Wicksell effect
The Wicksell effect is the combination of a price effect and a real effect on the valuation of changes in the capital stock. Swedish Economist Knut Wicksell (1851 – 1926) used the Austrian analytic framework to discuss the effect. [1]
An important implication of the effect is that the valuation of the capital stock is extremely problematic in all realistic situations. [2][3] The price effect involves a reevaluation of the inventory of capital goods due to new prices. The real effect due to the price weighted sum of changes in the physical quantities of different capital goods. The term itself was introduced by Uhr (1951) and its importance noted by both Joan Robinson (1956) and Trevor Swan (1956). [4][5][6][7]
There is a difference between "Price Wicksell effect" and "Real Wicksell effect". A price Wicksell effect refers to a change in relative prices corresponding to a change in income distribution, given the system of production in use. A real Wicksell effect also refers to a change in relative prices corresponding to a change in income distribution, but it in addition takes into account the problem of choice of technique.[1] The "changes" under consideration are comparisons of long period equilibria.[1]
See also
[edit]References
[edit]Wicksell, Knut[1893](1954)"Value, Capital and Rent" London: Allen and Unwin. Reprint 1970. New York: Kelly.
Wicksell, Knut[1901](1934)"Lectures on Political Economy Vol.1:General Theyory"Trans. E.Classen, ed. Lionel Robbins. London: George Routeledge and Sons.
- ^ a b c Heinz D. Kurz(2008)"Wicksell effect" in International Encyclopedia of the Social Sciences
- ^ Wicksell, K (1893) Value, Capital and rent
- ^ Wicksell, K (1934) Lectures on Political Economy
- ^ Uhr, C (1951) Knut Wicksel, a centennial evaluation, American Economic Review 41, December 829-60
- ^ Robinson, J (1956) The Accumulation of Capital
- ^ Swan, T (1956) Economic Growth and capital accumulation, Economic Record, 32, Nov 334-61
- ^ Burmesiter, E (1987) Wicksell effect, In The New Palgrave Dictionary of Economics, Eatwell et al (1987)
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