Stockholm school (economics)

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Knut Wicksell, Swedish economist. Important source of inspiration for John Maynard Keynes and the Stockholm School. Wicksell.jpg
Knut Wicksell, Swedish economist. Important source of inspiration for John Maynard Keynes and the Stockholm School.

The Stockholm School (Swedish : Stockholmsskolan), is a school of economic thought. It refers to a loosely organized group of Swedish economists that worked together, in Stockholm, Sweden primarily in the 1930s.

Swedish language North Germanic language spoken in Sweden

Swedish is a North Germanic language spoken natively by 9.6 million people, predominantly in Sweden, and in parts of Finland, where it has equal legal standing with Finnish. It is largely mutually intelligible with Norwegian and to some extent with Danish, although the degree of mutual intelligibility is largely dependent on the dialect and accent of the speaker. Both Norwegian and Danish are generally easier for Swedish speakers to read than to listen to because of difference in accent and tone when speaking. Swedish is a descendant of Old Norse, the common language of the Germanic peoples living in Scandinavia during the Viking Era. It has the most speakers of the North Germanic languages.

The history of economic thought deals with different thinkers and theories in the subject that became political economy and economics, from the ancient world to the present day in the 21st Century. This field encompasses many disparate schools of economic thought. Ancient Greek writers such as the philosopher Aristotle examined ideas about the art of wealth acquisition, and questioned whether property is best left in private or public hands. In the Middle Ages, scholasticists such as Thomas Aquinas argued that it was a moral obligation of businesses to sell goods at a just price

Economist professional in the social science discipline of economics

An economist is a practitioner in the social science discipline of economics.

Contents

The Stockholm School had—like John Maynard Keynes—come to the same conclusions in macroeconomics and the theories of demand and supply. Like Keynes, they were inspired by the works of Knut Wicksell, a Swedish economist active in the early years of the twentieth century.

John Maynard Keynes English economist

John Maynard Keynes, 1st Baron Keynes, was a British economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. He built on and greatly refined earlier work on the causes of business cycles, and was one of the most influential economists of the 20th century. Widely considered the founder of modern macroeconomics, his ideas are the basis for the school of thought known as Keynesian economics, and its various offshoots.

Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole. This includes regional, national, and global economies. Macroeconomists study aggregated indicators such as GDP, unemployment rates, national income, price indices, and the interrelations among the different sectors of the economy to better understand how the whole economy functions. They also develop models that explain the relationship between such factors as national income, output, consumption, unemployment, inflation, saving, investment, international trade, and international finance.

In economics, supply is the amount of something that firms, producers, labourers, providers of financial assets, or other economic agents are willing and able to provide to the marketplace. Supply is often plotted graphically with the quantity provided plotted horizontally and the price plotted vertically.

William Barber’s comment upon Gunnar Myrdal´s work on monetary theory goes like this:

Gunnar Myrdal Swedish economist

Karl Gunnar Myrdal was a Swedish economist and sociologist. In 1974, he received the Nobel Memorial Prize in Economic Sciences with Friedrich Hayek for "their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena." He is best known in the United States for his study of race relations, which culminated in his book An American Dilemma: The Negro Problem and Modern Democracy. The study was influential in the 1954 landmark U.S. Supreme Court Decision Brown v. Board of Education. In Sweden his work and political influence were important to the establishment of the Folkhemmet and the welfare state.

“If his contribution had been available to readers of English before 1936, it is interesting to speculate whether the ‘revolution’ in macroeconomic theory of the depression decade would be referred to as ‘Myrdalian’ as much as ‘Keynesian’” [1]

History and aspects

Two of the most prominent members of the Stockholm School were Stockholm School of Economics professors Gunnar Myrdal and Bertil Ohlin. The movement's name, "The Stockholm School", was launched in an article by Bertil Ohlin in the influential Economic Journal in 1937, "Some Notes on the Stockholm Theory of Savings and Investment".

