9 - Macrodynamics and the Stockholm School

Summary

The Stockholm School and its dynamics

A fifty-year perspective

The Stockholm School is identified with economic dynamics, microeconomic as well as macroeconomic. Its founding fathers were Knut Wick-sell and Gustav Cassel. Wicksel's macrodynamic accomplishment was his cumulative process of inflation at frozen physical output (Wicksell, 1898). Cassel's microdynamic accomplishment was his dynamization of a Walrasian general economic equilibrium into a model of a “uniformly progressing state” growing in its physical quantities at frozen prices (Cassel, 1918, 1932, pp. 32–41 and 137–55). His macrodynamic accomplishment was his aggregation of such a model (Cassel, 1918, 1932, pp. 61–2).

The Stockholm School climaxed in the 1930s. As Petersson (1987) does, one might distinguish between an earlier Stockholm School, typified by Myrdal (1927, 1931), Lindahl (1930), Ohlin (1934, 1937), and Lundberg (1937), that laid the groundwork and a later Stockholm School, typified by Svennilson (1938) and Lindahl (1939), that provided the methodology. What, then, was the Stockholm School?

Ever since the days of Wicksell and Cassel the Swedish method had been dynamic: Economic variables were functions of time. But dynamics has two intersecting dimensions shown in Table 1 and exemplified by some of the authors mentioned in the present paper.