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Abstract:
This article demonstrates certain doctrines of the Austrian school of economics are untenable. The focus is on certain aspects of capital theory undergirding Austrian Business Cycle theory. Other criticisms of Austrian Business Cycle Theory from Cambridge-Italian economists are briefly surveyed. This paper demonstrates an entrepreneur may simultaneously classify a capital good into several orders, as orders of goods are defined by Austrian economists. Hayekian triangles are defined. This paper demonstrates that the shape of a Hayekian triangle varies with the interest rate, even if real resources are not reallocated across stages of production. It is demonstrated, by means of an example, that no tendency need exist for entrepreneurs to respond to lower interest rates by reallocating resources from producing low order goods to producing higher order goods, or otherwise increasing the capital-intensity of the structure of production.

Austrian Economics, Sraffian Economics, Input-Output Tables and Analysis, Capital Theory, Business Cycles

Abstract:
This article demonstrates certain doctrines of the Austrian school of economics are untenable. The focus is on certain aspects of capital theory undergirding Austrian Business Cycle theory. Quotations from the Austrian school economist Ludwig Lachmann and the Italian-Cambridge economist Joan Robinson exhibit common findings on the impact of expectations on the valuation of capital goods and the consequent difficulties in aggregating capital across individuals. This paper demonstrates an entrepreneur may simultaneously classify a capital good into several orders, as orders of goods are defined by Austrian economists. Hayekian triangles are defined. This paper demonstrates that the shape of a Hayekian triangle varies with the interest rate, even if real resources are not reallocated across stages of production. It is demonstrated, by means of an example, that no tendency need exist for entrepreneurs to respond to lower interest rates by reallocating resources from producing low order goods to producing higher order goods, or otherwise increasing the capital-intensity of the structure of production.

Austrian Economics,Sraffian Economics,Input-Output Tables and Analysis,Capital Theory,Business Cycles

Abstract:
This article demonstrates certain doctrines of the Austrian school of economics are untenable. The focus is on certain aspects of capital theory undergirding Austrian Business Cycle theory. Other criticisms of Austrian Business Cycle Theory from Cambridge-Italian economists are briefly surveyed. This paper demonstrates an entrepreneur may simultaneously classify a capital good into several orders, as orders of goods are defined by Austrian economists. Hayekian triangles are defined. This paper demonstrates that the shape of a Hayekian triangle varies with the interest rate, even if real resources are not reallocated across stages of production. It is demonstrated, by means of an example, that no tendency need exist for entrepreneurs to respond to lower interest rates by reallocating resources from producing low order goods to producing higher order goods, or otherwise increasing the capital-intensity of the structure of production. The rejection, as is typical of the modern Austrian school of economics, of a physical measure of the average period of production and of a production function with an aggregate measure of capital as an argument is not sufficient for rigorous capital theory. Hayekian triangles are arguably not a good tool for investigating capital theory.

Austrian Economics, Sraffian Economics, Input-Output Tables and Analysis, Capital Theory, Business Cycles

Abstract:
The Cambridge Capital Controversy is a long-lasting dispute over the validity and internal coherence of neoclassical theory. A number of textbooks are available to help teach the controversy. Some of these textbooks contain exercises and numeric examples. An important part of the controversy centered on the phenomena of reswitching and capital-reversing, and some of these textbook exercises illustrate these phenomena. This paper is directed towards those who want to create their own simple examples of reswitching in two-commodity models. It shows how to construct such numeric examples, given the maximum wage and switch points for two wage-profits curves that reswitch.

Undergraduate Economics Education, Sraffian Economics, Input-Output Models, Input-Output Tables and Analysis, Capital Theory, Production Theory

Abstract:
Piero Sraffa's masterpiece, The Production of Commodities by Means of Commodities, is written in a remarkably terse style and presents many problems of interpretation and understanding. The role of the Standard commodity in Sraffa's work is one contentious area in interpretations. This paper shows that M. Reder made mathematical errors on this topic in an early review of Sraffa's book. Mark Blaug took up one of these errors and inserted it in successive editions of his well-known textbook on the history of economic thought and in a New Palgrave entry. Heinz D. Kurz and Neri Salvadori point out this error in an exercise in their textbook on the theory of production and in a later paper. Finally, this paper points out Blaug's recent acknowledgement of this error, leading to the likelihood of its removal from at least his textbook in future editions. Nearly half a century after the publication of Sraffa's book, the error described in this paper might be removed from the textbook containing it.

History of Microeconomics, Sraffian Economics

Abstract:
This paper examines elements of Roger Garrison's Time and Money as an exposition of Austrian Business Cycle Theory. This paper demonstrates an entrepreneur may simultaneously classify a capital good into several orders, as orders of goods are defined by Austrian economists. Hayekian triangles are defined. This paper demonstrates that the shape of a Hayekian triangle varies with the interest rate, even if real resources are not reallocated across stages of production. It is demonstrated, by means of an example, that no systematic tendency need exist for entrepreneurs to respond to lower interest rates by reallocating resources from producing low order goods to producing higher order goods, or otherwise increasing the capital-intensity of the structure of production. The rejection, as is typical of Garrison and others in the modern Austrian school of economics, of a physical measure of the average period of production and of a production function with an aggregate measure of capital as an argument is not sufficient for rigorous capital theory. Hayekian triangles are arguably not a good tool for investigating or explaining capital theory.

Austrian Economics, Sraffian Economics, Input-Output Tables and Analysis, Capital Theory, Business Cycles

Abstract:
In the Cambridge Capital Controversy, critics associated with Cambridge, UK, attack the logical coherence of neoclassical theory and claim to outline an alternative approach to economics. The most prominent neoclassical economists responding to the controversy acknowledge that many models in the mainstream literature are problematic in theory. Neoclassical economists argue, however, the canonical neoclassical theory is best expressed in disaggregated short period General Equilibrium models of intertemporal and temporary equilibria. They claim belief in the logical consistency and coherence of these models is and should be unaffected by Cambridge criticism. Recently, a dispute has arisen whether capital-theoretic paradoxes reappear in these short period models, in a different form. This paper presents a short period, overlapping-generations General Equilibrium model for exploring these issues. Further work is needed to analyze this model in light of the capital controversy.

Sraffian Economics, Dynamic Analysis, Input-Output Models, Factor Income Distribution, Input-Output Analysis, Intertemporal Choice, Capital Theory

Abstract:
This note considers a linear programming formulation of the problem of the firm. A neoclassical non-increasing labour demand function is derived from the solution of the linear program. Only a set of measure zero on this function, one or two points in the examples examined, provides equilibria of the representative firm. Equilibria of the representative firm are characterized by decisions of its managers that allow the same decisions to be made in successive periods. Hence, one can explain the quantity of labour that firms desire to hire either by a traditional neoclassical labour demand function or by equilibria of the firm, but generally not both.