Hayek Distinguishes Between (a) INHERITED Capital Goods and (b) Intermediate Goods or Capital Goods TO BE PRODUCED

For Hayek’s model there are two important distinctions among factors of production. The first distinction is between (a) inherited capital goods, or goods already existing at the moment that a production plan is being made, and (b) intermediate goods, or capital goods (of greater or lesser permanence) to be produced as part of a sequence of production steps leading to final output. Hayek’s exposition in Prices and Production neglected inherited capital goods. It depicted the first production stage as involving only land and labor, which created intermediate goods that then progress through subsequent production stages toward final sales. Knight’s model, by abstracting from roundabout production, abstracts entirely from intermediate goods. It offers only undifferentiated capital (the inherited Crusonia plant), which instantly yields 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.