The Online Library of Liberty

A project of Liberty Fund, Inc.

• Acknowledgements
• Part One: Introduction
• Walter E. Grinder, In Pursuit of the Subjective Paradigm: Walter E. Grinder
• Austrian Economics In the Present Crisis of Economic Thought
• Part Two: Setting the Stage
• The Significance of the Austrian School of Economics In the History of Ideas
• The Role of Expectations In Economics As a Social Science
• Professor Shackle On the Economic Significance of Time
• The Science of Human Action
• Model Constructions and the Market Economy
• Part Three: the Market Process
• Some Notes On Economic Thought, 1933–1953
• Methodological Individualism and the Market Economy
• Economics As a Social Science1
• Ludwing Von Mises and the Market Process
• Part Four: Problems In Macroeconomic and Capital Theory
• Complementarity and Substitution In the Theory of Capital
• Mrs. Robinson On the Accumulation of Capital
• Sir John Hicks On Capital and Growth: (review Article)
• Sir John Hicks As a Neo-austrian: (review Article)
• A Reconsideration of the Austrian Theory of Industrial Fluctuations
• Part Five: On Economic Policy
• Causes and Consequences of the Inflation of Our Time
• The Market Economy and the Distribution of Wealth
• Cultivated Growth and the Market Economy
• Appendix: Economic Writings of Ludwig M. Lachmann

Sir John Hicks as a Neo-Austrian

(Review Article)

1.

In the opening passage of the Preface of his latest book1 Sir John Hicks tells us about the place it holds in his work on capital theory. “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.... Nor do the later volumes supersede the earlier, save in a few quite limited respects.... 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.”

This is certainly true. We notice, e.g., that Part II of the new book, its central part, has the same heading, “Traverse,” as had chapter XVI of Capital and Growth. In fact, what we now find here, in chapters VII to XII, is a careful restatement and elaboration, much qualified but also more sharp edged, of the earlier argument.

The real significance of the new book, however, lies elsewhere. It is impossible to describe its character adequately by indicating its place within the Hicksian oeuvre. It also has a place, which may turn out to be an important place, in the context of the present crisis in economic thought.

Reprinted from South African Journal of Economics 41 (September 1973): 195–207.

Value and Capital (1939) belongs to the epoch of neoclassical ascendancy of which our author was such a protagonist and during the struggle for which he won fame. Capital and Growth (1965) belongs to a period of neoclassical “expansionism” when the concept of general equilibrium was to be extended from the stationary state to economic growth. Our author then weighed up and critically surveyed various methods that might be employed to this end.

Today neoclassical economics is very much on the defensive. It is under fire from many sides. When Mr. Sraffa in 1960 gave his famous book the subtitle Prelude to a Critique of Economic Theory, few of his readers can have had a clear conception of the direction the critique might take. The end of the 1950s found neoclassical economics still powerfully entrenched. If, in 1973, Professor Shackle adds to the title of his book Epistemics and Economics the subtitle A Critique of economic doctrines,2 the reader cannot but realize that what is challenged in the plural is no longer a single predominant doctrine. Moreover, the challenge is issued in circumstances in which our certainties are few and the future of economic theory is by no means assured.

In this situation Sir John Hicks is taking command of the neoclassical forces already in some disarray. With the cool and dispassionate air of the veteran soldier he decides which positions are to be given up, and which must be defended at all costs. His strategy is the defence of the central neoclassical notion of general equilibrium, and in particular its modern extension, “steady growth.” He tries to show that, on assumptions most of us would regard as reasonable, there are strong forces impelling the system towards a new steady growth path whenever a former growth equilibrium has been disturbed by technological change, and that some plausible generalizations can be established about the forms such “Traverse” might take. Growth equilibrium makes sense because the equilibrating forces are likely to be strong enough to prevail. Our author calls his approach “A Nee-Austrian Theory.” As in Böhm-Bawerk, the production and use of capital goods are given a time dimension. The main difference, according to him, lies in the fact that Böhm-Bawerk used a model in which a flow of inputs produces a “point output,” while his is a “flow input-flow output” model.

