Bertil G. Ohlin (1899-1979)

Bertil Gotthard Ohlin (Swedish: [ˈbæ̌ʈːɪl ʊˈliːn]) (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.

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”.
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.

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.

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

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
Main article: 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 major factors of production, namely labor and capital, are not available in the same proportion in both countries.
The two goods produced either require more capital or more labor.
Labor and capital do not move between the two countries.
There are no costs associated with transporting the goods between countries.
The citizens of the two trading countries have the same needs.
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.

Swedish economist and political leader who is known as the founder of the modern theory of the dynamics of trade. In 1977 he shared the Nobel Prize for Economics with James Meade.

Bertil Ohlin studied at the University of Lund and at Stockholm University under Eli Heckscher. His interest in international trade developed early, and he presented in 1922 a thesis on trade theory. Ohlin studied for a period at both the University of Oxford and Harvard University; at the latter institution he was influenced by Frank Taussig and John H. Williams. He obtained his doctorate from Stockholm University in 1924 and the following year became a professor at the University of Copenhagen. In 1930 he succeeded Eli Heckscher at Stockholm University. At this time Ohlin became engaged in a controversy with John Maynard Keynes, contradicting the latter’s view that Germany could not pay war reparations. This debate over reparations had much influence on the modern theory of unilateral international payments.

In 1933, Bertil Ohlin published a work that won him world renown, Interregional and International Trade. In this Ohlin built upon earlier work by Eli Heckscher and on the approach in his own doctoral thesis to provide a theory of the basis of international trade; it is now known as the Heckscher-Ohlin theory and has become standard. It also provided the basis for later work on the effects of protection on real wages. As a member of the “Stockholm school” of economists, Ohlin developed, from the foundations laid by Knut Wicksell, a theoretical treatment of macroeconomic policy and the importance of aggregate demand which anticipated that of John Maynard Keynes.

Ohlin served as head of the Liberal Party in Sweden from 1944 to 1967. He was a member of the Riksdag (parliament) from 1938 to 1970 and was minister of commerce (1944-1945) in Sweden’s wartime government.

Major Works of Bertil Ohlin
– The Equilibrium Rate of Exchange, 1921, Ekon Tidsk
– Theory of Trade, 1924
– Ist eine Modernisierung der Aussenhandelstheorie erforderlich?, 1927, WWA
– Equilibrium in International Trade, 1928, QJE
– The Reparation Problem: A discussion, 1929, EJ
– The German Reparations Problem, 1930, Ekon Tidsk
– Die Beziehung zwischen internationalen Handel und internazionalen Bewegungen von Kapital und Arbeit, 1930, ZfN
– The Course and Phases of the World Economic Depression, 1931
– Protection and Non-Competing Groups, 1931, WWA
– Interregional and International Trade, 1933
– Mechanisms and Objectives of Exchange Controls, 1937, AER
– The Problem of Employment Stabilization, 1949