Life
Johan Gustav Knut Wicksell was born in Stockholm on 20 December 1851, the youngest of the six children of grocer Johan Wicksell and his wife Catharina. He lost his mother at the age of 6 and his father at 15.
Yet family life with his father and sisters, who loved to discuss anything in the spirit of a debating club, made a lasting impression on him. In school, Wicksell was regarded as very talented, but also reprimanded for his “rebellious attitude”. During adolescence, he fell under the spell of the Lutheran Awakening movement that was widely popular in the mid-nineteenth century. After seven years of intensive Bible studies, he came across the works of Charles Darwin, David Friedrich Strauβ and Henrik Ibsen. They led him into a deep crisis of faith, from which he emerged as an atheist and free thinker. By then, in 1873, Wicksell had already earned his first degrees in philosophy, history, Latin, Nordic languages, astronomy and mathematics at Uppsala University. He aspired to become a professor of mathematics, but his advanced studies took 12 years, partly due to financial problems, but mostly because he intensively engaged in social and political activities. He completed his studies in 1885, at the age of 35, but by that time he had abandoned his ambitions for a chair in mathematics.Wicksell’s life took a new direction in the late 1870s, when he read George Drysdale’s Elements of Social Science (1878), a book on the ‘Three primary social evils: poverty, prostitution, and celibacy’. He began to study Malthusian theories of population and gave a public lecture in 1880, in which he presented overpopulation as the main cause of poverty and alcoholism in Sweden. The lecture was received with admiration and indignation, as Wicksell fervently advocated birth control. It drew such large audiences that it was repeated several times and printed in several thousand copies.
It earned Wicksell the reputation of a radical liberal with a social mission, who argued with wit and tact. Within a short time he was able to make a living as a lecturer and writer of articles and pamphlets about poverty, liberty and social reform. Some critics pointed out, however, that he lacked deeper understanding of the economic causes of overpopulation. As it came from highly regarded authorities in public debate, such as the Uppsala professor David Davidson, Wicksell took this criticism very seriously and turned to extensive studies of classical political economy. Between 1885 and 1889, he used a small inheritance and several grants from the Loren Foundation to travel to London, Paris, Strasbourg, Vienna and Berlin, where he talked to social reformers, such as Drysdale and Annie Besant, and attended lectures of Georg Friedrich Knapp, Carl Menger and Adolph Wagner - without, however, being much impressed. Of more importance was his close reading of the classics, in particular the works of Thomas Malthus, David Ricardo and John Stuart Mill. He also studied the marginalist writings of Stanley Jevons, Menger and Walras that are nowadays regarded as the pioneering works of neoclassical economics.When Wicksell discovered Bohm-Bawerk’s Positive Theory of Capital in a Berlin bookshop in 1889, it came as “a revelation” to him. As he remembered in his obituary for Bohm-Bawerk 25 years later, the book had helped him
to penetrate theoretically the phenomenon of interest and the overall problem of economic distribution when it is complicated by the presence of capital... All of a sudden I saw... the roof being erected on a scholarly edifice. Ever since the days of Ricardo, economists had only managed to construct its lower floors and otherwise had to be content with collecting more or less useful building materials. (Wicksell 1914: 322)
Bohm-Bawerk’s theory inspired Wicksell to draft a series of lectures on the new mar- ginalist theories of value, capital and rent.
Since Stockholms hogskola, the University College of Stockholm (now Stockholm University), refused to let Wicksell give his lectures on its premises, he presented them to Arbetarforeningen, the Workers’ Association in Stockholm. The first lecture attracted an audience so large that it had to be moved to a bigger hall. When Wicksell came to the details of value theory, however, that hall quickly became too big (Gardlund 1956: ch. 6). Their humble origins notwithstanding, the lectures were translated into German and came out in print in 1893, published by Gustav Fischer at Jena. The book carried the title Uber Wert, Kapital und Rente, and it was Wicksell’s first major contribution to economic theory, favourably received by both Bohm-Bawerk and Walras.It did not take long before further contributions followed, with Wicksell endeavouring to qualify for an academic position at the University College of Stockholm. Apart from his passion for scientific research he had private motives. In summer 1888, during holidays in Copenhagen, he had met Anna Bugge, a teacher from Kristiania (now Oslo). After a few dances in the summer night, they had parted and started a long and intensive correspondence with each other. In summer 1889 Knut had visited Anna at her parents’ home and eventually convinced her, to the disapproval of her parents, to take part in a civil marriage contract and to move to Stockholm with him. With the birth of their two sons, Wicksell now had a family to feed. This he could hardly manage as a freelancing lecturer and writer, especially since he never compromised on his radically liberal views. For the same reason, he failed to find employment at the University College, although it was more formally pointed out that he lacked a doctoral degree. His 1893 treatise on value theory was not accepted as a doctoral dissertation, so he began to work on a thesis on tax incidence and justice in taxation. This led eventually to a larger study of public finance which was published under the title Finanztheoretische Untersuchungen nebst Darstellung und Kritik des Steuerwesens Schwedens (1896). The first part of the book is largely identical to the thesis for which Wicksell was awarded the doctoral degree by Uppsala University in 1895.
