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OEconomia (2012), 2012:388-391 (2012), 2012:388-391 NecPlus
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Book Review

Daniele Besomi (ed.)

Besomi Daniele (ed.), Crises and Cycles in Economic Dictionaries and Encyclopaedias Abingdon-New York, Routledge, 2011, 676 pages, ISBN: 978-0415499033

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Guglielmo Forges Davanzatia1

a1 Università del Salento. A slightly shorter version of this review has been published in Italian in Moneta e Credito, 65(257), 83-86.
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This work, edited by Daniele Besomi, independent researcher in History of economic thought, has a fundamental merit. It provides an extremely detailed, exhaustive reconstruction of how—since the early 1800s—theories of economic crisis and the business cycle have been summarised in the main dictionaries and encyclopaedias. It is clear that, unless the study of past theories is seen as a mere exercise in erudition, we are looking at a book that—given the subject—is extremely topical, and can be used to interpret the crises of our times.

The reconstruction of the way economists have disseminated their theories is an area of research that has been gaining momentum in recent decades, producing a considerable amount of literature, both national and international, on a broad range of issues. It is a research field of great interest: most of the economists of the past—like many of those working today—did not see their role as being exclusively confined to academia, but felt obliged to make their economic theories comprehensible to a wider public of non-specialists. In this sense, as Besomi points out in the introductory chapter of his book, this commitment is to be considered “educational”, and is important because dictionary and encyclopaedia entries make acquired knowledge systematic, can orient the directions of scientific research and also play a significant role in spreading the theories amongst a public of non-economists. According to Besomi (9), the editors’ choice of the authors from whom to commission encyclopaedia entries essentially depends—apart from their competence—on the “language constraint”, which means that in the past the economists selected were, in most cases, English-speaking. This idea is perfectly plausible, although it can reasonably be thought that, especially in more recent times, the working of the publishing industry—and the related aim of the publishing houses to make a profit—has influenced the selection of authors who are invited to write dictionary and encyclopaedia entries.

The book required the work of eighteen economists and historians of economic thought and took about two years of collective effort to finish. It is organised in twenty-eight chapters. The first three, written by Besomi, are of a methodological nature and give an overall picture within which to place the single contributions. Besomi makes two observations. Firstly, the fact that the very nature of dictionaries and encyclopaedias changes considerably over time. While the early dictionaries from the first half of the 1800s are mainly devoted to what in current language might be called applied economics, the dictionaries of the 1900s take a very general approach to the themes they deal with, and are accompanied by specialised dictionaries. Secondly, the definition of the exact subject of study, as it were, has been gradually refined in the course of time: in the earliest manuals, economic crises (and economic cycles) were given widely differing names (Glut, Distress, Embarassment, Stagnation, Panic, Bubble, Fluctuations, Recessions, Crisis, Cycle), while it is only in relatively recent years that the conventional names of crisis and cycle have been settled on. In the third chapter, Besomi makes an interesting analysis of the etymology of the terms adopted and the evolution of their use by economists, from the first half of the 1800s to the end of last century. Amidst the wealth of information contained in the text, on which we cannot dwell now for reasons of space, two noteworthy points stand out in the revisitation of the topics and thought of the authors examined, starting from the book’s fifth chapter.

The first point standing out deals with the endogenous/exogenous nature of the crises. The first dictionaries considered here are French and were published from the 1830s onwards. The cultural climate was dominated by the question of progress, in spite of the fact that the French economy of the time suffered from intense, recurrent crises: special reference is made to those of 1825-1826, 1828-1832 and 1836-1839. The authors writing in those years in most cases regarded crises as inevitable events, innate to the mechanisms of reproduction of the system, although the distinction was still not completely clear between a crisis deriving from “endogenous” factors or from “exogenous” factors. In this sense, it could be pointed out that it was not their aim to put forward “general theories” of the crises, and that they acknowledged that crises could be generated by a multiplicity of causes, some of which were related to “external” events (poor management of economic policy, bad harvests in agriculture). They were, in the main, economists and social science scholars who might be considered “minor”, but who formulated interpretations of the crises of considerable originality, above all in the importance they placed on the role of credit and finance, in a historical context where the financial sphere was at an embryonic stage of development. There are a great many contributions. Among these, for the first period considered, it is worth noticing that of Courcelle-Seneuil (dealt with by Ludovic Frobert in chap. 5), in which it is pointed out that crises derive mainly from credit squeezes and that on the level of economic policy, they can only be solved by a more incisive regulation of the banking system.

