Capital and Time: A Neo-Austrian Theory

Capital and Time: A Neo-Austrian Theory

Capital and Time: A Neo-Austrian Theory

Capital and Time: A Neo-Austrian Theory


This book, first published in 1973, takes up an important approach to capital which had gone out of fashion. It is being reissued in paperback in recognition of the recent renewed interest in this approach. The 'Austrian' theory of capital concentrates on the inputs and outputs in theproductive process, and has an advantage over more modern theories of economic dynamics in that it is more naturally expressible in economic terms: the production process over time is taken as a whole, rather than disintegrated. However, this approach had been largely abandoned because it seemed tobe unable to deal with fixed capital. Sir John overcomes this problem here by allowing for a sequence of outputs, and the consequences for dynamic economics are profound and novel.


This is the third book I have written about Capital. Value and Capital (1939); Capital and Growth (1965); Capital and Time (1973). They were not planned as a trilogy. I had no idea, when I finished the first, that I would write the second; when I finished the second, that I would write the third. Nor do the later volumes supersede the earlier, save in a few quite limited respects. Capital (I am not the first to discover) is a very large subject, with many aspects; wherever one starts, it is hard to bring more than a few of them into view. It is just as if one were making pictures of a building; though it is the same building, it looks quite different from different angles. As I now realize, I have been walking round my subject, taking different views of it. Though that which is presented here is just another view, it turns out to be quite useful in fitting the others together.

Value and Capital was a product of the Keynesian thirties. Though I began to write it before I had seen the General Theory, the 'capital' or 'dynamic' part of the book is deeply influenced by Keynes. the method, of course, being descended from Walras and Pareto, is quite un-Keynesian; but the problem to which it is applied, in the second part of the book, is similar to Keynes's problem. What determines the short-period equilibrium of a closed system, when that is conceived, not just in terms of tastes and resources but in terms of plans and expectations, oriented towards a future that is outside the period in question? in such Temporary Equilibrium analysis, the future plays its part, but it remains the future. We do not go ahead to later periods, when what was future becomes present.

By the time I wrote Capital and Growth, many others had gone ahead; a principal object in writing was to clear my own mind on what they had been doing. So Capital and Growth is critical and expository, rather than constructive. I was fully aware, by this time, of the variety of ways by which 'capital' could be approached, of the variety of angles from which the 'building' could be viewed. I had no desire to champion any one to the exclusion of others.

There was no reason in principle why the methods that were listed in Capital and Growth should be the only ones possible; and

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