PROFESSOR HAYEK ON THE PURE THEORY OF CAPITAL.

This article comments on professor Friedrich August von Hayek's article "The Pure Theory of Capital," which was published in 1941. Hayek defined capital as a congeries of heterogeneous resources, the only way to calculate an average is to weight these resources according to their values and their relative values. Professor Hayek assumed that all factors of production are fully employed in an absolute sense. In the equilibrium-over-time situation, however, full employment means that at the ruling prices, no more resources are obtainable than are actually employed. That is, equilibrium can occur at any level of employment in the ordinary sense of the term, and although general increasing supply prices are stipulated. The professor's analysis of stationary equilibrium involves the determination of the optimum time-distribution of a congeries of resources of given equilibrium value both in a simple economy ruled by a communist dictator and in a competitive price economy.