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Why would you draw a distinction between the two?

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Thu Jun 29th, 2006 at 02:41:53 PM EST
[ Parent ]
Because it's questionable whether they're equivalent? It's not immediately obvious to me that they are, in the short- to medium- run (the real world) at least.
by Colman (colman at eurotrib.com) on Thu Jun 29th, 2006 at 02:43:57 PM EST
[ Parent ]
The point, if I remember correctly (which is, granted, always a big "if"), I was making was that sending machinery to a new plant in China was no different from sending money to finance a new plant in China.  One way or another, the capital needed to begin production is moving to the new production site -- hence, in this sort of example, my contention that there is no point in drawing a distinction.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Thu Jun 29th, 2006 at 02:54:20 PM EST
[ Parent ]
The point I was trying to make was that TBG is arguing that "productive capital" is a figment of our imagination, but was (IMHO) confusing capital with fiat money. I find the distinction between financial assets and capital goods useful at least for that reason. Also, there is more than one kind of "capital good" (if you insist, you can include various financial assets in that category) and the relative exchange values are meaningful whether or not one of them is a recognizable form of "money".

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jun 29th, 2006 at 03:02:14 PM EST
[ Parent ]
Okay.  Fair enough.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Thu Jun 29th, 2006 at 03:20:16 PM EST
[ Parent ]
I don't think it's that simple. Most accounting systems seem to be based on an indirect assessment of the perceived value of tangibles.

My point is really that the bottom line - as its known - refers to perceived value in terms of this famous fiat money. In this world view the productive value of any asset - including money itself - can only be assessed in fiat money terms.

The fact that it's mythical fiat money that's being accumulated is very much the problem. By using only this one dimension of value the real social, personal and ecological costs of 'growth' can be kept hidden. And the benefits of social developments that can't easily be assessed in fiat money terms can (literally) be discounted.

So a factory or a computer can only be considered 'capital' in reference to this one dimensional value yardstick. These items may, or may not, have real-world productive value in the sense of personal empowerment and social development. But that productive value is always assessed indirectly in terms of a fictional fiat-money based number that hides information about how this kind of 'capital' is created and used.

It's not so much that I'm confusing the two - more that economic accounting is based on keeping the two confused.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Jun 29th, 2006 at 03:25:59 PM EST
[ Parent ]
The relative fiat-money-value of two tangible goods is independent of the value of the fiat money and is a meaningful quantity. But you are right that converting everything to its fiat-money value can lead to counterintuitive conclusions. I am thinking that changing the numeraire (see my comment to DoDo in a parallel thread) would be a useful exercise to determine whether a value is real or an artifact of fiat money.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jun 29th, 2006 at 03:31:26 PM EST
[ Parent ]
In that sort of example, you're right.
by Colman (colman at eurotrib.com) on Thu Jun 29th, 2006 at 03:20:55 PM EST
[ Parent ]
Miguel is, of course, right in saying that that money and capital goods are not absolute equivalents.  Obviously I can't walk into Wal-Mart with a piece of heavy machinery from a GM plant and exchange it for an iPod.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Thu Jun 29th, 2006 at 03:52:56 PM EST
[ Parent ]
Might be fun to try though.
by Colman (colman at eurotrib.com) on Thu Jun 29th, 2006 at 03:55:47 PM EST
[ Parent ]
The look on the cashier's face, alone, would be worth it.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Thu Jun 29th, 2006 at 03:58:31 PM EST
[ Parent ]
Money is fungible, capital goods are not.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jun 29th, 2006 at 02:47:22 PM EST
[ Parent ]

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