Mats Lundahl

Inequality is ubiquitous in time and space. It is often measured simply as differences in incomes between various groups, but the phenomenon is more complex than so. Inequality is a many-faceted phenomenon that manifests itself in a number of ways. It shows up in a variety of contexts, for example gender, age, origin, ethnicity, disability, sexual orientation, class, religion and place. The present book is mainly about how the economy is shaped in such a way as to generate differences in economic and social welfare between individuals, regions and nations. However, we feel that the attention cannot be limited simply to economics. Thus, our chapters cover a broad spectrum. The book begins with a section that highlights some of the 'traditional' features of inequality: class and gender. The second section deals with the manifestation of inequality in terms of incomes and wealth differences. Thereafter, we turn to the causes of inequality. The third section explores the effects of discrimination and plunder (by those in power). The final section serves to drive home the point that geographic and institutional factors have an important place as well when it comes to shedding light on what equality is, how it manifests itself, and which its consequences are.

In ‘Discrimination as a Determinant of Economic Inequality’, Ali Ahmed, Mats Lundahl, and Eskil Wadensjö examine how economic theory can be used to unearth the mechanisms to produce discrimination and inequality, to identify the winners and losers from it, and to construct recipes for the eradication of discrimination. They stress the fact that economics is far from a unified social science and hence the need to apply different theories as different situations call for it. Two notorious cases are examined: the South African apartheid system and the American discrimination of blacks by whites. The chapter ends with an examination of a number of contemporary cases of ethnic discrimination of minorities.

A predatory state is a state where the ruler (or the ruling clique) attempts to maximize his private income by preying on the citizens. In 'The Predatory State: A Case of Extreme Inequality' Mats Lundahl lists several historical and contemporary instances of predatory rule. He examines the trade-off between income and security faced by predatory rulers, and some mechanisms that can be used to shift it. The chapter details some of the most important mechanisms used for plunder, methods that rest on the control of the state apparatus. It also points to the extreme concentration of income to a small minority and highlights the negative consequences for economic efficiency and growth.

Ethnic discrimination is common in labor and housing markets. It leads to lower wages and higher unemployment for ethnic minorities, to segregation in the labor market, and to residential segregation. Several studies show that the Covid-19 pandemic increased the extent of ethnic discrimination. The prejudice against hiring migrants may have increased because people from countries where the epidemic started or from countries with a lower vaccination coverage were blamed for the spread. It may also have increased in the cases where the Covid-19 pandemic led to higher unemployment making it less costly for employers to discriminate.

According to Knut Wicksell, the cause of poverty was found in the growth of the population—a fact that Wicksell stressed all his professional life. Too many children made for poor families. Diminishing returns everywhere characterized the economy, which in the end would be conducive to a Malthusian situation unless the surplus population emigrated. The optimum population was the one maximizing the per capita income. As Wicksell saw it, the remedy, in turn, was early marriages combined with the use of contraceptive methods within the family. For a long time, the conventional wisdom was that Wicksell’s analysis of poverty was the one area where he was not original; he was simply considered a follower of Malthus. Our analysis, however, shows that Knut Wicksell’s views on population growth, diminishing returns and poverty constitute a full-fledged general equilibrium system of population growth, production, consumption, international trade and migration in a framework that was later recognized as the specific factors model of international trade. 

The chapter surveys Gunnar Myrdal’s approach to the study of poverty. It begins with an account of how he gradually developed his methodology through a series of works dating from the late 1920s and early 1930s and continues with how he applied it to the population issue in Sweden, the racial problem in the United States, in An American Dilemma, in his analysis of international inequalities in the 1950s, and the issue of poverty in South Asia, in Asian Drama, from the 1930s to the end of the 1960s. Myrdal’s analysis rests on some or all of the following elements: dynamic analysis; circular, cumulative causation; institutionalism; explicit value premises; and social engineering. There is no factor that is more important than others as the cause of poverty, but Myrdal works with a social system where all the elements that integrate the system influence and are influenced by each other. When one of them begins to move in a certain direction, the others will do so too and in the process reinforce the impact of the rest. In order to break out of poverty, political intervention is needed-social engineering-and this must rest on explicitly stated value judgments as to the desired goals and means. © 2021 selection and editorial matter, Mats Lundahl, Daniel Rauhut, and Neelambar Hatti; individual chapters, the contributors.

This chapter deals with the view of Theodore W. Schultz on what causes poverty and how poverty can be overcome, mainly as he expressed it in Transforming Traditional Agriculture, published in 1964. It also examines the criticism directed against Schultz and some suggested alternatives to his analysis. The basic tenet of Schultz’ analysis is that farmers in poor countries are profit maximizers who behave rationally. They are poor because they are constrained. The production factors at their disposal are fully utilized, but their yield is low. New, technologically superior production factors are needed to break out of poverty: above all improvement of the human factor through education. Schultz’ critics argued that he neglected that traditional farmers are operating in an environment characterized by risk of falling below the subsistence level in bad years, and that hence their behavior was guided by survival algorithms instead of by profit maximization, and that his discussion of education and its effects failed to take the institutional context in the Third World into account. © 2021 selection and editorial matter, Mats Lundahl, Daniel Rauhut, and Neelambar Hatti; individual chapters, the contributors.

This introduction presents an overview of the key concepts discussed in the subsequent chapters of this book. The book provides presentation of the work of the economists who received the 2019 Prize in Economic Sciences in Memory of Alfred Nobel. It deals almost exclusively with poverty within a nation, with the situation of individuals in society. The book explores the perspective to a comparison between nations, rich versus poor nations, and to the mechanisms which make for differences between national income levels. It identifies and examines what he had to say about the nature, origin, and possible solution of poverty. The book discusses poverty in the context of criticism of socialism, and the authors explain why this is so. It provides a discussion of the causes of poverty and its possible remedies, according to Hayek. © 2021 selection and editorial matter, Mats Lundahl, Daniel Rauhut, and Neelambar Hatti; individual chapters, the contributors.