organizing, via his publishing house, the rank of the liberal économistes, see Le Van-Lemesle, 2004, pp. 102–125. On the Dictionnaire de l’économie politique, see in particular pp. 123–125. 3 In his PRÉFACE DE L’ÉDITEUR, Guillaumin lists the bibliographical sources, screened line by line: Quérard’s France Littéraire, including the subsequent Littérature contemporaine; the Bibliographie générale de la France; Michaud’s Biographie universelle; the Biographie des contemporaines; Custodi’s Scrittori classici italiani di economia politica; de Bona y Ureta’s bibliography of Spanish economists; de la Sagra’s Catálogo de escritores económicos españoles (1848); the German biographical dictionaries by Ersch, Kaiser and Hinrichs; →Brockhaus-Konversationslexikon, →Rotteck’s Staatslexikon, the journals Archiv der politischen Oekonomie und Polizeiwissenschaft (1835–1853) and Zeitschrift für die gesamte Staatswissenschaft (1844–); and McCulloch’s Literature of political economy (1845). 4 Guillaumin’s PRÉFACE and Clément’s INTRODUCTION are both dated 1853, yet included in the first volume dated 1852. This probably reflects the fact that the Dictionaire, like many analogous works at the time, was first published in fascicles and only later as bound volumes. 5 De Molinari, 1853, p. 425 (de Molinari was himself an eminent member of this group, and wrote a number of entries for the Dictionnaire. He also wrote a biographical note

220 Daniele Besomi

6

7 8 9 10

11 12 13 14

on Coquelin; de Molinari, 1852). The point is also stressed in Garnier’s obituary of Guillaumin, where it is stressed that the Dictionnaire became the true encyclopaedia of the school of economists at a time when political economy was being heavily battered by all sorts of adversaries (Garnier, 1865, p. 14). The attitude of defining the holders of opposite views as non-economists, or even ‘enemies of political economy’, seems to have been widespread within the circle of writers for the Dictionnaire, as de Molinari qualified as such a friend of Coquelin who defended protectionism (1852, p. 168). Accordingly, Charles Gide denied the school the qualification of ‘liberal’: while admitting that its members adopted the motto laisser faire, laisser passer, the school showed itself to be most illiberal in the sense of its narrowness of ideas and intolerance of contrary opinion (1890, p. 612). The ‘art’ of political economy, as opposed to the ‘science’. On the origin of the distinction and its centrality for the liberal school, see Fontaine, 1996. A new entry on COMMERCIAL CRISES was written by White (1882). Notably, among the other entries there is J.-B. Say’s DÉBOUCHÉS, translated as OUTLET (on which see more below in the text). This section borrows from the biographical notices in de Molinari, 1852, de Nouvion, 1908 and especially Nataf, 2006, from which the assessment on the development and radicalization of Coquelin’s views on banking is drawn. Coquelin repeatedly insisted on the temporary character of crises: ‘this disturbance of business must be impermanent, otherwise it would not be a crisis but a chronic disease that would imply a rapid ruin or at least a decline of the country’ (p. 526). He also qualified crises as ‘brief’. Of this explanation there is no further mention in the entry, revealing that the case was deemed to be totally uninteresting and/or unlikely. Coquelin cited large excerpts from his own Le crédit et les banques, 1848b, pp. 221–224, which had already appeared in the 1848a article and is reproduced in Coquelin, 1849, pp. 377–378. This view was taken up by Gerolamo Boccardo in the entries on BANCA and CRISI in his →Dizionario dell’economia politica (1857–1853), which relied very much on Coquelin’s ideas and even on his wording; see Chapter 11. On Coquelin’s view and the debate on free banking in France, see Nouvion, 1908, pp. 48–63. De Molinari believed that Coquelin was the first writer in Europe to advocate free banking (1852, pp. 170–171). For a discussion of Carey and Coquelin’s views, see Nataf, 1993; Nataf, 2006 argues that Coquelin’s early writings published in 1832 in Le Temps anticipated Carey. Several writers, however, preceded both Carey and Coquelin, and blamed the monopoly of the issuing bank as the cause of panics and crises. The anonymous author of a pamphlet on Commerce in consternation: or, The banking bubble burst! cited a passage from the Leeds Intelligencer which argued that ‘we are satisfied that until the monopoly of the Bank of England is destroyed, as a check thus imposed on their arbitrary eductions of the circulating medium, periodical embarrassments like the present one are inevitable’ (Anonymous, 1826, p. 22). In a debate with Thomas Attwood on the respective merits of the English and the Scottish banking systems, John Sinclair argued in favour of the latter and against the privilege of the Bank of England; he maintained that ‘It is quite practicable, by placing the circulation of the country on a proper footing, to prevent the recurrence of those melancholy scenes of distress, which are so frequently experienced in England. In Scotland, where a judicious system of banking is established, and where any number of persons can associate for banking purposes, they are scarcely known’ (1826, p. 48). Mushet also argued that ‘When the monopoly of the Bank [of England] expires, and the trade in money is perfectly free, a better order of things may arise, and more paper and less coin may be employed, with perfect security to the public’, which would be protected from fluctuations in the rate of interest (1826, p. 206). The matter was also discussed by an anonymous contributor

Coquelin on bank monopoly and crises 221

15

16 17

18

to the Edinburgh Review under the heading ‘Monopoly, or free trade, in Banking’ (1833). Robert Bell (1838) also maintained that ‘so long as the monopoly of the Bank of England cannot be efficiently counteracted, we shall be exposed to periodical returns of monetary panics and convulsions’ (p. 22). More examples are surely likely to be found. Coquelin is barely mentioned in Bergmann’s monumental history of crises theories in the nineteenth century, and only in connection with his reference to their almost periodical recurrence (Bergmann, 1895, p. 235). John Mills, in his seminal paper on the credit cycle, also cited Coquelin only in connection with his observation that crises are ‘almost periodical’ – commenting that two decades later one could drop the adverb (Mills, 1868, p. 14n). Coquelin is not referred to by Hutchison (1953), nor – in connection with cycles of free banking – by Schumpeter (1954). There were entries on COQUELIN, CHARLES in →Palgrave’s Dictionary of political economy and in Seligman’s →Encyclopaedia of the social sciences (referring, however, to banking rather than to crises), but not in the →New Palgrave or in →Blaug’s Who’s who in economics. Nevertheless, Nataf claims that Coquelin’s writings on crises (misnamed ‘business cycles’) ‘were considered a crucial contribution until the end of the nineteenth century’; this view is not supported by any evidence (Nataf, 1993, p. 103; similarly, Nataf ’s entry on COQUELIN, CHARLES in →Glasner’s Business cycles and depressions: an encyclopedia, 1997); more modestly, elsewhere the same writer refers to the fact that two of Coquelin’s contemporaries and fellow members of the liberal group, de Molinari and Paul Coq, adopted his book as the best on the subject (Nataf, 2006, p. 525). A search through JSTOR and other bibliographic sources does not reveal any references to his specific explanation of crises. For a survey of the literature, see Besomi, 2010a. There were, of course, a number of books and articles titled in the plural: in the French language, the term ‘crises’ was used by Guéroult, 1831; Millot, 1837; Chitti, 1839; Briaune, 1840; in English the term ‘crisis’ was less used at the time, but terms such as ‘embarrassments’, ‘revulsions’ and ‘panics’ were used in the plural (e.g., McCulloch, 1819 and 1826; Joplin, 1841; Duncan, 1842; Lawson, 1848). The distinction was eventually explicitly discussed by E. D. Jones, who in 1900 suggested that explanations of the cycle could be divided into two categories: those ascribing the movement to a continuous cause, and those relying on intermittent pulses. The analogy he used to illustrate the former case is interesting: ‘To grant that a phenomenon is of periodic occurrence does not necessarily imply that the force which causes it is spasmodic or lacking in continuity. A regularly operating force, when at a certain point its cumulated effects disturb the equilibrium under which the force has up to that time operated, may manifest itself only periodically in certain of its aspects. The simplest illustrations of this are the intermittent spring and the geyser’ (Jones, 1900, pp. 131–132).

REFERENCES Anonymous, 1826, Commerce in consternation: or, The banking bubble burst! being a sketch of the rise, progress, and decline, of the late paper panic (London: Cock). Anonymous, 1833, Monopoly, or free trade, in banking, Tait’s Edinburgh Magazine, III, pp. 84–90. Arena, R., 2001, J-B. Say and the French liberal school of the nineteenth century. Outside the canon? In E. L. Forget and S. Peart (eds), Reflections on the classical canon in economics: essays in honor of Samuel Hollander (London: Routledge), pp. 205–223. Bell, R., 1838, Letter to James William Gilbart . . . manager of the London and Westminster Bank, on the relative merits of the English and Scotch banking systems: with practical

222 Daniele Besomi suggestions for the consolidation of the English joint-stock banking interest (Edinburgh: Bell & Bradfute). Bergmann, E. von, 1895, Die Wirtschaftskrisen: Geschichte der nationalökonomischen Krisentheorien (Stuttgart: W. Kohlhammer). Besomi, D., 2008, James Anthony Lawson on commercial crises and their periodical recurrence, Structural Change and Economic Dynamics, 19: 4, December, pp. 330–341. Besomi, D., 2010a, The periodicity of crises: a survey of the early literature. Journal of the History of Economic Thought, 32: 1, March, pp. 85–132. Besomi, D., 2010b, ‘Periodic crises’: Clément Juglar between theories of crises and theories of business cycles, Research in the History of Economic Thought and Methodology, 28A, pp. 169–283. Briaune, M., 1840, Des crises commerciales. De leur causes et de leur remèdes (Paris: Bouchard-Huzard; reprinted New York: Burt Franklin, 1971). Carey, H. C., 1838, The credit system in France, Great Britain and the United States (Philadelphia: Carey). Chitti, L., 1839, Des crises financières et de le réforme du système monétaire (Brussels: Meline). [Cockburn, R.], 1840, Reworks suggested by the present state of trade and credit (London: E. Wilson). Coquelin, C., 1848a, Les crises commerciales et la liberté des banques, Revue des Deux Mondes, XXVI, 1 November, pp. 445–470. Translated as Coquelin, 1849; translated and abridged as Coquelin, 1850. Coquelin, C., 1848b, Du crédit et des banques (Paris: Guillaumin. 2nd edn as Le crédit et les banques, 1859; 3rd edn, with an introduction by Courcelle-Seneuil and a biographical and bibliographical note by de Molinari, 1876). Coquelin, C., 1849, The causes of commercial crises, Hunt’s Merchants’ Magazine, XXI, October, pp. 371–388 (translation of Coquelin, 1848a). Coquelin, C., 1850, Restrictions on banking the cause of commercial crises, Bankers’ Magazine, X, pp. 219–227 and 308–313 (translates and abridges Coquelin, 1848a). Cory, I. P., 1842, Competition: its abuse one of the chief causes of the present distress among the trading, manufacturing, and commercial classes: with suggestions for remedying it (London: Painter). De Vivo, G., 2006. [Review of] The biographical dictionary of British economists. Contributions to Political Economy, 25: 1, pp. 121–126. Duncan, W. B., 1842, Mercantile embarrassments, and the present state of the banking system (Edinburgh: John Johnstone). Fontaine, P., 1996, The French economists and politics, 1750–1850: The science and art of political economy. Canadian Journal of Economics, 29: 2, May, pp. 379–393. Garnier, J., 1865, Notice sur M. Guillaumin, fondateur du Journal des Économistes (Paris: Parent). Gide, C., 1890, The economic schools and the teaching of political economy in France. Political Science Quarterly, 5: 4, December, pp. 603–635. Guéroult, 1831, De la Banque de France et du crédit considéré comme moyen de soustraire le pays aux crises commerciales (Paris: Les Marchands de nouveautés). House of Commons Secret Committee on Commercial Distress, 1848, First report from the Secret Committee on Commercial Distress, with the minutes of evidence (London: House of Commons). Hutchison, T. W., 1953, A review of economic doctrines 1870–1929 (Oxford: Clarendon Press). Ingram, J. K., 1888, A history of political economy (New York: Macmillan).

Coquelin on bank monopoly and crises 223 Jevons, W. S., 1878, Commercial crises and sun-spots, Pt. 1, Nature, XIX, 14 November, pp. 33–37 (reprinted in Investigations in currency and finance, edited by H. S. Foxwell, London: Macmillan, 1884, pp. 221–235). Jevons, W. S., 1879. Preface to the second edition, The theory of political economy (London: Macmillan). Jones, E. D., 1900, Economic crises (New York and London: Macmillan). Joplin, T., 1841, The cause and cure of our commercial embarrassments (London: James Ridgway). Juglar, C., 1862, Des crises commerciales et de leur retour périodique en France, en Angleterre et aux États-Unis (Paris: Guillaumin). Lawson, J. A., 1848, On commercial panics: a paper read before the Dublin Statistical Society (Dublin: Dublin Statistical Society). Le Van-Lemesle, L., 2004, Le juste ou le riche: l’einseignement de l’économie politique 1815–1950 (Paris: Comité pour l’histoire économique et financière de la France). [McCulloch, J. R.], 1819, Commercial embarrassments and trade with France, Edinburgh Review, LXIII, July, pp. 48–74. [McCulloch, J. R.], 1826, Commercial revulsions [review of The late crisis in the money market impartially considered, London, 1826], Edinburgh Review, XLIV, June, pp. 70–93. Mill, J. S., 1848, Principles of political economy with some of their applications to social philosophy, London. In J. S. Mill, Collected works, Vols II and III (Toronto: University of Toronto Press, and London: Routledge, 1965). Millot, L., 1837, Études sur les principales causes des crises commerciales et périodiques (Paris: E. Legrand et Descauriet). Mills, J., 1868, On credit cycles and the origin of commercial panics. Transactions of the Manchester Statistical Society, Session 1867–1868, pp. 5–40. Molinari, G. de, 1852, Charles Coquelin, Journal des Économistes, XXXI: 137–138, September–October, pp. 167–176 (reprinted in the 3rd edn of Coquelin, 1848). Molinari, G. de, 1853, [Review of] Dictionnaire de l’économie politique. Journal des Économistes, XXXVII, October–December, pp. 420–432. Mushet, R., 1826, An attempt to explain from facts the effect of the issues of the Bank of England upon its own interests, public credit, and Country Banks (London: Baldwin, Cradock & Joy). Nataf, P., 1993, New England’s depression-proof free banking system: the viewpoints of Henry Charles Carey and Charles Coquelin. In R F. Hébert (ed.) Perspectives on the history of economic thought, vol. IX: Themes on economic discourse, method, money and trade (Cheltenham: Elgar, pp. 97–106). Nataf, P., 2006, La vie et l’oeuvre de Charles Coquelin (1802–1852). In P. Nemo and J. Petitot (eds) Histoire du libéralisme en Europe (Paris: PUF), pp. 511–530. Nouvion, G. de, 1908, Liberté du commerce et des banques: Charles Coquelin: sa vie et ses travaux (Paris: Félix Alcan). Say, J.-B., 1832, Cours complet d’économie politique pratique: ouvrage destiné à mettre sous les yeux des hommes d’état, des propriétaires fonciers et des capitalistes, des savans, des agriculteurs, des manufacturiers, des négocians, et en général de tous les citoyens, l’économie des sociétés (Brussels: Meline. 3rd edn, annotated and augmented by H. Say, Paris: Guillaumin, 1852). Schumpeter, J. A., 1954, History of economic analysis (London: Allen & Unwin). Sinclair, J., 1826, On the means of relieving the present pecuniary embarrassments of the country, and preventing their recurrence; together with the plan of a chartered company

224 Daniele Besomi for promoting the security of the country banks. In J. Sinclair and T. Attwood, The late prosperity and the present adversity of the country explained; the proper remedies considered, and the comparative merits of the English and Scottish systems of banking discussed, in a correspondence between Sir John Sinclair and Mr. Thomas Atwood (London: Ridgeway & Hatchard). Wilson, J., 1847, Capital, currency and banking, being a collection of a series of articles published in The Economist in 1845 . . . and in 1847. . . Concluding with a plan for a secure and economical currency (London: The Economist). Woodbury, L., 1840, Report of the Secretary of the Treasury. On the finances. Public debt and Treasury notes. Exports and imports within the commercial year 1839. Estimate of the receipts and expenditure for 1840. Explanations of the estimates as to the expenditures and of some further reductions in them. On some permanent safeguard under fluctuations in receipts and expenditures. The manner of keeping the public money, with the proper guards against losses. Condition of banking institutions generally, and the kind of money receivable for public dues. Miscellaneous. Niles’ Weekly Register, 7: 19, 4 January, pp. 293–298.

9

Commercial crisis and credit in the first Spanish general encyclopaedia (1851–1855) Jesús Astigarraga and Juan Zabalza

Enciclopedia moderna, Diccionario universal de literatura, ciencias y artes, agricultura, industria y comercio, Madrid, Establecimiento de Francisco de Paula Mellado, 1851–1855.

9.1 INTRODUCTION After the publication of the first edition of →J. Canga-Argüelles’s Diccionario de hacienda (Dictionary of public finance, 1826–1827), Spanish encyclopaedic literature containing economic entries began to grow significantly.1 Spanish economists, however, did not complete any specialized dictionary for the rest of the nineteenth century. Therefore, economic entries were embedded within the large Spanish general encyclopaedias such as Enciclopedia moderna and Diccionario enciclopédico hispanoamericano (Hispanic-American encyclopaedic dictionary), and, later on, during the first third of the twentieth century, within the famous Espasa Calpe, the greatest of the Spanish general encyclopaedias. These entries were written by economists who were closely connected to different ideological groups. They tried to influence economic policy by spreading their own economic doctrine and proposals for economic policy through this kind of literature. Such entries show, however, that the Spanish economists paid little attention to the notions of economic crisis and business cycles. For example, the economic entries in Diccionario enciclopédico hispanoamericano, but also those in Enciclopedia Espasa Calpe, particularly leaned towards the so-called ‘social question’, namely, the social consequences suffered by capitalist economies caused by industrialization. Therefore, the entries related to economic crisis were basically focused on the social consequences of depression such as unemployment, impoverishment and the mitigation of these phenomena through the establishment of the first institutions of the welfare state or the promotion of certain ideologies. There are not, however, any economic entries focusing either on the causes, symptoms or nature of economic crises, or the existence of business cycles.2 Nevertheless, there was an exception: the entries for CRÉDITO (credit) and CRISIS COMERCIAL (commercial crisis) in Enciclopedia moderna (1851–1855), the first Spanish general encyclopaedia.

226 Jesús Astigarraga and Juan Zabalza 9.2 THE ENCICLOPEDIA MODERNA (1851–1855) Enciclopedia moderna, diccionario universal de literatura, ciencias y, artes, agricultura, industria y comercio (Modern encyclopaedia: universal dictionary of literature, sciences, arts, agriculture, industry and commerce, 1851–1855) is a major work of Spanish culture of the nineteenth century. The large number of economic entries contained in the encyclopaedia represented the culmination of the surge of economic literature that took place in the second quarter of the nineteenth century, aimed at popularizing political economy in Spain (Astigarraga et al., 2001). Such literature, however, seems even more significant since in Spain there was no clear distinction between academic and more ideological discourse, designed to be spread over wide circles (Almenar, 2000). The 33 original volumes of the Enciclopedia moderna, together with two supplementary tomes, were published between 1851 and 1855. In the following decade, between 1865 and 1867, the encyclopaedia was extended by the addition of four new volumes, although their entries on political economy were actually of no interest. The large number of volumes finally published, the wide range of topics contemplated by the entries (around 50), and the contribution of prestigious Spanish intellectuals and scholars of the mid-nineteenth century reveal the magnitude of this project. Undoubtedly, profound changes at the heart of Spanish society during the first half of the nineteenth century, such as the growing literacy of the population due to the gradual generalization of education and the reinforcement of a stable and vigorous middle class that had reached high levels of purchasing power, were underlying factors for the publication of the encyclopaedia, as they significantly helped to create a favourable economic environment for the market of general encyclopaedias.3 F. de P. Mellado, who was the publisher and promoter of Enciclopedia moderna, seems to have been an archetypal member of the intellectual Spanish bourgeoisie, which grew significantly from the beginning of the 1830s. This section of society held an interest in, and attached great importance to, the production and diffusion of culture as a means for consolidating liberal society. In fact, this period was characterized by the emergence of liberal publishers as significant historical figures, whose aim was to swing public opinion towards the acceptance of the principles of liberalism (Villacorta, 1980). In particular, F. de P. Mellado promoted the translations of French books and encyclopaedias that dealt mainly with geography, history, the arts and crafts. Enciclopedia moderna, however, was undoubtedly his most outstanding contribution, as it had a considerable print run by Spanish standards in the mid-nineteenth century. Therefore, the success of the encyclopaedia indicates the existence of a strong desire to spread technical and ideological knowledge in order to strengthen the liberal order. In particular, Enciclopedia moderna preceded the creation, a few years later, of great institutions and publishing projects inspired by the doctrine of free trade. Therefore, its economic entries seem to be a useful source for improving our understanding of the intellectual influence of Spanish liberalism in the midnineteenth century.

Crises in the first Spanish general encyclopaedia 227 Enciclopedia moderna is set out in a modern format compared to other similar Spanish contemporary works. In fact, the anonymous entries included complete bibliographies. Entries were listed alphabetically and covered 50 topics, which can be grouped into history and geography, moral philosophy and religion, law and jurisprudence, logic and mathematics and, finally, political economy. Its modernity seems to be influenced by Encyclopédie moderne: dictionnaire abregé des sciences, des lettres, des arts, de l’industrie, de l’agriculture et du commerce (1847–1852) by Didot Publishers. There are more than a hundred anonymous economic entries which altogether account for approximately 900 pages. Many other entries that are classified in Enciclopedia moderna under topics such as ‘moral philosophy’, ‘moral economics’ or ‘rural economics’ included certain economic concepts that are largely uninteresting. The economic entries in Enciclopedia moderna were written in three phases. The first stage is certainly brief, as it only covers the first volume, and embraces several economic entries that were mostly translated from Didot’s Encyclopédie moderne (1847–1852) (Enciclopedia moderna, 1851–1855, Vol. IX). The second phase, from Vol. II to Vol. XXVII, is the main part of the encyclopaedia in terms of political economy as its economic entries possess a certain analytical quality. In fact, the entries herein analysed belong to this phase of the encyclopaedia. As described below, the journalist, poet and economist José Joaquín de Mora compiled and wrote this part of the encyclopaedia. Finally, between 1865 and 1867, Enciclopedia moderna was expanded by the addition of four new volumes, although their entries on political economy were of no interest.

9.3 JOSÉ JOAQUÍN MORA AS AUTHOR OF THE ENTRIES FOR CREDIT AND COMMERCIAL CRISIS IN ENCICLOPEDIA MODERNA Mora’s life might be the canonical example of the committed liberal in the first half of the nineteenth century in Spain. He was born in Cádiz in 1783 and was brought up according to Jansenist, rationalist and naturalist principles. He became a Professor of Logic at the San Miguel College of Granada, where he taught Condillac and Bentham between 1802 and 1808, which was unusual at that time in Spain (Monguió, 1967). During this early period, Mora read the works of the so-called Scottish philosophers of common sense, T. Reid and D. Stewart, who greatly influenced his life, and his literary style and ideas. In fact, Mora learned from Reid that axioms and definitions are not to be ‘proven’ and are the foundation of all reasoning and science – from mathematics to rhetoric; this approach should substitute the scholastic philosophy that prevailed in Spain at the time (Mora, 1845). In fact, Curso de lógica y ética según la escuela de Edimburgo (Course of logic and ethics based on the Edinburgh School), which was published six times in Latin America and in Spain between 1832 and 1853, symbolizes the role played by Mora in spreading the ideas that he considered crucial for bringing up young people according to the principles of liberal society. Mora explicitly recognized that he

228 Jesús Astigarraga and Juan Zabalza was a mere translator trying to spread the philosophical system of the Scottish philosophers. Nevertheless, the philosophy of common sense was also a protest against the exclusive systems of thought and this seems to be Mora’s statement regarding literary, economic and religious issues. Such an approach was exemplified by his admiration for romanticism or his rational approach to religion. This eclecticism that so characterizes Mora’s way of thinking also extended to his economic thought (Smith, 1968). Mora’s patriotic convictions saw him fighting against the Napoleonic troops that invaded Spain in 1808 and he became a prisoner in France. After returning to Spain in 1817, he began his career as one of the country’s main propagators of science and literature. Later, during the brief Liberal period (1820–1823), he expanded his activities by becoming a founder and promoter of newspapers, a translator into Spanish of philosophical and political books, a professor in the Ateneo Español (Spanish Athenaeum) and a member of a number of political societies. By then, together with other economists such as J. M. Vadillo or M. Marliani, he formed part of the first generation of the Spanish advocates of free trade, led by his friend the outstanding economist A. Flórez-Estrada. Mora’s exile in Britain was crucial to explaining the evolution of his thought and his commitment to spreading liberalism.4 First, he reinforced his connections with British culture and became an anglophile writer. Second, he read the works of the main British economists and he had a personal relationship with Bentham and J. R. McCulloch. In fact, he translated the pamphlet Consejos que dirige á las Córtes y al pueblo español Jeremías Bentham (Jeremy Bentham’s advice to the Spanish parliament and people) into Spanish (Schwartz, 1999), and he is said to have met J. R. McCulloch on several occasions, whom he considered to be the most important economist at that time (Mora, 1843). Third, and most importantly, he met the German publisher R. Ackermann, who appointed him director of two newspapers and as a contributor to Forget-me-not, which was the British version of the popular German literary annuals. It seems that Ackermann recruited Mora for his skill as a journalist, but also for his profound intellectual background (Llorens, 1979). Furthermore, Ackermann found in Mora, together with other Spanish liberals exiled in London, the perfect propagator for his publishing plans in the recently founded republics of Latin America, which included the translations of some successful English educational works written mainly by William Pinnock (Roldán, 2003). In fact, the catechisms of Geography, Grammar and particularly of Political Economy were probably written by Mora himself. This frenetic activity created the opinion that Mora was a superficial and vacuous intellectual. However, as R. S. Smith pointed out, ‘Mora was not a professional economist; however, he was capable of understanding the trends in economic science at that time. Furthermore, he was sufficiently skilled to set them out in such a way that they could be popularized’ (Smith, 1967). Undoubtedly, the main interest of Spanish liberals was to promote the establishment of liberal institutions and, in the case of Mora, to endorse free trade in Latin American republics (Monguió, 1967). When Mora moved to Argentina – invited by the then Prime Minister Rivadavia, whom he had met in England – and

Crises in the first Spanish general encyclopaedia 229 afterwards to Chile, Peru and Bolivia, he practised what he had preached in London. First, he continued spreading liberal ideas through countless articles. With regard to political economy, he included some articles in Crónica Literaria y Política of Buenos Aires and later in El Mercurio Chileno, which, retrospectively, suggests that Mora intended to publish them as a dictionary. He also advised the reformist leaders B. Rivadavia, A. de Santa Cruz and S. B. P. Pinto to promote the introduction of free trade in South American countries. Mora was also involved in setting up liberal institutions, such as the Chilean Liberal Constitution in 1828, and promoted the creation of some educational institutions. In fact, he published several textbooks specifically devoted to instruction.5 Mora’s educational goals may be symbolized by the interpretation of Destutt’s literary ideas, as he admitted that the French thinker helped to purify the Spanish language in such a way that scientific principles could be more clearly explained in the Spanish republics (Amunátegui, 1888). In the 1840s, when Mora returned from exile, he published De la libertad de comercio (On the freedom of commerce, 1843), which was based on a wide range of sources but mainly inspired by J. R. McCulloch, the Italian F. Mengotti or the Spaniard P. Pebrer, and other significant writings such as Memoria sobre los puertos francos (Memorandum on free ports, 1844) which were of his own creation. A large number of excerpts from these works were finally inserted in Enciclopedia moderna. He continued his activities as a lecturer at the Colegio San Felipe Neri (Cadiz), contributed to journals, and finally he achieved public acknowledgement in his own country when he was appointed as a member of the Royal Academy of the Spanish Language and as General Consul of Spain in London in 1856. He died in Madrid in 1864. Mora seems to have nurtured the idea of writing some entries to be included in a dictionary or encyclopaedia for a long time. In particular, a quarter of a century earlier, Mora had published a series of articles in El Mercurio Chileno that had similar titles to some entries in Enciclopedia moderna. Furthermore, Mora inserted some of his previous publications in the encyclopaedia without making any significant changes to them. For instance, the manuscript ‘España (industria y comercio)’ (Spain, industry and commerce), dating back to 1850 and discovered in the Argentinian National Library, was finally published in Enciclopedia moderna under the entry ESPAÑA (Siegrist de Gentile, 1992). Similarly, the above-mentioned work Memoria sobre los puertos francos, first published in 1844, was included in the entry PUERTOS FRANCOS (Free ports) in Enciclopedia moderna, as well as a large number of excerpts from De la libertad de comercio (1843).

9.4 CREDIT AND COMMERCIAL CRISES IN ENCICLOPEDIA MODERNA Two economic entries in Enciclopedia moderna are of importance for the notions of economic crisis and cycles: CRÉDITO and CRISIS COMERCIAL. There is also a minor reference made to financial crises in the entry BANCOS EXTRANJEROS (Foreign banks) that is not worth commenting on in this article (Enciclopedia

230 Jesús Astigarraga and Juan Zabalza moderna, 1851–1855; Vol. III). The entries CRÉDITO and CRISIS COMERCIAL in Enciclopedia moderna are contained in Vol. XI, which means that they were probably drafted before the publication of →Coquelin and Guillaumin’s Dictionnaire de l’économie politique (1852), which turned out to be one of the most profusely quoted intellectual sources in the subsequent economic entries written by Mora in Enciclopedia moderna. As previously mentioned, Mora first considered writing economic entries for inclusion in an encyclopaedia during his Chilean exile. By this time he had drafted several entries that were published as articles in different issues of the journal El Mercurio Chileno. There was not, however, anything in these articles that might be connected to what would be the entries for CRÉDITO and CRISIS COMERCIAL in Enciclopedia moderna. The articles BANCOS DE DESCUENTO (Banks of discount), CIRCULACIÓN (Circulation) and BANCOS (Banks) described a kind of credit crisis that Mora blamed on the bad management of public credit – which he exemplified with the famous crisis of the so-called System of Law – and therefore he put crisis down to specific and exceptional circumstances that obviously were not linked to any periodical or oscillating phenomenon (Mora, 1828). Conversely, as we will demonstrate below, a large part of both entries were taken from a French mid-nineteenth century dictionary: →Guillaumin’s Encyclopédie du commerçant. Dictionnaire du commerce et des marchandises (1837–1839).

