Ricardo and Wicksell on Monetary Economy

Abstract

This paper expounds the characteristics of both D. Ricardo's and K. Wicksell's theory of monetary economy. By comparing them, we find a clue to the re-examination of the history of macroeconomics from classical economists to J. M. Keynes.
Wicksell, a pioneer of 20th century's macroeconomics, had a great respect for Ricardo's view of prices, and regarded it as the starting point of his own theory, in spite of his several criticisms of it. Indeed, Ricardo's view anticipated that of Wicksell more than Wicksell realized. We can cofirm this in Ricardo's comment on the relation of interest to price movements and the role of the banking system in it. While Wicksell is often referred to as a forerunner of Keynes, we are apt to take Ricardo merely as a proponent of Say's law and quantity theory of money, and hence the founder of ‘classics’ as Keynes said. But, after the above consideration, we ought to revalue Ricardo's view, and place it in the origin of the stream of thought which developed, via Wicksell's theory of price fluctuations, into Keynes's General Theory.