ABSTRACT
Knut Wicksell’s analysis of the influence of technical changes on rents and wages in volume 1 of his Lectures ([1901b] 1934: 133-44) has been described as ‘the first modern discussion of technical change and distribution’ by Paul Samuelson (1965: 354). Wicksell was the first economist to apply the then new marginal productivity theory of distribution to the treatment of the effects of technical change on income shares. His discussion of technical progress was in great part motivated by the new chapter ‘On Machinery’ in the third edition of David Ricardo’s ([1821] 1951) Principles, in which Ricardo changed his previous opinion that the introduction of machinery is beneficial to all classes of society, including workers. Ricardo claimed in that chapter that the introduction of machinery could reduce aggregate output, the demand for labour and (although only implicitly) real wages. Wicksell contended that Ricardo was only partly right, since labour-saving technical progress indeed reduces real wages, but cannot lower national income. Wicksell’s criticism of Ricardo has been discussed in the literature (see Sylos-Labini 1969: 133-6; Hansson 1983; Coleman 1985; Samuelson 1988, 1989), with an emphasis on Wicksell’s claim that the fall in real wages increases the profitability of old labour-intensive technology and leads to the reabsorption of workers displaced by the (partial) introduction of new technology.