9.4.1 CRISIS

COMERCIAL

in Enciclopedia moderna

Mora started defining commercial crisis as ‘Epochs of general discredit in markets and commercial towns that lead to the stagnation of commerce and business’. Subsequently, he defined the symptoms, which, in his words, were basically scarcity of credit, rising interest rates, falling prices, falling-off expenditure, and consequently bankruptcy and lockouts (Enciclopedia moderna, 1851–1855, Vol. XI). As mentioned, this formulation, as well as most of the entry, was taken, almost word for word, from the article CRISE COMMERCIALE in Guillaumin’s Encyclopédie du commerçant, which had been drafted by Michel6 (see Chapter 6). However, at this point, Mora points out that the psychological mood of social classes in such a situation is called ‘panic’ in England. This idea, given his profound knowledge of English economic literature, might have been taken from some of the contemporary works that adopted such a term at the time he was writing Enciclopedia moderna’s economic entries (Besomi, 2010a). Commercial crises are also classified in Encyclopédie du commerçant into two groups according to the causes that bring them into being, namely, those that have nothing to do with economic conditions, such as political events or wars, and those connected to business or industrial organization, to which the article pays particular attention (Mora, CRISIS COMERCIAL; Michel, CRISE COMMERCIALE). At the same time, Mora took up Michel’s classification of economic causes into those connected to credit and, in particular, to what Mora calls the ‘misuse of credit’, and those referring to the ‘distortions’ of factors of production. Nevertheless, he pointed out that the latter seems to be a consequence of the former. Credit is ‘by no means a

Crises in the first Spanish general encyclopaedia 231 mighty part of wealth, as we have demonstrated in the entry CRÉDITO, inasmuch as it aims at transferring capital towards the economic agents which are able to allocate it in the most efficient way’ (Mora, CRISIS COMERCIAL). Once Mora had explained the crucial role played by credit in capitalist societies, he described what he deemed to be the mechanism of commercial crises. Commercial crises, in his words, start with an overabundance of money as a consequence of the flow of credit provided by financial institutions, which provokes growing prices of cotton – it seems that cotton represented industry as a whole, as in Michel’s example – and eventually give rise to the outflow of capital abroad. Subsequently, the circulation of banknotes decreases and, despite falling commodity prices, goods are not sold out. Finally, unemployment becomes widespread. Such a sequence may have been taken by Michel from Cours complet d’économie politique pratique in which J.-B. Say describes a similar pattern (Say, 1828). Mora provides two examples of such a series of events, which are also taken from Michel: the English commercial crisis of 1825 and the French financial crisis in the early nineteenth century caused by the mass circulation of bills of commerce. Nevertheless, we have not found any mention of the periodicity of commercial crises as indicated by Michel in CRISE COMMERCIALE, which means that Mora had not observed the significance of this aspect of crises.7 At this point, the transcription of the entry for CRISE COMMERCIALE from Guillaumin’s Encyclopédie du commerçant ends, and the rest of the article, as far as we know, seems to be original. However, Mora’s original contributions are by no means analytically significant, as he suggested that economic crises might be caused by ethical misbehaviour on the part of individuals, which he called ‘the wrong management of private and public financial institutions’. In particular, he referred to the immorality of bank managers and the specific problem of public debt that Spain was experiencing around the time when the encyclopaedia was published. Regarding the latter, Mora does not support the policy of introducing public debt into the stock market: ‘this practice confers a certain negative character to public wealth since it paves the way for falling into fraud through the dissemination of false information in order to influence the prices of public securities’, and thus it creates a general economic disorder (Mora, CRISIS COMERCIAL). The policies suggested by Mora for resolving commercial crises pursued clearcut political goals: the adoption by the Spanish government of the principles of economic freedom, such as the liberalization of foreign trade, the abolition of prohibitively high custom duties or the protectionist practices of the Custom Duties Administration. Such policies, according to Mora, will drive capital towards ‘nobler’ and more lucrative activities, which, at the same time, will be in keeping with the ‘path of civilization’.

9.4.2 CRÉDITO in Enciclopedia moderna The economic entries in Enciclopedia moderna are, on the whole, self-contained. Nevertheless, the crucial role given by Mora to the entry for CRÉDITO meant that a large number of economic articles in the encyclopaedia were linked to this entry

232 Jesús Astigarraga and Juan Zabalza through an extensive number of cross-references. Mora defines credit as the ‘reliance of one person on another to whom the former has lent money, or when somebody sells commodities to another person postponing their payment’, which is exactly the definition provided by Michel in the entry for CRÉDIT in Guillaumin’s Encyclopédie (Mora, CRÉDITO, p. 560). Mora, as did Michel, distinguished between commercial and public credit. The former defined the role of credit as a ‘moral’ means by which deals between economic agents are made possible, and therefore the absence of credit implies a shortage in the demand for labour and insufficient production. That is to say, Mora once again made the connection between credit and production. Once Mora had defined and mapped out the meaning of credit, he highlighted two ideas that were also taken from Michel’s entry on CRÉDIT. First, he emphasized the advantages of using banknotes, since this physical instrument had proven to be the cheapest and most efficient backing for credit. Mora refers to McCulloch – and indeed quotes the Scottish economist in the entry – for endorsing this idea. However, as was common practice in economic entries in Enciclopedia moderna, he did not offer ideas from an original intellectual source but quoted from Michel’s entry. Second, Mora explains, drawing upon a ‘certain French economist’, who was in fact Michel again, that whatever were the influence of credit and agents of credit on industrial wealth, it does not follow that they are factors of production or that they create capital. Credit and ‘credit agents’, however, are useful since they boost the circulation of the existing capital. Hence, capital finally flows towards the hands of those who employ it in the most efficient way for society, and thus, bank notes are not able to produce wealth directly, as wealth is the result of man’s labour. (p. 560) (Mora, CRÉDITO) Nevertheless, he stressed that labour cannot be set into motion without the support of capital. The second part of the entry, which focused on public credit, is far less interesting from the point of view of this article. Nevertheless, there are a number of interesting suggestions that were taken from Michel’s entry on CRÉDIT, and others that seem to be original contributions made by Mora. Indeed, Mora clearly defends the role of public credit in facing certain unusual circumstances like the reduction of money, financing wars and infrastructure, or the bankruptcy of the Exchequer. The idea that credit plays a more prominent role in constitutional countries in which freedom and property are guaranteed by law than in monarchies is presented in a more understated way than it is in Guillaumin’s Encyclopédie, in spite of Mora’s political commitment to economic freedom. In fact, he merely mentions that the policy of public credit is more desirable than selling territories of the Crown in order to obtain public revenues. Finally, Mora, as in the entry for CRISIS COMERCIAL, recommended the implementation of certain economic policy measures such as amortizing public debt through funds from the public national budget – which he thought to

Crises in the first Spanish general encyclopaedia 233 have been successful in Britain and France – and the adoption of certain general rules (máximas generales) in order to ‘satisfy the needs of some and foster the interests of others’ (Mora, CRÉDITO). On the other hand, according to Mora, policies and behaviours such as immoderation in public expenditure, the improvidence and imprudence of officials, a perturbation in the social economy caused by the ‘passion for politics’, senseless wars and, of course, trade barriers impeded the fulfilment of such economic goals.

9.5 CONCLUDING ASSESSMENT OF THE ENTRIES ON CREDIT AND CRISIS IN ENCICLOPEDIA MODERNA The entries for CRÉDITO and CRISIS COMERCIAL in Enciclopedia moderna portray the secondary role that Spain played in the development of the political economy in Europe during the nineteenth century, as it was a country that did not make any relevant contribution to economics during this period. Spanish economists, however, were committed to spreading and successfully adapting imported ideas from other European countries. During certain periods of time, the adaptations to the Spanish economic context were so skilfully carried out that they have been considered by historians as actual contributions to the history of economic thought (Llombart, 2000). In fact, the authors of the economic entries in Enciclopedia moderna used a wide variety of foreign economic sources such as the main British and French classical works and journals or the main encyclopaedic works – specialized in political economy or otherwise – of the eighteenth and nineteenth centuries (Astigarraga and Zabalza, 2007). However, as we have seen, this is not the case for the entries for CRISIS COMERCIAL and CRÉDITO in Enciclopedia moderna, as Mora translated a large part of them from Guillaumin’s Encyclopédie. It seems, therefore, that Mora, at the time of writing these entries, did not use, and was therefore probably unfamiliar with →Coquelin and Guillaumin’s Dictionnaire de l’économie politique (1852– 1853), which was published almost at the same time as the first economic entries in Enciclopedia moderna. Nonetheless, Guillaumin and Coquelin’s Dictionnaire influenced the subsequent economic entries of the encyclopaedia, such as the crucial entry for ECONOMÍA POLÍTICA (political economy), which was published some time after CRÉDITO and CRISIS COMERCIAL (Astigarraga and Zabalza, 2007). Both entries in Guillaumin’s Encyclopédie du commerçant (1837–1839) were compiled by a certain Michel, about whom we have no further information. As mentioned earlier, there are almost no references in Mora’s previous works to the analysis of commercial crisis. Therefore, it seems that Mora, once he was involved in compiling the entries for Enciclopedia moderna, had to draw upon secondary sources and, in this particular case, upon the entries drafted by Michel almost half a decade before. Such transcription explains why the entries are, to some extent, anachronistic in comparison with similar entries in Guillaumin and Coquelin’s Dictionnaire (1852–1853). Nevertheless, the crucial idea of relating crises to credit, which was almost universally accepted at the time, is shared by Michel, Coquelin

234 Jesús Astigarraga and Juan Zabalza and Mora. In particular, the abuse of credit as the main cause of commercial crisis, the insignificance attributed to the misuse of factors of production in causing a commercial crisis, the acknowledgement that credit is an essential means to achieve the wealth of a nation or the irrelevance of the mismanagement of productive forces of manufacture in provoking a commercial crisis are features that are self-evident in the economic entries drafted by Michel, Coquelin and Mora. Nevertheless, Michel, as well as Mora, entitled the entry ‘Commercial crisis’ in the singular, as did most other contributors on crises in early encyclopedic writings (see Chapter 6), in strong contrast with the plural formula used by Coquelin, who assumed that crises were a periodical phenomenon that should be explained. Therefore, Mora’s interpretation belongs to the group of theories that explain crises as the result of some institutional conflict that impedes the correct performance of the economic system, and, like Coquelin – and obviously Michel – he assumed that the problem should be placed within the context of monetary issues (see Chapter 8 on Coquelin). However, there is no mention of the existence of privileged banks as the main cause of the abuse of credit, as Coquelin pointed out in the entry on CRISES COMMERCIALES in Guillaumin and Coquelin’s Dictionnaire (1852–1853). Mora only refers to the ‘immorality’ of bankers who merely seek profit for themselves and, consequently, there is insufficient evidence in Mora’s contributions to make any reliable comparison with Coquelin’s advocacy of free banking. In this respect, we can only infer that Mora did not consult Guillaumin and Coquelin’s Dictionnaire. Nevertheless, it should be mentioned that he makes reference to Jackson’s criticism of the monopoly of the American central bank in the entry for BANCOS (Enciclopedia moderna, Vol. II). Mora’s transcription from Guillaumin’s Encyclopédie du commerçant, however, was not complete and some characteristics of commercial crisis that were highlighted by Michel were dismissed. For example, Mora did not discuss the periodical recurrence of commercial crises despite the description of the mechanism of crises in Guillaumin’s Encyclopédie, which implicitly refers to periodicity when crisis is related to credit. In other respects, Mora’s approach to commercial crisis is actually of no interest, as he did not take into account aspects such as the timing of crises, their regularity or lifespan, and, even less, obviously, the causes of their cyclical recurrence. Mora’s disregard towards such questions is significant since both entries were copied from Guillaumin’s Encyclopédie du commerçant. It seems, however, that Mora was not actually concerned with theoretically analysing commercial crisis. Conversely, his interest in economic crises resided in their connections to economic growth, and, naturally, to the adoption of free trade by Spanish policy makers as the best way to promote the prosperity and welfare of Spain, which was the main statement defended in the rest of the economic entries in Enciclopedia moderna (Astigarraga and Zabalza, 2007). Consequently, we believe that Mora was, in fact, fleshing out the entry with information about the phenomenon of commercial crisis and its connections to credit – or abuse of credit – which did not generate any real interest in the rest of the Spanish economists at the time, or at least historians have not noticed such interest towards crises. A pamphlet presenting some Reflections on the present

Crises in the first Spanish general encyclopaedia 235 mercantile distress experienced in Great Britain: and more or less affecting other nations on the continent of Europe, &c. &c., originally written in English, was published in 1826 by the outstanding Spanish economist A. Flórez-Estrada during his exile in Britain (Flórez-Estrada, 1826). According to Flórez-Estrada, the fall in money supply caused by the independence of Latin American republics lay behind the British economic distress of 1825. Flórez-Estrada’s work seems to have had a certain impact among British and French economists – in particular, Jean-Baptiste Say – who criticized his theories regarding the contemporary British economic crisis. However, we have found no indication of any possible influence of FlórezEstrada’s approach on the Spanish economists at the time, not even on those like Mora who were living in England at the time when this work was published. In fact, the work was published for a second time in English and only the third edition was finally published in Spanish (Llorens, 1979). Furthermore, historiography has largely ignored Flórez-Estrada’s contribution. In this regard, the few indications that suggest a level of interest in this area, such as the diffusion of Sismondi’s approach to crises or the strong influence in Spain of Cours complet by Jean-Baptiste Say, in which Chapter XIX, entitled ‘Abus des banques de circulation’, approaches this issue, require further research to gain a better understanding of the attention paid by Spanish economists to the phenomenon of economic crises (Say, 1828; Lluch and Almenar, 2000). Nevertheless, it should be pointed out that, in contrast with France and Great Britain, Spain did not experience economic crises until 1848. Even in this case, historians have debated animatedly about the capitalistic nature of this crisis but they have not reached a consensus on it. Whatever the interpretation of economic historians, Mora did not mention the economic problems of the Spanish economy at the end of the 1840s, which would lead us to believe that he did not interpret this phenomenon as being analogous to the British and French economic experiences. On the other hand, it seems that Mora prevalently intended to place the analysis of commercial crisis and credit within the context of the debate on economic policy, and more specifically the discussion on economic freedom and free trade that took place in Spain in the mid-nineteenth century, as his proposals for facing economic crisis seem to suggest (Bru, 1980; Astigarraga and Zabalza, 2007). We conclude by referring to the significance of these entries in the context of the international flow of economic ideas. Mora’s entries in Enciclopedia moderna demonstrate how differently economic ideas are transferred across nations. In this case, diffusion, obviously, should be classified as popularization as it was addressed towards an assorted and non-specialized public. Such a broadly based audience probably thought that the economic entries in the encyclopaedia were drafted by using the works of outstanding economists such as Smith or McCulloch as intellectual sources. The article, however, demonstrates how economic ideas are spread through secondary means, in this particular case through the economic entries in Guillaumin’s Encyclopédie du commerçant. Therefore, their influence was channelled through intermediaries who, to some extent, tinged original concepts with some nuances according to the author’s intellectual background, and economic and political interests, the limitations imposed by the publisher or the indispensable

236 Jesús Astigarraga and Juan Zabalza simplifications required for their popularization. Such circumstances contribute strongly to explaining the changes experienced by original ideas once they have embarked on an international itinerary.

NOTES 1 Canga-Argüelles, a liberal economist and Minister of Public Finances, drafted two outstanding compilations based on British and French classical political economy that were intended to be used in training senior civil servants in the Spanish Department of Public Finance. Nevertheless, there are no entries relating to any aspect of economic crises (→Canga-Argüelles, 1826–1827; 1833–1834). 2 References made to crises are actually of no interest in Vocabulario de la economía by J. M. Piernas y Hurtado, which was published three times in 1877, 1882 and about 1900, as they basically dealt with the social consequences of economic slumps. A number of articles in the dictionary such as PAUPERISMO (pauperism), MISERIA (squalor) or POBREZA (poverty) are indicative of this (→Piernas y Hurtado, 1877). 3 The first volume of the Enciclopedia española del siglo XIX (1842–1845) inserted some entries on political economy which were basically translations into Spanish from the Dictionnaire encyclopédique’s first edition by Le Bas (1840–1845). 4 Nineteenth-century Spain was characterized by political turbulence. Briefly, the Napoleonic invasion led to the promulgation of the first Spanish Constitution in 1812. However, the absolutists regained the government from 1814 until 1820. There was a brief period of three years during which the liberals held power, but this was cut short by the invasion of the absolutist European powers in Spain. The liberals did not return to Spain until 1832 when the absolutist Spanish king Fernando VII died. 5 In the Foreword to Curso de lógica y ética según la escuela de Edimburgo (1832), Mora explained that his intellectual influences on logic and ethics at that time were, in fact, the same as those he had had 25 years earlier: the philosophers of common sense together with F. Bacon, D. Hume, A. L. C. Destutt de Tracy and T. S. Jouffroy. However, he also acknowledged the influence of elementary treatises such as Systematic education (1815) by L. Carpenter, W. Shepherd and J. Joyce, which was one of the main compendiums specifically written to educate the British middle class in the eighteenth and nineteenth centuries (Monguió, 1967). 6 We have not found any personal or intellectual details about the unknown author of some entries in →Guillaumin’s Encyclopédie du commerçant (1837–1839). 7 By then, several writers in France and Great Britain had observed the periodicity of commercial crises (Besomi, 2010b).

REFERENCES Almenar, S., 2000, El desarrollo del pensamiento económico clásico en España. In E. Fuentes-Quintana (ed.), Economía y economistas españoles. Tomo IV. La economía clásica (Barcelona: Círculo de Lectores Galaxia Gutenberg), pp. 7–92. Amunátegui, M. L., 1888, D. José Joaquín Mora: apuntes biográficos (Santiago de Chile: Imprenta Nacional). Astigarraga, J. and Zabalza, J., 2007, Political economy in the first Spanish general encyclopaedia. Mora’s economic entries in the Enciclopedia moderna (1851–1855), History of Economic Ideas, XV: 2, pp. 79–108. Astigarraga, J., Zabalza, J. and Almodovar, A., 2001, Dictionaries and encyclopaedias on

Crises in the first Spanish general encyclopaedia 237 political economy in the Iberian Peninsula (18th, 19th and 20th centuries), Storia del Pensiero Economico, 41, pp. 25–63. Besomi, D., 2010a, ‘Periodic crises’: Clément Juglar between theories of crises and theories of business cycles, Research in the History of Economic Thought and Methodology, 28A, pp. 169–283. Besomi, D., 2010b, The periodicity of crises: a survey of the literature before 1850, Journal of the History of Economic Thought, 32: 1, March, pp. 85–132. Bru, S., 1980, La difusió a Espanya de les idees econòmiques de Sismondi, Recerques, X, pp. 33–50. Enciclopedia española del siglo diez y nueve, o biblioteca completa de ciencias, literatura, artes y oficios, etc. por una sociedad de literatos españoles y de hombres especiales en diversas ciencias y profesiones, 1842–1845 (Madrid: Imprenta y librería de Ignacio Boix). Enciclopedia moderna: diccionario universal de literatura, ciencias, artes, agricultura, industria y comercio, 1851–1855 (Madrid: Establecimiento Tipográfico de Mellado). Flórez-Estrada, A., 1826, Reflections on the present mercantile distress experienced in Great Britain: and more or less affecting other nations on the continent of Europe, &c. &c (London: Ridgway). Le Bas, M. Ph., 1840–1845, Dictionnaire encyclopédique (Paris: Didot Frères). Llombart, V., 2000, El pensamiento económico de la ilustración en España. In E. FuentesQuintana (ed.), Economía y economistas españoles. Tomo III. La ilustración (Barcelona: Círculo de Lectores-Galaxia Gutenberg), pp. 7–81. Llorens, V., 1979, Liberales y románticos: una emigración española en Inglaterra (1823–1834) (Madrid: Castalia). Lluch, E. and Almenar, S., 2000, Difusión e influencia de los economistas clásicos en España (1776–1870). In E. Fuentes-Quintana (ed.), Economía y economistas españoles. Tomo IV. La economía clásica (Barcelona: Circulo de Lectores Galaxia Gutenberg), pp. 93–170. Monguió, J., 1967, José Joaquín de Mora y el Perú del Ochocientos (Madrid: Castalia). Mora, J. J., 1828, De los bancos de descuento y circulación, El Mercurio Chileno, July, pp. 149–171. Mora, J. J., 1843, De la libertad de comercio (Seville: Establecimiento tipográfico del silencio). Mora, J. J., 1845, Curso de lógica y ética según la escuela de Edimburgo (Madrid: Mellado). Roldán, E., 2003, The British book trade and Spanish American independence: education and knowledge transmission in transcontinental perspective (Aldershot: Ashgate). Say, J.-B., 1828, Cours complet d’économie politique pratique (Paris: Rapilly). Schwartz, P., 1999, Estudio preliminar. In J. J. Mora, 1999, De la libertad de comercio (Madrid: IEF), pp. viii–xlix. Siegrist de Gentile, N. L., 1992, José Joaquín de Mora y su manuscrito sobre la industria y el comercio de España hacia 1850 (Cádiz: Universidad de Cádiz). Smith, R. S., 1967, Aspectos del libre comercio y proteccionismo en la economía española, 1800–1850, Humanitas, VIII, pp. 635–650. Smith, R. S., 1968, El pensamiento económico de José Joaquín de Mora, Humanitas, IX, pp. 595–607. Villacorta, F., 1980, Burguesía y cultura. Los intelectuales españoles en la sociedad liberal 1808–1931 (Madrid: Siglo XXI).

10 Expectations and crises in Auguste Ott’s Dictionnaire des sciences politiques et sociales Daniele Besomi

Ott, A., 1854–1855, Dictionnaire des sciences politiques et sociales comprenant la politique, la diplomatie, le droit naturel, le droit des gens, les rapports de l’Église et de l’État, l’administration, les finances, la police, la force armée, l’économie politique et la statistique: avec le texte ou le résumé des traités les plus importants, des constitutions et lois fondamentales des peuples anciens et modernes, et l’analyse des principaux ouvrages sur la politique et les autres sciences sociales (Paris: Migne), 3 vols, 2,000 pp.

10.1 OTT’S DICTIONARY AND THE ENCYCLOPÉDIE THÉOLOGIQUE Auguste Ott’s Dictionary of political and social sciences, including politics, diplomacy, natural law, national laws, the relationship of church and state, administration, finance, police, army, political economy and statistics. With the text or abstract of the most important treatises, constitutions, the fundamental laws of modern and ancient civilizations, and an analysis of the main writings on politics and other social sciences was the sixtieth dictionary of the series forming the →Encyclopédie théologique (theological encyclopaedia) published by the Abbé Migne. This was in turn part of a colossal editorial project of a Bibliothèque universelle du clergé (universal library of the clergy), more than a thousand volumes in quarto. The Encyclopédie théologique consisted of 100 separate specialized dictionaries, for a total of 171 volumes. The first series, 1845–1849, was mostly concerned with religious matters, but already included dictionaries of astronomy, chemistry and geology. Almost half of the titles in the second series, 1851–1855, were devoted to secular themes, while the third series, 1854–1866, was again more religion-oriented. More than one-tenth of the entire collection was devoted to scientific disciplines; eight dictionaries dealt with natural sciences and five with social sciences (for a list of titles, see Langlois and Laplanche, 1992, pp. 245–252). The Encyclopédie théologique was one of the three enterprises in France aiming at harmonizing traditional religious thinking, which was badly battered during the

Auguste Ott on expectations and crises 239 Revolution, with the recent growth of scientific knowledge; the other two were the 25-volume →Encyclopédie du dix-neuvième siècle (1836–1843) and the 18-volume →Encyclopédie catholique, both initiated in 1836 (Bénichou, 1992, pp. 99–103). Migne’s was by far the vastest of the three and was organized on a different basis. While its competitors were alphabetically ordered, the Encyclopédie théologique was organized methodically, on the model of Panckoucke’s →Encyclopédie méthodique, with the entries within each dictionary alphabetically ordered. Migne offered subscriptions to the entire series, or to individual dictionaries. The selected readership of these Catholic encyclopaedias was the new generation of priests, recruited en masse between 1820 and 1840 and hastily educated (Langlois, 1992). Their objective was to make various disciplines accessible to this literate but not specialized audience, and of making such disciplines compatible with Catholic doctrine;1 they thus fulfilled at once a popularizing and an apologetic role, if not a strictly militant one (Bénichou, 1992, pp. 108–109, 121). Ott’s dictionary was the first of the third and last series of Migne’s Encyclopédie. It was meant to fill an obvious lacuna in Migne’s project, as political science and economic issues had recently become of overwhelming importance and wide concern, so that any conscientious person would find it necessary to be acquainted with all the subjects that were being discussed daily. This was especially true for Migne’s selected readership, as most of these issues were of interest for religion and had been discussed by theologians, and as the Church always had to exert some influence on political and economic matters (→Ott, Dictionnaire, Vol. 1, PRÉFACE, p. 11). The dictionary, entirely written by Ott, is mostly devoted to politics, in particular to the institutions, the administration, the law systems and the constitution of various countries. In Ott’s plan, political economy is of interest as the special and autonomous science of the means of physically preserving society and improving its well-being: ‘The subject of this science is human labour and its organization within society, as well as the production and distribution of the objects necessary to the material subsistence of the people’, both socially and individually, and as such it must be incorporated in the dictionary almost in its entirety (p. 15). Most of the customary headings are indeed discussed, although with a special emphasis on labour: labour in general, division of labour, its organization – both historically, and with much attention to producers’ co-operative associations. There are entries devoted to economics in general, including the various approaches and schools; to production and circulation (in particular the banking system); to international trade; to the problem of markets; and to the distribution of income. This panoramic view is offered by Ott himself. Interestingly, he provided at the end of the dictionary a methodical index, reassembling thematically the knowledge broken down under alphabetically arranged headings. This is a remarkable innovation, effectively complementing the usual system of cross-references. Ott’s general approach is expounded as follows: In a work like this the reader wants to find a large number of facts and documents, rather than an elaboration of the author’s views. So far as theory is

240 Daniele Besomi concerned, the reader requests to be introduced to the different writings, researches and opinions expounded in each of the social sciences, and wants to become acquainted with the issues raised by each of them. As to practical matters, he wants to know about the institutions that existed and about the real facts as depicted by history and by the legislation of various countries. The following plan will therefore be followed: Under the heading of each scientific discipline, of each social institution, and of each problem under discussion, we have presented the general state of each discipline, the definitions that are related to it, the history of each institution and its current features, and the opinions concerning each particular problem. (PRÉFACE, p. 15) If this explains the full dictionary title, it does not, however, represent how Ott proceeded in the entry on CRISE. While the history of the subject is lacking from the entry, this is nonetheless fortunate as Ott’s own view is rather original and well worth having.

