The Mythology of Capital

“The Mythology of Capital.” Quarterly Journal of Economics 50 (1936): 199–228.


“Professor Knight’s crusade against the concept of the period of investment revives a controversy which attracted much attention thirty and forty years ago but was not satisfactorily settled at that time. In his attack he uses very similar arguments to those which Professor J.B. Clark employed then against Böhm-Bawerk. However, I am not concerned here with a defense of the details of the views of the latter. In my opinion the oversimplified form in which he (and Jevons before him) tried to incorporate the time element into the theory of capital prevented him from cutting himself finally loose from the misleading concept of capital as a definite “fund,” and is largely responsible for much of the confusion which exists on the subject; and I have full sympathy with those who see in the concept of a single or average period of production a meaningless abstraction which has little if any relationship to anything in the real world. But Professor Knight, instead of directing his attack against what is undoubtedly wrong or misleading in the traditional statement of this theory, and trying to put a more appropriate treatment of the time element in its place, seems to me to fall back on the much more serious and dangerous error of its opponents of forty years ago. In the place of at least an attempt of analysis of the real phenomena, he evades the problems by the introduction of a pseudo-concept devoid of content and meaning, which threatens to shroud the whole problem in a mist of words.”

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