Saturday, November 25, 2017

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1974


Press Release

9 October 1974


The Royal Swedish Academy of Sciences has awarded the 1974 Prize for Economic Science in Memory of Alfred Nobel to

Professor Gunnar Myrdal and Professor Friedrich von Hayek

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.

The Academy of Sciences consider that Myrdal and von Hayek have, in addition to their contributions to central economic theory, carried out important interdisciplinary research so successfully that their combined contributions should be awarded the Prize for Economic Science.

Since the Economics Prize was inaugurated, the names of two economists, whose research has reached beyond pure economic science, have always been on the list of proposed prizewinners: Gunnar Myrdal and Friedrich von Hayek. They both started their research careers with significant works in the field of pure economic theory. In the main, their early work - in the twenties and thirties - was in the same fields: theory of economic fluctuation and monetary theory. Since then both economists have widened their horizons to include broad aspects on social and institutional phenomena.

Controversial Ideas
Mainly by directing most of his research on economic problems in the broadest sense, particularly the negro problem in the USA and the poverty of the developing countries, Myrdal has sought to relate economic analysis to social, demographic and institutional conditions. von Hayek has extended his field of study to embrace such elements as the legal framework of economic systems and issues concerning the way individuals, organizations and various social systems function. Both have been deeply interested in problems of economic policy and have therefore also studied possible changes in the organizational, institutional and legal conditions prevailing in our societies. Something Myrdal and von Hayek have in common is a well-documented ability to find new and original ways of posing questions, put forward new ideas on causes and policies, a characteristic that often makes them somewhat controversial. This is only natural when the field of research is extended to include factors and linkages which economists usually take for granted or neglect.

Myrdal - Economics and Social Science
Early in his scientific career Myrdal revealed the breadth of his interests in economics. His book, Vetenskap och politik i nationalekonomien, 1930, ("The Political Elements in the Development of Economic Theory"), was a pioneering critique of how political values in many areas of research are inserted in economic analyses.

When making its decision, the Academy of Sciences has attached great importance to the monumental work, An American Dilemma: The Negro Problem and Modern Democracy (1944). It is primarily in this massive work of scholarship that Myrdal has documented his ability to combine economic analysis with a broad sociological perspective.

Myrdal's extensive research into the problems of developing countries is of very much the same nature as An American Dilemma. This, too, is economic and sociological research in the broadest sense, where great importance is attached to political, institutional, demographic, educational and health factors.

The Functional Efficiency of Economic Systems
von Hayek's contributions in the field of economic theory are both profound and original. His scientific books and articles in the twenties and thirties aroused widespread and lively debate. Particularly, his theory of business cycles and his conception of the effects of monetary and credit policies attracted attention and evoked animated discussion. He tried to penetrate more deeply into the business cycle mechanism than was usual at that time. Perhaps, partly due to this more profound analysis, he was one of the few economists who gave warning of the possibility of a major economic crisis before the great crash came in the autumn of 1929.

von Hayek showed how monetary expansion, accompanied by lending which exceeded the rate of voluntary saving, could lead to a misallocation of resources, particularly affecting the structure of capital. This type of business cycle theory with links to monetary expansion has fundamental features in common with the postwar monetary discussion.

The Academy is of the opinion that von Hayek's analysis of the functional efficiency of different economic systems is one of his most significant contributions to economic research in the broader sense. From the mid-thirties he embarked on penetrating studies of the problems of centralized planning. As in all areas where von Hayek has carried out research, he gave a profound historical exposé of the history of doctrines and opinions in this field. He presented new ideas with regard to basic difficulties in "socialistic calculating", and investigated the possibilities of achieving effective results by decentralized "market socialism" in various forms. His guiding principle when comparing various systems is to study how efficiently all the knowledge and all the information dispersed among individuals and enterprises is utilized. His conclusion is that only by far-reaching decentralization in a market system with competition and free price-fixing is it possible to make full use of knowledge and information.

von Hayek's ideas and his analysis of the competence of economic systems were published in a number of works during the forties and fifties and have, without doubt, provided significant impulses to this extensive and growing field of research in "comparative economic systems". For him it is not a matter of a simple defence of a liberal system of society as may sometimes appear from the popularized versions of his thinking.