Hostname: page-component-cd9895bd7-p9bg8 Total loading time: 0 Render date: 2024-12-27T17:55:43.948Z Has data issue: false hasContentIssue false
  • English
  • Français

WRITING “THE PROBABILITY APPROACH” WITH NOWHERE TO GO: HAAVELMO IN THE UNITED STATES, 1939–1944

Published online by Cambridge University Press:  14 May 2007

Olav Bjerkholt
Olav Bjerkholt
Affiliation:
University of Oslo/Statistics Norway
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper is concerned with the progress of Trygve Haavelmo's research and with his activities in general during his stay in the United States from June 1939 until the publication of his thesis “The Probability Approach in Econometrics” (Haavelmo, 1944, Econometrica 12, Suppl. 1–118) in July 1944. His original intention had been to stay in the United States only until the end of 1940, but the outbreak of World War II and the German occupation of Norway left him stranded. His “Theory and Measurement” treatise (Haavelmo, 1941, “On the Theory and Measurement of Economic Relations,” hectograph), the first version of “The Probability Approach,” was completed by the middle of 1941. From 1942 Haavelmo worked in New York for the Norwegian government in exile and was called upon to present his ideas to econometricians. Throughout his time in the United States he argued that probability should be accepted as an integral part of economic theory and as a basis for verification in economics. This paper considers how much of Haavelmo's approach was the result of his prewar experiences and how much the result of his time in the United States. It elaborates on his contact with Jerzy Neyman, Abraham Wald, and Jakob Marschak and the circumstances leading to the publication of “The Probability Approach.” Haavelmo's activities have been tracked through letters, seminar notes, and a reconstruction of his itinerary. The paper is a sequel to Bjerkholt (2005, Econometric Theory 21, 491–533).The presentation owes very much indeed to the advice of three anonymous referees and to the editor Peter Phillips, as the result of which it was restructured, reformulated, and much improved. I am sincerely grateful to all of these individuals for their generous and constructive advice. The source material for the paper is to a large extent correspondence and documents from the Haavelmo Archive at the Department of Economics, University of Oslo, as organized by Tore Thonstad. It also draws on material from the Frisch correspondence files at the National Library of Norway and from the Frisch Archive at the Department of Economics, University of Oslo. I am most grateful to Wendy Glickman of the Rockefeller Archive Center for providing me with copies of the monitoring sheets on Haavelmo. I owe my colleague Tore Schweder thanks for very helpful advice. I have furthermore benefited from personal communication with Ted Anderson, Kenneth J. Arrow, Leo Hurwicz, Eilev S. Jansen, Lawrence R. Klein, J.J. Polak, and Paul A. Samuelson, for which I am most grateful. NBER's Claudia Goldin, Chris Nagorski, and Robert Lipsey helped me sort out some puzzles. Thanks are also due to Lesney Levene for invaluable linguistic advice and to Inger Bjerkodden for encouragement all along. The responsibility for all remaining errors (surely, a nonempty set) is entirely my own.

Type
Research Article
Information
Econometric Theory , Volume 23 , Issue 5 , October 2007 , pp. 775 - 837
Copyright
© 2007 Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Aldrich, J. (1994) Haavelmo's identification theory. Econometric Theory 10, 198–219.Google Scholar
Allen, R.G.D. (1939) The assumption of linear regression. Economica 6, 191–201.Google Scholar
Arrow, K. (1978) Jacob Marschak. Challenge (March–April), 69–71.
Bird, K. & M.J. Sherwin (2005) American Prometheus. The Triumph and Tragedy of J. Robert Oppenheimer. Knopf.
Bjerkholt, O. (1998) Ragnar Frisch and the foundation of Econometric Society and Econometrica. In S. Strøm (ed.), Econometrics and Economic Theory in the 20th Century. The Ragnar Frisch Centennial Symposium, pp. 26–57. Cambridge University Press.
