Muslim Schools?  Just Not That, Please…

You are a member of the committee that decides about the laureate of this significant award.  How far in advance do you usually know who wins?

The final decision is always made on the morning of the day on which the laureate is announced, so nobody knows it for certain in advance.  But of course, I know the proposal of the committee in advance, which contains the names of the probable winners.  But I cannot disclose anything about the proposal in advance; the level of secrecy is extremely high.

How does a person become a member of the committee for awarding such an honour – and for how long does he remain one?

My present term is for three years.  A person can be a member for a maximum of twelve years, and no more than nine of those may be consecutive.  The members are elected by the Swedish Royal Academy of Sciences.

Is Swedish citizenship a condition?

No, look at me, for example: I was born in Norway.  The condition is to be either a citizen of Sweden or a foreigner who has lived and worked in Sweden for at least two or three years.

ADVANTAGEOUS CROWN.  “The Czech Republic can – like Sweden – tame unemployment during the crisis.  Thanks to its independent currency,” thinks Tore Ellingsen.

Please describe the process for selecting the laureates.  It is, reportedly, an all-year process.

The Academy, through the committee, which meets about once a month, approaches figures from the field of economics, soliciting their nominations.  We ask them to describe the developments in the given area of economics and emphasise and evaluate the key contribution of the relevant researchers and the researchers themselves.  The committee is in close contact with other members of the Academy of Sciences and gradually the short list of candidates crystallises.  But discussion is always only about those who were nominated that year – that is a basic requirement.  In the end, the committee makes a final proposal and that can be evaluated and commented upon by other members of the Academy.  And then the proposal – including the commentaries – is voted upon; each member of the Academy of Sciences can vote.

So six member of the committee make a proposal, which is then voted on by all members of the Academy.

Formally, the committee has five members and a secretary.  There are also associate members – presently three.  All these people put the proposal together, but the Academy does not have to accept it.  Theoretically, it would be possible for it to select a different candidate than one that was proposed.  And in any given year, the award does not have to be granted at all.

During the year, do you feel any pressure from economists and academics, that they should get the award?

In this regard, it is relatively important that one cannot nominate oneself.  And I think that the best way to get the award is to do good research.  Exerting any effective pressure in this regard is really not easy.

How many people must nominate a candidate?

One is enough. But not just anyone can nominate – only people who have been approached; only their nominations are of any relevance.

And how many are there of those who can nominate?

I think that that is also secret, but there are quite a few of them.  They give the committee one to three names, the sphere of research, why that area is of significance in the given year, and why the researchers they have proposed mean anything in that area.

Many economists and the media compare the Swedish crisis from the early 1990s to the present global crisis.  Do you agree?

Definitely.  Credit markets and the drop of real estate prices played a significant role in the Swedish crisis; the entire banking sector had tremendous difficulties.  Some banks collapsed, and others had to be rescued by the government in order for them not to collapse.  So it was very similar to what is now happening worldwide.

Tore Ellignsen (47)

Professor of Economics at the Stockholm School of Economics is presently one of the five full-fledged members of the committee for awarding the Nobel Prize in Economics.  Originally Norwegian, he studied economics in Bergen and at the London School of Economics.  Among his interests, he includes his family (he has two children), rock and roll, and fishing on islands near Stockholm.  He does not have a driver’s licence; his wife does the driving.

Do you think that Sweden took a lesson from the Nineties and was better prepared for this crisis?

Yes.  I think that Swedish banks still remember the Nineties very vividly.  That enabled them to avoid irresponsible lending this time.  Although I am not sure whether risky lending was the key cause of the crisis in the Nineties.  It was also a difficult time because of the reunification of Germany and high interest rates.  The Swedish crown was tied to a basket of currencies, at exchange rates that today seem not to have been sustainable in the long term.  Today, interest rates are not as high and the Swedish crown is not dependent.  I think that, so far, the impact of the present crisis is less onerous, compared to 1992.  For example, real estate prices in Stockholm are higher than when the crisis started.

Is it an advantage for you that you did not adopt the euro?    

It is definitely advantageous for Swedish industrial producers.  When you compare Sweden to Germany, a country where a significant part of industrial production is intended for export, it is clear that when the Swedish crown weakens significantly, it is advantageous for Swedish producers in comparison with German companies, which trade in euros.  The employees of the above-mentioned Swedish companies profit from the situation, because they are not being laid off.  On the other hand, consumers feel a drop in the purchasing power of the Swedish currency.  But overall, it is an advantage to have an independent currency at this point.

