Albert Aftalion was born in Bulgaria (Roustchouk) in 1874 into a Jewish Sephardi family.

He came to France in 1876 when his parents decided to settle in Nancy. He completed a doctorate in law at the University of Paris, where he was appointed as “Charge de conference” (lecturer) and embarked on a doctorate in political economy (defended in 1899) on the economics of Sismondi.

Somewhat surprisingly, at this time, his preoccupation with Sismondi was driven only by his interest in poverty in relation to the industrializing countries, and in interrogating the objectives of political economy more widely (Demals 2002b). In 1900, he moved to the University of Lille and in 1901, after success at the French national academic competition, the “Concours national d’agregation”, he was appointed “Professeur adjoint”. He went on to take up a chair in Political Economy and the History of Economic Doctrines in 1906 in the same university. In 1923 he accepted a chair in Statistics at the University of Paris, and in 1934 he succeeded Charles Rist as Professor of Political Economy. Throughout his successful academic career he was deeply respected by his peers. However, during the dark episode in French academia in 1940 (the Jew status laws were enacted on 3 October, 1940), he was dismissed by the Paris University Council (Delmas 2002a). He was not allowed back into the university until 1944, and in 1946 he retired.

Aftalion was one of the most influential French economists in the first half of the twentieth century (Guitton 1957; Lhomme et al. 1957): he had a major influence on the way economics developed in France, and despite the fact that his contributions were not systematically translated into English, he rapidly became well known internationally (Schumpeter 1954, LLP 1914, Persons 1914). His reputation was attributable mainly to his 1909 and 1913 contributions to business cycle theory although he also made contributions in other economic areas.

Aftalion first published in 1896. At that time, he was writing on various topics (married women’s rights, the development and regulation of sea ports in Germany and Sismondi). From 1903 (after moving to Lille), he started to focus on industry - mainly the textile industry where his empirical investigations included the conflicting relationships between workers and owners of the firms (1907, 1912). His first publication on this topic appeared in 1908 and was to continue to figure in his work although progressively he included monetary as well as international dimensions in his economic analysis. His interest in monetary issues really began in 1924 with a paper on exchange rates variations, and in 1927 he published a book on monetary theory (Dangel and Rainelli 2000; Dangel in Dormard 2002). This book was very successful and in 1937 was translated into Japanese. Also in 1927 he seemingly published his first paper in English. It is also notable that Aftalion published a paper in 1923 on the foundations of Socialism (Frobert 1999). For the rest of his academic career, Aftalion continued to be interested in monetary and business cycle theories, and he produced an interesting analysis of the crises during the chaotic period between 1930 and 1932 (see, for example, the detailed bibliography in the Cahiers Lillois d’Economie et de Sociologie special issue; Dormard 2002).

Nevertheless, Aftalion is known essentially for his contribution to business cycle theory. Although he did not invent the concept, he is acknowledged as the economist who devised the accelerator principle, a very sophisticated pre-Keynesian version of

business cycle analysis developed under the influence of marginalism (Dangel and Raybaut 1997; Raybaut in Dormard 2002). Like Clement Juglar, Aftalion relied on empirical analysis, and systematically tested his theory. He studied intensively and also taught statistics. His first empirical work on the industries of Northern France had a profound influence on his theory (Dormard 2002).

Following Juglar (to whom he refers explicitly in his first essay in 1908-09), Aftalion considered that crises were general and periodic. He then logically rejected exogenous business cycle theories. He argued that while causes have consequences, they nevertheless provide only superficial explanations of business cycles: fundamental elements need to be identified from among the inherent characteristics of industrialized countries. Referring explicitly to the contributions of E. von Bδhn-Bawerk, A. Marshall and J.B. Clark, Aftalion insisted that the core element of business cycles lay in the structure of the production process. Moreover, he supposed that: “To the consumer the value of goods purchased depends on the satisfaction which he expects to receive from them. To the producer the value of materials depends on the price which he expects to obtain for them upon resale after transformation... on his forecast of future prices” (Aftalion 1927: 165). Those expectations are alternately (overly) optimistic or (overly) pessimistic, and it is the length of the production process of capital goods that prevents entrepreneurs from making the “right” decisions. Indeed, modern production processes are characterized by two distinct stages: the production of capital goods, and the production of consumption goods. As long as the effective level of capital is lower than the expected level, the demand for additional capital will increase in all sectors (because of inter-sectorial interactions) as activity develops: this is the prosperity phase. The economy is naturally and progressively led to overcapitalization, and finally overproduction:

In the modern capitalistic technique the actual state of demand and prices is a bad index of future demand and prices, because of the long interval which separates the moment when new constructions are undertaken from that when they satisfy the demand. So long as the fixed capital under construction is not finished, demand may continue to be unsatisfied and prices may remain high.

(Aftalion 1927: 166)

It was exactly in order to represent this mechanism that Aftalion used stove metaphor. It should be noted that entrepreneurs repeat their mistakes (which means fluctuations recur) not because they are irrational but because they face uncertainty (Dangel and Raybaut 1997). A crisis starts when the prices are decreasing which is interpreted as a general decrease in the intensity of the need for the goods produced. During the recession phase, the forecasting error is reversed: the amount of capital dedicated to the construction of production capacity is smaller than is required by the secular trend. The progressive diminution of stocks is interpreted as a positive signal: “New orders are given... A new cycle begins” (Aftalion 1927: 166).

Aftalion argued that fluctuations in the economy were inevitable, and were magnified by the structure of modern economies, that is, the social and technical organization of production. His objective was to refute Classical theory which denies the possibility of general overproduction. Although not wholly successful in this aim, he was an undoubted contributor to this debate.

Muriel Dal Font Legrand

Albert Aftalion was born in Bulgaria (Roustchouk) in 1874 into a Jewish Sephardi family.

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