In a note to Chapter I he rightly points out that “the concept of production as a process in time” is nothing peculiarly “Austrian.” “It is just the same concept as underlies the work of the British classical economists, and it is indeed older still.” A poignant example from Boccacio's Decameron is given. Certainly Böhm-Bawerk was a Ricardian capital theorist who asked questions about the causes and magnitude of interest Ricardo had been unable to answer. “What Böhm-Bawerk did was to take the classical concept of capital, and to marry it with the theory of individual choice which he got from Menger”(p.13). This is only partly true since Menger did not like Böhm-Bawerk's interest theory at all.3 The question arises whether this neo-Austrian theory is not altogether too “classical” to be characteristically “Austrian.” To his question, by no means of interest only to historians of thought, we shall return in the concluding section.

At the end of the note mentioned the Cambridge “post-Keynesians,” today perhaps the best known, but by no means the only, opponents of neoclassical orthodoxy, receive actual praise. “It is the post-Keynesians who would better be called neoclassics; for it is they who, to their honour, have wrought a Classical Revival.” But for all this Hicksian courtesy their arguments fare no better. We are reminded that, e.g., the Wage Fund, to which our author ascribes great importance, was also a Ricardian idea (pp.58–62).

With so many labels lying scattered all over the floor of our wine cellar no wonder it is hard to know which one to stick on to the vintage Sir John is offering us here.

2.

The method of analysis employed in the book is described as sequential analysis. We are concerned with what happens in a sequence of “weeks.” “The one-week relations ... determine the course of the model in week T, when everything that has happened before week T is taken as given. Having determined the course in week T, we can then proceed to week T+I, applying similar relations, but with the performance of week T now forming part of the past” (p. 63). The method bears some resemblance to, but is not identical with, the kind of sequence analysis Lindahl4 and Professor Lundberg5 propounded in the 1930s as an alternative to short-run equilibrium analysis. An important difference is that in the Hicksian model the labour and capital market are the only markets. “All ‘original’ inputs are taken to be homogeneous, and all final outputs homogeneous; so there is just one non-intertemporal price, the input-output price-ratio” (p.37). As with Böhm-Bawerk, we are in a one-commodity world. This sequential analysis is used to trace the effects of a technological change on the production system through time. As distinct from the Walrasian model, the effects of change are here not instantaneous but lagged. From our knowledge of the sequence of stages of production we can determine how long it will take such effects to permeate our system. Since technical change is mainly “embodied,” the coexistence of old and new processes and gradual replacement of the former by the latter provide the time dimension of change. In a “steady state” all processes are of the same kind. A productive process is defined “as a scheme by which a flow of inputs is converted into a flow of outputs” (p.14). We have to think of it as essentially a sequence of stages of production (coal, iron, steel, machinery, cutlery), but have no remember that there is only one “output good.” Therefore in a “steady state” only one process is in operation.

In Part I, Model, the analytical tools are displayed, some of them already known to us. In Chapter II we have a Fundamental Theorem: “It is always true that a fall in the rate of interest will raise the capital value curve of any process—will raise it throughout—while a rise in the rate of interest will lower it” (p.19). In the next chapter we are told “the fact that a process is in use does not imply that it would now be profitable to start it. When it was started, it appeared to be profitable, but conditions have changed. Either because of new invention, or because of changes in prices, its profitability has gone; so the starting of new processes of that kind would no longer be payable. It may nevertheless be profitable to carry on the remainder of such a process” (p. 32). How, we wonder, do prices change in a one-commodity world?

