A note on re-switching, the average period of production and the Austrian business-cycle theory

Saverio Fratini

The Review of Austrian Economics, 2019, vol. 32, issue 4, No 7, 363-374

Abstract: Abstract According to a new formulation, the average period of production is calculated by taking the shares of costs referable to each period out of the total amount of costs as weights. Once this notion had been introduced, its inverse relationship with the rate of interest prompted some scholars to believe that it could serve as a good measure of capital intensity, expecially in view of a possible resumption of the Austrian business-cycle theory. As will be shown, however, this new average period poses some problems. On the one hand, the inverse relationship mentioned above does not preclude the re-switching of production methods. On the other, if re-switching occurs, the most roundabout method may paradoxically be the one that gives the smallest net output per worker. This result can affect the revival of the Austrian business-cycle theory.

Keywords: Average period of production; Degree of roundaboutness; Capital; Re-switching; Austrian business-cycle theory (search for similar items in EconPapers)
JEL-codes: B25 B53 D24 D33 E32 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (7)

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DOI: 10.1007/s11138-019-0432-0

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