10.2 AUGUSTE OTT Auguste Ott was born in Strasbourg on 20 January 1814 and died at the age of 89 on 6 August 1903.2 Little is known about his schooling, except that he took humanités, that is, Latin and Greek literature. He was trained as a lawyer, was called to the Bar in 1836 and obtained a doctorate in Law in 1839. Very soon his interests in philosophical and moral issues prevailed. In 1840–1842 he published a Handbook of universal history, followed in 1844 by a critical account of the Hegelian and Kantian systems, Hegel et la philosophie allemande. He became a follower of the doctrines of the Catholic associationist Philippe Buchez, with whom he collaborated in revising the Histoire parlementaire de la Révolution Française for the 2nd edition (5 volumes, 1845–1847). He was one of the founders, with Buchez, of the Revue Nationale, which he edited from 1847 to its demise in 1851. When Buchez died, he wrote his obituary and an account of his doctrines (Ott, 1865 and 1866). Ott’s main work, a Traité d’économie sociale ou l’économie politique coordonée au point de vue du progrès (Treatise on social economics, or, political economy restated from the perspective of progress, 1851),3 is a systematization of Buchez’s views, placed in the context of the developments of economic ideas.4 Interestingly, Ott does not focus exclusively on the orthodox approach – English political economy, represented in France by the doctrines of Say and his followers – but also considers the views of the critics, in particular, the numerous writings aimed at suggesting social reform, with special attention to the doctrines of Proudhon, Owen and the Saint-Simonians (on the latter, see Chapter 5). None are necessarily consistent or free of errors, and accordingly Ott attempts to expound all views and understand them in a unified methodological setting in order to prepare the ground

Auguste Ott on expectations and crises 241 for channelling the evolution of political economy into a truly social economy, guided by the ‘supreme principle of social progress, that is, the realization of justice in economic relationships, the emancipation of the working classes and the improving of their physical and moral condition’ (Ott, 1851, p. ix). Ott’s casting of the problem is of interest for us, as it builds the foundations of his approach to crises. The ‘English’ view focuses on wealth and material production. For political economy, as a ‘physical’ science, man is nothing but the producer of wealth, and eventually its consumer. Accordingly, the problem of the distribution of wealth is approached in terms of the conditions under which it takes place easily and without interruption, but ignoring the issue of its justice. On the other hand, consumption is seen as a destruction of wealth; the problem of the preservation of both society and individuals is therefore also disregarded. Ott, on the contrary, thought that social economy, being a moral science, should incorporate an inquiry into the means of achieving the reproduction of society via a just retribution of work. He thus redefined the object of economics as ‘labour considered from the social point of view, or, alternatively, as society from the point of view of labour’ (p. 14). The objective and result of work is not only the physical preservation of the individual, but also the preservation of society. Ott’s syncretistic approach, consisting in the identification of the elements of truth in each doctrine, led him to critically examine the foundations of Say’s law, on which the orthodox doctrine of production and demand was based. Ott eventually turned Say on his head, and it is on the reversal of the causal relationship between markets and production that he built the interpretation of crises he eventually advanced in the Dictionnaire.5

10.3 CRISES IN OTT’S DICTIONNAIRE Crises are discussed almost exclusively in two entries of the Dictionnaire: CRISE and DÉBOUCHÉS. The issue of the law of markets was dealt with at length in the Traité, and the entry in the Dictionnaire consists almost entirely of passages taken from the earlier discussion. A part we retrospectively recognize as being of the utmost interest, namely, the determination of the conditions of reproduction of the system, was instead omitted. The entry on crises, on the contrary, is mostly new and supplies a rather original explanation of the phenomenon. In the entry on DÉBOUCHÉS, Ott at first approves of Say’s way of couching the problem of whether and how production finds its vent on the market. He agrees with the principle that products in the end exchange against products, regardless of the value of money. But he rejected Say’s inference that each product will necessarily eventually find a buyer. True, Say had admitted that this only happens on condition that the exchange value of the product covers its cost, and that partial maladjustments are always possible. Yet this is not sufficient. As Sismondi had already argued, and ‘the commercial crises regularly recurring at fixed times, so to speak’ prove, conditions of general overproduction may occasionally occur. On the one hand, producers may supply goods that are not needed by consumers;

242 Daniele Besomi on the other hand, consumers may lack the purchasing power to buy those goods, even if they would like to buy them. As to the first aspect, Ott points out that the individual demand for goods depends on their utility. While needs may well be unlimited, people have priorities, and at any rate one cannot consume more than a certain amount of a specific commodity, such as bread. Anything produced in excess of that is bound to be unsaleable. As to purchasing power, Ott maintains that as incomes are a share of what society produces, the way in which production is distributed is of the utmost importance for its market. Most people (he estimates about 5 million out of the 6.5 million families living in France) have an income lower than 1,000 francs and can only afford to buy basic wage goods. Another 1.3 million families have an income of between 1,000 and 5,000 francs; they can thus afford some better-quality goods and even some luxury goods. The production of most luxury goods, however, is mostly addressed to the remaining 200,000 families. The country’s production must therefore satisfy the demand of specific goods arising from the different income classes. Ott concludes that production must conform to its market, which in turn depends on demand. He thus turns Say’s conclusion on its head: The market [débouchés] therefore depends on the buyer’s interest, on his willingness to buy, on demand, not on production, on the willingness to sell. Demand and market are, so to say, synonymous. Instead of saying, following Say, that the extent of markets is proportionate to the extent of production, one must affirm that the extent of production is proportionate to the extent of the markets. The society’s total production must be equal to the aggregate of individual demands. This is the first law of markets. (DÉBOUCHÉS, Vol. 2, p. 50) The expenditure of the richest class is subject to wide fluctuations. Some of it consists in necessary consumption goods and is probably quite stable. However, the part expended on luxury goods is liable to waver considerably in times of, for example, social unrest or war. Such events can also disturb the flow of savings to the capital market, thereby affecting the capitalists’ possibility of acquiring production goods. Speculation on the stock market can also have a similar effect. If the production of luxury goods or instruments of production is considerably reduced, the consequences are felt throughout. The workers producing them, in fact, lose their jobs, can no longer buy basic goods and transmit the trouble to the other branches of production. This introduces the theme of crises. In Ott’s Traité they are discussed mainly under the heading of ‘Concurrence’ (competition). In an unregulated system driven by competition, industrial production is intrinsically anarchic and disordered. The individual interest is completely detached from the interests of society, and the unequal distribution of income makes things worse. The competition between capitalists drives down prices, often by means of diminished quality of goods, leads to the concentration of capital in a small number of hands, and induces capital

Auguste Ott on expectations and crises 243 holders to engage in speculation and stock-jobbing. The competition between workers in turn drives wages down. Without explicitly drawing the connection, Ott adds to this description that ‘the commercial crises periodically afflicting industry are a necessary effect of the causes described above, and must infallibly return under such regime at shorter and shorter intervals’ (Ott, 1851, p. 180; similarly, pp. 331 and 610). This argument is taken up verbatim in the Dictionnaire under the heading CONCURRENCE and further developed in CRISE.6 The phenomenon is described as ‘consisting in the more or less complete freezing of business, that is, of sales and purchases and eventually of production. Its immediate cause is ordinarily an overabundance of products on the market, and a general reduction of their prices. Its consequences are numerous failures, difficulties in all transactions, a tightening of credit (reserrement des capitaux), and the stoppage of production until the market is clear and an active demand sparks off activity again’ (CRISE, Vol. 1, col. 1388). Crises deserve to be carefully studied because they tend to recur ‘at fixed times, so to speak, and at intervals that seem to become shorter rather than longer’. There have been six in France between 1810 and 1848, and similar events simultaneously took place in the United States and all over Europe, in particular in England. ‘This is obviously a general phenomenon, congenital to the very organization of modern industry’ (ibid.). Ott observed – without, however, further elaborating – that economists have formulated various explanations of crises. Most of the alleged particular causes are indeed capable of generating such events, in particular political crises or revolutions, sudden and unfounded speculations, or bad crops. Some economists blame crises on the excess of paper money issued and circulated by banks, but this is unlikely. As paper money is convertible, it would be difficult for banks to circulate currency in excess to the needs of trade. Crises are not ordinarily due to fluctuations in credit given by banks; it is always in their interest to expand credit, and they only restrict if they are forced by the crisis itself to withdraw it. Ott recognized, however, that this surely makes the crisis more intense. Besides these particular causes of crises, there is a general one – not noted by economists – that explains their regular recurrence. Ott takes up the issue of competition and the anarchy of production as discussed in the Traité, but gives it a new twist. Entrepreneurs decide how much to produce on the basis of their judgement as to the state of business. However, they cannot know in advance what the state of demand will be when their goods are ready to be sold, as there is no generally available information concerning what their competitors are doing. All entrepreneurs are acting on the same, limited information, and a number of them will be induced to expand production on the same grounds, all together eventually producing in excess. Each [entrepreneur] must rely on his own appreciation, on his own guess as to the future state of the market. On what is such an estimate based? On the high price of commodities, on their temporary scarceness on the market, on the high profits that can be gained by producing them. On these grounds, he

244 Daniele Besomi will seize the occasion and start producing. But others will do the same, and soon the goods that used to be scarce become overabundant. Prices will decrease, and at some point fall below production cost. Eventually the market will be glutted, and only a small fraction of the products will be able to be sold, and sold at a considerable loss. Sales, purchases and production then come to a halt. If this happens to some important kind of goods – those involving large amounts of capital, employing a large number of workers or requiring for their production several kinds of other goods –, the stagnation in these branches will affect all the others. This is a full commercial crisis. (CRISE, Vol. 1, col. 1389) In support of this view, Ott cites (ibid.) a passage from the testimony of Koechlin before the commercial enquiry of 1834, in which he stressed that ‘the profits related to high prices [of calicoes] have induced the creation of new factories. These new factories have contributed to an increase of production at a time when internal consumption was diminishing and when external markets were being lost. This led to an overproduction crisis’.7 Ott also cited the passage in the Traité (Ott, 1851, p. 86n), without, however, explicitly connecting it to a general interpretation of commercial crises and especially without interpreting it in terms of expectations. Ott concluded that such a chain of events can only be prevented by means of forecasting institutes that could supply some approximate estimate of what the market’s need will be. Ott’s discussion, however, stops here and there is no further elaboration.

10.4 ASSESSMENT Despite its brevity, Ott’s entry on CRISIS is extremely innovative. His explanation of how expectations are bound to be systematically disappointed is, to the best of my knowledge, the first of its kind. True, Ott relies on a cobweb-like mechanism, of which there were some earlier instances. In particular, John Wade presented a model of the cycle based on the delayed response of quantities produced to price fluctuations, while demand reacts faster (Wade, 1826, 1833; for a discussion, see Besomi, 2008). The passage by Koechlin cited by Ott is indeed rather similar to Wade’s approach. But in Ott the lag between production decisions and the delivery of output plays quite a different role. In Wade’s cobweb model the delay is responsible for the mismatch between production and demand by means of simple inertia. Ott’s emphasis on the formation and disappointment of expectations in conditions of genuine ignorance of the future, and the awareness that this very future is affected by the decisions made today by independent competitors all trying to guess how the future will be, is well ahead of its time. It involves two thorny issues: the role of uncertainty in disrupting equilibrium, and the mismatch of individual decisions and their collective outcome. His discussion is sketchy, but the problem is expounded fairly precisely; nobody, however, seems to have taken it up before the Swedes in the inter-war years.

Auguste Ott on expectations and crises 245 Ott emphasized the periodical character of crises, and claimed that the explanation of crises he advanced was capable of accounting for the regularity of their recurrence. Yet he failed to see that his mechanism was easily reversible and suited to explaining not only the upper turning point of a cycle, but also the trough.8 He only thought of it almost four decades later; in the second edition of his Treatise he depicted as follows the ‘true relationship’ between production and demand: Demand induces production, but this production systematically overshoots that demand. There follows a glut, the goods produced cannot be sold, and production halts, as producers are ruined. This interruption of production again excites demand, which induces more production, so that the movement recommences afresh. Gluts succeed scarcity and scarcity gluts; this is the fatal circle in which production necessarily revolves when it has no other guide than individual demand. These phenomena generate what are called commercial crises. (1892, Vol. 1, p. 139) Ott’s discussion of the problem of markets is also remarkable. In mid-nineteenth century France it was quite exceptional for Say’s law to be openly challenged. The économistes, of strong liberal faith and orthodox descent from Say’s ideas, had a firm grip on doctrine and on publication outlets (see also Chapters 8 and 12). In England as well, the Ricardian success in the debate with Malthus on the issue of general gluts moved the reflections on crises on a different terrain. Crises were thus blamed on one or another external event, or on speculative excesses (possibly favoured by laxity in credit policy), on mismanagement of the currency or some other inappropriate banking policy, on monopoly, tariffs or other impediments to the smooth working of competition. By invoking such frictions and exogenous causes, the constraint of Say’s law, sanctioning the impossibility of general gluts, was dodged in one way or another. Ott was one of the few who explicitly recognized that the law of markets was incompatible with the recurrence of crises, and accordingly turned it upside down. This was all the more rare in a dictionary: if we do not count Ganilh, who contested Say’s law without explicitly discussing crises (see Chapter 6, note 12 to Section 6.6), the only earlier exception was Roscher (see Chapter 7), and after Ott the issue was explicitly taken up only at the turn of the century, in particular by Herkner (Chapter 18) and Lexis (Chapter 19). Ott (quite appropriately) omitted from the dictionary some interesting elaborations on the issue of the markets for products he offered in the Traité. They nevertheless deserve to be briefly mentioned. While Ott maintained that in a capitalist system crises are inevitable, this was not necessarily the case in a society where a considerable part of production was managed by workers’ co-operative associations. He devised a scheme for partitioning social production between three sections: those producing basic consumption goods, those producing luxury goods and those producing means of production. Production being organized as shown by the scheme would satisfy at once the needs of the workers of each sector (in terms of their private consumption goods, both basic and luxury, and of the means

246 Daniele Besomi of production), and guarantee an equitable distribution of social production between all those participating in production.9 Such a model can legitimately be called a ‘reproduction scheme’, as it defines the requisites necessary for the reproduction of the conditions for production (Ott does not consider enlarged production, except for mentioning that this is possible, provided proportions are preserved throughout). Ott’s formulation, moreover, is presented in the form of an input–output scheme, making it interesting also as one of the steps in the prehistory of such an analytical tool (Besomi and Colacchio, 2010). Similarly to Marx, Ott had couched the crisis problem in terms of the conditions that may, or may not, be satisfied in order to ensure an outlet to the entire production, depending on both its use value and on the purchasing power of all those involved in production. Ott developed his argument having in mind a society of cooperatively organized workers; he insisted, however, that the scheme would also apply to a capitalist society if profits were spent on luxury goods, although nothing guarantees that production would follow the scheme. The anarchy of production and competition suggests that it does not, except by accident, while Ott’s reflections on crises in the Dictionnaire indicate the systematic reasons why it does not.

NOTES 1 Migne’s strategy consisted in integrating scientific knowledge into his Encyclopédie only after having moralized the corresponding disciplines: the advances of science were first interpreted as philosophical problems, and subsequently subsumed under theology (Bénichou, 1992, p. 121). 2 Short biographical notes on Ott can be found in Dantès, 1875; Lermina, 1885; Glaeser, 1878; Sitzman, 1909–1910; Vapereau, 1893; the richest biographical entry is Anonymous, 1966. None of these indicates Ott’s death year, while Timmermans, 1977 suggests that he died around 1890. Yet Ott’s death date was announced shortly after his passing away by de Molinari in the Journal des Économistes (1903). 3 Besides the Dictionnaire and a second edition of this treatise, published in two volumes in 1892, Ott published little else on economics. After the mid-1850s, he only published historical and philosophical writings, and edited and translated German books. Nor did his contributions to other dictionaries touch upon economic themes; one was on the Catholic Church (ÉGLISE CATHOLIQUE, for →Block’s Dictionnaire général de la politique, 1863), the other on MALTHUS (for Vol. 15 of the →Encyclopédie du dixneuvième siècle, 1851), where only the theory of population was discussed. 4 Ott’s historical approach may have played some part in Migne’s entrusting him with the writing of the Dictionnaire. The idea – originally developed by the Abbé de Lamennais and Olympe Philippe Gerbet in the early 1830s – of a ‘Catholic science’ on which Migne’s Encyclopédie théologique was based in fact relied on a historical method consisting in the extraction of the true and universal character of Catholic religion from the historical development of religious ideas. By extension, the histories of sciences prove their universal character, revealing their deep Catholic nature (for a full discussion, see Laplanche, 1992, in particular pp. 21–27). In the economic entries of the Dictionnaire, however, Ott did not pursue the historical method to the same extent. 5 On Ott’s views on co-operation and his position in the Catholic associationist movement, see Demoustier and Rousselière, 2005a, 2005b; Duroselle, 1951; Desroche, 1991; Gaumont, 1924; Gueslin, 1998.

Auguste Ott on expectations and crises 247 6 The entry is titled in the singular, but after briefly supplying a definition of ‘crisis’ in political language and of ‘commercial crisis’, Ott switches to the plural and devotes the bulk of the entry to the discussion of ‘commercial crises’. 7 Full citation not given. It may refer to Koechlin, 1835. 8 In contrast, other early propounders of cobweb-like mechanisms immediately caught the symmetry of their construction and used them to explain the reversals of the movement in both directions. 9 While Buchez was content with claiming that workers should co-operatively organize production, Ott went much further in specifying how production should be organized (see Duroselle, 1951, p. 107).

REFERENCES Anonymous, 1966, Ott, Auguste. In J. Maitron (ed.), Dictionnaire biographique du mouvement ouvrier français (Paris: Les editions ouvrières, 1964–1997), Vol. 3, pp. 166–167. Bénichou, C., 1992, L’ignorance des savoirs. In C. Langlois and F. Laplanch (1992), La science catholique. L’‘Encyclopédie théologique’ de Migne (1844–1873) entre apologétique et vulgarisation (Paris: Éditions du Cerf), pp. 93–122. Besomi, D., 2008, John Wade’s early endogenous dynamic model: ‘commercial cycle’ and theories of crises, European Journal of the History of Economic Thought, 15: 4, December 2008, pp. 611–639. Besomi, D. and Colacchio, G., 2010, Auguste Ott on commercial crises and distributive justice: an early input–output scheme, Review of Political Economy, 22: 1, January, pp. 76–96. Dantès, A., 1875, Dictionnaire biographique et bibliographique, alphabétique et méthodique, des hommes les plus remarquables dans les lettres, les sciences et les arts, chez tous les peuples, à toutes les époques (Paris: A. Boyer). Demoustier, D. and Rousselière, D., 2005a, L’économie sociale et coopérative des associationnistes: de la critique des fondements de l’économie politique à la régulation sociale du marché, Annals of Public and Cooperative Economics, 76, pp. 517–543. Demoustier, D. and Rousselière, D., 2005b, Social economy as social science and practice: historical perspectives on France. In J. Clary, W. Dolfsma and D. M. Figart (eds) Ethics and the market: insights from social economics (London and New York: Routledge). Desroche, H., 1991, Histoires d’économie sociales. D’un tiers état aux tiers secteurs, 1791–1991 (Paris: Syros/Alternatives). Duroselle, J.-B., 1951, Les débuts du catholicisme social en France, 1822–1870 (Paris: Presses Universitaires de France). Gaumont, J., 1924, Histoire générale de la coopération en France. Les idées et les faits. Les hommes et les oeuvres. Vol. 1: Précurseurs et prémices (Paris: Fédération nationale des coopératives de consommation). Glaeser, E., 1878, Biographie nationale des contemporains, rédigée par une société de gens de lettres, sous la direction de M. Ernest Glaeser (Paris: Glaeser). Gueslin, A., 1998, Invention de l’économie sociale: idées, pratiques et imaginaires coopératifs et mutualistes dans la France du XIXe siècle, 2nd edn (Paris: Economica). Koechlin, N., 1835, Enquête commerciale. Interrogatoire de M. Nicolas Kœchlin, fabricant et président de la Chambre de commerce de Mulhouse (Strasbourg: n.p.). Langlois, C., 1992, Migne, L’‘Encyclopédie théologique’ et ses auteurs. In C. Langlois and F. Laplanche, 1992, La science catholique. L’‘Encyclopédie théologique’ de Migne (1844–1873) entre apologétique et vulgarisation (Paris: Éditions du Cerf), pp. 39–61.

248 Daniele Besomi Langlois, C., and Laplanche, F., 1992, La science catholique. L’‘Encyclopédie théologique’ de Migne (1844–1873) entre apologétique et vulgarisation (Paris: Éditions du Cerf). Laplanche, F., 1992, Une entreprise de la ‘science catholique’: l’‘Encyclopédie théologique’ de Migne. In C. Langlois and F. Laplanche, 1992, La science catholique. L’‘Encyclopédie théologique’ de Migne (1844–1873) entre apologétique et vulgarisation (Paris: Éditions du Cerf), pp. 17–37. Lermina, J., 1885, Dictionnaire universel illustré, biographique et bibliographique, de la France contemporaine: comprenant par ordre alphabétique la biographie de tous les français et alsaciens-lorrains marquants de l’époque actuelle, l’analyse des oeuvres les plus célèbres . . ., par une société de gens de lettres et de savants (Paris: L. Boulanger). Molinari, G. de, 1903, Chronique [Announcement of Ott’s death], Journal des Économistes, series 5, LIII, August, p. 318. Ott, A., 1851, Traité d’économie sociale ou l’économie politique coordonnée au point de vue du progrès (Paris: Renou). 2nd edn in 2 volumes, 1892 (Paris: Fischbacher). Ott, A., 1865, Nécrologie. P.-B.-J. Buchez, Journal des Économistes, Series III, XXIV, September, pp. 443–447. Ott, A., 1866, Du système d’association ouvrière proposé par Buchez, Journal des Économistes, Series III, XXV, July, pp. 61–75. Sitzmann, É., 1909–1910, Dictionnaire de biographie des hommes célèbres de l’Alsace: depuis les temps les plus reculés jusqu’à nos jours (Rixheim: impr. de F. Mutter). Timmermans, C., 1997, Ott, Auguste, in F. Laplanche (ed.) Dictionnaire du monde religieux dans la France contemporaine. Vol. 9, Les sciences religieuses: le XIXe siècle, 1800–1914 (Paris: Beauchesne), p. 508. Vapereau, G., 1893, Dictionnaire universel des contemporains contenant toutes les personnes notables de la France et des pays étrangers (Paris: L. Hachette), 6th edn. Wade, J., 1826, Digest of facts and principles, on banking and commerce: with a plan for preventing future re-actions (London: Thomas Ward). Wade, J., 1833, History of the middle and working classes; with a popular exposition of the economical and political principles which have influenced the past and present condition of the industrious orders. Also an Appendix of prices, rates of wages, population, poorrates, mortality, marriages, crimes, schools, education, occupations, and other statistical information, illustrative of the former and present state of society and of the agricultural, commercial, and manufacturing classes (London: Effingham Wilson. Reprinted New York: Kelley, 1966).

11 Gerolamo Boccardo on internally generated commercial crises Daniele Besomi

G. Boccardo, Dizionario della economia politica e del commercio così teorico come pratico: utile non solo allo scienziato ed al pubblico amministratore ma eziandio al commerciante, al banchiere, all’agricoltore ed al capitalista. Turin: Sebastiano Franco e figli. 4 vols, 1857–1863.1

11.1 THE DIZIONARIO DELLA ECONOMIA POLITICA The first edition of Gerolamo Boccardo’s Dictionary of political economy and commerce, practical and theoretical, useful to the scientist and the civil servant, but also to the merchant, the banker, the agriculturalist and the capitalist was published in Turin in fascicles later bound in four 28-centimetre volumes (totalling about 2,800 pages) between 1857 and 1863. Its purpose was twofold. First, Boccardo aimed at covering Italian doctrines and a number of aspects specifically concerning Italian conditions, which were not adequately discussed in foreign dictionaries of economics (PREFAZIONE, Vol. 1, p. vii). Second, he aimed at filling a gap in the Italian literature, which lacked specialized dictionaries in economics. A recently published Dizionario di geografia universale (Dictionary of universal geography: Marmocchi, 1854–1862) enabled Boccardo to reduce the corresponding part of his treatment. But →da Portula’s Dizionario analitico di diritto e di economia industriale e commerciale (Analytical dictionary of law, trade and industrial economics, 1843), Azuni’s Dizionario universale ragionato della giurisprudenza mercantile (Universal dictionary of commercial law: Azuni 1786–1788) and →Antonelli’s Enciclopedia del negoziante (Trader’s encyclopedia: 1839–1843, 1850) were judged as superficial and lacking a treatment of theoretical and practical economics (DIZIONARI ECONOMICI E COMMERCIALI, Vol. 2, p. 46). Boccardo saw the publication of such a dictionary as a necessity. Although this kind of work was criticized for presenting a parcelled (and by its nature disordered) view of the knowledge of the subject, dictionaries offer to practical people an easy way of finding solutions to specific problems and give scholars the benefit of neat surveys of opinion on specific topics (PREFAZIONE, Vol. 1, p. vii). In Boccardo’s view,

250 Daniele Besomi the dictionary is therefore ‘the most efficacious means propagating knowledge’ to practical, busy people who need guidance for their business and at the same time want to learn about some aspects of the subject without being forced to read entire treatises. It has the advantages of both the newspapers and the book, with none of their drawbacks: ‘it is as easy to read as a newspaper, but not as light and superficial; it can dig as deep as a book, and take a very broad perspective, but enables the reader to focus on his specific points of interest’ (ibid., p. xix). This propaganda of the true doctrines of social sciences also serves the cause of combating the sophisms and errors of the socialists. Malthus, followed by Sismondi, has inquired on the laws governing pauperism, laying the foundations of the pathology of society to accompany its physiology as founded by Smith. It became clear that crises and suffering of the working classes require action to be taken. The socialists, however, have been alone in advocating reform and progress, and have therefore received the involuntary sympathy of those who wanted these problems to be solved. But the socialists had distorted the principles of the science as well as rejecting the existing social order, while these complex problems require a scientific approach. The only means for winning back consensus is by introducing all possible improvements in human welfare, and in divulging the true and beneficial notion of the economics of social living (ibid., pp. xiv and xvi–xvii).2 Before undertaking his task, Boccardo seems to have explored the existing economics and commercial dictionaries. He briefly surveyed a number of them in the entry DIZIONARI ECONOMICI E COMMERCIALI, in particular →Savary’s Dictionnaire universel de commerce, 1723 (‘precious when it was written, yet full of mistakes and omissions while containing many useless pages’), →Postlethwayt’s Universal dictionary of trade and commerce, 1751 (‘largely a translation of Savary, it is in many ways fallacious, in particular for a tendency to stray from his chosen topics), →Mortimer’s New and complete dictionary of trade and commerce, 1766–1767 (‘better than its predecessors, yet too largely dedicated to geographical and technological issues’), →Ganilh’s Dictionnaire analytique d’économie politique, 1826 (‘often superficial, and too narrow’ in the choice of entries), and especially →McCulloch’s Dictionary . . . of commerce and commercial navigation, 1832 and → Coquelin and Guillaumin’s Dictionnaire de l’économie politique, 1852. Of McCulloch’s ‘classical Dictionary of commerce’, Boccardo appreciated ‘the immense collection of documents and the many articles it contains that could be considered special essays and tracts’. But although the various issues ‘are discussed with good and practical sense’, the work ‘lacks theoretical notions and doctrinal principles’. Guillaumin’s dictionary suffers the opposite drawback: it focuses on theoretical principles (yet overlooks Italian contributions) but neglects practical issues. Moreover, having been written by numerous competent writers whose views are not fully consistent, it may be found very useful by scholars but somewhat confusing to the occasional reader, and may even generate some scepticism in those who notice ‘the diverging opinions that are unfortunately still dividing the students in social sciences’ (Vol. 2, pp. 44–46). Yet Boccardo borrowed heavily from it, by quoting and paraphrasing relevant parts of several important entries; this also applies to his discussion of crises.

Boccardo on internally generated economic crises 251 Boccardo’s Dictionary is, then, a one-man enterprise, the product of many years of work, addressed to the scholar (some entries have extensive bibliographies) as well as to the paterfamilias, the capitalist and the trader, supplying them with the theories concerning commerce, banking and manufacture, but also the corresponding factual evidence with the most updated statistics concerning population, trade and wealth in different countries (PREFAZIONE, Vol. 1, pp. xix–xx). Boccardo stressed that the purpose of his work was not only theoretical but also to some extent philological.3 The Dictionary thus aims at carefully and univocally defining the terms in use in the discipline. Boccardo pointed out that while the origin of political economy owes a considerable debt to Italian writers, the recent advances had mainly taken place in Britain and France. Accordingly, while the earlier terminology borrowed much from the Italian language, the recent words originated from other countries. Unless a suitable term already existed in Italian, Boccardo decided to use the foreign word: ‘I prefer the Accademia della Crusca to dislike me, than scientists to laugh at me’.4 French neologisms are particularly abundant – Boccardo, whose mother was Alsatian, had a good understanding of the French language, and French writers are well represented among his biographical entries; moreover, Italy became acquainted with political economy via France, rather than Britain.5 Boccardo claimed that his organization of the materials was new, not only for Italy but perhaps in the whole world. He maintained that to each specific doctrine a corresponding individual entry must correspond, which, however, crossrefers to all subordinated topics deserving a special discussion (PREFAZIONE, pp. vi and xx). The cross-references were indicated in the form ‘(see ENTRY)’. Yet cross-referencing was scarcely a new idea, as it had been explicitly used by →Chambers’s Cyclopædia in 1728, and it was used by McCulloch, although not by Coquelin and Guillaumin. A useful innovation by Boccardo was the indication, right after the title of the entry, of the branch of the discipline to which the terms refers – e.g. ‘political economy’, ‘social economics’, ‘biography’, ‘commercial history’, etc.

11.1.1 Editorial history Boccardo’s Dictionary went through three editions. From the second edition he added the attribute ‘universal’ to its title, dropped the list of professionals to whom the work was addressed, and specified that the dictionary included ‘1. A complete exposition of all doctrines and theories of the economic science, by means of articles as ample as specific treatises; 2. A full repertory of entries concerning commercial practice, where the businessman will find notices concerning the consuetude, the accounting methods and the effects of his operations; 3. everything concerning commercial law; 4. theoretical and practical statistics, in all its branches; 5. the relationship of economic and trading sciences with natural sciences and technology; 6. the geography and history of trade’. The second edition was published in two volumes in 1875–1877; the third, also in two volumes, was published in 1881–1882. In spite of indicating that the later editions were considerably revised and enlarged,

252 Daniele Besomi only the second edition introduced a few substantial revisions (Gioli, 2001, pp. 232–233), in particular by dropping the biographical entries and updating the theoretical part by referring to marginalism and the German historical school (Bianchi and Faucci, 2005).

