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Trygve Haavelmo in the Econometrics Field Term Paper

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Introduction

Trygve Magnus Haavelmo was a Norwegian scholar who majored in Economics and Econometrics. He was born on 13th December 1911, in Skedsmo, Norway. He is one of the most influential economists of the 19th century. This paper will take a detailed look at Trygve Haavelmo’s life; his movement through life, his works, his accomplishments, and other aspects of his life.

Early life

Trygve Haavelmo studied at the University of Oslo where he was a student of Ragnar Anton Kittil Frisch, another Norwegian economist. Ragnar is credited for having coined many economic terms such as macroeconomics, flow-input, econometrics, point-output, and many more. Ragnar Frisch was a joint winner of the Nobel Prize winner in Economics with Dutch economist Jan Tinbergen, In 1969 (University of Oslo par. 1). Frisch was a major influence on Haavelmo. In 1939, Haavelmo fled the Nazi invasion of Norway and moved to the United States. Here, he joined Harvard University as a Fulbright student. The Fulbright program is a scheme that offers educational grants to exchanges, students, scholars, educators, graduate students, and professionals to study in the United States (newschool.edu par. 2).

The Econometrics field

One of the fields that Haavelmo focused on and made major contributions to, is Econometrics. Econometrics, according to econometrics.org, combines a number of subjects including mathematics, economics, economic theory, and statistics. The website nobel-winners.com defines econometrics as the application of mathematical models in association with statistical techniques to economic data. “The goal of econometrics is twofold: to give economic theory empirical data and to empirically verify it. It is a study that produces measurements, where qualitative data is turned into quantitative mathematical forms. Once this is performed, these statements can then be empirically proven, unproven, measured, and compared.” (Econometrics.org par.1).

Haavelmo’s first major work

It was between 1940 and 1946 as a Fulbright scholar at Harvard, that Trygve Haavelmo made his major contribution to Economics and Econometrics. During this period, he produced a work that presented a new tool for economists and formed the basis of modern Econometrics. In 1943, while he was at Harvard University, Haavelmo wrote an article that was published on Econometrica, a Journal of the Econometric Society. In 1944 he produced a second work as part of his dissertation for his doctorate. This paper was supplementary to the paper he had written the previous year. In this work, he introduced the “probability approach” to Econometrics. The work attempted to provide a theory for the analysis of economic variables’ interaction. This work-based econometrics is more firmly on the probability theory. This work provided the answer to questions about the applicability of probability models to economic data. In this work, he argued that quantitative economic models must necessarily be probability models. The previously relied on deterministic models are inconsistent with observed economic quantities, and it is, therefore, incoherent to apply deterministic models to non-deterministic data. The errors that are inevitably present should be incorporated into models making them the models more accurate. By acknowledging that economic models are probability models, it follows naturally that the best way to quantify, estimate and draw conclusions about the economy is through mathematical statistics. This work made it possible for economics to conduct relevant experiments (and have higher confidence levels in this experiment) in an attempt to learn about the economy from data.

His achievements and awards

Trygve Haavelmo also contributed to economics and econometrics in many other ways. After he became a professor at Oslo, he conducted research on economic theories. In 1954, basing his findings on the research, he published a book called ‘A Study in the Theory of Economic Evolution, which was one of the first works to evaluate the reasons why countries are underdeveloped, as compared to other counties. The website nobelprize.org also notes that Haavelmo also made a valuable contribution to the theory which determines the development of investments in a country. Another of Haarelmo’s major contributions was the solving of the identification problems in simultaneous equations derived from econometric problems (Haavelmo, 1943, 1947). He is credited for having differentiated the “structural” from the “reduced” form equation and discussed the relationship between the original parameters and the reduced-form estimates. What’s more, he was the one who introduced the “determinant condition” for identifiability (nobelprize.org 1).

Other publications by Haavelmo

His work on the probability approach in Econometrics earned him a doctorate in Philosophy in 1946. From 1947 to 1948 he served as the Trade department head of division at Oslo University. For the better part of his life, he was involved in teaching institutions and conducting researches. He served as a Professor in Economics and Statistics at the University of Oslo from 1948 to 1979. Other publications that Trygve Haavelmo made include; The Inadequacy of Testing Dynamic Theory by Comparing the Theoretical Solutions and Observed Cycles, Family Expenditures and the Marginal Propensity to Consume, A Study in the Theory of Investment, and about a dozen more publications. Trygve earned several recognitions throughout his lifetime. In 1989, the Norwegian economist was awarded the Nobel Prize in Economic Sciences because of his contribution to economics through his work on probability in Econometrics during the early 1940s. Trygve’s Haavelmo passed away on 26th July 1999 (University of Oslo).

Summary

Trygve Magnus Haavelmo was a Norwegian economist born in the year 1911. He attended the University of Oslo and was a student of the renowned Ragnar Frisch. He later moved to the United States during the second world war and joined Harvard University as a government-sponsored scholar. During his studies at Harvard, he wrote two major works that had a major effect on Econometrics. The first was written in 1943 and was published in the Econometrica, an Econometrics journal. The second article was his doctorate paper and was about “The Probability Approach in Econometrics”. These works have had a major change in this field. These works are considered by most Econometricians to have provided the foundations for present-day econometrics. These works earned Trygve Magnus a Nobel Price in Economics in the year 1989. He contributed to economics in other areas such as being a professor at Oslo University, publishing numerous journals, publishing books, pioneering in research relating to economic topics such as the reasons for a country’s relative underdevelopment as compared to others. Furthermore, he came up with solutions to identification problems in simultaneous equations of econometric problems. Haavelmo’s work was original, influential, and of high quality. He is branded as one of the top economists of the nineteenth century. Trygve Haavelmo passed away on 26th July in 1999.

Works cited

Econometrics.org. “Econometrics.” 2005. Web.

newschool.edu. “Ragnar A.K. Frisch, 1895-1973.” n.d. 2010. Web.

newschool.edu “Trygve Haavelmo, 1911-1999.” n.d. 2010. Web.

Ragnar Frisch. nobel-winners.com. n.d. 2010. Web.

The Norbel organization. “Trygve Haavelmo. The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1989.” n.d. 2010. Web.

University of Oslo “Ragnar Frisch – Nobel Prize winner in economics 1969.” 2000. Web.

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