Tag Archives: Austrian School Of Economics

Figure 1: A Pattern Diagram with Triple Switching In demonstrating the lack of foundation for claims of the Austrian school about the supposed relationships between a greater supply of capital, a consequent lower rate of profits, and a longer period of production, I have so far only presented examples in which the economic life of an existing machine can be extended or truncated. Schefold (1980: 170) interprets a more roundabout technique as one in which a long-lived machine is used to...

Figure 1: Wage Frontier for a Fixed Capital Example This post presents a perturbation of parameters in a 'one good' model of fixed capital. The coefficients of production differ from those in this reswitching example. But the model has the same structure. Consider a one-commodity economy in which labor and widgets are used to produce new widgets, the only consumption good. (The use of the term 'widget' to designate the single produced commodity emphasizes how unrealistic this model is.)...

Figure 1: Wage Frontier for a Fixed Capital Example1.0 Introduction I continue to explore the simplest multisector model of the production of commodities by means of commodities in which circulating and fixed capital is used in both sectors. In previous explorations, I locate a four-technique pattern, observe recurrence of truncation, and provide an example in which truncating all machines is infeasible. I think my taxonomy of fluke switch points and methods of visualizing the effects of...

Figure 1: Variation of Choice Of Technique with a Coefficient of Production This post continues the analysis of this example. The coefficients of production and the techniques are the same as in the linked post, except here I consider the results of varying a1, 2, the amount of corn needed as circulating capital in operating Process II at unit level. Figure 1 above shows how the choice of technique varies with this parameter. This is a two-sector model, in which new machines and corn are...

Figure 1: A Partition of a Parameter Space for the Schefold Example1.0 Introduction I want to revisit a perturbation analysis of an example, from Bertram Schefold, of reswitching with fixed capital. Suppose workers use a machine to produce something or other, where the machine lasts several production periods. It is a possible choice to run the machine for less than its full physical life. One might think than choosing to adopt a technique with a longer economic life of the machine...

1.0 Introduction I have not posted about a non-fluke switch point in a while. This is an example from Bertram Schefold. I have examined perturbations and variations of this example before. Here I present an example with tables exhibiting arithmetic. Is this any more transparent than examples presented with graphs? I have been listening to some lectures on YouTube, especially Richard Wolff. I now have another hypothesis why mainstream economists have been promoting lies, ignorance, and...

This post, as suggested, extends this one-good example. I assume a constant returns-to-scale technology, as specified in Tables 1 and 2. Labor is advanced to the capitalists, and wages are paid out of the surplus at the end of the year (period of production). The capitalists (incorrectly) expect the technology in existence at the start of the year to continue to exist. I assume prices of (re)production prevail. Table 1: Inputs for The Technology InputProcess(I)(II)(III)Labor30 eσ0,1(1 -...

This post is about the misrepresentation of Sraffian capital theory in Lewin and Cachanosky (2019). I cannot recommend this short book. Presumably, it is meant as an introduction. But I do not see it as succeeding. I do not see what a more advanced audience would get out of it that is not available in a few recent papers by Lewin and Cachanosky. Before proceeding to my main theme, let me note that I agree with some parts of this book, mainly where Lewin and Cachanosky draw on Ludwig...

Figure 1: APP Around Switch Points1.0 Introduction I take it that the Austrian theory of the business cycle builds on Austrian capital theory. The following two claims are central to Austrian capital theory: Given technology, profit maximizing firms adopt a more capital-intensive, more roundabout technique at a lower interest rate. The adoption of a more roundabout technique increases output per worker. Originally, Eugen von Böhm-Bawerk proposed a physical measure of the average period...

Those who understand price theory reject the theory of the Austrian Business Cycle (ABC). I am thinking here that its logical invalidity follows from post-Sraffian capital theory. It is also wrong because of its reliance on the concept of the natural rate of interest. Some years ago, I tried to get published a demonstration that ABC theory was in error. I forget how many journals rejected it. Four or five articles here are from this series of revisions. The rejections from the journals...