Cumulative Process Models from Thornton to Wicksell

Abstract

The celebrated Wicksellian theory of the cumu-lative process is a landmark in the history of mone-tary thought. It gave economists a dynamic, three-market (money, credit, goods) macromodel capable of showing what happens when banks, commercial or central, hold interest rates too low or too high. With it one could trace the sequence of events through which money, interest rates, borrowing, spending, and prices interact and evolve during inflations or deflations. The prototype of modern interest-pegging models of inflation, it influences thinking even today. It also confirms the adage, well known to historians of science, that no scientific discovery is named for its original discoverer [19, p. 147]. For, as documented below, it was not Knut Wicksell but

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