Economics Dictionary of ArgumentsHome
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| Capital: Capital in economics refers to assets used to produce goods and services, including financial capital, machinery, buildings, and human skills. It represents an investment in productive resources, contributing to economic growth, productivity, and wealth generation. Capital can be physical or human, and its accumulation is crucial for development._____________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. | |||
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Frank H. Knight on Capital - Dictionary of Arguments
Rothbard III 401 Capital/time/production/Frank H. Knight/Rothbard: The idea that the capital structure is maintained intact without savings, as it were automatically, is fostered by the use of the “net” approach. If even zero savings will suffice to maintain capital, then it seems as if the aggregate value of capital is a permanent entity that cannot be reduced. Rothbard III 402 This notion of the permanence of capital has permeated economic theory, particularly through the writings of J.B. Clark and Frank H. Knight, and through the influence of the latter has molded current “neoclassical” economic theory in America. To maintain this doctrine it is necessary to deny the stage analysis of production and, indeed, to deny the very influence of time in production.(1) >Interest rates/Rothbard, >Factors of Production/Rothbard. Production/time/Rothbard: The all-pervading influence of time is stressed in the period- of- production concept and in the determination of the interest rate and of the investment-consumption ratio by individual time preference schedules. Frank H. Knight/RothbardVsKnight: The Knight doctrine denies any role to time in production, asserting that production “now” (in a modern, complex economy) is timeless and that time preference has no influence on the interest rate. This doctrine has been aptly called a “mythology of capital.” >Time preference. RothbardVsKnight: Among other errors, it leads to the belief that there is no economic problem connected with the replacement and maintenance of capital.(2,3) 1. If permanence is attributed to the mythical entity, the aggregate value of capital, it becomes an independent factor of production, along with labor, and earns interest. 2. The fallacy of the “net” approach to capital is at least as old as Adam Smith and continues down to the present. See Hayek, Prices and Production, 2nd ed. London: Routledge and Kegan Paul, 1935. Reprinted by Augustus M. Kelley, 1967. pp. 37–49. This book is an excellent contribution to the analysis of the production structure, gross savings and consumption, and in application to the business cycle, based on the production and business cycle theories of Böhm-Bawerk and Mises respectively. Also see Hayek, “The Mythology of Capital” in W. Fellner and B.F. Haley, eds., Readings in the Theory of Income Distribution (Philadelphia: Blakiston, 1946), pp. 355–83; idem, Profits, Interest, and Investment, passim. 3. For a critique of the analogous views of J.B. Clark, see Frank A. Fetter, “Recent Discussions of the Capital Concept,” Quarterly Journal of Economics, November, 1900, pp. 1–14. Fetter succinctly criticizes Clark’s failure to explain interest on consumption goods, his assumption of a permanent capital fund, and his assumption of “synchronization” in production._____________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. |
Knight I Frank H. Knight Risk, Uncertainty, and Profit 2017 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 |
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