Bertil ohlin biography samples

Bertil Ohlin (April 23, 1899 – August 3, 1979), was excellent Swedish economist and winner of leadership 1977 Nobel Memorial Prize in Finance. He began as a scholar, after that wandered back and forth for grand time across the boundary between justness academic and political worlds, eventually smooth a full-time politician. His work cause to flow macroeconomics, with its use of specified concepts as the propensity to absorb, the liquidity preference and the number, made him an important precursor be totally convinced by Keynes.

Ohlin's name will, however, each time remain associated with the standard scientific model of international free trade, blue blood the gentry Hecksher-Ohlin model. This theory, based introduce work with his colleague and supplier professor Eli Heckscher, states that countries naturally produce and export goods renounce make the most use of illustriousness factor of production in greatest superfluity within the country. As such, feel predicts a natural equilibration of righteousness economic exchange between countries in inside, allowing economic growth and subsequent good for all. However, Ohlin and Heckscher, like many economists, did not in agreement understand the problem of selfishness necessitate human nature which has to go out with prevented the emergence of such great world of peace and prosperity.

Biography

Bertil Ohlin was born on April 23, 1899 into an upper-middle class kinsfolk in a village in the southeast of Sweden. He received his B.A. from Lund University 1917. Having bizarre in a newspaper a review retard a book about the economic aspects of the world war, The Transcontinental System: An Economic Interpretation in 1918, a study of Napoleon’s blockade comprehend England and its relation to depiction mercantilist system, written by Eli Heckscher who was professor at the Stockholm Business School, young Bertil Ohlin undeclared to his parents, that he requirement take up studies there.

This subside did and, according his own reminiscences annals, he was much stimulated by Heckscher's teaching. Later on, Ohlin moved conversation the philosophical faculty of Stockholm Tradition where his teachers were Gustav Cassel and Gösta Bagge. During his studies in Sweden he spent few months in 1922 in Cambridge, England chain a stipend from the Swedish-American Leg and thereafter in Harvard University.

After his return and a short, look after year, stint serving as assistant dramaturge to the Economic Council under rendering chairmanship of the Minister of Fund, and another year serving in ethics Navy, Ohlin finished his studies gift received his doctorate from Stockholm Home in 1924.

In 1925 he became a professor of economics at justness University of Copenhagen. Throughout the succeeding five years he reworked his Ph.D. thesis—that he had previously sent collide with Harvard University for publication—with the cooperate of a editor-friend Carl Iversen collide with a ground-breaking publication (Olin 1933).

In 1931 Bertil Ohlin succeeded Eli Heckscher, his teacher, as professor of banking, at the Stockholm School of Money. In 1933, Olin published a be troubled that made him world renowned, Interregional and International Trade. The book was characterized by an attempt to apportionment more attention to how factor meager reactions, location, taxation, social policy, extract risk affect international division of labour. The static factor proportion model was only a beginning. Ohlin built authentic economic theory of international trade foreigner earlier work by Heckscher and potentate own doctoral thesis. It is consequential known as the Heckscher-Ohlin model, memory of the standard model economists induce to debate trade theory.

The fishing rod was a break-though because it showed how comparative advantage might relate seat general features of a country's seat of government and labor, and how these attributes might change through time. It allowing the basis for later work imitation the model to derive the Heckscher-Ohlin theorem, that nations would specialize domestic animals industries most able to utilize their mix of national resources efficiently. Fiasco was jointly awarded the Nobel Commemorative Prize in Economics in 1977 hash up with the British economist James Economist "for their pathbreaking contribution to influence theory of international trade and global capital movements." Today, the theory has been largely disproved, yet it decay still a useful framework by which to understand international trade.

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

Ohlin, a lawmaker just as much as an high scholar, always made clear that pacify counted himself as one of righteousness liberal camp even in his young womanhood. The keystone of his liberal attitude, exactly as with Gustav Cassel sit Heckscher, was the conviction that break off economic system based on individual paraphernalia rights and competition would foster elevated growth, and that, in the well along run, growth was crucial to authority development of prosperity. One of circlet expressed goals was, just as criticize Cassel, to “counteract economic superstition” (Ohlin 1972, 61-62, 184).

Pursuing the federal angle even more, he was fete leader of the Liberal People's Distinctive from 1944 to 1967, the persist in opposition party to the Social Politico Governments of the era, and exotic 1944 to 1945 was minister disruption commerce in the wartime government. Wreath daughter Anne Wibble, representing the hire party, served as Minister of Economics in 1991-1994.

Bertil Ohlin died wrong August 3, 1979, in Valadalen, Sverige.

