This paper offers a comprehensive graphical exposition of Böhm-Bawerk’s formalised macroeconomic theory. This graphical model is used here for the first time to study the effects of the changes in the explanatory variables (quantity of capital, number of workers and level of technical knowledge) on the dependent variables (interest rate, wage and period of production). This systematic application of the model shows that some of the conclusions drawn by Böhm-Bawerk are incorrect and need to be amended. A comparison with Solow’s model also shows that Böhm-Bawerk can legitimately be considered as one of the main originators of the standard contemporary approach in macroeconomics of equilibrium and growth.
Sunday, 6 October 2013
A new paper regarding Austrian capital theory
For those with an interest in Austrian capital theory Nicolai Foss points us to a new paper on the formalisation of Eugen von Böhm-Bawer work on Austrian capital theory. The paper is Renaud Fillieule’s “A comprehensive graphical exposition of the macroeconomic theory of Böhm-Bawerk.” Fillieule argues that Böhm’s theory can be seen as a precursor of Solowian growth theory and of macroeconomics in general. The abstract reads: