A Challenge to Garrison’s Version of Hayekian Macro

Robert Vienneau, “Some Capital-Theoretic Fallacies in Garrison’s Exposition of Austrian Business Cycle Theory: A Research Note”.


“In response to the global economic crisis, some have advocated that economists consider the economics of the Austrian school. This paper examines elements of Roger Garrison’s Time and Money as an exposition of Austrian Business Cycle Theory not incorporating some of the more complex elements of Hayek’s Pure Theory of Capital. This paper demonstrates an entrepreneur may simultaneously classify a capital good into several orders, as orders of goods are defined by Austrian economists. Hayekian triangles are defined. This paper demonstrates that the shape of a Hayekian triangle varies with the interest rate, even if real resources are not reallocated across stages of production. It is demonstrated, by means of an example, that no systematic tendency need exist for entrepreneurs to respond to lower interest rates by reallocating resources from producing low order goods to producing higher order goods, or otherwise increasing the capital-intensity of the structure of production. The rejection, as is typical of Garrison and others in the modern Austrian school of economics, of a physical measure of the average period of production and of a production function with an aggregate measure of capital as an argument is not sufficient for rigorous capital theory. Hayekian triangles are arguably not a good tool for investigating or explaining capital theory.”

Vienneau’s blog postings on Hayek and more can be found here.  Vienneau quotes Garrison on the Cambridge capital controversy here.

Background: “Whatever Happened to the Cambridge Capital Controversies?” (pdf) And see also this.

And on the whole topic, let me recommend Jack Birner’s The Cambridge Controversies in Capital Theory.

This entry was posted in Capital Theory, Garrison. Bookmark the permalink.

One Response to A Challenge to Garrison’s Version of Hayekian Macro

  1. Vasile says:

    I have once browsed Robert’s site, and I was left with the impression that his argument is roughly the following: The theory that big nights led to big headaches is wrong because if we intake alcohol in such and such and such (very) special circumstances than we will not have headache on the following morning. “So, thereby, I consider the theory that alcohol abuse leads to headaches disproved in its entirety”

    Of course, if some want to be sure, he should not take my word for it. He’ll have to check for himself.

Comments are closed.