ABSTRACT
This chapter provides an introduction to the Austrian theory of capital and business cycles as developed principally by Ludwig von Mises and most prominently by Friedrich A. von Hayek in a series of lectures at the London School of Economics. In 1974, the Royal Swedish Academy of Sciences awarded the Prize for Economic Science in Memory of Alfred Nobel jointly to Gunnar Myrdal and Friedrich von Hayek “for their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social, and institutional phenomena.” The theory begins with a version of classical free-market economics as applied to real investment, which involves giving up current consumption to be able to produce more goods and services in the future. Joseph Schumpeter was a most prominent Austrian economist, along with Hayek, during the Keynesian era of the 1930s and 1940s.
