Austrian Capital Theory | Roger W. Garrison

Summary

El script proporciona una discusión detallada sobre la teoría del capital en la escuela austriaca de economía, contrastando sus conceptos con las ideas de otros economistas prominentes como Frank Knight y Milton Friedman. Se explora la importancia de entender la estructura temporal del capital y cómo los cambios en las tasas de interés pueden afectar el ciclo económico, llevando a un crecimiento sostenible o a un cíclico de auge y depresión. La charla destaca la heterogeneidad del capital y su impacto en la producción y distribución de bienes, resaltando la diferencia fundamental entre enfoques estáticos y dinámicos del proceso productivo. Además, se cuestiona la noción de que la producción y el consumo son simultáneos y se aboga por una comprensión más profunda de la teoría del capital para prever y posiblemente evitar crisis económicas.

Takeaways

• 📚 La teoría del capital austriaca es fundamental para entender el ciclo económico de la escuela austriaca y su importancia en la economía.
• 🗓️ La estructura temporal del capital, que varía con los cambios en las tasas de interés, es crucial para la teoría económica austriaca.
• 💡 La distinción entre la teoría del capital de Frank Knight y la de la escuela austriaca se centra en la percepción de la estructura del capital y la importancia del tiempo en la producción.
• 🧩 La heterogeneidad del capital es un concepto clave en la teoría del capital austriaca, lo que significa que no todos los bienes son intercambiables y cada uno tiene su propio valor y uso.
• 🌱 La noción de que los árboles crecen en un estado estable y no hay consideración del tiempo en la producción, según Knight y Friedman, es un punto de discusión en la teoría económica.
• 🔄 La teoría del capital de la escuela austriaca enfatiza la secuencia de etapas en la producción y cómo el tiempo influye en el valor y la producción de bienes.
• 📉 Las tasas de interés son un factor determinante en la asignación de recursos y en la estructura de producción; una disminución en las tasas de interés puede llevar a un ahorro y reasignación de recursos.
• 🚀 Un aumento en el ahorro puede resultar en una realocación de recursos hacia etapas tempranas de producción, lo que promueve un crecimiento sostenible si las tasas de interés son verdaderas señales del mercado.
• 💥 Si las tasas de interés son manipuladas por el banco central, puede resultar en un auge artificial que lleva a un ciclo de burbuja económica.
• 🤔 La percepción de la teoría del capital varía considerablemente entre economistas, lo que demuestra la complejidad y la diversidad de enfoques en la economía.
• 🌟 La teoría del capital austriaca proporciona una visión detallada de cómo las decisiones de ahorro y las tasas de interés afectan la planificación de la producción y la asignación de recursos a largo plazo.

Q & A

¿Qué es la teoría del capital austriaco y por qué es esencial para entender el ciclo económico?

La teoría del capital austriaco es fundamental para entender el ciclo económico porque proporciona una visión detallada de cómo funciona la economía, particularmente en lo que respecta a la inversión, el ahorro y el papel del banco central en la economía. Ayuda a explicar fenómenos como la inflación, la recesión y el crecimiento económico.

¿Por qué la teoría del capital de la escuela austriaca es crucial para entender el ciclo de negocios?

La teoría del capital de la escuela austriaca es crucial porque muestra cómo las decisiones de ahorro y la estructura del capital afectan el crecimiento económico y pueden llevar a ciclos de expansión y recesión. La teoría destaca la importancia de la planificación temporal y cómo las decisiones de inversión pueden afectar el equilibrio económico a largo plazo.

¿Qué es el modelo de etapas de producción de Hayek y cómo se relaciona con la teoría del capital austriaco?

El modelo de etapas de producción de Hayek es una representación de cómo los recursos se transforman a través de diferentes etapas antes de convertirse en bienes de consumo finales. Se relaciona con la teoría del capital austriaco al enfatizar la importancia de la estructura temporal del capital y cómo las decisiones de inversión y ahorro afectan esta estructura, lo que a su vez influye en el ciclo económico.

¿Cómo la reducción de las tasas de interés puede afectar la economía según la teoría del capital austriaco?

Según la teoría del capital austriaco, una reducción de las tasas de interés puede llevar a una realocación de recursos hacia etapas de producción tempranas, lo que puede resultar en un aumento en la producción de bienes de consumo a lo largo del tiempo. Sin embargo, si las tasas de interés son manipuladas artificialmente por el banco central en lugar de ser una respuesta natural al ahorro, esto podría llevar a un auge artificial seguido por un derrumbe.

