The Hayekian Triangle Is a Faulty Analytical Tool with 14 Fundamental Problems

In this paper we maintain that because of 14 fundamental problems considered below, though not necessarily in the order of importance, the “Hayekian triangle” is a faulty analytical tool. First, at the conceptual level regarding all consumers’ goods collectively, the aggregative nature of the triangle is problematical. Second, again re all consumers’ goods collectively, as with most other aggregative concepts in economics, there is no coherent way to construct a measure thereof. Third, more “round-aboutness” is confounded with more time consuming; i.e., a structure of production with more stages is confounded with a lengthier period of production. Fourth, the period of production inherent in a more complex structure of production is confounded with the period of production that exists during the transition from a less to a more complex structure of production. Fifth, the concept “stages of production” is incoherent. Sixth, the vertical axis represents the value of consumer goods, not consumption. Therefore, what is needed is not a time-structure of production, which is but one of the two types of actions, but rather a time-structure of action, to include both types of action; to wit: production and consumption. Seventh, the triangle can be used to account either for goods in process (or circulating capital) or, or for fixed capital. It cannot account for both simultaneously, a serious shortcoming as it is intended to be used to explicate the time consuming process of producing consumption goods using heterogeneous fixed capital goods at different points in the process. Eighth, re goods in process, the triangle cannot handle post- initiation-of-production infusions of resources. Ninth, when “shifting triangles” are used the time dimension is confused, and this has two baleful consequences. Tenth, the implicit assumption of differentiability regarding the hypotenuse of the triangle is anathema to Austrianism. Eleventh, the triangle model cannot incorporate leisure. Twelfth, the triangle has not been mathematized. As a consequence of these errors, the “triangle” does not demonstrate that which it purports to show. Thirteenth, the triangle is the wrong geometrical figure for these purposes; if one must be used, arguendo [for the sake of argument], the trapezoid is preferable. Fourteenth, the triangle ignores durable capital goods.

--William Barnett II and Walter E. Block, "On Hayekian Triangles," in Essays in Austrian Economics (Bronx, NY: Ishi Press International, 2012), Kindle e-book, 237-238.