Economics Dictionary of ArgumentsHome
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| Capital consumption: Capital consumption, also known as depreciation, refers to the wear and tear, obsolescence, or depletion of physical assets like machinery, buildings, and equipment over time. It represents the reduction in value of these assets due to use or aging and is accounted for in national income calculations to measure net economic output. 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. | |||
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Murray N. Rothbard on Capital Consumption - Dictionary of Arguments
Rothbard III 534 Capital Consumption/Rothbard: Refusal to maintain the value of capital, i.e., the process of net dissaving, is known as consuming capital. Granting the impossibility of measuring the value of capital in society with any precision, this is still a highly important concept. “Consuming capital” means (…) failing to maintain existing gross investment and the existing capital goods structure, using some of these funds instead for consumption expenditure.(1) Rothbard III 535 Capital/service/Knight, Frank H.: “the production of any service includes the maintenance of things used in the process, and this includes reproduction of any which are used up . . . really a detail of maintenance.”(2) Service/RothbardVsKnight: This is obviously incorrect. Services are yielded by things, at least in the cases relevant to our discussion, and they are produced through the using up of things, of capital goods. And this production does not necessarily “include” maintenance and reproduction. This alleged “detail” is a completely separate area of choice and involves the building up of more capital at a later date to replace the used-up capital. 1. It is often assumed that only depreciation funds for durable capital goods are available for capital consumption. But this overlooks a very large part of capital - so-called “circulation capital,” the less durable capital goods which pass quickly from one stage to another. As each stage receives funds from its sale of these or other goods, it is not necessary for the producer to continue to repurchase circulation capital. These funds too may be immediately spent on consumption. See Hayek, Pure Theory of Capital, pp. 47 ff., for a contrast between the correct and the fashionable approaches toward capital. 2. Frank H. Knight, “Professor Hayek and the Theory of Investment,” Economic Journal, March, 1935, p. 85 n. Also see Knight, Risk, Uncertainty, and Profit, pp. xxxvii–xxxix._____________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 |
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