The “Correct” Length of the Roundabout Method of Production Is Determined by the Size of the Subsistence Fund or the Period of Time for which this Fund Suffices

Let us assume that in some country production must be completely rebuilt. The only factors of production available to the population besides laborers are those factors of production provided by nature. Now, if production is to be carried out by a roundabout method, let us assume of one year’s duration, then it is self-evident that production can only begin if, in addition to these originary factors of production, a subsistence fund is available to the population which will secure their nourishment and any other needs for a period of one year. The population would in any case have an interest in stretching the roundabout method of production as long as possible, as every “cleverly chosen” lengthening of the roundabout method of production results in increased output. The extent to which the roundabout method of production can be lengthened is restricted, however, by the limited nature of the subsistence fund. The greater this fund, the longer is the roundabout factor of production that can be undertaken, and the greater the output will be. 

It is clear that under these conditions the “correct” length of the roundabout method of production is determined by the size of the subsistence fund or the period of time for which this fund suffices. If a shorter roundabout method of production were begun with a subsistence fund that suffices for one year, then the output would be smaller than it could have been. However, if the roundabout method of production is too long, then it could not be completed without interruption. 

—Richard von Strigl, Capital and Production, trans. Margaret Rudelich Hoppe and Hans-Hermann Hoppe, ed. Jörg Guido Hülsmann (Auburn, AL: Ludwig von Mises Institute, 2000), 6-7.