Stockholm School of Economics Swedish business school

The Stockholm School of Economics is one of Europe's leading business schools. SSE offers BSc, MSc and MBA programs, along with highly regarded PhD- and Executive Education programs. SSE's Master program in Finance is ranked no.18 worldwide as of 2018. The Masters in Management program is ranked no. 12 worldwide by the Financial Times. QS ranks SSE no.26 among universities in the field of economics worldwide. The school is the only privately funded university in Sweden and is often considered as the most selective and prestigious academic institution in the Nordics.

Bertil Ohlin Swedish economist and politician

Bertil Gotthard Ohlin was a Swedish economist and politician. He was a professor of economics at the Stockholm School of Economics from 1929 to 1965. He was also leader of the People's Party, a social-liberal party which at the time was the largest party in opposition to the governing Social Democratic Party, from 1944 to 1967. He served briefly as Minister for Trade from 1944 to 1945 in the Swedish coalition government during World War II. He was President of the Nordic Council in 1959 and 1964.

The article was published in response to the publication of Keynes' magnum opus, The General Theory of Employment, Interest and Money in 1936, and its purpose was to draw international attention to the Swedish discoveries in the field, many of which had predated the discoveries of Keynes. Gunnar Myrdal was early in supporting the theses of John Maynard Keynes, maintaining that the basic idea of adjusting national budgets to slow or speed an economy was first developed in Sweden by him and the Stockholm School.

<i>The General Theory of Employment, Interest and Money</i> book by John Maynard Keynes

The General Theory of Employment, Interest and Money of 1936 is the last and most important book by the English economist John Maynard Keynes. It created a profound shift in economic thought, giving macroeconomics a central place in economic theory and contributing much of its terminology – the "Keynesian Revolution". It had equally powerful consequences in economic policy, being interpreted as providing theoretical support for government spending in general, and for budgetary deficits, monetary intervention and counter-cyclical policies in particular. It is pervaded with an air of mistrust for the rationality of free-market decision making.

Scandinavian welfare state

Myrdal and Ohlin went on to further develop their theories, and in so doing, they developed the intellectual underpinnings of the modern north European welfare state. Their theories were embraced and implemented as national policy by the two powerful arms of the Swedish labor movement, the Swedish Social Democratic Party and the national labor union, the Swedish Trade Union Confederation.

In the post-World War II geopolitical situation of the Cold War, with two rival predatory political blocks, their theories also achieved wide international appeal as a "Third Way", i.e. a middle way between a capitalist economy and a communist economy. The objective of this "third way" was to achieve a high level of social equality without undermining economic efficiency.

Leading members

Other members, such as Erik Lundberg, continued as business cycle-oriented economists.

See also

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Nicholas Kaldor British/Hungarian economist

Nicholas Kaldor, Baron Kaldor, born Káldor Miklós, was a Cambridge economist in the post-war period. He developed the "compensation" criteria called Kaldor–Hicks efficiency for welfare comparisons (1939), derived the cobweb model, and argued for certain regularities observable in economic growth, which are called Kaldor's growth laws. Kaldor worked alongside Gunnar Myrdal to develop the key concept Circular Cumulative Causation, a multicausal approach where the core variables and their linkages are delineated. Both Myrdal and Kaldor examine circular relationships, where the interdependencies between factors are relatively strong, and where variables interlink in the determination of major processes. Gunnar Myrdal got the concept from Knut Wicksell and developed it alongside Nicholas Kaldor when they worked together at the United Nations Economic Commission for Europe. Myrdal concentrated on the social provisioning aspect of development, while Kaldor concentrated on demand-supply relationships to the manufacturing sector. Kaldor also coined the term "convenience yield" related to commodity markets and the so-called theory of storage, which was initially developed by Holbrook Working.

Paul Samuelson American economist

Paul Anthony Samuelson was an American economist and the first American to win the Nobel Memorial Prize in Economic Sciences. The Swedish Royal Academies stated, when awarding the prize in 1970, that he "has done more than any other contemporary economist to raise the level of scientific analysis in economic theory". Economic historian Randall E. Parker has called him the "Father of Modern Economics", and The New York Times considered him to be the "foremost academic economist of the 20th century".

