Gunnar Myrdal was a Swedish economist who won the Nobel Prize in Economics in 1974.
In 1957, he published the book Economic Theory and Underdeveloped Regions based on extensive research. He argued that traditional economic theory, which focused on the behavior of markets and individuals, was inadequate in explaining the complex economic reality of underdeveloped regions. He believed that economic development was affected by a wide range of social, cultural, and historical factors, which needed to be taken into account in any economic analysis.
Myrdal argued that economic development required a coordinated effort of governments, providers of foreign aid, and local communities. He was against free trade and rejected the notion that market prices could enable efficient resource allocation. He agreed with the dominant doctrine that growth and industrialization were linked and furthered ideas of central planning and import substitution, writing that governments should “give free entrance to capital goods but clamp down on imports of consumption goods and, in particular, luxury goods.” Myrdal added to the big-push and balanced-growth theories of Paul Rosenstein-Rodan and Ragnar Nurkse with his idea of a circular and cumulative economy, in which a policy change causes other changes; “because of such circular causation a social process tends to become cumulative and often to gather speed at an accelerating rate.”
He used this idea to support central planning: “It should be clear, however, that if an underdeveloped country really succeeds in starting and sustaining by its policy interferences an upward cumulative process of economic development, this will provide more not less space for what private enterprise such a country possesses or is able to foster.”
Myrdal’s work not only influenced development economics, but also helped shape the policies of international organizations such as the World Bank and the United Nations in their efforts to promote economic development in the developing world.