¿Por qué la teoría del capital de Frank Knight y la de la escuela austriaca pueden llevar a conclusiones económicas diferentes?

La teoría del capital de Frank Knight ve al capital como un stock de factores productivos que producen una flujo constante de bienes de consumo, mientras que la escuela austriaca se enfoca en la estructura del capital y cómo cambia con los cambios en las tasas de interés. Estas diferencias fundamentales en la comprensión del capital y su rol en la economía pueden llevar a conclusiones económicas diferentes, especialmente en lo que respecta a la política monetaria y su impacto en el ciclo de negocios.

¿Qué es la estructura del capital y por qué es importante en la teoría económica?

La estructura del capital se refiere a la forma en que los recursos se organizan a lo largo del tiempo en diferentes etapas de producción. Es importante en la teoría económica porque determina cómo las decisiones de inversión y ahorro afectan la producción y el consumo a lo largo del tiempo, y cómo las fluctuaciones en las tasas de interés pueden influir en esta estructura, llevando a efectos en el crecimiento económico y el ciclo de negocios.

¿Cómo la noción de 'capital humano' se relaciona con la teoría del capital austriaco?

En la teoría del capital austriaco, el 'capital humano' se considera como una forma de capital, que es la habilidad y el conocimiento acumulados de los trabajadores. Aunque algunos economistas austriacos como Rothbard no estaban completamente a favor del término 'capital humano', la idea subyacente es que los recursos humanos son una parte valiosa del capital de una empresa y que su valor puede ser expresado en términos de su capacidad para generar futuros ingresos.

¿Por qué es difícil establecer unidades estándar para el capital según la perspectiva económica?

Establecer unidades estándar para el capital es difícil debido a la heterogeneidad radical del capital. Mientras que las unidades de trabajo (horas laboradas) y la tierra (acres) pueden ser relativamente fáciles de definir y medir, el capital abarca una amplia gama de bienes y tecnologías, cada uno con características únicas que lo hacen difícil de medir de manera uniforme.

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¿Cómo la reducción de tasas de interés por parte del banco central puede afectar la economía de acuerdo con la teoría de Milton Friedman?

Según Milton Friedman, una reducción de tasas de interés por parte del banco central tiende a aumentar los precios de los recursos en comparación con los precios de los servicios. Esto podría alentar la producción de dichos recursos, pero al mismo tiempo, los precios de los servicios podrían aumentar en relación con los precios de los recursos, trayendo todo de vuelta a su estado inicial y sin cambios en las tasas de interés.

¿Cuál es la diferencia fundamental entre la visión de la estructura del capital de la escuela austriaca y la noción de 'stock y flujo' de Frank Knight?

La visión de la estructura del capital de la escuela austriaca se enfoca en la importancia del tiempo y cómo las decisiones de inversión y ahorro afectan la producción a lo largo del tiempo. Mientras tanto, la noción de 'stock y flujo' de Frank Knight ve el capital como un stock de factores productivos que producen una flujo constante de bienes de consumo, sin un enfoque específico en la estructura temporal o en cómo las tasas de interés pueden afectar esta estructura.

¿Cómo la teoría del capital de la escuela austriaca puede predecir ciclos de auge y recesión?

La teoría del capital de la escuela austriaca predice ciclos de auge y recesión al analizar cómo las decisiones de inversión y ahorro, influenciadas por las tasas de interés, pueden llevar a una realocación de recursos que no está alineada con las preferencias de tiempo real del consumidor. Si las tasas de interés son artificialmente bajas, esto puede llevar a un auge temporal basado en inversiones mal orientadas, que eventualmente conduce a una recesión cuando las malas inversiones son reconocidas y se corrige el equilibrio económico.

Outlines

00:00

📚 Introducción a la Teoría del Capital Austriaca

El primer párrafo introduce la teoría del capital austriaco, destacando su importancia para entender el ciclo económico de la escuela austriaca. Se menciona que otros escuelas de pensamiento, especialmente Milton Friedman, no comprenden plenamente esta teoría. Se discute la diversidad de usos del término 'capital', desde el capital bancario hasta el capital humano, y se enfatiza la necesidad de entender la estructura del capital y cómo los cambios en las tasas de interés pueden afectar el crecimiento económico y generar ciclos de auge y depresión.

05:02

🧐 Heterogeneidad del Capital y su Comprensión

Este párrafo profundiza en la naturaleza radicalmente heterogénea del capital, contrastándola con la heterogeneidad del trabajo y la tierra. Se explora la dificultad de definir unidades de capital de manera clara y se cuestiona la noción de que el capital, en su forma más amplia, incluye factores como el trabajo y la tierra. Se destaca la importancia de la temporalidad en la teoría del capital austriaco y cómo esta puede cambiar con las tasas de interés.

