To Understand Disastrous Economic Policies Like the Dot-Com Bust and Housing Bubble, Study the Battles over Capital and Capital Theory

In the world of economic policy, the relevance of (Austrian type) capital theory has increased dramatically. The appeal of what Ludwig Lachmann referred to as “neoclassical formalism” has not diminished. Policy-makers, following the counsel of their economic advisors, who are ruled by a belief in the significance of economic aggregates, have persistently ignored, indeed precipitated, capital structure distortions; the results of which have been two major domestic economic crises (the dot-com bust and the housing-bubble meltdown), a global credit crisis, a chronic fiscal deficit and an exploding debt burden that threatens to destroy the very fabric of the economy’s value-creating potential.This book is designed for those who wish to understand, in a thorough and fundamental way, the nature and significance of capital. What makes an economy “capitalist”? How does value get created over time? If we get this wrong we may end up paying a high price indeed.

The erroneous ideas upon which disastrous economic policy has been based have come down from the intellectual forebears of the current generation of economic advisors. A full appreciation of this entails understanding the nature of battles fought long ago over the nature and significance of capital and capital theory. Accordingly, the focus of this book on this particular aspect of the history of economic thought remains very relevant.

--Peter Lewin, preface to the second edition of Capital in Disequilibrium: The Role of Capital in a Changing World, 2nd ed. (Auburn, AL: Ludwig von Mises Institute, 2011), xi.