Some Capital-Theoretic Fallacies of Austrian Economics

22 Pages Posted: 25 Oct 2007

Multiple version iconThere are 2 versions of this paper

Date Written: October 2007


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.

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

JEL Classification: B25, B51, D57, E22, E32

Suggested Citation

Vienneau, Robert L., Some Capital-Theoretic Fallacies of Austrian Economics (October 2007). Available at SSRN: or

Robert L. Vienneau (Contact Author)

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