On the Development of Austrian Capital Theory

Abstract

Traditional Austrian capital theory almost ceased to exist at the end of the thirties. The work of its main founder, EUGEN VON BÖHM-BAWERK, has only little visible influence on the mainstream of contemporary capital theory. This can be verified by looking at the reference list of almost any textbook. Since the impact of the Austrian view on the development of economic theory and the reasons for its decline are not known to every reader, Section 1 of the present paper gives a short outline of Austrian capital theory until 1940. Section 2 sketches the integration of capital theory into an intertemporal general equilibrium approach and ends with mentioning some of the major research areas which emerged in the seventies. All of them have in common that they emphasize time aspects of economic activities. Among these is the revival of Austrian capital theory. In Section 3 this renaissance is described in its two major variants:(1) the subjectivist or Austro-American school and (2) neo-Austrian capital theory.