Knut Wicksell on Poverty: No Place Is Too Exalted

By Mats Lundahl | Go to book overview

4

The centerpiece of Wicksell's theory

Diminishing returns

The centerpiece of Knut Wicksell's writings on population growth and poverty is diminishing returns. Had it not been for diminishing returns, the population problem would have been much easier to solve but, as diminishing returns prevail everywhere in the economy, there is an inexorable tendency for population growth to result in a reduction of per capita income and wages. Wicksell was completely convinced that these diminishing returns were strong enough to swamp the productivity-increasing effects of technological progress in the long run. Not only that, but in his Lectures in Political Economy he wrote (Wicksell, 1934:214):

The unprecedented growth of the population recently witnessed in Europe, and still more in some extra-European countries, will certainly, sooner or later-probably in the course of the present century-prepare the way for much slower progress and possibly for completely stationary conditions.

At the core of this gloomy prediction we find the notion of diminishing returns.


The Swedish problem

On several occasions, Knut Wicksell gave voice to his pessimism with respect to the ability of the Swedish economy to increase production. He did not see as sustainable the 'extraordinary material progress' that Sweden as well as 'the civilized world in general' (Wicksell, 1887a:22) had experienced during the preceding century. Agriculture could expand only slowly and the output of forest and iron products could not increase at rates equal to those of the past. Wicksell saw diminishing returns setting in everywhere. He did not hesitate in his discussion of the remedy. If income could not be made to expand fast enough, expenditures had to be reduced. 'It is possible, at least

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Knut Wicksell on Poverty: No Place Is Too Exalted
Table of contents

Table of contents

  • Title Page ix
  • Contents xiii
  • Preface xv
  • 1 - Introduction 1
  • 2 - Tumultuous Beginnings 8
  • 3 - The Causes of Population Growth 23
  • 4 - The Centerpiece of Wicksell's Theory 30
  • 5 - Overpopulation, Specialization, and Trade 39
  • 6 - Emigration 50
  • 7 - The Optimum Population 59
  • 8 - Wicksell's Views 69
  • 9 - Why Was Wicksell Accused of Lack of Originality? 86
  • Notes 105
  • References 109
  • Index 117
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