Chapter IV, “Technique and Technology,” contains a discussion of the “Re-switching” problem. Like every one else, Sir John admits the possibility of re-switching, of a fall in the rate of interest leading to a substitution of labour for capital instead of the other way around, “but it looks like being on the edge of the things that could happen” (p. 44). He notes that the re-switching possibility impairs the “lengthening of the period of production” of “the older Austrians” as much as the neoclassical substitution of capital for labour. “Both are special cases, in which the differences between techniques are reduced to differences in a single parameter. Neither, in general, is admissible” (p. 45).

In the next chapter, V, two important analytical tools are presented. We are reminded “that steady state theory ... divides into these two branches. There is (1) the Fixwage theory, as I shall call it, in which w (the real wage) is given but employment is variable, and (2) the Full Employment theory, where there is full employment of a labour supply the movement of which is given exogenously” (p. 48).

In the former, with an elastic supply of labour, the limit of activity is set by savings. We thus have Full Performance as a counterpart to Full Employment. “We can nevertheless accept that an economy may run at less than Full Performance; and if confidence is insufficient, that is what it will do” (p. 52). We are warned “that Full Performance has nothing to do with the monetary system.... Money is not the cause of fluctuations; it is a complication, but no more than that” (p. 55).

Secondly, in this chapter the assumption of “static expectations” is adopted “since it probably throws as much light on actual processes of development as we can expect to get from our general approach” (p. 56). To this important assumption we shall have to return later on.

Thirdly, we have the distinction between major and minor switches. “A major switch is one that can only be made at the start of a process; but a minor switch can be made to a process that has already been started” (p. 61). We have to remember here that, since labour is our only input, all such switches refer to the amount of labour per unit of output within a process. Our author makes it clear that his “minor switches” are more or less the kind of supply adjustments permissible within Marshall's short period. There appears to be no place here for the reshuffling of existing capital combinations in response to unexpected change.

The chapter ends with a defence of the Wage Fund theory likely to give little satisfaction either in Cambridge or at M.I.T. Professor Kaldor's well-known views on wages are said, “more or less surreptitiously,” to imply a resuscitation of classical Wage Fund theory. “It should never have been supposed that the Wage Fund (however carefully qualified) was a complete theory of wages; it does no more, at the best, than explain how the wage is determined in the current ‘week,’ the past course of the economy being given. It is a very short-run theory; it needs to be completed by the consideration of longer-run effects. Our method of dealing with longer-run effects will be developed ... we shall try to exhibit them sequentially” (p. 60).

Mill is criticised for having abandoned this classical doctrine. “The article, in which the recantation occurs, is not one of Mill's better economic writings; one suspects that by 1868 he was much less interested in economics than he had been as a younger man” (p. 59).

3.

The problem of Part II (Chapters VII–XII) is the Traverse. “It is the determination of the path of our model economy (the Full Performance or maintainable path) when the economy is not in a steady state. Such a path must have a definite time-reference; for, out of the steady state, one point of time is not like another. In particular, it must have a beginning” (p. 81). Somewhat apologetically our author tells us he “would like to assume that this initial state is itself a mixed state, itself the result of a transition which is still incomplete; but a state of that sort we do not yet understand” (ibid).

Thus we have to start in a steady state, “and should proceed to trace out a path which will be followed when the steady state is subjected to some kind of disturbance.... We begin with an economy which is in a steady state, under an ‘old’ technique; then, at time O, there is an ‘invention,’ the introduction of ... a new technology” (ibid). The new technology is embodied in new processes. Gradually, as these become completed and old processes disappear, the system adjusts itself to the change. While this process is under way our system can, of course, not be in a steady state since its capital stock does not have the composition requisite to either the old or the new equilibrium. We confront a “sequence, involving changes in wages and interest, in production and employment, which we have to work out.... It cannot be taken for granted that the sequence generated in this matter, will tend to a new equilibrium. It may or it may not” (p. 82).

To be assured of the completion of the Traverse, of the attainment of a new equilibrium growth path, we have to make a number of special assumptions one of which is that the relative periods of construction and utilization of our capital goods are not affected by the new technology. This is called the Standard Case.

