Maggs Bros.

An unusually nice copy of the first English translation of Wicksell’s ‘most original contribution to economics’ (Blaug), a major influence on the Keynesian school as evidenced by Richard Kahn’s role as translator. Keynes himself proof-read the translation and remarked to Kahn that ‘It doesn’t read in the least like a translation’ and that it ‘was miles above the usual standards of translations’ (quoted in Moggridge, ‘Richard Kahn as an historian of economics’, p. 108).

‘In Interest and Prices, Wicksell’s most enduring contribution, he more or less founded modern macroeconomics by going back to Tooke’s contra-quantity theory of money, according to which the price level is determined not by the quantity of money but by the national income in the form of the total flow of expenditure on goods and services. While rejecting Tooke’s argument, he restated the old quantity of money so as to emphasise expenditure flows, carefully distinguishing the direct effect of an increase in the quantity of money on prices via the cash balances individuals are willing to hold and the indirect effect on prices that operate through variations in the rate of interest. The idea that this indirect effect arises when the money rate of interest deviates from the real rate of return on new capital projects had appeared in the earlier writings of Thornton and Ricardo. Wicksell seems to have been inspired by a single passage in Ricardo’s Principles (1817), a book which he was in the habit of reading again and again. He called this real rate of return the ‘natural rate of interest’, arguing that if it exceeded the loan rate of interest for any reason whatsoever, a ‘cumulative process’ of price inflation would result, coming to a halt only if the banking system runs up against a legal or conventional reserve requirement. This led him to analyse criteria of monetary equilibrium in the sense of a monetary and banking system that would maintain a stable level of prices (Blaug).