10:02

🌳 Desarrollo de la Teoría del Capital en el Tiempo

El tercer párrafo aborda la discusión entre diferentes economistas sobre la naturaleza del capital y el tiempo en la producción. Se menciona la visión de Clark y Knight, quienes ven el tiempo de producción como irrelevante en un estado estable, contrastando con la perspectiva de Hayek y otros austriacos para quienes el tiempo de producción es crucial. Se discute la idea de que la producción y el consumo son simultáneos y cómo esto afecta la teoría económica del capital.

15:06

🔍 Teoría del Capital como 'Black Box'

Este párrafo compara la teoría del capital de Knight con una caja negra, un dispositivo que no requiere que el usuario conozca su interior para funcionar. Se discute cómo el capital se mantiene a sí mismo y produce una corriente de bienes de consumo. Se destaca la idea de que todos los factores de producción, incluyendo el capital humano y la tierra, se pueden considerar como formas de capital en una perspectiva más amplia.

20:08

📈 Efectos de las Tasas de Interés en la Teoría del Capital

Se explora cómo las tasas de interés afectan los precios de los factores productivos y los servicios en la teoría económica. Se describe cómo la reducción de las tasas de interés por parte del banco central puede llevar a un aumento en los precios de los factores productivos y, en última instancia, en los servicios. Se discute la idea de que estos cambios pueden deshacer los efectos iniciales de las tasas de interés y cómo la teoría económica de Friedman sugiere que estos cambios ocurren de manera simultánea, sin tiempo para una depresión económica.

25:08

🏭 Estructura del Capital y Proceso de Producción

Este párrafo se enfoca en la estructura del capital y cómo la producción ocurre en secuencias de etapas, donde la salida de una etapa sirve como entrada para la siguiente. Se discute la importancia del tiempo en la secuencia de producción y cómo la teoría del capital de Hayek se enfoca en la estructura temporal del capital y las implicaciones de las tasas de interés diferenciales. Se destaca la diferencia entre la visión de Hayek y otros economistas como Knight y Friedman en cuanto a la importancia del tiempo y la estructura del capital en la producción económica.

30:12

🌱 Aumento de la Estructura de Producción y Crecimiento Económico

El último párrafo aborda cómo un aumento en la ahorro de los individuos puede afectar la estructura de producción y, por tanto, el crecimiento económico. Se discute cómo el ahorro puede llevar a una realocación de recursos hacia etapas tempranas de producción y cómo esto puede resultar en un aumento en la producción de bienes de consumo a lo largo del tiempo. Se destaca la importancia de que las tasas de interés sean verdaderas señales de la disposición de las personas a ahorrar y cómo esto puede llevar a un crecimiento sostenible, en contraste con un auge artificial generado por la manipulación de las tasas por parte del banco central.

Keywords

💡Teoría del Capital Austriaca

La Teoría del Capital Austriaca es un concepto fundamental en la escuela económica austriaca que se centra en cómo el capital se organiza y se utiliza en la producción. En el video, se discute la importancia de entender esta teoría para comprender los ciclos económicos y cómo los cambios en las tasas de interés afectan la estructura del capital y, en última instancia, la economía en general.

💡Ciclo Económico

El Ciclo Económico hace referencia a las fluctuaciones en la actividad económica que ocurren a lo largo del tiempo. En el video, se argumenta que la Teoría del Capital Austriaca es crucial para entender los ciclos económicos, y cómo las decisiones de ahorro y las tasas de interés pueden influir en el crecimiento económico o en la aparición de burbujas económicas.

💡Tasa de Interés

La Tasa de Interés es el costo de prestar dinero y un factor clave en la economía que influye en la inversión y el ahorro. En el video, se discute cómo las tasas de interés pueden cambiar la estructura del capital y cómo los cambios artificiales en las tasas, como los realizados por un banco central, pueden llevar a un auge y posterior derrumbe económico.

💡Estructura del Capital

La Estructura del Capital se refiere a la organización temporal y heterogénea del capital en la producción. Se destaca en el video que esta estructura puede cambiar con los cambios en las tasas de interés y es esencial para adaptar los planes de producción a las preferencias temporales de los consumidores.

💡Ahorro

El Ahorro es el acto de mantener una parte de los ingresos para futura utilización en lugar de gastarlos inmediatamente. En el video, se argumenta que el ahorro afecta las tasas de interés y, en consecuencia, la estructura del capital y la producción económica, ya que un aumento en el ahorro puede reallocar recursos hacia etapas tempranas de producción.

