Lectures on Political Economy (Routledge Revivals)

Volume I: General Theory

Knut Wicksell

• Publisher: Routledge
• Year: 2022
• eBook ISBN: 9781136857416
• Edition: 1
• Topic: Economics
• Subtopic: Economic History
• Index: Economics

First published in English in 1934, this Routledge Revival is a reissue of Volume Iof Swedish economist Knut Wicksell's hugely influential work two volume workon political economy, a text which influenced ageneration of economists. Concernedpredominiantly with a mathematical treatment of issues of economictheory, the firstvolume dealsspecifically the theory of value, the theory of production and distribution and the theory of capital accumulation. Wicksell examines the origin of interest and offers a solution to the problem of distribution under capitalistic production, referencing the work of Eugen vom Böhm-Bawerk and Karl Gustav Cassel.

PART II

THE THEORY OF PRODUCTION AND DISTRIBUTION

BIBLIOGRAPHY.—There still exists no exhaustive presentation of this subject on modern lines; at least, not in an elementary form. Walras in his Éléments once and for all correctly formulated the solution to the problems of production, distribution, and exchange as a whole, but his treatment of the economic function of capital is hardly satisfactory. Böhm-Bawerk, on the other hand, whose work Kapital und Kapitalzins¹—and especially its latter part, Positive Theorie des Kapitals²—is the chief source for the modern theory of capital, did not concern himself with the synthetic treatment of the problem of production and distribution as a whole. An attempt to combine the work of both these writers into a single whole is to be found in my essay, Üher Wert, Kapital und Rente; and also in the elegant but unfortunately unfinished articles of Enrico Barone, “Studi sulla Distribuzione” (Giornale degli Economisti, 1896). P. H. Wicksteed’s succinct Co-ordination of the Laws of Distribution³,⁴ (London, 1894) is interesting and rich in ideas—but not easy to read. Jevons’ Theory of Political Economy contains many instructive, though scattered, remarks on production. The most exhaustive treatment of the subject in English, from the modern point of view, is to be found in Marshall’s Principles of Economics, an abridgment of which was published under the title Elements of the Economics of Industry.

An original writer, unfortunately to a large extent self-taught, is the German, Effertz, who in several works (of which the earliest is contemporary with the Positive Theorie des Kapitals) develops views similar to those of Böhm-Bawerk; they are often very well stated.

We have hitherto examined, as far as it has been possible to do, the process of valuation of the material objects or direct personal services with which we satisfy our needs. We shall now consider how the available stocks of goods (and, strictly speaking, personal services also, in so far as the supply of services presupposes a supply of consumable goods) are maintained, renewed, and replaced. In other words, we shall now consider production.

As has already been indicated, the problem of value and exchange cannot be finally solved unless attention is simultaneously paid to production. Production, on the other hand, as it actually takes place, cannot be understood except in association with the laws of exchange and exchange value. In reality, exchange, and consequently valuation, enter into all production. Even in an individual’s production with his own resources for his own needs there is always, at least in the wider sense of the word, an exchange (or choice); the resources can be used either in direct consumption or in indirect consumption—through the medium of production. Thus, for example, anyone who has labour available, so long as he is a free human being, has the choice of using his working hours either for rest or diversion, or for productive employment in the ordinary sense. The element of exchange naturally appears even more clearly in production which is carried on in association with outside labour or other factors; or when the product is intended for consumption by others, as is the case nowadays with the vast majority of goods produced. In the former case, there is, of course, a direct exchange of factors of production—land, labour, and capital—against their necessary remuneration—wages, rent, and interest. In the latter case, production proceeds with constant reference not only to the volume of the output which can be obtained, but also to the exchange value anticipated or already determined on the market. In the majority of practical cases, both of these considerations are present.

Production and exchange can only be separated by a process of abstraction; but such abstraction is an invaluable aid in the survey and examination of what at first sight appear to be hopelessly complicated phenomena. For this reason, we have hitherto assumed, in our examination of the principles governing market values, that the supplies in the market to meet the needs of consumers in a given period are given in advance; although, naturally, these supplies are continuously affected in reality by new production—especially in modern times with highly developed communications. In the same way we can, and shall for a while, in our treatment of production and distribution, ignore the changes in the exchange value of goods which are constantly brought about by relative changes in production and consumption. In other words, we assume, in the first instance, that for the society in question these exchange values are given—as they approximately are in reality for every individual producer, in his relation to the market as a whole. A concrete case of this kind would arise if a country or some smaller area produced only one or a very few staple commodities and imported everything else it required; so that all exchange values could be assumed to be determined in advance by the market of some larger area, or even the world market.

