Axel Leijonhufvud, RIP

There’s no discipline that discards its heroes as quickly and as comprehensively as economics. Axel Leijonhufvud is an outstanding example of this “roll-over-Beethoven” tendency. Leijonhufvud means lion’s head in Swedish.

He died on May 5 at the age of 89. He produced his seminal work at the age of 25. The book was called On Keynesian Economics and the Economics of Keynes. In it he argued, totally convincingly, that Keynesian economics had to be re-examined. There was no algebra or geometry in the book. No model, either.

The reason I am talking about him in this space, which is meant for books, is not his economics, which was quite revolutionary, but because he was such a good writer. Not of fiction but of economics.

As happens in such cases, the orthodoxy ignored him. How dare he question received wisdom. The political establishment in the US also didn’t take to him because what he was saying was quite inconvenient to it. But good work never goes to waste. His theory laid the foundations of the rational expectations theory. This theory said people don’t make the same mistake twice.

It held sway till a few years ago. Now the orthodoxy is that there is no such thing as rationality!

However, this is not the place to dwell on his work in economics, or that of others. Instead, I want to bring to your attention a paper he wrote in 1973 called Life Among the Econ. It was a devastating takedown of economics and economists. It was also hilarious.

You can find it on Google. It is not a very long paper, even for this age of Twitter. It deserves to be read because it reveals all the angst he must have felt at not being taken seriously. But the thing is, he was absolutely right about the discipline and its denizens. It’s probably true of all academics, but no one has dared to lampoon his or her own discipline quite so brutally.

The fable: He starts the paper saying “The Econ tribe lives in the far North…the extreme clannishness, not to say xenophobia, makes life amongst them extremely difficult for the outsider.”

He goes on to say that this tribe, even though primitive, has a very complex social structure where caste and status are crucial. The main determinant is caste. In those days the theoreticians ruled the world of economics.

The paper becomes funnier as it goes along, not least because it sums up the whole business of economics so well. He says there is a pecking order in which “one may find that A pecks B, B pecks C, and C pecks A”. The italics are in the original. In that sense it’s pretty democratic.

Although in this tribe everyone talks behind the backs of everyone, “social cohesion (in the tribe) is maintained by a shared distrust of outsiders”.

Also, status is determined by how a member uses an instrument called “modl”. “The status of a male econ is determined by his skill in making a modl of his field”.

There are rites of passage as well.  Leijonhufvud writes that a young economist is not admitted to adulthood by the elders until he had made a “modl” and demonstrated his virtuosity and skills.

Form over substance: And so on, in a way that will appeal to and resonate with many a scorned economist without a “modl” to his name but with a new way of looking at problems.

Leijonhufvud’s target was the ritualistic orthodoxy of mainstream economics of those days which insisted on mathematical models regardless of the soundness of the argument without a “modl”.

Over the 1970s that orthodoxy transformed into an insistence on data. I have heard a professor at the Delhi School of Economics dismiss an argument saying contemptuously “but where is the data? No data, no talk.” Logic by itself was irrelevant.

Was Leijonhufvud being unfair? After all, economists have reinvented economics many times in the last 200 years. True enough but the hard facts that Leijonhufvud wrote about tribalism, clannishness, the power that the “elders” wield and rites of passage remain indisputable.

Leijonhufvud’s works should have forced economists to rethink their approach to their method generally and macroeconomics in particular. That he failed is because he made the mistake of pointing out that the emperor was wearing transparent clothes.