💡Banco Central

Un Banco Central es la entidad que controla la política monetaria de un país y tiene la responsabilidad de mantener la estabilidad de la moneda. En el video, se menciona que las decisiones del banco central de reducir las tasas de interés pueden tener efectos a corto y largo plazo en la economía, incluyendo el estímulo de un auge artificial.

💡Homogeneidad del Capital

La Homogeneidad del Capital se refiere a la noción de que todos los tipos de capital son intercambiables y pueden ser tratados como una sola masa. En el video, se cuestiona esta idea y se argumenta que el capital es radicalmente heterogéneo, lo que significa que diferentes tipos de capital tienen propiedades y usos únicos que no se pueden simplificar en una 'masa' de capital.

💡Tiempo de Producción

El Tiempo de Producción es la cantidad de tiempo que se necesita para transformar los insumos en productos finales. En el video, se discute cómo el tiempo de producción es un variable clave en la economía austriaca y cómo afecta la estructura del capital y la planificación de la producción.

💡Fluenciales y Stock

Fluenciales y Stock son términos que describen la producción económica. Un stock es una cantidad acumulada de un bien o recurso, mientras que un flujo se refiere a la cantidad que fluye o se produce en un período de tiempo. En el video, se discute cómo estos conceptos son importantes para entender la producción y la asignación de recursos en la economía.

💡Recursos

Los Recursos son los insumos necesarios para la producción de bienes y servicios. En el video, se destaca la importancia de la asignación de recursos en la estructura de producción y cómo las decisiones de ahorro y las tasas de interés pueden afectar la distribución y el uso de estos recursos a lo largo del tiempo.

💡Economía de Steady State

Una Economía de Steady State es una economía en la que la producción y el consumo se mantienen en un patrón constante a lo largo del tiempo sin crecimiento económico significativo. En el video, se discute cómo la noción de un estado estable puede ser problemática si no se tiene en cuenta la dinámica y la secuencialidad de la producción y la asignación de recursos.

Highlights

Lecture focuses on Austrian capital theory and its importance to understanding the business cycle.

Contrasts Hayekian stages of production model with Frank Knight's concept of capital as a stock yielding a flow of consumption goods.

Discusses the confusion around the term 'capital' due to its varied use in economic contexts.

Explains the Austrian school's concept of capital structure as a temporal pattern of heterogeneous producers' capital.

Critiques the idea that capital is radically heterogeneous, unlike labor and land, and its implications for economic understanding.

Details how changes in interest rates, whether due to saving or central bank intervention, affect the capital structure.

Differentiates between the views of capital maintenance as a technical detail versus a matter of choice.

Explores the concept of capital as the only factor of production, absorbing human capital, land, and other sources.

Analyzes the impact of central bank actions on interest rates and the subsequent effects on the prices of sources and services.

Discusses the steady-state economy and its relation to production time, a concept that is irrelevant in Knight's view but crucial in Austrian economics.

Presents the idea of capital as a 'black box' that maintains itself and yields a flow of consumable output.

Compares the static view of capital in the 'black box' theory with the dynamic market processes in Austrian economics.

Examines the role of saving in reallocating resources towards early stages of production and its effect on economic growth.

Illustrates the structure of production as a triangle representing the intertemporal structure of an economy experiencing growth.

Clarifies the critical differences between Knight's and Hayek's views on capital, interest rates, and the market mechanism.

Warns of the potential for an artificial boom and bust when interest rates are artificially lowered by a central bank, contrasting with sustainable growth from genuine saving.

