The Great Idea of Knut Wicksell

Abstract

In the spring of 1889, just before he married in Paris, Knut Wickseil was strolling along a street in Berlin when his eyes caught a book on economics by the renowned Austrian economist Eugen von Böhm-Bawerk. The Positive Theory of Capital¹ influenced Wicksell profoundly. From this inspiration in 1889 came a wellspring of originality that eventually inspired both Richard Musgrave and James Buchanan. Wicksell commented in a letter to a friend:²

I procured a copy and was soon lost in the book. I understood most of it rather imperfectly, as can be seen from my notes in the margin….Nonetheless the book came to me as a revelation. I had already tried on my own, with little success, to penetrate the phenomenon of interest and the general problem of economic distribution, when complicated by the existence of capital (as well as labor and natural resources)….It was as though I now saw with my own eyes the roof being put on a scientific construction, which no economist since the days of Ricardo had managed to raise above its lower floors.