Wicksell’s Novel Macro Thinking: Consequences for Understanding Cycles, Crises and Policy

Arie Arnon ()
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Arie Arnon: Ben-Gurion University of the Negev

Chapter Chapter 1 in Debates in Macroeconomics from the Great Depression to the Long Recession, 2022, pp 3-24 from Springer

Abstract: Abstract The Swedish economist Knut Wicksell (1851–1926) exerted profound influence over many of the scholars who shaped macroeconomics in the 1930s as well as in later years. In his acclaimed treatise on monetary theory, Interest and Prices (1898), Wicksell reevaluated the debates among the Classicals, who did not provide satisfactory answers to the determination of the price level. Wicksell suggested an alternative innovative approach based on his “two rates” theory. Wicksell’s writings during the first decade of the twentieth century, mainly in the years 1906–1910, shifted from his early attention focused on the price level to questioning the disturbing phenomena of fluctuations in the real economy—cycles and crises—a topic that became central in the economic debates of the 1930s. In considering how we could avoid “economic fluctuations and crises...” his answer was that the economy should follow a “stationary” state, where demographic and productive changes were synchronized. Later chapters discuss the impact Wicksell's innovative ideas had on later scholars, among them John Maynard Keynes and Friedrich Hayek.

Date: 2022
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DOI: 10.1007/978-3-030-97703-0_1

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