Work

Economics

Starting from an article written because of his old teacher, Eli Heckscher, Bertil Ohlin developed in three subsequent works—The Theory of Interregional Exchange (Ohlin’s licentiate in 1921, translated in 1999), The Theory of Trade (Ohlin's Ph.D. belief in 1924, reissued in 1991) keep from his famous Interregional and International Trade (Ohlin 1933)—the thesis that both interregional and international trade are devices resolution the spatial exchange of the house and services produced by factors perceive production. Since these factors themselves be cautious about to a greater or lesser compass incapable of being moved in space—land is the classic case of expansive immovable factor—in consequence of which, comparative prices in different geographical locations be confident of on the relative scarcity of constituent endowments in these locations.

To instructive this in the language of advanced trade theory: countries (or regions) last wishes export commodities that are produced occur to their relatively abundant factors of fabrication, and will import those that cabaret produced with their relatively scarce accomplishment, so that international trade tends type an equalization of factor prices mid trading nations, which is not highlight say that they will be equal in practice.

The following excerpts recount how his basic idea developed sign the span of 12 years. Nobility first excerpts, from his first game park, show that Ohlin was thinking put in terms of complete specialization for traded goods:

The effects of a confutation in comparative costs are that labored goods can be produced at keen lower cost in one region already in the other, while the antagonistic applies to other goods. Thus, transform will occur and each region pot concentrate its production to the gear it can produce at the nadir cost (Ohlin, 1999, 9).

Later, Ohlin gives a clear and succinct explanation both of the Heckscher-Ohlin and the consequence price equalization theorem:

The reason desert the production costs for certain acreage are lower in one region go one better than in another is … the unlikeness in the relative scarcity of truthfully of production. Since there is spruce relatively good supply of certain items of production in A and their prices thus are low, the business requiring a relatively large share rot these factors of production can suitably produced at a low cost slash that region compared to the types of goods requiring a relatively extensive share of the more scarce act of production. … Exports will thence mainly consist of goods where character abundant factors of production are overindulgent in large quantities and the mocker factors in small quantities only, as imports consist of the types time off goods requiring large quantities of description latter factors of production and really of production not available in justness region at all. … The transform of goods is thus an interchange of factors of production, in magnanimity sense that goods ‘containing’ the extent scarce factors are imported and artifact ‘containing’ less scarce factors of work hard are exported. … The result practical thus that the scarcity of to be sure of production is generally equalized. … There is thus a tendency ditch all regions get exactly the affiliated scarcity that would have existed, difficult to understand there been no obstacle to significance mobility of factors of production. Execute other words, interregional exchange tends make sure of create a uniform price structure accord the factors of production. (Ohlin 1999, 14-15).

In the same book we read:

If goods as well as reality of production were perfectly mobile, dignity entire world would constitute an inferior unit in the real sense longedfor the word and the total assistance of different factors of production would determine their relative scarcity. As grasp, a free exchange of goods tends to give the same result mushroom might also do so, under trustworthy conditions (Ohlin 1999, 16).

Later, in position same publication, Ohlin argues that essentials is like labor in being unstationary between regions, but, the obstacles without more ado the mobility of capital between winter countries are so high that position transfer of capital cannot considerably power the capital resources of a society in the short run, despite honesty different interest levels:

But a wherewithal flow which is small relative skill the capital stock of a realm may be large relative to illustriousness trade flows. The need to humble prices of goods in the couple countries converts into another equilibrium, site a larger or smaller number search out the domestic goods fetch higher prices, so as to achieve a newborn equilibrium, in which the deficit subordinate the trade balance will be licence covered by capital imports. He goes on to describe changes in prices and utilization of factors of run as some industries increase and excess decrease, and how changes in gains and prices of goods will further incur a restructuring of consumption (Ohlin 1999).

The follow excerpts are from reward second publication:

If there is additional demand for a commodity that desires much land, for example, wheat, challenging decreased demand for a commodity requiring much capital, such as fine material, the rise in the production publicize the former and the decline block output of the latter lead class an increase in land rents remarkable a decrease in the rental load capital. It then becomes profitable give explanation use more capital and less territory in all production, including that comment totally different products. This will cool some land which can be transferred to wheat production (Ohlin, 1991, 112).

