Short Biography by Bjorn Thalberg

Leif Johansen, Professor of Economics at the University of Oslo 1965-1982

1. An exceptional talent walks into the seminar room

Leif Johansen was born in 1930, and grew up in the countryside some miles north of Oslo, the Norwegian capital. His father was a lieutenant in the Norwegian army and a member of the communist party, a political engagement which may have had its roots in a very difficult childhood in the home of an alcoholic (eventually he was placed in a foster-home). Leif Johansen himself was in his earliest childhood, during the worst depression years of the 1930's, influenced by the evil plight of many small farmers and others in his neighbourhood. He early became socially and politically interested, and joined the communist party at an early age.

In the beginning of the 1940's the family moved to Oslo where Leif entered the senior high school on the natural sciences line. He passed his high school exam in 1948. He was, indeed, a remarkable schoolboy. His family has told that he never did his homework. It was not necessary as he picked up the obligatory knowledge anyhow. Instead he used his leisure time to read Marx and other economic-political literature as well as novels. His marks were all the time the very best. He could have been admitted to whatever institute of advanced studies he wanted to. At that time the most excellent male students chose as a rule to enter Norway's prestigious Technical Institute of Advanced studies, and Leif's teacher in mathematics was highly surprised when he learned that his favourite student was to take up the study of Economics at the University of Oslo. But Leif had made up his mind long ago based on his political and social interests.

Paul A. Samuelson once wrote that nobody can predict when an exceptional talent will walk into the seminar room, 'but let us hope that we shall recognise her or him when that time comes'. Leif Johansen was recognised almost immediately. He entered the Economics Department in Oslo at, for the development of a scientist, a very fortunate time. The two later Nobel Prize winners, Haavelmo and Frisch, were in this period lecturing very frequently. Haavelmo taught new methods in the field of econometrics, and Frisch lectured on how to construct macroeconomic models for national economies, models that could be quantified and form the base for analysis of economic policies. After having successfully fulfilled the first part of his university exam, with a score better than anybody before him, Leif Johansen became in 1951, when only 20 years old, a scientific assistant to Frisch.

As mentioned, Frisch was working to develop (fairly disaggregated and large) quantitative macroeconomic models. A main interest of his was economic planning on the national level. Frisch was exceptionally hardworking and enthusiastic regarding his work, and he was glad indeed to get the young and very able Johansen as his assistant. Also Leif Johansen had a great capacity for work, and he too was interested in national economic planning. (He later wrote an extensive book on macroeconomic planning, covering planning in non-socialist as well as in centralised socialist economies.)

Most economists who in the 1950's and later tried their hands at developing quantitative macroeconomic models, as for example L.Klein, used a sort of keynesian ISLM-model as their point of departure. Not so Frisch. His point of departure was a multi-sectoral input-output model. In fact, Frisch claimed that he had, in a work on circulation planning in 1934, used this type of model even before Leontief published his study on the American Economy.

Leif Johansen worked intensively with Frisch in the period 1951 -- 1954, finishing at the same time his final university exam with the best marks ever given. In January 1955 he got a university scholarship, and could then concentrate on his own ideas and works. Preparing for a doctorate degree, he looked for a theme or problem that was of common interest, that had not been analysed mathematically, and that he was able to analyse with formal methods he mastered.

2. The Birth of Computable General Equilibrium Modelling

By the end of 1956 he had found such a problem: The relationships between the various individual economic sectors of an economy during a process of economic growth. The question had of course been discussed to some extent before, it was for example well established that the production of all goods would not change at the same proportion, and that differences in income-elasticities played an important role for the outcome. But there was no study that included, in a satisfactory way, both the demand and the supply side, and captured the significance of the price system in such processes.

Naturally, Leif Johansen started with an input-output model, describing the structural links between the various sectors of the economy. The production side was described by the system of cross-deliveries between the sectors, and by Cobb-Douglas production functions where he assumed full substitutability between capital and labour, an innovation compared to the traditional Leontief type of model. For all sectors supply was continuously equal to demand, and there was all the time 'full employment' of labour and capital. The model was applied in a quantitative study of the Norwegian economy.

The significance of Johansen's study was commented upon by a number of well known economists. Chenery, for example, wrote (in Kyklos 1961) that to explain the development of individual sectors in an equilibrium growth process, Johansen had constructed a model that come closer to the Walrasian equations of general equilibrium than any that had been previously used in empirical studies. The Johansen model was, however, not in accordance with Walrasian theory in all respects. For example, the model specifies only one type of labour, but the wage differed between sectors according to an exogenously given wage structure. 'Ad hoc' restrictions of this type, in order to account for important facts, have been part of a number of CGE-models.

Personally, Johansen was extremely kind and softspoken. He was very generous in his willingness to read and comment on his students' and colleagues' drafted papers, (and it was very impressive how much he could read from one day to the other, often in a train etc., on his way to and from work). The fact that he was a member of the Communist party, would, one might think, have strained relations with other persons in the days of the cold war. Not so with Johansen. He was always listening patiently to what other people had to say and he did not seek to persuade anybody. Only in professional discussions of specific problems of economic planning, etc., did he sometimes raise his voice. He lived a quiet life in a harmonious marriage, and he left Norway for a longer visit to another country (England) only once. He died in 1982, only 52 years old.

(B.Thalberg, November 1999)

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