Will Sweden adopt the single currency in the end?

We can only guess.  Most people think that it will happen sooner or later.  My personal estimate is that it will take another ten years for us to adopt it.

In the Czech Republic, a debate about the euro is also under way.  Paul de Grauwe, a Belgian economist and one of the fathers of the eurozone, told me that it is better for the Czech Republic to stick to its currency during the crisis.  According to him, it will thus be possible to devalue the currency, thereby accelerating the recovery after the crisis, which is what Sweden did in the crisis year of 1992.

I think that this is true from the purely nationalistic point of view, just as it is, purely from the Swedish perspective, more advantageous to have an independent currency at this point.  The same may apply to the Czech Republic, of course: it, too, can tame unemployment thanks to having an independent currency.  On the other hand, bolstering employment in countries such as Sweden and the Czech Republic may cause the opposite effect elsewhere.  And that is why some people may say that this is a kind of nationalistic selfishness; however, it is true that it is not possible to calculate this and say with certainty that one employee who keeps his job by this means in Sweden or in the Czech Republic automatically robs another employee of his job somewhere else in Europe.

You work with economic models.  What do you make of the allegation that they, too, are in part responsible for the crisis, because due to the necessary simplification, they undesirably distort reality and confuse their users – bankers and analysts?  For example, they assume that people behave more or less rationally, that they do not succumb to herd behaviour, and so on.

I think that practical users are influenced by the teaching of economists, but I would say that it is quite optimistic to assume that merely because we teach certain theories, those theories have a significant impact on the conduct of people in practice.  I do not think that there is a strong link between theories and that which led to the crisis.

Sweden is a so-called social welfare state.  Do you think that it is a successful model of economic policy and that it should be used by other countries, as well?

I think that it is successful, even more than could have been expected given the usual concept of human nature.  Whether it should be used by other countries is a question for voters – the citizens of those countries.  It is not so clear to what extent this Scandinavian model could be “exported” elsewhere.  In certain countries, it could be very difficult, for example, due to the different composition of the population, to introduce such a model successfully.

Do you think that Scandinavians have certain specific character traits that make the model so successful?

I would think twice before claiming that people in different countries also have different traits and character.  Of course, they may be certain genetic predispositions, for example, people in certain parts of the world have a greater predisposition towards alcohol.  It cannot be ruled out that in a certain regard Scandinavians are different than others, but culture and tradition probably play a more significant role.

Do you have in mind certain specific favourable cultural particularities that helped this model along?

I think that the egalitarian tradition has very deep roots in Scandinavian countries.  People are also accustomed to working hard there – although their after-tax income is not so great (laughs).

Is this related to the low level of corruption in Scandinavian countries?

Yes, and that is, in turn, related to the high level of trust in the society and the low level of political polarisation.  Polarisation is usually a source of distrust.  Distinct world-views in a society, which are reflected on the political scene, lead people to different faiths and convictions – for example, some believe in a plan, others in the market.  These differences make it difficult for us to believe other people – those who see everything very differently from us.  It is easier to believe others if everyone goes to the same school and has the same experience.  So for example compulsory school attendance introduced in the 19^th century – the fact that the children of workers, clerks, doctors, and directors  attend the same school – definitely contributed to making the society more equal, to the enhancement of mutual trust; children did not grow up in segregated communities.  But of course, we can go a step deeper and ask how it was possible to introduce such a type of education at that time at all.  But that is a job for historians.

Can the low corruption also be explained by the fact that Sweden is a nationally homogenous country, similar to Japan?

Definitely.  The high level of homogeneity enhances trust in society.  There are many scientific studies on this topic.  And not only cultural homogeneity, but also economic, concerning income and salaries.  In the US, there is a far greater level of distrust among people in regions with a broad income gap.

Do you not fear the influx if immigrants to countries such as Sweden or Norway?

I do not fear the influx (there are not so many of those people, after all) as much as I fear segregation.  Above all, I think that it is very dangerous to let subcultures thrive.  For example, I think that the introduction of Muslim schools would have horrendous consequences.  Immigration in connection with heightened multiculturalism is destructive.

An abbreviated version of this interview, obtained in Stockholm, was published in Týden No. 42 on 19 October 2009.