Hicks’ Neo-Austrian Theory of Capital

Abstract

In Chapter 3, Section 3.1, we noted that in the seventies there has been a renaissance of the ideas of Austrian capital theory. The first to take up this subject again was Hicks [1970], As we mentioned above, the “Walrasian” or neoclassical approach to capital theory neglected the temporally vertical structure of production. This neglect was expounded by Kennedy [1968] in an article in a Festschrift in honour of Hicks. It caused Hicks [1970] to take up his own thoughts on the Austrian approach, which he had first elaborated in Value and Capital [1939]. His 1970 paper was the basis of his third book on capital theory, namely Capital and Time. A Neo-Austrian Theory [1973]. In 1939 he had already expressed his discomfort with the outcome of the great capital controversy of the thirties: “The reader rises from a perusal of these papers with the feeling: ‘Clearly Bohm-Bawerk was wrong; but there must have been something in what he said, you cannot construct such an elaborate theory as that out of nothing.’ The core of truth of the Austrian theory needs to be discovered before we can really claim to have a satisfactory theory of capital” [1939, p. 193]. In connexion with this statement he develops his own capital theory in Value and Capital.