“As the title of his 1941 book indicates, the theory of capital lay at the heart of his theory of the cycle. The reason is that he attributes the cycle not to changes in aggregate demand, or even to changes in the quantity of capital, but to changes in the structure of production and hence the structure of the capital stock. In this, his theory was highly unusual: one of the reasons for his failure to engage more effectively with Keynes was the latter’s inability to see how the theory of capital could be of any importance for the cycle. Because the theory of capital is so central, and because it is so complex, it needs to be explained carefully. After that, the rest of his theory falls into place comparatively easily.”

—  Roger Backhouse (economist)

"Hayek on money and the business cycle", 2006

Adopted from Wikiquote. Last update June 3, 2021. History

Help us to complete the source, original and additional information

Do you have more details about the quote "As the title of his 1941 book indicates, the theory of capital lay at the heart of his theory of the cycle. The reason …" by Roger Backhouse (economist)?
Roger Backhouse (economist) photo
Roger Backhouse (economist) 4
British economist 1951

Related quotes

“Hayek’s essential gist in capital theory was that capital is heterogeneous, that it cannot be put to many uses simultaneously or at different times. If these empirical assumptions as to capital’s heterogeneity are false, then his theoretical system of economic activity falls. Hayek never established that changes in interest rates primarily and predominantly influence capital production of goods of higher order and their prices.”

Alan O. Ebenstein (1959) American political scientist, educator and author

Hayek's Journey: The Mind of Friedrich Hayek (2003)

“In the years after 1936, whilst Hayek was working on The Pure Theory of Capital, most economists were convinced by Keynes, whose theory had an elegance and simplicity that Hayek’s did not. Keynes’ theory lacked Hayek’s theoretical rigor in that it was not based on equilibrium (on individual rationality), and there were places in the argument where Keynes relied on loose, informal arguments, preferring to put his trust in intuition rather than formal theory. Keynesians did not solve the problems with capital theory that Hayek had identified: they just bypassed or ignored them. According to Hayek’s methodological criteria, Keynes’ theory was decidedly inferior. Against this, Keynes’ theory provided opportunities for mathematical and statistical analysis that Hayek’s did not. Indeed, though Hayek paid some attention to data, he did so only minimally: he certainly made no attempt to test his theory against statistical data. The choice of Keynesian theory was, at least in part, a methodological one.”

Roger Backhouse (economist) (1951) British economist

"Hayek on money and the business cycle", 2006

“When Keynes’s General Theory was published in February 1936, it obliterated all else on the scene in academic economics. Hayek was known to be working on a treatise on capital as Keynes’s work was published (the work that became The Pure Theory of Capital). While there was some anticipation in academia for this forthcoming major work, interest even by economists in Hayek’s work waned.”

Alan O. Ebenstein (1959) American political scientist, educator and author

Hayek's Journey: The Mind of Friedrich Hayek (2003)

Jeremy Hardy photo

“Capitalism is a great idea in theory, but in practice it just doesn't work.”

Jeremy Hardy (1961–2019) British comedian

The News Quiz, BBC Radio 4, November 2008

Georgi Plekhanov photo

“Bourgeois scientists make sure that their theories are not dangerous to God or Capital.”

Georgi Plekhanov (1856–1918) Russian revolutionary

The Faber Book of Aphorisms, W. H. Auden and Louis Kronenberger (ed.), p. 261.
Attributed

Arthur Conan Doyle photo

“It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts.”

Arthur Conan Doyle Sherlock Holmes

Source: Sherlock Holmes

“Contingency theory states that there is no single organizational structure that is highly effective for all organizations.”

Lex Donaldson (1947) British-Australian organizational sociologist

Lex Donaldson, "The normal science of structural contingency theory." Studying Organizations: Theory and Method. Thousand Oaks, Calif: Sage (1999): 51-70.
Context: Within organization studies, contingency theory has provided a coherent paradigm for the analysis of the structure of organizations. The paradigm has constituted a framework in which research progressed leading to the construction of a scientific body of knowledge... Contingency theory states that there is no single organizational structure that is highly effective for all organizations. It sees the structure that is optimal as varying according to certain factors such as organizational strategy or size. Thus the optimal structure is contingent upon these factors which are termed the contingency factors. For example, a small-sized organization, one that has few employees, is optimally structured by a centralized structure in which decision-making authority is concentrated at the top of the hierarchy, whereas a large organization, one that has many employees, is optimally structured by a decentralized structure in which decision-making authority is dispersed down to lower levels of the hierarchy.

Edmund Phelps photo

“What theory can we use to get us out of the impending slump quickly and reliably? To use the 'new classical' theory of fluctuations begun at Chicago in the 1970s – the theory in which the "risk management" models are embedded – is unthinkable, since it is precisely the theory falsified by the asset price collapse. The thoughts of some have turned to John Maynard Keynes. His insights into uncertainty and speculation were deep. Yet his employment theory was problematic and the 'Keynesian' policy solutions are questionable at best…. At the end of his life Keynes wrote of 'modernist stuff, gone wrong and turned sour and silly'. He told his friend Friedrich Hayek he intended to re-examine his theory in his next book. He would have moved on. The admiration we all have for Keynes's fabulous contributions should not sway us from moving on.”

Edmund Phelps (1933) American economist

Edmund Phelps "Keynes had no sure cure for slumps."in: The Financial Times. Columbia University, November 4, 2008.

“Attribution theory concerns the process by which an individual interprets events "as being caused by particular parts of the relatively stable environment" (Heider, p. 297). Consideration of attribution theory is relevant for a symposium on motivation in several respects. The theory describes processes that operate as if the individual were motivated to attain a cognitive mastery of the causal structure of his environment.”

Harold Kelley (1921–2003) American psychologist & academic

Source: "Attribution theory in social psychology." 1967, p. 193

Amartya Sen photo

“The behavioral foundations of capitalism do, of course, continue to engage attention, and the pursuit of self-interest still occupies a central position in theories about the workings and successes of capitalism. But in these recent theories, interests are given a rather different—and much more "positive"—role in promoting efficient allocation of resources through informational economy as well as the smooth working of incentives, rather than the negative role of blocking harmful passions.”

Amartya Sen (1933) Indian economist

1990s, Foreword to The Passions and the Interests (1996)

Related topics