By David K. Levine
Axel Leijonhufvud was a gentleman and a scholar. As an undergraduate at UCLA my first class in macroeconomics was from Axel and I later had the pleasure of knowing him as a colleague and a friend.Axel well understood that what we do as economists is less to create ideas than to advance ideas and beginning with his monumental work Keynesian Economics and the Economics of Keynes he looked towards the past as a guide to the future. One might think from his interest in the history of thought and his reservations about formal methods that he was a stuck-in-the-mud traditionalist. Nothing could be further from the truth: Axel was extremely broad-minded and supported good research regardless of whether it was “macro” or “micro” and whether it was the type of pure theory I did early in my career or whether it was careful empirical work. Because of his broad interest in economics Axel was an outstanding graduate student supervisor and mentored and mentored well an enormous number of graduate students over his career. An anecdote makes this point. The first graduate student I helped to supervise was as a young assistant professor at UCLA. This student had been attracted to UCLA to work with Axel Leijonhufvud. His interest was in political economy, a topic neither Axel nor I specialized in. As his work in political economy was game theoretic in nature Axel quickly sent him to me with the suggestion that he take me on as a co-supervisor. I wish I could say that either Axel or I was responsible for the work done by this particular student: in fact we would meet on the occasion of a completed paper which we would read with awe and perhaps make a few expositional suggestions. Axel and I understood the work well enough to write good letters and help place this particular student in his first job at Stanford: I imagine if you are an economist you are familiar with the work of Guido Tabellini. Insofar as his supervisors deserve some credit I would say that Axel and my first collaboration was a fruitful one. A second example of Axel’s broad approach to economics was in his faculty recruiting when he was department chair. The “Minnesota North Stars” scheme was to hire more or less the entire macroeconomic faculty from the University of Minnesota to UCLA. It was not to be, but the connections we forged during this effort paid off in the long run. It was the start of a successful effort to build UCLA macroeconomics and led to the hiring of such notable faculty as Gary Hansen, Michele Boldrin, Roger Farmer, Lee Ohanian, Andy Atkeson and Hugo Hopenhayn. As Axel was a profound intellectual influence on me, let me wrap up with the lessons he taught me. A key idea developed by Axel was that of the Keynesian corridor. This postulates that with respect to moderate shocks a modern economy behaves as linear quadratic models of rational expectations and modest frictions suggest it should. However: with respect to bigger shocks – those that led up to the great depression; the oil shock of the 1970s; or the financial shock of 2008 – things break, and the economy does not recover so easily or rapidly. That is a profound idea and one I fear is true, but Axel has a very specific and important idea about what it is in an economy that breaks when it is subject to too much stress. He observed that modern economies have long chains – he spoke of credit chains, but we might equally well think of supply chains. The problem is that these chains are fragile – break one link and the chain no longer functions. A big shock by breaking too many of these chains leads to a situation where the economy has trouble repairing itself. This too is a profound idea and one that I fear is true. When I say Axel was a gentleman I mean he was exemplary. Whether at UCLA where we were colleagues for decades or at Trento where I saw him from time to time I shall miss him.