Just in case it slipped by the radar of potential readers, I bring to your attention a 2003 Journal of Economic Perspectives article, “Whatever Happened to the Cambridge Capital Theory Controversies?” (I ran across the article on this blog post, cited by Gene Callahan in a recent piece.) The article may be interesting to Austrians for a number of reasons:
- First, it cites Bohm-Bawerk, Hayek, and others on Austrian capital theory, and does so respectfully.
- Second, it documents how the neoclassical mainstream clearly lost the capital debates on theoretical grounds, and yet proceeded as if nothing significant had happened.
- Third, it shows how both sides are still missing the basic (Austrian) point, that interest is not a return to capital (goods). (I have submitted a paper to HOPE on this, with suitable math bells-and-whistles; maybe they’ll publish it.)
- And fourth, it has some (sometimes unintentionally) funny quotations.
For example, Mark Blaug: The Cambridge School has this crazy idea, that if we have a rigorous simple theory, and then we discover one little flaw in it, that makes it more complicated to use it, we are finished. If we need five tyres to run a car instead of four tyres, we haven’t got a car any more, so we must give up everything and start using an aeroplane.
