Capital, Accumulation, and Money (eBook)

Preface to First Edition 8
Preface to Second Edition 14
Prologue 16
Contents 24
List of Figures 28
Chapter 1: Premises and an Overview 30
Chapter 2: Myros and Other Concepts and Definitions 36
Myros 37
Myros Recovery Charges 40
Human and Nonhuman Capital 41
Chapter 3: The Macroeconomic Framework 45
An Overview 45
Constraints (or ``Conservation Laws´´) Imposed by the Pool of Fluid Capital 50
The Determination of Asset Values 53
Aggregate Demand and Supply 56
Macroeconomic Equilibrium 57
Chapter 4: Interest and Money 59
Factors Making for the Existence of Interest 60
Determination of Money and Natural Rates of Interest 61
A World with Fiat Money 69
The Concept of Velocity and the Demand for Money 71
Power of the Monetary Authority 73
The Commercial Paper Market 74
Some Notes on Monetary Policy 75
Chapter 5: Production and Investment 77
Capital and Production 77
From Production to Investment 80
Roles of the Money and Natural Rates of Interest 90
Financing of Investment: An Illustration 90
Chapter 6: General Price Level and Inflation 92
Defining the General Price Level 92
Problems Arising from Excessive Monetization of Assets 99
The General Price Level and the Natural Rate of Interest 102
Equilibrium in the Natural and Money Rates of Interest 103
Chapter 7: Capital Values, Wealth, and Related Topics 106
The Aggregate Wealth of an Economy 106
Money as Wealth and Real-Balance Effects 107
Some Implications of Old Masters as a Store of Value 108
Taxation of Capital Gains 110
Forced Saving and Investment 112
More on Excess Monetization of Assets 114
Loan Defaults and the Stock of Money 115
Crowding-Out 116
Burden of the National Debt 119
Ricardian Equivalence 120
Commodity Money 121
Fluid Capital and the Gold Standard 122
Demonetization and Monetization of Economies 125
Economic Growth with Deflation: The Period 1873-1896 in the USA 128
Chapter 8: Macroeconomic Equilibrium and Employment 130
Chapter 9: Capital Theory in Perspective 139
Schumpeter 139
Keynes 142
Irving Fisher 143
Böhm-Bawerk 144
Jevons and Wicksell 145
Capital as Embedded (or Stored) Labor 146
Capital Theory as the Economics of Time 147
Capital Accounting 149
Capital and Nonrenewable Natural Resources 152
Chapter 10: Opportunity and Sunk Costs 154
Opportunity Costs 154
The Measurement of Unit Incremental Cost 156
Sunk Costs 157
Chapter 11: Trade, Transfers, and Monetary Overhangs 160
Trade and Exchange Rates 160
Monetary Overhangs and Capital Levies 162
Wealth Transfers and Monetary Overhangs: A Stylized Analysis 164
Policies for Eliminating a Monetary Overhang: The Case of German Reunification 171
The German Reunification: An Assessment 175
Chapter 12: Questions Related to Consumption and Saving 177
The Macroeconomics of Retirement Saving and Consumption 177
Questions Related to Position Goods 179
Questions Related to Engel Curves and Income Elasticities 181
The Hierarchical Nature of the Pool of Fluid Capital 183
Chapter 13: Questions Related to Economic Growth 185
The General Mechanics of Economic Growth 185
Some Basic Truths Concerning Economic Development 187
Keynes and Economic Bliss 187
The Endogenous Nature of Economic Growth 188
The Role of Technological Change 189
Investment in Research and Development 190
Economic Growth in Reverse: Large-Scale Disasters in Low-Income Economies 191
Economic Growth and Different Stages of Development 192
Chapter 14: Themes and Counterthemes: Fluid Capital in Retrospect 194
Postscript 201
Chapter 15: Background and Tools for Understanding and Dealing with Recurrent Financial Crises 203
The Impact of Uncertainty on Economic Activity 204
Uncertainty and the Pace of Investment 207
Hedge, Speculative, and Ponzi Financing 210
The Many Burdens of Quasi-Rents 212
The Banking Principle, Banking Disease, and Financial Panics 215
Types of Investors 217
Differences Between Goods Markets and Asset Markets 218
The Floor for Asset Values 219
Asset Prices in a Financial Panic: the Role of a Lender-of-Last-Resort 220
The Effect of Financial Panics on the Real Economy and the Role of Fiscal Policy 223
Conclusion 225
Chapter 16: Booms, Busts, and Financial Panics: The Financial Meltdown of 2007-2009 226
The Anatomy of Financial Panics 226
Emergence from Recession 226
Awakening of Asset Markets 227
Some Signs of Danger 228
Casinos with Banks 229
Getting Ready for a Fall 229
Onset of a Panic 231
The Fragility of Financial Markets 231
A Digression on Uncertainty, Confidence, and Trust 234
Preludes to Panic 236
The Layering of Financial Intermediaries 237
Lessening of Borrower and Lender´s Risk 238
Spiking of Expectations 239
Asset Prices Outpacing the Increase in the Pool of Fluid Capital 239
Explosion of Derivatives Trading 240
Activities of Hedge Funds 241
Globalization of Finance 241
The Uniqueness of Banks and the Lender-of-Last-Resort 242
Some Observations on the Financial Meltdown of 2007-2009 243
Lessons for Reform 247
Summary and Wrap-Up 249
Appendix AOn the Role of Theory in Economic Analysis 253
Introduction 253
Economic Theory in Action: The Theory of Consumer Choice 254
Modeling Real-Time Dynamics 257
Conclusions 259
Appendix BInvestment Functions Don’t Necessarily SlopeDownward 261
Appendix C Implications of the Oil Price Increasesof the 1970s 266
Appendix DA Program for Social Savings Reform 274
Appendix EAdditional Tales Involving a Primitive Economy 276
Bibliography 283
Index 289