It is then seen that the Fixwage Path (Ch. VIII) presents the simplest case. Here there is only one switch from the old to the new technology which then remains “dominant throughout the Traverse.” All the benefits of progress accrue as profits (by assumption not to be consumed) and result in more investment and growth. When the new technology has been completely absorbed, wages rise in one jerk, the growth rate declines and we continue our journey on the new steady state level. Even here, however, the replacement of labour by better machines may cause temporary unemployment soon to be absorbed by increased accumulation. We are of course reminded that this is the problem of Ricardo's Chapter 31 “On Machinery.”

Sir John is able to draw a practical lesson, perhaps of some relevance to African countries today: “To industrialize, without the savings to support your industrialization, is to ask for trouble. That is a principle which practical economists have learned from experience. It deserves a place, a regular place, in academic economics also” (p. 99).

As soon as we allow for wage flexibility, however, the problem of expectations naturally raises its head. Here “the choice should in general depend on expected wages as well as on current wages” (p. 110). But our author brushes it firmly aside: “I shall in this book leave that complication out of account. I shall assume static expectations.“

The main difficulty with flexible wages on the Traverse is of course that every time the wage rate rises a different technique (within the range of the new technology) becomes the most profitable. There will be repeated substitution against labour, but the wage rise is only slowed down, not held up. “The function of substitution, in an expanding economy, is to slow up the rises in wages that come from technical improvement; but the effect of the retardation is to stretch out the rise, making it a longer rise, so that a larger rise than would otherwise have occurred, is ultimately achieved. That is the Principal Proposition I am advancing in this chapter” (p. 115).

In Chapter XI, “Shortening and Lengthening,” the Austrian aspect of the problems of the Traverse at last comes into view. If processes are “lengthened” by more investment in the construction industries, the even flow of their products through the system requires, at each processing stage, the presence of additional savings, in the form of working capital, to buy them. “Even when the wage is variable, lengthening of the construction period causes jerks.... When the wage is stabilized, the disturbances to the productive process (as a whole) are intensified” (p. 132). The intertemporal complementarity of some of our processes may fail, their parts no longer fit together.

At the end of the chapter Sir John pays a tribute: “To have drawn attention to vertical displacements was a major contribution; it is due to Professor Hayek.

“Where (I may as well emphasize here) I do not go along with him (or with what he said in 1931) is in the view that the disturbances in question have a monetary origin” (p. 133). We may point out here (as seems indeed to be admitted in the parenthesis) that already in his Copenhagen lecture of December 1933 Hayek put the main emphasis on divergence of plans and expectations rather than on “monetary disturbances.”6

4.

In Part III the author is at last descending into the arena of Controversy, armed not with his sword but with his camera. The connoisseur of Hicksian art expecting revealing glimpses of the, as yet, imperfectly known, crevices where all seemed solid rock, is not disappointed.

Chapter XIII deals with The Measurement of Capital—Value and Volume. It is redolent of a famous wrangle on the same topic between Mr. Sraffa and our author that took place on the island of Corfu in 1958.7

Objective value is market price, but in the Hicksian model “there are no markets in intermediate products” (p. 157). After all, the reader reflects, the one-commodity world assumption exacts a price! “We nevertheless associated with every process, at every stage of its ‘life,’ a capital value. These values could not be market values; they must thus be subjective values, steps in the process by which technique is chosen” (p. 157). But, “Whose are the expectations, of future net outputs, from which the forward-looking value is to be derived? ... The expectations of different individuals are not harmonious, and the statements which they record in their balance-sheets of magnitudes which depend on these expectations are not harmonious” (p. 161). Hence they cannot be added up. Most economists have concluded that it is therefore impossible to measure capital. Sir John Hicks seems hesitant. He spares a kind thought for the statistician and advises him to measure capital “by volume,” though admitting that “it also, in its more sophisticated form, requires a value measure at a base date” (p. 163). The reader notices that the divergence of human expectations plays here a vital part.

