Wicksell p found it remarkable that from a technical point

Wicksell (1958 [1900]), p. 105) found it “remarkable” that “from a technical point of view” production attains its maximum under free competition. He claimed throughout volume 1 of his Lectures (pp. 164–165, 196–197) the significance of his demonstration that the search for maximum net profit leads to maximum national income. Wicksell (ibid) acknowledged that he “proved this on the assumption of production without capital, but it will easily be seen that its essence remains unchanged, like the objection of Ricardo, which it was our purpose to refute, even if the argument is applied to capitalistic production”. As explained by Wicksell in part III of his Lectures, if capital accumulation is taken into account, production will reach its maximum when the economy is “satiated with capital”, at zero marginal productivity of capital and interest rate (this corresponds to the concept of “Ramsey\'s Bliss” as the culmination of the capital accumulation process; see Boianovsky, 1998). Although Pareto is not mentioned in the Lectures’ section about technical progress, it is clear that Wicksell\'s restatement of the machinery question aimed not just at Ricardo\'s chapter 31 but also at Pareto\'s optimality: In his review of the Manuel, Wicksell (1958 [1913], pp. 169–170) took Pareto to task for overlooking the contradiction between the notion that production is maximized under free the and the “impressions and opinions of everyday life”. This was illustrated by Ricardo\'s claim that the private gain of a producer might be better suited by a reduction of his gross product, which apparently expressed what “experience teaches us”. Wicksell referred to his argument that the transition to production with smaller gross return could only be partial, which vindicated Pareto\'s result that production coefficients under free competition are the same as in a socialist economy. However, differently from a market economy, a socialist society would in principle ensure that the increase in output was not appropriated by a few while the welfare of the “broad mass” of the population worsened. Wicksell (pp. 170–171) observed that “there is no trace of any such considerations in Pareto. He is content to derive a more or less self-evident proposition by the elegant formulae of the calculus of variation”. In case the introduction of machinery brought wages all the way down below subsistence level, Wicksell (1934 [1901,1911], p. 141) suggested that, instead of enforcing minimum wage, a better solution would be to supplement the deficiency with transfer taxation paid by landowners, while letting wages fall to their full-employment marginal productivity level. As pointed out by Samuelson (1989, p. 55), Wicksell\'s view that transfer payments can “bribe people into accepting a new Pareto-optimal equilibrium” anticipated some aspects of the 1930s new welfare economics’ notion of winners compensating losers (see also Humphrey, 2004, pp. 17–18). The concept of compensating payments enlarges the area of comparability between Pareto optimal positions (cp. Chipman, 1976, p. 92, who has shown that some elements of the Compensation Principle may be found already in Pareto, 1894). As a corollary of Wicksell\'s analysis of the machinery question, any policy that leads to an increase in physical output is recommendable, regardless of the question of comparability of individual utilities, since individuals may be compensated and made better off without making others worse off (cf. Kaldor, 1939). Surely, the meaning of “compensation” in this context is quite distinct from Marx\'s “compensation theories” discussed in the previous section. Wicksell also applied his framework, originally devised for interpreting the machinery question, to examine the effects on income distribution of shifts in relative prices of goods, in both closed and open economies. His output maximization result holds only for a closed economy. If the economy is open, the new position of equilibrium after the introduction of machinery is not reached until labour (or capital) “has been transferred abroad, so that the raising of the gross returns occurs only in the world economy, not in the restricted nationalistic sense”, with the same negative effects on domestic wages (Wicksell, 1958 [1913], p. 170). Changes in the demand for productive factors may be induced not just by technical progress, but also by shifts in relative prices. Wicksell (1919) argued that an increase in the international price of land-intensive primary commodities (such as iron ore and wood produced by Sweden), relatively to manufactured goods, brings about higher demand and price of the abundant factor (land) and a reduced demand and price of the scarce factor (labour). If the increase in relative price is strong enough, then, under competitive conditions, wage reduction may lead to migration. “For the world economy as a whole this would be highly advantageous; from the point of view of the world economy nothing is more beneficial than that those parts of the earth best suited to the production of raw materials be devoted to such purpose; for the Swedish people, as a nation, it is a different matter” (Wicksell, 1919, p. 17). Wicksell derived a Stolper–Samuelson effect in a two-good, two-factor model – related to the Dutch disease concept developed later in the 1970s – which would provide the starting-point for Eli Heckscher\'s elaboration of his seminal trade model (see Boianovsky, 2013, pp. 63–64, and references there cited). Once again, Ricardo was the benchmark, this time as a further development of his theory of comparative advantages.