The Review of Austrian Economics

, Volume 32, Issue 4, pp 363–374 | Cite as

A note on re-switching, the average period of production and the Austrian business-cycle theory

  • Saverio M. FratiniEmail author


According to a new formulation, the average period of production is calculated by taking the shares of costs referable to each period out of the total amount of costs as weights. Once this notion had been introduced, its inverse relationship with the rate of interest prompted some scholars to believe that it could serve as a good measure of capital intensity, expecially in view of a possible resumption of the Austrian business-cycle theory. As will be shown, however, this new average period poses some problems. On the one hand, the inverse relationship mentioned above does not preclude the re-switching of production methods. On the other, if re-switching occurs, the most roundabout method may paradoxically be the one that gives the smallest net output per worker. This result can affect the revival of the Austrian business-cycle theory.


Average period of production Degree of roundaboutness Capital Re-switching Austrian business-cycle theory 

JEL classification

B25 B53 D24 D33, E32 



Thanks are due to C. Gehrke, G.C. Harcourt, H.D. Kurz and two anonymous referees for comments and suggestions. The usual caveat applies.


  1. Bliss, C. J. (1975). Capital Theory and Distribution of Income. Amsterdam: North-Holland/Elsevier.Google Scholar
  2. Böhm-Bawerk, E. (1884). The ultimate standard of value. Annals of the American Academy of Political and Social Science, 5, 1–60.CrossRefGoogle Scholar
  3. Böhm-Bawerk, E. (1891). The positive theory of capital. London: Macmillan.Google Scholar
  4. Braun, E. (2017). The theory of capital as a theory of capitalism. Journal of Institutional Economics, 13(2), 305–325.CrossRefGoogle Scholar
  5. Braun, E. (2018) Capital as in capitalism, or capital as in capital goods, or both? Review of Austrian Economics, forthcoming.Google Scholar
  6. Cachanosky, N., & Lewin, P. (2014). Roundaboutness is not a mysterious concept: A financial application to capital-theory. Review of Political Economy, 26(4), 648–665.CrossRefGoogle Scholar
  7. Cachanosky, N., & Lewin, P. (2016). Financial foundations of Austrian business cycle theory. In S. Horwitz (Ed.), Studies in Austrian macroeconomics (advances in Austrian economics, vol. 20) (pp. 15–44). Bingley: Emerald Group Publishing.CrossRefGoogle Scholar
  8. Fratini, S. M. (2013). Malinvaud on Wicksell’s legacy to capital theory: Some critical remarks. In E. S. Levrero, A. Palumbo, & A. Stirati (Eds.), Sraffa and the reconstruction of economic theory (Vol. I). New York: Palgrave-Macmillan.Google Scholar
  9. Fratini, S. M. (2014). The Hicks-Malinvaud average period of production and ‘marginal productivity’: A critical assessment. European Journal of the History of Economic Thought, 21(1), 142–157.CrossRefGoogle Scholar
  10. Hagemann, H., & Kurz, H. D. (1976). The return of the same truncation period and reswitching of thechniques in neo-Austrian and more general models. Kyklos, 29, 678–708.CrossRefGoogle Scholar
  11. Harcourt, G. C. (1972). Cambridge controversies in the theory of capital. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  12. Hicks, J.R. (1946 [1939]), Value and Capital, 2nd edition. Oxford: Clarendon Press.Google Scholar
  13. Hicks, J. R. (1973). Capital and time. A neo-Austrian theory. Oxford: Clarendon Press.Google Scholar
  14. Howard, M. C. (1980). Austrian capital theory: An evaluation in terms of Piero Sraffa’s Production of Commodities by Means of Commodities. Metroeconomica, 32(1), 1–23.CrossRefGoogle Scholar
  15. Jevons, W. S. (1888). The theory of political economy. London: Macmillan.Google Scholar
  16. Kurz, H. D. (2000). The Hayek-Keynes-Sraffa controversy reconsidered. In H. D. Kurz (Ed.), Critical essays on Piero Sraffa’s legacy in economics (pp. 257–301). Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  17. Kurz, H. D. (2015). Capital theory, crises, and business cycles: The triangular debate between Hayek, Keynes, and Sraffa. Journal of Reviews on Global Economics, 4, 186–191.CrossRefGoogle Scholar
  18. Lewin, P., & Cachanosky, N. (2018a). The average period of production: The history and rehabilitation of an idea. Journal of the History of Economic Thought, 40(1), 81–98.CrossRefGoogle Scholar
  19. Lewin, P., & Cachanosky, N. (2018b). Value and capital: Austrian capital theory, retrospect and prospect. Review of Austrian Economics, 31(1), 1–26.CrossRefGoogle Scholar
  20. Lewin, P., & Cachanosky, N. (2018c). Substance and semantics: The question of capital. Journal of Economic Behavior & Organization, 150, 423–431.CrossRefGoogle Scholar
  21. Malinvaud, E. (1986). Reflecting on the theory of capital and growth. Oxford Economic Papers, 38(3), 367–385.CrossRefGoogle Scholar
  22. Malinvaud, E. (2003). The legacy of Knut Wicksell to capital theory. Scandinavian Journal of Economics, 105(4), 507–525.CrossRefGoogle Scholar
  23. Orosel, G. O. (1979). A reformulation of the Austrian theory of capital and its application to the debate on reswitching and related paradoxa. Zeitschrift Für Nationalökonomie-Journal of Economics, 39(1/2), 1–31.Google Scholar
  24. Orosel, G. O. (1990). Period of production. In J. Eatwell, M. Milgate, & P. Newman (Eds.), Capital theory (pp. 212–219). London: Macmillan.CrossRefGoogle Scholar
  25. Samuelson, P. A. (1966). A summing up. Quarterly Journal of Economics, 80(4), 568–583.CrossRefGoogle Scholar
  26. Sargan, J. D. (1955). The period of production. Econometrica, 23(2), 151–165.CrossRefGoogle Scholar
  27. Sraffa, P. (1960). Production of commodities by means of commodities. Cambridge: Cambridge University Press.Google Scholar
  28. Steedman, I. (1972). Jevons theory of capital and interest. The Machester School, 40, 31–52.CrossRefGoogle Scholar
  29. von Weizsäcker, C. C. (1971). Steady State Capital Theory. Berlin: Springer-Verlag.CrossRefGoogle Scholar
  30. Weizsäcker, C.C. von (1977), ‘Organic composition of capital and average period of production.’ Revue d’Economie Politique, 90: 198–231.Google Scholar
  31. Wicksell, K. (1934). Lectures on political economy (Vol. I). London: George Routledge & Sons.Google Scholar
  32. Yeager, L. B. (1976). Toward understanding some paradoxes in capital-theory. Economic Inquiry, 14(3), 313–346.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Dipartimento di EconomiaUniversità di Roma TreRomeItaly

Personalised recommendations