Ragnar Frisch 1933. Propagation and impulse problems in dynamic economics. In Economic
Essays in Honour of Gustav Cassel (pp. 171-205). London: Allen and Unwin.
1. Explain the title. In other words, what is a propagation problem and an impulse problem, and
dynamic economics?
A propagation problem is how you should explain how a model has changed out of
equilibrium, which can only be the case in a dynamic economy; otherwise it would have to be
static and deviations from the equilibrium would not be possible. (different causes of the
deviations and at different times should be considered).
An impulse problem is how you explain how one situation grows out of the foregoing and
look at the differences between the causes that change the economy out of its equilibrium.
Propagation problem; the existence of oscillations happening to the economy
Impulse problem; regular occurring, but uneven shocks to the economy (?)
-> see tutorial slide
2. Explain figure 1 on page 4.
This figure shows the first representation or visualization of the economy as a system in a
model. It shows the different factors in the economy; the production of capital and consumer
goods, the stock of capital and consumer goods, land and the human machine. You also see
the streams between the factors and how they work together and produce for humans.
It shows the complete macro-dynamic problem and is also seen as the Tableau Economique.
-> The government however, is not included in this model of the economy.
3. What is a “simple system”?
It is a mechanism that shows how something works, it is therefore understanding, leading to
the fact that you then can control the system and use it when it is mathematized. You can
make calculations with this simple system to also predict situations.
It shows only the essential factors or parts.
In the text, the simple system doesn’t explain the oscillations in the economy.
4. What is a “macro-dynamic system”? By which equations does Frisch define this system?
A macro-dynamic system is something like as shown in figure 1. It represents the working of
the economy as a whole. Frisch defines this by the equations (influenced by
Tinbergen/Samuelson)”
Yt = gt + Ct + It with Ct =α Yt -1 and It = β (Ct – Ct – 1)
Paul Samuelson 1939. Interactions between the multiplier analysis and the principle of
acceleration. The Review of Economics and Statistics 21 (2), 75-78.
1. What sort of interaction does Samuelson suggest between the “multiplier analysis” and the
“principle of acceleration”?
The principle of acceleration is the cause of the multiplier analysis. The principle of
acceleration is captured in the variable β, whereas the multiplier catches the total change in
national income after a change in (for example) government spending (proportional).
2. How does Samuelson describe an economy?
Samuelson assumes that the national income consists of governmental deficit spending,
private consumption expenditure and private investment (G + C + I). This together forms the
economy of a country. (see question 4 of the first text for formulas)
Essays in Honour of Gustav Cassel (pp. 171-205). London: Allen and Unwin.
1. Explain the title. In other words, what is a propagation problem and an impulse problem, and
dynamic economics?
A propagation problem is how you should explain how a model has changed out of
equilibrium, which can only be the case in a dynamic economy; otherwise it would have to be
static and deviations from the equilibrium would not be possible. (different causes of the
deviations and at different times should be considered).
An impulse problem is how you explain how one situation grows out of the foregoing and
look at the differences between the causes that change the economy out of its equilibrium.
Propagation problem; the existence of oscillations happening to the economy
Impulse problem; regular occurring, but uneven shocks to the economy (?)
-> see tutorial slide
2. Explain figure 1 on page 4.
This figure shows the first representation or visualization of the economy as a system in a
model. It shows the different factors in the economy; the production of capital and consumer
goods, the stock of capital and consumer goods, land and the human machine. You also see
the streams between the factors and how they work together and produce for humans.
It shows the complete macro-dynamic problem and is also seen as the Tableau Economique.
-> The government however, is not included in this model of the economy.
3. What is a “simple system”?
It is a mechanism that shows how something works, it is therefore understanding, leading to
the fact that you then can control the system and use it when it is mathematized. You can
make calculations with this simple system to also predict situations.
It shows only the essential factors or parts.
In the text, the simple system doesn’t explain the oscillations in the economy.
4. What is a “macro-dynamic system”? By which equations does Frisch define this system?
A macro-dynamic system is something like as shown in figure 1. It represents the working of
the economy as a whole. Frisch defines this by the equations (influenced by
Tinbergen/Samuelson)”
Yt = gt + Ct + It with Ct =α Yt -1 and It = β (Ct – Ct – 1)
Paul Samuelson 1939. Interactions between the multiplier analysis and the principle of
acceleration. The Review of Economics and Statistics 21 (2), 75-78.
1. What sort of interaction does Samuelson suggest between the “multiplier analysis” and the
“principle of acceleration”?
The principle of acceleration is the cause of the multiplier analysis. The principle of
acceleration is captured in the variable β, whereas the multiplier catches the total change in
national income after a change in (for example) government spending (proportional).
2. How does Samuelson describe an economy?
Samuelson assumes that the national income consists of governmental deficit spending,
private consumption expenditure and private investment (G + C + I). This together forms the
economy of a country. (see question 4 of the first text for formulas)