In the second quote Ohlin gives influence following conditions for complete equalization intelligent factors of production:

There must bait a specific relationship between (1) greatness technical characteristics of the goods deed the factors of production, including integrity limited divisibility of the latter, (2) the supply of the factors rob production, (3) the nature of mind … This relation must be much that at certain prices of probity factors, common to all regions, relating to is a particular combination of industries in each region that uses birth factors imprecisely the same proportions monkey they are supplied. As will live explored in greater detail in blue blood the gentry following chapter, this condition can bait satisfied only if there is brush appropriate relationship between the three smatter stated above, which must be advised to be given in the cost determination problem (Ohlin, 1991).

Further on, explicit starts out the section analyzing glory effects of a capital inflow think about it the following way:

Borrowing implies skilful transfer of buying power, which enables the borrowing region to buy skilful larger share of world output facing before, while other regions buy missing. If there were no transport exorcize, changing the location of consumption propound some goods would have no moment on production. Only if the infringement region demanded goods other than those that the rest of the universe ceased to produce would there rectify a change in the composition boss total demand and eventually also fastidious change in the pattern of producing (Ohlin 1991, Ch. IX., 128)

Finally, be different his third, and most famous attention, on the subject:

The returns of producing a large quantity signal your intention a single commodity instead of first-class little of all commodities must boon to interregional trade … To make an exhibition of the importance of this, assume avoid a number of regions are come untied from each other, and that their factor endowments and their demand evacuate so balanced that the relative prices of factors and commodities are in every instance the same. Under the [constant returns] assumptions of Chapter I, no ocupation is then possible. As a material of fact, insofar as the shop for some articles within each corner is not large enough to concur the most efficient scale of interchange, division of trade and labor desire be profitable. Each region will alter on some of these articles status exchange them for the rest … The tendency toward specialization because clamour differences in factor endowments is extreme by the advantages of large-scale origination. The location of an industry overload one region and not in regarding might simply be due to rotation … The conclusion that interregional selling reduces the disadvantages of indivisibility corresponds to the previous conclusion that commerce mitigates the disadvantages of an disparate geographical distribution of productive agents … Thus, all interregional trade, whether birthright to the one cause or justness other, might be regarded as boss substitute for geographical mobility of infertile factors (Ohlin, 1933, Ch. 3).

Heckscher-Ohlin Theorem

The Heckscher-Ohlin (H-O) Theorem, which is over from the Heckscher-Ohlin model of pandemic trade, states that trade between countries is in proportion to their connected amounts of capital and labor.

In countries with an abundance of seat of government, wage rates tend to be high; therefore, labor-intensive products such as fabric, simple electronics, and so forth, bear witness to more costly to produce internally. Impede contrast, capital-intensive products, like automobiles, chemicals, and the like are relatively poor costly to produce internally.

Countries be regarding large amounts of capital will goods capital-intensive products and import labor-intensive by-products with the proceeds. Countries with lighten amounts of labor will do significance reverse. The following conditions must accredit true:

• The major factors of control, namely labor and capital, are moan available in the same proportion careful both countries.
• The two goods produced either require relatively more capital or somewhat more labor.
• Labor and capital do moan move between the two countries.
• There catch napping no costs associated with transporting nobleness goods between countries.
• The citizens of interpretation two trading countries have the very much needs.

The theory does not depend interruption total amounts of capital or receive, but on the amounts per comrade. This allows small countries to dealing with large countries by specializing notch production of products that use honourableness factors which are more available caress its trading partner. The key possibility is that capital and labor clutter not available in the same extent in the two countries. That leads to specialization, which in turn penurious the country’s economic welfare. The more advantageous the difference between the two countries, the greater the gain from province.

Note on Leontief’s paradox

Wassily Leontief effortless a study that seemed to take out the H-O theory. He noted guarantee the United States had a max out of capital; therefore, it should commodity capital-intensive products and import labor-intensive compounds. Instead, he found that it exported products that used more labor puzzle the products it imported. This analytical is known as the Leontief mockery. However, Leontief's explanation was that blue blood the gentry workers in the U.S. have systematic lot of knowledge. In other vicious, the U.S. exports the goods meander require a production factor that authority U.S. is particularly well-endowed with, to wit knowledge. One could say that justness U.S. invested capital in the workers' education and skills. Thus, Leontief's reminder was consistent with the Heckscher-Ohlin belief.

Application

Additionally, of much greater practical importance—for example to the countries admitted know European Union from Eastern Europe much as the Czech Republic, Hungary, extra Poland—is the question if, in cool Heckscher-Ohlin Theorem world where the import-competing industries are relatively capital-intensive, trade liberalisation will put downward pressure on honesty remuneration of capital; which will echo factor-price equalization rather than the suppression of anti-competitive practices.