In Chapter XIV “The Accumulation of Capital” comes under discussion. We learn that the owners of capital invested in old processes will suffer capital losses even if these processes do not have to be cut short, because future output has to be discounted at the new, higher rate of interest. The word “malinvestment” is never used. It is noteworthy that no other case of it is ever mentioned.

Our author realizes that on a Full Employment path, with capital values changing all the time, the assumption of static expectations becomes hard to maintain. “A sequence of capital values, in which each term is calculated on assumptions that are belied by later elements in the sequence, does not look like being worth the trouble of writing it down” (p. 172). The only alternative, however, is “correct expectations of the wages and interest which in the course of the Traverse will be realized.” Sir John firmly rejects it: “In positive economics we must not endow our actors with perfect foresight; for to do so would abolish Time, which is our subject” (ibid). But static expectations, the reader may feel, imply no less the abolition of Time as the dimension in which knowledge becomes diffused. And what entitles us to endow our actors with convergent expectations when we know that in reality they are bound to diverge? To “Austrian” thinking the diversity of expectations is a feature of the world no less significant than the diversity of preferences. They really belong together.

The chapter ends with another significant warning: “In a progressive economy, with wages rising, the increment of capital at cost is almost certainly much lower than appears from social accounting statistics. A great deal of saving is needed to prevent the volume of capital from declining. It should cause no surprise if it were found that there were happily progressive economies, with rising real incomes, in which the volume of capital was declining; the rise in real incomes would then seem to be ‘due’ to technical progress, and to technical progress alone. But that would not mean that the saving was unnecessary; it would be necessary, to keep the ‘real’ wage-fund rising, so that full employment could be maintained with the rising real wages” (p. 176).

In the last chapter The Production Function, described as “the nub of the Controversy,” comes under review. “So static a concept does not fit at all readily into our present line of thought” (p. 177). On the other hand, “it may reasonably be claimed that the neo-Austrian approach is richer; it gives us a deeper understanding ... not only because it offers some comprehension of the whole of a process of adaptation.... Still more important is the inability of the static method to relate the process of growth to saving and investment....for it works with Equipment, not with Capital; it is negligent of Capital in any accounting sense” (p. 182). The chapter ends with the statement, “A reminder that the Distribution of Income is not, in the short-run, a well-founded economic concept is perhaps not the least important point which has emerged from our enquiry” (p. 184). An appendix, “The Mathematics of Traverse” ends the book.

5.

It is futile to quarrel about labels. A thinker who carries on Böhm-Bawerk's work cannot be gainsaid the predicate “Austrian” if he claims it. The question, however, whether this “neo-Austrian theory” is not more “classical” than “Austrian,” inspired by Ricardo and Walras rather than by Menger and Hayek is more than a mere matter of intellectual genealogy.8 It concerns the consistency of the new work. It also is germane to some aspects of the Grand Controversy now raging. Can neoclassical equilibrium theory be successfully defended on the macro-economic level alone? Can Sir John Hicks defeat the neo-Ricardian counter-revolution now gathering strength at Cambridge by showing himself the more subtle Ricardian?

We may look at these important questions in various perspectives and should not confine ourselves to one of them. Seven years ago, when reviewing Capital and Growth in this journal, I raised the issue of subjectivism versus formal analysis. The issue remains as germane to the new book as it was to the old.9

Economics has two tasks. The first is to make the world around us intelligible in terms of human action and the pursuit of plans. The second is to trace the unintended consequences of such action. Ricardian economics emphasized the second task, the “subjective revolution” of the 1870s stressed the urgency of the first, and the Austrian school has always cherished this tradition. The pursuit of the second task, to be sure, need not, in principle, impede that of the first. Experience has shown, however, that formal analysis on a fairly high level of abstraction is indispensable to accomplishing our second task, in particular where the number of possibilities is large and, in order to reach any firm conclusions, we have to limit this number by restrictive assumptions which may hinder us in the pursuit of our first task. For it is just part of this latter to explain the dazzling diversity of our world, and restrictive assumptions do not serve this purpose.

