Knut Wicksell
Johan Gustav Knut Wicksell ( born December 20 1851 in Stockholm; † May 3, 1926 ) was a Swedish economist. According to him, the Wicksellsche process is named, which describes the mutual dependencies of interest policy and economic development. With his approach, he coined the Swedish School of Economics.
Life
1851 Knut Wicksell was born the youngest of five children of a grocer in Stockholm. At age 13, he came to the high school and joined a group of freethinkers in which compacted in a literary circle against the establishment. After passing his final exam Wicksell began in 1872 at the University of Uppsala Latin, Scandinavian languages , mathematics, astronomy, history and philosophy to study (where you have to remember at this wealth of faculties that at that time the courses were not as specialized as the case today is ). During this time, Wicksell is an avowed atheist.
1885 Wicksell went to London, where he read the classical English economists ( esp. Smith, Ricardo, Mill and Bentham ). By 50, he was professor at the University of Lund. After his retirement in 1916 he returned to Stockholm, where he advised the resident Bank of Sweden. In May 1926 Wicksell died the age of 75 from pneumonia in Stocksund.
Work
Wicksell investigated systematically for the first time the relationship between money supply, interest rates and price levels. He described the Keynes effect before John Maynard Keynes. In Wicksell's main business interest of money and goods prices (1898 ) come to ask how it happened, for example, to price fluctuations in the economy or why the prices are never stable. Wicksell also claims that inflation is just as unhealthy as deflation.
He distinguished the first time between "normal " and " natural " ( real ) interest rate and defined as natural capital interest "that rate of the loan interest rate at which this is quite neutral behaves compared to the prices of goods, they neither increase nor decrease the tendency " and further explains Hans Gestrich to Festellungen Wicksell: " the interest will therefore set so that the investment prices do not go up drives by their stress on the credit system, on the other hand also is large enough that prices will not fall. " Wicksell alluding to monetary policy choices the central bank ( interest rates, open market operations, standardization of Liquiditsreservesätze ) and possible effects on.
Wicksell saw it as the task of a government monetary institution ( central bank) that strike the right balance between these two rates. With its economic theoretical considerations Wicksell was the father of the overinvestment theory and the dynamics of the monetary policy is named after him - Wicksell shear process.
The Wicksellsche process
The Wicksellsche process describes decisions of monetary policy on investment, saving behavior and economic as follows: The reduction in the nominal interest rate below the real interest rate initially has the consequence that will save less and consume more - aggregate demand increases. The entrepreneurs ask to investments for more credit. The result is an increase in demand for capital goods, while at the same time shows the capital market as unproductive. The infertility is compensated for by credit creation. Thus, each cut in interest rates causes credit creations, investment and more consumption. The investments lead to higher wage and salary payments and also increase consumption. The result is a price increase on goods market. Conversely found in artificial elevation of the benchmark interest rate unlimited falling demand and prices instead ( Wicksell shearing process to bottom). Thus Wicksell points out: In exaggerations the rate hike, this calm, in economic decline, the rate cut may increase the activity.
Works (selection)
- Financial Theoretical investigations. In addition to representation and criticism of taxation in Sweden. 1896
- Interest of money and goods prices. 1898
- Money and credit. 1922 ( lectures on political economy based on the marginal principle / Vol 2 )