Ingemar Ståhl. A Market Liberal in the Swedish Welfare State Jonung, Lars; Jonung, Christina 2020 Document Version: Publisher's PDF, also known as Version of record Link to publication Citation for published version (APA): Jonung, L., & Jonung, C. (2020). Ingemar Ståhl. A Market Liberal in the Swedish Welfare State. Stockholm: Dialogos. Total number of authors: 2 General rights Unless other specific re-use rights are stated the following general rights apply: Copyright and moral rights for the publications made accessible in the public portal are retained by the authors and/or other copyright owners and it is a condition of accessing publications that users recognise and abide by the legal requirements associated with these rights. • Users may download and print one copy of any publication from the public portal for the purpose of private study or research. • You may not further distribute the material or use it for any profit-making activity or commercial gain • You may freely distribute the URL identifying the publication in the public portal Read more about Creative commons licenses: https://creativecommons.org/licenses/ Take down policy If you believe that this document breaches copyright please contact us providing details, and we will remove access to the work immediately and investigate your claim. LUND UNIVERSITY PO Box 117 221 00 Lund +46 46-222 00 00 INGEMAR STÅHL A Market Liberal in the Swedish Welfare State Christina and Lars Jonung (eds.) INGEMAR STÅHL A Market Liberal in the Swedish Welfare State Dialogos Dialogos Förlag Odengatan 36 113 51 Stockholm [email protected] www.dialogosforlag.se Ingemar Ståhl – A Market Liberal in the Swedish Welfare State Christina and Lars Jonung (eds.) First edition First printing Copyright © 2020 by Dialogos Förlag 2020 Design: RPform, Richard Persson Jacket photo: Per Lindström Print: ScandBook AB, Falun 2020 ISBN 978-91-7504-371-5 List of contents Preface ........................................ 7 Introduction .................................... 9 LarS JoNuNg 1. Ingemar Ståhl 1938-2014. A Portrait. .............. 11 INgemar StåhL 2. The Rise and Fall of Index Loans in Sweden........ 65 INgemar StåhL 3. Ownership and Control in Business Enterprises ..... 77 INgemar StåhL 4. Problems of Information in Economic Policy ....... 105 INgemar StåhL 5. It Will Soon Be 1984 … ........................ 123 INgemar StåhL 6. What is Wrong with the Welfare State? ........... 135 INgemar StåhL 7. A Coasean Journey through Estonia – A Study of Property Rights and Transaction Costs .......... 155 Preface This is a book about Ingemar Ståhl, a prominent professor of eco- nomics in Sweden. We first met him as graduate students in Lund in the late 1960s. We became friends and eventually colleagues at the department of economics. The friendship soon involved our families. Our contact with Ingemar lasted until his passing in 2014. To honor Ingemar Ståhl we edited a book in Swedish, published in 2018, where former students and colleagues pay their tribute to him. In addition, the book contains a selection of reprinted articles by him. Eventually, we decided to also publish a book in English about Ingemar Ståhl, although much shorter than the Swedish version. Our aim with this volume is to present him to an international audience as he made significant contributions to economic policies and public debate in Sweden during the 1960s, 1970s, 1980s and 1990s, worth a wider attention. We have many debts concerning this volume. We are indebted to all those who contributed to the Swedish edition, to Alan Harkess for skillfully translating from Swedish chapter 1, 3 and 5 and to the Ståhl family for their help. We want to thank Adri De Ridder, Oskar Grevesmühl, Daniel Klein and David Warsh for insightful and constructive comments. We owe a special thanks to Kurt Schuler for adjusting our text to U.S. readers and to Geoffrey Wood for making it more accessible for UK readers. We are also grateful to our friend and publisher Torgny Wadensjö at Dialogos for his support. This book was made possible by generous financial assistance from Karl Staaffs fond, Sven och Dagmar Saléns stiftelse and Thora Ohlssons stiftelse. Lund in March 2020 Christina and Lars Jonung Introduction INgemar StåhL (1938–2014) made important contributions to eco- nomics and economic policy in Sweden. He is little known outside of Sweden as he mainly wrote in Swedish. This book gives a broad account of Ståhl’s life and works. It is based on our Swedish book, Ingemar Ståhl – en ekonom för blandekonomin, published in 2018 by the Swedish publisher Dialogos. The Swedish title means Ingemar Ståhl – an economist for the mixed economy. We chose it because one of Ståhl’s most prominent papers dealt with the proper economic theory for analyzing the mixed economy, that is, a market economy with a large public sector. However, the term “mixed economy” is little used today in Sweden or elsewhere; instead, the