Macroeconomics and the History of Economic Thought

H.M. Krämer, Heinz D. Kurz, H.-M. Trautwein, H. M. Krämer, Heinz D. Kurz, H. -M. Trautwein

• Publisher: Routledge
• Year: 2012
• ISBN:
  9781136329128
• Edition: 1
• Topic: Economics
• Subtopic: Macroeconomics
• Index: Economics

The essays in this Festschrift have been chosen to honour Harald Hagemann and his scientific work. They reflect his main contributions to economic research and his major fields of interest.The essays in the first part deal with various aspects within the history of economic thought. The second part is about the current state of macroeconomics. The essays in the third part of the book cover topics on economic growth and structural dynamics.

1 Harald Hagemann at 65

An introduction

Hagen M. Krämer, Heinz D. Kurz and Hans-Michael Trautwein¹

Festschriften form a genre of celebratory publications that has a long tradition in the German language area. Apparently the first Festschrift was Jubilaeum typographorum Lipsiensium: Oder Zweyhundert-Jähriges Buchdrucker JubelFest, published in 1640 by Gregor Ritzsch, a Leipzig book printer who wished to honour the bicentennial of Johannes Gutenberg’s introduction of the printing press. This was an appropriate starting point for the tradition, since Gutenberg’s movable type page setting and printing had led to a technological revolution that helped to expand networks of knowledge formation far beyond the earlier confines of oral tradition and handwritten copies. Even if the employment effects of the technical change (a favourite subject in Harald Hagemann’s research) are especially difficult to quantify in this case, Gutenberg’s innovation certainly had a huge positive net effect in the long run – not to speak of the cultural externalities that the subsequent ages of Renaissance and Enlightenment brought along.

Most of the Festschriften do not honour innovations or institutions, but respected academic persons at a later stage in their lives and careers, often around retirement age. Their formats and contents vary a lot, ranging from slim and casual books of friends (libri amicorum) to multi-volume collections of strictly scientific papers. Yet, they all demonstrate that the researcher-teacher in question has managed to attract a circle of colleagues, who are willing to pay academic tribute to him or her. It has been pointed out that the Festschrift genre is prone to suffer from heterogeneity and a lack of quality of essays, as the selection of contributions tends to be a matter of personal relations rather than scientific progress. More acerbic critics characterize Festschriften as mixed assortments of leftovers and adulation, dutifully compiled by former assistants of pompous professors, or by colleagues who expect reciprocation. As the discipline of economics has largely moved away from the old hierarchies and changed its modes of publication and communication, the Festschrift tradition may soon come to an end. Harald Hagemann himself has sometimes warned his younger colleagues from burying their better publications in Festschriften, as they – regardless of their quality – are ranked as ‘third-class funerals’ in terms of professional attention.

At the same time, however, Harald has been a diligent user of Festschriften, and in many cases a contributor or even editor (the two Gedenkschriften in memory of Adolph Lowe and John Hicks should be counted in – see Chapter 32 in this volume). He has frequently referred his colleagues to classics in the genre, such as the volumes in honour of Gustav Cassel and Arthur Spiethoff, both published in 1933, and holding pathbreaking essays of Ragnar Frisch (on ‘Propagation Problems and Impulse Problems in Dynamic Economics’, in the former) and John Maynard Keynes (on ‘A Monetary Theory of Production’, in the latter), as well as numerous noteworthy contributions from other economists. Harald would also argue that many issues of refereed journals, sometimes highly ranked, suffer from heterogeneity and quality problems, too. He might, moreover, point out that some Festschriften of more recent origin contain relevant and much-cited articles; the book in honour of Edmund Phelps is a case in point (Aghion, Frydman, Stiglitz and Woodford, 2003; cf. Leijonhufvud 2004). Not all Festschriften are funerals, and some papers buried ‘third class’ have an interesting afterlife.

