Axel Leijonhufvud In Memoriam

23 May, 2022 at 14:27 | Posted in Economics | 3 Comments
 

Axel Leijonhufvud, circa mid-1980's. | Download Scientific DiagramI first came across Axel’s writing as an undergraduate student at Manchester University where we were taught from his doctoral dissertation, Keynes and the Keynesians; a book that shot Axel to intellectual rock stardom. He argued in that book that Keynes’ General Theory had nothing to do with sticky wages and prices but was instead about inter-temporal coordination failure

Although Axel recognized the importance of mathematical methods, he also recognized the limitations of formalism and he insisted that a good economist must be aware of the past. To this end he was a strong supporter of the teaching of economic history and the history of thought as part of the core curriculum.

Economic history disappeared as a core subject from many economics departments in the 1980s. UCLA was an exception largely due to Axel’s insistence that a good macro economist needs to understand the past before she can understand the present or the future …

Axel’s support of the history of thought was deemed anachronistic by many of his contemporaries who viewed economics through the lens of a linear progression of knowledge. In contrast, Axel viewed science — and particularly economics as a non experimental science — as a tree in which herd behavior led often to persistent treks down roads to nowhere …

Axel was a follower of Imre Lakatos and his view of the progression of economics was heavily influenced by Lakatos’ methodology and the concept of progressive and degenerative scientific research programs. In his view, modern macroeconomics is a degenerative research program that took a wrong turn in the 1950s. Axel was right about this and it is a theme that has influenced my own research agenda. Time will tell if the profession will eventually agree.

Roger Farmer

In physics,​ it may possibly not be straining credulity too much to model processes as ergodic — where time and history do not really matter — but in social and historical sciences it is obviously ridiculous. If societies and economies were ergodic worlds, why do econometricians fervently discuss things such as structural breaks and regime shifts? That they do is an indication of the unrealisticness of treating open systems as analyzable with ergodic concepts.

The future is not reducible to a known set of prospects. It is not like sitting at the roulette table and calculating what the future outcomes of spinning the wheel will be. Reading leading mainstream economists today one comes to think of Robert Clower’s apt remark that

much economics is so far removed from anything that remotely resembles the real world that it’s often difficult for economists to take their own subject seriously.

Anyone can construct models. To be seriously interesting, models have to come with an aim. They have to have an intended use. If the intention of a model is​ to help us explain real economies, it has to be evaluated from that perspective. A model or hypothesis without specific applicability is not really deserving our interest.

Without strong evidence,​ all kinds of absurd claims and nonsense may pretend to be science. We have to demand more of a justification than a rather watered-down version of ‘anything goes’ when it comes to the postulates on which mainstream economics is founded. If one proposes things like ‘rational expectations’ one also has to support its underlying assumptions. None is given, which makes it rather puzzling how rational expectations have become the standard modelling​ assumption made in much of modern macroeconomics. Perhaps the reason is that economists often mistake mathematical beauty for truth.

3 Comments

  1. 《In physics,​ it may possibly not be straining credulity too much to model processes as ergodic — where time and history do not really matter》
    .
    Is it just coincidental that I was just thinking about the ergodicity of individual water molecules in a mountain waterfall I was camped beside? From observation, is it not reasonable to conclude that some droplets appear to get stuck in whirls and loops that drive them back upstream to cascade down again and get caught up in the same vortex that drove them back the previous time?
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    In other words if you look closely at a waterfall, do you see evidence that ergodicity does not hold, because some water molecules are going around and round, so their time series average height would not descend with the theoretical stream molecules that start at the top of a stream and go down to the ocean? Are there some that stay caught up in whirls indefinitely? Could I take you to the spot and show you whirlpools where the same water drops seem to be circling, even as others rush by, thus severely challenging an ergodic interpretation of physical water molecules in a natural stream?

  2. “Anyone can construct models. To be seriously interesting, models have to come with an aim. They have to have an intended use. If the intention of a model is​ to help us explain real economies, it has to be evaluated from that perspective. A model or hypothesis without specific applicability is not really deserving our interest.”
    .
    Leijonhufvud’s view on this is quite clear in the first few minutes of the interview where Leijonhufvud explains his view on model making – it is as essentially Lars has outlined.
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    However, he does not dismiss model making out of hand. He says the way models are taught is the wrong way around. Economists should look at the functioning of an economy and then find a model to explain it.
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    Also interesting in Farmer’s tribute to Leijonhufvud, is his mentioning of the volume of papers delivered at a conference celebrating Leijonhufvud’s contribution to macroeconomics.
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    Lars is wont to label Leijonhufvud a Keynesian. I am not so sure this is an accurate portrayal, as I have argued elsewhere.
    .
    In the volume, the first paper is contributed by David Laidler – “Axel Leijonhufvud and the Quest for Micro-Foundations: some reflections”.
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    It seems to me that Laidler, in his inimitable inquisitive style, paints a picture of a theorist that is grappling with macroeconomic disequilibrium from a Marshallian/Walrasian persepective -not Keynesian.
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    Laidler also points out that Leijonhufvud argued that the “fixed price IS-LM exercises not only seriously misrepresented the economics of Keynes but, more generally, were inadequate for analysing the behaviour of any market economy…”
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    In this vein, it is worth noting that a new book by Young and Fuller (Reinterpreting Mr. Keynes The IS-LM Enigma Revisited) has concluded that Keynes may have pre-empted Hicks’ development of the IS-LM model by several years.
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    Young discovered a page of handwritten notes and equations scrawled by Keynes and found in his papers recently (believed to have been written in 1933). The notes and equations look very similar to those proposed by Hicks.

    • And Young had previously written, “Interpreting Mr Keynes: The IS-LM Enigma”, 1987.


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