This Element presents a new framework for Austrian capital theory, starting from the notion that capital is value. Capital is the value attributed by the valuer at any moment in time to the combination of production-goods and labor available for production. Capital is the result obtained by calculating the current value of a business-unit or business-project that employs resources over time. It is the result of a (subjective) entrepreneurial calculation process that relates the flow of consumptions goods to the value of the productive resources that will produce those consumptions goods. The entrepreneur is a ubiquitous calculating presence. In a review of the development of Austrian capital theory, by Carl Menger, Eugen von Böhm-Bawerk, Ludwig von Mises, Friedrich Hayek, Ludwig Lachmann as well as recent contributions, the Element incorporates the seminal contributions into the new framework in order to provide a more accessible perspective on Austrian capital theory.
Author(s): Peter Lewin and Nicolas Cachanosky
Publisher: Cambridge University Press
Year: 0
Language: English
Pages: 90
Cover......Page 1
Title page......Page 3
Copyright page......Page 4
Austrian Capital Theory: A Modern Survey of the Essentials......Page 5
Contents......Page 6
1.1 What Is Capital?......Page 7
1.2 Financial versus Physical Capital......Page 9
2.2 Production Takes Time......Page 11
2.3 Menger’s View of Capital Is Implied by His View
of Subjective Value......Page 13
3.1 Böhm-Bawerk and the Productivity
of Roundabout Production......Page 14
3.2 Böhm-Bawerk and the Problem of Measuring the Average
Period of Production......Page 15
3.3 But What Does It Mean?......Page 17
3.4 Looking Back and Looking Forward; the Retreat
to Ricardian Equilibrium......Page 20
4.1 Hayek’s Triangle: A Special Case of Böhm-Bawerk’s
Special Case......Page 22
4.2 Introducing Stages of Production......Page 23
4.3 The Legacy of Hayek’s Triangle......Page 27
5 Hayek’s Capital Theory......Page 29
5.1 If Not the APP, Then What?......Page 30
5.2 Capital Consumption and Maintenance: The Importance
of Heterogeneity and Uncertainty......Page 33
5.3 Permanent Income: What Is Foreseen and What
Is Not Foreseen......Page 38
6.1 The Heterogeneity of Production Goods
and the Austrian School......Page 41
6.2 Heterogeneity, Investment, and Technological Change......Page 43
6.3 Capital Accumulation Usually Entails Technological Change......Page 44
6.4 Lachmann’s Contributions to ACT in Relation
to “Capital as Finance”......Page 45
7.1 Mises Has a Financial View of Capital......Page 47
7.2 Ambiguities in Mises’s View of Capital......Page 48
7.3 Mises’s Capital Is an Historically Specific Concept......Page 51
8.1 A Böhm-Bawerkian Production Function?......Page 52
8.2 Problems with the Aggregate Production Function......Page 54
9.1 John Hicks’s Neo-Austrian Capital Framework......Page 57
9.2 A Simple Conceptual Framework......Page 59
Inputs and outputs.......Page 61
Capital„-value„ (NPV or CV).......Page 62
The internal rate of return.......Page 63
9.4 Looking Forward and Looking Backward......Page 64
9.5 Capital Plans and Macroeconomics......Page 66
9.6 Considering the Austrian Business Cycle: Discount Rates
Changes and Time......Page 68
9.7 D as a Measure of the Interest Elasticity of the Capital
Value of the Investment......Page 70
10 Conclusion: The Entrepreneur Adds Value by Capitalizing Resources......Page 71
A.1 Background......Page 73
A.2 A Simple Illustrative Example......Page 75
A.3 Evaluation......Page 77
References......Page 81
Acknowledgments......Page 88
