A Retrospective Look at The Hayek Story: Roundaboutness, Sticky Consumption, and Sequestered Capital

James McClure, David Chandler Thomas and Lee Spector

No ajdnq, SocArXiv from Center for Open Science

Abstract: Friedrich Hayek’s business cycle theory, withered throughout the 1930s as he admitted that its underlying model of Böhm-Bawerkian roundaboutness was incomplete and inadequate. In 1934, Hayek started a two-volume book on capital theory, completing only one volume in 1941. Curiously, Hayek (1941) cites Hicks’ (1939) Value and Capital but not the financial measure of roundaboutness that Hicks suggested as a substitute for Böhm-Bawerkian roundaboutness. In 1967, Hicks criticized the inexplicable lags in The Hayek Story. Hayek maintained his view that consumption was sticky and responded to Hicks with a mound-of-honey analogy. Nevertheless, Hayek maintained that his business cycle theory was fundamentally correct and continued to hope that others might someday discover a capital structure theory to undergird it. Toward fulfilling Hayek’s hope, we suggest augmenting the canonical stages of production with a sequestered-capital stage where products are invented, productized, and inventoried prior to launch, uncoordinated by observable prices.

Date: 2020-05-19
New Economics Papers: this item is included in nep-his and nep-hpe
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Journal Article: A RETROSPECTIVE LOOK AT “THE HAYEK STORY”: ROUNDABOUTNESS, STICKY CONSUMPTION, AND SEQUESTERED CAPITAL (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:ajdnq

DOI: 10.31219/osf.io/ajdnq

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