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A RETROSPECTIVE LOOK AT “THE HAYEK STORY”: ROUNDABOUTNESS, STICKY CONSUMPTION, AND SEQUESTERED CAPITAL

Published online by Cambridge University Press:  22 February 2021

James E. McClure Open the ORCID record for James E. McClure [Opens in a new window] ,
David Chandler Thomas Open the ORCID record for David Chandler Thomas [Opens in a new window]  and
Lee C. Spector
James E. McClure
Affiliation:
James E. McClure, David Chandler Thomas, and Lee C. Spector, Ball State University.
David Chandler Thomas
Affiliation:
James E. McClure, David Chandler Thomas, and Lee C. Spector, Ball State University.
Lee C. Spector
Affiliation:
James E. McClure, David Chandler Thomas, and Lee C. Spector, Ball State University.
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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] 2009) cites John Hicks’s (1939) Value and Capital but not the financial measure of roundaboutness that Hicks suggested as a substitute for Böhm-Bawerkian roundaboutness. In 1967, in “The Hayek Story,” Hicks criticized the inexplicable lags. 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.

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Articles
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Journal of the History of Economic Thought , Volume 43 , Issue 1 , March 2021 , pp. 83 - 102
Copyright
© The History of Economics Society, 2021

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Footnotes

For comments and criticisms on earlier drafts, we thank Roger Garrison and Steven Horwitz. Any remaining errors are ours.

References

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