THE REHABILITATION OF MONETARY THEORY IN SWEDEN

Abstract

PROFESSOR ERIK LUNDBERG's book Business Cycles and Economic Policyl is very hard to review. It is a large and most ambitious work which deals with a great many aspects of the central theme. Moreover, Professor Lundberg's main points are often so carefully qualified that it is sometimes difficult to know exactly what the author's opinion really is. This caution is probably partly due to the fact that he knew that in Sweden his book would be revolutionary; and it has, in fact, already given rise to a widespread discussion on economic policy which will probably have farreaching effects. Indeed, the development of economic theory in Sweden is bound to be affected as a result of the new slant given to the discussion by Professor Lundberg and not least by his revival of older theories in new forms. The book reflects the author's struggle to arrive at new conceptions, as far as Swedish economic thought is concerned, and to work out a fresh method of approach, but it cannot be said to constitute, as now presented, a clear statement of fully matured ideas. Nor can it be said that many of the ideas expressed by Lundberg are 'new' in an absolute sense, as most of them are already fairly familiar to economists in England and on the Continent. In Sweden, however, where, for instance, the interest rate was banned as a subject of discussion for several years, from the spring of 1945 onwards, many of Lundberg's conceptions are new to most of those who have taken up the study of economics since the late 1920's. Only an economist of Erik Lundberg's standing could give these old ideas in their new form sufficient authority to establish a new trend; and he is to be congratulated on having had the courage to show so fully in what direction his economic thinking has been taking him. The Stockholm School of Economics had its origin in the lectures and writings of Knut Wicksell, a man of the Left with, on the whole, liberal ideas, and in the work and teaching of David Davidson,2 politically a 1 Konjunkturer och ekonomisk Politik, Stockholm, 1953 (550 pages). 2 Knut Wicksell's first major published work was Geldzins und Giterpreise (Jena, 1898). This was followed by the Lectures on Political Economy, which were published in Swedish in 1901 and 1906 and appeared in an English translation in 1934, 9 years after Wicksell's death. David Davidson reviewed Wicksell's Geldzins und Giiterpreise in Ekonomisk Tidskrift in 1899 and in this review he already made clear the main points on which he differed from Wicksell. Although there was a vast field of agreement between Wicksell and Davidson, the debate continued for over two decades, mainly in articles in Ekonomisk Tidskrift. Gustav Cassel and Eli F. Heckscher also contributed to the economic theory of their time, but they did not occupy quite such a central position as Wicksell and Davidson, who, in spite of all their differences, had the most profound respect for each other's economic thinking. Wicksell had the more original mind, and it is probably true to say that he is now recognized all over the world as having been one of the half-dozen greatest economists of the last hundred years.