Economics at Uppsala From Berch to Lindahl/Palander

A Survey by Ragnar Bentzel, Professor of Economics at Uppsala University 1965–1985.

The Department of Economics at Uppsala University has a long and somewhat motley history. Since the first professorship in the subject was established in the middle of the eighteenth century, the Department’s teaching and research has occasionally attained great heights, but for other, and in some cases lengthy, periods, its levels of activity and scholarship have left much to be desired.

Anders Berch

The first chair in economics in the Nordic countries was instituted in 1741 at the Faculty of Law in Uppsala. Its first occupant was Anders Berch, a chief official at the Swedish Board of Commerce who, ten years earlier, had the foresight to write and defend an academic dissertation on the need for just such a chair. After his appointment he was given the sonorous title of Juris Prudentiae, Oeconomiae et Commerciorum Professor, much the envy of his successors.

Berch was an enthusiastic social reformer whose mercantilistic ideas would probably be best classified as ultraliberal today. He elaborated these ideas in an anonymous 1746 publication titled Politisk aritmetik (Political Arithmetic). This must be seen as a largely political document, hardly a scholarly analysis in the modern sense. The same can be said about Berch’s textbook, which was published a few years later. Besides political arguments it contained recommendations regarding the pursuits of agriculture and forestry.

For Uppsala residents the construction of Theatrum Oeconomicum perhaps stands out as Berch’s most lasting contribution. An apartment in a still extant building in the centre of town was turned into an exhibition gallery, with various objects and pictures designed to illustrate certain sections of his textbook. The apartment has been used for other purposes in the last two hundred years and has largely been forgotten, but to this day it is called Oeconomicum. It was sadly gutted by fire in the summer of 1990. The building remains standing, but is much the worse for wear.

Pehr Niclas Christernin

Following a pattern that was not uncommon in those days, Berch struggled energetically to have his son appointed his successor as professor. He did not succeed, however; he was succeeded instead by Pehr Niclas Christernin, a sharp-witted theoretician of a rather modern cut. To be sure, the latter’s scholarly production was not especially extensive, consisting as a matter of fact of a single book, published in 1761, but it was of high quality and of quite a different stripe than Berch’s mixture of political declarations and agricultural lore. The main theme of Christernin’s book was monetary policy, and two of its highlights are its profound discussions of the theory of quantity and of changes in exchange rates. Both in terms of its statement of the problem and its reasoning, this work was almost of modern calibre.

After just a few years as professor of economics Christernin took over a chair in philosophy. His efforts in that field, however, appear not to have been outstanding. Uppsala University did a negative doublé, losing a good economist and acquiring a poor philosopher.

Christernin had an eccentric turn of mind, which often played tricks on him. He was egocentric, querulous, strident, and generally oafish. These features rendered him undiplomatic and made it difficult for him to cooperate with others. As a result of this, he often found himself at odds with his fellows and was involved in a number of “scandals.”

Like Berch, Christernin has a building in Uppsala which is associated with his name. He lived in the “Dean’s House,” situated between the Cathedral and Holy Trinity Church. Can it be seen as symptomatic that just that building was the centre of yet another scandal, the widely publicised “bishop’s affair” of the 1950s?

David Davidson

After Christernin’s “defection” economic research at Uppsala fell into a long period of darkness. As far as can be determined, no economists of any prominence emerged for the following one hundred years. It was only at the end of the 1800s that light returned to the Department. The person who kindled that light was the brilliant David Davidson.

Davidson completed his doctorate in 1878 and was appointed professor at Uppsala in 1880. His research ranged over broad areas, primarily theory of capital, theory of value, and monetary and finance theory. His dissertation dealt with theory of capital, to which he made an extremely substantial contribution. He anticipated to a large extent the theses of the great Böhm-Bawerk, not least with regard to his analysis of the foundations of interest.

Davidson’s ideas never achieved an international breakthrough, probably because he wrote in Swedish. If he had written in more internationally saleable languages, he would probably have attained a not insignificant place in the history of economic doctrine. In our country, however, he was highly appreciated both for his theory of capital and for his monetary theory, not to mention the norm of monetary policy which bears his name.

In the 1920s a famous debate raged between Wicksell and Davidson concerning the objectives of monetary policy. Wicksell maintained that the goal should be to keep the level of prices constant and, with changes in productivity, to let wages vary in proportion to productivity. Davidson, on the other hand, promulgated the thesis that, with changes in productivity, wages should remain unchanged and that prices should vary in inverse proportion to productivity. This “Davidson’s norm” was justified partly by arguments involving business-cycle policy aiming to hinder the emergence of cumulative processes of the sort Wicksell had studied, and partly by arguments of Equity; meaning that in periods of improved productivity people with fixed income, such as those living on pensions and on bank interest, would also benefit from this enhanced production.