Bjerkholt, O. (2005) Frisch's econometric laboratory and the rise of Trygve Haavelmo's Probability Approach. Econometric Theory 21, 491–533.Google Scholar
Christ, C.F. (1994) The Cowles Commission's contributions to econometrics at Chicago. Journal of Economic Literature 32, 30–59.Google Scholar
Cowles Commission (1939) Report of Fifth Annual Research Conference on Economics and Statistics at Colorado Springs, July 3–28, 1939. Cowles Commission for Research in Economics.
Cowles Commission (1940) Report of Sixth Annual Research Conference on Economics and Statistics at Colorado Springs, July 1–26, 1940. Cowles Commission for Research in Economics.
Cowles Commission (1952) Economic Theory and Measurement: A Twenty Year Research Report 1932–1952. Cowles Commission for Research in Economics.
Davis, G.C. (2000) A semantic interpretation of Haavelmo's structure of econometrics. Economics and Philosophy 16, 205–228.Google Scholar
Dobb, E.L. (1941) The problem of assigning a length to the cycle to be found in a simple moving average and in a double moving average of chance data. Econometrica 9, 25–37.Google Scholar
Epstein, R.J. (1987) A History of Econometrics. North-Holland.
Frisch, R. (1926) Kvantitativ formulering av den teoretiske økonomikks lover. Statsøkonomisk Tidsskrift 40, 299–334.Google Scholar
Frisch, R. (1929) Correlation and scatter in statistical variables. Nordic Statistical Journal 1, 36–102.Google Scholar
Frisch, R. (1931) Johan Åkerman: Om det ekonomiska livets rytmikk. Statsvetenskaplig Tidskrift 34, 281–300.Google Scholar
Frisch, R. (1933a) Propagation problems and impulse problems in dynamic economics. In K. Koch (ed.), Economic Essays in Honour of Gustav Cassel, pp. 171–205. Allen & Unwin.
Frisch, R. (1933b) Pitfalls in the Statistical Construction of Demand and Supply Curves. Veröffentlichungen der Frankfurter Gesellschaft für Konjunkturforschung, Neue Folge, Heft 5. Hans Buske.
Frisch, R. (1934) Statistical Confluence Analysis by Means of Complete Regression Systems. Publikasjon 5, Institute of Economics, University of Oslo.
Frisch, R. (1938) Statistical versus theoretical relations in economic macrodynamics. Memorandum prepared for the Business Cycle Conference at Cambridge, England, July 1938, to discuss Professor J. Tinbergen's publications for the League of Nations.
Frisch, R. & H. Holme (1935) The characteristic solution of a mixed difference and differential equation occurring in economic dynamics. Econometrica 3, 225–239.Google Scholar
Griliches, Z. (1974) Errors in variables and other unobservables. Econometrica 42, 971–998.Google Scholar
Haavelmo, T. (1938a) The method of supplementary confluent relations, illustrated by a study of stock prices. Econometrica 6, 203–218.Google Scholar
Haavelmo, T. (1938b) Drei Beispiele der ökonometrischen Forschung in den Niederlanden. Weltwirtschaftliches Archiv 48, 7*–11*.Google Scholar
Haavelmo, T. (1939a) Review of Herman Wold: A Study in the Analysis of Stationary Time Series, Uppsala, 1938 (Almqvist & Wiksell). Weltwirtschaftliches Archiv 50, 114*–116*.Google Scholar
Haavelmo, T. (1939b) Statistical testing of dynamic systems if the series observed are shock cumulants. In Report of Fifth Annual Research Conference on Economics and Statistics at Colorado Springs, July 3–28, 1939, pp. 45–47. Cowles Commission for Research in Economics.
Haavelmo, T. (1940a) The inadequacy of testing dynamic theory by comparing theoretical solutions and observed cycles. Econometrica 8, 312–321.Google Scholar
Haavelmo, T. (1940b) The problem of testing economic theories by means of passive observations. In Report of Sixth Annual Research Conference on Economics and Statistics at Colorado Springs, July 1–26, 1940, pp. 58–60. Cowles Commission for Research in Economics.
