Widening Wicksell’s conception of political economy: his “thoroughly revolutionary programme”

Abstract

Knut Wicksell’s opinion that political economy is a “thoroughly revolutionary programme” has often been neglected in the literature. Actually, Wicksell aimed at implementing such a programme in order to enlarge political economy as a “practical science”. It is articulated around three main features: a criticism of the marginal theories, the redefinition of society as a whole, and the advent of social justice. Indeed, Wicksell claimed that economic and social problems may be solved only by a complete social reorganisation. Hence, I show that Wicksell’s social reform programme drives his particular view of and approach to political economy.

Keywords:

• Knut Wicksell
• social justice
• marginalism
• instability

Acknowledgements

I am very grateful to Marianne Johnson and Richard Sturn, for the helping discussions and suggestions on previous drafts of this paper. This paper also benefited from the many insightful comments made by the participants of the 20th ESHET summer school, of the ESHET conference 2018 and of the HES conference 2018. I also thank the two anonymous referees for their helpful comments which have helped considerably to improve the quality of the paper.

Notes

1 He was sentenced to imprisonment for “reviling and mocking God’s holy words in such circumstances as to cause general offence” (Gårdlund 1958, 249–250).

2 Wicksell was granted a chair in Economics at Lund in 1901, and was promoted to “ordinary” professor in 1903.

3 This is also a reference to the “revolutionary eighties” of Sweden with the emergence of radical free thinker groups.

4 In 1893, in a letter to his friend Hjalmar Öhrvall, Wicksell said that he is “almost ready to believe that we are drifting towards a revolution as the only means of escaping from the present wretched situation” (Gårdlund 1958, 140).

5 In 1887 he went to Paris, to Lausanne, then to Vienna, and finally stayed in Strasbourg until 1888 (Gårdlund 1958, 102–110; Uhr 1962, 1991, 79–80).

6 Originally Wicksell asked in 1889 for permission to give a few lectures on the theory of value at the university, but that was denied to him. Thus, in line with his political commitment, he gave it at the Workers’ Association in Stockholm (Wicksell 1893, 17; Gårdlund 1958, 118–119). Those lectures then constituted the introduction of his first theoretical book.

7 “Man is, indeed, not only a consumer; he is also a producer. Yet he is, both phylogenetically and ontogenetically, both in racial and individual development, a consumer long before he is a producer” (Wicksell 1901a, 6).

8 “Modern investigations in the theory of value have led to the setting up of a principle […] called the marginal principle, whose application extends far beyond the actual province of the exchange of goods […] In other words, it governs every part of political economy” (Wicksell 1893, 50, see also 1901, 14, 1902, 121, 126).

9 In his first theoretical intervention in 1880 Wicksell starts the lecture by saying that “Human beings are undoubtedly pleasure-seeking by nature” (Wicksell 1880, 85), and then he shifts to the idea of acquiring what the individual “direly needs” (ibid., 86).

10 See also Wicksell (1900); Gårdlund (1958, 90, 132); Jonung (1988, 510).

11 Wicksell discovered the writings of J. S. Mill and the utilitarian doctrine in 1879 (Gårdlund 1958, 45). He participated in the second Swedish translation of Mill’s On Liberty and considered his writings as “the basic text and codex” for the Swedish 1880s generation (Wicksell 1917, 236; Swedberg 2002, 135). See also Gårdlund (1958, 45); Swedberg (1999, 503); Johnson (2011, 585).

12 Mill also criticized this concept of “the greatest number” (Hollander 1985, 626).

13 Mill stresses this by reference to the Middle Ages, when it was usual to grant a “bonfire of old women”. Indeed, “To grant such a bonfire would have been really to consult the greatest happiness of the greatest number, yet ought it to have been the principle of wise, nay, of perfect, (for so the dogma states,) of unimpugnable legislation?” (Mill 1833, 502).

14 See Riley (1988, 84–85).

15 Wicksell does not define precisely what he means by universal competition. I argue it refers in his theories to the generalization of free competition among all classes, i.e. when classes don’t combine to take advantage, and let the relative prices be established through the offers and demands on the market (Wicksell 1895, 92).

16 Each time Wicksell presents his theories he also stresses their limitations. For marginal utilities he raises five issues, including the non-existence of free competition which “is, and can be, only incompletely realized in actual life” (Wicksell 1901a, 71–72).

17 See also Pålsson Syll (1993, 182).

18 The “different financial positions” (Wicksell 1901a, 33).

19 “If, for example, we were to deprive a violin virtuoso of his instrument, a genuine Stradivarius, in order to give it to somebody else who could only use it as fuel, it is clear that the economic gain and loss, however high we might rate the need of the latter for fuel, could scarcely be equal” (Wicksell 1901a, 77).

20 Wicksell quotes Walras – in French – and his “disciple and successor” Pareto who defended a view Wicksell characterizes as “all-too-optimistic” (Wicksell 1901a, 73–74, 82–83).

21 Wicksell refers to the “so-called ‘harmony’ economists” as Henry Carey and Frédéric Bastiat (Wicksell 1901a, 4). He criticizes their “pretentious sophism, lacking any scientific base” (Pålsson Syll 1993, 173).

