IVA's Gold Medal - At the intersection with a feel for the right topics

Professor Torsten Persson is receiving IVA’s Gold Medal for his innovative research at the intersection of economics and political science – research that combines sophisticated mathematical models with in-depth empirical studies. His most important work focuses on the connections between economic policy and political institutions. He has also applied his expertise to help shape Swedish economic policy.
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Since the 1970s Torsten Persson has been working from high up in Stockholm University’s building A with a fantastic view over Frescati. Not far away is the Arrhenius Laboratory which was once home to the QZ data processing centre.

“That’s where we went to get print-outs from processed statistics on large sheets of paper. If we weren’t careful to punch in the right information on the punch cards, all we got were error messages.” 

The ability to collect, store and extract relevant data impacts how research is designed today, and its results.

“We have a far greater chance of arriving at more relevant conclusions today. We can use statistics from the entire population, instead of tiny samples. This is an importance difference compared to previously.”

Torsten Persson uses sophisticated mathematical models to explain what is going on in society. He sees the connections between economic policy and political institutions based on data on the population. Persson stepped into unexploited territory early on with research at the intersection of economics and political science. He has also applied his expertise to help shape Swedish economic policy.

The intersection of economics and political science was something that held a fascination for him early on. It was during his time as a travel guide in Spain under dictator Franco that he became interested in political science and the connections to socio-economic growth.

“With research it’s like you just slip into something by chance and you keep on going. When things go well you get an appetite for more. My life as a researcher and delving deep into things I think are exciting and interesting is of course a great privilege.”

Torsten Persson’s perhaps most important work focuses on the connection between economic policy and political institutions, for example that countries with a parliamentary system – all else being equal – have a bigger public sector than countries with a presidential régime. In a frequently cited article under the heading “Is inequality harmful for growth?” Persson and his research colleague Guido Tabellini maintain that inequality impedes economic growth. In Persson’s most recent study, which attracted a lot of attention, he and four colleagues show that factors like income distribution and the job market are at least as important as increased immigration in comprehending the success of the Sweden Democrats (SD).

“Rather than increased immigration we identified employment and financial crises as causes of SD’s success. In more general terms we can understand how events in society affect our democracy by studying which types of people get involved in politics, which individuals get elected and lead political parties, and how they use their power.”

Persson’s research often starts with him creating a mathematical model based on economic or political theories. He then adds data to the model from empirical studies based on advanced statistical methods.

Persson was a member of the Lindbeck Commission at the beginning of the 1990s. The Commission’s recommendations on the importance of an independent central bank, a quantitative inflation goal, a stricter budget process and bringing competition into the public sector had a big impact on Swedish economic policy in the decades that followed.

“Holding a 90-minute speech for a sitting government about fixing one of Sweden’s worst financial crises is something you don’t get to do every day. The whole thing was dramatic. We now know that employment fell by 10 percent in just one quarter. In December 1992 when the Swedish krona was in trouble, Assar Lindbeck was commissioned by the Prime Minister to produce recommendations to fix the crisis. We essentially worked around the clock for three months in a separate department within the Ministry of Finance and came up with 113 recommendations.”

Do you think the politicians listened to your advice?

“We surprised them by not pointing to individual mistakes. Instead our message was that economic policy had been systematically distorted by poorly designed institutions. We highlighted the problem of the Riksbank’s position and the parliamentary budget process, and offered analysis on how to reform and improve social institutions.”

What were your driving forces?

“I’m brainwashed by my own research,” laughs Persson. “But it is good to have guidance to make sure people spend their time on the right things. Applying for large research grants is actually a good process because it forces you to stop and think about what you really want to spend your time on in the future; to plan something original to research. The research will not be good if you’re fishing for media attention. The important thing is to aim for the best possible research quality. If it happens to be an interesting topic that hits the mark, the attention will come by itself. Important topic, interesting results – you’re welcome.”

TORSTEN PERSSON

Age: 64 

Education: PhD, Stockholm University in 1982, Associate Professor, 1984. Professor at the Institute for International Economic Studies (IIES), Stockholm University 1987.

Career: Member of the Royal Swedish Academy of Sciences (KVA) since 1993 and member of IVA since 1997. Since 1999 Centennial Professor at the London School of Economics. Guest research fellow at several universities, including Harvard, Princeton, Berkeley and Tsinghua. Secretary, member and Chairman of the Committee for Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. 

Distinctions: President of the European Economic Association and Econometric Society. Honorary doctorate, Aalto University, Helsinki and the University of Mannheim. Yrjö Jahnsson Award 1997, awarded by the European Economic Association to Europe’s foremost economist under the age of 45. The Torgny Segerstedt Medal from Uppsala University 2003. Foreign Honorary Member of the American Economic Association.

 

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