Theories of distribution and capital
Between the 1950s and 1970s, Wicksell effects played a central role in the Cambridge debates on the neoclassical theory of capital. The main adversaries in these controversies were Piero Sraffa, Luigi Pasinetti and Joan Robinson in Cambridge (UK) on the one hand, and Paul Samuelson and Robert Solow in Cambridge (Massachusetts) on the other.
The central, interrelated questions were (1) whether an economy’s capital stock in the aggregate can be determined independently of the rate of interest, and (2) whether the choice of the technique of production is independent of the distribution of income. Cambridge, Massachusetts, affirmed, whereas Cambridge, England, denied categorically. Dissecting the original Wicksell effect into a price effect and a real effect, it was shown that the objections of the English side were essentially correct. The controversies did not, however, end in consensus and progress. Nowadays most economists prefer to remain silent on the birth defects of the neoclassical theory of distribution, if they are aware of them at all. Wicksell, who had openly addressed them and who had untiringly attempted to repair them, would certainly not have approved of such negligence.