Axel Leijonhufvud and a Bit of Autobiography
| Nicolai Foss |
As blogging is an inherently narcissistic undertaking, I hope I will be excused for the following piece of autobiographical indulgence.
I began studying economics at the University of Copenhagen in 1983. The three first years essentially followed a micro and macro division (with a strong dominance of macro stuff). The macro part, particularly in my second year, was positively awful. The intention clearly was that macro should lead directly to econometrics, so all teaching and reading material centered on analyzing the causal structure of one silly Keynesian model after another.
The indoctrination with Tinbergen-style Keynesianism was rather massive, but there was one paper in the syllabus that dealt with monetarist and new classical critiques of Keynesianism. Naturally, this paper (though dismissive of the critics of Keynesianism) triggered my interest in those writers who were somehow in opposition to the tedious Keynesianism that we were taught. Hunting expeditions to the library ensued.
In this way, I discovered a book by a Henry Hazlitt, called The Failure of the New Economics, which was virulently anti-Keynes, and somewhat primitive in its reasoning. Some further search uncovered a book in distinguished blue binding, and an intriguing title in golden letters, On Keynesian Economics and the Economics of Keynes: A Study in Monetary Theory by an author with a familiar Scandinavian name, Axel Leijonhufvud. I was completely captivated by this book, and it became my economics bible until I graduated from the University of Copenhagen.
Leijonhufvud presented macro economics in way that made sense (of course, my professors considered him a "minor verbalist" although some admitted, when pressed, that he had a "fine intuition"). He had — with Robert Clower — been one of the first economists to make a reasoned call for micro-foundations in macro-economics, stressing that micro-foundations should be built on rationality assumptions but with great attention to information assumptions. He argued that aggregation was something highly problematic. Implied in this was a break with the general equilibrium model. Modelling should be done, not by postulating ad hoc rigidities, but by examining adjustment processes, "false prices", "rationing," etc.
Leijonhufvud claimed in the book to be able to re-construct Keynes as following exactly such a program. This "economics of Keynes" was a far cry indeed from the "Keynesian economics" that I hated. Leijonhufvud had a great style and he made a provocative argument. Naturally, I became a diehard Leijonhufvudian. Leijonhufvud's book also led me to discover the work of Hayek, and later Kirzner and Mises, as well as Shackle and Loasby. I think it also led me in the direction of Herbert Simon, and therefore ultimately towards the muzzy management stuff that I currently do.
OK, enough of autobiography. What prompted this post was my discovery of this very interesting interview by Brian Snowdon with Axel Leijonhufvud. Leijonhufvud covers his early career, the writing of the 1968 book and its interpretation, discusses the corridor hypothesis, and offers reflection on contemporary work on growth, business cycles and macro-economics. Highly recommended! Here is a very nice paper by Peter Howitt (perhaps the most Leijonhufvudian contemporary macro economist) on the 1968 book. And here is some recent info on Axel Stig Bent Leijonhufvud.