Haavelmo, T. (1941a) A note on the variate difference method. Econometrica 9, 74–79.Google Scholar
Haavelmo, T. (1941b) The effect of the rate of interest on investment: A note. Review of Economic Statistics 23, 49–52.Google Scholar
Haavelmo, T. (1941c) On the Theory and Measurement of Economic Relations. Hecto, Harvard University, Cambridge, Massachusetts.
Haavelmo, T. (1942) Wicksell's theory of interest rates and prices (abstract). Econometrica 10, 178–179.Google Scholar
Haavelmo, T. (1943a) The statistical implications of a system of simultaneous equations. Econometrica 11, 1–12.Google Scholar
Haavelmo, T. (1943b) Statistical testing of business cycle theories. Review of Economic Statistics 25, 13–18.Google Scholar
Haavelmo, T. (1944) The probability approach in econometrics. Econometrica 12, supplement, 1–118.Google Scholar
Haavelmo, T. (1945) Multiplier effects of a balanced budget. Econometrica 13, 311–318.Google Scholar
Haavelmo, T. (1989) Econometrics and the welfare state. In Les Nobel Prix 1989, pp. 283–289. The Nobel Foundation.
Haavelmo, T. (2007) The nature and logic of econometric inference: The 1942 Hillside Lecture. Econometric Theory 23, 838–851.Google Scholar
Haavelmo, T. & H. Staehle (1941) “The Elements of Frisch's Confluence Analysis.” Hecto, Harvard University, Cambridge, Massachusetts.
Heckman, J.J. (1992) Haavelmo and the birth of modern econometrics: A review of The History of Econometric Ideas by Mary Morgan. Journal of Economic Literature 30, 876–886.Google Scholar
Hendry, D.F., & M.S. Morgan, eds. (1995) The Foundations of Econometric Analysis. Cambridge University Press.
Hood, W.C., & T.C. Koopmans, eds. (1953) Studies in Econometric Method. Cowles Commission Monograph 14. Wiley.
Hotelling, H. (1942) Problems of prediction. American Journal of Sociology 48, 61–76.Google Scholar
Klein, L.R. (1943) Pitfalls in the statistical determination of the investment schedule. Econometrica 11, 246–258.Google Scholar
Klein, L.R. (1991) The Statistics Seminar, MIT, 1942–1943. Statistical Science 6, 320–330.Google Scholar
Keynes, J.M. (1939) Professor Tinbergen's method. Economic Journal 49, 558–568.Google Scholar
Koopmans, T.C. (1937) Linear Regression Analysis of Economic Time Series. Publication 20, Netherlands Economic Institute.
Koopmans, T.C. (1940) The degree of damping in business cycles. Econometrica 8, 79–89.Google Scholar
Koopmans, T.C. (1941a) Distributed lags in dynamic economics. Econometrica 9, 128–134.Google Scholar
Koopmans, T.C. (1941b) The logic of econometric business cycle research. Journal of Political Economy 49, 157–181.Google Scholar
Koopmans, T.C. (1942) Serial correlation and quadratic forms in normal variables. Annals of Mathematical Statistics 13, 14–33.Google Scholar
Koopmans, T.C. ed. (1950) Statistical Inference in Dynamic Economic Models. Cowles Commission Monograph 10. Wiley.
Levy, P. (1937) Théorie del'addition des variables aléatoires. Gauthier-Villars.
Mann, H.B. & A. Wald (1943) On the statistical treatment of linear stochastic difference equations. Econometrica 11, 173–220.Google Scholar
De Marchi, N. & C. Gilbert (1989) Introduction. Oxford Economic Papers (Special Issue on the History and Methodology of Econometrics) 41, 1–14.Google Scholar
Marschak, J. (1942) Economic interdependence and statistical analysis. In O. Lange, F. McIntyre, & T.O. Yntema (eds.), Studies in Mathematical Economics and Econometrics—In Memory of Henry Schultz, pp. 135–150. University of Chicago Press.
