Stockholm school (economics)

Stockholm school (economics)

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The Stockholm school, or Stockholmsskolan, is a school of economic thought
History of economic thought
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...

 whose antithesis is the gold standard
Gold standard
The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...

 centered Austrian School of Economics
Austrian School
The Austrian School of economics is a heterodox school of economic thought. It advocates methodological individualism in interpreting economic developments , the theory that money is non-neutral, the theory that the capital structure of economies consists of heterogeneous goods that have...

. It refers to a loosely organized group of Swedish economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...

s that worked together, in Stockholm
Stockholm
Stockholm is the capital and the largest city of Sweden and constitutes the most populated urban area in Scandinavia. Stockholm is the most populous city in Sweden, with a population of 851,155 in the municipality , 1.37 million in the urban area , and around 2.1 million in the metropolitan area...

, Sweden
Sweden
Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....

 primarily in the 1930s. The Stockholm school had at the same time as John Maynard Keynes
John Maynard Keynes
John Maynard Keynes, Baron Keynes of Tilton, CB FBA , was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments...

, but independently, come to the same conclusions in macroeconomics
Macroeconomics
Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of the whole economy. This includes a national, regional, or global economy...

 and the theories of demand
Demand (economics)
In economics, demand is the desire to own anything, the ability to pay for it, and the willingness to pay . The term demand signifies the ability or the willingness to buy a particular commodity at a given point of time....

 and supply
Supply (economics)
In economics, supply is the amount of some product producers are willing and able to sell at a given price all other factors being held constant. Usually, supply is plotted as a supply curve showing the relationship of price to the amount of product businesses are willing to sell.In economics the...

. Like Keynes, they were inspired by the works of Knut Wicksell
Knut Wicksell
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....

, a Swedish economist active in the early years of the twentieth century.

Two of the most prominent members of the Stockholm school were Stockholm School of Economics
Stockholm School of Economics
The Stockholm School of Economics or Handelshögskolan i Stockholm is one of Northern Europe's leading business schools. Its Masters in Management program is ranked no. 2 in Northern Europe and no. 13 in Europe by the Financial Times...

 professors Gunnar Myrdal
Gunnar Myrdal
Karl Gunnar Myrdal was a Swedish Nobel Laureate economist, sociologist, and politician. 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...

 and Bertil Ohlin
Bertil Ohlin
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...

. 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". 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.

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
Welfare state
A welfare state is a "concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility for those...

. Their theories were embraced and implemented as national policy by the two powerful arms of the Swedish labor movement, the Swedish Social Democratic Party
Swedish Social Democratic Party
The Swedish Social Democratic Workers' Party, , contesting elections as 'the Workers' Party – the Social Democrats' , or sometimes referred to just as 'the Social Democrats' and most commonly as Sossarna ; is the oldest and largest political party in Sweden. The party was founded in 1889...

 and the national labor union, the Swedish Trade Union Confederation
Swedish Trade Union Confederation
The Swedish Trade Union Confederation , commonly referred to as LO, is a national trade union centre, an umbrella organisation for fifteen Swedish trade unions that organise mainly "blue-collar" workers...

. In the post-World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...

 geopolitical situation, 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 socialist economy. The objective of this "third way" was to achieve a high level of social equality without undermining economic efficiency.

Leading members


  • Gunnar Myrdal
    Gunnar Myrdal
    Karl Gunnar Myrdal was a Swedish Nobel Laureate economist, sociologist, and politician. 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...

    , professor at the Stockholm School of Economics
    Stockholm School of Economics
    The Stockholm School of Economics or Handelshögskolan i Stockholm is one of Northern Europe's leading business schools. Its Masters in Management program is ranked no. 2 in Northern Europe and no. 13 in Europe by the Financial Times...

    , and later Stockholm University
    Stockholm University
    Stockholm University is a state university in Stockholm, Sweden. It has over 28,000 students at four faculties, making it one of the largest universities in Scandinavia. The institution is also frequently regarded as one of the top 100 universities in the world...

    , spent many years in the U.S. writing the book An American Dilemma
    An American Dilemma
    An American Dilemma: The Negro Problem and Modern Democracy is a 1944 study of race relations authored by Swedish economist Gunnar Myrdal and funded by The Carnegie Foundation. The foundation chose Myrdal because it thought that as a non-American, he could offer a more unbiased opinion...

    : The Negro Problem and Modern Democracy
    , an investigation into the situation of African American
    African American
    African Americans are citizens or residents of the United States who have at least partial ancestry from any of the native populations of Sub-Saharan Africa and are the direct descendants of enslaved Africans within the boundaries of the present United States...

    s, funded by the Carnegie Foundation
    Carnegie Corporation of New York
    Carnegie Corporation of New York, which was established by Andrew Carnegie in 1911 "to promote the advancement and diffusion of knowledge and understanding," is one of the oldest, largest and most influential of American foundations...

    . Myrdal co-authored, together with his wife Alva Myrdal
    Alva Myrdal
    Alva Myrdal was a Swedish sociologist and politician. She received the Nobel Peace Prize in 1982. She married Gunnar Myrdal in 1924....

     the book Crisis of the Population Question, published in 1934. The book served as a major source of inspiration for the construction of the modern Swedish welfare state
    Welfare state
    A welfare state is a "concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility for those...