11.1.2 Reception Boccardo’s Dictionary was well received in Italy and abroad.6 When the publication of the fascicles of the first volume was still under way, the Giornale dell’Ingegnere, Architetto ed Agronomo appreciated that an Italian dictionary of political economy was seeing the light, stressed that the experience of the previously published foreign dictionaries enabled its author to avoid their mistakes, and praised the style and organization of the materials (Pareto, 1857). A few years later, upon the publication of the 51st fascicle (of the 80 planned), the same journal confirmed that the Dictionary was fulfilling its promises and was receiving good press in Italy and abroad (Pareto, 1860). The Annali Universali di Statistica systematically reported in long articles the progress of Boccardo’s work, all written by the journal’s editor, Giuseppe Sacchi, citing large excerpts of some relevant entries. The first article praised the filling of the gap in the literature and lauded the author as one of the most conscientious Italian economists, before reproducing Boccardo’s declaration of intentions (Sacchi, 1857a); the second reproduced in full the first two parts of Boccardo’s PREFAZIONE, briefly referred to a few articles (ABBONDANZA, ACQUE, ACCATTONAGGIO, AFRICANO COMMERCIO, AMERICA, AGGIOTAGGIO, that is, respectively, ‘Abundance’, ‘Waters’, ‘Begging’, ‘African trade’, ‘America’, ‘Stock-jobbing’) and reported large extracts of ANARCHIA (‘Anarchy’) (Sacchi, 1857b). By July 1858 the fascicles up to letter F (well into the second volume) had been published, and the reviewer could report that the work was receiving unanimous praise from the Italian periodical press (Sacchi, 1858a). In October and November, Sacchi reproduced in full the entry ECONOMIA POLITICA, to which he appended a critical note disputing Boccardo’s definition of the discipline (an improved version of the one propounded by Say) and arguing that true economists should become consultants for the government (Sacchi, 1858b). By mid-1859, the third fascicle of Vol. III was published, and in the issues of July and August Sacchi reproduced most of the article on LIBERTÀ NELLE MATERIE ECONOMICHE (‘on economic freedom’), for ‘it expounds the act of faith shared by all Italian economists’ (1859, p. 265). The Accademia dei Georgofili, announcing that the publication of the dictionary was proceeding speedily in spite of the difficult times, commented that the high hopes raised by the project were being fulfilled (Tabarrini, 1859, p. xciv). The Archivio Storico Italiano announced the publication in 1857, when eight fascicles had already been printed, noting that the important topics were discussed with a fair amount of economic doctrine and historical erudition, and expecting that the finalized work would give to Italy a book of undoubted utility and would be one of the most important publications in economics (Anonymous, 1857). A proper

Boccardo on internally generated economic crises 253 review by G. Rosa was published later in the year. It began with an apologia concerning dictionaries as a genre and a rebuttal of the criticisms of popularizing literature, which itself indicates that such a tool was much more controversial in Italy than elsewhere in Europe (Rosa, 1857, pp. 114–116, 119–120). Rosa praised the broad scope of the dictionary, in particular the outlining of the links between economics and statistics, law, history and geography, and saw in Boccardo’s wide knowledge, in particular of history, and intimate understanding of the discipline the best person for the task. Of the specific articles in the fascicles published by then, the reviewer noted that the major entries such as BANCA and AGRICOLTURA were very extensive treatises in themselves, characterized by original research rather than resulting from an assembly of the views of others (p. 122). Finally, the reviewer recommends the dictionary not only to scholars but also to administrators of public and private businesses and to shopkeepers, for laying out a host of useful notions in an accessible way, without, however, renouncing scientific precision (pp. 131–132). Interestingly, like Rosa, a number of Italian notices on the Dizionario discussed the merits and limits of dictionaries as opposed to treatises. In the collection of reviews compiled by the publishers at an early stage of publication ([Franco], 1858], this is one of the most common themes – surely brought to the fore by the fact that Boccardo himself begins his PREFAZIONE by discussing it. Most commentators stressed the usefulness of dictionaries in popularizing individual concepts or entire disciplines, and in supplying a handy tool to the learned to find quickly the information they need; in doing so, some explicitly rejected the arguments of the detractors of such tools,7 witnessing that in Italy there was some resistance to the usage of such reference works. I could not find many reviews in the foreign periodical press – not even in the Journal des Économistes, where Boccardo’s work had often been reviewed, or at least mentioned. The publication of the Dizionario, however, was announced by the Zeitschrift für die gesamte Staatswissenschaft and by the Bibliothèque Universelle de Genève (the latter’s article is reproduced in [Franco], 1858). The work is not mentioned in Loria’s obituary (1904) of Boccardo for the Economic Journal, but it was reviewed (together with →Macleod’s Dictionary of political economy8) in the Jahrbücher für Nationalökonomie und Statistik. The reviewer focused on the lexicographical aspects (promising a further article on the substantive aspects, which, however, does not seem to have been published), stressing Boccardo’s elegant style and reporting his scope and selected readership (Kircheisen, 1864).

11.2 GEROLAMO BOCCARDO Gerolamo Boccardo (1829–1904) graduated in Law in 1849. He worked for a short time as a lawyer, but soon switched to teaching in a Genoa college. In 1850 he was a founding member and the Secretary of the Accademia di Filosofia Italica, the proceedings of which he edited. He started teaching various subjects at the University of Genoa in 1861: political economy, geography, statistics, and public

254 Daniele Besomi finance and accounting; meanwhile, he was called to co-ordinate the reform of schooling programmes. Boccardo’s main contribution to economics was to popularize and diffuse the subject by means of textbooks. The most remarkable one, especially considering his young age, was a Tract of political economy, theoretical and practical, in three volumes (the first theoretical, the other two practical9), in the Preface of which he admitted that he was not contributing anything substantially new but was attempting to systematize and make accessible to ‘Italian youth the body of knowledge of the masters of the discipline’ (Boccardo, 1853, p. 3). The Trattato went through eight editions (the last of which was published in 1894), without, however, being substantially updated with the new approaches as they became available.10 This is at odds with Boccardo’s important role in making known in Italy, via the Biblioteca dell’economista (a series of translations of economic works of importance, the editorship of which Boccardo took over from Francesco Ferrara and for which he was and still is greatly praised), the writings of mathematical economists such as Cournot, Jevons and Walras. The Dizionario incorporated instead, in the second edition, an entry on mathematics applied to political economy (MATEMATICA APPLICATA ALL’ECONOMIA POLITICA; for a discussion, see Giocoli, 2001). The Dizionario is one of the products of this popularizing activity and of Boccardo’s encyclopaedic spirit – an attitude designed to encompass and represent social phenomena in their multiple aspects and complexity (Bianchi and Faucci, 2007, § 1.2). While its fascicles went to press, Boccardo also published a textbook of history of commerce, industry and political economy (1858). He also edited the 31 volumes of the 6th edition of the →Nuova enciclopedia italiana (1875–1888), which inherited from the 4th edition the translation of Blanqui’s 1836 entry on CRISE COMMERCIALE for the →Encyclopédie des gens du monde (see Chapters 5 and 6). Boccardo also had an active political life. In 1858, he was elected to the Genoa city council, of which he remained a member for three decades, and had administrative duties between 1860 and 1864. He became a Senator of the Italian kingdom in 1877 and State Councillor in 1888.11 Boccardo wrote some passages on crises preliminary to the Dizionario. A chapter of the Trattato is devoted to industrial crises. Producers face continuously changeable demand and supply conditions, and have to struggle endlessly to find a balance between production and consumers’ needs. If a country’s production is mainly addressed to domestic demand, capitalists can cope fairly easily, unless forecasts are upset by political disturbances. However, if industry competes with the whole world, crises become more frequent and can have catastrophic proportions. Boccardo agrees with some economists of the French school, in particular Blanqui and Sismondi, that crises can be even more serious in economies where industries are large and rely heavily on machinery. But if constraining the size of industry and introducing protection would make those economic storms less ruinous, it would also limit economic growth (Boccardo, 1853, Vol. 2, Ch. 2). This argument does not explain much. More convincing are the passages on banking monopoly vs. free banking in which Boccardo explicitly takes up Coquelin’s argument (pp. 234–251). Large extracts of this were later reproduced in the dictionary.

Boccardo on internally generated economic crises 255 Boccardo also drafted a report for the Genoa Chamber of Commerce on the crisis Italy was undergoing in 1854. Boccardo argued that crises are characterized by a temporary distrust and paralysis of credit. Although Italian entrepreneurs had recently become more expert and active, and therefore susceptible to falling prey to those fevers of speculation that marked the virulent crises of the past decades in France and England, in Boccardo’s view the main reasons for the Italy-specific difficulties were political. He concluded that government intervention could not remedy the lack of trust, but argued that political action could prevent a crisis by promoting banking freedom and the issue of banknotes of smaller value, and by eliminating restrictions on interest rates – in other words, to make crises ‘less frequent and less calamitous’ the government should eliminate the artificial obstacles it had previously set to the development of credit (Boccardo, 1854).

11.3 CRISES IN BOCCARDO’S DICTIONARY The subject of crises is discussed in a dedicated entry titled CRISI (in Italian, the word crisi is unchanged in the plural; it is clear from context, however, that Boccardo meant the plural) and in the entry on BANCA, with scattered observations elsewhere.

11.3.1 The first edition Having recalled the etymology of the term ‘crisis’ (from the Greek word meaning ‘decision’), Boccardo suggests that economists have been borrowing the term from pathology, where it indicates sudden turns for the better or for the worse in the course of a disease. In economics, it indicates ‘any perturbation of the social interests, intense or not so deep; it must be temporary and ephemeral, otherwise it would not be a crisis but a chronic disease that would lead to the ruin of society’ (p. 731). Boccardo begins his discussion by distinguishing three major kinds of crises: agricultural, industrial and commercial. Each can have different causes, which it is useful to analyse separately; it must be remembered, however, that because of the interconnectedness of the economic system, crises in one branch often have spillover effects and expand to the entire economy. Bad crops, for instance, mean scarcity of raw materials for manufactures, increases in the price of food to which wages adapt slowly and partially, with the consequence that producers’ costs rise while workers are worse off. Trade also suffers, and the reserves of specie deplete as corn is imported from abroad, causing a monetary crisis. Finally, public finances are drained by the increased number of poor and fail to replenish due to the general impoverishment of society (pp. 731–732; this is also discussed under the heading MONETA (currency), Vol. 3, p. 431). Agricultural crises, however, were more important in the past, and are diminished in intensity by the improvement in cultivation methods and transportation. Industrial crises, on the contrary, gain importance with the spread of manufacture. Among their multiple possible causes, the most frequent one is failed speculation. This

256 Daniele Besomi can be due to overproduction, when a profitable business attracts too many producers; this is especially favoured by the ‘Colbertistic system’ of protectionism, which encourages the growth of fragile enterprises protected by monopolies, which collapses as soon as competition appears. Were it not for protectionism, the fall in prices would fairly quickly warn entrepreneurs that production is excessive, thus avoiding the worst excesses. Another, and far more serious, cause of failed speculation is the overestimation of profitability due to wrong data or miscalculations; this was the case in 1825, when the illusion that much gold could be extracted from South American mines attracted far too many expeditions, equipped with the wrong kind of machinery, all destined to be disappointed. Additional possible causes of industrial crises are strikes (which, in truth, are more often the effect of crises) or sudden changes in demand, due to changes of fashion. The most common kind of crises are the commercial ones, also because trade is necessarily troubled by agricultural and industrial crises. Their causes can be divided into internal and external. The latter are ‘all the facts that, without originating from trade, inevitably affect its course’, such as wars, political commotions, safety of transportation, etc. (p. 739). While the commercial troubles arising from such causes negatively affect most people, some can draw important benefits (for instance, the weapons industry). Among the internal causes there are in the first place the openings of new commercial ways or improvements in old ones. A second possible internal cause is perturbation in the means of exchange, following the discovery of new mines or the inappropriate fixing of parity between metals (Boccardo further elaborated on this in the entry on MONETA, Vol. 3, p. 402). This is sometimes called a ‘monetary crisis’ – ‘a legitimate and appropriate name to describe a variety of commercial crisis; it would, however, be wrong and false if it were intended to designate a special category, distinct from commercial crises’ (p. 733). By far the most common among the internal causes of commercial crises are imbalances in credit. Citing Coquelin’s entry on CRISES COMMERCIALES (in →Coquelin and Guillaumin’s Dictionnaire de l’économie politique, 1852–1853; see Chapter 8), Boccardo stresses that in advanced countries most commercial transactions are based on credit; credit is in turn based on trust, and if for any reason confidence fails, all credit transactions are suddenly interrupted and the inconvenience very quickly expands to the entire trading world. The problem is not intrinsic to credit itself; on the contrary, credit is an instrument of progress: during times of confidence, trade advances more than it subsequently declines during the following crisis. Troubles arise when there is abuse or bad use of credit, which leads to a fever of speculation or overtrading. Such phenomena are further encouraged by the banking practice linked to the banking monopoly. This aspect is only mentioned in the entry on crises, but is fully discussed in the entry BANCA, more precisely in the section ‘Della libertà bancaria’ (‘On banking freedom’, Vol. 1, pp. 296–306). Boccardo openly supports free banking; his argument on the restriction on banking as ‘almost inevitably’ dragging the system into commercial crises explicitly refers to Carey and especially Coquelin.12 A privileged bank issues some banknotes, which substitute an equal amount of metal coins, the

Boccardo on internally generated economic crises 257 value of which is now free to search out a different kind of use. But alternative uses are limited, so that this money will be deposited at the bank, waiting for more remunerative employment. The central bank’s reserve (now consisting partly of its own capital, partly of deposits) thus grows, and further issues become possible. While this process continues, the mass of capital seeking employment grows, and the interest paid by the Bank (following the usage of the time, ‘Bank’ with a capital means the central bank) diminishes. Speculative enterprises become comparatively more and more attractive, including the less solidly founded ones. At this point, depositors want to withdraw their deposits. Soon the Bank has to drain its reserves and risks failure unless it is saved by some external intervention. The crisis becomes general as the difficulties of the Bank are passed on to its creditors (for a more detailed summary of Coquelin’s argument, see Chapter 8). Having discussed the causes of crises, in his entry CRISI Boccardo turns to the remedies. Many naive writers believe that government action can directly affect the course of the crisis. Yet what is really needed – namely, the return of confidence that, alone, guarantees that credit will be resumed – is not in the reach of the government or of individual citizens. Any other intervention, far from constituting a panacea, may instead generate further problems. Some, for instance, advocate the issue of paper money, which, however, would create additional discredit. The only true prevention of crises can be summarized in the word freedom. Make free the industry and trade, and whenever one branch of production suffers, capital will either move to other branches or flow in in help of the diseased one, depending on the case. Abolish protection and monopoly, and those weak trees growing under their shade and protection and liable to fall at the first blow of free air will no longer sprout. Make banks free, and the most terrible crises, those spontaneously arising from the privileges of these powerful institutions, will become impossible. Make interest rates free, and capital will move wherever it is needed. The public will then enjoy the invaluable advantages of competition. (p. 736) The body of the entry on crises ends here. Boccardo, however, added an Appendix on the crisis of autumn 1857 (‘when the article was already in press’, p. 736). He concluded that its main cause was overtrading in the United States (where the crisis originated), with speculation being particularly rampant in the undercapitalized railway companies. Banks incautiously financed many such ventures, at first enabling the entire speculative system to take off and later, in turn, to fail. This was coupled with an increase in the consumption of luxury goods imported from Europe, far above what the country itself was capable of producing. The death blow was delivered when capital was recalled to Europe to finance the Crimean War. Boccardo warned that some banks’ reckless behaviour should not be taken to be the main cause of the crisis, for after all the ratio of reserves to issues (about 35 per cent) was overall higher than at the time of the 1837 crisis (28 per cent); he

258 Daniele Besomi stressed that it should not be inferred that the fault was intrinsic in the liberal banking system adopted in the United States (p. 736). He submitted that better communications on the two sides of the Atlantic would have eased the crisis, for in Europe people panicked at the first, delayed news from America before knowing that the productive system was quickly recovering, and their alarmed reaction fed back into the American crisis (p. 737). With regard to remedies, Boccardo insisted that no direct and immediate national cure can exist, because the disease originates from a complexity of causes of a much wider scope. It would be possible, however, to prevent the recurrence of similar events (or at least diminish their nefarious effects) by appropriate legislation pinning central banks down to their core business of helping trade, relieving their portfolios of the public funds obstructing them, eliminating all constraints on the ratio of issues to reserves (in the article on BANCA Boccardo argued that unfettered Banks would find the appropriate ratio, depending on the needs of the market: Vol. 1, pp. 294–295), and making the use of paper money more popular by lowering the minimum face value of banknotes. But so long as this advice from men of science will appear paradoxical to practical people; so long as banking law is governed by the principles of monopoly; so long as questionable institutions such as the Crediti mobiliari13 favour and encourage gambling on the stock exchange; so long as, in prosperous times, speculators will blindly trust overtrading companies but will panic at the first signals of impending danger; so long as, in other words, economic science will be mastered by a few privileged people rather than becoming familiar to the public, crises will recur periodically, as well as the errors and prejudices in the speeches of those who suggest their supposed remedies. (CRISI, p. 738) The periodicity of crises was further discussed in the entry PERIODICITÀ (Vol. 4, pp. 31–32). Boccardo argues, with reference to Vico’s doctrine of recurring cycles of history, that the law of periodicity is one of the fundamental laws of order and harmony of the universe, which surprisingly no economist has so far perceived, and placed it among the general principles of economics. The satisfaction of economic needs induces people to become more and more audacious in their activities, and the credit system and financial operations give them the means of further multiplying the means for doing so. This, however, makes such ventures more and more risky; speculation and stock gambling take over, until crises break out, ruin most people, and bring the system to rest. Everybody is discouraged and economic activity goes back to basics. After some time, new capital is formed, confidence returns and the ascending cycle recommences, resulting in the same outcome. ‘Only this series of facts can explain the remarkable phenomenon of the periodical return of those economic diseases of society we call crises, which several economists have perceived but so far failed to explain.’14

Boccardo on internally generated economic crises 259

11.3.2 The later editions The entries on CRISI in the second and third editions of the dictionary are practically identical to each other, including their pagination, but differ from the first. The most relevant emendation consists in the elimination of the Appendix on the 1857 crisis, which was not substituted with discussion of later events. The other differences are mostly matters of detail. Boccardo dropped the quotation marks around citations, so that one no longer knows which passages are quoted verbatim; and he shortened the citations from his 1854 Report on the crisis, substituting the remainder with an expanded discussion of speculation (p. 643). He dropped the explicit reference to banking freedom,15 but he incorporated an explanation of the ‘law of remarkable periodicity’16 which commercial and banking crises seem to obey – a discussion that again owes much to Coquelin (who is not named in this connection). Interestingly, while most contemporary explanations of the return of crises emphasize the instability of the overtrading and speculative processes but take for granted (and therefore do not think necessary to explain) that a new phase of prosperity will follow naturally the crisis and its aftermath, Boccardo explicitly stresses instead the instability of the depressed state created by the cumulation of unused loanable capital (an explanation that had recently been advanced by Walter Bagehot, 1873, from whom Boccardo may have borrowed). The ruins of which the markets are scattered [after a crisis] induce a state of gloom and discredit, during which capitalists not only refrain from gaming and hazardous speculations, but also abstain from the routine and safe trading operations. Capital either cumulates in the banks’ coffers at a very low interest, or is invested in real estate. But such a state of things is necessarily precarious. Those who know that their capital could yield an 8 or 10 per cent, cannot be content with a 3 or 4 per cent. The temptation to go back into more profitable business soon turns into a craving. This change in the mood is awaited by the adventurers, the project-makers, and the founders of new companies promising a 100 per cent gain. At this point (sooner where the national temper makes people bold, as in America; later elsewhere; but inevitably everywhere) the tide of speculation, gaming and pumping and dumping – in a word, of the crisis – rises again. (CRISI, p. 643) Besides the alterations that Boccardo introduced in the later editions, one he did not insert should be mentioned. Boccardo was an early (yet not uncritical) supporter of Jevons’s sunspot theory (1875, 1878). He had already suggested in 1872 (p. 310) that sunspots are related to meteorological phenomena that affect the abundance of crops and in turn influence human affairs, and thus welcomed Jevons’s more articulated and explicit statements. In 1879, Boccardo wrote an article ‘The laws of periodicity of crises. Economic perturbations and sunspots’, where he stated the problem, cited large excerpts of Jevons’s 1878 article for Nature, discussed further literature and expounded additional data he was himself gathering, suggesting that there is high probability, if not certainty, that the regularity of crises

260 Daniele Besomi reflects the existence of some law, as opposed to the reign of chaos (1879a, pp. 410–411).17 Most of these considerations were incorporated in the 6th edition of Boccardo’s Trattato (1879b), but not in the last edition of the Dizionario (1881).

11.4 ASSESSMENT Boccardo’s treatment of crises is far from original. The core of his argument is explicitly borrowed from Coquelin, and does not need further discussion, except perhaps to point out that Boccardo also took up Coquelin’s distinction between the occasional, immediate cause of crises and their deep causes – the banking monopoly (BANCA, p. 301). Notwithstanding this lack of originality, Boccardo’s entry on CRISES introduced two interesting novelties. The first is the categorization of different kinds of crises18 and the discussion of their relationship. Strictly speaking, this is not the first such distinction. In the entry CRISE COMMERCIALE ET INDUSTRIELLE of →Monbrion’s Dictionnaire universel du commerce, 1838 (translated into →Antonelli’s Enciclopedia del commerciante, 1841), these two kinds of crises are assigned different causes, but the distinction is introduced more as a matter of course than by methodological necessity (see Chapter 6). Boccardo is adamant that he was instead thinking of a more cogent criterion, which, however, he failed to specify; regrettably, his explanation for its introduction is limited to the statement ‘for love of methodological exactness’ (p. 739).19 Nevertheless, something more specific can be inferred from Boccardo’s discussion of monetary crises. At an early stage of writing, he had planned to have an entry specifically for them, as is indicated by a cross-reference in the entry AMERICA (p. 124). He must have soon realized, however, that this would have given to his reader the impression that monetary crises are a kind of event distinct from the other categories he listed, while they should be classified instead as a subspecies of commercial crises (p. 733). The wrong classification would reflect a bad understanding of the phenomenon, as was the case for the writers who interpreted the 1857 crisis as being caused by the scarcity of money. Boccardo insisted instead that the real cause of the crisis was a lack of trust, while the scarcity of money was a consequence of the credit crisis (Appendix to the entry on CRISI, p. 737). In the entry on MONETA (currency), Boccardo took up the matter again and explained that most monetary crises are not an isolated phenomenon, but are the consequence of other perturbations affecting the economic and financial world. Misinterpreting the monetary aspect of the crisis as its essence is a consequence of mistaking the effects for the causes of the phenomenon and results in turn in proposing as panaceas remedies that are likely to make the disease worse and perhaps even chronic (Vol. 3, p. 419).20 The second novelty consists of the distinction between internal and external causes of crises. This is normally attributed to Mentor Bouniatian (see e.g. Vogel, 1917, p. 16, and Hayek, 1933, p. 143), but Boccardo had already outlined it in his 1854 ‘Report on the commercial crisis’, where he suggested that two groups of crises should be distinguished: ‘those deriving from corrupted intrinsic conditions

Boccardo on internally generated economic crises 261 of a country’s trade, and those arising as a consequence of causes alien to the system of commerce’. He added that the former are ‘more simple and spontaneous’ (p. 4). The wording echoes Coquelin’s, who dubbed as ‘(so to speak) spontaneous’ the crises originating from within the commercial system itself (see Chapter 8, Section 8.3.2). If, also on this, Boccardo’s starting point was almost surely Coquelin, he pushed the distinction one step beyond the French writer, and beyond the similar distinction introduced by Blanqui in his entry CRISE COMMERCIALE for the →Encyclopédie des gens du monde, 1836, and by Michel in CRISE COMMERCIALE for Guillaumin’s →Encyclopédie du commerçant, 1839 (see Chapter 6, Section 6.3). While Coquelin was merely interested in stressing the endogenous character of crises and his predecessors only aimed at differentiating the causes of crises, Boccardo not only appreciated the importance of Coquelin’s point but added that the crises whose causes are internal are ‘more important and more susceptible of scientific enquiry’ (CRISI, p. 733). Such a distinction leads very far, for it tends to restrict the theoretical field to crises born from the inner logic of commercial relationships within a given institutional setting. Boccardo even came close to reversing the logical implication and denying a scientific status to the propositions ascribing crises to external facts. After outlining the facts of the 1857 crisis, in fact, he stated: ‘it is almost incredible that many of our fellow citizens insist in considering the crisis [. . .] as an isolated fact and as depending on subordinate causes’ (p. 737). Also interesting is Boccardo’s interpretation of the periodical return of crises in terms of a general cyclical view of history, a perspective that encompasses also other economic, social and physical phenomena. Boccardo offers one of the few explicitly cyclical interpretation of crises at a time when the phenomenon was indeed widely recognized but understood in terms of recurring crises, with the explanatory emphasis on crises more than on their recurrence. Yet some ambiguity remains, as this view is not directly incorporated in the CRISIS entry (in the first edition) but confined to a subordinate entry (not even cross-referenced from CRISI). Crises are an example of Boccardo’s law of periodicity, rather than periodicity being at the core of the nature of crises. Such a transition, however, required another half a century to be completed.

NOTES 1 The covers indicate as publication years 1858–1863, while the corresponding first pages report 1857–1861; the difference originates in the fact that the work was published in separate fascicles, bound together only at a later stage. 2 We shall see below, however, that Boccardo denied that the government could possibly remedy commercial crises. 3 Thus he had, for instance, a purely philological entry on BANCO, from which the word ‘bank’ derived in several languages, including the Italian ‘banca’. 4 PREFAZIONE, Vol. 1, pp. xix–xx. The Accademia della Crusca, founded in 1583, is one of the leading Italian institutions devoted to research in the field of the Italian language. 5 Comuzzi Pighin, 1978–1979, p. 127. This essay is dedicated to the borrowing of French

262 Daniele Besomi

6

7 8 9 10 11 12

13

14

15 16 17 18 19 20

economic and commercial terminology in Boccardo’s Dizionario. A number of these terms are still in use. An early collection of notices and reviews of the Dizionario in the Italian and foreign press is given by the publisher ([Franco], 1858. I am grateful to Riccardo Faucci for giving me a photocopy of this compilation). Most of these articles, to judge by perusing of a limited number of fascicles, were rather favourable, as regards both the general spirit of the work and the treatment of specific issues. See in particular a reviewer initialled N.R., writing in the Gazzetta del Popolo, 15–16 September 1857, cited in [Franco], 1858, p. 27. Macleod’s Dictionary (on which, see Chapter 13) carries an entry on BOCCARDO, GEROLAMO; it deals mostly with the Trattato, but refers to the ‘comprehensive and very excellent’ Dizionario as Boccardo’s best work (1863, p. 276). Courcelle-Seneuil praised this separation as the first attempt to set in practice an idea suggested by Pellegrino Rossi, but regretted it was not pushed far enough (1854, p. 152; 1859, p. 458). For a characterization and an editorial history of this work, see Bianchi and Faucci, 2005 and 2008. For additional details on Boccardo’s life and writings and further assessments, see the essays included in Augello and Pavanelli, 2005. In the entry on BANCA, Boccardo uses several pages of his Trattato; there, he explicitly acknowledges that he has strictly followed Coquelin’s argument and numerical example. The precise source is not indicated, but is easily identified as Coquelin, 1848, pp. 212–219. The banks or societies of Credito mobiliare were institutions specializing in giving financial assistance to start-up companies or companies in financial difficulties by buying their shares, and taking care of the issuing of new shares or launch on the stock exchange. Boccardo was extremely critical of such institutions, as they used their vast capitals to influence share prices only in order to raise the value of their own stocks (see entries CREDITO MOBILIARE and PEREIRE). A reference to the ‘remarkable periodicity of crises’ is already found in Boccardo, 1854, p. 3. This kind of explanation was far more common at the time than Boccardo seemed to believe, although the emphasis was more on the recurrence of crises than on their regular timing (Besomi, 2010). Bianchi and Faucci (2005) point out that Boccardo’s early support of a plurality of issuing banks turned into a support of a unique issuing bank in 1863. This duplicates in substance the argument, and also the terminology, of the entry on PERIODICITÀ (unchanged in the various editions of the dictionary). Boccardo supported the sunspots theory to the end of his life, as illustrated by a popularizing article on ‘Sunspots and economic crises’ in the monthly supplement to the daily Corriere della Sera (Boccardo, 1904). Besides the kinds of crises listed in the text, in the entries on BANCA (Vol. 1, p. 288) and on CINA (‘China’) (Vol. 1, p. 519) Boccardo used the expression crisi finanziaria to indicate a crisis in public finances. The following distinction between different kinds of crises, limited to the differences between monetary and commercial ones, is due to Juglar’s 1863 entry on CRISES COMMERCIALES in →Block’s Dictionnaire général de la politique; see Chapter 12. A similar argument, without a general classification of the different kinds of crises but with a denunciation of the confusion between ‘pecuniary crisis and credit crisis’, was already expounded in Boccardo, 1854, p. 8.

Boccardo on internally generated economic crises 263 REFERENCES Anonymous, 1857, [Notice on] Dizionario della economia politica e del commercio, Archivio Storico Italiano, 5: 1, pp. 170–171. Augello, M. M. and Pavanelli, G., 2005, Tra economia politica e impegno civile: Gerolamo Boccardo e il suo tempo (Genoa: Brigati). Azuni, D. A., 1786–1788, Dizionario universale ragionato della giurisprudenza mercantile (Nice: Società Tipografica), 4 volumes. 2nd enlarged and corrected edition, Livorno: dai torchj di Glauco Masi, 1822–1823, 4 volumes. 3rd edn, nella quale si è fusa la nuova giurisprudenza dall’avvocato Giuliano Ricci, in 2 volumes (Livorno: Fratelli Vignozzi), 1834. 4th edn, in 2 volumes (Livorno: Fratelli Vignozzi), 1837. 5th edn (and 1st edn in Sardinia) (Sassari: L. Azzati), 1844, in one volume. Bagehot, W., 1873, Lombard Street (London: King). Besomi, D., 2010, The periodicity of crises: a survey of the early literature, Journal of the History of Economic Thought, 32: 1, March, pp. 85–132. Bianchi, G. and Faucci, R., 2005, Genesi e struttura del ‘Trattato’ e del ‘Dizionario della economia politica e del commercio’. In M. M. Augello and G. Pavanelli, 2005, Tra economia politica e impegno civile: Gerolamo Boccardo e il suo tempo (Genoa: Brigati), pp. 111–138. Bianchi, G. and Faucci, R., 2007, Il Trattato di Gerolamo Boccardo e le sue edizioni. In M. M. Augello and M. E. L. Guidi (eds), L’economia divulgata. Stili e percorsi italiani (1840–1922). Vol. I: Manuali e trattati (Milan: Franco Angeli), pp. 79–101. Boccardo, G., 1853, Trattato teorico-pratico di economia politica (Turin: Società editrice della biblioteca dei comuni italiani), 3 volumes. Boccardo, G., 1854, Rapporto sulla crisi commerciale (Genoa: Camera di commercio). Boccardo, G. 1858, Manuale di storia del commercio delle industrie e dell’economia politica ad uso delle Scuole Speciali Secondarie (Turin: Franco). Boccardo, G., 1872, Il sole operajo e la economia industriale. In G. Boccardo, Prediche di un laico (Forlì: F. Gherardi). Boccardo, G., 1879a, La legge di periodicità delle crisi. Perturbazioni economiche e macchie solari. Archivio di statistica, III: 3, pp. 385–412. Boccardo, G., 1879b, Trattato teoretico-pratico di economia politica, 6th edn (Turin: Roux e Favale). Boccardo, G., 1904, Macchie solari e crisi economiche. La lettura – Rivista mensile del Corriere della Sera, 1904: 1 January, pp. 26–30. Comuzzi Pighin, P., 1978–1979, Francesismi e neologismi nel Dizionario della economia politica e del commercio di Gerolamo Boccardo, Studi mediolatini e volgari, 26, pp. 125–141. Coquelin, C., 1848, Du crédit et des banques (Paris: Guillaumin). Courcelle-Seneuil, J. G., 1854, Traité théorique et pratique d’économie politique. Journal des Économistes, 13 (2nd series, 1st year), 7 July, pp. 151–155. Courcelle-Seneuil, J. G., 1859, Trois publications nouvelles de M. Boccardo. Journal des Économistes, 23 (2nd series, 6th year), 9 September, pp. 457–464. [Franco, S.], 1858, Giudizi dei pubblicisti si esteri che nazionali sul dizionario della economia politica e del commercio cosi teorico come pratico utile non solo allo scienziato . . . (Turin: Sebastiano Franco e figli). Giocoli, N., 2001, La voce ‘Economia matematica’ da Boccardo a Debreu, Storia del Pensiero Economico, 42, pp. 123–143.

