Economics Dictionary of ArgumentsHome
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| Capital goods: Capital goods are physical assets used by businesses to produce consumer goods and services. Examples include machinery, tools, buildings, and equipment. Unlike consumer goods, capital goods are not directly consumed but are essential for production processes, contributing to economic growth and productivity.See also Capital, Capital structure, Production, Production 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 Goods - Dictionary of Arguments
Rothbard III 46 Capital goods/Rothbard: (…) there is only one way by which man can increase his production of consumers’ goods per unit of time - by increasing the quantity of capital goods. Beginning with unaided labor and nature, he must, to increase his productivity, mix his labor energy with the elements of nature to form capital goods. These goods are not immediately serviceable in satisfying his wants, but must be transformed by further labor into lower-order capital goods, and finally into the desired consumers’ goods. >Capital/Rothbard. Rothbard III 53 All capital goods are perishable. Those few products that are not perishable but permanent become, to all intents and purposes, part of the land. We can therefore say that capital goods, during production, are transformed into their products. Rothbard III 54 Saving: [the] act of building another [capital good] involves a further act of saving. In order to invest in a replacement for the [capital good], [the producer] must again save - restrict his consumption as compared to the production that might be available. Thus, the capital structure is renewed (…). Rothbard III 55 (…) any actor, at any point in time, has the choice of: (a) adding to his capital structure, (b) maintaining his capital intact, or (c) consuming his capital. Choices (a) and (b) involve acts of saving. The course adopted will depend on the actor’s weighing his disutility of waiting, as determined by his time preference, against the utility to be provided in the future by the increase in his intake of consumers’ goods. >Production/Rothbard. Rothbard III 56 Making repairs (…) requires an independent act of saving and a choice to save. An actor’s decision on what objects to invest in will depend on the expected utility of the forthcoming consumers’ good, its durability, and the length of his waiting-time. If two consumers’ goods have the same expected marginal utility in daily serviceability and have the same period of waiting time, but one is more durable than the other, then the actor will choose to invest in production of the former. On the other hand, if the total serviceableness of two expected consumers’ goods is the same, and their length of period of production is the same, the less durable good will be invested in, since its total satisfactions arrive earlier than the other. Rothbard III 57 Also, in choosing between investing in one or the other of two consumers’ goods, the actor will, other things being equal, choose that good with the shorter period of production, (…). >Consumer goods/Rothbard. Rothbard III 59 Time/future/risks/Rothbard: Since investment in capital goods involves looking toward the future, one of the risks that an actor must always cope with is the uncertainty of future conditions. Producing consumers’ goods directly involves a very short period of production, so that the uncertainty incurred is not nearly as great as the uncertainty of longer processes of production, an uncertainty that becomes more and more important as the period of production lengthens.(1) Rothbard III 60 We may explain the entire act of deciding whether or not to perform an act of capital formation as the balancing of relative utilities, “discounted” by the actor’s rate of time preference and also by the uncertainty factor. Rothbard III 205 Consumtion: Every man must be a consumer, and therefore this analysis of consumer spending applies to all persons. Most people earn their income from the sale of their labor services. However, if we accept previously produced goods, because someone must have originally produced them, all other money incomes must derive from new production of capital goods or consumers’ goods. (This is apart from the sellers of land or its services, whose ownership must have originally derived from the finding and reshaping of unappropriated land.) Producers of capital goods and consumers’ goods are in a different position from sellers of labor service only. >Service/Rothbard. Rothbard III 352 Capital goods/Investments/time/Rothbard: If the owners of land and labor factors receive all the income (e.g., 100 ounces) when they own the product jointly, why dotheir owners consent to sell their services for a total of five ounces less than their “full worth”? Is this not some form of “exploitation” by the capitalists? The answer again is that the capitalists do not earn income from their possession of capital goods or because capital goods generate any sort of monetary income. The capitalists earn income in their capacity as purchasers of future goods in exchange for supplying present goods to owners of factors. It is this time element, the result of the various individuals’ time preferences, and not the alleged independent productivity of capital goods, from which the interest rate and interest income arise. Rothbard III 373 Capital goods/production/Rothbard: (…) , capital is not an independently productive factor. Capital goods are vital and of crucial importance in production, but their production is, in the long run, imputable to land, labor, and time factors. >Factors of production, >Evenly Rotating Economy. Income: What does earn an income is the conversion of future goods into present goods; because of the universal fact of time preference, future satisfactions are always at a discount compared to present satisfactions. The owning and holding of capital goods from date one, when factor services are purchased, until the product is sold at date two is what capitalist investors accomplish. This is equivalent to the purchase of future goods (the factor services producing capital goods) with money, followed by the sale at a later date of the present goods for money. The latter occurs when consumers’ goods are being sold, for consumers’ goods are present goods. When intermediate, lower-order capital goods are sold for money, then it is not present goods, but less distantly future goods, that are sold. In other words, capital goods have been advanced from an earlier, more distantly future stage toward the consumption stage, to a later or less distantly future stage. The time for this transformation will be covered by a rate of time preference. >Time preference, >Production/Rothbard. 1. This uncertainty is a subjective feeling ("hunch" or estimate) and cannot be measured in any way. The efforts of many popular writers to apply mathematical "probability theory" to the uncertainty of future historical events are completely vain. Cf. Mises, Human Action, New Haven, Conn.: Yale University Press, 1949. Reprinted by the Ludwig von Mises Institute, 1998. pp. 105-18._____________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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> Counter arguments against Rothbard
> Counter arguments in relation to Capital Goods
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