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THE AVERAGE PERIOD OF PRODUCTION: THE HISTORY AND REHABILITATION OF AN IDEA

Published online by Cambridge University Press:  01 February 2018

Peter Lewin  and
Nicolás Cachanosky Open the ORCID record for Nicolás Cachanosky [Opens in a new window]
Peter Lewin
Affiliation:
Navenn Jindal School of Management, University of Texas at Dallas, [email protected]
Nicolás Cachanosky
Affiliation:
Department of Economics, Metropolitan State University of Denver, [email protected].
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Abstract

Austrian capital theory tried to capture the intuitive and basically undeniable importance that time plays in economic life, but arguably was diverted down a blind alley with Eugen von Böhm-Bawerk’s average period of production, a purely physical measure of ‘roundaboutness’—the length of the production process. For the general case, such a measure is a chimera. But the intuition is strong, and the idea survived and reappeared at various points in the history of capital theory. Almost unknown to economists, an alternative value measure of roundaboutness has existed at least since John Hicks’s formulation of his average period (AP) in 1939, which, coincidentally, was exactly the same measure discovered by the financial actuary Frederick Macaulay in 1938, called by him “Duration” (D). Macaulay’s D, more richly interpreted as Hicks’s AP, is a measure that more appropriately captures what it was that the Austrians struggled to express over many years in their capital theory and in their analysis of the business cycle.

Type
Articles
Information
Journal of the History of Economic Thought , Volume 40 , Issue 1 , March 2018 , pp. 81 - 98
Copyright
Copyright © The History of Economics Society 2018 

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