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A Note on Some Lesser-Known Works of Erik Lindahl

Published online by Cambridge University Press:  07 November 2014

William P. Yohe
William P. Yohe*
Affiliation:
Duke University
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Type
Notes and Memoranda
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Canadian Journal of Economics and Political Science/Revue canadienne de economiques et science politique , Volume 28 , Issue 2 , May 1962 , pp. 274 - 280
Copyright
Copyright © Canadian Political Science Association 1962

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References

1 Lindahl, Gertrud, his wife, and Wallmén, Olof published a complete chronological bibliography in the Ekonomisk Tidskrift, LXII, no. 2, 05, 1960, 59–74.Google Scholar

There has recently been occasion in Sweden for reassessing Lindahl's work over the period 1927–39, much of which is familiar to English-speaking readers. Karl-Gustav Landgren finally published his long-awaited book, Den ‘nya ekonomien’ i Sverige: J. M. Keynes, E. Wigforss, B. Ohlin och utvecklingen 1927–39 (The New Economics in Sweden: Keynes, J. M. et al. and the Developments of 1927-39; with English summary; Stockholm: Almqvist & Wiksell, 1960)Google Scholar, which contains sections about Lindahl.

As summarized by Olof Palme (quoted in Lindahl, G., “Erik Lindahl och 30-talets sysselsattningsproblem” [Erik Lindahl and the Employment Problem of the Thirties], Ekonomisk Tidskrift, LXII, no. 4, 12, 1960, 296)CrossRefGoogle Scholar, Landgrens' major thesis is that “in Sweden it was Ernst Wigforss [the Minister of Finance who first proposed the use of expansionary fiscal policy in the early 1930's] who, while economic research was still occupied with traditional wage theory, etc., appropriated the new economics …” and thus “helped get the economists out of the magic spell of the antiquated theories which held them prisoners.” This view of the early Stockholm School is, to say the least, rather unconventional. To prove his point, Landgren had to attempt to show that economic writings prior to 1933 displayed an exclusive preoccupation with neoclassical problems and policy correctives. His treatment of Lindahl, whom he never credited with accepting the new economics, much less anticipating any of it, has been described by Tor Fernholm (see reference below) as “a disservice to Swedish economics.”

A special issue of the Ekonomisk Tidskrift (LXII, no. 3, Sept., 1960) was devoted to a discussion of Landgren's book in a series of quite critical papers by Fernholm, Wigforss, and Erik Lundberg. All three attacked Landgrens analysis of Lindahl's work. Even Wigforss, the politician, in describing an encounter with Lindahl in the early 1930's, commented (p. 185): “He confined his remarks solely to the theoretical tenability of the reasoning in my presentation but in such a way that it was difficult to believe he could have been aloof from the whole trend.” In addition, the next issue contained a well-documented refutation by Mrs. Lindahl, “Erik Lindahl,” of Landgren's interpretation of Lindahl.

2 Die Gerechtigkeit der Besteurung (Lund: Gleerup, 1919)Google Scholar and “Einige strittige Fragen der Steuertheorie,” in Meyer, Hans, ed., Die Wirtschaftstheorie der Gegenwart (Vienna: Springer-Verlag, 1928), 282–304.Google Scholar Pages 85–98 of the former and the latter in its entirety have been translated in Musgrave, R. A. and Peacock, A. T., eds., Classics in the Theory of Public Finance (New York, 1958), 168–76 and 214–32CrossRefGoogle Scholar respectively. Both are discussed at length in Musgrave, R. A., The Theory of Public Finance (New York, 1959), 73–80.Google Scholar Also available now is one of Lindahl's last works, “Tax Principles and Tax Policy,” in International Economic Papers, no. 10 (1960).

For general comments on the extent of Lindahl's reputation, see the interesting personal note (in English) by Turvey, Ralph, “Erik Lindahl,” Ekonomisk Tidskrift, LXII, no. 1, March, 1960, 5–8.Google Scholar

Hans Brems, in a letter written on 16 October, 1959, had this interesting observation to make about Lindahl. He “is, first, a very modest person, always willing to depreciate himself and his importance. Second, when he requests time he really means it. He will usually take it without even requesting it … He is the world's most charming person just as he is—I met him this summer at Elsinore again and he hadn't changed. But as one of his colleagues, Landgren, once remarked: ‘Erik tänker utomordentligt djupt och uto-mordentligt långsamt [Erik thinks with extraordinary depth and extraordinary slowness].’”

3 Some useful, if not very incisive, comments on Lindahl's writings are contained in Landgren's earlier little book, Economics in Modern Sweden (Washington, D.C., 1957).Google Scholar

4 See Fernholm, , Economisk Tidskrift, LXII, no. 3, 180.Google Scholar My interpretation is in accord with Turvey's enumeration of cases where Lindahl was “strikingly modern while at the same time in line with the traditional approach” and where his thought “showed great continuity.”

5 His earlier contribution in this area were (1) National Income of Sweden, 1861–1930, written with E. Dahlgren and K. Kock, Stockholm Economic Studies, no. 5 (Stockholm, 1937); and (2) Studies, 74–136.

6 The Basic Concepts of National Accounting,” International Economic Papers, no. 7 ( 1957), 71. This originally appeared in Swedish in 1954.

