Peter Lewin

The University of Texas at Dallas | UTD · Naveen Jindal School of Management

The Austrian School interpretation of the Keynes-Hayek debate runs counter to the conventional wisdom that Hayek “lost” the debate. Austrians maintain that they have the substantive theoretical high ground and the Keynesian perspective to this day fails to comprehend it. But in all of the many variations and repetitions of the ABCT, though of episo...

In order to identify an entrepreneurial opportunity, calculation is required. The entrepreneur must do more than simply perceive an opportunity to do something new to create value in the marketplace. Insofar as alternative possible actions exist, the entrepreneur must choose between them. And even as the chosen opportunity is pursued, he must choos...

In a recent contribution to this journal Saverio Fratini (Review of Austrian Economics, 2019) offers a critique of our work on Austrian Capital Theory on the grounds that our conception of capital and “roundaboutness” does not appear to provide adequate support for the Austrian business-cycle theory. In this comment we explain why we think this cri...

Ludwig Lachmann looked to the Austrian School of economics as an intellectual space of refuge from the sterile formalism that constituted the academic work of the mainstream economics establishment. From an early interest in capital-theory, he moved to broader epistemological, methodological, and institutional concerns – specifically, from the subj...

This Element presents a new framework for Austrian Capital Theory, starting from the notion that capital is value. Capital is the value attributed by the valuer at any moment in time to the combination of production-goods and labor available for production. Capital is the result obtained by calculating the current value of a business-unit or busine...

A keynote address in which the author looks back at the rebirth of Austrian economics, characterizes its current state, and looks forward to its future development. The early years after the rebirth focused on methodology, but as the modern school has development its concerns have become much more varied and connected to specific current issues. Th...

We argue that the application of financial analysis, especially that of duration, clarifies and supports the application of the average period of production in Austrian business cycle theory. We also suggest that the focus in the recent ABCT literature should be more on the average period of production and less on the stages of production as depict...

The time is right for a reexamination of Austrian capital-theory. We attempt to capture the essence of Carl Menger’s approach to capital, highlighting the important distinction between goods and the valuable services they yield (implying that goods are valuable only because they yield valuable services) and highlighting also the importance of money...

Austrian capital theory tried to capture the intuitive and basically undeniable importance that time plays in economic life, but arguably was diverted down a blind alley with Eugen von Böhm-Bawerk’s average period of production, a purely physical measure of ‘roundaboutness’—the length of the production process. For the general case, such a measure...

The perennial question 'What is Capital' has been getting some attention recently. Although the distinction between capital as a financial construct and capital as a collection of physical production-goods is well known, we argue that the former concept is undepreciated. The two concepts are often conflated in practice, and the relationship between...

The ability to rationally evaluate time-consuming productive activities is what distinguishes capitalism from alternative social systems. Capital-accounting provides the framework for such evaluations that allow decision-makers to calculate the relative values to them of alternative productive activities. In this paper I show how insights from Aust...

Following financial concepts like duration and economic value added (EVA®) we estimate the impact of interest rate movements on firms that are more and less roundabout. We find that firms that are more roundabout, that is, work with expected cash-flows with higher duration, are more sensitive to interest rate movements. To the extent that monetary...

Ludwig von Mises seems to be something of an outlier within the Austrian school when it comes to capital – though his position is clearly foreshadowed in a neglected article by Carl Menger (1888). In this paper, we examine Mises's view on capital and suggest that it constitutes a bridge between Austrian and institutional economics. As an outflow of...

Purpose A comprehensive understanding business cycles needs to account not only for the allocation of resources over time but also for resource allocation across industries at any point in time. But to properly understand how these “time-distortions” take place and how the price mechanisms that drive them work, a clear and well-defined conceptualiz...

We repeat the mistakes of history because of the neglect of history, the imperfections of memory, and the complexity of social situations. I begin with a discussion of the first two and then turn to the third. After discussing the meaning and significance of complexity, I discuss the causal ambiguity surrounding economic policies and what this impl...

In this paper, we study financial foundations of Austrian business cycle theory (ABCT). By doing this, we (1) clarify ambiguous and controversial concepts like roundaboutness and average period of production, (2) we show that the ABCT has strong financial foundations (consistent with its microeconomic foundations), and (3) we offer examples of how...