Whatever the current status of Festschriften in general, we think that Harald Hagemann deserves one of his own where papers will not be buried, but receive a wide readership. The reasons for commemorating Harald’s sixty-fifth birthday on 15 April 2012 with essays in his honour will become obvious in the course of the book, starting right here with the presentation of the man and his work. Since Harald is not an ordinary Ordinarius, i.e. does not at all conform to the stereotype of the pompous German professor, the style of presentation will deviate somewhat from the standard laudatio. The editors will present Harald in a triptych of their different perspectives on him as their colleague and friend. Heinz Kurz, who was Harald’s close colleague at Kiel and Bremen in the 1970s and 1980s, and has been close friend ever since, makes a start. Hagen Krämer, who was Harald’s student at Bremen in the 1980s and collaborates with him in various scientific and economic policy contexts, follows. Hans-Michael Trautwein, who was Harald’s assistant at Hohenheim in the 1990s and continues to cooperate with him, takes the final part.

Harald Hagemann, close friend for more than four decades

I do not recall: was it yesterday or forty years ago that I (Heinz) met Harald for the first time? In September 2011, when these lines were written, it was an unbelievable forty years ago. I met Harald at the University of Kiel, where Albert Jeck had been appointed to the chair in economic theory two years before. Albert had been my teacher at the University of Munich. He invited me to become one of his research assistants. I visited Albert in order to talk over the details of the position. On this occasion he introduced me to his staff, including Harald, who at the time was about to finish his studies of economics and was employed as a student teaching assistant. After graduation, he too became a research assistant of Albert’s. We shared an office for several years.

It was the time of the two Cambridge controversies in the theory of capital. The papers of major economists filled the pages of the main economic journals. Harald and I shared a critical orientation in economics, and as students had received the ordinary marginalist fare provided by German universities with reservation. We were on the lookout for alternative points of view. We understood that Piero Sraffa’s Production of Commodities by Means of Commodities (Sraffa 1960) played a central role in the capital controversy, and so we decided, together with Albert and a few other young colleagues, to study the book in detail. This was a difficult but highly rewarding task. We also read the swiftly growing literature in the area and decided to focus, in our PhD theses, on topics of the capital debate. Harald wrote about the concept of the rate of return on investment. This, Robert Solow had introduced in the hope and expectation of escaping the criticism levelled at the neoclassical concept of capital as a magnitude that can be ascertained prior to and independently of relative prices and the distribution of income. In his PhD thesis, Harald showed that this was a will-o’the-wisp (Hagemann 1977). I wrote a thesis on Sraffa’s book, and especially on the roots of his approach to the theory of value and distribution in classical political economy (Kurz 1977). It was in those years that we both developed a deep interest in economic theory and in the history of economic thought – the two sides of a single coin.

We discussed a lot and benefited from one another. We also felt the need to bring into the open what we had concocted, and had plans to publish a number of papers and books – alone, together and also involving Albert and other colleagues. Not all our plans materialized, but some did. The first joint paper we published was devoted to the relationship between the theory of value in the classical economists and in Marx (Hagemann, Kurz and Magoulas 1975), followed by a piece on the return of the same truncation period of fixed capital in the von Neumann model and in Classical theory on the one hand, and in John Hicks’s Neo-Austrian theory on the other (Hagemann and Kurz 1976). The paper was translated into other languages and reprinted in various books.

After my return to Kiel from a British Academy Visiting Scholarship in the academic year 1977–78 at the University of Cambridge, I found that the blackboard in our common office still carried our scribbles of several months previously. Truth is enduring.

Whilst still in Cambridge I was approached by Peter Kalmbach, a former teacher of mine in Munich, who urged me to apply for a newly established chair at the University of Bremen. In 1979 I was appointed, and it looked as if I would have to part company with Harald for an indefinite period. But, due to a ruse of history, the period lasted only three years. A quickly rising number of students led the Senator of the Hanse City of Bremen, who was in charge of the university, to install additional chairs in economics and business administration. Luckily enough, Harald applied for one of them and was appointed to it in 1982. We were now in three in the department, Peter, Harald and me – a critical mass of people interested in serious non-mainstream economic analysis, Keynes and the Classics in particular. We gradually managed to build up what could be called a research unit, which attracted some of the best students there, who wished to write their diploma theses and, later, their PhD theses with us.