264 Daniele Besomi Gioli, G., 2001, Dizionari economici ed enciclopedie in Italia nella seconda metà dell’Ottocento, Storia del Pensiero Economico, 41, pp. 231–256. Hayek, F. A., 1933, Monetary theory and the trade cycle (London: Cape). Jevons, W. S. [1875], The solar period and the price of corn. In W. S. Jevons, Investigations in currency and finance, edited by H. S. Foxwell (London: Macmillan, 1884), pp. 194–205. Jevons, W. S., 1878, Commercial crises and sun-spots, Nature, 14 November. Reprinted in W. S. Jevons, Investigations in currency and finance, edited by H. S. Foxwell (London: Macmillan, 1884), pp. 221–243. Kircheisen, J., 1864, Ein englisches und ein italienisches Wörterbuch der Volkswirtschaft, Jahrbücher für Nationalökonomie und Statistik, 2, pp. 456–461. Marmocchi, F. C., 1854–1862, Dizionario di geografia universale: contenente gli articoli piu necessari della geografia fisica secondo le idee nuove ed i lavori piu insigni de’ geologi e de’ naturalisti (Turin: Società Editrice Italiana). Pareto, R., 1857, [Review of] Dizionario della economia politica e del commercio. Giornale dell’ingegnere, architetto ed agronomo, 5, November, pp. 275–276. Pareto, R., 1860, [Notice on] Dizionario della economia politica e del commercio. Giornale dell’ingegnere, architetto ed agronomo, 8, April, p. 206. Rosa, G., 1857, [Review of] Dizionario della economia politica e del commercio. Archivio Storico Italiano, 5: 2, pp. 114–132. Sacchi, G., 1857a, [Review of] Dizionario della economia politica e del commercio. Annali universali di statistica, 13 (3rd series), February, pp. 115–116. Sacchi, G., 1857b, [Review of] Dizionario della economia politica e del commercio. Annali universali di statistica, 13 (3rd series), March, pp. 280–288. Sacchi, G., 1858a, [Review of] Dizionario della economia politica e del commercio. Annali universali di statistica, 19 (3rd series), July, pp. 3–4. Sacchi, G., 1858b, [Review of] Dizionario della economia politica e del commercio. Annali universali di statistica, 20 (3rd series), October, pp. 42–62, and November, pp. 119–131. Sacchi, G., 1859, [Review of] Dizionario della economia politica e del commercio. Annali universali di statistica, 22 (3rd series), June, pp. 265–286; 23, July, pp. 7–32. Tabarrini, M., 1859, Rapporto del ff. di Segretario delle Corrisp. Avv. Marco Tabarrini, letto nell’Adunanza ordinaria del dì 10 luglio 1859. Atti della R. Accademia EconomicoAgraria di Georgofili di Firenze, NS 6, pp. xc–xciv. Vogel, E. H., 1917, Die Theorie des volkswirtschaftlichen Entwicklungsprozesses und das Krisenproblem (Vienna: Hölder).

12 Clément Juglar (1863–1891) Tracking and interpreting the periodic return of crises Cécile Dangel-Hagnauer

Dictionnaire général de la politique, avec la collaboration d’hommes d’État, de publicistes et d’écrivains de tous les pays, edited by Maurice Block, Paris: O. Lorenz. 1st edn, 1863–1864; 2nd edn, 1873. Nouveau dictionnaire d’économie politique, published under the editorship of Léon Say and Joseph Chailley, Paris: Guillaumin. 1st edn, 1891–1892; supplement, 1897; reprinted 1900.

12.1 THE DICTIONARIES The French economist Clément Juglar (1819–1905) is still widely considered as one of the pioneers of the theory of business cycles. His contribution in this area achieved recognition in the second half of the nineteenth century both in France and abroad, and, as shown by Besomi (forthcoming), it attracted the attention of some of the major theorists of the business cycle in the first half of the twentieth century. However, from the 1950s until recently1 his works had sunk into oblivion, save for an article by Niehans, 1992. So whereas the name of Juglar is rather familiar to the general public, his works have been overlooked. One reason for this neglect is the relative lack of interest raised by Juglar’s major work, Des crises commerciales et de leur retour périodique en France, en Angleterre et aux États-Unis (On commercial crises and on their periodic return in France, in England and in the United States), a book which comes in the form of a muddled and bulky volume, especially in its second edition. Fortunately, Juglar contributed two dictionary entries on CRISES COMMERCIALES (commercial crises) shortly after the publication of the two editions (1862 and 1889) of Des crises commerciales. Both provide the reader pressed for time with a clear and concise account of Juglar’s main line of argument, which did not vary over the nearly three decades that separated the two editions. Actually, Juglar spent almost 50 years (his first article on crises was published in 1856) endeavouring to provide evidence that commercial crises were not individual episodes caused

266 Cécile Dangel-Hagnauer by external events but instead recurrent phenomena that shared the same nature. Crises were also one of the three ‘periods’ that characterized the course of business. However, although Juglar insisted on their build-up during the period of ‘prosperity’ and on the return to normal conditions after the period of ‘liquidation’, crises remained his main focus of attention. So, whereas examining these two entries shows that Juglar’s conception of crises did evolve over these three decades, it also reveals that Juglar fell short of producing a fully fledged theory of business cycles, as underscored by Besomi, 2010. The first entry appeared in 1863 in the Dictionnaire général de la politique (General dictionary of politics, with the collaboration of statesmen, public law specialists and writers from all countries), edited by Maurice Block. Juglar was also requested by Léon Say and Joseph Chailley (also known as Chailley-Bert2) to write a similar entry for the Nouveau dictionnaire d’économie politique (New dictionary of political economy), the first volume of which was published in 1891. It is noteworthy that Juglar also contributed two entries to →Léon Say’s Dictionnaire des finances (1889), one on BANQUES and another on CRISES FINANCIÈRES ET COMMERCIALES, co-authored by P. des Essars. Juglar, Block, Chailley-Bert and Léon Say were members of the French liberal school, which dominated political economy in France in the nineteenth century. Jean-Baptiste Say was beyond doubt the school’s founder. Whereas he presented himself in his first works as the propagator in France of the ideas of Adam Smith, he gradually developed his own brand of political economy in strong opposition to the British classical school and to Ricardo in particular. As emphasized by Arena (2001), Say rejected Ricardo’s conception based exclusively on abstract reasoning and favoured instead a more balanced approach that relied on both abstraction and observation. This approach was shared by many of his followers within the French liberal school. Following Arena, it is possible to distinguish three generations of French liberal economists and three main periods in which the school’s history can be divided. The first period, 1800–1848, was marked by the personality of J.B. Say. In this period, the message disseminated by the school was progressive and even revolutionary, as it consisted in fighting the legacies of the ancien régime that still permeated French society. The influence of the French liberal school reached its peak in the second period, 1848–1870, during which the French liberals defended both the existing social order and free trade, thereby opposing socialists and protectionists. Starting in 1870, the influence of the school slowly faded. Interestingly, the school developed a threefold strategy of penetration of French society. The liberal economists taught political economy, occupying the four chairs in the discipline that existed in France and lecturing within the private sector, in particular within the École libre des sciences politiques, inaugurated in 1872. They also established learned institutions, among which the most influential was the Société d’économie politique, founded in 1842. Liberal economists also dominated the Académie des sciences morales et politiques. Finally, the school controlled several journals, notably Le Journal des Économistes, created in 1841, while the French publisher Gilbert-Urbain Guillaumin played a leading role in spreading the school’s ideas. However, the French liberals lost part of their educational

Clément Juglar and the periodic return of crises 267 influence when, in 1877, chairs of political economy were created in the law faculties to which were initially appointed professors who had not been trained in political economy but gradually developed their own expertise, founding a new journal in 1887, the Revue d’Économie Politique, which made no secret of its hostility towards the liberal school’s monopoly in the teaching of political economy.3 Thus, when Block’s Dictionnaire de la politique was published, the French liberal school was at the height of its influence, whereas it had begun its decline when Say and Chailley’s Nouveau dictionnaire d’économie politique appeared.4

12.1.1 The Dictionnaire général de la politique Maurice Block (1816–1901) was a statistician and economist, born in Berlin. His family moved to Paris in 1818, so Block began school in France, before being sent to Germany, where he studied in Bonn, Heidelberg and Tübingen, after which he returned to Paris, where he acquired French citizenship in 1848. He was fluent in French, English and, of course, German. In 1844 he entered the French Ministry of Agriculture and Commerce, where he became the assistant director of the Statistique de France in 1853. His early involvement in research, which led to the publication of the Statistique de la France (1860), apparently displeased his superiors, driving him to retire in 1862 and devote the rest of his life to scholarly work. He was elected a member of the Académie des sciences morales et politiques in 1880. His numerous publications include Les progrès de l’économie politique depuis Adam Smith (1890) and the Traité théorique et pratique de statistiques (1886). His most important contributions were probably in editing the Annuaire de l’économie politique et de la statistique and two dictionaries, the Dictionnaire de l’administration française (1856) and the Dictionnaire général de la politique. He also published a →Petit dictionnaire politique et social in 1896.5 Block was wedded to the French liberal school, as evidenced by Émile Cheysson in his obituary of Block, quoting him as having written in 1890, at a time when the school’s influence was on the wane: The sound economic doctrines whose banner France has always held so high, and that scholars like Jean-Baptiste Say, Bastiat, Michel Chevalier and others defended so brilliantly, are strongly attacked today. I am almost alone in defending them against our foreign learned adversaries, and I dare to say that I am constantly beavering away at it. (1907, p. 13) The Dictionnaire général de la politique went through two editions. The first edition came out in 1863–1864 and was reprinted in 1867; 144 scholars contributed to its two volumes, representing 1,180 and 1,140 pages. In the PRÉFACE, Block writes that this dictionary on politics has brought together ‘elite intelligences’ in order to present, on the one hand, ‘the political and social notions that have supported the proof of criticism and facts’ and, on the other hand, ‘the discussion of the ideas that an in-depth examination will still have to classify among truths or

268 Cécile Dangel-Hagnauer errors’ (p. v). In line with Block’s adherence to the views of the French liberal school, the principles underlying this collective work embrace the recognition of ‘the effectiveness of freedom, the need to enlarge the scope of individual initiative, the beneficial action of moral and material progress, the obvious error of extreme opinions’ (ibid.). Published in 1873 and reprinted in 1884, the 2nd edition also included entries by 144 contributors (with few changes from the list of those who contributed to the first edition). In the new PRÉFACE, among the dictionary’s objectives Block states that of offering a neutral ground for contributors of different opinions. He also specifies that the term ‘politics’ has been taken in its broadest sense, that is, that of ‘science of government’. As such, it encompasses many topics, from forms of power to different sorts of constitutions, but also doctrines and facts. Because it seeks to be comprehensive, the dictionary deals with topics such as taxation, as well as with subjects pertaining to political economy or concerning public services in so far as they touch upon the science of government. This explains how Juglar’s entry on CRISES COMMERCIALES found its way into this dictionary. Finally, whereas only ten years separate the two editions, new articles appear in the second one, in which almost all the entries have been revised. This is the case for Juglar’s own entry. As attested by the review authored by Jules Simon (1865), the Dictionnaire général de la politique was well received. This dictionary, Simon writes, bridges a gap in a country where there are only ‘inaccessible libraries or insignificant pamphlets’ (p. 155). While Simon questions whether political science is actually a science, he considers that Block’s dictionary provides the knowledge that is necessary for those seeking to enter a political career. It includes historical, financial, economic as well as legal knowledge. Simon stresses that, however impartial the authors have tried to remain, the doctrine underlying the dictionary is that of the ‘great and noble school that aspires to liberty . . . [and] strives at . . . bringing on progress’ (ibid.). The success of the dictionary, both in France and abroad, is also emphasized by Henri Baudrillart (1874) in his review of the second edition of the dictionary. He pays tribute to the work, stressing its ‘capital importance and indisputable utility’ (p. 476), the great abundance of facts and documents it contains and the clarity and reliability of the exposition of doctrines and theories. Among the features underlined by Baudrillart, there is its ‘judicious and grand liberalism’, founded firmly upon ‘certain essential and fundamental principles’, although it is ‘a book of principles without being partisan’ (ibid.). Like Simon, Baudrillart commends the dictionary’s broadness of scope – ranging from the analysis of different constitutions to the study of education and of agricultural, industrial and demographic resources – but more especially he approves of the space assigned to political economy and law, thereby providing evidence that ‘politics does not separate itself from the elements of civil life’, all the more so as ‘alongside the role of the state extends the even vaster role of individual activity’ (ibid.).

Clément Juglar and the periodic return of crises 269

12.1.2 The Nouveau dictionnaire d’économie politique The Nouveau dictionnaire d’économie politique also went through two editions, but with the second one being merely a reprint of the first. It comprises three volumes that appeared in 1891 (1,168 pages), 1892 (1,345 pages) and 1897 (277 pages). Actually, the third volume is a supplement to the first two. As the first edition sold well, the editors, Léon Say and Joseph Chailley-Bert, began preparing a second edition, but decided instead to issue this Supplément, which appeared one year after the death of L. Say. Whereas the Introduction to the Nouveau dictionnaire was written by ChailleyBert, as the latter writes in the PRÉFACE of the third volume: ‘The Supplément, like the Dictionnaire, was entirely written under the high inspiration of M. Léon Say. It is he, in concert with me, who decided upon the list of topics, chose the authors, read the manuscripts, revised the proofs’ (PRÉFACE, p. v).6 The politician and economist Léon Say was born in Paris in 1826. Like his grandfather, Jean-Baptiste Say, he was a strong advocate of free trade. Having completed his studies at the Law Faculty in Paris, he worked for the Eichtal Bank (1850–1852) and sat on the board of numerous companies. From 1869 to his death in 1896 he held several political positions (as member of parliament, prefect, finance minister, very briefly ambassador of France in London and president of the senate). He was also a professor at the École libre des sciences politiques and was elected to the Académie des sciences morales et politiques in 1874 and to the Académie française in 1886. In his article devoted to SAY (LÉON, JEAN-BAPTISTE) in the supplement of the Nouveau dictionnaire, Chailley-Bert insists on the important role Say played within the ministry of public finances, of which he was the minister for six years. Chailley-Bert describes Say as driven by a single motive: ‘the defence of liberty . . . in all its forms and in all circumstance’ (p. 263). In particular, he was an adversary of the protectionists as well as of the socialists, going so far as to assert that socialism proceeded from protectionism (ibid., p. 264). Joseph Chailley-Bert was born in 1854 in Saint-Florentin and died in Paris in 1928. He was an essayist and served as a politician, holding several positions between 1906 and 1919. With a doctorate in law, he became a professor at the École libre des sciences politiques and contributed articles to the Revue des Deux Mondes and the Journal des Débats, a journal controlled by the French liberals. His main interest was in colonization and he founded the Institut colonial international in 1893. In its first edition, the Nouveau dictionnaire was published in the form of fascicules. The first volume of the Nouveau dictionnaire begins with a 16-page introduction by Chailley-Bert, written when the last article of the second volume had just appeared. The INTRODUCTION, common to the two editions, is divided into five sections. In the first section, Chailley-Bert presents the Nouveau dictionnaire as an entirely revised edition of →Coquelin and Guillaumin’s Dictionnaire de l’économie politique, whose two volumes were first published in 1852 and 1853.7 A new edition was indeed necessary, Chailley-Bert writes, in the wake of the ‘veritable economic revolutions that occurred very soon after its publication’ (INTRODUCTION, p. v).

270 Cécile Dangel-Hagnauer The goal that Say and Chailley-Bert had pursued in preparing their dictionary was to ‘enhance [its] doctrinal value and [its] practical usefulness’ (p. vii), as stated in the second section. To that effect, they had called upon a limited number of contributors, ‘united within a common doctrine’ (p. vi), who were asked to write all the articles that were related to the same subject. Chailley-Bert adds that ‘none of our collaborators wrote a word without seeking agreement with us with regard to the fundamentals of doctrine’ (p. vii). As to the contents of the Nouveau dictionnaire, it covers the ‘theories of pure political economy’ but also more applied issues related to ‘commerce, agriculture, banking, money, public finances and, in another connection, the issues of contingency, co-operation, participation in profits, association, and finally what is referred to as the doctrine of the socialists’ (ibid.). Finally, Chailley-Bert draws the reader’s attention to the three tables included at the end of the second volume. Altogether, the three tables add up to 133 pages. A ‘bibliographic table’ comprises the names of the authors and the titles of the books cited in the dictionary. Interestingly, a ‘methodical table’ indicates in what order the articles of the dictionary should be read for it to be used as a ‘Treatise on political economy.’8 An ‘analytical table’ brings together all the scattered material related to a given subject. The second section closes with Chailley-Bert indicating that L. Say and he are thinking about preparing a second edition.9 The third section of the INTRODUCTION is entirely devoted to the doctrine of the liberal school, which Chailley-Bert describes as a ‘school of progress’, as attested by the names of its leaders: ‘Turgot and Adam Smith, J.-B. Say and Stuart Mill, Cobden and Bastiat, Herbert Spencer, and to a certain extent the French positivists’ (ibid.). This statement is followed by a genuine profession of faith: Political economy, as it had been conceived by Turgot, Adam Smith, and J.-B. Say, stems from a single word: freedom. Freedom of trade, freedom of the individual; free exchange and free initiative. D’Argenson had already said: ‘Not too much governing’. After him, enlarging his thought, economists had repeated: ‘laissez faire, laissez passer’. They estimated that all goes as well as one might wish when nothing is regulated. The wealth of nations is made up of the wealth of individuals. You want a prosperous nation; let individuals act as they please. Their interest is a guarantee of their activity; in their pursuance of happiness and well-being, they will find the easiest path and the shortest one. Provide them with security; secure their tools, their fields, their workshops, in a word their property, from violence. For the rest, allow them to be free to work when and how they want, free to sell the fruit of their labour where and how it pleases them; no fetters, no control. (p. viii) This said, Chailley-Bert notes the evolution of political economy and emphasizes the need to add to the principle of freedom the principle of solidarity, affirming that the liberal school has become the ‘school of individual activity and collective responsibility’. Accordingly, he argues that the teachings of evolutionism, and the

Clément Juglar and the periodic return of crises 271 idea of the ‘survival of the fittest’, do not apply to society so long as all people behave as active participants, so that co-operation breeds progress. Moreover, the author points to the change visible in the liberal school, indicating that its adherents have become less hostile to government interference than J.-B. Say and display more indulgence towards association. Finally, Chailley-Bert indicates that subjects such as the theory of value or the theory of the ‘appropriation of wealth’ are not dealt with in the Nouveau dictionnaire, whose purpose is that of being ‘a work of popularization’ (p. x). It is important to note that Chailley-Bert does not believe in the contribution of historical facts and statistics to scientific advance, prompting the lengthy and virulent attack on the German historical school contained in the fourth section. However, Chailley-Bert is also critical of the state of the ‘French school’. In the fifth and final section, he shows that the latter’s decline is due to three factors: the way political economy is taught in France, the lack of consideration it enjoys and the distinctive character of the turn of mind of the French. Almost two pages are devoted to deploring the fact that political economy is taught in law faculties and to advocating the establishment of ‘faculties of economic and political sciences’.10 He also laments the lack of political influence of (liberal) ‘economists’ and the small number of those who have occupied political positions, hence their lack of influence in matters regarding political economy, the sole exception being the ‘intermittent victories of free trade’ to which they contributed (p. xix). However, even here, Chailley-Bert considers that the economists’ involvement in the defence of this ‘menaced liberty’ has damaged their reputation among the French public, who were generally hostile to the opening of the country’s borders to international trade. Another consequence of their quasi-exclusive focus on free trade, also emphasized by Chailley-Bert in his review of →Palgrave’s Dictionary of political economy for the Economic Journal, is that it has distracted them ‘from the study of the whole of economics . . . [and] taken away all leisure for attacking, following and solving other problems’ (1897, p. 262).11 The Nouveau dictionnaire was reasonably well received. It was, in any case, sufficiently well circulated for Juglar’s entry to attract enough attraction and deserve a translation in Rhodes Journal of Banking (Juglar, 1894). Commenting earlier on the first three instalments, Seligman (1890) indicates that 15 more instalments were expected for the completion of this entirely different edition of the dictionary, which had been previously edited by Coquelin and Guillaumin. Interestingly, he deplores the lack of contributions by the ‘adherents of the newer school, represented by the Revue d’Economie Politique’ and the too rare contributions by non-French writers, his overall assessment being that the dictionary will be of value to those wishing to keep ‘abreast of French development’. In his review of 1893, André Liesse points out the favourable reception with which the Nouveau dictionnaire was met, also presenting it as the new edition of →Coquelin and Guillaumin’s Dictionnaire de l’économie politique, which had become outdated. Comparing the two editions, Liesse regrets that ‘the combative spirit that ran through the columns of the old Dictionnaire’ was no longer there, whereas ‘A word, an article, at the time when Guillaumin published the first

272 Cécile Dangel-Hagnauer economic encyclopaedia was a cartridge fired at the protectionist or socialist enemy’ (p. 283). A puzzling comment is made by Liesse, who notes that ‘the doctrines of Darwin and Spencer, of the evolutionists in a word’ (p. 281) had left on the Nouveau dictionnaire their powerful mark, which contradicts Chailley-Bert’s own assertion. More to the point, among the subjects dealt with in the new edition, Liesse welcomes the inclusion in particular of topics relating to public finances and to private finance, in accordance with the recent development of commercial banking in France. He ends his review by describing the dictionary as not only a useful reference but also a work for study, drawing the reader’s attention to the three tables that complete the dictionary.

12.2 JOSEPH CLÉMENT JUGLAR Following in the footsteps of his father, Juglar studied medicine and became a physician at the age of 27. However, he quickly abandoned the medical profession as a result, it seems, of the events of 1848 and of his travels, which both aroused his interest in social and economic matters. Juglar travelled enormously, to England, Spain, Italy, Greece, Turkey and Algeria. Visiting Spain in 1850, he returned with a statistical inquiry on Spanish hospitals. In 1851, he began writing a series of articles, published in the Journal des Économistes and the Annuaire de l’Économie Politique, on the demographic evolution of France between 1772 and 1849, and on the colonization of Algeria. His training as a physician had developed his skills of observation, which he applied first to the statistical study of the French population and that he would soon apply to the study of commercial crises. Between 1856 and 1861, he published several articles on commercial crises and on banking statistics. However, his first important contribution was the memorandum for which he was awarded the prize of the Académie des sciences morales et politiques in 1860. This memorandum was published as the first edition in 1862 of Des crises commerciales et de leur retour périodique en France, en Angleterre et aux EtatsUnis. Juglar also submitted a memorandum to the Académie in 1865 on the conditions of the circulation of credit and on the differences between banknotes and other forms of credit. It would later be published in 1868 as Du change et de la liberté d’émission (On foreign exchange and the freedom of issuing). In the meantime, Juglar had been entrusted, along with Paul-Jacques Coullet of the Bank of France, with the work of translating and publishing in 1865 the Extraits des enquêtes anglaises sur les questions de banque, de circulation monétaire et de credit (Extracts from the English parliamentary enquiries on the issues of banking, circulation of money and credit). Juglar was then to spend the next 40 years writing and publishing (predominantly in the Journal des Économistes) on commercial crises, money, credit, banking and other financial matters (such as foreign exchange and bimetallism), as well as on demographics and social policy. His most important contribution in that period was the publication of the second edition in 1889 of Des crises commerciales, a third edition of which he was preparing, according to Paul Beauregard (1908), just before his death.

Clément Juglar and the periodic return of crises 273 In his obituary, Beauregard provides a summary of Juglar’s method: A profound observer, a meticulous analyst, he searched relentlessly for the exact and precise facts. His knowledge of languages enabled him to consult the statistics of different countries, to bring them together, to compare them; his scientific conscientiousness saved him from all error as well as from all exaggeration; his hard work allowed him to accumulate materials in the midst of which he moved about easily. He put into practice, in the strictest fashion, the rigour of the method of observation. But he was not enslaved to it. From analysis, he rose to synthesis; a statistician, he was also philosopher. He had not . . . condemned . . . the taste for generalization. He did not fall for the error of those schools that, in political economy, want to compel us to collect information indefinitely, leaving to the future the task of formulating laws. While giving the facts time to speak, as soon as they did speak, he was quick to hear them, that is, to interpret them, and to draw all the teachings they contained. Then, according to the true scientific method, he subjected so to say the theory he had just constructed to observation and never ceased checking it. (Beauregard, 1908, pp. 4–5) Eager to spread the use of statistics as a method of enquiry, Juglar contributed to the creation of societies of statistics. Thus, after entering the Société d’économie politique at the very beginning of his career, in 1852, he participated in founding the French Société de statistique, of which he became the president. He was also an honorary member of the Royal Statistical Society of London and was one of the founding members of the International Statistical Institute. A devout Catholic, Juglar was known for showing ‘feelings of benevolence and charity’, but he was also a ‘rigorous economist and a vigorous liberal’, and relied only on ‘the mutual respect of the rights of all people and on the normal working of the economic laws to improve the lot of mankind’ (ibid. p. 32).

12.3 THE ENTRIES As their title indicates, the entries on CRISES COMMERCIALES written by Juglar for the Dictionnaire général de la politique and for the Nouveau dictionnaire d’économie politique deal with ‘commercial’ crises. In both articles, Juglar notes a tendency to commonly refer to such crises as ‘monetary’ crises, whereas he clearly asserts that there is no such thing as a ‘monetary’ crisis per se. Two reasons explain this: on the one hand, commercial crises are all monetary crises as they are accompanied by the depletion of metallic reserves; on the other hand, there can be reductions in reserves that end spontaneously without affecting the course of business. These are not ‘crises’. Another characteristic of Juglar’s commercial crises is that they ‘return periodically’, as expressed by the title of his book, Des crises commerciales et de leur

274 Cécile Dangel-Hagnauer retour périodique en France, en Angleterre et aux États-Unis. Juglar strongly insists on this feature in the entry written for Block’s Dictionnaire, where he refers repeatedly to the ‘periodic return of crises’. To track the periodicity of crises, Juglar relies extensively on banking statistics, mainly on the variations in the amount of discounts and the level of metallic reserves of issuing banks, pointing to the ‘regularity’ of these movements. This raises the question of what Juglar really means by ‘periodic’. A cursory reading might lead one to believe that what Juglar has in mind is ‘strict’ periodicity, as he writes: ‘Every six or seven years, a general liquidation seems to be necessary for trade to start expanding once again’ (CRISES COMMERCIALES, 1863–1873, English translation as Juglar, 2010a, p. 120). However, Juglar also draws up a table (ibid., p. 131) showing that, over the period covered by banking statistics, crises occurred in the same year (or in the immediately preceding or following year) in France, England and the United States. In the case of France, crises broke out in 1804, 1810, 1813, 1818, . . ., 1847, 1857, 1864. So, quite clearly, not only is there a simultaneity in the outbreak of crises in the three countries, which points to the interdependence of their markets, but in addition, the time intervals separating crises are, in fact, ‘irregular’. So what Juglar really means is that crises are ‘recurrent’.12 A modified and completed version of the same table is inserted in the entry prepared for Say and Chailley’s Nouveau dictionnaire (CRISES COMMERCIALES, 1891, English translation as Juglar, 2010b, p. 151), with the same goal, that of proving the simultaneity of the crises affecting different countries. In this entry, however, Juglar refers more sparingly to what he now calls ‘periodicity’, specifying that ‘Since the beginning of the century we see crises recurring at rather close, although by no means regular, intervals (ibid. p. 162). Actually, Juglar is more explicit in the second edition of Des crises commerciales (1889), in which Chapter XV is devoted to the ‘Periodicity of crises’. In this chapter Juglar clearly states his disagreement with Jevons (and Cobden) with regard to the decennial character of commercial fluctuations (p. 163).13 It is noteworthy that Juglar does not use the words ‘cycles’ or ‘cyclical’. The expression he uses is ‘oscillations’, in a very general sense, with no reference to the notion of equilibrium, which is also a term used very loosely by Juglar.