This paper is a review essay of the latest volume of The Collected Works of F.A. Hayek, entitled 'The Market and other Orders.' The paper examines the development of Hayeks' ideas about order, as manifested in the essays collected in this volume. Issues examined include: Hayek's accounts of the market and the mind as spontaneous orders; his relianc...

In this paper I revisit the question of coordination - of plans by prices and other social institutions. Prices contain ambiguous information that requires interpretation. How are they, in spite of this, able to coordinate plans and actions? The answer given in this paper is that they are not - they do not. I suggest that a closer examination of pl...

The colloquial understanding of capital as financial-capital is after-all close to the mark, at least closer than thinking of capital as a collection of physical things. The latter is perhaps responsible for more confusion and controversy than clarity. A consideration of the role of time in production and investment decisions, as explored in this p...

Following financial concepts like duration and economic value added (EVA®) we estimate the impact of interest rate movements on firms that are more and less roundabout. We find that firms that are more roundabout, that is, work with expected cash-flows with higher duration, are more sensitive to interest rate movements. To the extent that monetary...

In this paper I revisit the question of coordination - of plans by prices and other social institutions. Prices contain ambiguous information that requires interpretation. How are they, in spite of this, able to coordinate plans and actions? The answer given in this paper is that they are not - they do not. I suggest that a closer examination of pl...

http://www.utdallas.edu/~plewin/

We apply the EVA terminology to the concepts of roundaboutness and average period of production in capital theory. By doing this we show that these terms have a clear and well understood financial interpretation. A financial application to capital theory helps to clarify obscure and controversial economic terms.

Richard Wagner has written a remarkable book, one to which it is difficult to do justice within the scope of a short review.It is part of Wagner’s ongoing work on related themes (see for example Wagner 2007, 2012a, b The difficulty is twofold. Firstly, the book is so rich in insights and nuggets of delightful clarity. How is one to convey even the...

We repeat the mistakes of history because of the neglect of history, the imperfections of memory and the complexity of social situations. I begin with a discussion of the first two and then turn to the third. After discussing the meaning and significance of complexity, I discuss the causal ambiguity of economic policies and what this implies for th...

Purpose - A comprehensive understanding business-cycles needs to account not only for the allocation of resources over time, but also for resource allocation across industries at any point in time. But to properly understand how these “time-distortions” take place and how the price-mechanisms that drive them work, a clear and well-defined conceptua...

We apply the EVA terminology to the concepts of roundaboutness and average period of production in capital theory. By doing this we show that these terms have a clear and well understood financial interpretation. A financial application to capital theory helps to clarify obscure and controversial economic terms.

The concept of ‘heterogeneity’ is much invoked in social science research especially in disciplines like psychology, sociology and anthropology and is now an integral part of economics in sub-disciplines like industrial organization, entrepreneurship, behavioral economics, and similar fields. This paper examines the fundamentals of the concept of h...

Unpacking the concept of entrepreneurial opportunity to include three categories of essential ingredients, this paper provides a fruitful framework for applying Israel Kirzner’s approach to entrepreneurship - bridging the entrepreneur as someone alert to opportunities to create value, to real world situations requiring the entrepreneur’s evaluation...

The ideas presented in this research are the authors ' and do not represent official positions of the Mercatus

This article offers an analysis of the causes of the subprime crisis, explaining that it is not an isolated incident and that we should concentrate our attention on the Fed’s monetary policy and pressures on the banking system received from the U.S. government for flexible lending. It also critically examines the Fed’s exit strategy and fiscal poli...

We offer here a capital-based view (CBV) that incorporates, and goes further than related views, (like the resource- and the knowledge-based view) of the firm. This general approach uses ideas about capital and its structure to examine the nature of heterogeneous resources and their attributes and how they are organized by entrepreneurs (individual...

This article investigates the nature of human capital (HC) through its relationship to the concept of capital more broadly. It shows that a 'proper' understanding of capital suggests that HC is a logical component of the capital structure of the economy and the organizations that comprise it. In contrast to the classical, the neoclassical, and (by...