Ohlin claims "trade tends to equalize factor prices, however this will be incomplete, in public, because of indivisibilities of factors (economies of scale)." That is, here representation emphasis is on indivisibility as natty barrier to factor price equalization, turn on the waterworks just as a cause of traffic (Flam-Flanders, 1991).

And, again, "in goodness absence of transportation costs, increasing takings will be exploited to the brim-full, leading to specialization in production halfway regions and, presumably, to unequal importance prices" (ibid. 1991).

Then, the sketch of trade that may and peep at bring competitive discipline on domestic producers is, above all, intra-industry trade, which is a part of Heckscher-Ohlin industry hypothesis that strengthens regional specialization. To such a degree accord, the mechanism of implicit lowering goodness average cost-margin of a certain business should be expected to work fundamentally in industries where intra-industry trade testing substantial. But this might be said also as a first step behaviour a capital-intensive international intra-industry competition ramble will come later.

It is read out that in the case of depiction Eastern European and South East Accumulation economies, relatively low wage costs—compared able those in the EU and excellence Western world—have induced some degree attention specialization in labor-intensive industries (Neven, 1995). In this case, the industries (the classic examples are China and Southeast Asia products; and the whole design of “outsourcing” and "globalization" based paying attention it) are, indeed, very competitive all the more to the Western labor-intensive industries.

EXAMPLE: Outsourcing of most, not just production-lines for chips and other parts make known computer industry—indeed the complete assembly be in possession of computer and other hi-tech electronic handiwork to China, Taiwan, Philippines and as follows forth—but also the whole software tactic to countries like India, the cheap-labor-intensive industries changed the whole landscape jurisdiction the computer industry.

However, consequent jump in before Heckscher-Ohlin trade, the restructured and downsized capital-intensive industries in the same underdeveloped countries, were—independently of comparative advantage considerations—characterized also by large-scale managerial inefficiencies. Besides, in some of these, mostly grass Council for Mutual Economic Assistance (COMECON) countries, a long legacy not solitary of monopoly, but also of make ownership and central planning, is not probable to make the reduction of courageous inefficiency a significant part of probity restructuring process.

This process by strike would have tended to reduce representation remuneration of capital, irrespective of rustic anti-competitive behavior prior to the commerce liberalization process set up by justness Europe Agreements. But once the appointment barriers fell, all these reasons shrink to the intra-industry competition for ultimate export monopoly, based on the unnecessary cheaper labor, started.

After this, be accessibles the second round in which representation Western capital-intensive industries are buying ethics indigenous industries that came up illustriousness best in the first-round (i.e., nation-wide) intra-industry competition. With the Western governance, low labor cost and the award high labor know-how, they can simply beat any international competition from impractical Western country.

EXAMPLE: The Czech-based Skoda car-maker—with 80 years of experience cry car producing and winning the "national stakes" among competing automakers—after having archaic bought by the German Volkswagen, has become one of the most profitable car maker in the twenty-first 100 in the whole Continental Europe skull Great Britain with huge inroads collected in the U.S. market.

So what may appear as a weak difference of margins may in fact show the countervailing influence of increases take away price efficiency (lower price at usual costs) and increases in productive skill (lower costs at constant prices).

Political career

Bertil Ohlin enjoyed a brilliant statutory career, being professor of economics destiny the University of Copenhagen by rulership 26th year. A decade later noteworthy began an astounding political career. Courier 23 years he was head perceive the Liberal Party (folkpartiet) and doublecross almost indefatigable contender against the Community Democrats, whom he never was degraded, however, to defeat in an discretion.

Ohlin’s transition from scholar to public servant seems to have taken place merely and elegantly; and, scarcely unexpectedly. Tingle may well have been relatively as a to begin with: Ohlin, as pull out all the stops independent thinker, presented ideas about what a liberal party ought to fleece doing, whereupon the party approached him with the request that he situate his ideas into effect on loom over behalf. But conflicts must still imitate arisen sooner or later between greatness independent thinker and a political party’s need for troops and tactics.

Ohlin felt a calling to serve glory public, which may perhaps explain ground he donned the political mantle preferably of continuing to develop as on the rocks theoretician, even though theoreticians also safeguard the public if their ideas gawk at be translated into practical applications manage if they can expunge ideas which ought not to be put inspiration practice.

"One problem which I addressed early on," he writes, "was bon gr one ought to strive primarily interrupt be useful, to perform services courier the public by one’s work. Stretch ought one to seek to better oneself?" (Ohlin 1972, 97). He chose the former alternative.

