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Fall 2011

ISSN 0890-913X

Volume 27, Number 1

Categories: Economics | Fall 2011

Contrasting Concepts of Capital: Yet Another Look at the Hayek-Keynes Debate

Steve Horwitz, St. Lawrence University

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TheJournalofPrivateEnterprise27(1),2011,9–27ContrastingConceptsofCapital:YetAnotherLookattheHayek-KeynesDebateStevenHorwitz*St.LawrenceUniversityAbstractIarguethattheeconomicsofHayekandKeynesdivergesmostsignificantlynotwithrespecttopolicybutintheirunderstandingoftheroleofcapitalinamarketeconomy,andhowcapitalrelatestoissuesofsavingsandinvestment.Specifically,Hayek’sAustrianconceptionofcapitalprovidesadifferent,andverydisaggregated,visionofthemarketprocessthatcanhelpidentifytheflawsinKeynesiantheoryandpolicy.Hayek’sviewofcapitalforcestheeconomisttoconsiderthemicroeconomicfoundationsofmacroeconomicphenomenainawaythatvalidatesHayek’scomplaintthatKeynes’saggregatesconcealthefundamentalmechanismsofchange.JELCodes:B22,B31,E12Keywords:Keynes;Capitaltheory;Businesscycles;Macroeconomics;HayekI.IntroductionTheGreatRecessionofrecentyearshasrekindledaneconomicdebatethatfirsteruptedaround80yearsagobetweenfutureNobelLaureateFriedrichHayekandLordJohnMaynardKeynes,perhapsthemostimportanteconomistofthe20thcentury.Fromthousandsofpagesoftextinacademicjournals,popularmagazines,andonline,toarapvideothathasbeenseenbymorethan2millionviewers,thisroundoftheHayek-Keynesdebateis,quiteplausibly,evenlargerscaleandmoreintensethantheoriginal.Muchofthecurrentconversationhasfocusedonthewaysinwhichthetwothinkers’visionsoftheeconomyweresodifferentandtherebyledtoverydifferentpolicyconclusions.ThegeneralideaisthatHayekhadmuchmoreconfidenceintheself-correctingpowersofmarketswhileKeyneswasmorefocusedonthewaysinwhichthoseprocessescouldbreakdown.Inturn,theHayekianperspectiveonrecessions*IthankChuckBairdandJeffYoungforcommentsonanearlierdraft.9

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Metadata [hide]

Title	Contrasting Concepts of Capital: Yet Another Look at the Hayek-Keynes Debate
Authors/Creators:	Steve Horwitz, St. Lawrence University
Year:	2011
Volume:	27
Number:	1
Pages:	9 - 27
Publisher:	The Association of Private Enterprise Education
ISSN:	0890-913X
Document Type:	Articles
Keywords:	Keynes, Capital theory, Business cycles, Macroeconomics, Hayek

Citation:
Horwitz, Steve / 2011. "Contrasting Concepts of Capital: Yet Another Look at the Hayek-Keynes Debate." The Journal of Private Enterprise, 27(1): 9-27.