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Two paths forward for Austrian macroeconomics

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Abstract

Twenty years ago, two scholars published important books on the subject of Austrian macroeconomic theory. Each offered a somewhat distinct approach. And, as much as it was the case when these two works were published twenty years ago, Austrian macroeconomists find themselves with two potential paths forward today. On the one hand, they might stress the temporal structure of production, while incorporating insights from finance. On the other, they might take a more general approach to capital specificity, while deviating from more mainstream economic models only insofar as is essential to preserve a uniquely Austrian view.

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Notes

  1. Cachanosky and Lewin (2014) provide a clear statement, writing that “The ambiguity of the term and the difficulty of defining the ‘average period of production’ plus the graphical representation of the Hayekian triangle invite confusion and the appearance of paradoxes like technology reswitching and capital reversing.” And, yet, they go on to write, that it is “very intuitive and useful as an expository device.”

  2. Gasoline, for example, can be used for immediate consumption or as an early-stage input for the production of some other good or service.

  3. Although it is not well appreciated, Braun (2015, 2016) show that a financial view of capital can also be found in the works of Menger and Mises.

  4. Fratini (2019b) offers a rejoinder.

  5. Bilo (2017) surveys the literature and concludes that Austrian macroeconomics necessarily “conflicts with the rational expectations.” Salter and Luther (2016) maintain Austrian macroeconomics is consistent with rational expectations.

  6. Reis (2018) surveys some of the “vibrant, varied, and exciting work” young macroeconomists are doing.

  7. Burns (2018) considers the relationship between human capital and the structure of production from an Austrian perspective.

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Correspondence to William J. Luther.

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Nicolas Cachanosky, Bryan Cutsinger, and Alexander Salter provided valuable comments on an earlier version of this paper. Any remaining errors should be attributed to the author.

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Luther, W.J. Two paths forward for Austrian macroeconomics. Rev Austrian Econ 34, 289–297 (2021). https://doi.org/10.1007/s11138-020-00511-y

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