Transcripts

okay y'all quiet down at three o'clock

it works fine this lecture is on

Austrian capital theory and that that's

essential to learning about the business

cycle of the Austrian school and I'll do

a lecture on that and another day or so

but I'm going to lead up to it so that

you can so see just how crucial it is to

get the capital Theory straight and to

recognize that other schools of

economics just don't see it they don't

they don't see it at all and especially

Milton Friedman and so I showed you two

views here one is a Hayekian stages of

production model you know what that is

and the other one is the freeing Banyon

and actually it's naughty and it comes

from Frank Knight when both knight and

freedmen were at the University of

Chicago and I would claim that freedmen

got just a little too much night to

understand how the business cycle works

we're going to neglect changes animal

spirits okay we'll just leave that leave

that aside now start out that one of the

reasons that people get confused about

capital in Austrian theory or any other

theory is that the word capital is used

in so many contexts and so I'll show you

a few and then we'll zoom in on the

couple that are at at issue this

afternoon

we can talk about bank capital as assets

minus liabilities or

net worth you know we know about that

liquid capital how liquid is it well

that's cash held by producers for future

investment so it's that's the you know

dollar

Capital hears fixed capital you know

what that is plant and equipment fixed

implies durable working capital

that's goods in process raw materials

and semi-finished good capitalized value

that's present value of net future

receipts so the word is used to mean a

lot of different things and human

capital present value of a skilled

workers future earnings

rothbard didn't like the use of the word

human capital and I'm not sure just why

I think I know and that's because

business firms have to hire people and

the capital that those people have are

their capital not not the producers

capital but nonetheless that's still

another use of the word capital now

we're going to get serious because I'm

underlining things okay and one of them

is Frank Knight his concept of capital

was as a capital stock so it's a stock

of productive factors that yield a flow

of consumption good so you'll hear a lot

this time about stock inflows and then

you could guess the other one is capital

structure that's the Austrian school the

temporal pattern of heterogeneous

producers capital okay and it's a

pattern that can change and can change

by changes in the interest rate and the

changes based on the interest rates do

one thing if the rates come down because

people start saving more

and it does another thing if it's a

central bank that pulls them down one

gets you increasing growth the other one

gives you boom and bust so that's what

you want to look for in this lecture so

trawl the rest of them out and those are

the ideas of capital that we're going to

work with now there's a problem of major

in capital and sometimes it's hard to

get a handle on this what's what's the

problem okay

and one way of saying it is capital as

heterogenous doesn't get very far a lot

of things are heterogeneous okay so that

can't be it

exclusively another one the C but aren't

labor and land heterogeneous - well yeah

yeah so what's so strange about capitals

let's go on capital is radically

heterogeneous now that sounds like

something Ludwig Lachman would say okay

and that's fine but we need to see what

it means okay

so just how radical is capital

heterogeneity so capital is

dimensionally capable there are every

genius it's dimensionally heterogeneous

all right now let's look at our labor

land and capital and I've put in some

units here for you to figure out what

they are not all units of labor are

alike well of course not all units of

land are alike and not all units of

capital airline well so what's so good

and what's so strange about capital

and I'll show you what and you'll be

able to see just what let's start with

was labor worker hours that's that's the

working unit now okay we could talk

about unskilled labor semi skilled labor

or

skilled labor okay but there's still

heterogeneous but at least we have an

idea of what the units are and then you

could guess what it is in land we'd call

it acres if you're talking farmland and

of course it can be different grades of

fertility it can be terrain it could be

location and so on but we can talk about

acres if it's residential then of course

look with the other way if it's

residential then you know that's another

way of looking at it now I'll ask you

what what are the units of capital

what are those units and you kind of

hard-pressed to say something and I've

scoured through a number of well say

intermediate level macro books to see

what they say about it right so and so

here are a few of them they just put

units on it's they have their

parentheses there are units of capital

yeah what are they well let's look at

even some worse intermediate macro what

you get doses are counted

it's not gonna work okay

chunks and honks I'm not a differential

no I'm you know I went to the computer

and just looked up and see what these

things are and and if that can work okay

so you know there you got gallons and

you got pounds and said no that's not

gonna work

there's a dose of capital okay there's a

chunk is it a standard chunk could be in

a home that's human capital beef broth

barrage against that - okay now what our

focus is on is the Austrians and Frank

Knight and later Friedman right so you

can see what the the divisions are

temporal pattern that's that's the

Austrians and it's not just Hayek it's

minger Mises shoe Pater bomba burger all

right it's all about the temporal

pattern you have to have a time element

in there and it it can change with the

interest rate and it's important what

about what it is that changed the

interest rate as I've already indicated

and then stock and flow has a pretty

antiseptic look it doesn't it doesn't

have any pattern at all just a stock of

it and the flow from it right

now it turns out that that same clash

came much earlier with of course now

bomba Varick looking at the temporal

pattern and John Bates Clark was stock

and flow okay and I don't I don't see

much of stock and flow that he had as

opposed to some of the others and

Friedman for instance although I have to

say I have good feelings with Clark but

that's only because he looks just like

my grandfather