In chapter 8, Besomi examines Charles Coquelin’s contribution in the Dictionnaire de l’économie politique. He stresses that the “abuse of credit” is a common condition of all commercial crisis, due to the existence of priviledged banks (banques privilégiées) which operate as monopolistic agents in the money market, and are in the position to create money. Coquelin’s contribution is significant especially because it aims at finding a common cause that explains all the crises, laying the foundations for formulating a general law of crises. From the mid-1800s, in the dictionaries examined, there emerges more clearly the difference between crises in certain sectors and general gluts, and a clear distinction is made between crises caused by factors endogenous to the system and those caused by external factors, starting from the Say’s law. Finaly, with Juglar (dealt with by Cécile Dangel-Hagnauer in chap. 12), we reach a systematisation of the thinking about the periodical nature of crises.

In this phase, the theories elaborated by the German economists are of great interest. Wilhelm Roscher, whose contribution is dealt with by Hagemann in chapter 7, maintains that equality between supply and aggregate demand is not normally guaranteed, due to the fact that money also plays the role of reserve of value and is therefore held back as a precautionary measure (202). It was mainly with Adolf Wagner, one of the authors dealt with here, in a chapter written by Vitantonio Gioia, that the validity of Say’s law was acknowledged. The originality of Wagner’s thinking lies mainly in the fact that for him Say’s law is also valid in a monetary economy, accentuating the stabilising role of speculation (315). Importantly, Gioia emphasises that, in Wagner’s view, crises may emerge not as a result of a structural defect of capitalism, but as consequences of human behaviour and of the tendency, on the part of economic agents, to expect continuously larger incomes, “letting themselves be tempted by speculation and overspeculation”. The shift of emphasis from the peculiarity of capitalism towards the limit of human nature leads, in Wagner’s view, to a “great philosophical problem”, which pertains to the relationship between freedom and necessity in a free-market economy (317).

It is clear that, underlying this contrast (on whether or not Say’s law is accepted) there is the contrast between those who believe that crises are endogenous and those who think they are caused by exogenous factors. As far as the first group of interpretations is concerned, the contributions referred to here blame the onset of the crisis on underconsumption, overproduction, and imbalances. And obviously the distinction between the crisis caused by exogenous or endogenous factors is closely associated with different economic policy prescriptions and cannot be classed as obsolete: the interpretations of the current crisis still revolve around this distinction.

The second point that sheds new light on the historiography of the theories of crises and cycles deals with the growing importance of technicalities. Indeed, the final chapters of the book highlight the fact that, above all in the emergence and consolidation of the “theory of the real economic cycle”, economists concentrate increasingly on purely technical aspects: among these are the study of nonlinear trajectories and of the dynamic complexity and refinement of econometric methods (Colacchio, chap. 26; Pilkington, chap. 27). This tendency is further proof of the growing interest among contemporary economists in the progressive perfecting of techniques of analysis and empirical verification, accompanied by the decline in interest in the “big issues” (value, income distribution, economic development) discussed by the classical economists.

Essentially, this work is recommended not only to historians of economic thought, but also to economists and to those interested in the field of History of political ideas. The chapters are written in accessible language and, overall, the reconstruction of the theories on crises and on the economic cycle, also in view of the topical nature of the issues examined, certainly deserves the greatest attention.