Seen in another perspective, even in the analysis of macroeconomic processes the micro-basis, the true springs of human action, must not be abstracted from. Yet, in the present book it is almost completely ignored. It is not to be thought that the author of Value and Capital has really come to believe that autonomous changes in demand and the diversity of expectations do not matter. But so eager is he to “get results,” to show that feasible forms of the Traverse are at least possible (since otherwise the “steady state” remains a mere figment of the imagination) that he seems ready to make any assumptions sufficiently restrictive to ensure them. We all understand that the present weakness of the neoclassical position may call for desperate measures. It is hard to see what is “Austrian” about them.

To substantiate our misgivings, two Hicksian assumptions lend themselves as ready examples, the one-commodity world and static expectations.

The weaknesses of Böhm-Bawerk's original construction were many. No doubt Sir John's flow output is a great improvement. But the fatal weakness of the former surely lies in the fact that we cannot apply it to a multi-commodity world which requires a price system invariant to changes emanating from the capital structure. Böhm-Bawerk's “subsistence fund” must always have that composition which corresponds to the tastes of the workers, otherwise there will be capital losses. Our author, of course, is not unaware of these problems (pp. 143–46), but the absence of a price system in his model does not a seem to bother him. Yet, in the current controversy this problem plays a significant part.

In any transition from disequilibrium to equilibrium a good deal depends on the events occuring “on the path.” In 1939 our author at least mentioned the consequences of trading at “false” prices.10 In 1965 he dismissed Edgeworth's “recontract” and Walras's “tâtonnement” as “artificial arrangements.”11 In the new model there can be no trading at “false prices” while we are in out Traverse for the simple reason that there are no markets at all! Is this “arrangement” any less artificial than Edgeworth's or Walras's were?

We cannot but feel similar misgivings about the heterogeneity of capital. “This has often been thought to be a difficulty, but I do not think it is” (p.178). The intermporal complementarity of intermediate products at the various stages of our processes impiles heterogeneity of one kind. Can we really neglect the “synchronical” heterogeneity of buildings, equipment, tools and stocks of goods? The faithful reader of Hicksian prose cannot help remebering how the assumption of a homogeneous “capital substance” was once said to be “the big thing that was wrong with classical theory. If there is just one homogeneous ‘capital’ ... there can be no problem of malinvestment—or of saving going to waste.” (Capital and Growth, p. 35). Will not the “minor switches” of the new model in reality often take the form of the reshuffling of existing capital combinations? Will not “old” capital goods released from such combinations compete with some of the new ones? There is also the possibility that the same capital combination, in response to shifts in demand from one final product to another, will switch from one output stream to another, producing capital gains and losses. While in reality all the more interesting cases of “minor switches” appear to arise in this context, in the Hicksian model all this vanishes from sight. This is a good example of one of the ways in which the exigencies of macro-economic formalism impede our understanding of the ways the market economy works.

In turning, once more, to static expectations we can now see that they provide another instructive example of the same kind. Our author is compelled to maintain this assumption because otherwise the number of possible consequences is virtually infinite. As long as our sole aim remains to predict the unintended consequences of action it is legitimate enough to narrow the range of possibilities by means of restrictive assumptions in order to achieve “results.” But if another of our aims is to render the world intelligible, exactly the opposite course of enquiry is indicated: we must convey to our readers an impression of the complexity and diversity of circumstances and try, as far as we can, to describe the range of possibilities. A widening, not a narrowing, of the scope of our enquiry is then what is required.

It was not personal caprice that prompted Menger's dislike of Böhm-Bawerk's capital theory and Walras's general equilibrium system; it was a conviction that in both a false picture of uniformity disguised the diversity of the world.