It may have been produced as a merely formal requirement, but it came to exert a notable influence on further developments in the fields of public finance and political economy.Yet there were further obstacles to Wicksell’s academic career. At that time, economics in Sweden was taught at the faculties of law. A law degree was a prerequisite to an appointment as lecturer or professor in economics. In his mid-forties and in a precarious financial condition, Wicksell thus had to study legal matters. As he found this extremely boring, he continued to do economic research in his free time, with a little help from his friends and some grants. In 1898 he presented “a study of the causes regulating the value of money”. This is the subtitle of the famous treatise on “interest and prices”, Geldzins und Guterpreise, which contains a theory of inflation based on differences between market rates of interest and the rates of return to real investment - an idea that Wicksell had outlined as early as 1889 (Boianovsky and Trautwein 2001a). As a by-product of boredom with legal matters, this path-breaking idea now saw daylight, but it took a few more decades for it to leave its mark on the evolution of macroeconomic thinking.
In 1899, Lund University created the position of a professor extraordinarius in economics. Wicksell applied, in competition with Gustav Cassel and two others. Despite protracted resistance of the Bishop of Lund, Wicksell was appointed professor in late 1901. Even conservatives argued that Sweden could afford to have at least one radical free thinker. In 1904 Wicksell was promoted to the position of a full professor. Finally, at the age of 52, he had secured his living and could concentrate on academic work.
During his professorship in Lund, Wicksell published many articles and other papers, but no more books. The only exceptions were the two volumes of his Lectures on Political Economy, published in Swedish in 1901 and 1906. The Lectures essentially combined and refined Wicksell’s earlier theories of value, distribution and money.
In addition to his academic work, Wicksell continued to propagate social reforms and to give lectures in the service of enlightenment and the freedom of speech. He tested the constitutional right to the latter in 1908, when he opposed the prison sentence that the liberal agitator Ljungdahl had received for blasphemy. Wicksell provoked the authorities, giving a public lecture on “the throne, the altar, the sword, and the money bag”. Examining the dogma of Immaculate Conception, which had been attacked by Ljungdahl, he surmised that:Joseph, the betrothed of the Virgin Mary... must in all piety have grumbled to himself, when nobody else heard it: “Why the hell didn’t the Holy Ghost let me father my little Jesus myself?” But then the world could not have been saved. That’s it, you see:... Private interests must give way to the general interest. (Translated from Gardlund 1956: 279)
As a consequence, Wicksell himself was tried for blasphemy and sentenced to two months in prison. There he spent his time writing a tract on demography and translating Adam Smith’s Wealth of Nations into Swedish.
Stubborn as Wicksell was in his conflicts with the temporal and spiritual authorities, he impressed his contemporaries with his unconventional and unassuming behaviour. His biographer Gardlund (1956: 371) described him as giving
the impression of a strong inner conflict, almost a split personality in fact. He was a wild agitator and an objective scholar at one and the same time, a hot-headed polemic, but sensitive and considerate of everybody near to him; he attacked and reviled religion, while singing hymns and revering jubilating deans; he expressed his admiration for the most stubborn rightists, while his place was on the extreme left.
This may appear to stand in contrast with Schumpeter’s high praise for Wicksell: “No finer intellect and no higher character have ever graced our field. If the depth and originality of his thought do not stand out more clearly than they do, this is only owning to this lovable modesty” (1893 [1954]: 862).
There is, of course, no contradiction between these two descriptions.After retirement in 1916, Wicksell and his wife Anna moved back to Stockholm, his beloved hometown. Anna Bugge made a political career in the women’s suffrage movement and the peace movement. As a Swedish delegate to the League of Nations and member of the Permanent Mandates Commission she travelled much and was away from home for long spells. Wicksell suffered from depression, but remained productive in his research work, setting the focus on capital theory and monetary policy, which had become a first-order social issue after the First World War, when the gold standard was suspended and Sweden suffered from waves of inflation and deflation. A consultant to the governor of Riksbanken, the Swedish central bank, since 1915, Wicksell came to be in high demand as an expert in parliamentary committees on banking, taxation and other matters. At the initiative of David Davidson, Eli Heckscher and other friends, the Political Economy Club (Nationalekonomiska foreningen) was founded in his honour, and Wicksell was made its first chairman. The club became an important debating forum and contributed significantly to the formation of the Stockholm School (or Swedish School), which in the 1930s came to expand Wicksell’s monetary theory into a more general mode of thinking about macroeconomic fluctuations. Yet Wicksell did not live to see the renewed interest in his theory of interest-rate gaps. He died on 3 May 1926 in Stockholm, at the age of 74.