Hayek Also Distinguishes Between (a) Factors that Yield Fixed Streams of Service Each Period and (b) Factors Whose Use Today Diminishes their Future Usefulness

The second important distinction is between (a) factors that yield fixed streams of service each period—namely, simple labor and permanent non-labor input sources—and (b) factors whose use today diminishes their future usefulness and raises the problem of maintenance. The first group of factors, apart from labor, can be called economic “land” goods, whether given by nature (David Ricardo’s “original and indestructible powers of the soil”) or manmade (Hayek’s example in The Pure Theory of Capital was a railroad tunnel that will need no maintenance once excavated). The second group encompasses all impermanent capital goods, from one-use blasting caps to depletable natural resource deposits to imperfectly durable machines. The simplified production model of Prices and Production treated all value-adding inputs, being applied in consecutive stages to advance intermediate goods toward final consumption, as coming from type (a) factors. The model reduced type (b) factors, impermanent capital goods, to intermediate goods. Knight’s model neglected impermanent capital goods in a different way. Its construct of a perpetual capital stock implied that the maintenance or replacement of any impermanent tools is automatic, embodied in the decision about the permanent level of future consumption.

—Lawrence H. White, ed., editor’s introduction to The Collected Works of F. A. Hayek, vol. 11, Capital and Interest, by F. A. Hayek (Chicago: University of Chicago Press, 2015), xxv.