Like Monsieur Jourdain, who wrote prose without being aware of it in the Le Bourgeois Gentilhomme by Molière, ^{Footnote 1} most of the graduate students, economists, or policy makers apply Gunnar Myrdal’s (1898–1987) political economic theory without being aware of it. In fact, we are all indebted to Myrdal when distinguishing ex-ante from ex-post phenomena. However, it would be unfair to reduce the 1974 Nobel Laureate contributions to this key methodological tool. ^{Footnote 2} The fascinating book from Örjan Appelqvist gives us the opportunity to measure the depth and broad dimensions of Myrdal’s thoughts that went far beyond economic phenomena per se. Following the 2008 crisis, Paul Krugman (Reference Krugman2011) advised the economists’ community to return to the legacy of “our due fathers” if we want to face the “dark age” for macroeconomics. Is Gunnar Myrdal a good candidate in this search of paternity? This is the challenge that this book has to face by convincing the reader to answer in the positive.

When I first began reading this stimulating book from Appelqvist, I was pretty sure I would be able to answer the question: Who was Gunnar Myrdal? After I read the first pages of the book, the question became harder than I had expected because Myrdal appeared through the pages as an academic, a policy maker, and a social thinker or a social scientist. Can someone play those entire roles at the same time? Unfortunately, the reader will be unable to answer the question, even after finishing the 168 pages of the book, as long as he considers Myrdal in the light of these three facets separately. As suggested by Milton Friedman, when there is no answer to a question, it may be because of the question itself. Thus, it could be fruitful to change our mind. Instead of considering the question of who Gunnar Myrdal was, it is rather more appropriate to apply Myrdal’s own methodology—when facing economics issues—by adopting the “cumulative causation” relationship. By so doing, the reader will quickly understand that Myrdal was, first, a social thinker or a social scientist—with his own assumed social democratic values—who took various positions and responsibilities as a policy maker in Sweden after the two world wars, as an international civil servant at the head of the UN commission for European development, and as an internationally renowned academic. The social thinker facet of Myrdal supplanted the other ones, and it had cumulative causation effects when he did economics in practice. As a prime requisite, when Myrdal strongly criticized political economy—particularly free trade theory—it was not disconnected from his moral and philosophical values. Maybe it is especially that part of Myrdal’s personality that made him so special or so heterodox among the economists’ community.

Appelqvist’s book aims at reassessing Myrdal’s thought by raising the following question: To what extent can Myrdal’s critical thinking of conventional economic theory be useful in confronting today’s challenges inherited from the 2008 great financial crisis? The best way to answer this broad question is to divide Appelqvist’s book into four major but interrelated topics: (1) the criticism on conventional methodology in political economy; (2) Myrdal’s position on international economic theory; (3) Myrdal’s involvement in broad social issues such as ecology and poverty; and (4) Myrdal’s unceasing call for supremacy in morality rather than rationality when policy making is concerned. This is the approach that we will adopt in this review.

Like most of the economists of that time, Gunnar Myrdal started studying law before being a graduate student in economics in 1927 under the supervision of Professor Gustav Cassel. ^{Footnote 3} Following the advice of his wife, Alva, Myrdal moved to economics study because she convinced him that economics would have a greater impact on solving social problems. From the very beginning of his studies, the intellectual interests of Myrdal were linked with practical issues. He believed that scientific knowledge reaches its significance only to the extent it can translate into social changes. Faithful with those values, the two Myrdals, Alva and Gunnar, quickly joined the Social Democratic party in Sweden.

