Axel Leijonhufvud

Axel Leijonhufvud (6 September 1933 – 2 May 2022) was a Swedish economist and professor emeritus at the University of California, Los Angeles (UCLA), and professor at the University of Trento, Italy.

Leijonhufvud focused his studies on macroeconomic monetary theory.

Axel was born to the noble family Leijonhufvud on 6 September 1933 in Stockholm, Sweden, to Helene Neovius and Erik Gabriel Leijonhufvud.

His father was a judge in Scania, a southern province in Sweden.

In his early adult years, he served as a seaman and later an officer with the Swedish Army, before leaving to study for a bachelor's degree from the University of Lund, graduating in 1960.

He went to the United States on a Scandinavian American Foundation scholarship, landing at the University of Pittsburgh where he obtained a Master of Arts degree in economics.

It was during his time here that he was introduced to his ultimate interest in monetary theory.

Leijonhufvud started his career at the University of California, Los Angeles, as an assistant professor at the school of economics in 1964, and became a full-time professor in 1971.

He later obtained a PhD in economics from Northwestern University in 1967.

In his defining book On Keynesian Economics and the Economics of Keynes (1968) he focuses on a critique of the interpretation of Keynesian economic theory by Keynesian economists.

He goes on to call the standard neoclassical synthesis interpretation of the Keynes' General Theory as having misunderstood and misinterpreted Keynes.

In 1968, at the age of 35, he published a famous scholarly book entitled On Keynesian Economics and the Economics of Keynes.

In the book, he argued that Keynesian economics had to be re-examined.

He made the case that John Hicks' IS/LM (Investment—Saving / Liquidity preference—Money supply) formulation of Keynes General Theory was an inadequate explanation for the "involuntary unemployment" in John Maynard Keynes's writings.

Rather, Leijonhufvud's reading of Keynes emphasizes disequilibrium phenomena, which cannot be addressed in the IS/LM framework, as central to Keynes' explanation of unemployment and economic depression.

Leijonhufvud used this observation as a point of departure to advocate a "cybernetic" approach to macroeconomics, where the algorithm by which prices and quantities adjust is explicitly specified, allowing the dynamic economy to be studied without imposing the standard Walrasian equilibrium concept.

In particular, Leijonhufvud advocated formally modelling the process by which information moves through the economy.

While the "cybernetic" approach may have failed to gain traction in mainstream economics, it presaged the rational expectations revolution that would ultimately supplant the IS/LM model as the dominant paradigm in academic macroeconomics.

Leijonhufvud wrote also the article "The Wicksell Connection: Variation on a Theme", where he presented the Z-Theory.

In another article called "Effective Demand Failures", he presents the Corridor Hypothesis.

In one of his papers, "Life Among the Econ" (1973), he takes a comical yet critical look at the inherent clannish nature of economists; the paper was considered a devastating takedown of economics and economists.

Published in the Western Economic Journal in 1973, Leijonhufvud's "Life Among the Econ" is a comical article outlining the discipline of economics, and the scholars that practice it, from the perspective of an anthropologist.

Professional economists are treated as a tribe known as "the Econ" and ensuing tribal analogues are produced throughout the piece to characterize the group's unusual behavior.

The paper takes a comical yet critical look at the inherent clannish and xenophobic nature of economists and was considered a devastating takedown of economics and economists.