When understood as an inevitable inconsistency of individual plans, disequilibrium is not only a necessary condition for the existence, and hence understanding, of the market process as we know it, it is also the glue connecting three other “Austrian” themes. In equilibrium heterogeneity of resources would have no strategic significance, specific a...

The family has not been exempt from the multiple and rapidly occurring changes in the world today, particularly in market economies. The number of marriages has declined, age at first marriage has risen, the number of divorces has risen sharply, the fertility rate has declined, and the division of labor within families has changed, not always in wa...

I examine here the connection between facts, values, and the burden of proof, and I suggest a relationship that is always present, though seldom acknowledged. We like to think of ourselves as conducting value-free scientific inquiry, yet values inevitably intrude. This inevitable intrusion does not necessarily suggest the abandonment of the attempt...

Part one of this paper considers the question of property rights in general and asks how such rights can be justified, contrasting Consequentialist with other approaches and concludes that it is impossible to avoid a broadly Consequentialist approach. Part two considers the question of intellectual property (IP) and asks how property rights justifi...

This paper traces the idea of Capital from Adam Smith to modern times and shows how different conceptions of Capital give rise to different approaches to economics and the range of problems that can be investigated. A structural, as opposed to a stock, approach to Capital is shown to be more conducive to a studies of business institutions and pract...

Two strategic perspectives are analyzed, the neoclassical microeconomic perspective (using the Ricardo-Marshall approach to rent) and the Market Process perspective (using the Fetter approach to rent). In a neoclassical world, rents indicate "unsolved" or unexploited "inefficiencies" as every hypothetical outcome is viewed against the standard of p...

Israel Kirzner has spent a career in articulating and refining concept of entrepreneurship; His work is indispensable for anyone seeking an understanding of the role of the entrepreneur in the economy. This paper provides a critical appreciation of this work, and considers how Kirzner’s insights might feature in a defense of Capitalism in the post-...

lthough this is a short book, 183 pages inclusive of index and bibli- ography, it covers a lot of ground. Drawing on her doctoral disserta- tion, Sandye Gloria-Palermo has undertaken a history-of-thought sur- vey of the Austrian tradition from Menger to Lachmann. In the process, she considers the works of Böhm-Bawerk, Wieser, Mises, Hayek, Rothbard...

Recent developments in Austrian-market-process economics are discussed, and, despite the continuing difficulties of communicating with mainstream economics, some causes for optimism are discerned. Looking to a useful future for Austrian economics will require that further empirical work in applying its insights be done. The question of placing the...

Introduction Readers of this book will be aware that the economics of QWERTY is a controversial area. This chapter reports on some of details of the controversy as it has unfolded to date. In particular the nature of the incipient debate between Liebowitz and Margolis and Paul David may be of some interest. 1 This debate is complicated by the fact...

this paper was presented at the SEA meetings in November 2000. We are grateful to the participants for useful feedback

. The theory of the firm seeks to explain the existence and boundaries of the firm in relation to the market. Since the pioneering work of Coase (1937), economics has developed a whole family of theories that focus on the ability of firms to economize on certain costs of using markets. More recently, researchers in strategic management have publish...

Since its publication in 1985 Paul David's "Economics of 'QWERTY"' has provided a paradigm case for the understanding and application of path-dependent processes in economics, some of which have been identified as yielding sub-optimal outcomes. The accuracy and relevance of this case, and this entire theoretical approach, has been subjected to crit...

Ludwig M. Lachmann was born in Berlin in 1906 and died in Johannesburg in 1990. For more than forty years, until his retirement in 1972, Lachmann established himself as a prominent South African economist and for a time served as head of the economics department at the University of Witwatersrand. From 1974 to 1987, he worked with Professor Israel...

The work of William Hutt is well known in the fields of labor economics, monetary economics and political economy. A hundred years after his birth it is appropriate to take note of a less well known work of his, The Economics of the Color Bar. This book, first published in 1964, is an in-depth examination of the origins and implications of aparthei...

this paper can be stated as follows: While the authors' strongest arguments are those made against the inconsistencies of the neoclassical method, one must nevertheless feel somewhat uneasy at their attempt to develop a more appropriate gauge of efficiency by which to judge the market economy. It is not so much that the alternative normative criter...