well-spotted mad so what about

production time in the Clark night

vision and it goes like this you see a

bunch of trees that have been set out

and some of them are growing because

they've been there more time than others

and Clark would argue and so would night

and so would freedom them okay that once

the steady state is reached and I

underline that then production time is

irrelevant to relevance and right now

clue you in that you may not have read

enough night but night puts quotation

marks around verbs that make you wonder

why to do and to me it seems like it

when he puts quotation marks you just

sort of crossing his finger like hope

you'll go for that you know

so we'll see more of them I'll let you

look for the quotation marks point them

out if you don't see him okay

so trees have a linear maturity

structure actually log glean here you

can see the curve a little bit okay each

period of sampling is set out and a

mature tree is harvested well okay look

they're over on the Left we'll start now

with year one these already got set it

out okay and so there we've got another

one okay and then look over at the right

and you can harvest that true okay and

so you've got a new tree and yet you've

got left what you had to start with all

right because it's a steady state as

long as you maintain this steady state

there's no time element involved at all

according to Knight and Freeman in that

sense maybe so the next period presents

us with the same maturity profile all

right let's see yeah see there grows it

grows again so that's that's what you

had before and you don't have to worry

about time at all okay so here's a look

at look at the quotation marks okay it's

the setting out that enables the

harvesting really is that what enables

the harvesting and what that means of

course is that somehow if you're just

dead set on having a steady-state

economy with no increase or no decrease

if you just have to have that then this

is what you do okay

now this

this one just got Hayek he couldn't

stand it setting out the sapling now

producers looking close the harvestable

free now okay and of course Hayek says

that's just an absurd use of words

that's all there is to it

it can't be true and there you go so

production and consumption are

simultaneous so don't why kayak why

you're worried about the time element

it's the same every every time so this

is what what night and then Friedman are

thinking about okay now here's George

Stigler and stickler courses most of you

know was at Chicago at the time that

Friedman was and night was so George

Stigler defends Clark and dismisses

bomba Varick on the basis of the

simultaneous simultaneity of production

and consumption we can say that any one

row of trees takes fifty years to mature

but since there is a constant output of

timber forever

there's simply no point in saying and

then a strange thing that's George

Stigler and this price is in production

no that's not it

it's production production and

distribution theories in 1941 and that's

stigler's dissertation under guess who

Frank not that's the story and we'll get

one more thing about about stings we

look at this

I wrote my dissertation in the history

of economic thought under Frank ty he

was so strong minded and so critical a

student of the literature that it was a

good many years before I could read

economic classics through my own eyes

instead of his I have never brought

myself to read through my doctoral

dissertation and that's production and

distribution theories again because I

knew I would be embarrassed by both the

knighting excesses and its immaturity

that's a stickler who said it at a at a

talk in the 1984 that and that's it all

right now we got when I call it black

box capital fear watch but black box

capital Theory is it it's like a flight

recorder on airline that's the black box

is it really black you know it's orange

okay it's a joint but the blackness is

that you don't get to see inside that's

it you don't just don't look at it okay

don't open it up so it's any complex

piece of equipment typically a

plug-and-play unit in an electronic

system the specific context about which

the user has no need to know all right

now this is a complete analog to the

capital stock all we need do now though

so that's the idea that you don't mess

what's in the box that's that's the

capital in there see what we can do with

it

yeah so you have maintenance of capital

it sort of maintains itself as you can

see and a flow of consumption so oh oh I

want to leave the maintenance of capital

there because that is just a

technicality because what that's what

you're looking at with the capital stock

the capital stock includes maintenance

as a there it is technically detail well

of course this it's not a technical

detail I mean some people would do more

maintenance than others you might do it

once a week or once every ten days once

every five days whatever you choose to

do okay and worries about this if it

goes wrong maybe you should do a little

more maintenance all right so it it's if

not a technical detail at all so hence

the capital stock is permanent it it

maintains itself it's permanent and they

say you know I'm saying he puts

quotation marks every time you turn

around and that that's actually not

always because he has another way of

saying it

capitals the Gerald O'Driscoll put me

onto this years ago and I keep

underlining it in my book on night here

it is the capital stock is permanent

well it is safer

and then a page or two later

now capital stock is permanent as it

were what else with a cold capital stock

is permanent so to speak what can you do

it's not permanent we're sorry okay so

the permanent capital stock yields a

perpetual flow and you think about what

the quality shion's are in a sense as

the work so to speak okay so if you go

for night and that's that's what you've

got to get into so here we are the

capital stock we've got maintenance of

capital we've got flow of consumption

okay so we have a system of capital

yielding consumable output all right

and then he says but really there's only

one factor of production you thought

there were three there were only one it

is capital okay

so human capital everything everything

becomes capital land becomes capital and

so on in the broad sense of sources so

now we've gone to the idea of sources

okay good sources much more inclusive

than just capital as you thought it was

before you realize there really there's

only one factor of production

and sources now look at her maintenance

