Skip to main content Accesibility Help
×
×
Home
Austrian Capital Theory
Austrian Capital Theory

This Element presents a new framework for Austrian capital theory, starting from the notion that capital is value. Capital is the value attributed by the valuer at any moment in time to the combination of production-goods and labor available for production. Capital is the result obtained by calculating the current value of a business-unit or business-project that employs resources over time. It is the result of a (subjective) entrepreneurial calculation process that relates the flow of consumptions goods to the value of the productive resources that will produce those consumptions goods. The entrepreneur is a ubiquitous calculating presence. In a review of the development of Austrian capital theory, by Carl Menger, Eugen von Böhm-Bawerk, Ludwig von Mises, Friedrich Hayek, Ludwig Lachmann as well as recent contributions, the Element incorporates the seminal contributions into the new framework in order to provide a more accessible perspective on Austrian capital theory.

  • Copyright
  • COPYRIGHT: © Peter Lewin and Nicolas Cachanosky 2019
Bierwag, G., & Fooladi, I. (2006). Duration analysis: An historical perspective. Journal of Applied Finance, 16(2), 144160.
Bierwag, G., Kaufman, G., & Toevs, A. (1983). Duration: Its development and use in bond portfolio management. Financial Analysts Journal, 39(4), 1535.
Birner, J. (1999). The place of the Ricardo effect in Hayek’s economic research programme. Revue d’économie politique, 109(6), 803816.
Böhm-Bawerk, E. v. (1890). Capital and Interest: A Critical History of Economical Theory. (G. D. Senholz, trans.). South Holland, IL: Libertarian Press, 1959.
Bornier, J. M. (n.d.). Comparing Menger and Böhm-Bawerk on capital theory. Retrieved from http://junon.univ-cezanne.fr/bornier/lastp.html
Braun, E. (2015a). Carl Menger’s contribution to capital theory. History of Economic Ideas, 23(1), 7799.
Braun, E. (2015b). The theory of capital as a theory of capitalism – hidden Austrian contributions to a historically specific approach to capital. Retrieved from: https://ideas.repec.org/p/tuc/tucewp/0015.html
Braun, E. (2017). The theory of capital as a theory of capitalism. Journal of Institutional Economics, 13(2), 305325.
Braun, E., Lewin, P., & Cachanosky, N. (2016). Ludwig Von Mises’s approach to capital as a bridge between Austrian and institutional economics. Journal of Institutional Economics, doi:10.1017/S1744137416000102.
Cachanosky, N., & Lewin, P. (2014). Roundaboutness is not a mysterious concept: A financial application to capital theory. Review of Political Economy, 26(4), 648665.
Cachanosky, N., & Lewin, P. (2016a). Financial foundations of Austrian business cycle theory. Advances in Austrian Economics, 20, 1544. Retrieved from: http://doi.org/10.1108/S1529-213420160000020002
Cachanosky, N., & Lewin, P. (2016b, September). An empirical application of the EVA® framework to business cycles. Review of Financial Economics, 30, 6067, http://doi.org/10.1016/j.rfe.2016.06.006
Cachanosky, N., & Lewin, P. (2018). The role of capital structure in Austrian business cycle theory. Journal of Private Enterprise, 8(2), 268280.
Clark, J. B. (1893). The genesis of capital. Yale Review, 302315.
Clark, J. B. (1988 [1888]). Capital and Its Earnings. New York, NY: Garland.
Cohen, A. J., & Harcourt, G. C. (2003). Whatever happened to the Cambridge Capital controversies? Journal of Econonomic Perspectives, 17(1), 199214.
Dorfman, R. (1959a). A graphical exposition of Böhm-Bawerk’s interest theoryThe Review of Economic Studies26(2), 153158.
Dorfman, R. (1959b). Waiting and the period of productionThe Quarterly Journal of Economics73(3), 351372.
Faber, M. (1979). An Introduction to Modern Austrian Capital Theory. New York, NY: Springer-Verlag.
Felipe, J., & Fisher, F. M. (2006). Aggregate production functions, neoclassical growth models and the aggregation problem. Estudios de Economica Applicada, 24(1), 127163.
Felipe, J., & McCombie, J. S. (2014). The aggregate production function: ‘not even wrong.’ Review of Political Economy, 26(1), 6084.
