To: Professor Block

I am an economics student with an interest in Austrian economics and I have a few questions about the structure of production (Hayek triangle). In the model there are 5 broad categories for the stages of production 1. mining/resources 2. refining 3. manufacturing 4. distribution 5. retail. I was wondering when there is more saving/capital goods and thus a lengthening of the production structure and increase in number of stages does this all occur in the first category of mining/resources? Or can it occur in other categories (i.e refining and manufacturing) alone or together with mining/resources? If lengthening did occur just in refining and manufacturing would would this push back the mining/resource stages further back in time? If you could answer these questions it would be greatly appreciated. Sincerely, D

Dear D: The Hayekian triangle has time, and stages on the vertical axis. Thanks to Roger Garrison, these variables have been transposed to the horizontal axis. I greatly approve of that. In my view, additional saving, more capital goods, affects all stages of production. Here is my article on the triangle. It is very critical of this triangle model, and also of Hayek and Garrison, but it answers your question in a myriad of ways:

Barnett, William II and Walter E. Block. 2006. “On Hayekian Triangles.” Procesos De Mercado: Revista Europea De Economia Politica; Vol. III, No. 2, Fall, pp. 39-141; http://mises.org/journals/scholar/block18.pdf; http://www.academia.edu/1359916/On_Hayekian_Triangles; http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1880543

To my great disappointment, no one has ever responded to what I regard as this breakthrough article of mine and my co authors’. The triangle is a basic element of Austrian economics, particularly of business cycle analysis and capital theory. We attack it root and branch in this article. Yet, the triangle is still widely used among Austrians. Go figure. I asked one economist, famous for his work on this model, to respond to this article. His response: “Triangles yesterday, triangles today, triangles tomorrow, triangles forever.” Very eloquent, very poetic, but, still, disappointing.

The Best of Walter E. Block