The Nobel Prize

Gunnar Myrdal (1898–1987)

Gunnar Myrdal was born in a rural farming community in central Sweden in 1898. He studied law at the University of Stockholm and was awarded his degree in 1923. Switching from law to economics he obtained a doctorate in economics from the University of Stockholm in 1927. After a year spent studying in the United States as a Rockefeller Foundation Scholar, Myrdal embarked on careers in politics and academia. In the former case he became an adviser to the new Social Democrat government of Sweden in 1932, served as a member of the Swedish Parliament on two occasions: from 1934 to 1936 and 1942 to 1946; he was also chairman of the Swedish Post-War Planning Commission and Minister for Trade and Commerce from 1945 to 1947. As an academic at the University of Stockholm, Myrdal held the Lars Hierta Chair in Political Economy from 1933 to 1939, and was Professor of International Economics from 1961 until he retired from the university in 1965, thereafter holding the title of Professor Emeritus until his death in 1987. While Professor of International Economics he founded the Institute of International Economic Research in Stockholm to undertake work on trade and development. Myrdal also served as Executive Secretary of the United Nations Economic Commission for Europe in Geneva between 1947 and 1957.

Myrdal’s many offices and honours included the award of over 30 honorary degrees from universities around the world. In 1974 Myrdal3 was awarded, jointly with Friedrich von Hayek, the Nobel Memorial Prize in Economics ‘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’ (Nobel Foundation, 2004).

Myrdal’s academic career can be traced back to the 1927 publication (in Swedish) of his doctoral thesis, ‘The Problem of Price Formation under Economic Change’, in which he emphasised the role of expectations. Many of the ideas included in his PhD were subsequently incorporated into his first book published in English: Monetary Equilibrium (Myrdal, 1939). Originally published in Sweden in 1931, then published in translation in Germany in 1933, the book deals with dynamic analysis of cumulative processes, introducing and incorporating the concepts of ex ante (what is planned or intended) and ex post (what is realised or actually happens) in relation to savings and investment. In Myrdal’s analysis, a gap between ex ante savings and investment (monetary disequilibrium) results in ex post balance due to unexpected gains and losses following price changes. Along with fellow Swedish economists Bertil Ohlin and Erik Lindahl, Myrdal became a leading member of the ‘Stockholm School of Economics’, famous for the development of the dynamic method and many concepts later identified as being central to Keynesian ideas.
During the 1930s, Myrdal also made his mark in Sweden in his parallel career both as an adviser to politicians and as a politician, proposing various policy measures to reduce the adverse effects of unemployment, and was highly influential in helping shape the Swedish welfare state. In a report to the Unemployment Committee in 1934, he developed a theoretical framework for analysing the economic effects of fiscal policy, and demonstrated the possibility of using expansionary policy to reduce unemployment.

In 1938, the Carnegie Corporation invited Myrdal to investigate the problems of the black population in the United States. Under their sponsorship his four-year multi-disciplinary study led to the publication of An American Dilemma: The Negro Problem and Modern
His wife Alva, a sociologist, whom he married in 1924, was awarded the Nobel Peace Prize in 1982 for her work on disarmament.

Democracy (Myrdal et al., 1944). The ‘dilemma’ in the book’s title being the divide between the ideal of equal opportunity embodied in the constitution and the actual treatment of blacks in America. The pioneering book (1500 pages in length), which combines insights from economics, sociology, politics, history, anthropology, psychology and law, soon became a classic. In his study, Myrdal utilised the Wicksellian concept of cumulative causation to explain the socioeconomic problems experienced by black Americans. Identifying a ‘bundle of interdependent causative factors’ he demonstrated how a cumulative process of deterioration or improvement will arise following a change in one of the interrelated factors such as low income, poor health and education, and racial discrimination by whites. A deterioration or improvement in one causative factor will lead to mutually reinforcing changes in other factors resulting in either a ‘vicious circle’ or ‘virtuous circle’.

In the postwar period, Myrdal switched the main focus of his research to the problems of less-developed countries and world poverty. This research led to the publication of a series of books (Myrdal, 1957; 1960; 1963; 1968; 1970), of which particular mention should be made of the 1968 three-volume Asian Drama: An Inquiry into the Poverty of Nations. This monumental classic (over 2250 pages in length) was the culmination of a ten-year study of eight countries (India, Pakistan, Burma, Thailand, Malaya, Indonesia, the Philippines and Ceylon) in which he analysed their social, political and economic structures, as well as their historical backgrounds. He again used the concept of cumulative causation, this time to explain the vicious circle of poverty, poor health, lack of education and underutilisation of the labour force in less-developed countries in South Asia. To break the vicious circle of poverty and start a virtuous circle of development through the process of cumulative causation, he advocated government development planning involving a number of measures including institutional reform.
Even from this brief overview of his career and main published works it should be apparent that Myrdal was an exceptionally talented individual. After making a number of important contributions to economic theory in his early work, he adopted a multidisciplinary approach to explain and put forward solutions to the real-world problems of black Americans and less-developed countries. In adopting this approach he stressed the importance of a number of interdependent causative factors. He rejected many of the concepts used within, and solutions provided by, orthodox economic analysis. For example, he thought it inappropriate to use Western concepts of underemployment and unemployment when studying the problems of less-developed countries. He argued that the solution to underutilisation of the labour force (in terms of low participation rates, duration of work and low productivity) in South Asia cannot rely simply on expanding aggregate demand.

Myrdal was also highly critical of the view that positive economics can be separated from normative economics. In an early book entitled The Political Element in the Development of Economic Theory (first published in Swedish in 1930, and subsequently published in German in 1932, and English in 1953) he highlighted the political or valuation element underlying the economic theories put forward by classical and neoclassical economists. He argued that economics always involves implicit value judgements (for example, in the choice of problems studied) and that economists must explicitly state their value judgements and also acknowledge institutional conditions. He pursued this theme in later books, presenting a critical appraisal of objectivity in social science research (Myrdal, 1969) and stressing the importance of taking interdependent political, social and institutional factors into account in economic research (Myrdal, 1973). As such he will be remembered as a radical or dissenting economist, outside of the mainstream, who adopted a multi-disciplinary approach to explain and find solutions to real-world problems.

Main Published Works
(1939), Monetary Equilibrium, London: W. Hodge & Co.
(1944), An American Dilemma: The Negro Problem and Modern Democracy (with the assistance of R. Sterner and A. Rose), New York: Harper & Brothers.
(1953), The Political Element in the Development of Economic Theory, London: Routledge & Kegan Paul.
(1957), Rich Lands and Poor: The Road to World Prosperity, New York: Harper & Brothers; UK edn Economic Theory and Underdeveloped Regions, London: Duckworth.
(1960), Beyond the Welfare State: Economic Planning and Its International Implications, New
Haven, CT: Yale University Press.
(1963), Challenge to Affluence, New York: Pantheon Books.
(1968), Asian Drama: An Inquiry into the Poverty of Nations, vols 1–3, New York: Pantheon
Books and Twentieth Century Fund.
(1969), Objectivity in Social Research, New York: Pantheon Books.
(1970), The Challenge of World Poverty: A World Anti-Poverty Program in Outline, New York:
Pantheon Books.
(1973), Against the Stream: Critical Essays on Economics, New York: Pantheon Books.

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