March 1, 2024
Ragnar Frisch

Ragnar Frisch: The best economist

Ragnar Anton Kittil Frisch (4 March 1895 – 29 July 1973) was a Norwegian economist most notable for his work with John Maynard Keynes in the development of the simple, yet profound, macroeconomic model known as the Keynesian Cross.

About Ragnar Frisch

He was born on 4 March 1895 at Voss in Hordaland, Norway. He received his Ph.D from the University of Oslo in 1926. (source: Wikipedia)

He was a professor of economics at the Norwegian School of Economics and Business Administration (NHH) in Bergen, Norway during the 1940s and 1950s and published several works concerning Keynesian economics, including a textbook titled “Et krisekonjunkturprogram av Ragnar Frisch” (“A Keynesian recession program by Ragnar Frisch”) which was translated into English as “Economic Theory”, published by Macmillan in 1946.

Life of Ragnar Frisch

Birth and study

Ragnar Frisch was born in Voss, which is a rural area located in Hordaland in Norway. Voss is also known for its natural environment, which is characterized by the Vosso river and the Hardangerjøkulen glacier, the latter of which serves as a reservoir for the Hardanger Hydroelectric Power Station.

Frisch had an inclination towards academics and was admitted to a private high school in Bergen two years earlier than he would have been permitted to enter public schools. Aged 14, Ragnar began his studies at Bergen Cathedral School and at 16 he took his examen artium (the Latin title awarded to secondary school students upon successful completion of secondary education).

Marriage

Marriage to Liv Frisch: In 1922 he married Liv Kristine Frisch (1896–1976), a dentist, one year his senior. Together they had two children: Anne Margrete Frisch (born 1923) and Bjørn Martin Frisch (born 1925). Ragnar and Liv married in Fusa Church, which is a church in Fusa municipality in southeastern Norway.

While Ragnar had no intention of pursuing a career as an economist at first, the Great Depression of the 1930s made him change his mind. In 1931, Ragnar’s daughter Anne Margrete was born.

Early Career

Frisch’s academic career started with him taking an economic history course taught by Gustav Cassel at the University of Oslo. He was so impress with his teacher’s macroeconomic theories that he applied for a Fulbright Scholarship to study economics at Yale University. Frisch was grant the scholarship and studies under such American economists as Irving Fisher, Wesley Clair Mitchell, and Jacob Viner. Frisch was guid by Jacob Viner to write a thesis on the workings of unregulated commodity markets. In 1925, Frisch wrote Theory of Price Flexibility which was publish in several journals and allow him to gain an association with John Maynard Keynes.

Work with Keynes:

At the London School of Economics, Frisch worked with John Maynard Keynes. Frisch’s contribution to monetary theory was mainly the development of a theory of currency in response to a theory about the limitations of previous monetary models. His contribution to economic policy and analysis was to complete Keynes’ model. He made an important contribution in his response to Roy Harrod’s Attempted Restoration of Employment by Increasing Credit 1937. And his analysis of how the automatic stabilizers responded to various disturbances in 1937. However, it has been argue that “The Role of Monetary Policy” (1938) is a more accurate treatment than “The Effects of a Currency Depreciation on International Trade” (1941).

Stratification

In 1940, Frisch published his seminal work in stratification. He argued that the development of an advanced economy was a process of three strata: The first was the people who lived off subsistence production and had no property rights. The second was those who had only very limited property rights. And did not have a clear idea of their place in society. The third stratum consisted of those with various forms of property rights, including shares and bonds, etc. He made some comparisons between social classes in the United States. And Europe which were important to explaining how economic developments changed with economic growth.

The book received widespread acclaim in Norway as well as within Scandinavia and at times throughout the world.

Ragnar Frisch

Frisch’s Macroeconomic Model

The model proposed by Frisch, known as the Keynesian Cross, is a graphical representation of an economy. It shows how consumption, investment, taxes and net exports affect national output or economic growth. The model mixes Keynesian and classical ideas. In principle, it tracks the interaction of aggregate demand. And supply in the economy through equilibrium price level and interest rate adjustments. The model also allows for bank runs. His work on this model is fundamental to understanding how monetary policy works. The most important part of this model is that there is a simple way to see what happens when monetary policy is change. This is a novel thing, since Keynesian models had never allowed for such clarity.

 

The box-and-diamond diagram is a graphical representation of the economy. In this model all products are lump together into one single market and have no market power. This was new to the classical model, which treated different markets as independent. The Keynesian model allowed for the interaction between these markets. And actually treated different markets as if they were all part of one ecosystem with no barriers between them. The consumer and investment class doesn’t trade with each other at all in this model.

Awards given to Frisch

Frisch was awarded the Nobel Memorial Prize in Economic Sciences in 1975 for his fundamental work in the analysis of economic systems. The Norwegian Parliament established a fund, the Ragnar Frisch Fund, to support and further research on topics which he chose to study. After his death, the Frisch Prize was instituted by the Norwegian Academy of Science and Letters (Norges Handelshøyskole) in 1981. The prize has since been awarded each year by the Norwegian Research Committee on Economic Theory (Norsk senter for økonomistyring [NOKT]) to an economist under 40 years old who has made an outstanding contribution to economics.

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