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From Austrian theory of capital to dissent: Nicholas Kaldor, Friedrich A. Hayek and the way to disequilibrium

Author

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  • Keanu Telles

Abstract

Purpose - In the early 1930s, Nicholas Kaldor could be classified as an Austrian economist. The author reconstructs the intertwined paths of Kaldor and Friedrich A. Hayek to disequilibrium economics through the theoretical deficiencies exposed by the Austrian theory of capital and its consequences on equilibrium analysis. Design/methodology/approach - The author approaches the discussion using a theoretical and historical reconstruction based on published and unpublished materials. Findings - The integration of capital theory into a business cycle theory by the Austrians and its shortcomings – e.g. criticized by Piero Sraffa and Gunnar Myrdal – called attention to the limitation of the theoretical apparatus of equilibrium analysis in dynamic contexts. This was a central element to Kaldor’s emancipation in 1934 and his subsequent conversion to John Maynard Keynes’The General Theory of Employment, Interest, and Money(1936). In addition, it was pivotal to Hayek’s reformulation of equilibrium as a social coordination problem in “Economics and Knowledge” (1937). It also had implications for Kaldor’s mature developments, such as the construction of the post-Keynesian models of growth and distribution, the Cambridge capital controversy, and his critique of neoclassical equilibrium economics. Originality/value - The close encounter between Kaldor and Hayek in the early 1930s, the developments during that decade and its mature consequences are unexplored in the secondary literature. The author attempts to construct a coherent historical narrative that integrates many intertwined elements and personas (e.g. the reception of Knut Wicksell in the English-speaking world; Piero Sraffa’s critique of Hayek; Gunnar Myrdal’s critique of Wicksell, Hayek, and Keynes; the Hayek-Knight-Kaldor debate; the Kaldor-Hayek debate, etc.) that were not connected until now by previous commentators.

Suggested Citation

  • Keanu Telles, 2023. "From Austrian theory of capital to dissent: Nicholas Kaldor, Friedrich A. Hayek and the way to disequilibrium," EconomiA, Emerald Group Publishing Limited, vol. 24(1), pages 86-114, April.
  • Handle: RePEc:eme:econpp:econ-10-2022-0139
    DOI: 10.1108/ECON-10-2022-0139
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    Cited by:

    1. DeMartino, George & Grabel, Ilene & Scoones, Ian, 2024. "Economics for an uncertain world," World Development, Elsevier, vol. 173(C).

    More about this item

    Keywords

    Nicholas Kaldor; Friedrich A. Hayek; Knut Wicksell; Gunnar Myrdal; Expectations; Equilibrium; Capital theory; B13; B22; B25; B31;
    All these keywords.

    JEL classification:

    • B13 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian)
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B25 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Historical; Institutional; Evolutionary; Austrian; Stockholm School
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals

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