Knut Wicksell - The Swedish School

Knut Wicksell and The Swedish School, Wicksell Theory

Knut Wicksell, the great Swedish economist, not only became recognized as the founder of a "school" of economic theory, but has exercised such great influence on other economists that one may say, without him economics would be different.

Wicksell was born in 1851, studied philosophy and mathe­matics, and obtained his degree in 1885. Thereafter, he took up economics, studying in France, Germany, Austria, and England. Returning to Sweden, he was made assistant pro­fessor at Lund in 1900, and there he occupied the chair of economics from 1904 to 1916. He died in 1926.

He wrote many articles for Swedish publications, and some for German and English journals. But his main work is con­centrated in five volumes published in German between 1893 and 1906. The English translation of his Lectures on Political Economy (1934 and 1935) contains his most important thought. It is necessary only to add the article on "The Influence of the Rate of Interest on Prices," Economic Journal, 1907.

Conditions and Antecedents

First it is to be observed that Wicksell's thought was greatly influenced by the long decline in prices and discount rates during the period 1873-1895, and the discussions which accompanied them. Probably it is fair to say that his thought had matured by 1898 when his Interest and Prices appeared. Thus he dwelt upon price movements, secular and cyclical, and tended to emphasize the part played by credit. He is a pioneer in coordinating theories of price and of interest with a theory of the value of money.

In Wicksell's background was a wide acquaintance with, and good understanding of, Classical Economics. The main influence on his thought, however, came from two sources: the Austrian School, particularly Bohm-Bawerk, and L. Walras. Other factors in his thought were the English economists, Wicksteed and Edge-Avorth, and through Wicksteed he was influenced by Pareto. Wicksell also cites Marshall occasionally.

Thus there was in this Swedish economist a good deal of the Classical and Neo-Classical thought. This appears in some attention given to production, and in the importance attached to "real" capital and to the barter aspect of exchanges. He also attached great importance to population, and was even imprisoned for a short time because of his views on this subject.

But for the most part, he deals with economic life in terms of marginal utility, and he makes large use of the mathematical equations upon which Walras depended. Wicksell sought to synthesize the marginal productivity analysis of the Austrian School and the general price equilibrium theory of the Lausanne School — the theoiy that all prices are so mutually interde­pendent that price problems can be solved by a mathematical process of simultaneous equations.