Aims of the lecture

• 1. To explain how economists thought about macroeconomic problems before Keynes’s General Theory (1936).

• 2. To show that the early twentieth century was a very creative period in macroeconomic theory.

• 3. To illustrate this using the examples of Irving Fisher and Knut Wicksell.

Bibliography

The main texts covered in this lecture are those of Irving Fisher and Knut Wicksell.

Irving Fisher’s The Purchasing Power of Money (New York: Macmillan, 1911) is the classic statement of Fisher’s version of the quantity theory of money. It is available online at http://oll.libertyfund.org/titles/fisher-the-purchasing-power-of-money (accessed 26 October 2017).

Fisher’s “The Debt-Deflation Theory of Great Depressions”, Econometrica 1:4 (1933), 337–57, explains the Great Depression. Note that though this appears in a technical journal, Fisher’s article employs solely verbal analysis, supported by graphs and statistics.

In addition to reprinting Fisher’s main works, the 14 volumes by W. J. Barber, R. Dimand and K. Foster (eds), The Works of Irving Fisher (London: Pickering & Chatto, 1996), contain relevant selections from unpublished correspondence and other materials such as talks he gave. For example, it includes his (in)famous talk on the eve of the Wall Street Crash claiming that the United States was entering a new era of prosperity.

Wicksell’s most comprehensive statement of his ideas on monetary economics is Knut Wicksell, Interest and Prices: A Study of the Causes Regulating the Value of Money [1898], R. F. Kahn (trans.) (London: Macmillan, 1936), which is available online at https://archive.org/details/interestandprice033322mbp (accessed 26 October 2017).

Wicksell’s Lectures on Political Economy, volume 2 [1906], E. Classen (trans.) (London: Routledge & Kegan Paul, 1935), gives a slightly later account of the theory, and his “The Influence of the Rate of Interest on Prices”, Economic Journal 17 (1907), 213–20, gives a brief summary of his ideas.

David Laidler’s The Golden Age of the Quantity Theory (Princeton, NJ: Princeton University Press, 1991) covers the period leading up to the First World War, focusing on Fisher, the Cambridge school (Marshall and Pigou) and Wicksell, though also with useful chapters on monetary theories of the cycle and on monetary policy problems of the period.