Austrian themes and the Cambridge capital theory controversies

Abstract

While Austrian economists and their models were only indirectly involved in the Cambridge capital theory controversies that came to a dramatic head in 1966, certain ideas argued for by the Cambridge, UK side were prefigured in some work by Austrian economists, especially F.A. Hayek in his 1941, The Pure Theory of Capital, which he wote largely as a result of earlier debates with both Sraffa and Keynes. This paper recounts the roots of the capital theory debates coming out of the nineteenth century, the arguments among Keynes, Sraffa, and Hayek, Hayek’s analysis that undermined traditional Austrian views of capital, the Cambridge controversies themselves, and then how various groups followed up in the aftermath, including neoclassicals, neo-Ricardians and Post Keynesians, and various groups of Austrians, who were themselves slow to recognize the full implications of Hayek’s work and its relation to the Cambridge capital theory controversies. A final point is that among both those following Sraffa and Joan Robinson more as well as those following Hayek more, some have seen the issues leading to broader complexity approaches to capital theory and economic dynamics.