22 “a penny or two more per day in the hands of the workers is of greater advantage than a penny or two in those of the propertied classes” (Wicksell 1901a, 79).

23 Although for the unanimity rule of taxation Wicksell stresses the importance of the individual action, he rapidly shifts back to the idea of group decision making. “However, the actual scope of the public service is not determined by the evaluation of the single individual, but by that of all (or at least of all voting) members of the group” (Wicksell 1896, 82).

24 Wicksell advocates the use of statistical data, which will be developed in Sweden under the impetus of two economists of the Stockholm school, Gunnar Myrdal and Erik Lindahl (Uhr 1962, 325).

25 By “criterion of citizenship” I mean both belonging to society and the fact that agents can participate in the political life of society.

26 Poverty is both the “sheer, ragged destitution” and what “is called worry and disappointment, sometimes general apathy and dejection” (Wicksell 1880, 86). See also Lundahl (2005, 14).

27 “the members of the poorer classes, who after all do also possess some judgment and who are not beasts of burden but human beings” (Wicksell 1896, 117).

28 And this argument is also raised to prevent violent revolution.

29 “And this certainly happens where the whole legislative and tax approval machinery still lies exclusively in the hands of the propertied classes (as it does in Sweden)” (Wicksell 1896, 87).

30 Indeed, Wicksell “embraced Malthusianism with the same kind of enthusiasm that believers display toward religion” (Swedberg 2002, 135).

31 “—merely in order to show how entirely different and much more complex is the character of an event judged from the viewpoint of the social economy, as compared with a similar one judged from the viewpoint of private economy” (Wicksell 1904a, 55).

32 Wicksell had read Comte, Darwin and Spencer and was influenced by sociological thinkers of “kindred spirits” (Swedberg 2002, 136).

33 He preferred to lecture for the workers’ unions and expressed his sympathy toward the Social Democrats (Uhr 1953, 329; Gårdlund 1958, 309).

34 During Wicksell’s time there were close connections between the Social Democrats and the Liberals in Sweden, and Wicksell dwelt in both camps. Yet in a letter to a friend written in March 1900 Wicksell wrote: “I have tended more and more to regard socialism as the most probable system for the future” (Gårdlund 1958, 176).

35 Commentators stress the fact that there is no distinction between positive and normative analysis in Wicksell’s scheme (Silvestre 2003, 530).

36 “The solution of this problem is […] always dependent not only on technical economic considerations, but also on the degree of our sympathies; […] on an ethical or philosophical postulate; […] the reasons must be clearly stated if we are to regard our view as scientifically established” (Wicksell 1901a, 4).

37 For more details on Wicksell’s role as a social reformer see Gårdlund (1958); Uhr (1951, 1962, 1–15); Swedberg (1999, 2002); Johnson (2006, 2010).

38 Practical theory applies the pure theory to the conditions found in reality and undertakes a critical examination of it by modifying the concepts until they are validated or refuted.

39 Usually the “science” corresponds to the theoretical knowledge of the world as it is, and the “art” is the practical knowledge of the world as it ought to be.

40 And before Wicksell, J. S. Mill claimed that: “Not only have different nations and individuals different notions of justice, but in the mind of one and the same individual, justice is not some one rule, principle, or maxim, but many, […] and in choosing between which, he is guided either by some extraneous standard, or by his own personal predilections” (Mill 1863, 81).

41 Obviously, political justice also includes Wicksell’s commitment to universal suffrage. For a study of the unanimity rule, see the works of Uhr (1953, 1962, 168–70); Medema (2005, 17–19); Johnson (2006, 2010).

42 “Emil Sax and those – mainly Italian – writers […] transformed, as it were, or meant to transform, the whole problem of tax justice from an ethical problem into a purely economic one” (Wicksell 1896, 74).

43 See Wicksell (1904b); Silvestre (2003, 531); Johnson (2011, 591).

44 This is in accord with Wicksell’s reference point in the evaluation of state institutions, which for him are to be assessed “in terms of social justice, based on the utilitarian principle” (Silvestre 2003, 530).

45 This is consistent with the importance of value premises in theory, and Wicksell’s way of seeing social reality.

46 See Wicksell (1896, 1900, 1912, 1923a, 1923b).

47 During the 1880s in Sweden, “barely a quarter of the adult male population fulfilled the strict economic conditions attached to the right to vote” (Gårdlund 1958, 137).

48 Mill also emphasizes this danger in society and the risk it could have for the development of the moral sense (Mill 1863, 76; Riley 1988, 179).

49 This rule is needed to defend the property-less class (the majority of society) against the properties class (the minority).

50 Wicksell refers to Turgot, Ricardo, Mill and Senior (Wicksell 1896, 62, 73; 1912, 153).

51 “The day is close when the balance of political power will be overturned. Let the eye rove East or West, North or South, everywhere the centre of gravity of political power is inexorably moving downwards” (Wicksell 1896, 96).

52 During the First World War Wicksell explained that the conflict resulted in a variation in the value of money which in turn earned windfall gains for the richest classes, leading to greater inequalities and new variations in prices in a cumulative way.