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Axel Leijonhufvud (1933-2022)

from Lars Syll

The orthodox Keynesianism of the time did have a theoretical explanation for recessions and depressions. Proponents saw the economy as a self-regulating machine in which individual decisions typically lead to a situation of full employment and healthy growth. The primary reason for periods of recession and depression was because wages did not fall quickly enough. If wages could fall rapidly and extensively enough, then the economy would absorb the unemployed. Orthodox Keynesians also took Keynes’ approach to monetary economics to be similar to the classical economists.

axel_press_highresLeijonhufvud got something entirely different from reading the General Theory. The more he looked at his footnotes, originally written in puzzlement at the disparity between what he took to be the Keynesian message and the orthodox Keynesianism of his time, the confident he felt. The implications were amazing. Had the whole discipline catastrophically misunderstood Keynes’ deeply revolutionary ideas? Was the dominant economics paradigm deeply flawed and a fatally wrong turn in macroeconomic thinking? And if this was the case, what was Keynes actually proposing?

Leijonhufvud’s “Keynesian Economics and the Economics of Keynes” exploded onto the academic stage the following year; no mean feat for an economics book that did not contain a single equation. The book took no prisoners and aimed squarely at the prevailing metaphor about the self-regulating economy and the economics of the orthodoxy. He forcefully argued that the free movement of wages and prices can sometimes be destabilizing and could move the economy away from full employment.

Arjun Jayadev

Fortunately, when you’ve got tired of the kind of macroeconomic apologetics produced by ‘New Keynesian’ macroeconomics, there are still some real Keynesian macroeconomists to read. One of them will always be Axel Leijonhufvud.

  1. Romar Correa
    May 20, 2022 at 12:44 pm

    Axel Leijonhufvud surely enriched the discussion. He captured a sense of the working of the system as a whole and advanced the ‘corridor hypothesis’. Within, feedback controls worked. Both price and quantity adjustments operated on the appropriate occasions. Walras and Marshall played their respective roles. All hell broke loose when economies veered outside the walls of the corridor.

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