Introduction [T]he long retreat from Bhm-Bawerk's classical objectivism in the theory of capital, which started with Professor Hayek's reply to Knight in 1936, was continued in his Pure Theory of Capital of 1941 and to which I endeavored to give provisional expression in my book Capital and its Structure in 1956, reaches [here] a new stage. (Lachma...

Introduction: Production Function Theories and Other Theories of the Firm New theories of the firm have been proliferating over the last two decades, including theories that go by such labels as Competence theories (Foss and Knudsen 1996), Evolutionary theories (Nelson and Winter 1982), Capability theories (Richardson [1960] 1990, 1972, Loasby 1998...

Introduction Murray Rothbard was a tenacious defender of the praxeological project originated by Ludwig von Mises. In his most extensive and most consciously theoretical work, Man Economy and State he attempted to give clear and complete expression to Mises's vision. This is particularly evident in his treatment of Interest and Capital 1 . He exami...

This article attempts to remedy this to some extent, by reexamining Lachmann's capital theory. Apart from being valuable in its own right, it is probably true that his work on capital is the only extensive application of his methodology - though there are hints of the implications for monetary theory and policy and labor economics and some other ar...

Edith Penrose and G. B. Richardson can be seen as pioneering an approach to understanding the business organization that is richer than the accepted production function approach found in mainstream economics. In this paper, the Penrose-Richardson approach is related to both the well-known Coasian-transaction-cost literature and to the less well-kno...

Two strategic perspectives are analyzed, the neoclassical microeconomic perspective (using the Ricardo-Marshall approach to rent) and the Market Process perspective (using the Fetter approach to rent). In a neoclassical world, rents indicate "unsolved" or unexploited "inefficiencies" as every hypothetical outcome is viewed against the standard of p...

The modern Theory of the Firm uses the concept of rent and makes implicit assumptions about equilibrium. An Austrian (Market Process) Theory of the Firm should have something to say about each of these. Two strategic perspectives are analyzed, the neoclassical microeconomic perspective (using the Ricardo-Marshall approach to rent) and the Market Pr...

This paper examines the role of money and monetary calculation in the determination of the production structure of the economy.

The conventional wisdom in economics holds, with Irving Fisher, that interest is explained jointly by the forces of time preference (thrift) and productivity. One school of thought, however, has held stubbornly to the assertion that interest is best understood as a result of time preference alone, time preference as the essential determinant of int...

What do we mean when we say action is possible in disequilibrium? If we adopt Hayek's approach to equilibrium, we must mean that we can act in a world where the plans that motivate and define those actions are not mutually compatible. This is hardly controversial. After all, the market process features rivalrous actions, that is, actions that are p...

[T]he long retreat from Bhm-Bawerk's classical objectivism in the theory of capital, which started with Professor Hayek's reply to Knight in 1936, was continued in his Pure Theory of Capital of 1941 and to which I endeavored to give provisional expression in my book Capital and its Structure in 1956, reaches [here] a new stage. (Lachmann,...

Neoclassical economic and sociological views of discrimination are compared. We summarize economic models of taste, statistical, error, and monopolistic discrimination. Economists argue that competitive market forces should lead to the demise of discrimination in the long run. After explaining these arguments, we present sociological arguments abou...

Increasing attention has been given in recent years to the valuation of reliability in the supply of electricity. It is peculiar in the use of the terms that the value of reliability is equivalent to the cost of unreliability. In attempting to identify and measure this cost, researchers have drawn a distinction between different types of cost, part...

This paper critically considers the neoclassical social-cost approach to problems of pollution. This traditional approach, when subjected to close scrutiny, is found to be seriously wanting in applicability and consistency. A less ambitious alternative based on notions of strict liability is offered...

Abstract This paper discusses the definition and measurement,of innovation,at the firm-level. Innovation is the ,process of introducing ,new ,ideas to the ,firm which ,result in increased firm performance. Various measures ,of innovative ,activity are discussed and evaluated. All the individual measures discussed can only act as partial indicators...

The work of William Hutt is well known in the fields of labor economics, monetary economics and political economy. A hundred years after his birth it is appropriate to take note of a less well known work of his, The Economics of the Color Bar. This book, first published in 1964, is an in-depth examination of the origins and implications of aparthei...