The Grand Crusade

Austrian economist Friedrich Hayek opened his 1936 essay “The Mythology of Capital,” referring to “Professor Knight’s crusade against the concept of the period of investment” (Hayek 1936, p. 199). What Knight was crusading about has been named in different ways, in terms of length of the production process, roundaboutness, period of waiting, period of investment, period of maturing, and others. It may be overstating the case to say this was a crusade, though it fits with the theological terminology so often applied to Knight, but it was certainly true that in the 1930s one of Knight’s core interests was capital theory and his writings on capital and interest theory were to span two decades. Like so much of his thinking, during this period Knight never offered a systematic theory; rather he developed his views through a series of journal articles, essays and book reviews, starting in 1916, with the bulk published from 1931 onwards. It was, as Emmett so neatly states, “a string of conversations with other theorists” (Emmett 2009, p. 78). As a result, trying to explain his theory is a process of picking one’s way through a series of essays and opponents’ responses to present a unified view, rather than explaining a coherent theory presented by Knight himself. This picking one’s way means encountering repetition and restatement of ideas in different ways, a fraught exercise that can easily give rise to debate with the other attempts to piece together his theory. If this is a problem for his critics, it certainly wasn’t for Knight, who was fully aware of the criticism, as he noted in a letter to Hayek: