Roger W. Garrison on the Ideas Subjectivist Capital Theory Strives to Elucidate and Systematize

Conceiving of competition as a discovery procedure — as a set of institutions that facilitate the discovery of profit opportunities — draws our attention away from the comparison of alternative equilibrium states and toward the workings of market processes. The shift in focus from timeless equilibria to market processes having an explicit real-time dimension creates a special role for the theory of capital. Capital goods, after all, bear a certain temporal relationship to the consumption goods that they help to produce. Expectations (and changes in expectations) on the part of entrepreneurs about future supply and demand conditions for consumption goods have implications about current choices made and actions taken with respect to the corresponding capital goods. Equivalently, consumption activities that extend over time are reflected in the constellation of capital goods that exist at a particular point in time.

While the capital goods themselves are the concrete objects of valuation and exchange, the ultimate basis for their valuation and exchange is future consumption activity, which, in turn, serves as the basis for production plans. Of course, the continually changing demands for consumer goods imply a continual revaluation of capital goods used in their production. Further changes in the valuation of particular goods result from the discovery of inconsistencies between the production plans of different entrepreneurs. And such discoveries are themselves the result of the market process that guides production towards the ultimate satisfaction of consumer demand. These are the ideas that subjectivist capital theory strives to elucidate and systematize. The theory maintains its subjectivist quality by highlighting the plans of entrepreneurs or other market participants (the subjects of the economic activity) rather than the capital goods themselves (the objects of their actions).

—Roger W. Garrison, “A Subjectivist Theory of a Capital-Using Economy,” in Austrian Economics Re-Examined: The Economics of Time and Ignorance, by Gerald P. O'Driscoll Jr. and Mario J. Rizzo, Routledge Foundations of the Market Economy 33 (London: Routledge, Taylor and Francis, 2015), 185.