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Saturday, September 17, 2005

Bo Malmberg and Gunnar Myrdal

This post is prompted by a new paper by Bo Malmberg (with Thomas Lindh and Joakim Palme) entitled : Generations at War or Sustainable Social Policy in Aging Societies? The paper is to be published in the Journal of Political Philosophy this month.

The paper is an excellent revue of the issues which surround the pyramid inversion and how questions of inter-generational justice may be addressed. It is also of interest since it draws our attention to the way in which Swedish social theorist Gunnar Myrdal was an early pioneer of many of the ideas of which I have recently begun to think about myself (in fact reading Myrdal's lectures I am amazed at how he seems to have gotten through to thinking about just the same issues (like ageing and productivity) which are worrying me right now).

In fact Myrdal seems to have:

1/ Had a major role role in the history of the debate about race relations in the US
2/ With his wife Alva (the mother of modern feminism?) pushed for a series of gender and child friendly policies in Sweden which seem to have given a lot of impetus to the so called 'Swedish model'.
3/ Been the first modern economist to raise the issue that the neo-Malthusians had it wrong about population (in this case the neo-Malthusian Knut Wicksell) and that number wasn't the important issue, but that structure and momentum were.

Myrdal made his population 'discoveries'in the 1930s for the purely conjunctural reason that Sweden was then already suffering from low fertility. As he points out, this was partly a 'structural shock' produced by economic recession and out-migration. But Sweden did have a very early move to the second phase of the demographic transition (the one were birth rates fall below replacement). Sweden's population dynamic has in fact held up fairly well over the last 60 odd years, partly due to inward migration and partly due to child friendly policies. But the long run tendency is making itself felt even in Sweden now.

Here is what Malmberg and company have to say:

"In the early twentieth century, Swedish birth rates fell sharply, reaching record low levels in the 1930s. Population growth could no longer be taken for granted. Instead, the prospect of a population decline had to be seriously considered. This demographic shift precipitated new interest in the population problem and opened up room for radical rethinking. A leading exponent of the new ideas was Gunnar Myrdal, a young Swedish economist soon to become responsible for the major study of racial relations in the US that would result in the book An American Dilemma. In 1940, he published his views on the population question in Population: A Problem for Democracy, based on his Godkin lectures at Harvard, making this not only a Swedish story but also an American one."

"Myrdal’s argument is based on the premise that the standard of living will be lower in a declining population than in a stationary population. His argument for this view was primarily that investment demand will be lower in a delining population and that this will lead to a deflationary situation with a demand shortfall. According to the Keynesian paradigm this would result in a low rate of economic progress. Myrdal’s argument carried substantial weight when presented to an American audience in 1938 with the depression experience fresh in its memory. It was taken up by Alvin Hansen in his 1939 presidential address to the American Economic Association and, in the same year, also by John Maynard Keynes in his famous Galton Lecture."

In one of those strange coincidences we find in life, last Saturday I was explaining to fellow Afoe blogger Tobias - wandering somewhere near the centre of the Gamla stan in Stockholm - that while some version of the Keynesian propensity to consume is in principle OK, what I now think is that this is not only a class phenomenon, but also an age phenomenon, and as median age rises then the proportion of extra income spent can change (as we can see in a 'middle aged' society like the US this relationship - via credit - may even become negative). Well, it now appears that the Swede Myrdal (who must himself have often walked those very streets) was the first to get through to this part of the argument. In some ways this makes him more of a visionary than Keynes, since Ks arguments are only part of the picture, Myrdal was moving us towards the bigger picture.I will try and develop this argument in subsequent posts.

Unfortunately "Population: A Problem for Democracy" (The Godkin Lectures) is not available online, it is however avalable here, at a new online library (subscription based) called questia. Now by one of those rare coincidences the very morning after I was searching for this book in Questia (you can read a few pages for free) they actually wrote to me offering me - as an economics blogger - a free three month subscription, so I have now read the whole thing, and will post more fully on another occasion.

Now for any who have had their appetite whetted by all this talk of Myrdal, can I recommend this paper, which apart from containing a lot of fascinating anecdotal detail does make a comparison of Myrdal's theory of fertility with Gary Becker's one.

Also another nice paper on the theoretical problems of the idea "demographic transition"(including an explanation of why the Swedish data playes such an important role in all these debates can be found here.

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