Fetter, F. A. (1977). Capital, Interest and Rent: Essays in the Theory of Distribution. Kansas City, MO: Sheed, Andrews and McMeel.
Fisher, F. M. (1993). Aggregation: Aggregate Production Functions and Related Topics. Cambridge, MA: MIT Press.
Fisher, F. M. (2005). Aggregate production functions: A pervasive but unpersuasive fairy tale. Eastern Economic Journal, 3, 489491.
Fisher, I. (1906). The Nature of Capital and Income. London: Macmillan.
Fowler, R. F. (1934). The Depreciation of Capital Analytically Considered. London: P. S. King & Son.
Garrison, R. (2001). Time and Money: The Macroeconomics of Capital Structure. London: Routledge.
Garrison, R. W. (2006). Reflections on reswitching and roundaboutness. In Koppl, R., ed., Money and Markets: Essays in Honor of Leland B. Yeager. New York, NY: Routledge, 186206
Hayek, F. A. (1931). Prices and Production, 2 edn. London: Routledge and Kegan Paul,1935.
Hayek, F. A. (1932). Capital consumption. In Hayek, F. A. & Mcloughry, R., eds., Money, Capital and Fluctuations, Early Essays, [1984]. (From Welschaftliches Archiv 36(1), 136158, translated from the German “Kapitalaufzehrug” by Greta Heinz). Reprinted in Capital and Interest (Vol. 11 in The Collected Works of F. A. Hayek, White, L. H., ed.). Chicago: University of Chicago Press.
Hayek, F. A. (1934). On the relationship between investment and output. Economic Journal, 44(174), 207231. As reprinted in Hayek, F. A. (2015), chapter 6, 75–99.
Hayek, F. A. (1935). The maintenance of capital. Economica, n.s. 2(7), 241276, as reprinted in F. A. Hayek (2015), chapter 10, 156–189.
Hayek, F. A. (1936a). The mythology of capital. The Quarterly Journal of Economics, 50(2), 199228, as reprinted in F. A. Hayek (2015) chapter 8, 11–140.
Hayek, F. A. (1936b). Technical progress and excess capacity. Lecture delivered in April 1936, as reprinted in Hayek (2015), chapter 9, 141–155.
Hayek, F. A. (1937a). Economics and knowledge. Economica, n.s., IV, 3354.
Hayek, F. A. (1937b). Investment that raises the demand for capital. Review of Economics and Statistics, 19(4), 174177.
Hayek, F. A. (1939). Profits, Interest and Investment and Other Essays on the Theory of Industrial Relations. New York, NY: Augustus Kelly.
Hayek, F. A. (1941a). The Pure Theory of Capital (Vol. 12 of The Collected Works of F. A. Hayek, 2007, White, L. H., ed.) Chicago: University of Chicago Press.
Hayek, F. A. (1941b). Maintaining capital intact: Reply. Economica, n.s. 8(31), 276288, as reprinted in Hayek (2015), chapter 12.
Hayek, F. A. (1994). Hayek on Hayek, and Autobiographical Dialogue. (S. K. L. Wenar, ed.). Chicago: University of Chicago Press. Republished by Liberty Fund, Indianapolis, 2008.
Hayek, F. A. (2015). Capital and Interest (Vol. 11 in The Collected Works of F. A. Hayek, White, L. H., Ed.) Chicago: University of Chicago Press.
Hicks, J. R. (1939). Value and Capital. Oxford: Oxford University Press.
Hicks, J. R. (1942). Maintaining capital intact: A further suggestion. Economica n. s., 9(34), 174179.
Hicks, J. R. (1973a). Capital and Time: A Neo-Austrian Theory. Oxford: Oxford University Press.
Hicks, J. R. (1973b). The Austrian theory of capital and its rebirth in modern economics. In Hicks, J. R., & Weber, W., Eds., Carl Menger and the Austrian School of Economics. Oxford: Clarendon Press. Reprinted in Hicks (1983), 96102.
Hicks, J. R. (1976). Some questions of time in economics. In Tang, A. M. & Westfield, F. M., eds., Evolution, Welfare and Time in Economics, Festschrift in Honor of Nicholas Georgescu-Roegenr. Lexington: Lexington Books. Reprinted in Hicks (1984), 263280.
