Nobel Economics and Social Democracy

Abstract

This chapter discusses two approaches to the economic balancing act of ‘satisfaction now’ and ‘satisfaction later’. How to manage this trade-off is what largely divides neoclassical economics from Social Democracy. In both approaches, people are ‘forward looking’. In economics, the future has a value in the present. The individual makes a choice that will maximize this present value. But in order to do this, the future needs to be known, and general equilibrium economics assumes that it is known: preferences, products, quantities, prices, everything. In contrast, Social Democracy has worked to secure the future by means of collective action, initially through trade unions, and then by means of parliamentary democracy. Social Democracy acts for those whose prior endowments are modest, with no boost from inheritance, ability, or luck. Their future is uncertain and they are always at risk.