While still in Kiel, Harald had established close contacts with Adolph Lowe (formerly Löwe), who in the 1920s had worked and taught in Kiel and then in Frankfurt. Adolph was a leading German economist at the time, but when the Nazis came to power he left the country in order to protect himself and his family. He first moved to Manchester and then to the newly founded ‘University in Exile’ in New York, later the New School for Social Research. We visited Adolph in the Bronx, where he lived in a home for elderly people. After the company that ran the home went bankrupt, Adolph settled in the house of his daughter in Wolfenbüttel, Germany, where he stayed until the end of his life, in 1995. Wolfenbüttel was only a few hours drive by car from Bremen. We visited Adolph regularly, and had fruitful and inspiring discussions with him.

The encounter with Adolph had a deep impact on our lives, academic and otherwise (see Hagemann and Kurz 1990). First, due to Adolph’s influence we turned to the problem of the employment effects of different forms of technical progress. Second, we felt the need to pay tribute to Adolph, the man and the scholar, his intellectual integrity and wonderful character, his erudition and good spirit. Third, we felt that the story of the emigration of economists from Germany after 1933 had still to be told. In this latter respect, Harald deserves all the credit for having successfully tackled the issue in terms of a remarkable two-volume work edited together with Claus-Dieter Krohn (Hagemann and Krohn 1999). It was was a huge achievement, and deserves to be translated into English. Harald summarized some of his findings in his presidential address on the occasion of the annual meeting of the European Society for the History of Economic Thought in Amsterdam in 2010 (Hagemann 2011).

As regards the second issue, in 1982 Harald and I proposed to the Academic Senate of the University of Bremen that an honorary doctoral degree be conferred upon Adolph. Alas, there was no legal basis for such an act, which several of the founding fathers of the ‘reform university’ had presumably considered outdated, to say the least. To our surprise we managed to convince the Academic Senate to pass the needed statutes, and in June 1983 Adolph Lowe was awarded the first honorary doctoral degree of the university (see Hagemann and Kurz 1984). The ceremony was attended by, among others, the Senator, representatives of the New School, and several of Adolph’s former students, including Marion Countess Dönhoff, editor of the weekly Die Zeit. It found a resounding echo in the media. Adolph gave a marvellous speech full of insights regarding the pressing problems of the day that it is still worth reading. After Adolph, honorary doctoral degrees were confered inter alia upon Marie Jahoda, Benoit Mandelbrot and Kurt Rothschild.

Finally, the concern Adolph had instilled into us regarding the problem of technical change and employment prompted Peter, Harald and me to submit a research proposal to the Stiftung Volkswagenwerk, one of Germany’s main research funding institutions. We were successful, and were given a substantial amount of money that allowed us to employ several young researchers. With the assistance of, among others, Reiner Franke, we elaborated a dynamic input–output model and studied the prospective employment effects of the introduction of computer-based instruments of production and of office automation in the West-German economy. In the 1980s, the employment effects of technical change were a heatedly discussed topic. Yet when the results of our investigation were published (Kalmbach and Kurz 1989), they fell flat on the ground. The interest of the public and the economics profession was now entirely overwhelmed by German unification and its consequences. For a while we tinkered with the idea of reformulating our model and applying it to the transition process involved, because we felt that the model was well suited to studying the complex dynamics in terms of an approach that allows for structural change and varying degrees of capacity utilization in the different sectors. However, for reasons that will soon become clear, things went differently. Another project financed by research funds dealt with the productivity growth decline experienced in those times; the main work was done by Christian Gehrke, who had joined us from Kiel, and Christof Rühl, who had graduated in Bremen. Christian is now a professor of economics in Graz, and Christof the Chief Economist of British Petroleum.