Marschak, J. & W.H. Andrews (1944) Random simultaneous equations and the theory of production. Econometrica 12, 143–205.Google Scholar
Morgan, M.S. (1990) The History of Econometric Ideas. Cambridge University Press.
Neyman, J. (1938a) Lectures and Conferences on Mathematical Statistics. Mimeo, U.S. Department of Agriculture, Washington, DC.
Neyman, J. (1938b) L'estimation statistique traitée comme un problème classique de probabilité. In Actualités scientifique et industrielles 739. Conférence internationale de sciences mathématiques, Paris.
Qin, D. (1993) The Formation of Econometrics. Clarendon Press.
Reid, C. (1982) Neyman—from life. Springer-Verlag.
Reiersøl, O. (1941) Confluence analysis by means of lag moments and other methods of confluence analysis. Econometrica 9, 1–24.Google Scholar
Reiersøl, O. (1945) Confluence analysis by means of instrumental sets of variables. Arkiv för Matematik, Astronomi och Fysik 32a, 1–119.Google Scholar
Samuelson, P.A. (1941) The stability of equilibrium: Comparative statics and dynamics. Econometrica 9, 97–120.Google Scholar
Samuelson, P.A. (1942) A note on alternative regressions. Econometrica 10, 80–83.Google Scholar
Samuelson, P.A. (1991) Statistical flowers caught in amber. Statistical Science 6, 330–338.Google Scholar
Scarf, H.E. (1992) Tjalling Charles Koopmans; August 28, 1910–February 26, 1985. Cowles Foundation Discussion paper 1029, Yale University, New Haven, Connecticut.
Spanos, A. (1989) On rereading Haavelmo: A retrospective view of econometric modelling. Econometric Theory 5, 405–429.Google Scholar
Staehle, H. (1942) The measurement of statistical cost functions: An appraisal of some recent contributions. American Economic Review 32, 321–333.Google Scholar
Tinbergen, J. (1939) Statistical Testing of Business-Cycle Theories. Vols. I and II. League of Nations.
Tintner, G. (1940) The Variate Difference Method. Principia Press. (Cowles Commission Monograph 5. Wiley.)
Tintner, G. (1941) The variate difference method: A reply. Econometrica 9, 163–164.Google Scholar
Tryfos, P. (2004) The Measurement of Economic Relationships. Kluwer Academic Publishers.
Uspensky, J.V. (1937) Introduction to Mathematical Probability. McGraw-Hill.
Wald, A. (1939a) A new formula for the index numbers. Econometrica 7, 319–331.Google Scholar
Wald, A. (1939b) Contributions to the theory of statistical estimation and testing hypotheses. Annals of Mathematical Statistics 10, 299–326.Google Scholar
Wald, A. (1940a) The approximate determination of indifference surfaces by means of Engel curves. Econometrica 8, 144–175.Google Scholar
Wald, A. (1940b) The fitting of straight lines if both variables are subject to error. Annals of Mathematical Statistics 11, 284–300.Google Scholar
Wilks, S.S. (1937) Statistical Inference. Edwards Bros.
Wilks, S.S. (1943) Mathematical Statistics. Princeton University Press.
Wilson, E.B. (1946) Review of The Probability Approach in Econometrics by Trygve Haavelmo. Review of Economic Statistics 28, 173–174.Google Scholar
Wold, H. (1938) A Study in the Analysis of Stationary Time Series. Almqvist & Wiksells.
Wolfowitz, J. (1952) Abraham Wald, 1902–1950. Annals of Mathematical Statistics 23, 1–13.Google Scholar
Woolley, E.B. (1941) The method of minimized areas as a basis for correlation. Econometrica 9, 38–62.Google Scholar
Working, E. (1927) What do statistical “demand curves” show? Quarterly Journal of Economics 41, 212–235.Google Scholar