Lectures on Political Economy

The first edition of this book was a very limited one, for I did not wish to deprive myself of the opportunity of publishing a new edition and of availing myself of the improvements which experience and expert criticism might suggest. Unfortunately, very little criticism, either public or private, has reached me; but during the ten years or more in which I have been teaching I have naturally discovered various defects, which in this edition I have endeavoured to correct. By omitting the chapter on the theory of population, which was published a couple of years ago in a revised form as a “Verdandi” publication, it has been possible, without increasing the size of the work, to find space for certain additions, which, I hope, will increase its value and its usefulness. Thus the presentation of the theory of rent and the problem of distribution in a non-capitalistic economy has been expanded and, in connection with the theory of interest, some pages have been devoted to a résumé and criticism of Böhm-Bawerk’s theory in its original form. Similarly, I have given a detailed alternative explanation1 of the origin of interest and of the solution of the problem of distribution under capitalistic production, in which I assume that the whole of the available supply of current labour and land is either invested in production at once, at the same time, or possibly at different moments of time; after which, the products mature spontaneously under the influence of free natural forces—as for instance in the laying down of wine for consumption, etc. Interest then appears in its purest form as the “marginal productivity of waiting” (or of time), and the problem, in all its phases, is easily susceptible of exact treatment in a mathematical form, without it being necessary to have recourse to calculation with so-called simple interest, as in Böhm-Bawerk’s well-known exposition.

Finally, the original brief discussion of the phenomena of the accumulation of capital has been expanded, and now includes an examination of Professor Cassel’s interesting contributions to the still very meagre literature of this subject.

As will appear from what has been said, the present edition has a more “mathematical” character than its predecessor. In every case, however, I have prefaced the mathematical analysis by an elementary treatment with definite—though usually arbitrary—figures. The passages in smaller type can, for the most part, be read and understood without any special knowledge of mathematics, and for the remainder, as I have said in the text, the standard reached nowadays in secondary schools should suffice.

Opinions may differ as to the value of this method. For my own part, I am convinced that a constant and logical argument from simple assumptions conveys more real knowledge than variegated but superficial talk upon everything under the sun: national character, racial differences, will to power, class interests, etc. Again, as regards the controversy concerning the so-called historical and theoretical treatment of economics (of which the latter must of necessity be more or less mathematical), this is a matter which can, in my opinion, be settled only by a division of labour. We must be deeply grateful to those persons who, by the discovery and investigation of documents relating to economic history—matters treated in a very step-motherly fashion by earlier historians—have succeeded in illuminating the present by the light of the past, and in showing to us some links on a chain of development of which we ourselves and our environment constitute another link. But, on the other hand, if economics is some day to become a real science and guide to practical business it must inevitably advance to certain positive results and principles of universal application. It will not do to treat questions relating to economic policy, to trade and industry, and especially to population, as if they were metaphysical speculations in which each person can adopt the point of view which appeals most to his temperament—and still more frequently, perhaps, to his private interests. We are here concerned with substantial quantities, measurable magnitudes, a and b, plus and minus. To secure an explanation of their relations which would be convincing to every thinking and unprejudiced person cannot be said to be outside the scope of economic inquiry, but must, on the contrary, be its ultimate goal.

I am, of course, far from regarding the following arguments, which are for the most part hypothetical, as an adequate foundation for a practical treatment of economic questions, though I have little doubt that they constitute a necessary preliminary—and, at the same time, provide a useful exercise for those concerned with such problems. In more than one case it may appear that a direct application of our principles to actual politico-economic problems would be quite natural. In such cases we must certainly be on our guard against over-hasty generalizations from results achieved by way of abstract deductions; and, unfortunately, the mathematical method affords no absolute guarantee against false deductions. But, in any case, that method has a great advantage over the merely descriptive method, in that errors committed cannot long be concealed, and false opinions cannot be defended long after they have been shown to be wrong.

KNUT WICKSELL.

LUND.

March, 1911.

2 This expression is perhaps not entirely suitable, since, as will easily be seen, the essence of the argument is in both cases the same. It is therefore also possible that I ought to have endeavoured to combine sections II, 2, C and D in a single uniform presentation. I have found myself unable, however, for various reasons, to do this. As they now stand, these two collateral presentations may materially support and explain each other.

• 1This expression is perhaps not entirely suitable, since, as will easily be seen, the essence of the argument is in both cases the same. It is therefore also possible that I ought to have endeavoured to combine sections II, 2, C and D in a single uniform presentation. I have found myself unable, however, for various reasons, to do this. As they now stand, these two collateral presentations may materially support and explain each other.
• 2The first edition of this book was a very limited one, for I did not wish to deprive myself of the opportunity of publishing a new edition and of availing myself of the improvements which experience and expert criticism might suggest. Unfortunately, very little criticism, either public or private, has reached me; but during the ten years or more in which I have been teaching I have naturally discovered various defects, which in this edition I have endeavoured to correct. By omitting the chapter on the theory of population, which was published a couple of years ago in a revised form as a “Verdandi” publication, it has been possible, without increasing the size of the work, to find space for certain additions, which, I hope, will increase its value and its usefulness. Thus the presentation of the theory of rent and the problem of distribution in a non-capitalistic economy has been expanded and, in connection with the theory of interest, some pages have been devoted to a résumé and criticism of Böhm-Bawerk’s theory in its original form. Similarly, I have given a detailed alternative explanation of the origin of interest and of the solution of the problem of distribution under capitalistic production, in which I assume that the whole of the available supply of current labour and land is either invested in production at once, at the same time, or possibly at different moments of time; after which, the products mature spontaneously under the influence of free natural forces—as for instance in the laying down of wine for consumption, etc. Interest then appears in its purest form as the “marginal productivity of waiting” (or of time), and the problem, in all its phases, is easily susceptible of exact treatment in a mathematical form, without it being necessary to have recourse to calculation with so-called simple interest, as in Böhm-Bawerk’s well-known exposition.