Roundaboutness is Not a Mysterious Concept: A Financial Application to Capital Theory
Nicolas Cachanosky, Metropolitan State University of Denver
Peter Lewin, University of Texas at Dallas – School of Management – Department of Finance & Managerial Economics
March 16, 2014
Abstract: We apply the EVA® terminology to the concepts of roundaboutness and average period of production in capital theory. By doing this we show that these terms have a clear and well understood financial interpretation. A financial application to capital theory helps to clarify obscure and controversial economic terms. We then extend our financial interpretation of roundaboutness and average period of production to the Austrian business cycle theory and show how this approach can be used to shed light on the subprime crisis.