EUGENE SLUTSKY 1927 ECONOMICS PAPER: RANDOM CAUSES & CYCLICAL PROCESSES

December 22, 2006 at 2:32 am | Posted in Books, Economics, Financial, Globalization, History, Research | Leave a comment

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Eugene Slutsky

1880-1948.

Eugene (or Eugen or Yevgeni) Slutsky intended to become a mathematician, but he was expelled from the University of Kiev for participating in student revolts and, after some wandering through engineering and Europe, he returned to Kiev and ended up getting a doctorate in law in the end and then heading to teach at the Kiev Institute of Commerce. This was in 1911 and Slutsky had a fine sample from several fields. It was the work of the Lausanne School in economics that attracted him and yielded up his first economics paper in 1915 – published in Italy (at the time, the last citadel of of Walrasian economics). In his 1915 paper, he presented the “Slutsky decomposition” of demand functions into substitution and income effects. His work was ignored and only much later, when the same principle was resurrected independently by John Hicks and R.G.D. Allen in 1934, did he eventually get some recognition. His other prominent contribution to economics came in 1927, when he showed that a series of shocks can be summed up to yield regular cyclical properties. This paper, which paralleled that of Frisch was the beginning of the shock-dependent business cycle that precedes the New Classical theory of today. The famous Slutsky-Yule Theorem (i.e. that the moving average of a random series may generate oscillatory movement when no oscillations exist in the original data) was also laid out in that paper. The rest of his work, much of it accomplished after his move to the Moscow in 1920, was in probability theory. The famous “Slutsky Theorem” which argued that if a statistic converges almost surely or in probability to some constant, then any continuous function of that statistic also converges in the same manner to some function of that constant – a theorem with applications all over statistics and econometrics – was laid out in his 1925 paper. Other limit theorems were provided in 1928 and 1929.

Major works of Eugene Slutsky

  • “On the Criterion of Goodness of Fit of the Regression Lines and on the Best Method of Fitting them to Data”, 1914, Journal of Royal Statistical Society.
  • “Sulla teoria del bilancio del consummatore”, 1915, Giornale degli Economisti.
  • “Über stochastische Asymptoten und Grenzwerte”, 1925, Matematischen Annalen.
  • “The Summation of Random Causes as the Source of Cyclical Processes”, 1927 (in Econometrica, 1937).
  • “Sur un criterium de la convergence stochastique des ensembles de valeurs eventuelles”, 1929, Comptes Rendu des seances de l’Academie des Sciences.
  • “Quelques Propositions sur les Limities Stochastiques Eventuelles”, 1929, Compte Rendu des seances de l’Academie des Sciences.
  • Tables for the Computation of the Incomplete Gamma Function and the Chi-Square Probability Distribution, 1950.
  • Selected Works of Eugen Slutsky, 1960.
  • Resources on Eugen Slutsky

Eugen Slutsky

April 7, 1880, UkraineMarch 10, 1948

In the 1920s Slutsky turned to working on probability theory and stochastic processes, but in 1927 he published his second famous article on economic theory, ‘The Summation of Random Causes as a Source of Cyclical Processes’. This opened up a new approach to business cycle theory by hypothesising that the interaction of chance events could generate periodicity when none existed initially.Eugen E. Slutsky (April 7, 1880, UkraineMarch 10, 1948) was an early-twentieth-century UkrainianRussian/Soviet mathematical statistician, economist and political economist.

Slutsky’s work in economics

He is principally known for work in deriving the relationships embodied in the very well-known Slutsky equation which is widely used in microeconomic consumer theory for separating the substitution effect and the income effect of a price change on the total quantity of a good demanded following a price change in that good, or in a related good that may have a cross-price effect on the original good quantity. There are many Slutsky analogs in producer theory.He is less well known by Western economists than some of his contemporaries, due to his own changing intellectual interests as well as external factors forced upon him after the Bolshevik Revolution in 1917. His seminal paper in Economics, and some argue his last paper in Economics rather than probability theory, was published in 1915 (Sulla teoria del bilancio del consumatore). Paul Samuelson noted that until 1936, he had been entirely unaware of Slutsky’s 1915 “masterpiece” due to World War I and the paper’s Italian language publication. R. G. D. Allen did the most to propagate Slutsky’s work on consumer theory in published papers in 1936 and 1950.

Vincent Barnett argues:

“A good case can be made for the notion that Slutsky is the most famous of all Russian economists, even more well-known [than] N. D. Kondratiev, L. V. Kantorovich, or M. I. Tugan-Baranovsky. There are eponymous concepts such as the Slutsky equation, the Slutsky diamond, the Slutsky matrix, and the Slutsky-Yule effect, and a journals-literature search conducted on his name for the years 1980-1995 yielded seventy-nine articles directly using some aspect of Slutsky’s work… Moreover, many microeconomics textbooks contain prominent mention of Slutsky’s contribution to the theory of consumer behavior, most notably the Slutsky equation, christened by John Hicks as the ‘Fundamental Equation of Value Theory’. Slutsky’s work is thus an integral part of contemporary mainstream economics and econometrics, a claim that cannot really be made by any other Soviet economist, perhaps even by any other Russian economist.” (Barnett, 2004)

In the 1920s Slutsky turned to working on probability theory and stochastic processes, but in 1927 he published his second famous article on economic theory, ‘The Summation of Random Causes as a Source of Cyclical Processes’. This opened up a new approach to business cycle theory by hypothesising that the interaction of chance events could generate periodicity when none existed initially.

Mathematical statistics work

Slutsky’s later work was principally in probability theory and the theory of stochastic processes. He is generally credited for the result known as Slutsky’s theorem.

References

  • Barnett, Vincent (2004). “E. E. Slutsky: Mathematical Statistician, Economist, and Political Economist?”. Journal of the History of Economic Thought 26 (1): 5-18;.
  • Barnett, Vincent (2006). “Chancing an Interpretation: Slutsky’s Random Cycles Revisited”, European Journal of the History of Economic Thought, 13 (3): 411-32.
  • Slutsky, E. E. (1915). “Sulla teoria del bilancio del consumatore”. Giornale degli Economisti 51 (July): 1-26;.

Eugene Slutsky

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