The New Palgrave Dictionary of Economics

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Haberler, Gottfried (1900–1995)

  • John S. Chipman
Living reference work entry

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DOI: https://doi.org/10.1057/978-1-349-95121-5_1101-2

Abstract

Gottfried Haberler was born on 20 July 1900 in Purkersdorf, near Vienna. He studied economics at the University of Vienna under Friedrich von Wieser and Ludwig von Mises, where he received doctorates in law (1923) and economics (1925). After two years in the United States and Britain he returned to Vienna, received his habilitation in 1928, and was appointed lecturer, later professor, of economics, at the University of Vienna, from 1928 to 1936. He was appointed professor at Harvard University in 1936, where he remained until his retirement in 1971, after which he was a resident scholar at the American Enterprise Institute, Washington, DC. He was President of the International Economic Association (1950–1), the National Bureau of Economic Research (1955), and the American Economic Association (1963). In 1980 he was awarded the Antonio Feltrinelli prize.

Keywords

Barone, E. Business cycles Comparative costs Cost-of-living index Factor mobility Fixed exchange rates Free trade Haberler, G. Homothetic preferences Indirect utility functions Inflation International trade theory Laspeyres index Paasche index Pigou effect Production-possibility frontier Purchasing power parity Real-balance effect Specific factor Stagflation Transfer problem 

JEL Classifications

B31 

Gottfried Haberler was born on 20 July 1900 in Purkersdorf, near Vienna. He studied economics at the University of Vienna under Friedrich von Wieser and Ludwig von Mises, where he received doctorates in law (1923) and economics (1925). After two years in the United States and Britain he returned to Vienna, received his habilitation in 1928, and was appointed lecturer, later professor, of economics, at the University of Vienna, from 1928 to 1936. He was appointed professor at Harvard University in 1936, where he remained until his retirement in 1971, after which he was a resident scholar at the American Enterprise Institute, Washington, DC. He was President of the International Economic Association (1950–1), the National Bureau of Economic Research (1955), and the American Economic Association (1963). In 1980 he was awarded the Antonio Feltrinelli prize.

Haberler’s first major work was his habilitation thesis (1927), The Meaning of Index Numbers, summarized in Koo (1985, pp. 546–9). This work stimulated a great deal of subsequent research on the theory of the price or cost-of-living index. Haberler defined the ‘true change in the price level’ as ‘the ratio of the money income in the first period to the money income in the second period that would leave the individual indifferent’ (Koo 1985, p. 547). Haberler’s main concern was to find conditions under which this ‘true price index’ would be bounded by the Laspeyres and Paasche price indices. Some of the difficulties with this approach (and with the similar, earlier approach of Konüs (1924)) were discussed by Bortkiewicz (1928), Neisser (1929), Staehle (1935), and Frisch (1936). Frisch remarked (p. 25) that Haberler’s definition of the ‘true change of the price level’ involved an implicit assumption of expenditure proportionality (homothetic preferences), and attributed this point (but apparently without justification) to Bortkiewicz; he also interpreted Haberler (1929) in his reply to Neisser and Bortkiewicz as accepting this point. In terms of contemporary concepts we may say that homothetic preferences characterize indirect utility functions of the form Y/C(p) where Y is income and C(p) is a homogeneous-of-degree-1 function of prices.

Undoubtedly Haberler’s most significant contribution was his reformulation of the theory of comparative costs (Haberler 1930a), which revolutionized the theory of international trade. Prior to this paper, the Ricardian theory still held sway, but had been so amended with ill-defined concepts such as ‘real cost’ and ‘units of productive power’ taking the place of labour allocation that it had lost all its simplicity and elegance. Haberler introduced the production ‘substitution curve’ (now usually known as the production-possibility frontier), allowing for several factors of production, and taken to be concave to the origin as a result of diminishing returns. This laid the foundations for Ohlin’s theory, as well as Lerner’s and Samuelson’s. True, as recently brought to light by Maneschi and Thweatt (1987), a footnote contained in the posthumous edition of Barone’s Principi (1936, pp. 170–3), depicting a (non-concave) production-possibility frontier and a community indifference curve, was actually present in the first (1908) edition – but not subsequent ones; hence Barone must be accorded priority. But Haberler’s independent discovery – and the use to which he put it – is what transformed the theory of international trade. Haberler also introduced the concept of a ‘specific factor’ – one that is completely immobile among industries – and used this concept with great effect in Haberler (1950) to illustrate the proposition that the gains from trade do not depend on the assumption of factor mobility.

Haberler made numerous other contributions to international economics, including (1) his synthesis and clarification of the Keynes–Ohlin debate on the transfer problem (Haberler 1930b); (2) his judicious use of purchasing-power-parity calculations to set exchange rates (Haberler 1945); (3) his introduction of the concept of supply and demand schedules for foreign exchange (1936) and his subsequent use of them (Haberler 1949) in qualified support of the proposition that a devaluation in a pegged-rate regime could improve a country’s balance of payments – but subject to the important proviso (1949, p. 213) that it would, through monetary expansion, likely shift these schedules; (4) his advocacy of free trade as the best policy for developing countries (Haberler 1959); (5) numerous contributions to past and current history of international economic relations (cf. Koo 1985).

