Swedish institutionalism

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Lars Pålsson Syll
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In recent times, there has been a growing interest in institutionalist trends and research within economics. Traditional explanations and analyses have seemed to have little or no value. Abstract and unrealistic theories have increasingly been replaced by historically grounded ones. Institutional and structural elements in the economy are highlighted, replacing overly short-term and model-based variables. It is, therefore, not surprising that economists have become interested in theories with a strong economic-historical perspective, where the starting points for understanding the dynamic development, transformation, and inertia of the economy differ from those in traditional neoclassical economic theory.

Johan Åkerman (1896-1982), who worked in Lund, Sweden, developed one such theory. Far from the centres of power and economic policy engineering, he devoted himself to the long-term and underlying aspects of economic development.

Like his American counterparts, Åkerman aimed to build a new economic theory with evolutionary and institutional features. His main interest until the beginning of the 1930s was empirical business cycle research. After that, his work expanded to include methodological and epistemological studies where he sought to surpass the narrow confines set by the neoclassical tradition in economics, as he perceived them. During the post-war period, he actively participated in debates on education and research policies and wrote articles on topics like international politics.

In his dissertation — Om det ekonomiska livets rytmik (1928) — Åkerman sets out to synthesize theoretical and statistical analyses of the problems of business cycle fluctuations. His primary focus is on understanding the relationships between different variations — seasonal, cyclical, and secular. What sets Åkerman apart is primarily the proposition that seasonal variations form the basis for the formation of business cycle fluctuations.

Åkerman also attempts to describe the difference between what he calls equilibrium economics and time economics. While equilibrium economics tries to avoid the problem of causation by ignoring time, time economics seeks to start from reality and the causal relationships that apply there, even if this means that the laws formulated cannot be as general as those of equilibrium economics; they become time-specific and only apply to a certain economic period. Time represents a distinct dimension, whose inclusion in the analysis must modify the entire established theoretical system. Åkerman believed that the conventional theory’s incorporation of the risk aspect to accommodate variability and dynamism in equilibrium economic analysis is reminiscent of “the baker’s apprentice who forgot to add yeast to the dough and, therefore, threw it into the oven afterwards.”

For Åkerman, attempts to bridge the gap between neoclassical analysis and a truly evolutionary and change-oriented time-economic analysis are epistemologically impossible. A completely new approach to economic analysis is necessary. In a dynamic analysis, one must grasp the process as having evolutionary elements. To interpret evolutionary phenomena, the questions must be grouped in a way that the driving forces clearly emerge. To achieve this, Åkerman divides societies into X and Y types.

The X-society corresponds to the orthodox economists’ free-market society. The direct opposite of the X-society is the Y-society, the fully implemented planned economy. The real society is always an XY-society, with elements from both model societies.

Åkerman argues that it is important to distinguish between what he calls causal analysis and calculation analysis. Causal analysis is “an objective and, if possible, quantitative reconstruction of the actual events,” while calculation analysis is “logical rationalizations of the calculating actions of individuals.” Every economic theory contains elements of both. The problem often lies in their confusion.

When Åkerman examines the existing economic schools, he can conclude that their differences can be attributed to their treatment of the reality- and summation problem. The former concerns the relationship between reality and the concepts with which we try to analyze and understand it. The summation problem concerns the relationship between the micro and macro levels of analysis. Normally in neoclassical economic theory, it is assumed that the whole (macro) is a simple sum of its parts (micro), which Åkerman views as a “victory of form over content.” Identity statements take precedence over causal analysis, and the relationship between different groups’ activities and the macroeconomy is “magically eliminated” with summation symbols.

The core of causal analysis lies in the study of structural transformation, in which Åkerman hopes to trace the most crucial elements of cumulative causality through systematic shifts in activity periods and demonstrate the power shifts that are decisive for the institutional transformation that necessitates the continuous change of economic theory.

In his magnum opus, Ekonomisk teori (Part I 1939, Part II 1942), Åkerman builds a synthesis of his early presentations and applies his theories to a large empirical material. In the concluding part of the first book, he discusses the central concept of structure. All the economic principles addressed in economics are actually conditioned by structure and strictly applicable only as long as this structure exists. The concept of economic structure is relativistic in nature. By designating a particular structure’s position relative to preceding and subsequent structures, the concept becomes primarily a tool for seeking the forces that govern structural changes.

Johan Åkerman was a highly original and distinctive economist. His methodological and theoretical works displayed rare sharpness and depth. In the early stages of his career, he primarily focused on empirical business cycle research. However, his own contributions in this area were characterized by a desire to broaden the boundaries of economic theory. Like Wicksell, he was interested in understanding business cycles as cumulative non-equilibrium processes, and similar to Schumpeter and the institutionalists (Veblen, Commons, Mitchell), he emphasized evolution and transformation, rather than equilibrium and static states.

Alongside John Hobson, Johan Åkerman is one of the most significant European institutionalists before World War II. His holistic approach permeated much of his work, as did his emphasis on imbalances, non-equilibrium, and conflicts between different groups in society. He attached great importance to the use of inductive methods. Like Mitchell, Åkerman eventually expanded his business cycle theories to encompass broader socio-economic analyses. His treatment of the reality and summation problem also demonstrates how critical he was of the neoclassical economists’ deductive constructions built around the concept of the ‘economic man.’

Åkerman shares many of the institutionalists’ views, but his concept of institutions is somewhat narrower than that of his American counterparts. Often, he equates institutions with power. In general, Åkerman tends to reduce the institutional analysis to a question of power among different groups in society, which is quite different from the broader analysis conducted by the American institutionalists.

Åkerman wanted to replace what he perceived as poorly substantiated calculation analyses prevalent in the existing theory with a causal analysis centred around a real understanding of reconstructed actual historical processes. Instead of analyses based on aggregate concepts, he advocated for an analysis of transformation processes built on disaggregated units such as groups and driving forces. According to Åkerman, achieving this required a broad social science synthesis that adequately incorporates changing structures and institutions in the analysis. This is what he sought to accomplish with his institutionalism.