Thread: This brief @PilkingtonPhil note on Gunnar Myrdal's _Monetary Equilibrium_ is indeed very good. That work (which helped earn Myrdal the Nobel he shared w/ Hayek) Some follow-up remarks here.

As Phil notes, Myrdal was a member of the Stockholm School, whose contributions to monetary theory built upon the work of Knut Wicksell, the school's founder. In By 1931, when _Monetary Equilibrium_ appeared, a (polite) rift had separated the school in two.

The rift began with a debate between Wicksell and David Davidson concerning the sort of price stability implied by a policy of keeping interest rates at their "natural" levels. Wicksell of course claimed that this would result in stable _output_ prices.

Davidson instead argued for a "productivity norm," with the stable factor prices, which would have the output price index move inversely with factor productivity.

Eli Heckscher and Gustav Cassel were among the more well-known Swedes who sided with Wicksell. Myrdal, in contrast, was , as did many those who sided with Davidson. (Hayek, by the way, also shared Davidson's opinion, as did many non-Swedes. See