Bertil Ohlin

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Bertil Ohlin
Bertil Ohlin.jpg
Bertil Ohlin
Minister for Trade
In office
1944–1945
Prime Minister Per Albin Hansson
Preceded by Herman Eriksson
Succeeded by Gunnar Myrdal
Leader of the People's Party
In office
1944–1967
Preceded by Gustaf Andersson
Succeeded by Sven Wedén
Member of the Swedish Parliament
for Stockholm Municipality
In office
1938–1970
President of the Nordic Council
In office
1959–1959
Preceded by Nils Hønsvald
Succeeded by Gísli Jónsson
In office
1964–1964
Preceded by Nils Hønsvald
Succeeded by Sigurður Bjarnason
Personal details
Born(1899-04-23)23 April 1899
Klippan, Skåne County
Died3 August 1979(1979-08-03) (aged 80)
Åre, Jämtland County
Nationality Sweden
Political party People's Party
Alma mater B.A. Lund University (1917)
MSc. Stockholm School of Economics (1919)
M.A. Harvard University (1923)
Ph.D. Stockholm University (1924)
Bertil Ohlin
Known for Heckscher–Ohlin model
Heckscher–Ohlin theorem
Awards Nobel Memorial Prize in Economic Sciences (1977)
Scientific career
Fields Economics
Institutions University of Copenhagen (1925–1930)
Stockholm School of Economics (1930–1965)
Doctoral advisor Gustav Cassel

Bertil Gotthard Ohlin (Swedish:  [¹bæʈːɪl ʊ¹liːn] ) (23 April 1899 – 3 August 1979) was a Swedish economist and politician. He was a professor of economics at the Stockholm School of Economics from 1929 to 1965. He was also leader of the People's Party, a social-liberal party which at the time was the largest party in opposition to the governing Social Democratic Party, from 1944 to 1967. He served briefly as Minister for Trade from 1944 to 1945 in the Swedish coalition government during World War II. He was President of the Nordic Council in 1959 and 1964.

Swedes are a North Germanic ethnic group native to Sweden. They mostly inhabit Sweden and the other Nordic countries, in particular Finland, with a substantial diaspora in other countries, especially the United States. Swedes are an officially recognized minority in Finland and Estonia.

Economist professional in the social science discipline of economics

An economist is a practitioner in the social science discipline of economics.

A politician is a person active in party politics, or a person holding or seeking office in government. Politicians propose, support and create laws or policies that govern the land and, by extension, its people. Broadly speaking, a "politician" can be anyone who seeks to achieve political power in any bureaucratic institution.

Contents

Ohlin's name lives on in one of the standard mathematical models of international free trade, the Heckscher–Ohlin model, which he developed together with Eli Heckscher. He was jointly awarded the Nobel Memorial Prize in Economic Sciences in 1977 together with the British economist James Meade "for their pathbreaking contribution to the theory of international trade and international capital movements".

A mathematical model is a description of a system using mathematical concepts and language. The process of developing a mathematical model is termed mathematical modeling. Mathematical models are used in the natural sciences and engineering disciplines, as well as in the social sciences.

Free trade Absence of government restriction on international trade

Free trade is a trade policy that does not restrict imports or exports; it can also be understood as the free market idea applied to international trade. In government, free trade is predominantly advocated by political parties that hold liberal economic positions while economically left-wing and nationalist political parties generally support protectionism, the opposite of free trade.

Heckscher–Ohlin model general equilibrium model of international trade by E. Heckscher and B. Ohlin, based on Ricardos theory of comparative advantage

The Heckscher–Ohlin model is a general equilibrium mathematical model of international trade, developed by Eli Heckscher and Bertil Ohlin at the Stockholm School of Economics. It builds on David Ricardo's theory of comparative advantage by predicting patterns of commerce and production based on the factor endowments of a trading region. The model essentially says that countries export products that use their abundant and cheap factors of production, and import products that use the countries' scarce factors.

Biography

Having received his B.A. from Lund University 1917 and his MSc. from Stockholm School of Economics in 1919. He obtained an M.A. from Harvard University in 1923 and his doctorate from Stockholm University in 1924. In 1925 he became a professor at the University of Copenhagen. In 1929 he debated with John Maynard Keynes, contradicting the latter's view on the consequences of the heavy war reparations payments imposed on Germany. (Keynes predicted a war caused by the burden of debt, Ohlin thought that Germany could afford the reparations.) The debate was important in the modern theory of unilateral international payments.

Lund University university located in the city of Lund in the province of Scania, Sweden

Lund University is a prestigious university in Sweden and one of northern Europe’s oldest universities. Lund University is consistently ranked among the world's top 100 universities. The university is located in the city of Lund in the province of Scania, Sweden, arguably traces its roots back to 1425, when a Franciscan studium generale was founded in Lund next to the Lund Cathedral. After Sweden won Scania from Denmark in the 1658 Treaty of Roskilde, the university was officially founded in 1666 on the location of the old studium generale next to Lund Cathedral.

