Economics Dictionary of ArgumentsHome
| |||
|
| |||
| Capital value: Capital value in economics refers to the total worth of a capital asset, such as real estate, machinery, or stocks, based on its current market value or potential income generation. It reflects the present value of future income streams or benefits derived from the asset. Capital value is crucial for investment decisions and assessing asset profitability. See also Capital, Capital structure._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
| Author | Concept | Summary/Quotes | Sources |
|---|---|---|---|
|
Murray N. Rothbard on Capital Value - Dictionary of Arguments
Rothbard III 291 Capital value/Rothbard: In the case of the durable good and its services, there is an equilibrium-price relation, which the market tends to establish. The market price of the good as a whole is equal to the present value of the sum of its expected (future) rental incomes or rental prices. At this point, we shall define the “price of the good as whole” (…). Def Captial value/Rothbard: The capital value of any good (be it consumers’ consumers’ or capital good or nature-given factor) is the money price which, as a durable good, it presently sells for on the market. The concept applies to durable goods, embodying future services. The capital value of a consumers’ good will tend to equal the present value of the sum of expected unit rentals. >Relative Price/Rothbard, >Renting/Rothbard, >Durable goods/Rothbard, >Price/Rothbard, >Indirect exchange/Rothbard, >Money/Rothbard, >Value/Rothbard, >Service/Rothbard, >Goods/Rothbard. Rothbard III 292 The capital value at any time is based on expectations of future rental prices. Speculation: What happens when these expectations are erroneous? Suppose, for example, that the market expects the rental prices of this house to increase in the next few years and therefore sets the capital value higher than 200 ounces. Suppose, further, that the rental prices actually decline instead. This means that the original capital value on the market had overestimated the rental income from the house. Those who had sold the house at, say, 250, have gained, while those who bought the house in order to rent it out have lost on the transaction. Thus, those who have forecast better than their fellows gain, while the poorer forecasters lose, as a result of their speculative transactions. It is obvious that such monetary profits come not simply from correct forecasting, but from forecasting more correctly than other individuals. If all the individuals had forecast correctly, then the original capital value would have been below 200, say, 150, to account for the eventually lower rental prices. In that case no such monetary profit would have appeared. (…) the gains or losses are the consequences of the freely undertaken action of the gainers and losers themselves. >Speculation/Rothbard. Rothbard III 293 Equilibirum: The equilibrium relation between the capital value on the market and the sum of expected future rents is a day-to-day equilibrium that tends always to be set by the market. It is similar to the day-to-day market equilibrium price for a good set by supply and demand. On the other hand, the equilibrium relation between present capital value and actual future rents is only a long-range tendency fostered by the market’s encouragement of successful forecasters. This relation is a final equilibrium, similar to the final equilibrium prices that set the goal toward which the day-to-day prices tend. Demand/renting: The demand for the durable good (…) will now be, not only for direct use, but also, on the part of others, demand for investment in future renting out. Similarly, the reserved demand for the good as a whole will be not only for direct use or for speculative price increases, but also for future renting out of the good. Rothbard III 294 Stock keeping: The capital value of the good will be such as to clear the total stock, and the total of all these demands for the good will be in equilibrium. The reserved demand of the buyers will, as before, be due to their reserved demand for money, while the sellers of both the good as a whole and of its unit services will be demanding money in exchange. Market: (…) for any consumers’ good, the possessors have the choice of either consuming it directly or selling it for money. In the case of durable consumers’ goods, the possessors can do any one of the following with the good: use it directly, sell it whole, or hire it out - selling its unit services over a period of time. Supply/Equilibrium: The shape of the supply curves in both the capital and rental markets will be either rightward- and upward-sloping or vertical, since the greater the expected income, the less will be the amount reserved for direct use. It is clear that the supply schedules on the two markets are interconnected. They will tend to come into equilibrium when the equilibrium-price relation is established between them. >Equilibrium price/Rothbard, >Entrepreneurship/Rothbard, >Allocation/Rothbard. Rothbard III 316 Renting/speculation/investments: Not only do the renting and selling of consumers’ goods rest on appraisement and on hope of monetary profits, but so does the activity of all the investing producers, the keystone of the entire productive system. (…) that the term “capital value” applies, not only to durable consumers’ goods, but to all nonhuman factors of production as well—i.e., land and capital goods, singly and in various aggregates. The use and purchase of these factors rest on appraisement by entrepreneurs of their eventual yield in terms of monetary income on the market, and it will be seen that their capital value on the market will also tend to be equal to the discounted sum of their future yields of money income.(1) Rothbard III 526 Capital value/production/Rothbard: Net saving (…) increases gross investment in the economy. This increase in gross investment at first accrues as profits to the firms doing the increased business. These profits will accrue particularly in the higher stages, toward which old capital is shifting and in which new capital is invested. An accrual of profits to a firm increases, by that amount, the capital value of its assets, just as the losses decrease the capital value. The first impact of the new investment, then, is to cause aggregate profits to appear in the economy, concentrated in the new production processes in the higher stages. >Production structure/Rothbard, >Capital structure/Rothbard. Land: (…) a progressing economy will lead to an increase in the real rents of ground land and a fall in the rate of interest. >Rent/Rothbard, >Interest rate/Rothbard, >Investments/Rothbard. Rothbard III 527 These two factors, in conjunction, both impel a rise in the real capital value of ground land. Future rises in the real values of rents can be either anticipated or not anticipated. To the extent that they are anticipated, the rise in future rents is already accounted for, and discounted, in the capital value of the whole land. A rise in the far future may be anticipated, but will have no appreciable effect on the present price of land, simply because time preference places a very distant date beyond the effective “time horizon” of the present. To the extent that rises in the real rate are not foreseen, then, of course, entrepreneurial errors have been made, and the market has undercapitalized in the present price.(2) >Land/Rothbard. Rothbard III 528 The only unique aspect to ground land (…) is that it is found and first put on the market at some particular time, so that the first user earns pure rent as a result of his initial discovery and use of the land. All later increases in the capital value of the land are accounted for in the value, either as entrepreneurial profits resulting from better forecasting or as interest return. >Capitalization/Rothbard, >Capital structure/Rothbard. 1. On appraisement and valuation, cf. Mises, Human Action, New Haven, Conn.: Yale University Press, 1949. Reprinted by the Ludwig von Mises Institute, 1998. pp. 328–30. 2. For a view of capitalized gains similar to the one presented here, see Roy F. Harrod, Economic Essays (New York: Harcourt, Brace & Co., 1952), pp. 198–205._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
||
> Counter arguments against Rothbard
> Counter arguments in relation to Capital Value
Authors A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Concepts A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
