Roundaboutness Is Not a Mysterious Concept: A Financial Application to Capital-Theory

28 Pages Posted: 19 Mar 2014 Last revised: 20 Nov 2014

See all articles by Nicolas Cachanosky

Nicolas Cachanosky

Metropolitan State University of Denver; American Institute for Economic Research

Peter Lewin

University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics

Date Written: June 26, 2014

Abstract

We apply the EVA terminology to the concepts of roundaboutness and average period of production in capital theory. By doing this we show that these terms have a clear and well understood financial interpretation. A financial application to capital theory helps to clarify obscure and controversial economic terms. We then extend our financial interpretation of roundaboutness and average period of production to the Austrian business cycle theory and show how this approach can be used to shed light on the subprime crisis.

Keywords: roundaboutness, average period of production, duration, modified duration, Macaulay duration

JEL Classification: B53, E23, E30

Suggested Citation

Cachanosky, Nicolas and Lewin, Peter, Roundaboutness Is Not a Mysterious Concept: A Financial Application to Capital-Theory (June 26, 2014). Review of Political Economy. Vol: 26. Issue: 4. Pages: 648-665. Available at SSRN: https://ssrn.com/abstract=2411022 or http://dx.doi.org/10.2139/ssrn.2411022

Nicolas Cachanosky (Contact Author)

Metropolitan State University of Denver ( email )

Student Success Building
890 Auraria Pkwy #310
Denver, CO 80217
United States

HOME PAGE: http://www.ncachanosky.edu

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

Peter Lewin

University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics ( email )

2601 North Floyd Road
P.O. Box 830688
Richardson, TX 75083
United States

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