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Introductory remarks
European Economic Review 32 (1988) 491-W.
North-Holland
History of Economic Thought: The Scandinavian Contribution INTRODUCTORY
REMARKS
Agnar SANDMO Norwegian
School oj Economics
and Business Administration,
5000 Bergen,
Norway
1. Introduction This session on the history of economic thought will hopefully turn out to be the first in a series of such events, with the history of thought becoming one of those fields of specialization which are regularly represented at the annual congresses of our association. It is an area which has not been well covered at any of the large European meetings of economists, but it is one in which much valuable work is done, and where there is a lot of interest also among economists who do not consider themselves to be experts in the field. Moreover, it is appropriate for an association whose aim it is to promote cooperation and unity among European economists, that it should provide a forum for the presentation of research into our intellectual traditions. The limitation of the present session to Scandinavian contributions to economics requires some explanation. To those who are not especially interested in the economic, social and intellectual history of Scandinavia and most non-Scandinavians are not - the regional focus might seem to be irrelevant or misleading. Why not simply compose a session of the three most interesting papers in the field? Or, if more structure is wanted, why not focus instead on some particular sub-discipline like monetary theory or some worldwide event like the marginalist revolution? I definitely agree that the session could have been organized along different lines, and such lines should be pursued in the future; we should not always find ourselves obliged to concentrate on the history of thought in the region or country in which the congress is held. But the history of economic thought may be approached from many different perspectives, of which the regional one is certainly not the least interesting. It gives the researcher an opportunity for studying the connections between social and political institutions on the one hand and the development of economics on the other which easily come in the background in studies that take a more ‘global’ view of intellectual developments. It is 0014-2921/88/S3.50
c.Q 1988.
Elsevier Science Publishers B.V. (North-Holland)
492
A. Sandmo. History of economic thought: The Scandinavian contributions
also fruitful for the study of the connections between the structure of academic institutions and the quantity and quality of economic research. These are problems which are not only of great historical interest, but which are of relevance to current discussions of research policy as well. 2. Some features of the Scandinavian countries There is of course a multitude of social and political features of the Scandinavian countries which are of interest to the historian of economic thought. Let me just mention a few facts which are, I believe, important both for getting a wider perspective on the three papers to follow, and for understanding the position of economics in the Scandinavian countries today. An obvious but important fact is that Denmark, Norway and Sweden are small countries, with populations ranging from four to eight million inhabitants. This has a number of implications for the social framework in which economists have worked in the past and in which they operate today. Although the number of active academic economists may have been comparable in relative terms to the larger European countries and the United States, the absolute number has of course been much smaller. This meant that in the early years of the economics profession in Scandinavia, an economist who was active in research had few colleagues in his own country with whom to communicate and discuss, and he would be very lucky to have close colleagues in his own university. This kind of situation can lead to isolation and provincialism - but it can also lead people to adopt a more international orientation than would otherwise have been the case. The success stories of Scandinavian economics tend naturally to be representative of the latter outcome, but the former is clearly also of interest to the historian of science. From the point of view of pure academic research one might believe that the rational response to smallness in absolute numbers would be concentration and specialization. It does seem fairly obvious that there must be economies of scale in research when many people work together on related problems, so that if educational and scientific planners had aimed to maximize national contributions to the international economic literature, they should put their economists together in a few big departments and encourage them to specialize. However, against this must be set the claims (apart from teaching) of applied and policy-oriented research. Here, too, there are probably economies of scale in research, but the individual policy problems are there and require economic expertise for their solution. In this situation the small countries are at a disadvantage. To get a group of economists together to do serious work in the economics of taxation may imply that problems of industrial organization will have to be neglected. If
A. Sandmo. History ojeconomic
thought: The Scandinavian
contributions
493
