Expectations and Full Employment: Hansen, Samuelson and Lange

Michaël Assous, Olivier Bruno, Vincent Carret and Muriel Dal Pont Legrand
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Vincent Carret: Université Lyon 2, CNRS, Triangle

No 2020-17, GREDEG Working Papers from Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France

Abstract: From the outset, expectations were a central part of the first macrodynamic models and early growth theories. In the 1940s, a third line of research emerged which questioned the capacity of an economy to reach full-employment equilibrium. Starting with Alvin Hansen (1938) and culminating with Oskar Lange (1944), the crux of the debate evolved from the existence of full employment equilibrium to analysis of its stability, suggesting an increased role for expectations and finally challenging the economic system's global stability. The present paper traces those debates through the contributions of Hansen, Paul Samuelson and Lange. Using archives materials, we show that while Samuelson's analysis of instability remained implicit, his correspondence reveals that he encouraged Oskar Lange to examine it more carefully. Lange's results are presented in his 1944 Cowles Commission Monograph. We point out that his contribution cannot be understood in isolation either from his exchanges with Samuelson or the way that Keynesian ideas were being interpreted in the United States. The paper finally questions Samuelson's view on instability and expectations.

Keywords: expectations; (in-)stability; full-employment; wages dynamics; Hansen; Samuelson; Lange (search for similar items in EconPapers)
JEL-codes: B2 B22 B3 D5 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2020-05, Revised 2020-12
New Economics Papers: this item is included in nep-his, nep-hpe and nep-pke
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http://195.220.190.85/GREDEG-WP-2020-17.pdf Revised version, 2020-12 (application/pdf)

Related works:
Journal Article: Expectations and full employment. Hansen, Samuelson and Lange (2021)
Working Paper: Expectations and full employment: Hansen, Samuelson and Lange (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:gre:wpaper:2020-17

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