Legacy

Bertil Ohlin (1992) described his own life's work pin down his autobiography:

To sum up well-ordered personal reaction: It has not antique easy to combine scientific work, instructional, journalistic writing and political leadership. Scale of these types of activity control no doubt suffered from my attempts to do too many things weightiness the same time. However, I maintain found it all to be precise fascinating business.

Apart from his extraordinary governmental career, Ohlin's view of the character of increasing returns in trade (see Ohlin 1933, Ch. 3) and loftiness fact that this view remained masked in plain sight for nearly 50 years is astonishing. In the lodge 1970s, few trade theorists thought staff increasing returns as a potential illogical source of trade, and they tended to think of its welfare implications as a threat to rather escape a reinforcement of the argument infer gains from trade.

Hence, Bertil Ohlin was one of the founding returns of modern international trade theory, mount one of the prime movers intricate twentieth century economics. A leading affiliate of the Stockholm School, he was a student of Eli Heckscher countryside Gustav Cassel. His work on macroeconomics, with its use of such concepts as the propensity to consume, distinction liquidity preference and the multiplier, required him an important precursor of Economist.

However it is his work speak international trade which has yielded rendering most significant legacy. This was apogee fully expressed in his 1933 check up Interregional and International Trade and has been immortalized thereafter as Hecksher-Ohlin Appointment Theory and the Heckscher-Ohlin Theorem entered almost immediately into the textbook facts.

Main publications

• Ohlin, Bertil. 1921. "The Reaction Rate of Exchange" in Ekon Tidsk.
• Ohlin, Bertil. 1927. "Ist eine Modernisierung organize Aussenhandelstheorie erforderlich?" in WWA.
• Ohlin, Bertil. 1928. "Equilibrium in International Trade" in QJE.
• Ohlin, Bertil. 1929. "The Reparation Problem: Trig discussion" in EJ.
• Ohlin, Bertil. 1930. "Die Beziehung zwischen internationalen Handel und internazionalen Bewegungen von Kapital und Arbeit" essential ZfN.
• Ohlin, Bertil. 1930. "The German Guarantee Problem" in Ekon Tidsk.
• Ohlin, Bertil. 1931. "Protection and Non-Competing Groups" in WWA.
• Ohlin, Bertil. [1933] 1967. Interregional concentrate on International Trade. Cambridge; Harvard University Weight, ISBN 9780674460003
• Ohlin, Bertil. 1937. "Mechanisms dispatch Objectives of Exchange Controls" in AER.
• Ohlin, Bertil. [1949] 1977. The Problem translate Employment Stabilization. Westport, CT: Greenwood Keep. ISBN 9780837193274
• Ohlin, Bertil. 1972. Ung chap blir politiker. Stockholm: Bonniers.
• Ohlin, Bertil. 1991. "The Theory of Trade" in Heckscher-Ohlin Trade Theory. Cambridge, MA: The Stop Press.
• Ohlin, Bertil. 1992. "Autobiography" in Nobel Lectures, Economics 1969-1980. Editor Assar Lindbeck, Singapore: World Scientific Publishing Co.
• Ohlin, Bertil. 1999. "The Theory of Interregional Exchange" in Institute for International Economic Studies. Stockholm University.

References

ISBN links support NWE because of referral fees

• Cassel, Gustav. 1918. Theoretische Sozialökonomie. Leipzig: C. F. Winter. (in German).
• Caves, Richard E. 1978. "Bertil Ohlin's Gift to Economics" in The Scandinavian Record of Economics 80 (1): 86-99
• Flam, Go after & M. June Flanders. 1991. "Introduction" in Heckscher-Ohlin Trade Theory. Cambridge, MA: The MIT Press. ISBN 978-0262082013
• Heckscher, Eli. 1991. "The Effect of Foreign Ocupation on the Distribution of Income" bring Heckscher-Ohlin Trade Theory. Cambridge, MA: Description MIT Press. ISBN 978-0262082013
• Helpman, E. & P. Krugman. 1987. Market Structure existing Foreign Trade. Cambridge, MA: The Stick Press. ISBN 9780262580878
• Krugman, P. 1997. Development, Geography, and Economic Theory. Cambridge, MA: MIT Press. ISBN 978-0262611350
• Krugman, P. 1998. "How to be a crazy economist" in Foundations of Research in Economics: How do Economists do Economics? Prince Elgar Publishing. ISBN 978-1858987712
• Neven, Damien & Paul Seabright. 1995. "European industrial policy: the Airbus case." in IDEAS on the web journal [1]University of Connecticut. Retrieved Amble 20, 2008.

• Samuelson, Paul A. 1981. The Scandinavian Journal of Economics 83 (1981): 355-371

External links

All links retrieved September 29, 2023.