The third area in which Haberler made major contributions is business-cycle theory (Haberler 1937, 1942). His classic synthesis, notably in the third edition of Prosperity and Depression (1941), introduced the important ‘real-balance effect’, initially called the ‘Pigou effect’ by Patinkin (1948), although Patinkin in his 1951 revision acknowledged Haberler’s priority over Pigou (1943). In the 1970s and 1980s Haberler furnished trenchant analyses of the phenomenon of worldwide inflation and the political economy of stagflation (cf. Koo 1985), displaying the unique combination of clarity and wisdom that are characteristic of his writings.

Information on Haberler’s life and work may be found in Schuster (1979), Chipman (1982), Baldwin (1982), Officer (1982), and Willett (1982). A complete bibliography of his writings is contained in Koo (1985).

Selected Works

  • 1927. Der Sinn der Indexzahlen. Tübingen: J.C.B. Mohr (Paul Siebeck).

  • 1929. Der volkswirtschaftliche Geldwert und die Preisindexziffern. Weltwirtschaftliches Archiv 30(July): 6**–14**.

  • 1930a. Die Theorie der komparativen Kosten und ihre Auswertung für die Begründung des Freihandles. Weltwirtschaftliches Archiv 32(July): 350–370. Trans. as ‘The theory of comparative costs and its use in the defense of free trade’ in Koo (1985).

  • 1930b. Transfer und Preisbewegung. Zeitschrift für Nationalökonomie 1: 547–554; 2, 100–2. Trans. as ‘Transfer and price movements’ in Koo (1985).

  • 1933. Der internationale Handel. Theorie der weltwirtschaftlichen Zusammenhänge sowie Darstellung und Analyse der Aussenhandelspolitik. Berlin: Julius Springer. Translated (revised by the author) as The theory of international trade with its applications to commercial policy. London: William Hodge & Co., 1936.

  • 1937. Prosperity and Depression. Geneva: League of Nations. 3rd edition enlarged by Part III, 1941. 5th and 6th editions, Cambridge, MA: Harvard University Press, 1964.

  • 1942. Consumer Instalment Credit and Economic Fluctuations. New York: NBER.

  • 1945. The choice of exchange rates after the war. American Economic Review 35, 308–318.

  • 1949. The market for foreign exchange and the stability of the balance of payments. Kyklos 3(3): 193–218. Reprinted in Koo (1985).

  • 1950. Some problems in the pure theory of international trade. Economic Journal 60: 223–40. Reprinted in Koo (1985).

  • 1955. A survey of international trade theory. Special papers in economics no. 1. Princeton: International Finance Section, Princeton University. Revised and enlarged edn, 1961. Reprinted in Koo (1985).

  • 1959. International trade and economic development. Cairo: National Bank of Egypt. Reprinted in Koo (1985).

Bibliography

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  2. Barone, E. 1908. Principi di economia politica. Rome: Tipografia Nazionale di Giovanni Bertero e C. German translation from the 3rd (1913) edn, Grundzüge der theoretische Nationalökonomie, Bonn: Kurt Schroeder, 1927. Posthumous edition, Le opere economiche, vol. 2, Bologna: Nicola Zanichelli Editore, 1936.Google Scholar
  3. Chipman, J.S. 1982. Salute to Gottfried Haberler on the occasion of his 80th birthday. Journal of International Economics [Supplement], January, 25–30.Google Scholar
  4. Frisch, R. 1936. Annual survey of general economic theory: The problem of index numbers. Econometrica 4: 1–38.CrossRefGoogle Scholar
  5. Konüs, A.A. 1924. The problem of the true index of the cost of living. Economic Bulletin of the Institute of Economic Conjuncture 9–10, October, 64–71. Translated from the Russian in Econometrica 7(1939), 10–29.Google Scholar
  6. Koo, A.Y.C., ed. 1985. Selected essays of Gottfried Haberler. Cambridge, MA: MIT Press.Google Scholar
  7. Maneschi, A., and W.O. Thweatt. 1987. Barone’s 1908 representation of an economy’s trade equilibrium and the gains from trade. Journal of International Economics 22: 375–382.CrossRefGoogle Scholar
  8. Neisser, H. 1929. Der volkswirtschaftliche Geldwert und die Preisindexziffern. Weltwirtschaftliches Archiv 29 (Part I): 6**–18**. Schlusswort, Part II, July, 14**–7**.Google Scholar
  9. Officer, L.H. 1982. Prosperity and depression – And beyond. Quarterly Journal of Economics 97: 149–159.CrossRefGoogle Scholar
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  11. Pigou, A.C. 1943. The classical stationary state. Economic Journal 53: 343–351.Google Scholar
  12. Schuster, H., ed. 1979. Univ.-Prof. Dr. Gottfried Haberler. In Österreicher, die der Welt gehören. Vienna: Mobil Oil Austria AG.Google Scholar
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  15. Willett, T.D. 1982. Gottfried Haberler on inflation, unemployment, and international monetary economics: An appreciation. Quarterly Journal of Economics 97: 161–169.CrossRefGoogle Scholar

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Authors and Affiliations

  • John S. Chipman
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