Unmixing the Metaphors of Austrian Capital Theory

Abstract

Austrian capital theory (ACT) over the past century has grappled with a number of conceptual difficulties. What progress has been made has failed to be integrated into the main body of Austrian capital theory. This paper argues (1) that pure theory is not a sufficient capital theory, and that paradigms and metaphors determine the shape and validity of mid-level theories, (2) that the vestigial Ricardian metaphors central to the canonical Hayek-Garrison model must be jettisoned, and (3) that progress in ACT requires taking the project rather than the capital good as the unit of analysis in capital theory. This proposed delineation of a Lachmann-Lewin-Cachanosky approach, distinct from the Hayek-Garrison approach, affirms the core appeal of ACT – a heterogeneous capital structure and a market process rather than a comparative static approach – by separating it from the business cycle theory, a long-overdue move with the potential to bolster both the analytical coherence and the empirical relevance that ACT has so far found elusive.

Keywords: Capital, Duration

JEL Classification: E14, E22, E32