focus has shifted to the welfare state. For this reason, and because Ståhl studied many aspects of the welfare state, we have changed the title for the English version to Ingemar Ståhl – A Market Liberal in the Swedish Welfare State. The English volume is a condensed version of the Swedish one. Chapter 1 is a portrait of Ingemar Ståhl as an economist, describ- ing his engagement over time in many fields, and evaluating his contribution to Swedish economics and economic policies. Six papers by Ståhl follow, selected to give a flavor of his broad interests. Chapter 2 reflects his work on indexed loans in the 1960s, a source of inspiration for the successful Swedish system for student loans and subsidies designed by him. He also explained why a type of indexed loans for Sweden’s housing sector introduced in the 1970s failed. Chapter 3 contains Ståhl’s seminal critique of wage earner funds that were proposed by a study commissioned by Sweden’s powerful central trade union confederation in 1975. Here he employed the theory of contracts and transaction costs developed by economists such as Ronald Coase and Armen Alchian to explain the conse- quences of making trade unions the sole owners of Swedish firms. 10 Ingemar Ståhl – a market lIberal In the SwedISh welfare State In Chapter 4, Ståhl considers the challenges facing an econo- mist who wants to inform politicians and voters about “rational decisions” concerning economic policy. This chapter mirrors his experience as a member of various government commissions, as policy advisor and as a highly active participant in the public de- bate. He found that the advice of the enlightened economist was often ignored. Here he gives his explanation for this fact. Chapter 5 is a satirical newspaper article published on New Year’s Eve of 1979. It shows Ståhl as a witty debater, adopting new and unexpected perspectives. The article is a warning that the generous Swedish welfare state may turn into a hard Orwellian version of itself if it tries to combat tax evasion by the registration of all sales and purchases. In the 1970s and 1980s, the public sector grew rapidly in Sweden, reaching unprecedented levels. Ståhl was fascinated by this process, writing about it in numerous contributions in Swedish. Chapter 6 summarizes his explanation of the driving forces behind the ex- pansion of the welfare state. To him, the Swedish public sector was too big. It might be reduced by a constitutional reform introducing qualified majorities for decisions by the parliament. Ever since his work in the 1960s for the research institute of the Swedish defense, Ståhl had a deep interest in the Baltic states. They provided the military bases for the Soviet Union that would be used for any military operation against Sweden. Following the collapse of the Soviet empire, he travelled to the Baltics in the early 1990s. Chapter 7 is a report from his journey “through the Estonian economic landscape”, using as his guide the work by Ronald Coase on property rights and transaction costs. Chapter 7 reflects Ståhl’s interest in property rights, contracts and law and economics. He tried to introduce these concepts in his teaching at the department of economics at Lund University. Eventually, he became so focused on the relationship between economics and law that he spent his last years as professor at the university’s Faculty of Law. LarS JoNuNg Chapter 1. Ingemar Ståhl 1938-2014. A Portrait For many decades, Ingemar Ståhl was a well-known economist in Sweden. He introduced new perspectives into economic debate, research and teaching. He made his presence felt in areas as di- verse as defense economics, rent controls, energy policy, financial economics, industrial policy, higher education, wage earner funds, environmental economics, law and economics, healthcare econom- ics and taxation. His intellectual curiosity led him to question prevailing ideas and to put forward new solutions. He found traditional welfare theory too limited to provide an understanding of the political process. Instead, he advocated a public choice perspective, which in his view would provide a more realistic interpretation of the goals of politicians and bureaucrats than that offered by traditional wel- fare economics. Ståhl also introduced the work of Ronald Coase on contracts and property rights in Sweden by applying it on various policy issues in public debate and by promoting it in his teaching. In his view, the study of economics should start from the study of contracts and property rights. Ståhl was appointed professor at Lund University at the young age of 33, in 1971. Over more than thirty years, he left his mark in many fields, retiring in 2004. He worked to introduce health eco- nomics, environmental economics, human capital, public choice, the economics of contracts and property rights, financial economics and law and economics in the curriculum. He embodied a sense of open academic enquiry.