Prices and Production: Lecture II, Part II
The most essential feature of the
capitalist system of production, as stated in the prior entry, is the
fact that at any moment a larger quantity of the original means of
production is being employed for the satisfaction of a future time.
The raison d'être
for
the capitalist system is that by lengthening the process of
production, it is possible to obtain more consumers' goods from any
given natural resources. The main interest for us in respect to this
is the fact that any change from a process of production of any
duration to one of a greater, or lesser duration will result in
definite changes for the structure of production. For our purposes,
it is useful to employ a schematic representation of the structure of
production via the Hayekian triangle.
In
the Hayekian triangle, one of the sides of the triangles symbolizes
the temporal dimension of the continual use of intermediate products
in the structure of production, which can be subdivided into separate
regions symbolizing different stages of production (for our purposes
this will be the vertical dimension), the other side of the triangle
symbolizes the output of consumer goods (the horizontal dimension),
and the hypotenuse represents the successive application of the
original means of production. Indeed, the hypotenuse also elucidates
the value of the original means of production, and the vertical
dimension the progress of time, in arbitrary units, so that “the
inclination of the line representing the amount of original means of
production used means these original means of production are expended
continuously during the whole process of production.” Ergo, it is
then apparent that the horizontal dimension represents the value
of the consumers' good output; on a similar note, the entire figure
of the Hayekian triangle represents value, not physical output, with
the interest rate intentionally neglected for this lecture.
The
area of the triangle represents the totality of the successive stages
that the original means of production passes through in order to
become consumers' goods. In addition, the area also displays the
total quantity of intermediate, producers' goods necessary at any
moment in time to secure a non-stop stream of consumers' goods. It
should be clear that the proportion between the amount of
intermediate goods, and the amount of output must expand with the
length of the roundabout production-process. As the time interval
between the first use of the original means of production, and the
final completion of consumers' goods increases, then the structure of
production becomes more capitalistic, and vice versa.
For
the purpose of lucidity, in Prices,
and Production,
Hayek transforms the picture of continuous process of production into
one that makes cross sections corresponding to the periods of
production in the aggregate structure in which goods flow from
period, to period at regular intervals. This results in what looks
most like a bar-graph with bars extending from the vertical axis, and
with the lengths of these bars increasing a la a value crescendo
until they reach their highest peak at the final consumers' goods
output. Though Hayek proceeds to utilize this diagram throughout the
lecture, since I do not have the images necessary for proper
communication, I will henceforth try to eschew for the purposes of
this live-blog.