12.3.1 CRISES COMMERCIALES in the Dictionnaire général de la politique Juglar’s entry in →Block’s Dictionaire général de la politique begins with a onepage introduction, is then divided into two main sections, and ends with a short conclusion. In the 1863 edition, only the second section bears a title: ‘Influence of political causes. Opinion of the main economists. Means of preventing crises, proposed remedies’, shortened in the 1873 edition to ‘Former opinions on crises’. The first section is partitioned into seven subsections: ‘Causes of crises’; ‘On discounts’; ‘On the metallic reserves’; ‘Circulation of banknotes’; ‘Deposits and various current accounts’; ‘On advances by banks on government securities, railroad stocks and bonds’; ‘Duration and liquidation of crises’. The second section is

Clément Juglar and the periodic return of crises 275 subdivided into three subsections: ‘Political causes of crises’; ‘Monetary crises’; ‘Opinions of the main economists’. These subtitles point to Juglar’s methodology, namely, the use of banking statistics as a means of providing the factual evidence of the periodic recurrence of crises and an estimate of the duration of the three ‘periods’ that succeed each other: ‘prosperity’, the ‘crisis’ and the ‘liquidation’. Juglar also presents, in this entry, his position with regard to the debates on crises, in particular on their causes. Although not numerous, the changes that Juglar introduced in the second edition of Block’s dictionary are important, as they bear witness to the work he accomplished on banking and foreign exchanges in the decade separating the two publications. 12.3.1.1 The crisis: its threefold definition The readers of this sort of entry would normally be entitled to a definition of the word ‘crisis’. Actually, they are provided not with one but with three definitions. First, ‘A commercial crisis is a disruption to the course of business’; second, ‘crises are the natural reaction that occurs as a consequence of efforts made to raise even further production that has already been carried to excess proportions’; third, ‘a crisis is . . . a general liquidation’. So, although Juglar underscores the periodicity of crises, thereby making an important step towards producing a theory of cycles, by distinguishing three phases within the oscillations that succeed each other periodically, we see him confusing the liquidation with the crisis itself. This state of confusion permeates the entire entry. The introduction of the article is, however, reasonably clear and provides a description of the main ingredients that make up the crisis. Accordingly, the three phases of the oscillation embrace: a) six or seven years of prosperity characterized by increasing prices; b) the crisis per se, marked by an abrupt surge in the demands for discounts and for withdrawals of metallic specie, and associated with an increase of the discount rate; c) the liquidation, its price cuts and diminished discounts, accompanied by the replenishment of bank reserves and the return of the discount rate to its ‘ordinary’ level. Juglar also succinctly depicts what happens in the short time-interval during which the crisis is causing devastation: disrupted business impedes the clearing of credit instruments, inducing agents to call upon banks for additional discounts. The increase in the interest rate and more stringent financial conditions induce businesses, faced with no other choice, to cut prices, which slows down activity, which in turn affects people’s lives, their consumption and their demographic behaviour. A sharp rise in discounts is thus a sure sign that the crisis has begun. Because merchants are left with unsold inventories, they fail to pay off their debts and anxiously ask banks for ready cash. Credit is thus at the heart of the process that causes crises. Consequently, crises are more acute in countries where trade and industry are highly developed, as business in such countries relies extensively on credit. Moreover, cross-border business is accompanied by cross-border credit, causing crises to spread internationally.

276 Cécile Dangel-Hagnauer 12.3.1.2 Banking statistics More than three and a half pages, out of the thirteen that the entry occupies, are devoted to analysing the balance sheets of the Bank of France and the Bank of England, with additional references to these items at the end of the article. These statistics are the raw materials on which Juglar works to bring to light the three phases of prosperity, crisis and liquidation. Discounts, metallic reserves, banknotes in circulation, deposits and current accounts, and advances on securities are presented in nine out of the eleven tables the article contains and are closely inspected. However, Juglar concentrates on the movements of discounts and metallic reserves, as they are the indicators he uses to demonstrate the existence of the three phases. Indeed, discounts rise during prosperity, reach a peak at the time of the crisis, and diminish during the liquidation. This sequence is observed ten times between 1799 and 1864, thereby providing the evidence that crises return periodically. Juglar also includes a table depicting the price of wheat in an attempt to show the evolution of the prices of commodities over the three periods. Of interest is the method used by Juglar to show the movement of discounts. Focusing on three periods – 1844–1849, 1850–1857 and 1858–1861 (1864 in the 2nd edition) – he notes the minimum and maximum level reached each year by discounts, and also by reserves and banknotes in circulation. Then, in a huge table he sets out in parallel the evolution of the minima and maxima reached by these items for the Bank of France and the Bank of England. The examination of these figures confirms that in France and in England discounts diminish during prosperity, exhibit a sharp increase when the crisis breaks out and drop markedly during the liquidation. Reserves move in the opposite direction, hence the drain of specie observed when the crisis breaks out and its return during the liquidation. In contrast, there is no relationship between, on the one hand, either the circulation of banknotes or deposits and current accounts and, on the other hand, the unfolding of the three phases. 12.3.1.3 Causation Having identified the movements in banking statistics that accompany prosperities, crises and liquidations, Juglar goes on to explain the phenomena at hand. Actually, half of the article is about the causes of crises: the long introduction is followed by a lengthy subsection titled ‘Causes of crises’; the entire second section discusses other economists’ opinions on the subject. In ‘Causes of crises’, Juglar rejects the usual explanations such as wars and food shortages. His goal is to prove that crises occur repeatedly and in very different contexts. To do so, he uses a distinction borrowed from medicine, the opposition between ‘predisposition’ and ‘determining cause’. A patient will contract pneumonia if he has a predisposition to catching it. If not, he can stay out in the cold and remain in good health. In an analogous fashion, crops can be bad, but the ensuing food shortage will produce no effect unless there is some ‘social predisposition’ that will cause a crisis to occur. So it is this social predisposition that Juglar seeks to bring out.

Clément Juglar and the periodic return of crises 277 As it is typical of human nature, speculation is a plausible candidate. Yet, although Juglar does underline the role that speculation plays during business upswings and the role played by the return of confidence at the end of the liquidation, he also insists on the role played by credit. Whereas speculation plays the leading part, the supporting role is filled by credit. Where there is little reliance on credit, speculation has little impact. In contrast, the development of credit during the nineteenth century, in particular between agents located in different countries, caused crises to have sweeping effects, in particular by building interdependence (solidarité) among nations, causing crises to spread across borders from market to market. In other words, Juglar’s objective is not only ‘to determine the circumstances in which crises develop and specify the causes that lead to their outbreak’, but also to discover ‘the conditions that are indispensable for them to exist, . . . the phenomena that are then constantly observed regardless of the so numerous and so diverse causes that are mentioned depending on the need of the moment’ (emphasis added) (CRISES COMMERCIALES, 1863–1873, English translation as Juglar, 2010a, p. 118). These conditions are the division of labour, the expansion of industry, commerce and foreign trade, and the widespread use of credit. Although speculation is a decisive ingredient – indeed, the adverse effects of credit would be small in its absence – on the other hand, speculation could not develop if it were not fed by credit. In his eulogy of Juglar’s contribution to the theory of cycles, Schumpeter goes so far as to quote Juglar apocryphally, writing, ‘the only cause of depression is prosperity’ (Schumpeter, 1954, p. 1124). The closest Juglar gets to writing something of the sort is: ‘The determining cause is elsewhere. It is the consequence of a previous state that must be studied carefully’ (Juglar, 2010a, p. 118). In the second section of the entry, Juglar goes to great length to show that crises do not have political causes and that they do not coincide with wars or other political events: they occur outside uprisings and revolutions and break out in periods of political calm. In the final subsection on the ‘Opinions of the main economists’, Juglar seeks to show that crises are caused neither by the excess issue of banknotes nor by sudden withdrawals of banknotes, citing the opinions of J.-B. Say, Senior, Wilson, Tooke, Coquelin and du Puynode. In particular, he challenges Coquelin and his position in favour of free banking (see Chapter 8). Almost an entire page is devoted to showing that granting banks issuing freedom would not prevent speculation and crises. In particular, Juglar examines the minima and maxima of deposits and shows that their erratic oscillations are disconnected from those of reserves and are thus unrelated to crises. He also points to the fact that the countries where free banking prevails are not better protected from speculation than others. More generally, he discusses central banking and the conduct of monetary policy. Alluding to the critiques of the Peel Act of 1844, he examines the restrictions imposed upon the Bank of France (in the employment of its equity), its monopoly in the issuance of banknotes, and its discount rate policy. Before closing the entry, Juglar mentions that other indicators (economic, demographic, financial) are synchronized with banking statistics (discounts and

278 Cécile Dangel-Hagnauer reserves), referring the reader to Des crises commerciales. The article actually ends with Juglar’s statement that there is no way to prevent crises other than perhaps through a better governance of banks. On the contrary, Juglar emphasizes that crises are the price to be paid for economic progress: the business sluggishness caused by the crisis is actually a ‘prelude to more beautiful destinies’. 12.3.1.4 The differences between the two editions Among the changes introduced by Juglar in the second edition of this entry, some merely involve wording and their main purpose is to provide greater clarity. For similar reasons, in his discussion on the opinions of other economists, Juglar added a paragraph in order to comment on J.-B. Say’s opinion. Naturally, the tables of statistics are updated. Probably to limit the overall length of the article, an entire passage (on the Crimean War) is omitted in the subsection on ‘political causes’. A similar reason probably explains why the bibliography that featured at the end of the 1863 edition was omitted in that of 1873. There are other additions to the text. Numerous sentences are completed with references to foreign exchange markets.14 These additions are easy to explain. In the meantime, Juglar had published with Coullet, in 1865, the Extraits des enquêtes anglaises and, in 1868, his second book, Du change et de la liberté d’émission. In Du change, Juglar discusses whether it is right to set a limit to the amount of banknotes issued by banks, and by the Bank of France in particular. Juglar argues that before answering this question it is necessary to examine the role played by foreign exchanges. To begin with, imposing restrictions on banknote issues is ineffective, because business transactions rely on credit, essentially trade credit, whereas banknotes are only used in retail trade and for the balancing of credit operations. Furthermore, issuing banks play an essential role in the clearing of commercial bills, namely in countries such as France which are not equipped with clearing houses. So, as long as credit instruments clear easily, transactions can unfold smoothly. However, because prices tend to rise when credit is relied upon extensively, sooner or later the clearing system is disrupted and a crisis breaks out. Actually, Juglar provides a detailed account of the different events that succeed each other in times of crises. The commercial crisis per se is accordingly one of the series of twelve ‘accidents’, nine of which build up to the commercial crisis itself and three enable its liquidation. At the centre of the process stands the foreign exchange market, where foreign debts issued by residents are cleared against claims on foreign countries. As long as the foreign exchange market is operating well, business can continue its usual course. However, should the clearing process be disturbed by an immoderate price increase, the trade deficit causes a fall in the foreign exchange rate and an outflow of specie. The reduction of metallic reserves is thus the result of trade imbalances, both at home and with foreign countries. So, to preserve their reserves, issuing banks are compelled to increase the discount rate. So, quite understandably, in the 1873 entry, foreign exchanges become an essential link in the process that leads to the outbreak of the crisis. It was to remain

Clément Juglar and the periodic return of crises 279 so in Juglar’s following writings, in particular in the entry he contributed for the Nouveau dictionnaire.

12.3.2 CRISES COMMERCIALES in the Nouveau dictionnaire d’économie politique Compared to the previous entry, the one Juglar wrote for Nouveau dictionnaire is only ten pages long and is better structured, organized tidily in five sections. 12.3.2.1 The crisis and prices The first question to be raised is whether, here, in this entry, Juglar provides a clear definition of crisis. From this standpoint, the title of the first section, ‘Outline of a crisis: three periods’, is somewhat disconcerting. However, the three ‘periods’ are each ascribed a separate denomination, a clear improvement over the 1863–1873 entry. Juglar thus distinguishes ‘the explosion of the crisis’, ‘the liquidation of the crisis’ and ‘prosperity’. The crisis per se, its ‘explosion’, is very brief (ten or fifteen days); the ‘liquidation’ lasts between two and four years, followed by seven to ten years of ‘prosperity’, characterized by great business activity fuelled by easily available credit. This induces prices to rise, gradually creating the conditions for a new crisis to break out. Among these conditions, Juglar points to the rise of the interest rate, a consequence of the growing scarcity of funds available for investment. Thus, by now, Juglar’s explanation includes the workings of the capital market. Furthermore, the increase in prices creates a situation of instability, wherein the slightest incident will trigger the ‘explosion’. The first section ends with the only table the entry contains. As indicated earlier, its purpose is to show that, between 1804 and 1882, in France, England and the United States, crises recurred 12 times, breaking out in the same year, or one or two years before or after. It is in the second section, titled ‘Definition of a crisis; causes of crises’, that Juglar seeks to provide a single unequivocal definition of the crisis. It is the ‘stoppage’ in the increase of prices – in other words, it occurs at the precise moment when the rise in prices, which is associated with prosperity – stops. The other events that accompany the crisis are mere consequences. The clearing of commercial bills is disrupted, so agents try to obtain cash from banks through greater amounts of discounts. Imbalances of payments occur not only within the country’s borders but also vis-à-vis foreign creditors, who thus demand payment in specie, so that banks soon face ‘unfavourable foreign exchanges’ and the depletion of their reserves. To protect them, the banks must then increase the discount rate. Why banks take this measure is explained by Juglar as follows. Actually, by doing so, the banks deter the holders of unsaleable commodities, who need to meet their financial commitments, from buying precious metals. The latter are indeed attractive, as their value is inherently more stable, so during prosperity their market value rises to a lesser extent than other prices. By increasing the discount rate, the banks bring up the price of precious metals to the price level of the other goods

280 Cécile Dangel-Hagnauer and assets. As a result, the agents are compelled to cut prices, which is what causes the general fall of prices observed at the start of the liquidation. All in all, the increase in the discount rate is an effect, not a cause, of the crisis. Having discarded the increase in the discount rate as the cause of crises, Juglar goes on to examine other possible causes, in particular those stated by other economists: Robert Peel, Tooke, US President Jackson, Ch. Coquelin, John Stuart Mill, de Laveleye, Bonamy Price, Leroy-Beaulieu, Max Wirth and Yves Guyot. Juglar criticizes all these authors for exclusively focusing on the liquidation, thereby neglecting the other two periods, whereas, in Juglar’s opinion, crises are caused by the increase in prices that develops during prosperity. Armed with his single definition of the crisis for which he has identified a single cause, Juglar sets out to account for the way the periods are linked to one another. At the outset, he eliminates existing explanations. He emphasizes his disagreement with the ‘old doctrine’ for which prices increase along with the quantity of money: as business is chiefly conducted on credit, the relevant concept is the ‘rapidity’ of the circulation of money, not its quantity. Juglar also reaffirms that crises are not caused by ‘accidents’; on the contrary, the mere variety of causes invoked by different authors simply provides evidence that such explanations are wrong. Juglar provides his own tentative explanation in the third lengthy (two-page) section of the entry, titled ‘Mechanism of crises’. He begins by examining an economy on the verge of revival. The liquidation having been successfully completed, everything is ready for recovery: interest rates are low and capital seeking employment is plentiful. With the awakening of the entrepreneurial spirit, project makers and, soon, speculators enter the picture. Prices begin to rise from the very start of prosperity due to the abundance of capital. They continue to increase throughout prosperity under the effect of a cumulative process fuelled by credit: loans stimulate demand, so prices and profits increase, which further facilitates the access to credit, and so on. Then, at some point, prices stop rising. Why? Juglar’s explanation is unfortunately disappointing. Facing supply, he says, suddenly, there is a lack of demand, which he fails to account for. He contemplates overproduction as a possible explanation, but leaves it unexplored, which is unsurprising, as Juglar provides no theoretical analysis of the production process. There remains the possibilities that wants may be lacking or prices may be too high. Discarding the first possibility, Juglar falls back on the argument that prices are too high, thereby embarking on a circular line of reasoning. To be fair, Juglar does attempt to explain the behaviour of prices at the height of the crisis, by distinguishing what happens in the retail market and in the wholesale market. In the retail market, prices remain too high. This is because price cuts are postponed thanks to the continued reliance on credit. As long as the banks accommodate the demand for credit, the holders of commodities can finance an increasing amount of inventories. Thus, in the wholesale market, an escalating quantity of unsold commodities faces a growing amount of discounts. In other words, the existence of credit is what creates price rigidity. However, when the banks increase the discount rate, agents are forced to cut their prices. As they pay back their loans,

Clément Juglar and the periodic return of crises 281 equilibrium is gradually restored. In the process the two stocks disappear. However, why prices continue to decline throughout the liquidation remains unexplained. In conclusion, clearly missing here is a theory of the determination of prices. An offshoot of this lack of a theory of prices is that Juglar considers that prosperity, albeit a period of rising prices, is ‘the normal state of the market’. 12.3.2.2 Crises, wealth and society For Juglar, crises will be more serious and more devastating in countries that enjoy greater and quicker progress, as he reaffirms in the short (one-page) fourth section, which bears the title ‘The relationship of crises with the wealth of countries’. In contrast, countries that are protected from crises and the damage they inflict are also those that benefit less (or not at all) from progress. He also adds that crises are more acute in areas that are closer to the foreign exchange markets, an observation he has already made in Des changes. In the final one-and-a-half-page section, titled ‘The influence of crises on the economic condition of societies: How to observe and measure it’, Juglar takes the opportunity to refer to the work he accomplished in Des crises commerciales, where he shows that the evolution of business activity is accompanied by demographic movements (marriages, births and deaths). More generally, this section bears witness to Juglar’s interest in statistics and in the measurement of the ‘social and moral condition of human societies at a determined period of time in the various countries’. Pointing to the difficulties raised by international comparisons, he suggests that the best method for overcoming them is to focus on the intensity of exchanges, notably through the examination of banking statistics, although other statistics can be used for completing the investigation, such as the issues of securities, imports and exports, government revenue, and so on. An additional advantage of this method is Juglar’s naive belief that the periodicity of crises and the ability to track their occurrence in the balance sheets of banks could be used as a means of predicting crises, as the author affirms in the entry’s final footnote. A short bibliography completes the entry. It includes works by Juglar, but also books by other authors such as Tooke, Lord Overstone, Briaune, Macleod and Wirth.

12.4 CONCLUDING REMARKS Juglar’s contribution marks an important stage in the transition from the theory of crises to the theory of cycles. However, its novelty has probably been exaggerated, as Besomi (forthcoming) demonstrates. Juglar owes his celebrity, as is well known, essentially to Schumpeter, who adopted in Business cycles a ‘convenient descriptive device’ in the form of a ‘three-cycle schema’ formed by three classes of cycles – ‘Kondratieffs’, ‘Juglars’ and ‘Kitchins’ (1939, p. 170). Schumpeter also wrote that Juglar was the ‘great outsider who . . . created modern business-cycle analysis’ (1950, p. 149) and that he was also ‘the first to have a clear perception of how

282 Cécile Dangel-Hagnauer theory, statistics and history ought to cooperate in our field’ (1939, pp. 162–163), the method advocated by Schumpeter himself (1954). Yet Juglar’s writings themselves have not stirred great interest, even in France, with the exception of the reference to Juglar by early-twentieth-century French economists writing on the business cycle, Aftalion (1913), in particular. Outside France, Juglar’s contribution very often remained ignored, barring Thom’s (1893) ‘Englished’ translation of Des crises commerciales, which is anything but a translation, however ‘very freely’ a translation may be ‘rendered’ in order to be considered as such (p. 1). Why, then, have Juglar’s writings suffered this neglect? The first reason that comes to mind is that they were scattered among numerous articles, as attested by the bibliography drawn up by F. Allisson et al. (2009). On the other hand, his writings on crises were brought together in the two editions of Des crises commerciales. However, in addition to having never been (properly) translated, the book is repetitious, its organization lacks rigour – especially in its bulky second edition – it is inelegantly written and Juglar’s sentence structure is frequently ambiguous. In the end, attempting to make sense out of it can be at times quite a trying experience. In sharp contrast, these two dictionary entries are easy to read and reasonably well written. They are concise and they bring forward Juglar’s main line of reasoning. Comparing the entries shows how Juglar’s analysis evolved over the period between the two editions of Des crises commerciales. In addition, these entries reveal the method he used to track the recurrence of crises, based on the analysis of the balance sheets of the issuing banks, this being especially visible in →Block’s Dictionnaire. These entries are thus quite valuable for forming an idea of Juglar’s contribution to the emergence of business cycle theory. From this viewpoint, Juglar’s main contribution was probably that of being (one of) the first economist(s), along with Jevons, to have systematically used statistics in his analysis of economic fluctuations. In the 1863–1873 entry, Juglar painstakingly scrutinizes the movement of economic activity through the evolution of central banks’ discount portfolios and metallic reserves. These indicators provide evidence that crises recur periodically and enable the author to bring to light several contiguous series of ‘prosperities’, ‘crises’, and ‘liquidations’. In contrast, banking statistics are not reproduced in the 1891 entry, although they remain instrumental to Juglar’s exposition of the movement of business activity. The main shortcoming that these two entries bring out is that while Juglar succeeds in establishing an empirical relationship between banking statistics and the course of business activity, he does not provide a theoretical explanation of what he observes. Yet these entries also portray Juglar striving over the years to reach this goal. Indeed, whereas we see Juglar placing great emphasis on causation in the 1863 entry and laying the blame on speculation for the recurrent outbreaks of crises, by 1873, in the entry’s second edition, foreign exchanges are also ascribed a role in triggering the crisis. By 1891, greater stress is placed on the causal role played by credit, and the workings of the capital market are introduced as an

Clément Juglar and the periodic return of crises 283 additional major factor. In particular, there is an attempt, albeit unsuccessful and incomplete, in the second entry to show how the three phases are connected to one another and to explain why prices grow during prosperity, why they stop increasing at the outbreak of the crisis, and why they start rising again at the end of the liquidation. However, Juglar makes no attempt to build a theory of the determination of prices, which it would have provided the proper basis for the definition of the crisis – the ‘stoppage’ in the increase in prices – that he suggests in his last writings. In addition to bearing witness to the maturation of Juglar’s conception of the ‘oscillations’, these two dictionary entries exhibit some formal differences. The entry in →Say and Chailley’s Nouveau dictionnaire is more carefully constructed than the one written for →Block’s Dictionnaire. More strikingly, the discussion in the 1863–1873 dictionary relies heavily on analysing the entry’s numerous tables of statistics, whereas only one table is contained in the 1891 entry. This contrasts with the improved quality of the statistics that Juglar relied upon in the 2nd edition of his book, which includes a list of prices of commodities and presents a refined utilization of the maxima/minima methodology. Undoubtedly, this contrast reflects the preferences of the editors of the two dictionaries. Whereas Maurice Block was a statistician, Joseph Chailley-Bert clearly expressed his dislike of statistics and inductive reasoning.

NOTES 1 In France, two articles on Juglar were published, in 1991 (Gilman) and 2000 (Pellissier). More recently, a special issue of the Swiss Revue Européenne des Sciences Sociales (Bridel and Dal-Pont Legrand, 2009) was dedicated to Juglar, following the conference organized by Jean de Mathan, Juglar’s great-grandson. It was held in Paris at the Institut de France, the seat of the Académie des sciences morales et politiques (to which Juglar was elected in 1892), in celebration of the centennial of Juglar’s death in December 1905. 2 He was the son-in-law of Paul Bert, a French physiologist and politician. 3 See Le Van-Lemesle, 2004, pp. 311–316. 4 For additional details on the French liberal school, in particular on the role played by G.-U. Guillaumin, see Chapter 8, Section 8.1 of this volume. 5 In the PRÉFACE of the Petit dictionnaire, Block explains that he had felt that a more affordable version of the Dictionnaire general de la politique should be made available to meet the needs of a wider public. He argues that universal suffrage assigns serious duties to citizens, who need to be able to assess the acts of the people they elect. Whereas some of the articles are mere reprints of the initial authors’ contributions, more than three-quarters of the Petit dictionnaire is made up of articles written by Block himself. It includes an entry on CRISES COMMERCIALES – in fact, a shortened version of Juglar’s entry, in the form of a selection of passages, from the 1873 edition. 6 By some strange stroke of fate, the text was modified in the 1900 edition to ‘in concert with him’. 7 For a presentation of →Coquelin and Guillaumin’s Dictionnaire de l’économie politique, see Chapter 8 on Charles Coquelin’s CRISES COMMERCIALES. 8 The table distinguishes eight headings: Pure political economy, Finances, Agriculture, Industry, Commerce and navigation, Colonization, Contingency, and Sociology. Crises are not considered as part of pure political economy; Juglar’s entry on CRISES COMMERCIALES is included instead under the heading Commerce and navigation.

284 Cécile Dangel-Hagnauer 9 As the 2nd edition was merely a reprint of the 1st, this statement remained unchanged when the latter actually came out. 10 Actually, Chailley-Bert’s plea remained unheard until 1957, which was when law faculties in France were transformed into faculties of law and economics, and 1968, when specific economics university departments were created (see Le Van-Lemesle, 2004, pp. 641–645). However, in the meantime, in 1896, a special competitive examination had been established for the recruitment of professors of economics (ibid., pp. 321–326). The author would like to thank Annie L. Cot for her valuable help in seeking this information. 11 In this review, Chailley-Bert points to the differences, opposing the conceptions underlying the Dictionary of political economy and the Nouveau dictionnaire d’économie politique. For further details, see Chapter 2, Section 2.4.1 of this volume. 12 This issue is carefully analysed by Besomi, 2010, pp. 225–239. Examining the transition from the theory of crises to the theory of cycles, he introduces a fourfold distinction among four approaches: ‘crises’, ‘alternations’, ‘recurring crises’ and ‘cycles’. This typology allows him to characterize Juglar’s contribution as belonging to the third approach. 13 For a more detailed presentation of this aspect, see Besomi, 2010, pp. 195–197. 14 This is the case, for example, for the following sentence, where the emphasized passage (italicized by C. D.-H.) was added to the original 1863 version: ‘At the same time, the banknotes issued in exchange for discounted mercantile paper are instantly presented for reimbursement, and under the influence of unfavourable foreign exchanges the metallic reserves diminish as swiftly as portfolios build up.’ The text continues and the paragraph ends with: ‘the exchange rate returns to par, and the reflux of specie begins’, also an addition (italicized by C. D.-H.) to the 1863 entry.

REFERENCES Aftalion, A., 1913, Les crises périodiques de surproduction (Paris: Editions M. Rivière). Allisson, F., Breban, L. and Bridel, P., 2009, Bibliographie des écrits de Clément Juglar (1846–1904), Revue Européenne des Sciences Sociales, XLVII: 143, pp. 107–124. Arena, R., 2001, J-B. Say and the French liberal school of the nineteenth century: outside the canon? In E. L. Forget and S. Peart (eds), Reflections on the classical canon in economics: essays in honor of Samuel Hollander (London: Routledge), pp. 205–223. Baudrillart, H., 1874, Dictionnaire général de la politique, par M. Maurice Block, avec la collaboration d’hommes d’État, de publicistes et d’écrivains de tous les pays; nouvelle édition, Journal des Économistes. 33, March, pp. 475–477. Beauregard, P. 1908, Notice sur la vie et les travaux de M. Clément Juglar (Paris: Institut de France). Besomi, D., 2010, ‘Periodic crises’: Clément Juglar between theories of crises and theories of business cycles, Research in the History of Economic Thought and Methodology, 28A, pp. 169–287. Besomi, D., forthcoming, The fabrication of a myth: Clément Juglar’s commercial crises in the secondary literature, History of Economic Ideas. Bridel, P. and Dal-Pont Legrand, M., eds, 2009, Clément Juglar (1819–1905): Les origines de la théorie des cycles, Revue Européenne des Sciences Sociales, XLVII: 143. Chailley-Bert, J., 1897, Dictionary of political economy. Edited by R. H. Inglis Palgrave, F.R.S., Vol. II. F.–M. (London: Macmillan. 1896, pp. xvi, 848, large 8vo). The Economic Journal, 7: 26, pp. 260–264.

Clément Juglar and the periodic return of crises 285 Cheysson, E., 1907, Notice sur la vie et les travaux de Maurice Block, Publications of the Institut de France, no. 9. Coullet, P.-J. and Juglar, C., 1865, Extraits des enquêtes anglaises sur les questions de banque, circulation monétaire et de crédit, traduits et publiés par ordre du Gouverneur et du Conseil de régence de la Banque de France et sous la direction de MM. Coullet et Juglar, Vols 1–8 (Paris: Furne et Ce and Guillaurium et Ce). Gilman, M.-H., 1991, Clément Juglar 1819–1905 – Analyste des crises. In Y. Breton and M. Lutfalla (eds), L’économie politique en France au XIXème siècle (Paris: Economica). Juglar, C., 1862, Des crises commerciales et de leur retour périodique en France, en Angleterre et aux États-Unis, 1st edn (Paris: Guillaumin). Juglar, C., 1868, Du change et de la liberté d’émission (Paris: Guillaumin). Juglar, C., 1889, Des crises commerciales et de leur retour périodique en France, en Angleterre et aux États-Unis, 2nd edn (Paris: Guillaumin). Juglar, C., 1894, Commercial crises, translated from the French of M. Clément Juglar in the Nouveau dictionnaire d’économie politique (Paris), Rhodes Journal of Banking, pp. 437–449. Juglar, C., 2010a, Commercial crises (1863–1973). Translation by C. Dangel-Hagnauer of CRISES COMMERCIALES, in →Block, Dictionnaire général de la politique (1863, 1873), Research in the History of Economic Thought and Methodology, 28A, pp. 115–147. Juglar, C., 2010b, Commercial crises (1891). Translation by C. Dangel-Hagnauer of CRISES COMMERCIALES, in →Say and Chailley, Nouveau dictionnaire de l’économie politique (1891), Research in the History of Economic Thought and Methodology, 28A, pp. 149–167. Le Van-Lemesle, L., 2004, Le juste ou le riche – L’enseignement de l’économie politique 1815–1950 (Paris: Comité pour l’Histoire Économique et Financière de la France, Ministère de l’Économie, des Finances et de l’Industrie). Levasseur, E., 1901, Nécrologie – M. Maurice Block, Journal des Économistes, 60, March, pp. 268–269. Liesse, A., 1893, Nouveau dictionnaire d’économie politique, publié sous la direction de M. Léon Say et de M. Joseph Chailley-Bert, Journal des Économistes, 52, March, pp. 281–285. Niehans, J., 1992, Juglar’s credit cycles, History of Political Economy, 24: 3, pp. 545–569. Pellissier, D., 2000, Clément Juglar: Héritage et actualité de sa théorie des crises. In P. Dockès, L. Frobert, G. Klotz, J.-P. Potier and A. Tiran (eds), Les traditions économiques françaises – 1848–1939 (Paris: CNRS Editions). Schumpeter, J. A., 1939, Business cycles: a theoretical, historical and statistical analysis of the capitalist process (New York: McGraw-Hill). Schumpeter, J. A., 1950, Wesley Clair Mitchell (1874–1948), Quarterly Journal of Economics, LXIV: I, pp. 139–155. Schumpeter, J. A., [1954] 1994, History of economic analysis, reprinted (London: Routledge). Seligman, E. R. A., 1890, Nouveau dictionnaire d’économie politique, Political Science Quarterly, 5: 2, June, pp. 334–336. Simon, J., 1865, Dictionnaire général de la politique, par M. Maurice Block, 2 vol. gr. in8. Paris, O. Lorenz, 1864, Report to the Académie des sciences morales et politiques. Journal des Économistes, 23, January, pp. 154–155. Thom, DeCourcey W., 1893, A brief history of panics and their periodical occurrence in the United States (New York: G. P. Putnam’s Sons).

