A Brief Introduction to Neo-Austrian Capital Theory

Abstract

A concise introduction to Neo-Austrian approach to capital theory with particular emphasis on the accessibility of the representation is provided. A basic T-period model for a centrally planned economy is introduced. Then we show how certain conditions on technology (superiority, roundaboutness) and preferences (impatience) serve to guarantee a positive rate of interest. Finally, it is briefly indicated how the model has been reformulated for market economies and how it has been generalized in order to address questions of structural change, particularly those related to environmental pollution and the depletion of natural resources.