Capital and Entrepreneurship. A Subjectivist Exposition of Roundaboutness and the Structure of Production Antony Mueller Antony Mueller UCS Graduate Business UCS Graduate Business School School University Caxias do Sul, University Caxias do Sul, Brazil Brazil [email protected][email protected]
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Capital and Entrepreneurship. A Subjectivist Exposition of Roundaboutness and the Structure of Production Antony Mueller UCS Graduate Business School University.
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Capital and Entrepreneurship. A Subjectivist Exposition of
Roundaboutness and the Structure of Production
Antony MuellerAntony Mueller
UCS Graduate Business School UCS Graduate Business School
University Caxias do Sul, BrazilUniversity Caxias do Sul, [email protected]@yahoo.com
Variant Meanings of “Capital”
Capital as Financial CapitalCapital as Financial Capital Capital a Production GoodsCapital a Production Goods Capital as a StockCapital as a Stock Capital as a Production ProcessCapital as a Production Process Capital as a Productive ForceCapital as a Productive Force Capital as a Factor of ProductionCapital as a Factor of Production
Capital Theory
Heterogeneity vs homogeneity of capital Heterogeneity vs homogeneity of capital Structured vs. unitaryStructured vs. unitary Production process vs. fixed stockProduction process vs. fixed stock Separate productivity of factors of Separate productivity of factors of
production vs Coordination and production vs Coordination and SpecializationSpecialization
Permanence vs. Non-permanencePermanence vs. Non-permanence Absence of Entrepreneur vs. Pivotal Role Absence of Entrepreneur vs. Pivotal Role
of Entrepreneurshipof Entrepreneurship
Roundaboutness – Umweg-produktion
QQ
Roundabout Roundabout Production Production
Standard Standard
Production Production
Available TimeAvailable Time
RTP
S
to t1
New RoundaboutProduction
Standard Production
Q
B
E
SP
RP
RP’
RTP n
RTP m
SSmSn
RTP
Roundaboutness and Stages of Production (dAD = 0)
FP
DoR
-ΔD
+ΔD
dAD = Change in Aggregate DemandDR = Degree of RoundaboutnessFP = Final ProductdD = Change in Demand
Modeling capital as “Hayekian triangle”A simple Hayekian triangle – Stages of ProductionA simple Hayekian triangle – Stages of Production
Degrees of ConsumptionDegrees of ConsumptionMaturityMaturity Consumable Consumable
Stages of Production (SP)Stages of Production (SP)
Savings and economic growth in the Hayekian triangle
DD
A A CC B B
CC B B A A
Shortening of Production Structure
DR
FP
+dD
-dD
Unsustainable Production StructuresCentral Planning Distortions
DR
FP
+dD +dD
Soviet-Cuba Style Development Policy = Guns and Butter Policy+DR+DR
+dD+dD +dD +dD
SoPSoP
Imports-maintained Production Structure
DR
FP
+dD
+dIM
Growth-cum-debt development strategy in a three-stages model
FP
DR
+dD +dD
+dIM
Forced Savings
DR
FP-dD +dD
+dEX
Natural and cyclical production frontiers
PP NPF NPF AD AD
CPFCPF
PoPo
Q0 Q0 OutputOutput
Productivity-induced expansion
PP NPFo NPF’ NPFo NPF’
P0P0
P1P1
ADAD
Q0 Q1Q0 Q1 OutputOutput
Money-induced expansion in the loanable fund model i ICD/CCD i ICD/CCD
SS S + dM S + dM
dADdAD LF LF
Savings and credit supply and demand
CDS
TCSi
TC
S+ΔM =
in
im
En Em
Productivity gains and inflation targeting – recipe for a boom bust cycle?
P P NPF NPF’ NPF NPF’
AD AD CPFCPF
P3P3 CPF’CPF’
P0 P2P0 P2 AD’AD’
P1P1
Q0 Q3 Q1 Q2 OutputQ0 Q3 Q1 Q2 Output
Government and consumption credit-driven expansion i i I I+CC+GC S S + dM I I+CC+GC S S + dM
i0i0
I, C, G I, C, G
Effect on production frontier
P P NPF’NPF’ NPFNPF
CPF ‘CPF ‘ CPFCPF
AD’ AD’
ADAD
Q2 Q0 Q1Q2 Q0 Q1 Output Output
Credit expansion and credit crunch – financial markets ii S - dMS - dM
II S S S + dMS + dM i’’i’’
i0i0 i’i’
dAD’’ dAD dAD’dAD’’ dAD dAD’ LF LF
Austrian Disaggregation
PQ = Pc (Qc) + PPQ = Pc (Qc) + PII (Q (QII11 +...+ Q +...+ QIIxx + ... + Q + ... + QIINN)) Keynesian Disaggregation:Keynesian Disaggregation: PQ = Y PQ = Y Y= C + I + GY= C + I + G Monetarist Disaggregation:Monetarist Disaggregation: MV = PQMV = PQ MV = YrPMV = YrP M = MB x mM = MB x m
Money side and goods side
M x V = Q x P(MV/P) = Q
Q
MV/P
P
Q
Po
Money side and goods side – Change of QM x V = Q x P(MV/P) = Q
Qo
MV/P
P
Q
Po
Q1
P1
Money side and goods side –change of M and/or VM x V = Q x P(MV/P) = Q
Q
MV/P’
P
Q
Po
P1
MV/P
Equation of Exchange
Equation of ExchangeEquation of Exchange MV = PQMV = PQ Keynesian Model:Keynesian Model: MV = P (Qc + QI + QG)MV = P (Qc + QI + QG) Monetarist Model:Monetarist Model: MB x m x V = P x Yr MB x m x V = P x Yr Disaggregated ModelDisaggregated Model MB x m x V = Pc (Qc) + PMB x m x V = Pc (Qc) + PII (Q (QII11 +...+ Q +...+ QIIxx + ... + + ... +
QQIINN) + P) + PAA(Q(QAA))
Classical, Monetarist, and Keynesian View
Classical Position:Classical Position: Auto-Stabilization through interest rateAuto-Stabilization through interest rate
Keynesian Position:Keynesian Position: Destabilization through investment (paradox of Destabilization through investment (paradox of
thrift) – Stabilization through deficit spendingthrift) – Stabilization through deficit spending Monetarist Position:Monetarist Position:
Destabilization through money – Stabilization Destabilization through money – Stabilization through stable money supplythrough stable money supply
Problem and its Solution
Instability through money, banking and Instability through money, banking and governmentgovernment
Solution proposalsSolution proposals Gold standardGold standard Commodity standardCommodity standard Denationalization of moneyDenationalization of money Hundred per cent reserve requirementHundred per cent reserve requirement
Summary Causes of Instability in Keynesianism and Causes of Instability in Keynesianism and
Monetarism: I and MsMonetarism: I and Ms Realb Business Cycle: Shocks, mainly Realb Business Cycle: Shocks, mainly
externalexternal Instability in Austrian Economics: deviation Instability in Austrian Economics: deviation
of monetary rate of interest from natural of monetary rate of interest from natural raterate
Causes of instability in this model: Any Causes of instability in this model: Any kind of interventionism as to I, G, Ms, Md, ikind of interventionism as to I, G, Ms, Md, i
Cycle gets amplified because of Fractional Cycle gets amplified because of Fractional Reserve BankingReserve Banking
Main elements of this model
Time preferenceTime preference RoundaboutnessRoundaboutness Stages of productionStages of production Standard productionStandard production Roundabout productionRoundabout production CapitalCapital EntrepreneurshipEntrepreneurship