    , relying heavily on government
    Government
    Government refers to the legislators, administrators, and arbitrators in the administrative bureaucracy who control a state at a given time, and to the system of government by which they are organized...

     intervention and social engineering
    Social engineering (political science)
    Social engineering is a discipline in political science that refers to efforts to influence popular attitudes and social behaviors on a large scale, whether by governments or private groups. In the political arena, the counterpart of social engineering is political engineering.For various reasons,...

     to create a "people's home" (Swedish: "Folkhemmet"). The work was later criticized for its discussion of racial issues. Myrdal received the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel (commonly known as the "Nobel Prize for Economics") in 1974.

  • Bertil Ohlin
    Bertil Ohlin
    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...

    , professor at the Stockholm School of Economics
    Stockholm School of Economics
    The Stockholm School of Economics or Handelshögskolan i Stockholm is one of Northern Europe's leading business schools. Its Masters in Management program is ranked no. 2 in Northern Europe and no. 13 in Europe by the Financial Times...

    , was party leader of the Swedish Liberal People's Party
    Liberal People's Party (Sweden)
    The Liberal People's Party is a political party in Sweden. The party advocates social liberalism and is part of the governing centre-right coalition The Alliance, which achieved a majority in the general election of 17 September 2006...

    , the largest opposition party in the Swedish Parliament, for over twenty years (1944–1967) battling the powerful incumbent Social Democratic government
    Government of Sweden
    The Government of the Kingdom of Sweden is the supreme executive authority of Sweden. It consists of the Prime Minister and cabinet ministers appointed by the Prime Minister. The Government is responsible for their actions to the Riksdag, which is the legislative assembly...

    . Professor Ohlin developed, together with professor Eli Heckscher
    Eli Heckscher
    Eli Filip Heckscher was a Swedish political economist and economic historian.-Biography:...

    , the world-wide standard economic model of international trade, the Heckscher-Ohlin theory. Ohlin received the Bank of Sweden Prize in 1977.

  • Gustav Cassel
    Gustav Cassel
    Karl Gustav Cassel was a Swedish economist and professor of economics at Stockholm University.Cassel's perspective on economic reality, and especially on the role of interest, was rooted in British neoclassicism and in the nascent Swedish schools...

    , professor of economics at the Stockholm University
    Stockholm University
    Stockholm University is a state university in Stockholm, Sweden. It has over 28,000 students at four faculties, making it one of the largest universities in Scandinavia. The institution is also frequently regarded as one of the top 100 universities in the world...

    , created the standard mathematical formulation of purchasing power parity
    Purchasing power parity
    In economics, purchasing power parity is a condition between countries where an amount of money has the same purchasing power in different countries. The prices of the goods between the countries would only reflect the exchange rates...

    , a central concept in microeconomics
    Microeconomics
    Microeconomics is a branch of economics that studies the behavior of how the individual modern household and firms make decisions to allocate limited resources. Typically, it applies to markets where goods or services are being bought and sold...

    .

  • Dag Hammarskjöld
    Dag Hammarskjöld
    Dag Hjalmar Agne Carl Hammarskjöld was a Swedish diplomat, economist, and author. An early Secretary-General of the United Nations, he served from April 1953 until his death in a plane crash in September 1961. He is the only person to have been awarded a posthumous Nobel Peace Prize. Hammarskjöld...

    , economist. Second Secretary-General of the United Nations. In office 10 April 1953 – 18 September 1961 (when he died in a plane crash on a peacekeeping mission to the Republic of the Congo (Léopoldville)
    Republic of the Congo (Léopoldville)
    The Republic of the Congo was an independent republic established following the independence granted to the former colony of the Belgian Congo in 1960...

    ). Dag Hammarskjöld is the only person to have been awarded the Nobel Peace Prize
    Nobel Peace Prize
    The Nobel Peace Prize is one of the five Nobel Prizes bequeathed by the Swedish industrialist and inventor Alfred Nobel.-Background:According to Nobel's will, the Peace Prize shall be awarded to the person who...

     posthumously (Alfred Nobel
    Alfred Nobel
    Alfred Bernhard Nobel was a Swedish chemist, engineer, innovator, and armaments manufacturer. He is the inventor of dynamite. Nobel also owned Bofors, which he had redirected from its previous role as primarily an iron and steel producer to a major manufacturer of cannon and other armaments...

    's testament
    Nobel Foundation
    The Nobel Foundation is a private institution founded on 29 June 1900 to manage the finances and administration of the Nobel Prizes. The Foundation is based on the last will of Alfred Nobel, the inventor of dynamite....

     explicitly states that the prize should be awarded only to the living).


Other members, such as Erik Lundberg
Erik Lundberg
Erik Filip Lundberg was a Swedish economist. He was a professor of political economics at Stockholm University and a member of the Stockholm School of economic thought...

, continued as business cycle
Business cycle
The term business cycle refers to economy-wide fluctuations in production or economic activity over several months or years...

-oriented economists.

Further reading

  • Carlson, Benny and Lars Jonung. "Knut Wicksell, Gustav Cassel, Eli Heckscher, Bertil Ohlin and Gunnar Myrdal on the Role of the Economist in Public Debate" (Sept 2006). http://econjwatch.org/issues/volume-3-number-1-september-2006


See also

  • James M. Buchanan
    James M. Buchanan
    James McGill Buchanan, Jr. is an American economist known for his work on public choice theory, for which he received the 1986 Nobel Memorial Prize in Economic Sciences. Buchanan's work initiated research on how politicians' self-interest and non-economic forces affect government economic policy...

  • Constitutional economics
    Constitutional economics
    Constitutional economics is a research program in economics and constitutionalism that has been described as extending beyond the definition of 'the economic analysis of constitutional law' in explaining the choice "of alternative sets of legal-institutional-constitutional rules that constrain the...