Formalizing a new approach to economic policy: Bent Hansen and the Rehn-Meidner model

In the early postwar years, two trade-union economists, Gösta Rehn and Rudolf Meidner, presented a Swedish alternative to Keynesianism. The so-called Rehn-Meidner model recommends restrictive macroeconomic policies, active labor market policies and solidarity wages to combine price stability with economic growth, equity and full employment. In the 1950s, Bent Hansen evaluated the validity of the Rehn- Meidner policy and the underpinning theory. Hansen’s theory of inflation shows that he was strongly influenced by Rehn’s idea about asymmetric wage drift. But Hansen questioned the generality of the Rehn-Meidner policy program. Hansen’s rigor analysis shall not conceal that, even together with Rehn, he was unable to shed light on the relationship between average profits and wages through labour scarcity or all relations between the policy means in the Rehn-Meidner model.