One of the major legacies that Myrdal left to economics was his methodological approach to reach scientific truth. Myrdal had always been faithful to his methodological approach, particularly when he was a policy maker—as Minister of Finance in 1940 or as Minister of Commerce in 1945, to name a few positions—in Sweden. Contrary to his PhD supervisor, Professor Cassel, Myrdal paid particular attention to drawing the line between what is true and what should be considered as valuable. When the two are mixed up, this results in confusions and inaccurate policy solutions. The best way to sum up Myrdal’s epistemological position can be expressed in the following way: as there are no answers without questions, there are, thus, no views in economics without point of view. In other words, economic theory or whatever policy measures are always value-laden. A major part of economic knowledge and theory is based on broad concepts (such as competition, markets, welfare, etc.), assuming that is the best way to be neutral. The later “scientific naïve” method that featured the Neoclassical theory is, to Myrdal, a non-neutral approach due to the fact that economics key concepts and assumptions are, in reality, built on (hidden) philosophical ideals. As a consequence, Myrdal supported what he called the “value critical” approach. In short, assuming non-neutrality—or judgment values—content in economic reasoning is the best way to be neutral. An economist and policy maker should adopt a value-critical premise in every economic debate before providing policy answers. As demonstrated by Appelqvist, when considering the sovereign debt crisis in Europe—and the inherited austerity plans—policy makers should have been more critical of the (liberal) values embodied in whatever European treaty and rules existed: the 60% public debt and GDP ratio or the 2% stability price level goal from ECB are just examples of a liberal value premise hidden in presupposed neutral economic rules. The debate following the (false) conclusions on the Carmen Reinhart and Kenneth Rogoff (Reference Reinhart and Rogoff2008) book is a good example of such economics bias that polluted economic policy.

It is, thus, not surprising that Myrdal did his PhD on the “the variability factor to the study of price formation.” This subject perfectly fits with his epistemological approach to economics phenomena. By underlining the mental expectation process that predetermined price formation, Myrdal demonstrated that there are no fixed laws that governed economic life and that can be deduced from the past. This is the reason why he introduced the famous ex-ante/ex-post distinction, so as to split the economic consequences of facts (ex-post) from their presupposed effects (ex-ante). Despite being in the footsteps of Knut Wicksell’s monetary theory, Myrdal, as most of the Stockholm school members, was critical about the existence of a unique stable price level. In fact, it is, thus, not evident that a unique price level existed per se, and, moreover, it is not self-evident that this corresponds to the equality between the (exogenous) normal rate and the monetary rate, as Wicksell supported in his 1898 Interest and Prices book. This is the message given by Myrdal’s Monetary Equilibrium in 1931. Broadly speaking, Myrdal reached the conclusion that abstract models are a good starting point for discussion but not the outcome. This methodological criticism in economic reasoning and policy making echoes the actual debate inherited from the 2008 crisis concerning the mainstream (econometric) method, in which economists prevailed. It clearly misled the entire economics community about the ongoing systemic risk in financial and derivatives markets (as was questioned by Queen Elizabeth II at the LSE in 2008).

Myrdal’s research interest in international economic theory is rooted to Swedish concerns during the 1931 crisis following the US financial crisis. During the Great Depression in the thirties, Myrdal and his wife were in New York as research fellows from the Rockefeller Foundation. They saw in practice the economic consequences of the financial crisis and the policy answers adopted by the US government. However, it is particularly following WWII that Myrdal developed his publications on international economic theory. ^{Footnote 4} Quite early, Myrdal strongly criticized the prevailing (liberal) free trade theory of the time, that of Heckscher–Ohlin. According to that theory, an increasing international trade will reduce inequalities between countries by way of an international equalization process of prices, notably wages. Myrdal’s critical analysis was based on both methodological and practical dimensions. The first wave of criticism began with his 1957 book Economic Theory and Under-Developed Regions. He devoted one specific chapter to criticizing Heckscher-Ohlin theory, in which the frontal attack relies on the unrealistic perfect equilibrium process—which he judged to be a liberal ideological order—which provides a false policy answer. The second wave of criticisms relied on the comparative advantage key concept that had led, in practice, to increasing welfare gaps instead of mutual advantages. On this topic, Myrdal denounced the unfair behavior of developed countries that he judged as fully responsible for such inequalities. During his lifetime in India, he was in a good position to testify to that failure. ^{Footnote 5}

Despite Myrdal’s own pessimism—he judged his action as an “almost complete failure” (p. 68)—he exerted his influence, even if mostly in theory, on international trade issues when he had been officially nominated in 1947 as the Executive Secretary of the United Nations Economic Commission for Europe (UNECE). During his ten years’ mandate, the quality and depth of the analysis proposed by the UNECE had been largely recognized. However, Myrdal felt disappointed owing to the conservatism and weight of developed countries’ lobbying forces that had prevented broader reforms on international trade issues, particularly concerning Latin American countries. During this period, he blamed the lack of political will for that weak result.

