Abstract
I have studied economics for more than 50 years and have always considered myself an econometrician in the original sense of econometrics, as “The use of mathematical and statistical methods to quantify the laws of economics.” Over this time, I have, inter alia, estimated huge numbers of demand equations for the purpose of acquiring estimates of price and income elasticities, played around with nonleast-squares methods of estimation, puzzled over what capital is and how money comes into being, and thought long and hard about how one might ground the theory of consumer choice in the neurosciences.
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- 1.
Recently, I had the pleasure of spending an evening with a young economics Ph.D. from Mexico who will be joining the University of Arizona economics department this fall. At one point during the evening, he asked what I thought economics had to contribute to society and why one should study it as a discipline. With hindsight, I don’t feel that I gave a good answer, and, in these notes and comments, I would like to try to do better. I am grateful to Harry Ayer and Richard Newcomb for comments and suggestions.
- 2.
Equally overlooked has been the contributions of the late Hyman Minsky, whose penetrating insights into the stability of monetary economies also take their cues from those chapters.
- 3.
If the investment is purchased in a spot market, C will be known. However, if it involves new construction over some horizon, then uncertainty will enter into the calculation of C as well, almost certainly to increase it.
- 4.
At one point before the first edition of my book on capital and money came out Taylor (2010), I sent a few chapters to H. S. Houthakker for comment, which, interestingly, he declined to do, by saying that he had never felt that he understood capital theory. I thought: if a mind like Henk’s does not feel comfortable talking about capital, then what chance have I? Nevertheless, I felt that I had a pretty good idea about how to think about and define capital, and it is to this that I now want to turn.
- 5.
Fluid capital can be seen as the “putty” in the “putty-clay” models of the 1960s and 1970s.
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It is useful to note that this approach to defining capital provides a root concept of capital for relating to one another the numerous concepts of capital that are found in the literature. To give a few examples: physical capital is fluid capital that has been embodied in produced means of production; working capital is fluid capital that is being devoted to financing current production; sunk capital represents that part of the original value of investment in physical capital that has not yet been repatriated into fluid capital through depreciation charges; finally, financial capital connotes immediate access to purchasing power (that is, to money).
- 7.
Among other things, imposition of such a rule on the banking system would foreclose position-financing loans to hedge funds and the trading desks of both bank and nonbank financial institutions. These entities should speculate and gamble with their own money, not with that which has been newly created.
- 8.
At essentially the same time that Keynes was writing Consequences, Schumpeter (1954) published a paper in German that gives the best treatment of the transfer problem that I have seen in the literature.
References
Keynes JM (1921) The economic consequences of the peace. Macmillan, New York
Keynes JM (1936) The general theory of employment, interest, and money. Macmillan, New York
Schumpeter JA (1954) The crisis of the tax state, translated by Stolper WF, Musgrave RA International economic papers. vol 4, In: Al Peacock et al Macmillan, 1954, pp 5–38. (Reprinted in Joseph AS (1991) The economics and sociology of capitalism. In: Swedberg R Princeton University Press)
Taylor LD (2010) Capital, accumulation, and money, 2nd edn. Springer, Berlin
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Taylor, L.D. (2014). Fifty Years of Studying Economics. In: Alleman, J., Ní-Shúilleabháin, Á., Rappoport, P. (eds) Demand for Communications Services – Insights and Perspectives. The Economics of Information, Communication, and Entertainment. Springer, Boston, MA. https://doi.org/10.1007/978-1-4614-7993-2_15
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