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A note on re-switching, the average period of production and the Austrian business-cycle theory

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  • Saverio M. Fratini

    () (Università di Roma Tre)

Abstract

Abstract According to a new formulation, the average period of production is calculated by taking the shares of costs referable to each period out of the total amount of costs as weights. Once this notion had been introduced, its inverse relationship with the rate of interest prompted some scholars to believe that it could serve as a good measure of capital intensity, expecially in view of a possible resumption of the Austrian business-cycle theory. As will be shown, however, this new average period poses some problems. On the one hand, the inverse relationship mentioned above does not preclude the re-switching of production methods. On the other, if re-switching occurs, the most roundabout method may paradoxically be the one that gives the smallest net output per worker. This result can affect the revival of the Austrian business-cycle theory.

Suggested Citation

  • Saverio M. Fratini, 2019. "A note on re-switching, the average period of production and the Austrian business-cycle theory," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 32(4), pages 363-374, December.
  • Handle: RePEc:kap:revaec:v:32:y:2019:i:4:d:10.1007_s11138-019-0432-0
    DOI: 10.1007/s11138-019-0432-0
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    More about this item

    Keywords

    Average period of production; Degree of roundaboutness; Capital; Re-switching; Austrian business-cycle theory;

    JEL classification:

    • B25 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Historical; Institutional; Evolutionary; Austrian; Stockholm School
    • B53 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Austrian
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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