Interest and Prices: A Study of the Causes Regulating the Value of Money

By Knut Wicksell

This antiquarian volume contains a fascinating treatise on interest-rates and prices in the late nineteenth century. Containing a wealth of interesting historic information on the state of the economy at this pivotal point in history, this is a text that will be of much value to those with an interest in the history and development of the modern economy, and is not to be missed by collectors of such literature. The chapters of this book include: 'Purchasing Power of Money and Average Prices', 'Relative Prices and Money Prices', 'The So-Called Cost of Production Theory of Money', 'The Quantity Theory and its Opponents', 'The Velocity of Circulation of Money', 'The Rate of Interest as Regulator of Commodity Prices', etcetera. This antiquarian book is being republished now in an affordable, modern edition complete with a new prefatory biography of the author. 'Interest and Prices' was first published in 1898.

• Language: English
• Publisher: Read Books Ltd.
• Release date: Mar 23, 2011
• ISBN: 9781446547328

Book preview

CHAPTER 1

INTRODUCTORY

CHANGES in the general level of prices have always excited great interest. Obscure in origin, they exert a profound and far-reaching influence on the whole economic and social life of a country.

Relative variations in the exchange values of individual groups of commodities are a necessary and obvious result of changes in the conditions of production and of technical improvements. The damage which they cause to individual classes of producers and of consumers is, to a greater or lesser extent, adjusted as a result of changes in demand or of the movement of capital, labour, and land, from those spheres of production which are now less remunerative to those which have become more remunerative.

But it is a different matter when a rise or fall occurs in the money prices of all, or of most, commodities. Adjustment can no longer proceed through changes in demand or through a movement of factors of production from one branch of production to another. Its progress is much slower, being accomplished under continual difficulties, and it is never complete; so that a residue, either temporary or permanent, of social maladjustment is always left over.

A general rise in prices is, of course, to the disadvantage of all those who receive fixed money incomes, as is the case to-day with a constantly increasing number of social groups. It is also to the disadvantage of all those who derive the whole, or a large part, of their incomes by lending money capital of one kind or another. (These constitute a class which is, of course, in no way confined to the class of real capitalists.) This is at any rate the case so long as a corresponding rise in the rate of interest does not happen to offset the fall in the purchasing power of money. Lastly, a general rise in prices is to the disadvantage of labour, so long as it has not the power to enforce a corresponding rise in wages. But it must not be forgotten that a rise in wages may precede a rise in prices, acting as its direct cause. It will indeed appear later that this must be regarded as the most probable procedure whenever the rise in the price level is gradual and permanent, as opposed to those more fortuitous changes which are brought about by speculative buying and the like. That being so, it is not possible, without further qualification, to speak of a rise in prices as causing a general injury to labour. On the other hand, an upward movement of prices acts undoubtedly as a stimulus to the spirit of enterprise; though this advantage is possibly more apparent than real, for it is only too often associated with unhealthy speculation, based on what is a boom on paper rather than in actual economic fact, and culminates in over-expansion of credit, credit disturbances, and