Hicks, J. R. (1979a). Is interest the price of a factor of production? In Rizzo, M., ed., Time, Uncertainty and Disequilibrium. Lexington: Lexington Books. Reprinted in Hicks (1983), 113138.
Hicks, J. R. (1979b). Causality in Economics. Oxford: Basil Blackwell.
Hicks, J. R. (1983). Classics and Moderns: Collected Essays on Economic Theory, Vol. III. Cambridge: Harvard University Press.
Hicks, J. R. (1984). The Economics of John Hicks. Selected and with an introduction by Dieter Helm. Oxford: Basil Blackwell.
Hodgson, G. M. (2014). What is capital? Economists and sociologists have changed its meaning: Should it be changed back? Cambridge Journal of Economics, 38, 10631086.
Horwitz, S. (2011). Contrasting concepts of capital: Yet another look at the Hayek-Keynes debate. The Journal of Private Enterprise, 27(1), 927.
Jevons, W. S. (1888 [1871]). The Theory of Political Economy. London: Macmillan & Co. Retrieved from: www.econlib.org/library/YPDBooks/Jevons/jvnPE.html
Keynes, J. M. (1936). The General Theory of Employment, Interest and Money. London: Macmillan.
Kirzner, I. M. (1966). An Essay on Capital. New York, NY: Augustus M. Kelly.
Koppl, R. (2014). From Crisis to Confidence: Macroeconomics after the Crash. London: Institute of Economic Affairs.
Lachmann, L. M. (1947). Complementarity and substitution in the theory of capital. Economica, 14, 108119.
Lachmann, L. M. (1948). Investment repercussions. The Quarterly Journal of Economics, 62(5), 698713. Reprinted in Lachmann (1994), chapter 9.
Lachmann, L. M. (1956). Capital and Its Structure. Mission, KS: Sheed, Andrews and McMeel, 2nd edn 1978.
Lachmann, L. M. (1986). The Market as Economic Process. Oxford: Basil Blackwell.
Lachmann, L. M. (1994). Expectations and the Meaning of Institutions: Essays in Economics by Ludwig M. Lachmann (Lavoie, D., ed.). New York, NY: Routledge.
Lester, R. B., & Wolf, J. S. (2013). The empirical relevance of the Mises–Hayek theory of the trade cycle. Review of Austrian Economics, 26(4), 433461.
Lewin, P. (1997). Capital and time: Variations on a Hicksian theme. Advances in Austrian Economics, 4, 6374.
Lewin, P. (1998). The firm, money, and economic calculation: Considering the institutional nexus of market production. American Journal of Economics and Sociology, 57(4), 499512.
Lewin, P. (2011 [1999]). Capital in Disequilibrium. Auburn, AL: Ludwig von Mises Institute.
Lewin, P. (2013). Hayek and Lachmann and the complexity of capital. In Garrison, R., ed., The Elgar Companion to Hayek. Cheltenham: Edward Elgar, chapter 8.
Lewin, P., & Cachanosky, N. (2016). A financial framework for understanding macroeconomic cycles. Journal of Private Enterprise, 33(2), 2132.
Lewin, P., & Cachanosky, N. (2018a). Value and capital: Austrian capital theory, retrospect and prospect. Review of Austrian Economics, 3(1), 126.
Lewin, P., & Cachanosky, N. (2018b). The average period of production: The history of an idea. Journal of the History of Economic Thought, 40(1), 8198.
Lewin, P., & Cachanosky, N. (2018c). Substance and semantics: The question of capital. Journal of Economic Behavior & Organization, 150(June), 423431.
Luther, W. J., & Cohen, M. (2014). An empirical analysis of the Austrian business cycle theory. Atlantic Economic Journal, 42(2), 153169. Retrieved from: http://doi.org/10.1007/s11293-014–9415–5
Macaulay, F. R. (1938). The Movements of Interest Rates. Bond Yields and Stock Prices in the United States since 1856. New York, NY: National Bureau of Economic Research.
McClure, J. E., Spectre, L. C., & Chandler, D. (2018). Hayek’s tacit knowledge. SSRN. Retrieved from: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3213973
Menger, C. (1871 [translated 1976]). Principles of Economics. (J. D. Hoselitz, trans.) Auburn, AL: Ludwig von Mises Institute, republished 2007.
