The Pure Theory of Capital

Friedrich A. Hayek

The greatest failing of non-Austrian theories of macroeconomics, it's been said, is that they lack a robust theory of capital. F.A. Hayek sought to fill out the theory of the business cycle with an impenetrable one, and the result was this remarkable 1941 treatise. It took him many years to write. It is surely his most detailed work in economic theory.

Appearing at the height of the Keynesian revolution, this treatise was sadly overlooked. Today it can be appreciated anew.

It offers a detailed account of the equilibrium relationships between inputs and outputs in an economy, Hayek’s stated objective was to make capital theory—which had previously been devoted almost entirely to the explanation of interest rates—“useful for the analysis of the monetary phenomena of the real world.” This takes him into a long explanation of the heterogeneity of the capital stock and its relationship to the passage of time.

Hayek reports that he never felt that he had fully completed the book but at 480 pages, it remains the most complete treatise on the subject ever published.

To be sure, this is for serious students, but the effort to grapple with Hayek's thought is heavily rewarded here.

The Pure Theory of Capital by F. A. Hayek
Meet the Author
F A Hayek
Friedrich A. Hayek

F. A. Hayek (1899–1992) is undoubtedly the most eminent of the modern Austrian economists, and a founding board member of the Mises Institute. Student of Friedrich von Wieser, protégé and colleague of Ludwig von Mises, and foremost representative of an outstanding generation of Austrian School theorists, Hayek was more successful than anyone else in spreading Austrian ideas throughout the English-speaking world. He shared the 1974 Nobel Prize in Economics with ideological rival Gunnar Myrdal "for their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena."  Among mainstream economists, he is mainly known for his popular The Road to Serfdom  (1944).

Mises Daily Friedrich A. Hayek
The ideal of conscious control of social phenomena has made its greatest influence felt in the economic field, writes F. A. Hayek. The present popularity of "economic planning" is directly traceable to the prevalence of the scientistic ideas we have been discussing. As in this field the scientistic ideals manifest themselves in the particular forms which they take in the hands of the applied scientist and especially the engineer, it will be convenient to combine the discussion of this influence with some examination of the characteristic ideals of the engineers. We shall see that the influence on current views about problems of social organization of his technological approach, or the engineering point of view, is much greater than is generally realized. Most of the schemes for a complete remodeling of society, from the earlier utopias to modern socialism, bear indeed the distinct mark of this influence.
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References

Chicago: University of Chicago Press, 1941