A Two-Period Two-Sector Neo Austrian Model

Abstract

In this chapter we will try to apply the lessons of the previous chapters, that is we will avoid the concept of a period of production and use von Neumann’s linear activity approach. To close the system we will introduce the demand side into the model. In addition, we will give up Assumption 2.3 (constancy of the subsistence fund and its given stationary time structure), which implies the stationarity of the system. In contrast to the Austrian theory of capital we will, therefore, allow nonstationary solutions. In this and the following chapters, however, we will restrict ourselves to two-sector models: one for the production of a consumption good and one for a capital good. While in Chapters 4 and 5 we will exclude the possibilities of reswitching and capital reversing we will admit them in Chapter 6, in which we will extend the analysis to a multisector model.

This chapter represents Bernholz [1971] viewed from Bernholz, Faber and Reiss [1977, 1978].