Giffen’s Good: A Case of Mistaken Identification

24 Pages Posted: 19 Nov 2013

See all articles by Liam Brunt

Liam Brunt

NHH - Norwegian School of Economics; Centre for Economic Policy Research (CEPR)

Date Written: November 2013

Abstract

Giffen reported that, in the late nineteenth century, English wheat consumption rose when its price increased – the first recorded “Giffen good”. Using Giffen’s data, I explain how he reached his conclusion. I then show that his analysis was faulty: price elasticity of demand appears positive when the demand curve is incorrectly identified, but is significantly negative – like any normal good – when it is correctly identified. Since the pathological Giffen good case was actually just mistaken identification, it is no surprise that Giffen goods are impossible to find elsewhere. Popularization of the Giffen good stemmed from Marshall’s and Samuelson’s influential textbooks.

Keywords: endogeneity, Giffen good, identification, stationarity

JEL Classification: B13, B16, D12

Suggested Citation

Brunt, Liam, Giffen’s Good: A Case of Mistaken Identification (November 2013). Available at SSRN: https://ssrn.com/abstract=2356967

Liam Brunt (Contact Author)

NHH - Norwegian School of Economics ( email )

Department of Economics
Helleveien 30
N-5035 Bergen, Hordaland
Norway

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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