Capital and Interest

240 Pages·2015·1.04 MB·English

by  F. A. Hayek

THE COLLECTED WORKS OF
F. A. Hayek
VOLUME XI
CAPITAL AND INTEREST
PLAN OF THE COLLECTED WORKS
Edited by Bruce Caldwell
Volume I The Fatal Conceit: The Errors of Socialism (1988)
Volume II The Road to Serfdom: Text and Documents— The Definitive
Edition (2007)
Volume III The Trend of Economic Thinking: Essays on Political
Economists and Economic History (1991)
Volume IV The Fortunes of Liberalism: Essays on Austrian Economics
and the Ideal of Freedom (1992)
Volume V Good Money, Part I: The New World (1999)
Volume VI Good Money, Part II: The Standard (1999)
Volume VII Business Cycles, Part I (2012)
Volume VIII Business Cycles, Part II (2012)
Volume IX Contra Keynes and Cambridge: Essays, Correspondence
(1995)
Volume X Socialism and War: Essays, Documents, Reviews (1997)
Volume XI Capital and Interest (2015)
Volume XII The Pure Theory of Capital (2007)
Volume XIII Studies on the Abuse and Decline of Reason: Text and
Documents (2010)
Volume XIV The Sensory Order and Other Essays
Volume XV The Market and Other Orders (2014)
Volume XVI Hayek on Mill: The Mill- Taylor Friendship and Related
Writings (2015)
Volume XVII The Constitution of Liberty: The Definitive Edition (2011)
Volume XVIII Essays on Liberty and Economics
Volume XIX Law, Legislation and Liberty
Supplement Hayek on Hayek: An Autobiographical Dialogue (1994)
The plan is provisional. Minor alterations may occur in titles of individual books,
and additional volumes may be added.
THE COLLECTED WORKS OF
F. A. Hayek
VOLUME XI
CAPITAL AND INTEREST
EDITED BY
LAWRENCE H. WHITE
The University of Chicago Press
f. a. hayek (1899–1992), recipient of the Presidential Medal of Freedom
in 1991 and cowinner of the Nobel Memorial Prize in Economics in
1974, was a pioneer in monetary theory and a leading proponent of
classical liberalism in the twentieth century. He taught at the University of
London, the University of Chicago, and the University of Freiburg.
lawrence h. white is professor of economics at George Mason
University.
The University of Chicago Press, Chicago 60637
The University of Chicago Press, Ltd., London
© 2015 by The Estate of F. A. Hayek
All rights reserved. Published 2015.
Printed in the United States of America
24 23 22 21 20 19 18 17 16 15 1 2 3 4 5
ISBN- 13: 978- 0- 226- 27487- 4 (cloth)
ISBN- 13: 978- 0- 226- 27490- 4 (e- book)
DOI: 10.7208/chicago/9780226274904.001.0001
“Professor Hayek and the Theory of Investment,” Frank H. Knight.
© 1935 Economic Journal. Reproduced with permission of Blackwell
Publishing Ltd.
“Maintaining Capital Intact,” A. C. Pigou. © 1941 Economica.
Reproduced with permission of Blackwell Publishing Ltd.
Library of Congress Cataloging- in- Publication Data
Hayek, Friedrich A. von (Friedrich August), 1899–1992, author.
[Works. Selections]
Capital and interest / edited by Lawrence H. White.
pages cm — (The collected works of F. A. Hayek ; volume XI)
Includes bibliographical references and index.
ISBN 978- 0- 226- 27487- 4 (cloth : alkaline paper) — ISBN 978- 0- 226-
27490- 4 (e- book) 1. Capital. 2. Investments. 3. Interest. I. White,
Lawrence H. (Lawrence Henry), editor. II. Title. III. Series: Hayek,
Friedrich A. von (Friedrich August), 1899–1992. Works. 1989 ; v. 11.
HB171.H4266 2015
332'.041—dc23
2014045424
♾ This paper meets the requirements of ANSI/NISO Z39.48- 1992
(Permanence of Paper).
THE COLLECTED WORKS OF F. A. HAYEK
Founding Editor: W. W. Bartley III
General Editor: Bruce Caldwell
Published with the support of
The Hoover Institution on War, Revolution, and Peace
Stanford University
The Cato Institute
The Earhart Foundation
The Pierre F. and Enid Goodrich Foundation
The Heritage Foundation
The Morris Foundation, Little Rock

CONTENTS
Editor’s Introduction ix
One Some Observations on the Imputation Problem (1926) 1
Two On the Problem of Interest Theory (1927) 20
Three Utility Analysis and Interest (1936) 32
Four Capital Consumption (1932) 47
Five Saving (1934) 67
Six On the Relationship between Investment and
Output (1934) 75
Seven Professor Hayek and the Theory of Investment
by Frank H. Knight (1935) 100
Eight The Mythology of Capital (1936) 118
Nine Technical Progress and Excess Capacity (1936) 141
Ten The Maintenance of Capital (1935) 156
Eleven Maintaining Capital Intact by A. C. Pigou (1941) 190
Twelve Maintaining Capital Intact: A Reply (1941) 194
Index 199

EDITOR’S INTRODUCTION
Hayek on Capital and Interest before The Pure Theory of Capital
The present collection of articles spans the first fifteen years of Fried-
rich A. Hayek’s professional career, a period almost entirely devoted to tech-
nical work in economic theory. Regarding the difficult issues of capital and
interest theory, the period can be divided into two unequal sub- periods. The
first two articles represent the young Hayek’s Vienna period, during which
he had been most importantly influenced by his distinguished University of
Vienna teacher Friedrich von Wieser.1 The later articles represent the more
mature Hayek’s London period, during which he was teaching at the Lon-
don School of Economics, and had been most importantly influenced by his
post- university mentor Ludwig von Mises. The second period followed his
1931 lectures published as Prices and Production and culminated in his 1941
book The Pure Theory of Capital.2 In these later articles, as in The Pure Theory of
Capital, Hayek developed in his own distinctive way a perspective on capital
and interest not grounded on the work of Wieser but rather on the work of
Wieser’s Viennese contemporary Eugen von Böhm- Bawerk. Additional influ-
ences were the work of the Swedish economist Knut Wicksell, who had devel-
oped Böhm- Bawerk’s theory more rigorously, and the business cycle theory of
Mises, who built on Böhm-B awerk and Wicksell.
1 On Hayek’s turn away from his early Wieserian thinking in connection with the socialist
calculation debate, see Laurence S. Moss, “Hayek’s Borderless Economy: His Escape from the
Household Model,” in F. A. Hayek as a Political Economist: Economic Analysis and Values, ed. Jack
Birner, Pierre Garrouste, and Thierry Aimar (London: Routledge, 2002).
2 F. A. Hayek, Prices and Production (London: Routledge, 1931); 2nd rev. ed. (1935); reprinted in
Business Cycles: Part I, ed. Hansjoerg Klausinger, vol. 7 of The Collected Works of F. A. Hayek (Chi-
cago: University of Chicago Press, 2012); Hayek, The Pure Theory of Capital (Chicago: University
of Chicago Press, 1941); reprinted as vol. 12 of The Collected Works of F. A. Hayek, ed. Lawrence H.
White (Chicago: University of Chicago Press, 2007).