John Stuart Mill and Wicksell’s cumulative process

Sotiropoulos, Dimitris (2008). John Stuart Mill and Wicksell’s cumulative process. Bulletin of Political Economy, 2(1) pp. 67–78.

Abstract

This article deals with the particular connection between the cumulative process in the writings of Knut Wicksell and John Stuart Mill. Although, the idea of the cumulative process is mainly attributed to Thornton, Mill was the first to emphasize that the discrepancy between the market rate of interest and the expected yield of investment were the reason why the prices generally increased during the first stages of the business cycle. Thus, he stressed the crucial role of investment, regarding the cumulative process as a disequilibrium situation, in which the net investment is positive and constantly increasing as a result of future expectations for profits. The connection between Mill’s and Wicksell’s argumentations points out that the introduction of money and credit into a barter economy in no way serves to discredit Say’s Law.

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