Contingent Expectations – Alexander Nutzenadel

Despite all these innovations, the prognostic value of the barometer method proved to be limited, as it did not anticipate the economic slump of 1922. More important, the Harvard Barometer also failed to predict the 1929 crash. After this disappointing experience, the schematic approach of the barometer was replaced by an “interactive approach,” based on exchanges with central bankers and other decision-makers (Lenel 2021, 84). This approach was designed to enable a more nuanced interpretation of statistical data with the objective to predict future events, including exogenous shocks and crises, with more confidence.

The Harvard Barometer became an influential source of information and was adopted by statistical offices in many other countries; at the same time, new institutes were founded to foster research in business cycles. In Great Britain, the London and Cambridge Economic Service (LCES) was established in 1922 following the model of the Harvard Index, while in Germany, the Deutsche Institut für Konjunkturforschung opened in 1925 under the leadership of the president of the Statistical Office, Ernst Wagemann. Similar institutes mushroomed in many other countries as well, including Italy, France, Sweden, and the Netherlands (Lenel 2021, 48–76).

While most of these initiatives were intended to provide households, investors, and firms with better information about future economic developments, a more systematic approach to business cycle research emerged only after the Great Depression. Three innovations characterized this new trend. First, empirical research was now combined more firmly with theoretical analysis of macroeconomic fluctuations. Admittedly, economists had observed business cycles of various lengths since the nineteenth century, but the existence of recurring regularities and the possibility of using statistical tools to predict them had always remained controversial.

Before the 1920s, prominent economists such as Adolf Löwe and Oskar Morgenstern had cast doubt on the practical use of forecasting in economics.

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