What structural changes will occur in the domestic economy if we increase petroleum revenue spending?   What were the causes of the financial crisis? How can we prevent history from repeating itself?   How can the authorities promote sound and stable economic growth and the efficient use of society’s resources? The last question has been the subject of debate for centuries. The prevailing view has shifted over time. Crises and recessions have often spurred new recognitions and new thoughts. Anton Martin Schweigaard, the lawyer and economist who has given this lecture its name, has been referred to as “the champion of 19th century economic liberalism in Norway”. 3 Schweigaard taught statistics and economics at the University of Oslo from 1836 and was a staunch advocate of free trade. The Scottish moral philosopher Adam Smith laid the conceptual foundation for economic liberalism in his book The Wealth of Nations. According to Adam Smith, economic decisions should be left to individuals. Market forces, or “the invisible hand”, should be allowed to function. Economic liberalism was a reaction to the prevailing mercantilist doctrine of the time, where state control by means of tariff protection, monopolies and other privileges was aimed at promoting certain industries. Schweigaard also strongly criticised government control:  2  In Agnar Sandmo (2006): “Samfunnsøkonomi – En idéhistorie (Economics – a history of ideas)”, Universitetsforlaget, p. 13. 3  Wilhelm Keilhau quoted in Halvor Mehlum (2008): “Samfunnsøkonomen Schweigaard (The economist Schweigaard), Memorandum No 20/2008”, Department of Economics, Oslo University, p. 5.

2  BIS Review 109/2010  “There is hardly a trace of the multitude of unnatural industrial plants that it wanted to promote. That is how powerless we are when we seek to determine the law of nature rather than follow its prescriptions.” 4 The ideals of free competition and a passive state predominated up to World War I, even though not everyone shared this view. The radical German economist and philosopher Karl Marx believed that competition and big industry led to falling profit rates and predicted that it would lead to the collapse of capitalism. 5 In pace with stock market crashes and deep depressions in the 1920s and 1930s, confidence in free market forces waned. The British economist John Maynard Keynes’ theories of economic management set a new standard for post-war economic thinking. Keynes argued that a decentralised market economy alone would not be stable. He advocated in particular that government should stimulate the economy in adverse periods by increasing government spending. Such a countercyclical policy was necessary in order to ensure that the market economy could again function effectively. Keynes’ theories gave support to an era of more state planning and control. Some countries went farther than others. In Norway, the first Nobel laureate in economics Ragnar Frisch was an important agenda-setter. Frisch, who worked here in this department, wanted to make the subject more scientific by using mathematics and statistics. According to Frisch, economic theory should be expressed by mathematical models and supported by quantified relationships.