Expectation and Forecast. Business Cycle Research in the United States, Germany and the Netherlands, 1920-1960

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Quantitative business cycle research explores past and current economic fluctuations in order to forecast future economic trends (professional expectation formation). These forecasts subsequently influence expectations and behavior of economic and political decision-makers (economic expectations) and thus future economic outcomes. The objective of this project is to investigate the process of professional expectation formation in business cycle research between 1920 and 1960. How did economists at the formerly New York-based National Bureau of Economic Research (NBER), the Deutsches Institut für Konjunkturforschung (IfK)/Deutsches Institut für Wirtschaftsforschung (DIW) in Berlin, and the The Hague-based Centraal Bureau voor de Statistiek (CBS) and the Centraal Planbureau (CPB) evaluate the past behavior of individual economic actors, and how did they use this information to identify the actors respective future economic expectations? How did business cycle researchers create forecasts based on this data? This study evaluates the influence of economic events, political institutions, and the individual degree of political integration of business cycle research on professional expectation formation. For this purpose, it undertakes a broad historical contextualization of the respective approaches of American, German and Dutch economists between 1920 and 1960. The timeframe of 1920 to 1960 encompasses the rise of business cycle research from its emergence as an independent scientific discipline following World War I up to its golden days as a directing element of modern Macroeconomics in the 1950s. Economists at the NBER, the IfK/DIW and the CBS were all influenced by the approach of the Harvard Committee of Economic Research (Harvard Business Barometer). The debates prior to the establishment of the three institutes and the goals assigned to them resembled each other. However, the three institutes quickly developed distinct research profiles. By comparing the process of professional expectation formation within the historical context of the United States, Germany and the Netherlands, the proposed study investigates the influence of experience and institutions on expectation and thus contributes to the ongoing academic discourse on economic expectation formation.