Giffens Good: A Case of Mistaken Identification
24 Pages Posted: 19 Nov 2013
Date Written: November 2013
Giffen reported that, in the late nineteenth century, English wheat consumption rose when its price increased the first recorded Giffen good. Using Giffens 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 Marshalls and Samuelsons influential textbooks.
Keywords: endogeneity, Giffen good, identification, stationarity
JEL Classification: B13, B16, D12
Suggested Citation: Suggested Citation