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Interest and Prices

  • Interest and Prices by Knut Wicksell
June 15, 1898Knut Wicksell

Tags Capital and Interest Theory

It was this work by Swedish economist Wicksell that drew Mises's attention to the effects of interest rate manipulation on the capital structure. This was the first to present the idea of the natural rate of interest, which Wicksell argued can be different from the prevailing rate on the market. The natural rate is equal to the return on capital in an imaginary economy without money. Mises took that idea and made it a central component of his business cycle theory. Wicksell was also an important critic of the Quantity Theory of money.

 

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References

Originally published in 1898. Translation published by the Royal Economic Society, London, 1936.