ABSTRACT
Triggered by a stimulating paper by Bo Sandelin (1980), there has been a debate about Knut Wicksell’s theory of capital and distribution that is known as “Wicksell’s missing equation.” To this debate have contributed, among others, Sandelin (1980, 1982), Takashi Negishi (1982a,b, 1985 (chapter 9)), Larry Samuelson (1982), and Tom Kompas (1992, chapter 4). The issue under consideration is whether or not Knut Wicksell had put forward a theory of capital and interest that is closed in the sense that the data, or independent variables, from which he started suffice to determine the unknowns, or dependent variables, especially the “natural” rates of wages, rents, and interest. The mentioned authors claim that there is one equation “missing” in Wicksell’s theory and that his formal system of equations is underdetermined. The question then is how to close the system in a way that is faithful to Wicksell. The authors under consideration differ in terms of the closures they suggest.