In Carl Uhr’s article in this volume, which provides an overview of Davidson’s contributions, it is not clarified to what a tremendous extent Davidson’s norm influenced the Swedish economic debate and policies. It is therefore perhaps not out of place to address this matter here.

In Penningpolitikens mål (Objectives of Monetary Policy) from 1924, Erik Lindahl argue in favour of applying Davidson’s norm. He based this argument primarily on the equity aspect. In the early 1930s Gunnar Myrdal subsequently took up the question of monetary equilibrium, and he too concluded that Davidson’s norm should be followed. The same opinion informed the Report of the Commission on Unemployment in 1935. The same thesis was propounded in a number of publications which, in the first half of the 1940s, discussed the shape of economic policy after the war. Among the advocates of the norm we notice Dag Hammarskjöld, who put forth his arguments in a 1944 article, and then minister of finance Ernst Wigfors, who was editing the Labour Movement’s post-war program, and in whose lap Davidson’s norm was firmly placed.

Despite the tremendous support Davidson’s norm enjoyed up to the end of World War II, it was quickly deflated following the war. The theory did not hold true for the reality that followed; the demands for nominal wage increases grew to be too strong.

Davidson was exceptionally short, which inspired a number of more or less funny stories about him. Among other things it was said that he sometimes suffered from insomnia and that on such occasions he would get up and take a walk under the bed. The truth of this claim has never been fully corroborated, however. The fact that his wife was exceptionally tall also paved the way for further ill-willed jokes.

Fritz Brock

After his retirement in 1919 Davidson devoted himself mainly to editing Ekonomisk Tidskrift, which he had founded. His retirement meant that a great darkness once again settled over the economic heavens at Uppsala. His successor, Fritz Brock, who occupied the chair in economics and fiscal law between 1921 and 1942, was by no means in possession of Davidson’s qualifications. After his appointment he did not publish any scholarly works, and he never had any students apart from those stuying for their basic law degree. During his twenty-one years as professor, not a single doctoral degree was granted at Uppsala, and this was during the golden age of Swedish economics. Elsewhere in the country there emerged the almost unnaturally prominent new generation of economists, led by Bertil Ohlin, Gunnar Myrdal, Erik Lindahl, Dag Hammarskjöld, Erik Lundberg, Ingvar Svennilsson, Alf Johansson, and the Åkerman brothers. But all was quiet on the Uppsala front. One wonders if there is a single economist today, of pre-retirement age, who has ever read or even heard of any works by Brock.

If Brock never became famous for his scholarly efforts, he was all the more notorious as a “character.” His students viewed examination results as purely stochastic variables, and there were those who failed six or seven times. They knew their only hope was to dig in and try, try again; they would win the lottery next time around. During examination days there were normally a queue of students outside the professor’s room and it happened, not to seldom, that one or more of those, who had been ploughed, went out and placed themselves at the end of the queue in order to take a new chance immediately. Sometimes this trick was a success.

Brock was a recluse, and he did not hold the opposite sex in very high esteem. The chances of a female student ever passing an examination were extremely small, and he once declared before a rather large gathering: “I have only known two women in my entire life. One is my housekeeper and the other is the Rektor [male, the authors remark] of the University.” In spite of this Brock did marry in the end, and, quite logically, his bride was his housekeeper. It is reported that he entered wedlock out of pure orneriness and with the sole intent of reducing the Swedish gross national product. Perhaps it is not entirely coincidental that Brock’s portrait at the Department has been adorned with a pair of horns.

Erik Lindahl

When Brock retired in 1942 he was succeeded by Erik Lindahl, and a new era was ushered in for economics at Uppsala. Even before his advent in Uppsala Lindahl had achieved great international renown. In our country he was not only known as a scholar, but also as an influential adviser to the government and central bank. It was of course a great pleasure for the University and its students to acquire a professor of such stature.

Lindahl’s international reputation was primarily based on three achievements. Firstly, there was his analysis of the applicability of the principle of interest in taxation and the resultant “Lindahl solution.” Then there was his magnum opus Studies in the Theory of Money and Capital, which was a general equilibrium analysis of monetary theory, monetary policy, and theory of capital. This book has become one of the classics of economic science. Thirdly, there was his penetration of the concepts and methods used by the so-called “Stockholm School.” He himself was a prominent member of this “school” alongside Bertil Ohlin, Gunnar Myrdal, and Erik Lundberg.

