Gunnar Myrdal – “Expectationist”

by | Mar 10, 2015

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Born December 1898 in Gustafs, Sweden. Died 1987 near Stockholm.


 

“Correlations are not explanations”

The joint winner of the 1974 Nobel Prize for Economics might have seemed just a little myrdalsurprised by his co-laureate, the proto-monetarist Friedrich Hayek, with whom he shared what must have been an uncomfortable platform. On the one hand, the hard anti-Keynesian who really didn’t approve of governments interfering in the economic cycle; on the other, this avowedly social democrat Swede who had laid down the basis for the Swedish welfare state, who had pioneered the ‘interactive social economics’ of desegregating America, and who was as much of a sociologist as an economist.

A Keynesian Before Keynes?

In fact they say that Hayek thought he’d been given the Nobel laureate as a sort of strategic counterbalance to Myrdal’s unabashedly leftist views. But the odd thing about Myrdal these days is that, although some of his leftist views still have the power to surprise, the basic assumptions that they embody are taken for granted almost everywhere.

It was Myrdal who had first fallen out with the pure ‘classical’ financial models that had dominated during the early decades of the 20th century, and who had been studying the role of expectations in price formation as early as 1927 – some years before Keynes had really got into his stride.

Myrdal often maintained that the basic idea of adjusting national budgets to slow or speed an economy had been developed by him in his 1932 book Monetary Economics, which had been published some four years before Keynes’s own General Theory of Employment, Interest and Money. And indeed, his interest in the social interaction of achievement and expectation, savings and spending, was prescient at a time when the world of the Great Depression was sticking to largely classical responses – and suffering for it.

Politics, Politics….

Myrdal served as a Social Democrat MP in Sweden between 1933 and 1947, becoming Minister of Trade in 1945 in the leftist government of Tage Erlander. That episode, of course, culminated in the Swedish monetary crisis of 1947, for which he was perhaps unjustly blamed. But he lost no time in moving to the United Nations Economic Commission for Europe, where he served as Executive Secretary until 1957, overseeing the reconstruction of post-war Europe and creating one of the leading centres of economic research and policy development. Meanwhile his interest was gradually shifting toward issues of opportunity for poor or underprivileged populations: his 1957 work, An International Economy, Problems and Prospects, Rich Lands and Poor and Economic Theory and Underdeveloped Regions, was regarded as seminal.

Desegregation in the US

But America remembers Myrdal most distinctly for the authorship of a work entitled An American Dilemma: The Negro Problem and Modern Democracy, which he had published as early as in 1944, working together with R.M.E. Sterner and Arnold Rose. The book had declared that the problem of race relations in America had resulted from a cumulative inter-relationship between the existing discrimination against African-Americans and their failure to achieve economically – largely because of the interplay of low opportunities, low incentives, and low motivation. This, he said, represented a failure by America to translate its sincere human rights ideals into practice for the African-American population. And the U.S. Supreme Court agreed with him in its 1954 decision (Brown v. Board of Education) to outlaw racial segregation in public schools.

Myrdal spent his final decades fighting for the equal treatment of other groups – Asians, Africans and, not least, women. But he remained to the very end an avowed economic interventionist – something for which not everyone has forgiven him.

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