We had engaged in the Volkswagen project not only for its own sake, but also as a means to propel a much more ambitious plan. Our success in attracting substantial external funds could be expected to indicate to the Senator of Bremen and the Rector of our university the fecundity of our theoretical and applied work, and prepare the ground for the establishment of the ‘Adolph Lowe Institute of Economic Research’ – a joint enterprise of our department and the Economics Department of the Graduate Faculty of the New School for Social Research. We were full of optimism. As a first step towards it, we established an exchange programme for students and members of the staff involving the two institutions. The programme still works today, and brought several students from Bremen to New York and a few vice versa.

Alas, things were not so good in Bremen. The city had accumulated what, by the standards of the day, was considered a huge public debt (in terms of today’s standards it would be peanuts), and its politicians were myopic, as politicians typically are. We felt that we might support our case by attracting offers from other universities to join their ranks. This in fact happened, but it turned out to be a two-pronged weapon. Harald got an offer from the University of Stuttgart-Hohenheim and I one from the University of Graz. We were invited by the Rector and the Senator to negotiate the conditions that would keep us in Bremen, but the offers we received were not very promising and clouded by financial uncertainty. We both felt that in these circumstances we had no choice but to leave. This was a hard decision, and I remember us talking it over time and again, the two of us and Peter. We received a lot of support – especially from our students, who demonstrated on our behalf in the city and forced the Senator to leave his office building by the back door. (Hagen Krämer was one of those students, and it comes as a surprise that despite his earlier rebellious inclination he nevertheless became a professor.) Other events had further disenchanted us. The attempt to appoint to the chair of Public Finance a highly promising young scholar, Wolfgang Wiegard, later Chairman of the Sachverständigenrat, the German Council of Economic Advisors, was thwarted by a coalition of radical and business economists in our department. All this was sobering, and our hopes of being able to build up a strong centre of research with an international orientation became more and more frustrated.

In 1988 Harald and I eventually accepted the offers and moved southwards. This did not bring our friendship and collaboration to a close. We stayed in contact with Peter and other friends at the University of Bremen and the New School for Social Research. We both served as Theodor Heuss Professors at the New School, and taught there repeatedly. When Adolph died, we edited a set of essays in his memory (Hagemann and Kurz 1998). We are active in the section devoted to the history of economic analysis of the Verein für Socialpolitik, and both served as the section’s Chair. We were involved in the establishment of the European Society for the History of Economic Thought (ESHET), and both served as its President. And we both contributed to academic journals, books, dictionaries and companions edited by one of us or both.

As the above shows, there are some striking parallels in our lives and careers, but also some noteworthy differences. Harald was a most talented soccer player. He is the proud proprietor of a red tie, which he loves to wear. Given the fact that the highest mountain of his home region Schleswig-Holstein, the Bungsberg, is 168 metres high, Harald is a remarkably good skier. When Harald abbreviates his name as HaHa, I always have the suspicion that this is directed at me.

Once in a while I seem to hear Harald talking in the office next to mine. I know that this is not possible. But I also know – as Doris, his wife, will certainly confirm – that his voice cannot easily be missed!

Harald Hagemann, man without conceit

When I met him at the University of Bremen in the mid-1980s, Harald was a young professor in his late thirties, and I (Hagen) was an even younger student in my early twenties. I forgot when we met for the first time, but I remember exactly the first time when he impressed me deeply. It was shortly after ‘Black Monday’ in October 1987, when stock markets had crashed to an extent not seen since 1929. Sitting close to a fountain-head of economic expertise, my fellow students and I were very curious to learn more about this breathtaking financial market shock from our professors. Most of them did not mention this event at all, but went on teaching according to their syllabus: some kept lecturing about classical value theory (although highly interesting, it was not relevant at all in this context), others pontificated about the inevitable end of capitalism in general (not really helpful for understanding what was going on). This was deeply dissatisfying. There was, however, this young professor who, with his long hair, fluffy beard and casual dress, loo...