Assar Lindbeck, who died on 28 August, aged 90, was for decades Sweden’s leading economist. As a research entrepreneur, he developed the Institute for International Economic Studies (IIES) at Stockholm University to an internationally prominent research institution, he was instrumental in creating the Nobel Prize in economics, and he reformed and internationalised the country’s economics PhD teaching. His own research spanned monetary and fiscal policy, the welfare state, the importance of social norms and the labour market – and he also played a key role in both Swedish and international public debates on these issues. He always emphasised that economists should both do research at the international frontier and participate actively in the policy debate – and that these two activities should cross-fertilise one another.
In addition to being a first-class researcher, Assar – it is natural to refer to him in this way as he was just “Assar” for Swedish economists – was also an outstanding research entrepreneur. Assar’s main contribution to Swedish and European economics was the development of the Institute for International Economic Studies (IIES) at Stockholm University as an internationally prominent research institution.
The IIES had been established in 1962 with later Nobel laureate Gunnar Myrdal as director and it served mostly as a writer’s factory for work on his books. This changed fundamentally when Assar took over as director in 1971 and began recruiting young PhD students. The institute was transformed into a graduate school where many later Swedish economics professors received their PhD training: among others Harry Flam, John Hassler, Henrik Horn, Torsten Persson, Jakob Svensson, Lars E O Svensson, Jörgen W Weibull and myself.
Assar did not conduct regular thesis supervision where we had to present carefully drafted research plans and receive well-structured feedback. We used to joke that it was in fact we PhD students who supervised Assar. This was our way of acknowledging that he created an extremely creative research environment in which research ideas were continuously aired and formal status was totally irrelevant: all that counted was the strength of the arguments. Small talk was avoided and almost all time, including lunches, coffee breaks and much of our free time, was devoted to scientific discussions.
When the phone rang at ten o’clock in the evening and you heard a familiar voice saying ‘hello, it’s Assar’, you knew that the night’s sleep was ruined because some research problem would have to be cracked. In return, Assar’s door was always open to those caught up in any research crisis.
Assar was instrumental in bringing about the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. He was a member of the Prize Committee from 1971 and its chair from 1981 to 1994. The Nobel affiliation of the Prize has sometimes been controversial, but it has played a large role in strengthening the status globally for both economics and social sciences in general. As chair of the Prize Committee, Assar established and defended the important principle that the prize should reward “gross” and not “net” scientific contributions – in other words, that “bad research” in other areas or questionable activities outside the field of economics should never be allowed to influence the evaluation of prize-worthy work. The principle may appear self-evident, but always risks being challenged in a social science like economics.
A problem for Swedish economics in the 1950s and 1960s was the inability to train new researchers. The famous professors from the so-called Stockholm School – who had developed similar ideas to those of Keynes in the 1930s – proved notoriously inept in leading their students to doctoral exams. Assar played a central role in establishing a modern training programme for PhD students in economics in Stockholm around 1970. After a few years, it led to a large number of doctoral degrees and became a model for the other economics institutions in the country.
Assar’s own research spanned wide fields. His early work, including his PhD dissertation (Lindbeck 1963), was on monetary and fiscal policy. He later became preoccupied with the incentive problems of the welfare state (e.g. Lindbeck 1987) and the importance of social norms. His best-known contributions (partly with Dennis Snower) concern the labour market, focusing on how wage formation and regulation often benefit established groups in the labour market (insiders) but make it difficult for vulnerable groups (outsiders) to find jobs (Lindbeck and Snower 1988, Lindbeck 1993).
The second main track in Assar’s life’s work was active participation in the public debate, both in Sweden and internationally. It was based on a belief that academic researchers – who do not have to take political party or interest group considerations for the sake of their careers – can add something important to the public discussion. Assar’s fearlessness in standing up for his opinions even when the wind blew in the opposite direction has set an example. It follows a long tradition among Swedish economists, including names such as Knut Wicksell, Gustav Cassel, Eli Heckscher and Erik Lundberg.
As early as the 1960s, Assar argued vigorously against the strong agricultural and rent regulations in Sweden. A recurring theme was that political intervention in market mechanisms often exacerbates the problems that are to be solved. He wrote an internationally acclaimed critique of the new political left’s economic theory (Lindbeck 1971). Assar was also a prominent member of the OECD’s McCracken group, which was influential in adapting earlier Keynesian thinking to the inflation problems of the 1970s by recommending a stronger focus on price stability goals (McCracken et al. 1977).
From the mid-1970s, Assar became heavily involved in the Swedish debate on the so-called wage earner funds, a proposal from the labour movement to impose new taxes on the business sector and use the proceeds for letting trade unions take ownership stakes in private companies – that is, a form of socialising them. Assar believed this would lead to dangerous union concentration of power and huge economic inefficiencies. He helped to arouse an initially dormant resistance in both liberal-conservative parties and private business. His criticism led to a break with the Social Democratic party, which he had more or less been born into, and of previous friendship with Olof Palme, Sweden’s Prime Minister 1969-76 and 1982-86.
Assar’s most important practical policy contribution was the chairmanship of the so-called Lindbeck Commission, which in 1993 formulated a number of proposals – 113 to be exact – for how the country would overcome the then current deep economic crisis. The main points concerned institutional changes: longer parliamentary terms, a tighter budgetary framework and a politically independent central bank – the Riksbank. These recommendations were implemented and likely contributed to Sweden’s successful economic performance over the last two decades. The Commission did not invent the proposals, but they were formulated convincingly by building on recently emerging research in political economy.
It can be difficult in social sciences to find a good balance between purely scientific activities and more practical policy advising. Assar Lindbeck’s life’s work shows how to produce high-quality research by being guided by current problems facing society while at the same time participating passionately in the debate about them. His belief in such cross-fertilisation between social science and policy debate is well described in his memoirs, unfortunately only available in Swedish (Lindbeck 2012). It is probably also the main legacy that he wanted to leave behind.
Lindbeck, A (1963), A Study in Monetary Analysis, Stockholm Economic Studies, New Series III, Almqvist & Wiksell: Stockholm.
Lindbeck, A (1971), The Political Economy of the New Left, Harper & Row: New York.
Lindbeck, A (1975), Swedish Economic Policy, Macmillan: London.
Lindbeck, A (1987), The Welfare State – Driving Forces, Functioning and Limits, Three Public Lectures, Lee Kuan Yew Distinguished Visitor Public Lecture Series, Singapore.
Lindbeck, A (1993), Unemployment and Macroeconomics, MIT Press: Cambridge Massachusetts.
Lindbeck, A (2012), Ekonomi är att välja, Albert Bonniers förlag: Stockholm.
Lindbeck, A, P Molander, T Persson, O Pettersson, A Sandmo, B Swedenborg and N Thygesen (1994), Turning Sweden Around, MIT Press: Cambridge Massachusetts.
Lindbeck, A and D J Snower (1988), The Insider-Outsider Theory of Employment and Unemployment, MIT Press: Cambridge Massachusetts.
McCracken, P, G Carli, H Giersch, A Karaosmanogu, R Komiya, A Lindbeck, R Marjolin and R Matthews (1977), Towards Full Employment and Price Stability – A Report to the OECD by a Group of Independent Experts, OECD Publications No. 38 909, Paris.