Three Essays on the History of Political Economy in the Twentieth Century.
Nicholas Kaldor, Friedrich A. Hayek, Knut Wicksell, Gunnar Myrdal, expectations, equilibrium, capital theory
In the early 1930s, Nicholas Kaldor could be classified as an Austrian economist. In the theory of capital wars at that time, for instance, Kaldor defended the Austrian theory of capital against the offensive of Frank H. Knight. We reconstruct the intertwined paths of Kaldor and Friedrich A. Hayek to disequilibrium economics through the theoretical deficiencies exposed by the Austrian theory of capital and its consequences on equilibrium analysis. In particular, the integration of capital theory into a business cycle theory by the Austrians and its shortcomings - e.g., criticized by Piero Sraffa and Gunnar Myrdal - called attention to the limitation of the theoretical apparatus of equilibrium analysis in dynamic contexts. This was a central element to Kaldor’s emancipation in 1934 and his subsequent conversion to John Maynard Keynes’ General Theory (1936). In addition, it was pivotal to Hayek’s reformulation of equilibrium as a social coordination problem in “Economics and Knowledge” (1937). It also had implications for Kaldor’s mature developments, such as the construction of the post-Keynesian models of growth and distribution, the Cambridge capital controversy, and his critique of neoclassical equilibrium economics.