Axel Leijonhufvud (6 September 1933 – 2 May 2022) was a Swedish economist and professor emeritus at the University of California, Los Angeles (UCLA), and professor at the University of Trento, Italy. Leijonhufvud focused his studies on macroeconomic monetary theory. In his defining book On Keynesian Economics and the Economics of Keynes (1968) he focuses on a critique of the interpretation of Keynesian economic theory by Keynesian economists. He goes on to call the standard neoclassical synthesis interpretation of the Keynes' General Theory as having misunderstood and misinterpreted Keynes. In one of his papers, "Life Among the Econ" (1973), he takes a comical yet critical look at the inherent clannish nature of economists; the paper was considered a devastating takedown of economics and economists.

Early life

Axel was born to the noble family Leijonhufvud on 6 September 1933 in Stockholm, Sweden, to Helene Neovius and Erik Gabriel Leijonhufvud. His father was a judge in Scania, a southern province in Sweden. In his early adult years, he served as a seaman and later an officer with the Swedish Army, before leaving to study for a bachelor's degree from the University of Lund, graduating in 1960. He went to the United States on a Scandinavian American Foundation scholarship, landing at the University of Pittsburgh where he obtained a Master of Arts degree in economics. It was during his time here that he was introduced to his ultimate interest in monetary theory. He later obtained a PhD in economics from Northwestern University in 1967.

Career

Leijonhufvud started his career at the University of California, Los Angeles, as an assistant professor at the school of economics in 1964, and became a full-time professor in 1971. In 1991, he started the Center for Computable Economics at UCLA and remained its director until 1997. He retired from UCLA in 1994, and served as a professor emeritus. He joined the University of Trento, Italy, in 1995, as a professor of monetary theory and policy. He retired in 2009. Leijonhufvud was awarded honoris causa doctoral degrees by the University of Lund in 1983 and the University Nice Sophia Antipolis in 1996.

Economic theory

Leijonhufvud's monetary economics built on the work of the American economist Robert W. Clower. In 1968, at the age of 35, he published a famous scholarly book entitled On Keynesian Economics and the Economics of Keynes. In the book, he argued that Keynesian economics had to be re-examined. He made the case that John Hicks' IS/LM (Investment—Saving / Liquidity preference—Money supply) formulation of Keynes General Theory was an inadequate explanation for the "involuntary unemployment" in John Maynard Keynes's writings. Rather, Leijonhufvud's reading of Keynes emphasizes disequilibrium phenomena, which cannot be addressed in the IS/LM framework, as central to Keynes' explanation of unemployment and economic depression. Leijonhufvud used this observation as a point of departure to advocate a "cybernetic" approach to macroeconomics, where the algorithm by which prices and quantities adjust is explicitly specified, allowing the dynamic economy to be studied without imposing the standard Walrasian equilibrium concept. In particular, Leijonhufvud advocated formally modelling the process by which information moves through the economy. While the "cybernetic" approach may have failed to gain traction in mainstream economics, it presaged the rational expectations revolution that would ultimately supplant the IS/LM model as the dominant paradigm in academic macroeconomics. Leijonhufvud wrote also the article "The Wicksell Connection: Variation on a Theme", where he presented the Z-Theory. In another article called "Effective Demand Failures", he presents the Corridor Hypothesis. In 2006, the Economics Department at UCLA organized a conference in honor of Leijonhufvud's contributions to the department and to economics at large. The conference was organized by Roger Farmer, and contains contributions from Farmer, Lars Peter Hansen, Peter Howitt, David K. Levine, Edmund S. Phelps, Thomas J. Sargent, and Kenneth L. Sokoloff, among others. The papers are published in a Festschrift, Macroeconomics in the Small and the Large.

Life Among the Econ

Published in the Western Economic Journal in 1973, Leijonhufvud's "Life Among the Econ" is a comical article outlining the discipline of economics, and the scholars that practice it, from the perspective of an anthropologist. Professional economists are treated as a tribe known as "the Econ" and ensuing tribal analogues are produced throughout the piece to characterize the group's unusual behavior. The paper takes a comical yet critical look at the inherent clannish and xenophobic nature of economists and was considered a devastating takedown of economics and economists.

<!-- While describing the "caste and status" structure of "the Econ", Leijonhufvud remarks how "status relationships do not seem to form a simple hierarchical 'pecking order'..." and that "in societies with a traditional pecking-order [sic]...an equilibrium develops in which little actual pecking ever takes place". By these comical observations Leijonhufvud's point is that within academic economics, there is little respect given on behalf of young economists toward their experienced colleagues. Alternatively, if there is such a recognized hierarchy, it is so stringent that little mobility is allowed: those at the top of the academic ladder do not easily give in to the desires of their lower-ranking counterparts, a practice that "carries no formal sanctions". Leijonhufvud later writes that hierarchy not only emerges generationally, but also between various fields of research: "A comparison of status relationships in the different 'fields' shows a definite common pattern." For "the Econ", the relative respect given to varying fields - the word they usurp for what is commonly understood as a caste - is contingent on their use of "modls", referring to the development of various economic models existing in academia today. Moreover, "modls" produced by different fields are not equally acknowledged by all - Macro and Micro Econs hardly appreciate, or even understand, the "modls" produced by the other. Within this allegorical language it is hard to miss Leijonhufvud's point that there is little interdepartmental understanding and collaboration in economics, at least during the early 1970s. Like common cultural misunderstandings, these gaps allow members of various schools of thought to quickly denigrate members of competing schools without first recognizing the context in which those schools, or "fields" as Leijonhufvud aligns them with, operate. Returning to his earlier critique of the generational pecking-order, Leijonhufvud further develops his theory of "grads, adults and elders". For "the Econ", the young adult, or "grad", is not accepted into the community until he produces a "modl" of sufficient complication for the master he or she works under. Yet this rite of initiation does not end with one initial acceptance: in order to maintain one's membership one needs to continually produce "modls", lest one be "turned out of the 'dept' to perish in the wilderness". This cultural demonstration is, of course, Leijonhufvud's commentary on the incessant need to publish new economic models within academia to sustain one's faculty position in an economic department. Yet Leijonhufvud later notes that these models rarely apply to the real world, though they are still the basis by which "Econs" look down upon Sociogs and Polscis (sociologists and political scientists). In defense of this practice among "the Econ", Leijonhufvud argues that it actually does not matter much whether "modls" work ("the Implementarist issue is no longer seen as productive") so long as they are filled with significant beliefs (this practice is particularly present among the "Math-econ", the priests of "the Econ"). Leijonhufvud ends his comical caricature by recognizing that, because of the aforementioned practices surrounding ineffectiveness of "modls", "The prospect for the Econ is bleak." While they are growing at increasing rates, most of them are quite poor and not self-sustainable. And yet, "the Econ remain as of old a proud and warlike race", which is all to say that economics as a primary discipline among the social sciences is dwindling even though members of its community do not want to recognize it as such. Sure, "the Econ" had inspiring routes, but they have since exhausted their resources and trust with those on the outside and collapse from within has already begun—more and more "Econs" are reduced to vagabonds with no true community to call home. -->

Personal life

Leijonhufvud's first marriage was to Märta Ising and together they had three children - Carl, Gabriella, and Christina. He married Earlene Craver in 1977. Leijonhufvud died on 2 May 2022. He was aged 88.

Select works