this is thought to be unacceptable, one is faced with the unpleasant alternative of spreading resources thinly across fields with unavoidable sacrifices in terms of depth of analysis. The actual policies followed by the Scandinavian governments (all universities are public) may be seen as reflecting a compromise between those two sets of considerations. Another implication of smallness concerns the importance of personalities. Individual economists like Knut Wicksell and Ragnar Frisch became - in very different ways - dominant influences on the direction of economic research in their own countries to a degree which is hardly parallelled in any of the larger countries. Personalities are also important for the direction of policy-oriented research. In small countries academic economists, politicians and bureaucrats tend to know each other and to get involved in a common set of problems. There must be few Scandinavian economists in senior positions who have not at one time or another served on some government committee or otherwise been involved in giving policy advice. This is a situation which has both positive and negative aspects. On the positive side is the sense of relevance and realism which on the whole seems to pervade in Scandinavian economics departments. The negative aspect is that involvement in policy advice may tend to weaken standards of research performance by taking too much time off from basic research. 3. Frisch, Wicksell and Danish macroeconomists The stories told in the following three ‘papers illustrate several of the general points made above. Ragnar Frisch was a great economist and a dominating personality in a small country which, at the time of his appointment to a chair at the University of Oslo, had only one university department of economics. Frisch’s view of economics quickly became the dominant one at least among younger economists, and it is interesting to note that he never really encountered any serious opposition in Norway to his views on the appropriate roles of mathematics and statistics in economics. Apart from relating an interesting episode in the history of macroeconomic theory, Jens Christopher Andvig’s paper also makes clear that a shift in Frisch’s research priorities had important - and possibly unfortunate - consequences for the general state of economics in Norway in the post-war period. Knut Wicksell is known to the international research community for his path-breaking contributions to several areas of economic theory - to the theory of production and capital, monetary theory and public finance. But he was very far from being a pure theorist. Throughout his life he wrote and spoke on public policy issues, not only on economic problems, but also on wider social, political and even religious matters. It is well known that his macroeconomic work was an important influence on the famous Stockholm
494
A. Sandmo. History of economic thought:
Tk Scandinavian conrriburions
School of macroeconomic theory in the 1930s. Maybe one can also see his influence in the very active part which more recent generations of Swedish economists have taken in the public debate on economic policy. Lars Jonung’s paper provides interesting glimpses of this aspect of Wicksell’s many-sided activities. It is well known that policy recommendations with a Keynesian flavour were advanced in a number of countries during and after the period of the great depression. The Danish debate is particularly noteworthy because several of the participants in it based their arguments on an analytical framework which is closely similar to that of Keynes; thus Jens Warming described a multiplier mechanism in very explicit terms as early as 1928. The paper by Niels-Henrik Topp describes the Danish economists’ concern both with theory and policy and discusses the reasons behind the slow political acceptance of the new ideas. When you are close to political decision-makers, they will probably hear what you say. But it does not follow that they will act on it.
North-Holland
History of Economic Thought: The Scandinavian Contribution INTRODUCTORY
REMARKS
Agnar SANDMO Norwegian
School oj Economics
and Business Administration,
5000 Bergen,
Norway
1. Introduction This session on the history of economic thought will hopefully turn out to be the first in a series of such events, with the history of thought becoming one of those fields of specialization which are regularly represented at the annual congresses of our association. It is an area which has not been well covered at any of the large European meetings of economists, but it is one in which much valuable work is done, and where there is a lot of interest also among economists who do not consider themselves to be experts in the field. Moreover, it is appropriate for an association whose aim it is to promote cooperation and unity among European economists, that it should provide a forum for the presentation of research into our intellectual traditions. The limitation of the present session to Scandinavian contributions to economics requires some explanation. To those who are not especially interested in the economic, social and intellectual history of Scandinavia and most non-Scandinavians are not - the regional focus might seem to be irrelevant or misleading. Why not simply compose a session of the three most interesting papers in the field? Or, if more structure is wanted, why not focus instead on some particular sub-discipline like monetary theory or some worldwide event like the marginalist revolution? I definitely agree that the session could have been organized along different lines, and such lines should be pursued in the future; we should not always find ourselves obliged to concentrate on the history of thought in the region or country in which the congress is held. But the history of economic thought may be approached from many different perspectives, of which the regional one is certainly not the least interesting. It gives the researcher an opportunity for studying the connections between social and political institutions on the one hand and the development of economics on the other which easily come in the background in studies that take a more ‘global’ view of intellectual developments. It is 0014-2921/88/S3.50
c.Q 1988.