Menger, C. (1888). Zur Theorie des Kapitals. Jahrbücher für Nationalökonomie und Statistik, 17, 149.
Menger, C. (1892). On the origin of money. The Economic Journal, 2(6), 239255.
Mises, L. v. (1912). The Theory of Money and Credit. (H. Batson, trans.). Indianapolis, IN: Liberty Fund, 1981.
Mises, L. v. (1920). Economic calculation in the socialist commonwealth. In Hayek, F. A., ed., Collectivist Economic Planning. London: Routledge and Sons, 87103.
Mises, L. v. (1922 [2011]). Socialism: An Economic and Sociological Analysis. Indianapolis, IN: Liberty Fund.Mises, L. v. (1949, 4th edn [1996]). Human Action. Irvington on Hudson, NY: Foundation for Economic Education.
Mises, L. v. [1931](2003). Inconvertible capital. In Mises, L. V., Epistemological Problems of Economics, 3rd edn (G. C. Reisman, trans.). Auburn, AL: Mises Institute, 231246. Retrieved from: https://mises.org/library/epistemological-problems-economics
Mises, L. v. (2003 [1933], 3rd edn). Epistemological Problems of Economics. (G. B. Reisman, trans.) Auburn, AL: Ludwig von Mises Institute. Retrieved from: https://mises.org/library/epistemological-problems-economics
Mulligan, R. F. (2002). A Hayekian analysis of the structure of production. Quarterly Journal of Austrian Economics, 5(2), 1733.
Murphy, R. P. (2015). Choice, Cooperation, Enterprise and Human Action. Oakland, CA: Independent Institute.
Osborne, M. (2005). On the computation of a formula for the duration of a bond that yields precise results. Quarterly Review of Economics and Finance, 45(1), 161183.
Osborne, M. (2014). Multiple Interest Rate Analysis: Theory and Applications. Basingstoke, UK: Palgrave.
Pigou, A. C. (1935). Net income and capital depletion. Economic Journal, 45(178), 235241.
Pigou, A. C. (1941). Maintaining capital intact. Economica, n. s. 8(31), 271273, as reprinted in Hayek (2015), chapter 11.
Pigou, A. C. (1946 [1932]). The Economics of Welfare, 4th edn. London: Macmillan & Co.
Piketty, T. (2014). Capital in the Twenty First Century. Cambridge, MA: Harvard University Press.
Powell, B. (2002). Explaining Japan’s recession. Quarterly Journal of Austrian Economics, 5(2), 3550.
Rothbard, M. (2009 [1962]). Man, Economy and State with Power of the Market (the Scholar’s edition). Auburn, AL: Ludwig von Mises Institute.
Samuelson, P. A. (1966). A summing up. Quarterly Journal of Economics, 80(4), 568583.
Schumpeter, J. (1942 [2010]). Capitalism, Socialism and Democracy. London: George Allen and Unwin.
Schumpeter, J. (1954). History of Economics Analysis. New York, NY: Oxford University Press.
Scott, M. (1984). Maintaining capital intact. Oxford Economic Papers, n. s. Supplement: Economic Theory and Hicksian Themes, 36, 5978.
Solow, R. (1956). A contribution to the theory of economic growth. The Quarterly Journal of Economics, 70(1), 6594.
Swan, T. (1956). Economic growth and capital accumulation. Economic Record, 32(2), 334361.
Uhr, C. (1960). Economic Doctrines of Knut Wisksell. Berkeley: University of California Press.
White, L. H. (2007). Introduction to Hayek (1941).
Wicksell, K. (1934 [1911]). Lectures on Political Economy, Vol. 1. London: Routledge.
Yeager, L. B. (1976). Toward understanding some paradoxes in capital theory. Economic Inquiry, 14(3).
Young, A. T. (2005). Reallocating labor to initiate changes in capital structure: Hayek revisited. Economic Letters, 3, 275282.
Young, A. T. (2012). The time structure of production in the US, 2002–2009.Review of Austrian Economics, 25(2), 7792. Retrieved from: http://doi.org/10.1007/s11138-011–0158–0

Metrics

Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between #date#. This data will be updated every 24 hours.

Usage data cannot currently be displayed