13 Henry D. Macleod’s Dictionary of political economy Britain’s first, aborted attempt Cécile Dangel-Hagnauer

A dictionary of political economy: biographical, bibliographical, historical, and practical by Henry D. Macleod, London: Longman, Brown, Longmans and Robert, 1863.

13.1 A BIOGRAPHICAL, BIBLIOGRAPHICAL, HISTORICAL AND PRACTICAL DICTIONARY OF POLITICAL ECONOMY Published more than 30 years before →Palgrave’s Dictionary of political economy (see Chapter 16), Macleod’s Dictionary of political economy: biographical, bibliographical, historical, and practical represents the first attempt at producing a dictionary of this kind in the English language. Unlike R. H. Inglis Palgrave, however, Henry D. Macleod (1821–1902) failed to bring his dictionary to completion. Moreover, although he was not the only author to have written a dictionary singlehandedly – another contemporary example being Boccardo, who published his Dizionario della economia politica between 1857 and 1862 (see Chapter 11) – Macleod only managed to publish a single 683-page volume, covering letters A to C, which allowed him nonetheless to include an entry on CRISIS, COMMERCIAL. Many of the Dictionary’s entries are ‘biographical’ and/or ‘bibliographical’ in that they either bear the name of a particular author with a (list of) reference(s) or indicate the title of a particular work published anonymously. Only a small number of the entries, around 30, belong to neither of these two categories, as several notices are quite lengthy. The longest is BANK, whose 152 pages account for more than 20 per cent of the volume. Four other articles cover between 30 and nearly 70 pages: CAPITAL, COINAGE, CREDIT and CURRENCY. In comparison, the article on CRISIS, COMMERCIAL is of ‘average’ size, as it comprises only 22 pages, which is nevertheless considerably more than the six and three pages devoted respectively to COST OF PRODUCTION and to CONSUMPTION. All in all, if one were to go by

Henry Macleod’s Dictionary of political economy 287 the size of the different articles, the dictionary hardly deserves the title ‘A dictionary of political economy, inasmuch as the vast majority of the entries relate exclusively to the subjects of credit and banking, with considerable emphasis laid on historical (and legal) aspects.1 In particular, the article titled BANK includes subentries devoted to a ‘Historical sketch of the rise and fall of banking in several countries’ – England, Scotland, Ireland, America, France – and to ‘Historical notes on the rise of banking in various countries – Rome, China, Italy, Venice, Genoa, Sweden, Holland. An indication of the kinds of entries found throughout the volume is provided in the advertisement that appeared in The Saturday Review on 24 December 1859: On Wednesday next, Part III, price 4s. A DICTIONARY OF POLITICAL ECONOMY: Biographical, Bibliographical, Historical, and Practical. By Henry Dunning Macleod, Esq. Principal contents— Banking in France, Mississippi Scheme—Bank Note—Baring—Bastiat— Baudrillart—Beccaria—Bentham—Bill of Exchange—Boccardo—Bodin— Bullion Report. Part III advertised here represents around 120 pages in the final volume. Four more years were necessary for the production and publication of the remaining half of the dictionary’s single volume. Part I was issued in 1858 and was reviewed in The Literary Examiner, where it was extremely well received. The anonymous reviewer hails the dictionary as the first English dictionary of political economy, underlining that whereas ‘the best literature’ in this ‘science’ was ‘written in the English language’, the dictionary would meet the needs of many students. Accordingly, he pays particular tribute to the ‘bibliographical knowledge’ amply supplied by many notices. More generally, he notes that Macleod was perfectly qualified for writing such a dictionary, on account of his interest and acquaintance both with the subject itself and with the works of others, owing to his ‘indefatigable zeal as a reader’ and ‘energy of independent thought’. The review contains a long passage from the Dictionary that provides some insights into Macleod’s conception of political economy. It is taken from the entry on AESCHINES, whose Eryxias Macleod commends as the first surviving treatise on political economy, and from which he quotes a long extract, thereby endorsing the opinions of the author, notably that value is rooted in exchangeability and that ‘intellectual wealth . . . is part of national capital’. For Macleod, ‘one of the chief defects of Adam Smith and Ricardo’ lies in their failure to have recognized this truth, whereas it was well apprehended by ‘the modern French school of Political Economy at the head of which stands J. B. Say’. The reviewer also provides some rapid observations on several other entries, but makes no comment on Macleod’s ‘articles Bank and Banking’, for lack of space and more especially as ‘Mr Macleod [had] already written an able book on the Theory and Practice of Banking’. The reviewer ends by alluding to Macleod as ‘a man sturdy in reading, thought, and

288 Cécile Dangel-Hagnauer speech’, with whom he was not always in agreement, while entirely perceiving the value of the book. This review also indicates that Macleod projected to produce the dictionary in 15 instalments of 96 pages each, which altogether would have represented some 1,440 pages. Was it the 683 pages needed to handle the first three letters of the alphabet that made ‘the publishers . . . put typographical considerations first, thus turning Macleod into a kind of unlyrical economic Schubert’ (Maloney, 1985, p. 123)? As testified by J. Kircheisen’s review article in the Jahrbücher für Nationalökonomie und Statistik, published the same year as the Dictionary, the first volume had actually required seven parts (Kircheisen, 1864). Hence Kircheisen expresses his doubts as to whether the eight remaining parts would suffice to complete the entire dictionary. Nevertheless, he points out the quality of the article on banking, comparing it to Lawson’s History of banking, and underscores the excellence of several articles, in particular the ones on the BULLION REPORT and on CRISIS, COMMERCIAL. He also states that the articles on CAPITAL, on CREDIT and on CURRENCY had already gained attention, in particular in the Jahrbücher. Finally, the German reviewer praises Macleod’s writing, its ‘French elegance and clarity’. In France, the publication of the first instalments of the Dictionary and of Macleod’s Elements of political economy provided Michel Chevalier with the opportunity to write, in 1862, an article for the Journal des Économistes, in which he discusses the author’s definition of political economy as well as his conception of currency, credit and capital. Whereas the discussion of the first point is rather a pretext for Chevalier to present his own conception, in contrast the article shows he is visibly convinced by Macleod’s approach of the latter subject. Kircheisen and Chevalier’s articles bear witness to the good reception of Macleod’s Dictionary in Germany and in France, on which Macleod prided himself: The first volume of my Dictionary was published in 1863; it was received with the warmest approval by the most distinguished foreign Economists, but, of course, the devotees of John Stuart Mill utterly ignored it. I wrote every word of it myself, and published it at my own expense, but it scarcely paid its expenses, and I did not think it advisable to continue such thankless work. (1896b, p. 149) This passage also indicates that it was Macleod’s own decision to interrupt the production of the Dictionary, as it did not sell well.

13.2 HENRY DUNNING MACLEOD That the Dictionary was a financial failure was perhaps due to the strong grip of →McCulloch’s Dictionary, practical, theoretical, and historical, of commerce and commercial navigation,2 which was not, however, a proper dictionary of political economy. Another explanation is that Macleod failed to achieve recognition with

Henry Macleod’s Dictionary of political economy 289 respect to his contribution to economics on the part of his British contemporaries, more particularly those he depicts as ‘the devotees of John Stuart Mill’.3 A reversal of opinion began in the 1930s. In his notice on MACLEOD, HENRY DUNNING, published in →Edwin R. A. Seligman’s Encyclopaedia of the social sciences (1933), Hayek provided a balanced assessment, describing Macleod as ‘one of the more remarkable of that great number of self-made economists who, discovering certain problems neglected by orthodox economists, believed it was their task to rebuild the science from its foundations’. Macleod was also, Hayek writes, ‘one of the first to obtain a clear grasp of the role of discount theory’. Schumpeter, in History of economic analysis, also praises Macleod for having ‘laid the foundations of the modern theory of banking’ and for having made ‘the first – though not wholly successful – attempt at working out a systematic theory that fits the facts of bank credit adequately’ (1954, p. 1115). However, both authors point out that Macleod ‘failed to secure recognition’, to quote Hayek’s words, or ‘even to be taken quite seriously’, as Schumpeter writes.

13.2.1 Presumptuousness and innovativeness Several reasons explain why Macleod was ignored so by his contemporaries. One reason was his overriding tendency to quibble, as emphasized by Maloney: It is, however, Macleod the polemicist who makes the first impact. A barrage of uninterrupted invective beats down upon the reader, page after page; all sensations being relative, we feel the sweetness of respite when, occasionally, overbearing rudeness is throttled back to mere stridency. The hectoring, at first entertaining, soon becomes as wearisome as the hair-splitting. Macleod, taken more than a few pages at a time, is not a very readable writer. (1985, p. 120) Like Maloney, Chevalier had already reproached ‘the harshness of [Macleod’s] criticisms towards some of his predecessors who are not the least renowned’ (1862, p. 191). Maloney also disparages Macleod’s style, in a somewhat exaggerated way, although it has been noted by others that ‘reading Macleod’s books [is] a chore’ (Skaggs, 1997, p. 121). However, the main difficulty with Macleod’s economics is related to the fact that he was a self-trained economist who remained an outsider to the profession. He learnt economics through his reading of the extant literature, in particular the works of Smith, Ricardo and J. S. Mill. Among other things, this enabled him to publish his imposing 690-page History of economics (1896b). Nonetheless, his isolation explains his ‘inability to put his many good ideas in a professionally acceptable form’, as Schumpeter (1954) notes. As a result, his work ‘attracted little attention, still less favorable attention’ (ibid.). On the other hand, in the area of money, credit and banking, Macleod was certainly an original writer ahead of his time. As a result, he was often misunderstood by his contemporaries, although he gained recognition abroad, notably in France, where Richelot (1863) devoted a book to the ‘revolution in economics brought about by Macleod.4

290 Cécile Dangel-Hagnauer Actually, Macleod’s interest in economics was sparked by problems he faced professionally. The son of a Scottish landowner, he was born in Edinburgh in 1821. He studied at Eton and at Trinity College, Cambridge, from which he graduated in 1843 with a degree in mathematics. His professional career began in Scotland, where he managed the family property and participated in the reorganization of pauper relief, while studying to become a barrister. In 1854, he joined the directorate of a joint-stock bank, which was engaged in a conflict with the Board of Trade. Macleod was asked to defend the case and won. ‘It was this case which was’, Macleod writes, ‘the origin of the modern Science of Economics’ (1896b, p. 142). Actually, in the process of looking for arguments in defending the case, Macleod thought he would find them in books on economics. Extremely disappointed, he came up with the idea that he would revolutionize the discipline, writing in 1896 that ‘the greatest opportunity that had come to any man since the days of Galileo had come to [him]’. Despite his claims, fellow economists considered him as a crank writer, which led him to endure many vexations, in particular in relation to his inability to secure an academic position. Macleod wrote 13 books. Some of them were, Hayek notes, basically reprints of books formerly published under a different title. Most dealt with credit and banking, and this is indeed the area where Macleod’s contribution is the most compelling. As emphasized by Skaggs (1997, 2003, 2004), Macleod made important contributions to the credit theory of money, to the theory of finance in economic development, and to the theory of capital.5 To begin with, Macleod was a pioneer in the building of a credit theory of money, and his approach to money and credit is strikingly modern. For Macleod, the value of money does not derive from the value of the commodity in which it may be embodied. Instead, the idea of commodity money is an offshoot of the notion of credit. Money, contrary to debt, is a general claim on all the goods and services produced within the economy. As more particularly noted by Schumpeter, Macleod’s analysis of money and credit led him to put forward a modern theory of banking wherein banks are not mere intermediaries between savers and borrowers. In BANK, Macleod writes: ‘it is almost universally considered that bankers are merely agents between persons who want to lend and those who want to borrow. Of all the fallacies that beset Political Economy at the present day this in one of the most mischievous and pestilent’ (p. 75). Instead, for Macleod, ‘banking consists in creating liabilities’ (p. 72). Banks create and exchange instruments of credit, whether in the form of notes or in the form of ‘entries and cheques [which] perform exactly the same functions as notes’ (p. 75). More remarkable, perhaps, is Macleod’s contribution to the theory of finance in economic development. As underscored by Skaggs (1997, 2003), it is unique, in so far as it has no roots in classical theory, and it remained an isolated attempt until the approach was developed in the 1950s by John Gurley and Edward Shaw (1960). Macleod based his conception of the role of finance as a means of mobilizing unused resources on his observation of the development of Scotland, but also on the idea that it is not because debits and credits cancel out when the balance sheets of banks are consolidated that these quantities should be disregarded. Quite the

Henry Macleod’s Dictionary of political economy 291 opposite: the structure of credit and debt plays a determining role. In brief, credit is a means of mobilizing capital, which leads Macleod to go so far as to assert that credit is capital, a far-embracing notion in Macleod’s conception as it also includes human capital, as noted earlier.

13.2.2 Macleod’s particular brand of political economy Examining the relationship between ‘capital’ and ‘credit’ provides the opportunity to sample Macleod’s style of writing and savour the twists and turns of his reasoning. Accordingly, let us begin with what Macleod considers as the subject matter of political economy, namely, ‘wealth’, which is composed of ‘economical elements’, that is, things that are ‘exchangeable. ‘Capital’ is then a particular form of wealth: ‘Capital is any Economical Element appropriated to the purpose of profit, or increase’ (CAPITAL, p. 331). Its value is the present value of the future profits that will be reaped at different future time intervals. There are different forms or ‘species’ of capital, each of which falls under this general conception. In particular, Macleod shows that ‘stock, or funds, or public debts’ are wealth, or, more precisely, ‘independent property’ (p. 342), an assertion that calls for the definition of ‘property’, which ‘is that “Right” to use a thing, and not the thing used’ or, put slightly differently, ‘property is not the thing itself, but the right to it’ (pp. 343 and 351). As this ‘right’ can be bought and sold, it is an ‘economical element’ and, as shares in companies are capital, their value consists in ‘the Right to receive and participate in the future profits of business’ (p. 347).6 The discussion of the concept of property leads Macleod to ‘the great subject of CREDIT (p. 351). Credit involves trust, but it is also a ‘right’. To begin with, credit is based on trust, in so far as ‘Every man engaged in business may be considered as a source producing profit . . . [T]hough a man’s future productivity may be profitable to himself, in order to make it marketable, or saleable, it is absolutely necessary that it should be believed in by others. – It is therefore called his credit’ (pp. 351–352). Credit in the form of trust is, then, what enables a merchant to sell his products to a trader who does not have the money to pay for them and receive instead the right to collect payment at a future date. As Macleod writes, ‘this operation is called credit’ (ibid.). In this instance: ‘The entire property in the goods passes from the merchant to the trader, in as complete a manner as if he had received money for them’ (p. 352). In exchange, the merchant receives ‘the right to demand payment [which] is itself an independent Economic Entity’ (i.e. ‘economical element’) (ibid.). From this it appears that credit is a particular form of capital: [T]raders . . . buy goods in exchange for the right of demanding a future payment. The quantity of credit brought into commerce, by these means is enormous in this country. . . . What we have said is, we hope, sufficient to shew that the quantity of credit which is in the market is a gigantic mass of exchangeable property, separate and distinct from, and over and above commodities and money, and that it is Capital. (ibid., pp. 352–355)

292 Cécile Dangel-Hagnauer Returning to Chevalier’s assessment of Macleod’s contribution, it is worth noting that, with regard to the assertion that ‘credit is capital’, Chevalier writes: ‘The impression I am left with upon reading Mr Macleod is, I do not hesitate to say, that he is more in the right than his adversaries, however eminent they may be’ (1862, p. 184).

13.2.3 Wasting opportunities and leaving one’s mark Interestingly, Macleod came very close to participating in the building of the utility theory, by defending a subjective theory of value. As Maloney observes, he failed, however, to understand the marginal principle. To make matters worse, he never acknowledged Jevons’s important contribution, rejecting the latter’s work as that of a writer who lacked practical knowledge in banking and law.7 So, whereas he could have climbed on the bandwagon of the marginal revolution and finally achieved recognition, he remained until the end an outsider to the economics profession, most probably because he seems to have made it a point of honour to criticize all ‘established’ economists. As Maloney (1985, p. 140) writes, Macleod ‘picked the right time for being out of touch’, whereas he was a strong opponent of protectionism and socialism and could have, on this account, found his place within Britain’s rising neoclassical orthodoxy. Nonetheless, when he died, in 1902, his ‘name and personality’ had achieved sufficient renown for him to deserve an obituary in The Economic Journal, where he is credited with having coined the phrase ‘Gresham’s Law of the Currency’ and ‘revived the use of Economics for Political Economy’ (Anonymous, 1902).

13.3 CRISIS, COMMERCIAL Macleod’s 22-page article on CRISIS, COMMERCIAL begins with an introductory section whose purpose is to state briefly the causes of crises. As to the bulk of the article, it is a description of the events surrounding the seven crises that occurred in 1763, 1783, 1793, 1797, 1825, 1847 and 1857, the author’s main purpose being to provide an account of the policy implemented by the Bank of England during each episode. Finally, in the last six pages, Macleod considers ‘the opinions of various persons, who are regarded as authorities on the subject’ (p. 627), before providing a more personal assessment of these views. As we shall see, Macleod’s chief objective here is to assert his agreement with the authors of the Bullion Report and, on the contrary, to lambast the framers of the Bank Act of 1844. Accordingly, he approvingly states the doctrine of the directors in charge of managing the Bank of England at the end of the eighteenth century, namely, that the demand for banknotes should be accommodated in the event of a crisis, the situation of the foreign exchanges permitting. Otherwise, the correct course of action would be to increase the discount rate, preferably at the incipiency of speculative excesses, which would stimulate the return of specie to the country, and would thence provide the backing for the Bank to increase the

Henry Macleod’s Dictionary of political economy 293 issue of banknotes. In sharp contrast, he firmly condemns the arbitrary limit placed upon the banknote issues of the Bank of England by the Act of 1844.

13.3.1 The origin and the causes of crises The article’s introductory paragraphs (pp. 626–627) provide a few insights into what is Macleod’s conception of crises, which remains nevertheless mainly implicit. One characteristic that is, however, stated explicitly is their ‘periodical recurrence’, this being mentioned three times in the article, almost incidentally, though, as Macleod considers this as something recognized by everyone. For the rest, after having described the underlying context in which crises are likely to occur, he goes on to list the causes that make them happen. In other words, he distinguishes ‘the sources whence commercial crises originate’ and their actual ‘causes’ or, to put it differently, the conditions that are conducive to crises and the events that might trigger one.8 Accordingly, whereas crises originate in the abuse of credit, which provides the fuel for the development of speculation, they may have four different causes. With regard to its role in bringing forth crises, Macleod emphasizes the twofold nature of credit. Thus, the opening sentence of the entry alludes to the ‘grand system of Credit’, its tremendous power of stimulating economic activity, hence, its ‘marvellous effects . . . on the prosperity of nations’. Conversely: ‘Like every other great power, like gunpowder, like steam, it is attended with commensurate dangers. Misused Credit is the cause of those terrible mercantile catastrophes which periodically sweep over the world’ (p. 626). As the Dictionary is strewn with numerous cross-references, Macleod quite naturally directs the reader to his long article on CREDIT, where he touches on crises only very briefly, to say the least. Finding where he does requires examining the end of the entry to which is appended an ‘Analysis of the article’ that features a reference to a paragraph indicated as dealing with ‘Unextinguished Credit [as] the cause of all commercial crises’ (p. 617). In the corresponding paragraph, Macleod assimilates crises to ‘monetary cataclysms’ and to bank failures. It is ‘Unextinguished Credit’ which produces those terrible monetary cataclysms, which shake nations to their foundations, scattering ruin and misery among societies. The inability of credit shops to extinguish the credit they have created, commonly called the failures of banks, are [sic], perhaps, among the most terrible social calamities of modern times. (p. 602) Now, as to whether crises could occur in the absence of credit, on this matter readers are left to their own devices and have to be content with Macleod’s assertions that ‘Commercial Crises originating in Credit have . . . a comparatively modern origin’; and ‘They increase in magnitude and danger with the gigantic development of Credit (p. 626). The author does provide some explanation nonetheless as to why crises originate in the abuse of credit. A crisis results from ‘over-production’, of which Macleod

294 Cécile Dangel-Hagnauer provides his own definition. Credit, he argues, is ‘productive by being purchasing power, – purchasing power, however, which has always to be redeemed. As a result, if people ‘produce, or bring forward for sale in any way whatever, or buy so much on credit, so that the price of the goods, &c, when sold cannot redeem the credit, . . . they have brought forward or produced too much’. For Macleod, ‘this is the true meaning of that often used but ill-defined expression Over-Production’, and ‘Every mercantile operation, therefore, attended with a loss, is over-production’. As the author observes, the frequent occurrence of crises raises two main issues, namely, whether they can be prevented through proper regulation, and how they are to be dealt with, in particular through the guidance of ‘the conduct of great Banks . . . during the tempest’. A related issue is whether assistance should be provided to borrowers who have been affected by the crisis but still remain solvent. Indeed, because crises generate widespread discredit, they harm not only those ‘who speculate injudiciously’ but even ‘persons . . . of the highest standing’. However, to address these issues, one needs to be able to ‘discern the symptoms that betoken the approach of those terrible convulsions’, which requires knowing what their causes may be. Although Macleod distinguishes four different causes, speculation is the driving force that always causes the trouble. Crises can be produced by prolonged low interest rates; the opening of new markets; bad harvests; or ‘the sudden commencement, or the sudden termination of a war’, as Macleod briefly indicates. First, a protracted period marked by low interest rates is likely to give rise to a crisis, as it creates the conditions for ‘wild speculators’ to breed schemes so as to take advantage of the credulity of those seeking ‘more profitable investments’. Macleod describes speculation as the purchase of shares with the intent of reselling them, thereby comparing it to gambling nourished by ‘speculative fever’ and manias. At some point, however, either because of calls or because ‘the circle of dupes has been exhausted, prices begin to waver’, which causes everyone to sell and prices to fall, thereby generating a ‘crash’. So, it is the decline in prices that leads borrowers to failure, a fact that is merely stated, as Macleod offers no analysis of the formation of prices, let alone of their variations. Second, the large gains provided by new markets attract the most enterprising adventurers, soon joined, though, by a herd of less capable imitators, causing ‘overproduction’. Third, the failure of a subsistence crop can create a sharp price increase that will attract speculators before ending in disaster. Finally, a ‘great general cause’ like the outbreak of war or the signing of peace will disrupt the normal course of business by increasing the demand for certain goods to the detriment of others, such disturbances being, of course, conducive to speculation. Having provided these initial indications, Macleod goes on to state the ‘object’ of the article, that is, ‘to examine the history of these catastrophes, and to explain what has been the action of the Bank of England, to consider the opinions of various persons, who are regarded as authorities on the subject, and to investigate the principles and the policy of the Bank Act of 1844’.

Henry Macleod’s Dictionary of political economy 295

13.3.2 The history of commercial catastrophes The greater part of CRISIS, COMMERCIAL is an historical account of the crises that occurred in the later half of the eighteenth century, on the one hand, and between 1825 and 1857, on the other hand. With regard to the series of events that led to the Bullion Report, the ‘fearful monetary disasters’ that occurred between 1815 and 1817, the crisis of 1819, ‘followed by the total suspension of cash payments by the Bank and the circumstances preceding the great crisis of 1825’, Macleod refers the reader to his section on ‘Banking in England’ and to the entry on the BULLION REPORT. 13.3.2.1 Late-eighteenth-century crises Between 1763 and 1797, Macleod distinguishes (pp. 627–632) five crises, which are not all granted the same amount of attention: less than one page to the first three, including no separate section for the crisis of 1772–1773. Macleod begins with the crisis of 1763, which occurred in the wake of the Peace of Paris. For the author, this crisis, which originated in Amsterdam, provides evidence that applying the precepts of the ‘Currency Principle’ – typographically indicated as a fully fledged entry but in fact only a section within CURRENCY – would not prevent crises. He describes the circumstances that led the crisis to spread to Hamburg and England, citing Smith, who bears witness to the support provided to merchants by the Bank of England. Ten years later, in 1773, another crisis broke out, to which the author allots seven lines where he stresses the ‘judicious liberality’ of the Bank of England that prevented a general destruction of credit. With the crisis of 1783, Macleod is provided with the opportunity to approvingly cite the doctrine endorsed in those days by the Bank of England ‘that while a drain on specie is going on, their issues should be contracted as much as possible; but that as soon as the tide had given signs of ceasing, and turning the other way, it was then safe to extend them freely’ (p. 628). This is precisely how the Bank of England handled this particular crisis, which was also an effect of the termination of a war, this time with the United States. Greater space is granted to the crisis of 1793, which Macleod analyses as a consequence of the signing of the Treaty of Commerce and Navigation in 1786, viewing the ensuing rise of foreign trade as both a blessing and a curse, and arguing that ‘Subsequent experience enables us to perceive that an increase of commerce proceeding at such a pace was sure to end in a catastrophe’. A table documents the sharp expansion in both exports and imports, which is accompanied by greater issues both by the Bank of England and by the so-called country banks. Because such banks did not enjoy sufficient credit, they were not immune from trouble in the event of a decline of confidence, hence Macleod’s criticism of the monopoly granted to the Bank of England. War was again the triggering factor, this time its declaration in 1793, as it ‘gave a shock to credit’. As the number of bankruptcies began to mount and actually started to soar following the declaration of war, the situation turned into a panic, which first affected only commercial houses, but soon

296 Cécile Dangel-Hagnauer spread to banks in England, but also in Scotland. In spite of the appeals to the Bank of England, the latter denied any assistance. Instead it ‘resolved to contract its issues’, causing ‘an electric shock’, as evidenced by Sir Francis Baring, cited twice in this passage. Relief came from a committee of the House of Commons that propounded a special issue of Exchequer bills in order to supplement the insufficient amount of currency. The bill was passed, spurring an immediate return of confidence. The decision was approved by the authors of the Bullion Report, as Macleod points out. Macleod evokes rather briefly the crisis of 1797 and the ensuing ‘Suspension of Cash Payments by the Bank of England’. He points, nevertheless, to the Bank of England’s inappropriate conduct at the time, that is, first the enlargement of its issues when foreign exchanges were adverse, and second their restriction when they became favourable. Macleod considers this contraction as a ‘disaster’, hence his explicit disapproval of the monopoly of the Bank of England: This disaster was the second notable penalty which the county paid within four years for the unjustifiable monopoly of the Bank. Never was there a more unfortunate example of monopolizing selfishness; it would neither establish branches of its own in the country, nor would it permit any other private company of power and solidity to do so, whose credit might have interposed and aided in sustaining its own. Moreover, when failure in confidence was felt in the country notes, it refused to supply notes of its own to supply in their place. The power of issuing what plays so important a part in commerce was absolutely forbidden to wealthy companies, and left in an unbounded freedom to private persons, many of whom had no capital or property to support their issues, and whose credit vanished like a puff of smoke in any public danger. The Bank consequently was left to bear the whole brunt of the crisis, solitary and unsupported, and finally succumbed. (p. 631) Ironically, though, Macleod also asserts that the war with France would have necessitated the suspension sooner or later, hence arguing that it was probably advantageous for the country that it did occur so early in the conflict. 13.3.2.2 The crisis of 1825 Macleod then jumps forward 28 years and broaches the crisis of 1825. The circumstances leading to the crisis having been described in the section on ‘Banking in England’, Macleod focuses here (pp. 632–635) exclusively on the handling of the crisis by the Bank of England. The crisis began with the fall of the exchange on Paris, which was the moment, to Macleod’s dismay, that the Bank of England chose to increase its issues, thereby nourishing the ‘speculative fever’ that was developing and adding ‘fuel to the flames’. As evidence of the actions taken by the Bank, Macleod inserts a table presenting the evolution of the quantities of coin and bullion, on the one hand, and of notes issued, on the other hand, adding that the country

Henry Macleod’s Dictionary of political economy 297 banks followed the example of the Bank of England and raised their issues substantially as well. Macleod then goes on to describe the rise of speculation in the first four months of 1825, soon followed by the reversal in the ‘tide of price’, which triggered calls for the payment of subscriptions, forced sales and ‘universal discredit’, aggravated by the limit set on interest rates at 5 per cent under usury law. Again, the Bank of England did the opposite of what was expected of it – at least by Macleod – this time in the reverse direction, and decided to contract its issues, making matters much worse by causing the failure of several houses, followed by a bank run. Macleod then recounts the circumstances that led the Bank to unleash its credit in December and issue an extra £5 million worth of notes (to be compared to the £17 million of the banknote circulation in November), which put an end to the panic in London. However, discredit had also spread throughout the country, which was only overcome by the distribution to the country banks of an opportunely rediscovered reserve of £1 notes. This immediately restored the credit of the whole banking system. Having completed his narration, Macleod comments on the ‘infatuated obstinacy’ of the Bank of England, which failed to recognize that the ‘circumstances of this famous crisis [were] the most complete and triumphant example of the unquestionable truth of the principles of the Bullion Report’. During the first months of the year, instead of diminishing issues when specie was being exported and speculation was spreading, it raised them. In the autumn, whereas the external drain had ceased, instead of augmenting its issues to meet the drain due to the difficulties of the country banks, it contracted them. Macleod also emphasizes that ‘the whole of the terrific crisis would have been saved’ had the bank resorted to its huge issue earlier. To support his argument he quotes several bankers heard in 1832 who had approved of the issue of the £1 notes, considering it helped to restore confidence in the country banks. The subentry ends with Macleod allowing himself the indulgence of quoting Lord Overstone – whose opinions, he reminds the reader, he has examined under CURRENCY – and noting the latter’s approval of the course of action taken by the Bank of England. 13.3.2.3 On the crisis of 1847 A lengthy section (pp. 635–638) is then devoted to the crisis of 1847. Macleod begins by underlining that the ‘great crisis of 1825’ had provided the proof that it was inappropriate to set a limit to the issues of the Bank of England. Nonetheless, he is also forced to recognize that ‘mismanagement’ on the part of the Bank’s directors had led to ‘difficulties in 1837 and 1839’. While these troubles were not serious enough to merit being dealt with in ‘a separate notice’, they nourished the arguments of the advocates of the currency principle – ‘Colonel Torrens, Mr. Samuel Jones Loyd (Lord Overstone)’ – and provided support for the passing of the Act of 1844 by Robert Peel. In addition to stressing the ‘complete delusion’ there was in supposing the Act could actually carry out the currency principle, Macleod insists that the ‘numerical limit’ set on the issues of the Bank of England was in complete contradiction to the opinion of bankers before 1840.