Elsevier Science Publishers B.V. (North-Holland)
492
A. Sandmo. History of economic thought: The Scandinavian contributions
also fruitful for the study of the connections between the structure of academic institutions and the quantity and quality of economic research. These are problems which are not only of great historical interest, but which are of relevance to current discussions of research policy as well. 2. Some features of the Scandinavian countries There is of course a multitude of social and political features of the Scandinavian countries which are of interest to the historian of economic thought. Let me just mention a few facts which are, I believe, important both for getting a wider perspective on the three papers to follow, and for understanding the position of economics in the Scandinavian countries today. An obvious but important fact is that Denmark, Norway and Sweden are small countries, with populations ranging from four to eight million inhabitants. This has a number of implications for the social framework in which economists have worked in the past and in which they operate today. Although the number of active academic economists may have been comparable in relative terms to the larger European countries and the United States, the absolute number has of course been much smaller. This meant that in the early years of the economics profession in Scandinavia, an economist who was active in research had few colleagues in his own country with whom to communicate and discuss, and he would be very lucky to have close colleagues in his own university. This kind of situation can lead to isolation and provincialism - but it can also lead people to adopt a more international orientation than would otherwise have been the case. The success stories of Scandinavian economics tend naturally to be representative of the latter outcome, but the former is clearly also of interest to the historian of science. From the point of view of pure academic research one might believe that the rational response to smallness in absolute numbers would be concentration and specialization. It does seem fairly obvious that there must be economies of scale in research when many people work together on related problems, so that if educational and scientific planners had aimed to maximize national contributions to the international economic literature, they should put their economists together in a few big departments and encourage them to specialize. However, against this must be set the claims (apart from teaching) of applied and policy-oriented research. Here, too, there are probably economies of scale in research, but the individual policy problems are there and require economic expertise for their solution. In this situation the small countries are at a disadvantage. To get a group of economists together to do serious work in the economics of taxation may imply that problems of industrial organization will have to be neglected. If
A. Sandmo. History ojeconomic
thought: The Scandinavian
contributions
493
this is thought to be unacceptable, one is faced with the unpleasant alternative of spreading resources thinly across fields with unavoidable sacrifices in terms of depth of analysis. The actual policies followed by the Scandinavian governments (all universities are public) may be seen as reflecting a compromise between those two sets of considerations. Another implication of smallness concerns the importance of personalities. Individual economists like Knut Wicksell and Ragnar Frisch became - in very different ways - dominant influences on the direction of economic research in their own countries to a degree which is hardly parallelled in any of the larger countries. Personalities are also important for the direction of policy-oriented research. In small countries academic economists, politicians and bureaucrats tend to know each other and to get involved in a common set of problems. There must be few Scandinavian economists in senior positions who have not at one time or another served on some government committee or otherwise been involved in giving policy advice. This is a situation which has both positive and negative aspects. On the positive side is the sense of relevance and realism which on the whole seems to pervade in Scandinavian economics departments. The negative aspect is that involvement in policy advice may tend to weaken standards of research performance by taking too much time off from basic research. 3. Frisch, Wicksell and Danish macroeconomists The stories told in the following three ‘papers illustrate several of the general points made above. Ragnar Frisch was a great economist and a dominating personality in a small country which, at the time of his appointment to a chair at the University of Oslo, had only one university department of economics. Frisch’s view of economics quickly became the dominant one at least among younger economists, and it is interesting to note that he never really encountered any serious opposition in Norway to his views on the appropriate roles of mathematics and statistics in economics. Apart from relating an interesting episode in the history of macroeconomic theory, Jens Christopher Andvig’s paper also makes clear that a shift in Frisch’s research priorities had important - and possibly unfortunate - consequences for the general state of economics in Norway in the post-war period. Knut Wicksell is known to the international research community for his path-breaking contributions to several areas of economic theory - to the theory of production and capital, monetary theory and public finance. But he was very far from being a pure theorist. Throughout his life he wrote and spoke on public policy issues, not only on economic problems, but also on wider social, political and even religious matters. It is well known that his macroeconomic work was an important influence on the famous Stockholm
494
A. Sandmo. History of economic thought:
Tk Scandinavian conrriburions
School of macroeconomic theory in the 1930s. Maybe one can also see his influence in the very active part which more recent generations of Swedish economists have taken in the public debate on economic policy. Lars Jonung’s paper provides interesting glimpses of this aspect of Wicksell’s many-sided activities. It is well known that policy recommendations with a Keynesian flavour were advanced in a number of countries during and after the period of the great depression. The Danish debate is particularly noteworthy because several of the participants in it based their arguments on an analytical framework which is closely similar to that of Keynes; thus Jens Warming described a multiplier mechanism in very explicit terms as early as 1928. The paper by Niels-Henrik Topp describes the Danish economists’ concern both with theory and policy and discusses the reasons behind the slow political acceptance of the new ideas. When you are close to political decision-makers, they will probably hear what you say. But it does not follow that they will act on it.