Wicksell on the Currency Theory vs. the Banking Principle

Abstract

In his search for a positive theory of the value of money Wicksell found the Quantity Theory and, even more so, the Banking Principle, quite inadequate. It is argued in this paper that Wicksell may have underestimated the theoretical value of the Banking Principle and that this principle is not incompatible with Wicksell’s own “Positive Solution”.

As the main source of references for this paper, I used Knut Wicksell, Föreldäningar i Nationalekonomi (Lectures in Economics), Vol. II, 3rd edition, Lund, 1929 (edited by Emil Sammarin). References to this volume in the subsequent text are indicated by the page number only. As a supplementary source, I used the English edition of Wicksell’s Qeldzins and Giiterpreise, entitled Interest and Prices, London, 1936. I am indebted to my colleague Eivind Bjentegdrd for important corrections in my original manuscript. I also want to thank Julie Sundqvist for translating my manuscript, originally in Norwegian.