Stockholm School of Economics Swedish business school

The Stockholm School of Economics is one of Europe's leading business schools. SSE offers BSc, MSc and MBA programs, along with highly regarded PhD- and Executive Education programs. SSE's Master program in Finance is ranked no.18 worldwide as of 2018. The Masters in Management program is ranked no. 12 worldwide by the Financial Times. QS ranks SSE no.26 among universities in the field of economics worldwide. The school is the only privately funded university in Sweden.

Harvard University Private research university in Cambridge, Massachusetts, United States

Harvard University is a private Ivy League research university in Cambridge, Massachusetts, with about 6,700 undergraduate students and about 13,100 postgraduate students. Established in 1636 and named for its first benefactor, clergyman John Harvard, Harvard is the United States' oldest institution of higher learning. Its history, influence, wealth, and academic reputation have made it one of the most prestigious universities in the world. It is cited as the world's top university by many publishers.

In 1930 Ohlin succeeded Eli Heckscher, his teacher, as a professor of economics, at the Stockholm School of Economics. In 1933 Ohlin published a work that made him world-renowned, Interregional and International Trade. In this Ohlin built an economic theory of international trade from earlier work by Heckscher and his own doctoral thesis. It is now known as the Heckscher–Ohlin model, one of the standard model economists use to debate trade theory.

Eli Heckscher Swedish historianand economist

Eli Filip Heckscher was a Swedish political economist and economic historian.

Economics Social science that analyzes the production, distribution, and consumption of goods and services

Economics is the social science that studies the production, distribution, and consumption of goods and services.

The model was a break-through because it showed how comparative advantage might relate to general features of a country's capital and labor, and how these features might change through time. The model provided a basis for later work on the effects of protection on real wages, and has been fruitful in producing predictions and analysis; Ohlin himself used the model to derive the Heckscher–Ohlin theorem, that nations would specialize in industries most able to utilize their mix of national resources efficiently. Today, the theory has been largely disproved, yet it is still a useful framework by which to understand international trade.

In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce that good at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior to trade. Comparative advantage describes the economic reality of the work gains from trade for individuals, firms, or nations, which arise from differences in their factor endowments or technological progress. The law or principle of comparative advantage holds that under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage.

In economics, capital consists of assets that can enhance one's power to perform economically useful work. For example, in a fundamental sense a stone or an arrow is capital for a hunter-gatherer who can use it as a hunting instrument, while roads are capital for inhabitants of a city.

Inflation increase in the general price level of goods and services in an economy over a period of time

In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy. The opposite of inflation is deflation, a sustained decrease in the general price level of goods and services. The common measure of inflation is the inflation rate, the annualized percentage change in a general price index, usually the consumer price index, over time.

In 1937, Ohlin spent half a year at the University of California, Berkeley, as a visiting professor. [1] [2] [3]

University of California, Berkeley Public university in California, USA

The University of California, Berkeley is a public research university in Berkeley, California. It was founded in 1868 and serves as the flagship campus of the ten campuses of the University of California. Berkeley has since grown to instruct over 40,000 students in approximately 350 undergraduate and graduate degree programs covering numerous disciplines.

Later, Ohlin and other members of the "Stockholm school" extended Knut Wicksell's economic analysis to produce a theory of the macroeconomy anticipating Keynesianism.

Ohlin was party leader of the liberal Liberal People's Party from 1944 to 1967, the main opposition party to the Social Democrat Governments of the era, and from '44 to '45 was minister of commerce in the wartime government. His daughter Anne Wibble, representing the same party, served as Minister of Finance from 1991 to 1994.

In 2009, a street adjacent to the Stockholm School of Economics was named after Ohlin: "Bertil Ohlins Gata".

Heckscher–Ohlin theorem

The Heckscher–Ohlin Theorem, which is concluded from the Heckscher–Ohlin model of international trade, states: trade between countries is in proportion to their relative amounts of capital and labor. In countries with an abundance of capital, wage rates tend to be high; therefore, labor-intensive products, e.g. textiles, simple electronics, etc., are more costly to produce internally. In contrast, capital-intensive products, e.g. automobiles, chemicals, etc., are less costly to produce internally. Countries with large amounts of capital will export capital-intensive products and import labor-intensive products with the proceeds. Countries with high amounts of labor will do the reverse.

The following conditions must be true:

The theory does not depend on total amounts of capital or labor, but on the amounts per worker. This allows small countries to trade with large countries by specializing in production of products that use the factors which are more available than its trading partner. The key assumption is that capital and labor are not available in the same proportions in the two countries. That leads to specialization, which in turn benefits the country's economic welfare. The greater the difference between the two countries, the greater the gain from specialization.

Wassily Leontief made a study of the theory that seemed to invalidate it. He noted that the United States had a lot of capital; therefore, it should export capital-intensive products and import labor-intensive products. Instead, he found that it exported products that used more labor than the products it imported. This finding is known as the Leontief paradox.