Eli Heckscher Swedish historianand economist

Eli Filip Heckscher was a Swedish political economist and economic historian.

Erik Lindahl Swedish economist

Erik Lindahl was a Swedish economist. He was professor of economics at Uppsala University 1942–58 and in 1956–59 he was the President of the International Economic Association. He was an advisor to the Swedish government and the central bank. Lindahl posed the question of financing public goods in accordance with individual benefits. The quantity of the public good satisfies the requirement that the aggregate marginal benefit equals the marginal cost of providing the good.

Knut Wicksell Swedish economist

Johan Gustaf Knut Wicksell was a leading Swedish economist of the Stockholm school. His economic contributions would influence both the Keynesian and Austrian schools of economic thought. He was married to the noted feminist Anna Bugge.

Ernst Wigforss Swedish politician

Ernst Johannes Wigforss was a Swedish politician and linguist (dialectologist), mostly known as a prominent member of the Social Democratic Workers' Party and Swedish Minister of Finance. Wigforss became one of the main theoreticians in the development of the Swedish Social Democratic movement's revision of Marxism, from a revolutionary to a reformist organization. He was inspired and stood ideologically close to the ideas of the Fabian Society and guild socialism and inspired by people like R. H. Tawney, L.T. Hobhouse and J. A. Hobson. He made contributions in his early writings about industrial democracy and workers' self-management.

Gustav Cassel Swedish economist

Karl Gustav Cassel was a Swedish economist and professor of economics at Stockholm University.

The term ex-ante is a phrase meaning "before the event". Ex-ante or national demand refers to the desire for goods and services which is not backed by the ability to pay for those goods and services. This is also termed as ‘wants of people’. Ex-ante is used most commonly in the commercial world, where results of a particular action, or series of actions, are forecast in advance. The opposite of ex-ante is ex-post (actual). Buying a lottery ticket loses you money ex ante, but if you win, it was the right decision ex post.

Erik Filip Lundberg was a Swedish economist, born in Stockholm. He was a professor of political economics at Stockholm University and a member of the Stockholm School of economic thought. He was president of the International Economic Association from 1968–1971. From 1969–1979, he was a member of the committee that selects the laureates for the Sveriges Riksbank Prize in Economic Sciences, the Economics Prize Committee, and served as the committee's chairman from 1975–1979.

Axel Leijonhufvud is a Swedish economist, currently professor emeritus at the University of California Los Angeles (UCLA) and professor at the University of Trento, Italy.

In economics, the loanable funds doctrine is a theory of the market interest rate. According to this approach, the interest rate is determined by the demand for and supply of loanable funds. The term loanable funds includes all forms of credit, such as loans, bonds, or savings deposits.

History of macroeconomic thought

Macroeconomic theory has its origins in the study of business cycles and monetary theory. In general, early theorists believed monetary factors could not affect real factors such as real output. John Maynard Keynes attacked some of these "classical" theories and produced a general theory that described the whole economy in terms of aggregates rather than individual, microeconomic parts. Attempting to explain unemployment and recessions, he noticed the tendency for people and businesses to hoard cash and avoid investment during a recession. He argued that this invalidated the assumptions of classical economists who thought that markets always clear, leaving no surplus of goods and no willing labor left idle.

The Nobel Memorial Prize in Economic Sciences, commonly referred to as the Nobel Prize in Economics, is an award for outstanding contributions to the field of economics, and generally regarded as the most prestigious award for that field. The award's official name is The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.

<i>The Scandinavian Journal of Economics</i> journal

The Scandinavian Journal of Economics was established as the Ekonomisk Tidskrift in 1899 by David Davidson. It became The Swedish Journal of Economics in 1965 and then The Scandinavian Journal of Economics in 1976. Davidson was the editor until his retirement in 1939 at the age of 85, having run it virtually as a one-man operation.

Don Patinkin was an Israeli/American monetary economist, and the president of Hebrew University in Jerusalem.

References

  1. W. Barber (23 November 2007). Gunnar Myrdal: An Intellectual Biography. Palgrave Macmillan UK. ISBN   978-0-230-28901-7.

Further reading