The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Wicksell’s Theory of Capital

  • Massimo Pivetti
Reference work entry


Wicksell first developed his real theory of capital on ‘the purely imaginary assumption’ that the phenomena of capital and interest could take place without the intervention of money or credit; he then endeavoured to bring to light the modifications that are called for by the appearance of money, and by so doing he laid the foundation of this century’s dominant approach to money and real magnitudes. Wicksell’s theory can actually be said to have established the basis of mainstream long-period analysis of the economy, with its explanation in real terms of the equilibrium rate of interest and the conception of money as a factor that may be important to the gravitation of the economy towards its equilibrium position but not as a determinant of that position.

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Massimo Pivetti
    • 1
  1. 1.