Unmixing the Metaphors of Austrian Capital Theory

Forthcoming, Review of Austrian Economics

18 Pages Posted: 3 Feb 2020 Last revised: 26 May 2020

Date Written: April 19, 2020

Abstract

A complement of metaphors inherited from the classical era has held back progress in Austrian capital theory (ACT). In particular, the attachment to circulating capital as the paradigmatic capital good, largely motivated by the business cycle theory, has locked ACT into a nonoperational point-output model of production. This paper draws out a distinct flow-output approach from work by Lachmann, Lewin, and Cachanosky, contrasts its associated metaphors and paradigms with those of the canonical Hayek-Garrison model, and argues that the former has the potential to bolster both the analytical coherence and the empirical relevance of ACT that it has so far found elusive. By focusing on the investment project rather than the capital good as the object of planmaking, the flow-output approach affirms the core appeal of ACT – a heterogeneous capital structure and a market process approach – by declaring independence from the business cycle theory.

Keywords: Capital, Duration

JEL Classification: E14, E22, E32

Suggested Citation

Harwick, Cameron, Unmixing the Metaphors of Austrian Capital Theory (April 19, 2020). Forthcoming, Review of Austrian Economics. Available at SSRN: https://ssrn.com/abstract=3516973 or http://dx.doi.org/10.2139/ssrn.3516973

Cameron Harwick (Contact Author)

SUNY College at Brockport ( email )

Brockport, NY 14420
United States

HOME PAGE: http://cameronharwick.com

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