7 Ibid.

8 See, e.g., his introduction to Wicksell, Knut, Selected Papers on Economic Theory (Cambridge, Mass., 1958), 33,nGoogle Scholar; “Några riktlinjer för penningvärdets stabilisering” (Some Approaches for Stabilizing the Value of Money), in Recept mot inflation (Remedy for Inflation) (Stockholm: Kungl Finansdepartementet, 1957), 62–4Google Scholar; “Full Employment Without Inflation,” Three Banks Review, no. 33, 03, 1957, 31–3Google Scholar; Spelet om penningvärdet (The Value of Money Game) (Stockholm: Kooperativa Förbundets Bokförlag, 1957), 7–8, 13–18 Google Scholar; and “Penningteoretiska utgângspunkter” (Points of Departure in Monetary Theory) in Om riksbankens sedelutgivningsrätt (On the Note Issuing Power of the Swedish Central Bank) (Stockholm: Statens Offentliga Utredningar, 1955, no. 43 ), 47. In the last three references, Lindahl, using Keynes' Treatise terminology, calls the phenomenon “income inflation,” as distinct from “profit (i.e., demand) inflation.” As would be expected, Lindahl was much more careful in his acknowledgement of the existence of “income inflation” than many writers have been. E.g., in Spelet he states (14): “An income inflation, as said before, presupposes a certain cooperation on the part of banks. But, while credit expansion may be said to be the driving force in profit inflation, it comes about, on the other hand, as a consequence of income inflation. Even if the credit market is kept so tight that the balance between investment and saving is maintained, income inflation can take place. The increased bank credit in such a case does not give rise to any excess demand but is accompanied by just enough of an increase in total demand for demand to equal total supply at the higher price level.”

See also Turvey, , “Erik Lindahl,” 7–8.Google Scholar

9 E.g., in the 1941–42 controversy with Ohlin and in “On Keynes' Economic System,” Economic Record, XXX (1954), 19–32 and 159–71.Google Scholar

10 “Not angående multiplikator-teorien,” Ekonomisk Tidskrift, LV, no. 3, 09, 1953, 218–22.Google Scholar This is the subject of my paper, “An Analysis of Professor Lindahl's Sequence Model,” L'industria, 1959, no. 2, 3–12.Google Scholar

11 This and other matters of Lindahl's, dynamics are covered in some detail in my doctoral dissertation at the University of Michigan, “The Wicksellian Tradition in Swedish Macroeconomic Theory” (Ann Arbor: University Microfilms, 1959), esp. 240–2.Google Scholar See also Benjamin Caplan, “Some Swedish Stepping Stones in Economic Theory: A Comment,” this Journal, VII, no. 4, 1941, pp. 559–62.

12 “Not angående multiplikator-teorien.” See also Hicks, J. R., “Methods of Dynamic Analysis,” in 23 Economic Essays in Honour of Erik Lindahl (Stockholm: Ekonomisk Tidskrift, 1956), 139–51.Google Scholar

13 See, e.g., Hansen, Bent, A Study in the Theory of Inflation (New York, 1951), 21–35.Google Scholar

14 Introduction to Wicksell's, Selected Papers, 42–4.Google Scholar In the same section he described Wicksell's “greatest contribution” as “paving the way for dynamic theory in the proper sense.” For a very “Wicksellian” interpretation of the ends and means of monetary policy, see his Speiet, 53. On the “persistent Wicksellianism of Lindahl's thought,” see Turvey, “Erik Lindahl,” 7–8.

15 A preoccupation with this assumption was evidently behind Lindahl's contention that Keynes should logically have regarded interest rates, rather than the money supply, as the appropriate policy parameter of the central bank. See “On Keynes' Economic System,” 166. The implications of this are examined in my “The Wicksellian Tradition,” 202,n. See also Bent Hansen, review (in Swedish) of Studies in the Quantity Theory of Money (ed. Milton Friedman), Ekonomisk Tidskrift, LIX, no. 3, 09, 1957, especially 243.Google Scholar

16 See “The Wicksellian Tradition,” 209–18. Bent Hansen admirably summarized these views in “Patinkin och pengar: Kvantitetsteorin redivivus?” (Patinkin and Money: The Quantity Theory Revived?), Economist; Tidskrift, LIX (1957), 85–6.Google Scholar The best known attack was by Ohlin in 1943 (translated as “The Stockholm School Versus the Quantity Theory,” in International Economic Papers, no. 10 [1960], 132–46Google Scholar).

17 See Marget, Arthur, The Theory of Prices (New York, 1938), I, 343.Google Scholar

18 Lindahl's most recent criticisms of Keynes were contained in “On Keynes' Economic System.” His comparison of Keynes and Wicksell is in “Penningteoretiska utgångspunkter,” 37–40.

19 This argument is quite unjustified. It is based on a confusion of Keynes' static function with a dynamic consumption function in which current consumption is made to depend on current income, a condition which, to the Swedes, occurs only in equilibrium, when income is “correctly anticipated.”

20 The same interpretation, i.e., regarding Wicksell's banks as a particular case of Keynes' speculators, is made by Ackley, Gardner (“Liquidity Preference and Loanable Funds Theories of Interest: Comment,” American Economic Review, XLVII, no. 5, 09, 1957, 668–9, note 8).Google Scholar That Wicksell's banks play a similar role to Keynes' speculators in reducing the flexibility of money interest rates is unquestionably true, but that there is the same rationale for their behaviour is open to objection. Wicksell stressed the importance of “routine” changing of bank rates in accordance with reserve positions; such changes did not reflect gain-maximizing behaviour under conditions of uncertainty about the future course of interest rates.

Ackley's position points to a closely related question: who really are the speculators in Keynes' theory? Are they the non-bank public, who do business with commercial banks and the government? Or are they the banks and the non-bank public, who do business with the central bank and the Treasury? The appropriate concept of “money” hinges on the extent of the speculator classification.

21 The first is from his AEA paper “Swedish Experience in Economic Planning,” American Economic Review, 05, 1950, 13 Google Scholar, and the second, from “On Keynes' Economic System,” 170.