For some applications, actually, you can actually represent anything as capital - just calculate its expected present discounted value, and voila, you're done.This is the financial aspect of capital rather than capital as a factor of production. It's sort of like the difference between firm investment as a type of expenditure versus financial investment as a form of saving.
Using the same sign for different symbols is an ongoing problem in economics. See, for instance, the running controversy over saving and investment. This is the second capital controversy and the first one is not agreed upon yet in the profession.
Bonkers for a "science." If you can't even get your definitions specified, what hope is there for clarity and consistency? No wonder economics is in such a mess if anything can mean whatever one wants it to mean.
Noahpinion
Is human capital really capital?
Noah Smith | Assistant Professor of Finance, Stony Brook University
3 comments:
"If you can't even get your definitions specified, what hope is there for clarity and consistency?"
But, that's the thing, there are clear, dictionary-like, universally accepted, definitions of what capital is. Any single microeconomics textbook contains one. It's just that these people either genuinely don't know them, or pretend not to know them.
I'm not much of a fan of Wikipedia for anything economics, but you can find one here:
http://en.wikipedia.org/wiki/Capital_(economics)
What these people want is to re-define capital (and labour); something along the lines that if the old definition of capital is not enough to prove that everyone gets what they deserve, then let's change the definition to something more suitable.
For short: they're moving the goal posts.
I've just thought of a good comparison.
Austrians say that an increase in money supply always leads to inflation, right?
Inflation is understood as a sustained and general price increase.
When, under recession, the "sustained and general price increase" fails to eventuate, as Keynesians claimed, what do Mises and Rothbard do?
First, they deny statistics are useful. This denies the validity of the Keynesian prediction that that fiscal stimulus under a recession does not lead to inflation.
Second, they change the definition of inflation: it no longer requires price changes, but the mere increase in the money supply IS inflation.
Well, the same thing happens to capital and labour.
Even worse, Magpie, as the Cambridge capital debate shows and which is what I was alluding to. Neoclassical economics doesn't have an operational definition of capital that is consistent. There's also a similar issue with specifying utility.
As you say, when definitions are fluid, then it's easy to move the goal post around as you like. Science it is not.
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