Why Hayek Abandoned the Average Period of Production?
Between 1933 and 1936, Frank Knight and Friedrich Hayek engaged in a spirited dispute about the Austrian Theory of Capital through an exchange of articles that revealed Knight’s criticism and Hayek’s defense of the concept of the Average Period of Production (APP). The controversy began with attacks by Knight (1933) in his Capitalistic Production, Time and the Rate of Return, to which Hayek (1934) responded with On the Relations between Investment and Output. Later, Knight (1934, 1935) continued with his “Capital, Time and the Interest Rate” and Professor Hayek, with his Theory of Investment. Finally, Hayek (1936) accepted in The Mythology of Capital problems that the concept of the APP caused the Austrian theory of capital, stating that he would never use it.