How it all began: Ragnar Frisch and the founding of the Econometric Society (1/3)

Economics is quantitative and mathematical. Nobody can question that. We might regret it, but it’s a fact that 95% of economists today make quantitative studies.  Only a small fraction of them managed to publish it in Econometrica, one of the top five journal edited by the Econometric Society (ES). Though, this has not always been the case. Things really change with the founding of the ES in December 1930 in Cleveland, USA. One economist played a key role in that development: the Norwegian Ragnar Frisch. Along with a bunch of mathematical American economists such as Irving Fisher and Charles Roos (at a time they were only a few) it was him who caused a sea change in the way to do economics (see the tribute to Frisch on ES website)

Ragnar Frisch is much less known than Fisher, without mentionning John Maynard Keynes or Joseph Schumpeter, which all became president of the society well before him. Though, he contributed enormously to the development of econometrics. How such a 35 years economist from a remote country like Norway manage to become such a driving force ?

It is no accident that most historical accounts (Bjerkholt 2014, Bjerkholt 2017, Louca 2007) are Frisch-centric.

Frisch gratuated in economics from Oslo university at a time when it was the easiest way to get a degree (Frisch, 1970 in Louca, 2007: 11). He moved to France in the early 1920s to study mathematics, where he remained until 1928 and then traveled to the United States before setling at Oslo where he became from 1931 the leader of the newly founded norwegian Institute of Economics. Frisch is known for popularizing the term Macrodynamics and Microdynamics. He was also key in popularizing the term Econometrics (Louça, 2007: 10). In his paper “Sur un problème d’Economie pure”, he wrote  “Econometrics has as its aim to subject abstract laws of theoretical political economy or ‘pure’ economics to experimental and numerical verification, and thus to turn pure economics, as far as is possible, into a science in the strict sense of the word” (Frisch, 1926 quoted in Louca, 2007: 10).

There were several reasons why he wanted to follow that line. The issue was first and foremost to continue the works of mathematical economists like Augustin Cournot, Stanley Jevons, Léon Walras, Fisher, and Vilfredo Pareto. Frisch wanted to succeed where he thought they had failed. For that, his aim was to figure out how to unify mathemathics, statistics and economics. This meant ” envisioning a general mathematical analysis of statistical phenomena” (Louca, 2007: 10, quoted in Andvig, 1981: 703). It also meant to develop new methods likely to embrace dynamic phenomena and to articulate it to economic statistics, (thereby gaining numerical results). (Louca, 2007: 10, quoted in Andvig, 1981: 703).

In the 1920s most mathematical economics is done in Europe. It is thus not surprising if Frisch turned to the French engineer-economist François Divisia in 1926 in order to launch a journal and to establish a ‘restricted circle’ (whose size whose discussed) of economists using mathematical methods, (Bjerkholt, 2017, 180). Frisch then shared his plan with mathematical economists from all over Europe: the Russian Ladislaus von Bortkiewicz and Eugen E. Slutsky, the British Arthur L. Bowley, the Hungarian statistician Karoly (Charles) Jordan, and the renowned Austrian economist Joseph Schumpeter (Louca, 2007: 11). It was Schumpeter who urged him to travel to the US. For him, an European association desespertaly needed “U.S. blood and money for worldwide success and influence” (see Allen’s biography on Fisher, quoted in Bjerkholt, 2017: 178). Within a few years, Frisch ended up at the centre of an European network of mathematical economists.

In 1928, Frisch crossed the Atlantic from Europe to the United States where he started a tour of US universities and research institutions in search for scholars interested in econometrics, without finding many to his great regret. It appears that scholars interested in econometrics came mostly from Europe, in contrary to the US were mathematical economic tradition was far from being dominant (Bjerkholt 2017: 178) and where most works were dedicated to agricultural issues. Though, he managed to met Charles F Ross, a mathematical economist from Cornel who took a great interest in the Frisch’s initiative. Additionally, he met Fisher at Yale and gained his support (Bjerkholt, 2017: 178).

Fisher was however pessimistic about the chance of creating a new society. He had failed to create a mathematical society of economists in the early 1910s (Christ, 2010: 2), and thought that the balance of forces was unfavorable. Institutionalists, led by Thorstein Veblen from the end of the 19th century, were at their peak during the Interwar (Rutherford, 2001: 1). This encouraged the development of quantitative methods by economists much more interested in making connections with sociologists and much less with mathemathical economists, even if institutionalists economists from the National Bureau of Economic Research (NBER) like Wesley Clair Mitchell, Mordecai Ezekiel, John Maurice Clarck accepted to join the ES.

Ironically, the American Economic Association (AEA) controlled by institutionnalists, turned out to be no real obstacle in this creation. Founded in 1885 by American economists influenced by and trained in the German Historical School, the AEA and its journal the American Economic Review (AER) published articles aimed at a relatively wide audience. Thus, articles which were too technical or mathematical rarely found their way into the AER (Rutherford, 2001: 5) and this anti-technical bias was also found in other contemporary American journals (see HET website). According to Gérard Debreu, one of the main contributor to mathematical economics after WW2 the 1933 volume of the AER “contained exactly four pages where any mathematical symbol appeared, and two of them were in the Book Review Section” (Debreu, 1991). Because nature abhors a vacuum, there was in the end a great opportunity to create a concurrent newspaper to the AER.

Benefiting from Fisher’s leadership, experience, and prestige (somewhat tarnished after the 1929 crash) and his contacts with American economists, along with Ross’s financial networks, Frisch made the first step towards the creation of the Econometric Society in December 1930.

In a subsequent post, we will review the strategy adopted by Frisch to make this possible in the months which follow his return from the US.

References 

Andvig, J. (1981), ‘Ragnar Frisch and Business Cycle Research during the Interwar
Period’, History of Political Economy 13(4): 695–725