After Myrdal’s failure to change the free trade agenda, he turned to a more academic career when he moved with his wife to India in 1955. From that time, he changed his research interests by focusing on social sciences at large at the expense of economic analysis. This period was fruitful in terms of publications, particularly two major works in 1968 and in 1972. Those two works both dealt with development issues for emerging countries. The tremendous Asian Drama book, published in 1968, aims at providing a thorough panorama of social, cultural, and economic factors impinging on the efforts of the government to achieve economic and social developments. Myrdal focused on the necessity to emphasize land reforms, population control policy, and education expenditures. This book had been a turning point in Myrdal’s thinking. He, then, understood to what extent modernization could take a long time, due to outside forces such as middle-class and rural elites impediments. In fact, he developed the notion of “soft state” so as to feature the present situation in India, and in most of emerging countries at large, where decisions are diluted on their way to implementation when local governments are concerned. The striking point of this impressive work is that it perfectly illustrates Myrdal’s methodology. The 1968 book clearly illustrates to what extent the general economic mechanism—i.e., market forces—does not lead to a tendency towards equilibrium but rather to a circular and cumulative causation. Myrdal reached the same conclusion in his 1970 book Challenges of World Poverty. In 1972 Myrdal still showed his capacity to understand the (changing) world when he embarked upon a new topic, that of the ecological consequences of the exponential postwar growth. Faithful to his critical analysis against the neoclassical paradigm and methodology, he drew considerable attention when he gave a lecture at the UN first conference on human environment. In this lecture, he demonstrated the inability of economic theory to tackle the ecological issue due to the everlasting markets analysis tool that economists favored, the lack of time dimension considered, and the weakness of the political will to cooperate on these long-term costly issues.

Despite having drawn attention, Myrdal’s works on broad social issues attracted criticism for having too many proposals and solutions. One way to answer these criticisms relies on Myrdal’s broad will in economic theory. Whatever the topics considered, Myrdal’s legacy and ability to transcend the post-2008 dilemmas turn around his call for morality rather than automatic rational behavior. The last chapter of Appelqvist’s book enables the reader to answer the first question we raised: Is Myrdal’s critical thinking of conventional economic theory useful in confronting today’s challenges inherited from the 2008 great financial crisis? Without any doubt, we answer in the positive when considering the four current challenges that economics faces nowadays: the great financial crisis, the debt burden in Europe, the ecological issue, and the epistemo-methodological debate in policy making. In a convincing way, Appelqvist succeeds in applying Myrdal’s way of reasoning to the structural issues that European countries face. The two major issues that Europe has to deal with—(Greek) sovereign overindebtedness and the liquidity trap—are fully melded with (liberal) ideological precepts. As a consequence, policy makers and governments remain blind and stuck in their low-growth context. If Myrdal had to solve the “European dilemma,” there is no doubt that he would have devoted time and energy to stand back to look at those broad key concepts. The debt can be useful when long-run investments are concerned, and it is not expenditure. For instance, the fiscal policy, such as popularized by Thomas Piketty’s successful book (2014), can be useful when it focuses on welfare purposes. Policy goals are not stuck in cement; they should be the subject of a broad democratic discussion so as to favor full employment instead of price stability.

However, by quoting John Kenneth Galbraith’s words, according to which Myrdal’s ideas “defined the time and the century, including what has gone wrong,” Appelqvist ended his book in a positive way by advising the reader to remember all the positive values of social progress and equity that Myrdal gave us. Conservatism, government’s impediments, or rational self-interest in decision making should, thus, be forgotten as long as we believe in social change by human beings.