of capital well land labor and capital

are all capital in the broader sense

right so maintain main maintenance of

sources is what we look at and look at

the flow of consumption it's the flow of

services because Knight doesn't want to

mess with people who aren't producers

that nonetheless have things like houses

that yield a return over time okay he

wants it he wants it all be services so

you have to think that everybody's a

renter or something everybody has a

service book cause they own a home all

right now don't try to read this what

what I read this it just wasn't wouldn't

work

let's put the sources up and the

maintenance of sources and the services

so that's what we got and I'm gonna try

to read it for you I may not make it but

to help me and maybe you are color coded

so you know where the services are and

you know where the sources are now

before I go through this just a wild

girl is all that's given so this is this

one is Freeman it goes over to the next

slide and I'll show you where it comes

from Freedman so this is Freeman and so

he's locked into tonight on on capital

theory okay well I have one blue thing

up there just to let you know what it's

about the key feature that's Freeman and

then I write of the process in which

interest rates have

been lowered and has put it that way

because what they're talking about has

been lowered by the central bank but

there's nothing just not that she

decided that to change her saving habits

okay it's been lowered okay so and so

the key feature is that it tends to

raise the prices of sources okay that

this student Hornstein of both producer

and consumer services and those consumer

services I have to do with houses that

are rented okay relative to the prices

of services themselves there really are

services like the maid or something like

that if therefore encourages the

production of such sources and at the

same time the everything happens here at

the same time so you don't have any any

problems during a bust right because the

whole happens at the same time the

direct acquisition of the services

rather than of the sources but these

reactions in their turn tend to raise

the price of services relative to the

prices of sources that is to undo the

initial effects of the interest rate

okay so nothing really has happened

because though time has been allowed for

anything to happen and it goes on it's

pretty busy okay the final result may be

arise in expenditures all directions

without any change in interest rates at

all interest rates and asset prices may

simply be the conduct through which the

effect of the monetary change is

transmitted to expenditures without

being altered at all so everything just

happens at once essentially and this is

there's no time for

a depression or a downturn and this

comes from Friedman's optimum quantity

of money and other essays you could look

it up that's the strange thing so

essentially he could have said he could

have said okay so much for that

Mises you know so it's for that Hayek

because nothing actually happens all

right now despite the fact that they're

talking talking about steady state do

you realize that things can go awry and

you can actually grow or you can

actually train right and so that they

show how this works do let's see if we

can do it okay there's a capital stock

doesn't get much output but everything

comes back to the capital stock

it's gone

alright now this let's just look at

night and hayek and modulus a Friedman

and Hayek alright it goes like this

maintenance is a technical detail Oh

hiya Quinn degree maintenance is a

matter of choice capital is permanent no

capital depreciates but is aldeman able

capital is the only factor capital is

heterogeneous and multi specific

production time is irrelevant in

production time is a key variable in boy

is that true in Austrian economics its

key variable it's all about sources and

services it's all about temporal capital

structure it's about stocks and flow

according to night and it's about

dynamic market processes according to hi

hi you can't think of two economists

that would be that far apart on these

basic issues but there they are and to

me it's I don't get it

with Friedman I don't get it the

Friedman would pick up on that and the

only thing I can think of is that he was

there with Frank Knight and you heard

what always said what Stiegler said

about how how he just couldn't read it

on his own had to read it through 9 as

reported in March thousand in his vienna

and chicago very webern and early 1950s

PhD candidate at the University of

Chicago reports that Austrian capital

theory

was one of those subjects were potent

verboten in Chicago right he says one of

those what were some of the others I all

right now let's look at minger and so

what's going on here he uses two term

goods of different quarters goods of the

seventh order goods of the first order

the goods of the first order are

consumption goods so we'll change that

to consumption good and you have

higher-order goods and that always

struck me as strange higher what makes

up higher and all I can think of it's up

there at the top of the screen you know

that's higher you call that higher order

good put the highest order Goods near

the top of the screen and Hayek followed

suit as you'll see shortly so there's a

higher word goods now what we see here

is production proceeds top to bottom

well how could it not you can't start at

the bottom and go to the top all right

but value imputation goes from bottom to

top okay

some of those parallels what dr. Salerno

talked about this morning

you can see what I've done is just

superimposed high-hat structural

production that's

page 56 or whatever in the structure of

production orders of goods and this this

thing hood of strange

took me a long time to wonderful what

does that mean birthing in another Hayek

hangers strange and what strange is is

that you have time coming down the

horizontal axis well okay but there's

nowhere else in this world of economics

where time goes downward always goes

upward but they've got it goes down with

you you might think that it crashes at

the origin or something

and at the bottom you have consumer

goods that are flushed out okay

and that's that's sort of on to clean it

up a little bit that's that's just

higher now okay yep I work on this to

sort of fix it because I didn't like

this time coming down in that and I

worked on it quite a while

Walter block told me I did a good job

okay so let's see how it works

[Laughter]

