Brenner: Neo Austrian?

Rakesh Bhandari bhandari at phoenix.Princeton.EDU
Wed Nov 25 20:57:16 PST 1998


Prof Brenner:

As a supplement to your argument on p.26ff, I include the following criticism of Hayek by Shackle (it seems that you would have a similar criticism of Austrian capital theory, so you may not alas be a neo Austrian Marxist!):

"Tools and machines may be in use , after many years of their life, to make other tools. Durability of tools and of productions has two consequences for Hayek's theory. It renders extremely difficult and elusive the task of linkng the application of measurable productive service by men and nature on one date with the emergence of a measurable consumable productio at another date. And durability is a chief vessel of the governance of the present by the past. An existing piece of equipment may cost more to operate per unit of product than one which coul dnow be designed. But unless the savings of the operating cost expected from a new design, as compared with the existing tool, have a total discounted value not less than its construction cost, it will not be ordered. Hayek's argument, viewing 'capital goods' as materials which only retain their physical identity through a process of fabrication into consumable form, overlooks the grip that durability has in constraining the business man's (sic) choice of productive methods. The span of the nine year business cycle, to which his theory was meant to apply, is not long enough for a wholesale discarding of existing equipment during which the latter half of its upward phase, say two or three years. "In referring just now to a test of worthwhileness of replacing obsolescent machines by new designs, we spoke of the savings *expected* to be made. This word reflects the most fundamental of all the difficulties which economic analysis faces. Time-to-come is not open to inspection, there can be no eye witnesses to history." p. 240 Pioneers of Modern Economics in Britain, ed. D.P. OBrien.

yours, rb



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