Svensk Uppslagsbok (The Swedish Encyclopedia) reports that he not only wrote Studies in the Theory of Money and Capital but also Studies in the Theory of Capital and Money. This must be seen as a slight exaggeration, however.

Erik Lindahl was interested in his students and was a good adviser of graduate students. He was very popular. As a lecturer, however, he was not especially heroic. He would tend to become involved in various tangents, and if he went to the blackboard to write formulas, he was hopelessly lost. His feeble talents as a lecturer caused many a foreign guest to ask: “Who actually wrote Lindahl’s books?” The question was all the more in order because his writings were characterised by the greatest lucidity and stringency, a result of the exhaustive work he invested in the formal construction of his writings. Each sentence was a battle.

Lindahl was known for the dexterity with which he could put his foot in his mouth. One example is his speech at the banquet he arranged for Bent Hansen after the latter’s disputation. Lindahl started off by affectionately mentioning that the Hansen family had arrived a half-hour late, which sent Bent’s weak-nerved wife through the ceiling. He then went on to harangue the examiners from the disputation, but forgot the first examiner (Haavelmo), skipping directly to the second and third with the words: “I need not harangue the second examiner [Kurt Eklöf], because he is so astute, but I must say a few words to the third examiner.”

Lindahl possessed a strong social conscience. He wished to defend the underdogs in society, which meant that he always nurtured an interest in income distribution and its developments. He attained a not insignificant influence on the shaping of economic policy through his writings and not least through his close contacts with the then minister of finance Ernst Wigfors and with the central bank. As a one-man commission on the imposition of a one-shot tax, he went against the opinion of the ministry and advised against such a levy.

As mentioned, Lindahl was an advocate of Davidson’s norm and feared the emergence of Wicksell’s cumulative processes. This interest in price-level developments led him to anxiously follow the trends in the consumer price index which he had devised for the Riksbank, and he often related how terrified he had been when price levels rose by more than 0.2 percent in one month in the late 1930s. Like many of his contemporaries, he believed that price hikes of more than three percent per annum would in the long run spell the end of the world. Time is a great teacher.

Tord Palander

When Lindahl had “sat upon the throne” for six years, he was joined by Tord Palander, who had been appointed professor of economics at the Arts Faculty in 1948. His arrival clearly augmented the Department’s resources. True, Palander was not as well known as Lindahl either inside or outside Sweden’s boundaries, but he had a very good name as a scholar, not least as an proponent of the poorly represented mathematical school. He had in fact come from the field of natural science: he was a trained civil engineer.

There is general agreement that Palander was a sharp-witted economist with exceptional powers when it came to criticising the work of others. His foremost work was his dissertation, which treats the theory of location. That opus earned him international fame. His other works include a publication on the possibility of introducing real loans in the Swedish credit market. That work has become one of the cornerstones of the debate that is still going on today about the role of real loans in the financing of housing in Sweden.

Unfortunately Palander fell victim to his own critical acuity. His self-criticism placed serious constraints on his scholarly productivity, rendering it limited in proportion to what his perspicacity seemed to promise.

In contrast with Lindahl, Palander was an excellent lecturer. His import was always clearly and plainly conveyed to his audience. This made his seminars both instructive and pleasant. On the other hand, he had an unfortunate way of taking problems that were already sufficiently complex and intentionally expanding them to the extremes of knottiness. Such complexities apparently amused him.

Privately Palander was a pleasant and entertaining social lion. Under his aegis parties were often arranged in the Department library, with Palander as the given centrepiece. He also gave occasional dinners in his home, and they were not seldom rather lively affairs. Not every participant recalled the day after exactly what had transpired the day before. It might also be mentioned that he arranged a “field trip” to Poland and another to Holland.

Considering Palander’s generally congenial manner, it is a mystery to many why he happened to get on the wrong side of so many other people. He wound up in a bitter feud with Lindahl rather soon, despite the fact that Lindahl was the one who had suggested that he be called to the chair and despite the fact that both he and Lindahl had sworn their “eternal friendship” at his inaugural banquet. He also found himself at odds with Torgny Segerstedt, Bent Hansen, Assar Lindbeck, Karl-Gustav Landgren, and many more, including the author of this chronicle. It was of course the Lindahl feud that was the most difficult one to deal with. Every correspondence between the two antagonists had to be conveyed via a third party, and this person had to play the role of a second-string foreign diplomat.

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Source: R. Bentzel et al., Economics at Uppsala University – the Department and Its Professors Since 1741. Acta Universitatis Upsaliensis, Studia Oeconomica Upsaliensia 23, Uppsala 1993.