Keynes and Hayek: The Money Economy

By G. R. Steele | Go to book overview

8

Capital, money and cycles

If Keynes focused on the short-run picture, and the classicists focused on the long-run picture, Hayek focused on the 'real coupling' between the two pictures. The Hayekian coupling took the form of capital theory - the theory of a time-consuming, multi-stage capital structure.

(Garrison 1999: iv)


Capital theory

One of the objectives of Hayek's Pure Theory of Capital (1941) is to meet the criticisms of his earlier exposition of a monetary theory of business cycles (Hayek [1929] 1933a, 1935b, 1939c). These are perceived to have arisen largely from 'the inadequacy of its presentation of the theory of capital which it presupposed' (Shackle 1981:242). Not only would a more rigorous exposition of capital theory further the analysis of business cycles, it would also secure a basis for a repudiation of Keynes's General Theory. Indeed, a case is made (see Caldwell 1998) that - of many possible explanations for Hayek's failure to review The General Theory - one of the more plausible is Hayek's realisation that the capital-theoretic foundations of his own analysis were shallow. In support of that case is Hayek's comment that 'an elaboration of the still inadequately developed theory of capital was a prerequisite for a thorough disposal of Keynes's argument'; that is, the argument that there is a 'direct dependence of investment on final demand' (Hayek 1983:48).

Austrian capital theory began as a refutation of the labour theory of value, according to which relative product prices are held to be determined by the different amounts of labour required to produce each product. In the early eighteenth century, Ricardo had shown that the labour theory could not hold where capital is used (see Moss and Vaughn 1986:548). His explanation is that a machine that is capable of the same output as that produced by 100 man-years must itself embody fewer than 100 man-years of work. Otherwise, no rationale exists for the use of the machine.

In building upon Ricardo's insights and upon the work of Böhm-Bawerk, Hayek explains how productivity is raised by the manner in which investments create economic resources out of non-economic resources (see Hayek

-140-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited page

Bookmark this page
Keynes and Hayek: The Money Economy
Table of contents

Table of contents

  • Title Page v
  • Contents ix
  • Figures and Tables x
  • Preface xi
  • 1 - Introduction 1
  • 2 - Vision in Economics 19
  • 3 - Philosophy and Political Economy 37
  • 4 - Money Issues 61
  • 5 - Macrodisequilibrium 78
  • 6 - Keynes and Senie Macromodels 101
  • 7 - Value Theory and Monetary Theory 117
  • 8 - Capital, Money and Cycles 140
  • 9 - Austrians and Post-Keynesians 160
  • 10 - Economic Guidance 183
  • Notes 205
  • Bibliography 208
  • Index 219
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this book
  • Bookmarks
  • Highlights & Notes
  • Citations
/ 227

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.