Wednesday, 19 April 2017

Assar Lindbeck On How To Be An Economist

Continuing my tradition of reviewing books years after everyone else, I recently picked up Assar Lindbeck's biography of his life as an economist, Ekonomi Är Att Välja (Eng: "Economics is about choosing"). Lindbeck, who turned 87 a few months back, is one of Sweden's most prolific and well-known economists (even my dad, who's only vaguely heard of Keynes and may have been somewhat familiar with Piketty or Krugman from some of my rants, instantly recognised Lindbeck's name and photo on the front cover: "I know this guy. Economist, pretty famous!"). He's been involved in almost much every major event in modern Swedish economic history, frequently features in major newspapers and TV debates. For over 60 years he has, both in public and in academic outlets, argued for a reform and repeal of rent control. Safe to say, this is one great economist I wanted to know more about.

My first exposure to his 2012 memoar, however, was reading the first chapter on Google Books during a very hot and humid Sydney afternoon, and Lindbeck's description growing up during the 1930s in the north of Sweden spurred my economic history interest. Very much like McCloskey, he uses a beautiful and elegant prose that completely captured me. Fast forward almost a year and I finally took the time to read all of it. All combined in one, it's a story of one man's life, one nation's postwar economic troubles spicid with frequent comments on the economics profession in general.

What most struck me about his inspiring career was how, both geographically and intellectually, he managed to be exactly where the action was, perfectly attuned to his surroundings: in 1968-9 when the left-wing wave that hit the campuses of Berkeley and Columbia, Lindbeck beck was a professor at those universities and he was conducting research on alternative economic systems; when Nordhaus published his renowned 1975 The Political Business Cycle Lindbeck had a few articles published arguing similar things, and he continuously added to Nordhaus' work in the most high-ranked economics journals; when Sweden's shipbuilding industry and banking industry were in crises in the 1970s and 1990s respectively, Lindbeck was an active participant in the official commissions advising the government (Chairing the latter). He was in the middle of the biggest political disputes of the post-war era, those of union-ownership and collectivisation of Swedish business, often the sole opponent willing to defend private property in public. Not to mention his close friendship and relation to Olof Palme, top-statesman of the postwar era.

Apart from his many international positions (Yale 1957 & 1976-77, Michigan 1958, Simon Fraser 1981, Stanford 1977, IMF and World Bank, 1986-87), he chaired the committee that decides on Riksbanken's Nobel Prize in Economics for over a decade. And we haven't even mentioned his academic contributions, among the most famous is the Insider-Outsider theory of labour market frictions, his work on price fixing/rent control/agricultural subsidies, and the welfare state. Klas Eklund, another one of Sweden's hot-shoot economists, begins his review of Lindbeck's book in the following way:
He has been the Nestor among Swedish economists for a few decades; most read, most influential, with most disciples. Additionally composer, painter, founder of Ekonomisk Debatt [Economics journal], author, excellent educator, convincing debater. 
The book is not an extended CV, even though Lindbeck kindly lists everything he has published (a ridiculous number of books, articles, columns and reports) but also a thematic discussion of several topics in laymen terms; environmental economics, development economics, subsidies and price fixing, the workings and problems of the welfare state (including a passionate defense!), banking and towards the end, and more general discussions of the profession.

The area where the book is fairly limited is its depth, which comes as no surprise considering that its target audience is the wider public. Moreover, his one-page, all-over-the-place attack on "market anarchists" whom he considers "naive" (p. 405), is surprisingly easy to counter, and many academic discussions end precisely when they become interesting. I should admit that he nevertheless managed to teach me quite a few things, some of them pretty amazing (such as the corrective behaviour of certain tax cuts). As a memoir and biography the book is superb.

Lindbeck clearly shows his pluralist tendencies, combining common sense and state-of-the-art economic modelling, but has never remained firmly in one kind of economics, working on selected topics. In a way, he's always been a contrarian, defending markets and private property in the 1960s and 70s, attacking the efficient market hypothesis or new classical models in the 1980s, and defending the welfare state in the 1990s and 2000s:
Early on in life I decided not to accept opinions simply because many others do. I have also had a very hard time remaining silent when debates in society went awry or when unrealistic research agenda has become commonly accepted among economists (p. 403). 
His advice for up-and-coming econ students is fairly refreshing, Paul Romer-style: "If you're never controversial, you probably never say anything new or interesting" (p. 404). In the concluding chapters he also outlines what he believes is the most important contribution of economics, which most academic economists probably would agree with. Considering his otherwise quite social democratic views of large redistributive welfare state and (sensible) regulation/interventions, he points to two very common concepts in economics that generally underpin most free-market positions:
  1. price formation in an open market; prices convey information about household preferences and companies' production possibilities, as well as provide adequate incentives for coordination
  2. Comparative advantage: to specialise in an area or production where one's inferiority is least distinctive.
In summary, this insanely-productive 87-year-old economist has done quite amazing things throughout his career. Yet, he remains humble – he disputes the fact that he really had much impact on the economic policies of post-war Sweden and warns against attaching too much importance to one's own actions  and dedicated – just a few weeks ago he co-published a column on integration in Sweden's largest newspaper and in February he wrote a similar column arguing against rent control).

If I, throughout my career, could produce/achieve/accomplish a tenth of what Lindbeck has, I will consider my career a great success. Now, when can we expect an English edition?

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