Trygve Magnus Haavelmo (13 December 1911 – 26 July
1999) was an
economist with main research
interests centered on the fields of
econometrics and economics theory.
During World War II he worked with Nortraship in the Statistical Department in
New York
City. He received his
Ph.D. in 1946 for his work on the
"probability approach in econometrics" (1944).
Biography
Early years
Born in
Skedsmo, Norway, Haavelmo
studied with Ragnar Frisch at the
University of
Oslo. He went to the United States in 1939 as a
Fulbright scholar, where he
remained until 1947. Haavelmo spent much of his sojourn at the
Cowles Commission, before
returning to Oslo.
There he first worked as head of division in
the Trade department from 1947-48, and subsequently was appointed
Professor in economics and statistics
at the University of
Oslo in 1948. He remained there until his
retirement in 1979.
Career
It was during his stay in the United States that Haavelmo wrote his
most influential work a 1944 article introducing the "
probability approach" to econometrics.
The probability approach argued that we should envision existing
economic data series as being "a
sample selected by Nature", i.e. randomly derived from a
"hypothetical" series of distribution which governed reality but
which was unobservable. Thus, Haavelmo argued, we can test the
validity of economic theories by couching
the theoretical model in terms of statistical relationships which
can then be tested. The relationship between theory and the
hypothetical underlying "reality", argued Haavelmo, is akin to the
relationship between the observed data and that "reality".
Therefore, if we can come close in relating theory with observed
data in some precisely defined statistical manner, then we are
effectively saying we have "reproduced" another "natural drawing"
from the hypothetical "reality" and thus our theoretical
relationships are in a sense "true".
Haavelmo also addressed the issues of
identification problems in
simultaneous equations econometric problems (Haavelmo, 1943, 1947).
It was Haavelmo who differentiated the "structural" from the
"reduced" form equation and discussed the relationship between the
original parameters and the reduced-form estimates. It was Haavelmo
that introduced the "determinant condition" for identifiability.
This set the ground for the "
Cowles
approach" approach to econometrics and the methodological
debates on
empirical economics that raged
during the 1940s.
Haavelmo contributed to other areas of economics. In
business cycle theory, Haavelmo argued in an
1940 paper that one need not obtain oscillations as a solution to a
dynamic model as one can obtain business cycles with a monotonic
dynamical system, provided there is an appropriate pattern of
shocks à la
Slutsky. Haavelmo is also
responsible for the famous Keynesian "
balanced budget multiplier
theorem" (1945).
In the 1950s, Haavelmo moved in more theoretical directions. In
1954, he published a book on
growth
theory with "skill accumulation" that anticipates many of the
themes of modern "
endogenous
growth" theories. His most bold effort was in attempting to set
out a
micro-founded theory of investment (1960). Haavelmo
identified the main problems of reconciling a
theory of capital with a theory of
investment.
In 1989, Haavelmo was awarded the
Nobel Memorial Prize
in Economic Sciences "for his clarification of the
probability theory foundations of
econometrics and his analyses of simultaneous economic
structures."
Major publications
- "The Method of Supplementary Confluent Relations", 1938,
Econometrica.
- "The Inadequacy of Testing Dynamic Theory by Comparing the
Theoretical Solutions and Observed Cycles", 1940,
Econometrica .
- "Statistical Testing of Business Cycles", 1943,
RES.
- "The Statistical Implications of a System of Simultaneous
Equations", 1943, Econometrica.
- "The Probability Approach in Econometrics", 1944,
Econometrica.
- "Multiplier Effects of a Balanced Budget", 1945,
Econometrica ("Supplementary Notes", 1946).
- "Family Expenditures and the Marginal Propensity to Consume",
1947, Econometrica.
- "Methods of Measuring the Marginal Propensity to Consume",
1947, JASA.
- "Statistical Analysis of the Demand for Food: Examples of
Simultaneous Estimation of Structural Equations", with M.A.
Girshick, 1947, Econometrica.
- "Family Expenditures and the Marginal Propensity to Consume",
1947, Econometrica.
- "Quantitative Research in Agricultural Economics: The
Interdependence Between Agriculture and the National Economy",
1947, J of Farm Econ.
- "The Notion of Involuntary Economic Decisions",1949,
EJ.
- "A Note on the Theory of Investment", 1950, RES.
- "The Concepts of Modern Theories of Inflation", 1951,
Eknomisk Tidssk.
- A Study in the Theory of Economic Evolution,
1954.
- "The Role of the Econometrician in the Advancement of Economic
Theory", 1958, Econometrica.
- A Study in the Theory of Investment, 1960.
- "Business Cycles II: Mathematical Models", 1968,
IESS.
- Variation on a Theme by Gossen, 1972 (Swedish).
- "What Can Static Equilibrium models Tell Us?", 1974, Econ
Inquiry.
- "Econometrics and the Welfare State", 1990, Les Prix Nobel
de 1989.
External links