298 Cécile Dangel-Hagnauer Macleod then recounts the circumstances that led to the crisis. He begins by presenting a table depicting, along with the amount of banknotes in circulation, the bank’s reserves of banknotes and bullion, as well as the discount rate. It shows the regular decline of the reserves of banknotes between August 1846 and the outbreak of turbulence in April 1847, at which date it fell to £21⁄2 million. This drove the Bank of England (no longer restrained by usury law) to increase the discount rate, thereby inducing an inflow of bullion, soon followed, however, by a drain at the end of June, which prompted the Bank to raise the discount rate, this time more vigorously. The ‘real’ crisis of 1847 began in August. There had been a speculation on wheat, which had produced a sharp price increase, soon trailed by a price fall that caused numerous failures. In the meantime, foreign exchanges improved and bullion began to re-enter the country. Because its reserves of banknotes had fallen considerably, in October the Bank announced it would grant no further advances. This sparked massive sales of securities at prices that showed implicit interest rates of up to 50 per cent. At the height of the crisis, between 18 and 23 October, there were numerous bank failures and a complete cessation of lending. Appeals were made to the government to suspend the Act. After five days of refusal, the government issued a letter authorizing the Bank of England to raise its advances on condition that it maintained the discount rate at a minimum of 8 per cent. The publication of the letter had the immediate effect of restoring confidence and ending the crisis: the mere knowledge that banknotes were available eliminated the need for them. Macleod then refers to a meeting at Parliament where the Chancellor of the Exchequer proposed appointing a parliamentary committee to inquire into the events. The Chancellor’s words, which Macleod quotes extensively, mirror his own description of the events. Interestingly, Macleod also cites Overstone as having affirmed that the conduct of the Bank of England had been in compliance with the Act and was in no way responsible for the ensuing events, while, in the same breath, approving the publication of the government letter. Actually, two committees were appointed. The Committee of the Commons merely concluded that it was not necessary to amend the Act. Much more to Macleod’s liking was the report of the Committee of the Lords. Macleod writes of the ‘superior capacity of the Lords as men of business to the Commons’. He cites the report as having ‘refused to recognize the doctrine of Mr. Loyd that “the [government] letter . . . was not a departure from the principle of the Act”’. The report also criticized ‘the framers of the Act, and the supporters of the theory upon which it is founded’ for not having taken into consideration the opinion of ‘the most eminent authorities of former times’. The section ends with a quote from the report, which asserted that ‘the inflexibility of the rule prescribed by the restrictive clauses of the Act of 1844 is indefensible’, thereby acknowledging the wisdom that presided over the suspension of the Act in October 1847, and affirming that a ‘discretionary relaxing power’ should be granted to the Bank, though it should be exercised only in a situation of favourable foreign exchanges.

Henry Macleod’s Dictionary of political economy 299 13.3.2.3 The crisis of 1857 In contrast to the crisis of 1847, which was merely ‘the inevitable termination of the multiplicity of derangements of the proper course of business’, the crisis of 1857 (recounted in pp. 638–641) ‘revealed a depth of rottenness in the commercial world which appalled every one’. In addition, it was more intense than the previous crisis and broke out unexpectedly. Difficulties began in 1855, causing a drain on the resources of the Bank of England, which reacted by increasing the discount rate, a measure approved by Macleod, praising the directors for having ‘learnt from experience’ and noting that ‘these very variations . . . preserved the security of the Bank’. The crisis actually broke out in the autumn of 1857 when it became known that railway companies in the United States had been paying dividends out of unearned profits. This led to the failure of several American banks, before producing within a few weeks an out-and-out run on New York banks that soon spread to banks in Great Britain. Macleod gives an almost day-to-day account of the events between September and December with the names of banks that were closed, and the increase in the discount rate by the Bank of England, the Bank of France and the Bank of Hamburg. This time the Bank of England behaved as if it were expecting a suspension of the Act and, sure enough, the government soon informed the directors that it would propose a ‘Bill of Indemnity’ and support them in the event that the bank was obliged to issue more notes than authorized by the Act. On this occasion the mere publication of the government letter was ineffective and, in November, ‘an Act was passed permitting a temporary suspension of the Bank Act till February 1st, 1858, provided that Directors did not reduce their discount below 10 per cent. On 24th December they reduced it to 8 per cent., thereby reviving the operation of the Act’. These events are retraced in three tables provided in the subentry, which otherwise has little more to offer than historical interest. The first table highlights the alarming state of the Bank of England’s reserves on 11 and 12 November, which was the day the government issued its letter. In contrast to what happened in 1847, the government’s letter in itself achieved no miracle, as evidenced by the table depicting the issues of the Bank in excess of their statuary limit, between 13 and 30 November. Finally, the weekly statement of the Bank’s Issue and Banking Departments, such as they had been distinguished by the Act of 1844, is presented for the last quarter of 1857.

13.3.3 The opinions of ‘authorities’ on the subject of crises The next four pages of the entry (pp. 641–645) relate the debates on the policy of the Bank of England throughout the century preceding the publication of the Dictionary. They contain many quotations, mainly Thornton’s deposition before the Committee of the Lords of 1797, a page-long excerpt from Thornton’s Enquiry into the nature and effects of the paper credit of Great Britain (1802), passages from the Bullion Report, and several quotations of Robert Peel.

300 Cécile Dangel-Hagnauer Although the length of the passages quoted from Thornton is rather excessive, the choices made by Macleod point to his clear understanding of the problems at stake, namely, the part played by the Bank of England in performing its role of lender of last resort. In particular, he notes that, for Thornton, increasing/decreasing the quantity of banknotes will tend to prevent/promote a run on the Bank. Macleod also notes Thornton’s discussion of the ‘rapidity of the circulation of bank notes’ and its relation to the propensity to hoard. Accordingly, Thornton considers it is impossible to estimate in advance the demand for banknotes, because it depends on several factors, in particular on the state of confidence, which influences instruments to circulate more or less rapidly, depending on whether they are spent or hoarded. Commenting on the special issue of Exchequer Bills in 1797, Thornton stresses the role it played in restoring confidence, and the fact that it was a profitable operation for the government. Macleod also quotes the testimonies of the Governor and Deputy Governor of the Bank of England before the Bullion Committee and an excerpt from the Bullion Report, stating that any limitation of the issues of the Bank of England would have damaging effects, especially during a commercial crisis. This opinion was also supported by the authors of the Resumption Act of 1819 (which officially reinstated the gold standard), in particular Robert Peel, who introduced the bill into Parliament, and for whom setting a definite limit to the amount of issues was unwise, as the quantity of circulation that was required depended on the price of gold and on the situation of the foreign exchanges, as well as on the state of confidence. All these references to ‘authorities’ enable Macleod to establish a contrast between the lessons that had been learnt from the crises that occurred before 1840 and the doctrine that presided over the framing of the Bank Act of 1844. In particular, Macleod points to Peel’s volte-face and his adherence to the currency principle after having previously rejected the idea of establishing a limit on the Bank of England’s issues. In the end, the judgement of the authorities of the former times proved to be superior, according to Macleod, as the Bank of England was granted permission to increase its issues beyond what the Act authorized in 1847 and was actually driven to do so in 1857, thereby violating the law.

13.3.4 On the course of action to pursue in the event of commercial crises In the final two pages of the article (pp. 645–647), Macleod states his own views on these issues. First, he reaffirms his disagreement with the currency principle: The arbitrary limitation of the word Currency to bank notes payable to bearer on demand exclusively, is . . . quite erroneous and contrary to all sound philosophy. The Currency Principle itself is a pure delusion; and . . . it is the greatest delusion of all to suppose that Bank Act of 1844 carries it out. (p. 645) For Macleod, the main source of this ‘delusion’ lies in a ‘mistaken view of the nature of credit’ and money:

Henry Macleod’s Dictionary of political economy 301 Nothing is more common than to say that money has intrinsic value, and that paper is only the representation of value. The very contradiction of the ideas involved in this language is shewn under CREDIT, CURRENCY, VALUE. It is totally forgotten that money has no value except what it will exchange for, and that whatever will exchange for gold is the value of gold. Paper that is always exchanged for gold . . . is equal in value to gold. The true problem then, is to discover how paper may best be kept at the value of gold. (ibid.) Second, Macleod emphasizes what he considers as both the merits and the drawbacks of the Act of 1844. Accordingly, Macleod considers that the Act ‘compelled the Directors to pay a strict attention to the rate of discount’, by inducing them to raise it to avert a foreign drain of reserves. He also welcomes the fact that the public had begun to understand the need to do so. On the other hand, Macleod underlines that the Act had the effect of transforming a crisis, which the Bank of England had no power to prevent, into an outright panic. To make matters worse, the Act created an anomalous state of affairs by obliging the Bank to commit a breach of law, a ‘pernicious [situation] in a constitutional country’. Third, Macleod argues that in times of crisis, raising the discount rate is insufficient. Quite the contrary, since the expectation that it will be raised induces agents to borrow more and to increase their hoards, as it ‘is then not a question of profit, but of existence’, a statement that is reminiscent of the view developed by Thornton. In contrast, the decision to increase the issue of banknotes has the effect of causing hoarded ones to come ‘out of their hiding places’. A fourth issue to which Macleod returns is whether insolvent borrowers should be bailed out. Whereas, in principle, ‘insolvent houses should be swept away’, the author also points to the fact that insolvent borrowers have creditors, who do not all deserve to fail, all the more so as ‘the modern system of credit’ causes ‘the mischief’ to extend even to the ‘paper of the greatest houses’, which itself becomes ‘unmarketable’. The climate of uncertainly thereby created by the ‘general distrust’ that characterizes crises requires that the Bank provide large-scale assistance, simply because ‘The Bank only has the means of judging which houses are solvent and ought to be supported, and which are insolvent and ought to fail’. The article ends with some reflections on the constitution of the Bank of England. While Macleod believes that the Act of 1844 should be repealed, he is also quite certain that the directors would now manage the bank on ‘sound principles’. Reaffirming his disapproval of the monopoly of the Bank of England – considering it is ‘utterly opposed to all sound principles of political economy’ – he argues that it had created an abnormal situation where the directors could claim simultaneously that they exercised ‘a great function of State’ and that they ought ‘to be exempt of all interference as a private body’, whereas, on the other hand, ‘their interests as merchants were opposed to their duty as bankers’. Nevertheless, Macleod seems confident that the risk no longer existed that the ‘latter gave way to the former’. In other words, like Bagehot (1873), he accepts the situation created by historical tradition, despite regretting that the Bank of England had become ‘an engine of the State’.

302 Cécile Dangel-Hagnauer 13.4 CONCLUDING REMARKS The dictionary format has the advantage of imposing constraints on its contributors. Accordingly, several of Macleod’s deficiencies raised by commentators such as Maloney do not appear here. The tone is moderate, the language is rarely excessive and the piece is clear, well-written and does not go into overly technical legal details, while remaining well documented, in particular thanks to the insertion of several tables containing trade and banking statistics. More specifically, the Dictionary’s entry on CRISIS, COMMERCIAL provides an interesting historical account of the events that unfolded at the time of the crises that occurred throughout the century preceding the publication of the Dictionary. The scope of the article is, however, quite narrow, as it concerns central bank policy only and deals, almost exclusively, with the evolution of the doctrine that underpinned the action taken by the Bank of England when faced with the various crises. As a result, apart from a few short incursions into difficulties met by Scottish banks, the mention of the events that took place in the United States at the onset of the crisis of 1857, and some cursory allusions to the Banks of France, Amsterdam and Hamburg, notably the application of the currency principle to the management of the latter two, the focus is chiefly on crises in England. Consequently, the reader whose curiosity may have been aroused by the title of the entry, CRISIS, COMMERCIAL, is more than likely to be disappointed. Eager to understand what crises are, why the disruptions that affect credit recur periodically, and how they relate to the disturbances affecting production and trade that accompany them, he or she is left unsatisfied. Admittedly, the introduction does provide a few indications as to the role played by credit in both stimulating economic activity and causing overproduction, and it clearly appears that this ambiguous outcome is the work of speculation. Yet no proper analysis of speculative behaviour enables us to understand its intimate relationship with credit and its effect on prices. Whereas Macleod is prolix when it comes to expounding his views on subjects related to credit and banking, here it is quite clear that he has little to say. The reader would have also appreciated, in the course of the exposition of the historical events that accompanied the various crises, some analysis of the ‘causes’ that triggered each crisis, at least as an illustration of the four causes the author lists in his introductory section. For example, while noting that the Bank of England maintained low interest rates in the spring of 1847, whereas speculation was on the rise, Macleod does not seize the opportunity to analyse and illustrate the actual effect of such conduct. Whereas he states the discovery of new markets as one of the causes conducive to crises, he only mentions in passing the losses related to the Mexican mining schemes and to the South American 1822–1825 episode. Conversely, whereas Macleod refers to the ‘rottenness’ of the commercial world, embezzlement is not listed among his causes of crises. Moreover, although Macleod often cites John Stuart Mill throughout his works, his attention was seemingly not drawn to Mill’s analysis of the role of speculation in bringing about crises, whereas the latter’s first writings on the subject date back

Henry Macleod’s Dictionary of political economy 303 to as early as 1826 (Forget, 1990).9 Indeed, the following flat statement is the closest Macleod comes to depicting the unfolding of the crisis: The speculative fever was at its height in the first four months of 1825, when it had spent its force, and came to an end in the natural course of things. . . . In the meantime that slack water, which Mr. Tooke observes always precedes a great turn of prices, took place. The increased prices of commodities which speculation had caused, could no longer be kept from being realized, and prices fell as rapidly as they had risen. (p. 632) In other words, the crisis is thus the ‘natural’ outcome of speculation. At some point, the rise in prices stops and is followed by their decline. Besides, sooner or later the crisis comes to an end, thanks to the intervention of the Bank of England, but Macleod makes no explicit mention of the recovery and the return of prosperity. In addition, whereas Mill advanced an explanation of the periodic recurrence of crises (Besomi, 2010, p. 97), Macleod is content with just asserting that ‘Every one knows that commercial crises will recur periodically’ (p. 647). An issue that would be worth addressing more thoroughly concerns the place of Macleod’s contribution within the nineteenth-century English debates on money and banking. Whereas he repeatedly states his hostility with regard to the currency principle, he shows no clear adherence to the banking school. On the contrary, he underscores his disagreement with Tooke as to the effect of the Act of 1844 on the variations of the discount rate (too frequent, according to the latter). On the other hand, he expresses his disapproval of the monopoly of the Bank of England, but it is more for doctrinal – considering it is contrary to the principles of sound laissezfaire economics – and practical – arguing it has led to the development of weakly capitalized country banks – reasons, than on analytical grounds. Accordingly, Charles Coquelin is granted a short entry in the Dictionary, but Macleod makes no mention of his position in favour of free banking (on which, see Chapter 8). Yet Macleod developed both an interesting conception of money and an advanced view of banking, and clearly understood the need for a lender of last resort, but he did not combine these elements together within a comprehensive theoretical framework. In other words, he produced the necessary building blocks, but he did not endeavour to construct a coherent theory of money, credit and banking. More specifically, a question that comes to mind is to what extent Macleod can be considered as having participated in the process that led to the widespread acceptance, within what Fetter (1965) labels ‘British monetary orthodoxy’, of the role of the central bank as lender of last resort. In the historical process that led to Walter Bagehot’s specification of the functions of the lender of last resort, Macleod appears to be more a witness than a real participant. In effect, he clearly shows his approval of Thornton’s assessment of the events of 1797, and successfully picks up the main ingredients that make up Thornton’s conception. He also cites Sir Francis Baring, but does not pick up his terminological usage of ‘dernier resort’. Like Bagehot, he considers that it is the central bank’s role to increase the issue of

304 Cécile Dangel-Hagnauer banknotes in the advent of a panic. In particular, that the central bank will behave in this fashion is something that must be publicly stated and known to everyone. He also believes that the central bank should only bail out solvent borrowers. On the other hand, although he is in favour of raising the discount rate in times of panic, he does not go so far as to explain, like Bagehot, the rationale behind imposing a penalty rate, in particular that doing so would encourage greater efficiency in bank management.10 Furthermore, he does not explicitly defend the principle that the central bank should hold large reserves. Overall, the greatest shortcoming of this entry lies perhaps in its general lack of originality. A large proportion of the entry is made up of quotations from ‘authorities’ heard by the parliamentary committees that were appointed in the wake of the different ‘commercial catastrophes’. More disappointing still is the fact that, although Sir Francis Baring is cited twice and Henry Thornton is generously quoted, the notion of lender of last resort does not stand at the centre of his argument, whereas Macleod clearly understood that this was the function of the Bank of England that was at work each time it intervened to put an end to bank runs and panics. Unlike Thomas Joplin and Vincent Stuckey, who were important actors during the 1825 crisis and the 1832 hearings (O’Brien, 2003), Macleod did not take part in developing the concept of lender of last resort. Nor did he participate, alongside Bagehot,11 in disseminating the idea of lender of last resort and helping both the economics profession and the public to understand its importance. This is precisely what could have been expected from a dictionary article – another missed opportunity, another instance of his ‘being out of touch’ (Maloney, 1985, 140)?

NOTES 1 Several entries refer to articles that never came into being. For instance, ACCUMULATION refers to COMPANY, and COMPANY refers to PARTNERSHIP. The dictionary ends with an entry devoted to CZÖRNIG, C.F. VON, followed by an additional one on COOPERATION, apparently forgotten along the way, which also refers to PARTNERSHIP. 2 For details, see Chapter 2, Section 2.3 of the present volume. 3 A notable exception is Jevons; see White, 2004. 4 Interestingly, the bibliography that Juglar appends to his dictionary article of 1891 (see Chapter 12 of the present volume) refers to Macleod’s entry on crises in his Dictionary of political economy. However, the designation of the entry (‘Banks crisis’) is erroneous. 5 Macleod’s contribution to the theory of credit was the subject, early in 1866, of N. G. Koopmans’s Ph.D. dissertation in Belgium. Also noteworthy is M. Lindner’s (1929) Ph.D. dissertation on the same subject and defended in Germany. Both references are cited by Hayek in 1933. 6 Macleod makes extensive use of capital letters, emphasizing words by writing them in upper-case. These words have been emphasized here with the use of italics. 7 For an in-depth analysis of the relation between Jevons and Macleod, see White, 2004. 8 This distinction is reminiscent of Juglar’s division between the ‘determining cause’ of all crises and the ‘occasional causes’ or particular circumstances in which crises burst out; see Chapter 12 of this volume.

Henry Macleod’s Dictionary of political economy 305 9 This is, in fact, unsurprising, considering Macleod’s general assessment of J. S. Mill, stated in his History of Economics and cited by White, 2004: ‘Every page of [J. S. Mill’s] work is full of the most glaring ignorance and blunders; and there is scarcely a single point in which he does not contradict himself. Now, in sober seriousness, we must ask how is this more consistent with scientific morality than cheating at cards, or forgery, or issuing base coin’ (Macleod, 1896b, p. 123). 10 As noted by Laidler, 2003, p. 70, fn. 16), Goodhart takes issue with T. M. Humphrey’s (1987) interpretation of the ‘very high’ rate, which Bagehot advocates the central bank should apply to protect reserves, as a ‘penalty’ rate (Humphrey, LENDER OF LAST RESORT, in →The new Palgrave dictionary of money and finance, 1987); see also p. 71, fn. 18. 11 As Fetter (1965, pp. 269–271) writes: ‘In 1860, . . . [Bagehot] became the editor of the Economist . . . Bagehot, despite his devotion to the principle of free trade, . . . brought in the idea of the Bank as a lender of last resort in a way that ran counter to much of James Wilson’s thought expressed earlier in the Economist’.

REFERENCES Anonymous, 1858, A dictionary of political economy: biographical, bibliographical, historical, and practical. By Henry Dunning Macleod, Esq., of the Inner Temple, barristerat-law. Part I. Longman and Co. The Literary Examiner, Issue 2655, Saturday, 18 December. Anonymous, 1902, Obituary. The Economic Journal, 12: 48, December, pp. 583–584. Bagehot, W., 1873, Lombard Street – A description of the money market (London: John Murray). Baring, Sir F., 1797, Observations on the establishment of the Bank of England and on the paper currency of the country (New York: Augustus M. Kelly, 1967). Besomi, D., 2010, The periodicity of crises. A survey of literature before 1850, Journal of the History of Economic Thought, 32: 1, pp. 85–132. Chevalier, M., 1862, Des définitions et de la nature du numéraire et du crédit – A l’occasion de deux ouvrages de M. H. D. Macleod, Éléments d’économie politique et Dictionnaire d’économie politique, Journal des Économistes, 2: 35, August, pp. 173–191. Fetter, F.W., 1965, Development of British monetary orthodoxy – 1797–1875, Cambridge, MA: Harvard University Press, reprinted (Fairfield: Augustus M. Kelly, 1978). Forget, E. L., 1990, John Stuart Mill’s business cycle, History of Political Economy, 22: 4, pp. 629–642. Fryer, S.E., rev. Maloney, J., 2004, Macleod, Henry Dunning (1821–1902). In Oxford dictionary of national biography (Oxford University Press) [www.oxforddnb.com/view/ article/34787, accessed 9 August 2009]. Gurley, J. G. and Shaw, E. S., 1960, Money in a theory of finance (Washington, DC: Brookings Institution). Kircheisen, J., 1864, Ein englisches und ein italienisches Wörterbuch der Volkswirtschaft – A dictionary of political economy: biographical, bibliographical, historical, and practical. By Henry Dunning Macleod, Esq. of the Inner Temple, barrister-at-law, etc. London 1862 u. 63. Vol. I, part 1–7 à 4 sh., Jahrbücher für Nationalökonomie und Statistik, 2, pp. 456–461. Koopmans, N. G. Cnoop, 1866, Macleods Krediettheorie, Ph.D. dissertation (Leuven). Laidler, D., 2003, Two views of the lender of last resort: Thornton and Bagehot, Cahiers d’Économie Politique, 45, pp. 61–78.

306 Cécile Dangel-Hagnauer Lindner, M. 1929, Die Kredittheorie von Henry Dunning Macleod, Ph.D. dissertation (Görlitz). Macleod, H. D., 1851, The results of the operation of the poorhouse system in Ross (Inverness: Courier Office). Macleod, H. D., 1855–1856, The theory and practice of banking: with the elementary principles of currency; credit; and exchanges, Vols 1 and 2 (London: Longman, Brown, Green and Longmans). Macleod, H. D., 1858, The elements of political economy (London: Longman, Brown, Green, Longmans and Roberts). Macleod, H. D., 1862, On the definition and nature of the science of political economy (Cambridge and London: Macmillan). Macleod, H. D., 1872–1875, The principles of economical philosophy, Vols 1 and 2 (London: Longmans, Brown, Green, Reader and Dyer). Macleod, H. D., 1875, What is political economy? Contemporary Review, 25 May, pp. 871–893. Macleod, H. D., 1882, Lectures on credit and banking (London: Longmans, Brown, Green, Reader and Dyer). Macleod, H. D., 1887, On the modern science of economics (London: John Heywood). Macleod, H. D., 1889, The theory of credit, Vols I and II (London: Longmans, Green & Co). Macleod, H. D., 1894, Bimetallism (London: Longmans, Green & Co.). Macleod, H. D., 1896a, Great Britain. In A. E. Horn, H. D. Macleod and J. P. Townsend (eds), A history of banking in all the leading nations, Vol. 2 (New York: Editor of the Journal of Commerce and Commercial Bulletin), pp. 1–337. Macleod, H. D., 1896b, The history of economics (London: Bliss Sands & Co.). Macleod, H. D., 1898, Indian currency (London: Longmans, Green & Co.). Maloney, J., 1985, Marshall, orthodoxy and the professionalisation of economics (Cambridge: Cambridge University Press). O’Brien, D. P., 2003, The lender-of-last-resort concept in Britain, History of Political Economy, 35: 1, pp. 1–19. Richelot, H., 1863, Une révolution en économie politique – Un exposé des doctrines de M. Macleod (Paris: Capelle). Schumpeter, J. A., 1954, History of economic analysis, reprinted (London: Routledge, 1994). Skaggs, N. T., 1997, Henry Dunning Macleod and the credit theory of money. In A. J. Cohen, H. Hagemann and J. Smith (eds), Money, financial institutions and macroeconomics (Boston: Kluwer Academic Publishers). Skaggs, N. T., 2003, H. D. Macleod and the origins of the theory of finance in economic development, History of Political Economy, 35: 3, pp. 361–384. Skaggs, N. T., 2004, Macleod, Henry Dunning (1821–1902). In D. Rutherford (ed.), The biographical dictionary of British economists (Bristol: Thoemmes Continuum). Thornton, H., 1802, An enquiry into the nature and effects of the paper credit of Great Britain, edited and with an Introduction by F. A. Hayek (London: George Allen & Unwin, 1939). White, M. V., 2004, Sympathy for the devil: H. D. Macleod and W. S. Jevons’s theory of political economy, Journal of the History of Economic Thought, 26: 3, September, pp. 311–329.

14 Adolf Wagner Economic crises, capitalism and human nature Vitantonio Gioia

Handwörterbuch der Volkswirthschaftslehre (1866, 1870), edited by H. Rentzsch, Leipzig: Mayer, 1866, and Julius Klinkhardt, 1870.

14.1 THE HANDWÖRTERBUCH DER VOLKSWIRTHSCHAFTSLEHRE The Handwörterbuch der Volkswirthschaftslehre (1866, 1870) is a significant work published during an extraordinary phase of the development of German social sciences, which was committed to the making of the ‘bürgerliche Gesellschaft’. A fundamental element of this process was given by the progressive emancipation of the individuals from the oppressive control ‘of the old Ständestaat (corporative state)’ (Schiera, 1989, p. 12). The rising autonomy of the social sciences, as an essential aspect of the process of ‘requalification of German liberalism’, led to a general reconsideration of the role of the state, defining new institutional models, original political ends and new kinds of relationships between political and economic space. In that context, the Handwörterbuch was explicitly conceived as a useful initiative to spread those liberal ideas that were able to bridge the gap between the old economic culture and the new models of economic behaviour. In Wagner’s opinion, the Handwörterbuch represented that radical kind of liberalism in Germany defined as Manchesterism (Manchester-Richtung) (Wagner, 1907–1908, Vol. 1, pp. 13, 23). In the Handwörterbuch, political economy was generally conceived as a part of the sciences of the state according to the cameralistic tradition and perceived as an autonomous science, able to develop a significant role in the process of cultural changes of German society (Höhmann, 2001, p. 189). In the Introduction to the Handwörterbuch der Volkswirthschaftslehre, Rentzsch defined its tasks as follows: 1

to build a comparative analysis between economic theories, taking into due consideration ‘the questions of the present’;

308 Vitantonio Gioia 2 3

to emphasize the relationship between the theoretical and the practical dimensions of the economic issues; to insert economic theorizing within the context of ‘different legislations’, in order to be able to evaluate ‘their influence’ on the necessary political reforms. (Rentzsch, VORWORT, p. i).

The Handwörterbuch wanted to represent ‘economic progress in an effective way’, placing in the foreground authors who have had a significant role ‘in the scientific making of the political economy’, but not neglecting the voices of their opponents, when their reasons were worthy of consideration (VORWORT, p. i). The dictionary was addressed to people who could play a significant role in the modernization process of Germany: the ‘scholars’, who aimed to grasp economic theories with a comprehensive view in the perspective of the solution of contemporary problems; the ‘economic corporations’ (chambers of commerce and other associations), which promoted the diffusion of new views among the economic agents; and, finally, the social scientists, who could use the Handwörterbuch as a ‘reference book’. In Rentzsch’s opinion, the Handwörterbuch, given its structure, ‘generally would not have left researchers without the expected answers’ (VORWORT, p. iv). In this way it will contribute to the increase and diffusion of economic culture and it will be able ‘to pave the way for economic reforms sustained by the strength of public opinion’ (VORWORT, p. iv).

14.2 ADOLF HEINRICH GOTTHILF WAGNER Adolf Heinrich Gotthilf Wagner was born at Erlangen on 25 March 1835. He studied jurisprudence and political science at the universities of Heidelberg and Göttingen. He was professor of political science at the universities of Dorpat and Freiburg. In 1870 he held the chair of Staatswi