The New Palgrave Dictionary of Economics

Living Edition
| Editors: Palgrave Macmillan

Haavelmo, Trygve (1911–1999)

  • Agnar Sandmo
Living reference work entry

Latest version View entry history

DOI: https://doi.org/10.1057/978-1-349-95121-5_1167-2

Abstract

Haavelmo was born in Skedsmo, Norway. He graduated from the University of Oslo in 1933 and joined Ragnar Frisch’s newly created Institute of Economics as a research assistant. He spent the war years working for the Norwegian government in the United States. After a year’s stay at the Cowles Commission at the University of Chicago, he returned to Norway in 1947, becoming professor of economics at the University of Oslo in 1948. He retired from his chair in 1979. In 1989 he was awarded the Nobel Memorial Prize in Economics, the Nobel citation referring to ‘his clarification of the probability theory foundations of econometrics and his analyses of simultaneous economic structures’.

Keywords

Balanced budget multiplier Capital theory Econometrics Haavelmo, T. Inequality (global) Investment theory Neoclassical theory of capital accumulation Probability 

JEL Classifications

B31 

Haavelmo was born in Skedsmo, Norway. He graduated from the University of Oslo in 1933 and joined Ragnar Frisch’s newly created Institute of Economics as a research assistant. He spent the war years working for the Norwegian government in the United States. After a year’s stay at the Cowles Commission at the University of Chicago, he returned to Norway in 1947, becoming professor of economics at the University of Oslo in 1948. He retired from his chair in 1979. In 1989 he was awarded the Nobel Memorial Prize in Economics, the Nobel citation referring to ‘his clarification of the probability theory foundations of econometrics and his analyses of simultaneous economic structures’.

Haavelmo first made his name by a series of path-breaking contributions to the theory of econometrics, most of which were written during his years in the United States. His 1943 article in Econometrica was the first to consider the statistical implications of simultaneity in economic models. This paper was one of the main sources of inspiration for the extensive work carried out in this area over the next decade, particularly at the Cowles Commission. Haavelmo developed his ideas further in the famous 1944 supplement to Econometrica; the main general contribution of this work was to base econometrics more firmly on the foundations of probability theory.

After his return to Norway, Haavelmo turned away from econometrics to economic theory as his main field of interest. In his 1957 presidential address to the Econometric Society (published the next year) he emphasized the need for a more solid theoretical foundation for empirical work as well as the need for theory to be inspired by empirical research.

Haavelmo’s Study in the Theory of Economic Evolution (1954), is a broad exploration of the contributions that analytical economics can make to the understanding of global economic inequality. As an early contribution to growth theory it is less notable for simple models and precise theorems than for its imaginative and experimental attitude towards hypotheses concerning population growth, education, migration and the international struggle for redistribution. The open-mindedness of the approach is very characteristic of the author.

Similar remarks apply to his 1960 book, A Study in the Theory of Investment. Its main objective is to provide a firmer microeconomic foundation for the macroeconomic theory of investment demand. To this end Haavelmo probes deeply into capital theory, emphasizing strongly, however, that a theory of optimum capital use does not in itself provide a theory of investment. This insight, and his clear statement of what has since been known as the neoclassical theory of capital accumulation, has been a major influence on late work in this area, both theoretical and applied.

Of Haavelmo’s other contributions to economic theory, special mention should be made of his 1945 analysis of the balanced budget multiplier. The expansionary effect in a Keynesian unemployment situation of a balanced increase of public expenditure and taxes had been pointed out before, but Haavelmo was the first to provide a rigorous theoretical analysis of it.

Haavelmo was also been very active as a teacher. His lecture notes on a wide range of topics in economic theory exerted a formative influence on generations of Norwegian economists.

Selected Works

  • 1943. The statistical implications of a system of simultaneous equations. Econometrica 11(January): 1–12.

  • 1944. The probability approach in econometrics. Supplement to Econometrica 12 (July): S1–115.

  • 1945. Multiplier effects of a balanced budget. Econometrica 13(October): 311–318.

  • 1947a. Methods of measuring the marginal propensity to consume. Journal of the American Statistical Society 42(237): 105–122.

  • 1947b. (With M.A. Girshick.) Statistical analysis of the demand for food: examples of simultaneous estimation of structural equations. Econometrica 15(April): 79–110.

  • 1954. A study in the theory of economic evolution. Amsterdam: North-Holland.

  • 1958. The role of the econometrician in the advancement of economic theory. Econometrica 26(July): 351–357.

  • 1960. A study in the theory of investment. Chicago: University of Chicago Press.

  • 1970. Some observations on welfare and economic growth. In Induction, growth and trade: essays in honour of Sir Roy Harrod, ed. W.A. Eltis, M.F.G. Scott, and J.N. Wolfe. Oxford: Clarendon Press.

Copyright information

© The Author(s) 2008

Authors and Affiliations

  • Agnar Sandmo
    • 1
  1. 1.