For a first approximation, we may also introduce another important simplification. As we have already said, every owner of a factor of production can choose between two methods of employing it: directly or in the service of production. Even if the relative exchange values of goods are given in advance, the need will constantly arise for the individual to weigh up against one another, on the one hand, the goods which he obtains, or can obtain, in return for his productive services and, on the other hand, the enjoyment he obtains from being able to dispose of them freely on his own account; as, for example, by having more leisure. We shall, however, assume for the present that the utility of the various factors of production, after a certain amount has been set aside for the owner’s direct consumption, becomes so insignificant for this purpose that it need not be taken into account in comparison with the indirect utility derived from their productive employment. And this assumption may be made without danger in the case of several factors of production. Private owners of building sites in cities do not usually leave any part unoccupied in order to retain it as a promenade ground. No landowner—unless he were a very exceptional person—would allow arable land to lie waste or would use it as a hunting ground. Still less has the owner of capital any choice in this respect; in order to obtain any yield from his capital he must employ it productively or, what generally amounts to the same thing, lend it to someone else. The personal, unproductive use of capital would almost necessarily be tantamount to its partial destruction. Dwelling-houses occupied by the owner constitute no exception to this rule, for the only possible productive use for such capital goods is that they should be occupied as dwellings.

Hence it is approximately true of land and capital—that is to say, of the capital existing at any given moment of time—that they enter as a whole into production. On the other hand, we cannot reasonably say the same thing about labour. It is a physical impossibility to work regularly for the whole twenty-four hours of the day, and even if working hours were limited to the maximum time which can be devoted to work in the long run, the labourer’s position would still be so miserable that only the most acute necessity would keep him from converting a little of his working time to leisure purposes. To the older economists, who generally held that the natural and average wages of labour exactly corresponded to the minimum of subsistence of the labourer and his family, it was natural to regard individual labour and hours of labour as a fixed and definite quantity, the limits of which were set only by the physical powers of the labourer. It is characteristic that when Adam Smith discusses the problem whether labourers are likely to respond to a rise in wages, by devoting more time to leisure he only does so in order to absolve them from this charge. Nowadays, when wages have fortunately risen somewhat above the subsistence level and when the limitation of working hours in order to give the worker an opportunity for educational and cultural activities has become one of the most eagerly sought objectives, especially on the part of the workers, this assumption is no longer permissible. Our use of it here will be only provisional, in order to simplify the argument. We must also remember that, in certain occupations (particularly the manufacturing industries), the amount of time devoted to production (especially the length of the working day) is largely determined independently of the individual worker, by collective agreements—which may be denounced collectively, but not individually, excepting in so far as an individual may occasionally “take a day off”.

We also ignore here the practically very important circumstance that the mental and physical health and strength of the worker, and consequently the efficiency of labour, are largely dependent on the wages received and, within certain limits, rise and fall with the wage.

Changes in the supply of labour due to movements of population—natural increase, emigration, immigration—are quite different in kind from these and may be disregarded here. For the most part, they are due to other than purely economic causes and only rarely do they cause the supply of labour available at a given moment, or in the near future, either to increase or decrease.

In the long run, of course, not only the total supply of labour, but also that of capital, and indeed of land also—or at any rate the available supply—will be subject to more or less extensive changes. The same is also true of labour on the qualitative side, in so far as changes in the manner of living, improved education, and upbringing may cause considerable changes in the efficiency of the available supply of labour. In a complete analysis of economic phenomena, these changes must of course be duly noted; for the moment, however, we shall content ourselves with what has been called the static aspect of the problem of equilibrium, i.e. the conditions necessary for the maintenance, or the periodic renewal, of a stationary state of economic relations.

If the country or area which was mentioned above were a unified economic unit, in which everything was produced and exchanged with the outside world on common account, the whole problem of production would be a purely technical one. Given the supply of factors, it would merely be a question of maximizing the production of the particular commodity produced by the country. If several commodities were produced—all of which were, in some measure, sold abroad at given prices—the object would be to maximize exchange value. Again, the distribution, whether of the direct output or of its equivalent obtained by exchange, would be an independent question and would be regulated by other than purely economic considerations.

The problem is different, at least at first sight, when production proceeds, as it...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Original Title
• Original Copyright
• Table of Contents
• Introduction by Professor Lionel Robbins
• Author’s Preface to Second Edition
• Introduction
• I. The Theory of Value
• II. The Theory of Production and Distribution
• III. Capital Accumulation
• Appendices