Knut Wicksell on Utility and Market Aggregation

Mauro Boianovsky

History of Political Economy, 2016, vol. 48, issue 2, 307-340

Abstract: Knut Wicksell discussed in his 1893 Value, Capital, and Rent, as part of a critical comment on Launhardt and Jevons, conditions for consistent aggregation. He argued that Jevons's “trading body†concept was only valid if identical linear marginal utility functions (with ensuing parallel Engel lines for all individuals) could be assumed, which he regarded as unrealistic. Wicksell preferred Léon Walras's notion of market excess aggregate demand functions, which are functions of prices only. Such functions would not be affected by aggregation problems, if only disequilibrium transactions were assumed away. The article also addresses Wicksell's position concerning the so-called Cournot problem (that the general equilibrium system may not be able to provide precise numerical solutions), and his use of the notion of the representative agent in the formulation of the saving function.

Date: 2016
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