okay so though the time goes left to

ride as you would think and the

consumption comes out of right as you

would guess okay you know there's a more

stylized trying well it does not a

styler that's the triangle

so we talk about the - triangle it's

just really the blue part there or

purple whatever whatever that is

hi I think triangle yeah production time

is the sequence of stages we get that

right now you might all be thinking if

we're dealing with a capital structure

isn't that really a simple thing thing

is simple to way looking at G's but at

least you have the time element there

and if you really think that's just too

simple for you to play with then go to

pure theory of capital instead of prices

in production and here's what you'll

find so you'll be better off with with

the purple triangle okay okay here we go

the structure production I think they've

got time capital base macroeconomics

disaggregates capital to enter

temporally consumable output is produced

by sequence of stages of production the

output of one stage feeding in to the

input of the next the temporal

temporally defined stages or array

graphically from left to right the

output of the final stage constituting

consumable output so there's the

triangle in stages at least we put the

stages back in and there's somebody at

the early stage it looks like he's on

the ball goes what he's doing

late stage now that guy's kind of

loafing and entering customers but show

up yeah late stage investment activities

is simple exemplified by inventory

management

now I put this and this is a factory it

says main gate down here and you see the

main gate over there and you'll see a

sign that says you are here if you've

ever gone to look at you you are here

now what's missing is that one that says

we are here and the point the point is

that that almost any factory would be

producing things that some go one stage

and some go another and you're not quite

sure because you haven't read prices and

production you don't know what is where

alright so they wouldn't be able to tell

you where it goes it might be ball

bearings that are that go to that go to

mining mining equipment and also go to

stage board is that early stage your

late stage so it's really you can't sort

it out at the industry level for

pedagogical convenience the initial

capital structure is shown as having

five stages with growth the number of

stages will increase well okay so while

all five of these stages are in

operation during each period resources

can be tracked to the structure of

production over time let's see this what

what's that what's the goods in process

there is oh this is a note here Henry I

see I can reduce the triangle in 1931

when Henry Ford was still producing a

Model A if only Hayek had had PowerPoint

he could have shown how the abstract

triangle aligns with real-world output

we can do that here and that's just to

show you that the output doesn't fall

out of the bottom okay you comes to the

right together the sequence of stages

format hijacking triangle of summary

depiction of the economies intertemporal

structure of production in an economy

experiencing secular growth the triangle

increases in size but not or not

necessarily in shape and that is an

increase in size if people are saving

right you know it'll change in shape if

they decide to save more or save less

that's what a man watch to the watch the

structure of production to expand here

you can see it expands as people must be

saving but it's the same general shape

as to triangle when people choose to

save more the change in their preferred

temporal pattern of consumption is

registered by the market the first and

foremost by reduction in interest rates

and this see reduced current consumption

frees up resources in the late stages

which then can be employed in the early

stages I should say which some can

become employed in the early stages so

it looks like it looks different let's

see

so what's the structure production

respond to an increase in save so sure

enough see when cane so they he didn't

have a triangle so when he saw that

people saved that means they're not

consuming well if they're not consuming

why would we be producing and Hayek says

realizes that notes if they're saving

that changes the interest rate and it

makes it makes production better more

profitable so in Hayek in theory

increase saving results in a

reallocation of resources towards the

early stages of production there the

differential interest rates that

sensitivities or the xix theory in

nineteen theory increasing saving beyond

capital mainland maintenance requires a

requirements result in an increase in

the capital stock but with no

implications about capital's temporal

structure that's that's what's lame

about this you can get a big capital

stock but it's not spread out just right

an increase in output of consumer goods

emerges over time as their as the early

and intermediate products move through

the more time-consuming structure of

production so now now that you have

saving you can increase faster

we can see clearly the critical

difference between night and high if you

burn through the casing of the high of

the night in black box we see the hayek

Hayekian temporal structure of capital

that allows for differential interest

rate sensitivities and hence reveals the

market mechanism that tailors production

plans to the inner temporal preferences

if the interest rates are telling you

the truth about people's willingness to

save it gets genuine sign a sustainable

growth if interest rates are being held

down by the central bank's we get an

artificial boom followed by a bust so

that's the end of this one in the start

of boom bust cycle when I do another you

okay they're there they are

thank you

[Applause]

you