It is a curious fact that in 1965, when in Capital and Growth he renounced the Acceleration Principle of which he had made use in earlier writings, Professor Hicks did so in words suggesting that he was ready to follow this “Austrian” line of thought: “It is hardly a discovery to find that we are unable to ‘simulate’ the behaviour of intelligent business management by any simple rule.... If we find—as we do find—that mechanical principles of adjustment do not offer a good representation, we shall have gained something in the way of scepticism about the use of such principles in more ambitious undertakings” (Capital and Growth, pp. 102–03).

The Acceleration Principle is of course merely a special instance of static expectations. It is ironical that, just in a “neo-Austrian theory,” an even more general “mechanical principle of adjustment” should occupy such a prominent place.

We have to remember that this work is part of a continuing tour d'horizon. “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.” Perhaps next time a few pictures will be taken at such angles that some of the problems mentioned will come into full view.

The book is, in a sense, a tract for the times, a powerful contribution to a current discussion of fundamental issues. What we are being told is that no answers to the questions raised can be found within the orbit of the Ricardian or Marshallian “long period,” while this is precisely where the Cambridge neo-Ricardians and their neoclassical opponents are trying to find them. “New Equipment, the increment of Equipment, is among the least suitable of all macro-economic magnitudes to be treated as an independent variable. That is really what is wrong with the Production Function” (p. 182), the mainstay of the neoclassical position. But since even long-period forces must operate within short periods, we can (sometimes) determine what will happen by tracing their action over a sequence of short periods.

When, forty years hence or so, the history of economic thought in the twentieth century comes to be written, historians will find, no doubt to their delight, that in the work of Sir John Hicks they hold in their hands a true mirror of the age. The interplay of ideas, the impact some had and the changes all underwent as a consequence, are to be found there, reflected as in a glass. We are no less in his debt for being his contemporaries.

NOTES

[[1]]John Hicks, Capital and Time: A Neo-Austrian Theory (Oxford: Clarendon Press, 1973).

[[2]]G. L. S. Shackle, Epistemics and Economics: A Critique of Economic Doctrines (Cambridge: Cambridge University Press, 1973).

[[3]]“This is the more noteworthy because Menger, far from welcoming that theory as a development of suggestions of his, severely condemned it from the first. In his somewhat grandiloquent style he told me once: ‘The time will come when people will realize that Böhm-Bawerk's theory is one of the greatest errors ever committed.’ He deleted those hints in his second edition.” J. A. Schumpeter, History of Economic Analysis (Oxford: Oxford University Press, 1954), p.847, note 8.

[[4]]E. Lindahl, Studies in the Theory of Money and Capital (London: Allen & Unwin, 1939).

[[5]]E. Lundberg, Studies in the Theory of Economic Expansion (London: P. S. King, 1937).

[[6]]F. A. von Hayek, Profits, Interest, and Investment (London: G. Routledge & Sons, 1939), pp. 135–56.

[[7]]See F. A. Lutz and D. C. Hague, eds., The Theory of Capital (London: Macmillan & Co., 1961), pp. 305–6.

[[8]]“Böhm's analysis was much too one-dimensional for Menger, in whose own vision everything immediately ramified in some five to ten dimensions. Menger would describe the accumulation of capital as an increase in the range of capital goods and an ever-increasing complexity of the web of complementarities, while Böhm unified capital by the concept of the period of production.” Erich Streissler, “To What Extent Was the Austrian School Marginalist?” History of Political Economy 4 (Fall 1972): 435.

[[9]]“Sir John Hicks on Capital and Growth,” South African Journal of Economics 34 (June 1966): 121–23.

[[10]]J. R. Hicks, Value and Capital (Oxford: Clarendon Press, 1939), p. 128.

[[11]]J. R. Hicks, Capital and Growth (Oxford: Oxford University Press, 1965), p. 54.