See also

Significant publications

Interregional and international trade, 1933 Ohlin - Interregional and international trade, 1933 - 5175280.tif
Interregional and international trade, 1933

Sources

Related Research Articles

Stockholm School (economics)

The Stockholm School, is a school of economic thought. It refers to a loosely organized group of Swedish economists that worked together, in Stockholm, Sweden primarily in the 1930s.

In economics, internationalization is the process of increasing involvement of enterprises in international markets, although there is no agreed definition of internationalization. There are several internationalization theories which try to explain why there are international activities.

Factor price equalization is an economic theory, by Paul A. Samuelson (1948), which states that the prices of identical factors of production, such as the wage rate, or the rent of capital, will be equalized across countries as a result of international trade in commodities. The theorem assumes that there are two goods and two factors of production, for example capital and labour. Other key assumptions of the theorem are that each country faces the same commodity prices, because of free trade in commodities, uses the same technology for production, and produces both goods. Crucially these assumptions result in factor prices being equalized across countries without the need for factor mobility, such as migration of labor or capital flows.

The Stolper–Samuelson theorem is a basic theorem in Heckscher–Ohlin trade theory. It describes the relationship between relative prices of output and relative factor rewards—specifically, real wages and real returns to capital.

The Rybczynski theorem was developed in 1955 by the Polish-born English economist Tadeusz Rybczynski (1923–1998). It states that at constant relative goods prices, a rise in the endowment of one factor will lead to a more than proportional expansion of the output in the sector which uses that factor intensively, and an absolute decline of the output of the other good.

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Leontief's paradox in economics is that a country with a higher capital per worker has a lower capital/labor ratio in exports than in imports.

Heckscher–Ohlin theorem theorem

The Heckscher–Ohlin theorem is one of the four critical theorems of the Heckscher–Ohlin model, developed by Swedish economist Eli Heckscher and Bertil Ohlin. In the two-factor case, it states: "A capital-abundant country will export the capital-intensive good, while the labor-abundant country will export the labor-intensive good."

The Linder hypothesis is an economics conjecture about international trade patterns: The more similar the demand structures of countries, the more they will trade with one another. Further, international trade will still occur between two countries having identical preferences and factor endowments.

Intra-industry trade refers to the exchange of similar products belonging to the same industry. The term is usually applied to international trade, where the same types of goods or services are both imported and exported.

The gravity model of international trade in international economics is a model that, in its traditional form, predicts bilateral trade flows based on the economic sizes and distance between two units.

Student Association at the Stockholm School of Economics

The Student Association at Stockholm School of Economics organizes all students enrolled at the Stockholm School of Economics (SSE). SSE is a leading European academic institution for education and research in the fields of economics, finance, corporate law, business, managerial sciences and marketing. It is situated in Stockholm, capital of Sweden. SASSE is affiliated with the Stockholm Federation of Student Unions.

In economics, the Metzler paradox is the theoretical possibility that the imposition of a tariff on imports may reduce the relative internal price of that good. It was proposed by Lloyd Metzler in 1949 upon examination of tariffs within the Heckscher–Ohlin model. The paradox has roughly the same status as immiserizing growth and a transfer that makes the recipient worse off.

International trade theory is a sub-field of economics which analyzes the patterns of international trade, its origins, and its welfare implications. International trade policy has been highly controversial since the 18th century up to our days. International trade theory and economics itself have developed as means to evaluate the effects of trade policies.

The Ricardo-Viner model, also known as the specific factors model, is an extension of the Ricardo model used in international trade theory. It was due to Jacob Viner's interest in explaining the migration of workers from the rural to urban areas after the Industrial revolution. Unlike the Ricardian model, the specific factors model allows for the existence of factors of production besides labor. In other words, labor is mobile, while the two other factors of production is immobile as opposed to the Ricardian model where labor is immobile internationally, but mobile between two sectors of an economy.

References

  1. "BERTH OHLIN'S CONTRIBUTIONS TO ECONOMIC THEORY" (PDF).
  2. Findlay, Ronald; Jonung, Lars; Lundahl, Mats (2002). Bertil Ohlin: A Centennial Celebration, 1899-1999. MIT Press. ISBN   9780262062282.
  3. Toporowski, J. (29 July 2013). Michał Kalecki: An Intellectual Biography: Volume I Rendezvous in Cambridge 1899-1939. Springer. ISBN   9781137315397.

Further reading

Party political offices
Preceded by
Gustaf Andersson
Chairman of the People's Party
1944–1967
Succeeded by
Sven Wedén
Political offices
Preceded by
Herman Eriksson
Minister for Trade
1944–1945
Succeeded by
Gunnar Myrdal
Awards
Preceded by
Milton Friedman
Laureate of the Nobel Memorial Prize in Economics
1977
Served alongside: James E. Meade
Succeeded by
Herbert A. Simon