Handbook on the History of Economic Analysis Volume II

Handbook on the History of Economic Analysis Volume II

Schools of Thought in Economics

Edited by Gilbert Faccarello and Heinz D. Kurz

Volume II contains entries on the major schools of economic thought and analysis. These schools differ with regard to their 'vision' of the working of the economic system, the major forces and interactions that shape its path, and the policy recommendations proposed. At any moment of time, several such schools typically compete with one another, striving for dominance within the economic and political discourse. Each Handbook can be read individually and acts as a self-contained volume in its own right. It can be purchased separately or as part of a three-volume set.

Chapter 24: Stockholm (Swedish) School

Hans-Michael Trautwein

Subjects: economics and finance, history of economic thought

Extract

The label Stockholm School refers to a group of Swedish economists who, between 1927 and 1939, developed dynamic methods for macroeconomic analysis. The most prominent members of the school were Erik Lindahl (1891–1960), Gunnar Myrdal (1898–1987), Bertil Ohlin (1899–1979) and Erik Lundberg (1907–1987). Important contributions were also made by Alf Johansson (1901–1981), Dag Hammarskjöld (1905–1961) and Ingvar Svennilson (1908–1972). The trademarks of the Stockholm School are the use of sequence analysis and the twin concept of ex ante/ex post to explore the formation of expectations and coordination of incongruent plans through adjustments of prices and quantities in interdependent markets. The school label came into international circulation through Ohlin’s “Some notes on the Stockholm theory of savings and investment” (1937), a critical review of Keynes’s General Theory (1936) from the vantage point of contemporaneous Swedish macroeconomics. The article, published in the Economic Journal, was a reaction to the lecture “My grounds for departure from orthodox economic traditions” that Keynes had given at Stockholm in October 1936, on invitation from the local Political Economy Club (Henriksson 1991: 41). Half a century later, the club secretary remembered that: The school label came into international circulation through Ohlin’s “Some notes on the Stockholm theory of savings and investment” (1937), a critical review of Keynes’s General Theory (1936) from the vantage point of contemporaneous Swedish macroeconomics. The article, published in the Economic Journal, was a reaction to the lecture “My grounds for departure from orthodox economic traditions” that Keynes had given at Stockholm in October 1936, on invitation from the local Political Economy Club (Henriksson 1991: 41). Half a century later, the club secretary remembered that: [i]t was certainly a remarkable event when the great prophet came to Stockholm pretending that he had seen a new light, only to be taken down by the Swedish youngsters – Myrdal and Ohlin were around thirty-five, Hammarskjöld thirty, Lundberg and Svennilson under thirty – who told him that he was rather old-fashioned, that the Swedish economists had gone much further, and that his, Keynes’s, very method, the equilibrium method, was unsuitable for the treatment of dynamic problems. (Cederwall 1991: 76) In his article, Ohlin presented this critique as a coherent body of research that he named the “Stockholm school of thought” (1937: 57).

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