Nowadays Keynesian economics is the most visible legacy of the debates about macroeconomic issues that marked the 1920s and 1930s. That is because Keynes and his associates were successful, in the well-defined sense of laying down an agenda for research, a syllabus for instruction, and a program for the conduct of policy that dominated the subject for three decades. In the 1920s and 1930s, however, Cambridge was but one of a number of centers where potentially important developments in what we would now call macroeconomics took place. Austrian business cycle theory, developed in Vienna and at the London School of Economics, and the work of the Stockholm School on problems of “monetary equilibrium,” attracted just as much attention as the efforts of Keynes and his associates, and no sign in the pre-1936 literature warned how quickly and completely Keynesian economics would come to dominate the discipline.

That two bodies of work could fail as completely as those produced by the Austrians and the Stockholm School are now commonly judged to have done presents an interesting problem in and of itself, and one of the aims of this paper is to investigate the nature of these failures. It has a second purpose though. Both the Austrians and the Stockholm School were self-consciously working on problems that grew out of the work of Knut Wicksell, indeed the very same problems. Even so, by about 1936 the Stockholm School had arrived at a set of ideas that some commentators (e.g., Shackle, 1967) claim anticipated to an important extent those of Keynes's General Theory, and that at the very least enabled them readily to understand and assimilate Keynes's thought.