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2010 | OriginalPaper | Chapter

14. Themes and Counterthemes: Fluid Capital in Retrospect

Author : Lester D. Taylor

Published in: Capital, Accumulation, and Money

Publisher: Springer US

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Abstract

In general, this book has involved exploration of themes related to fluid capital. More explicitly, it has examined the implications of three definitions, one relating to a concept of capital and the other two relating to two macroeconomic identities. The definition of fluid capital provides a root concept of capital from which virtually all existing notions of capital can be connected and rationalized. The two identities, in contrast, involve equalities between the value of production in current prices and the income the production generates, and between the value of goods in the pool of fluid capital and the corresponding value of claims on the same.

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As should be evident from these paragraphs, it is inappropriate in my view to measure changes in the general price level in terms of standard Laspeyres price indices. Only current-quantity weighted chain indices provide meaningful measures of inflation and deflation.

This will be true, moreover, even in situations in which the stock of money is changed exogenously, as was the case, for example, when East and West Germany merged in 1990. Because of the pegging of the two marks at close to par, there was, in effect, a once-and-for-all increase in the stock of marks, with no offsetting increase in the pool of fluid capital. Again, there is no reason to assume that the part of the increased stock of marks that sought outlet against goods would be spread proportionately.

That capital has to finance both current production and investment in produced means of production has generally been overlooked in the literature on capital theory. A notable, but partial, exception was R.G. Hawtrey in his two early volumes on the trade cycle, Good and Bad Trade (1913) and Currency and Credit (1919). Hawtrey’s focus, however, was on the general availability of money and credit, rather than the relationship of these to fluid capital.

See Appendix B.

“Right” in this context is taken to mean that the pool of purchasing power that is created is consistent with a stable general price level.

See Davidson (1978, 2009), Minsky (1975, 2008).

See “Minsky’s moment,” Buttonwood, The Economist, April 2, 2009.

Davidson, P. (1978), Money and the Real World (second edition), John Wiley and Sons, New York.

Hawtrey, R.G. (1913), Good and Bad Trade: An Inquiry into the Causes of Trade Fluctuations, Longmans and Green, London (reprinted by Augustus M. Kelley, 1962).

Hawtrey, R.G. (1919), Currency and Credit (second edition, 1923), Longmans and Green, London.

Minsky, H.P. (1975), John Maynard Keynes, Columbia University Press, New York.

Minsky, H.P. (2008), Stabilizing an Unstable Economy, McGraw-Hill, New York, (First Edition, Yale University Press, 1986).

Title: Themes and Counterthemes: Fluid Capital in Retrospect
Author: Lester D. Taylor
Publisher: Springer US
Book: Capital, Accumulation, and Money
Print ISBN: 978-0-387-98168-0

Electronic ISBN: 978-0-387-98169-7

Copyright Year: 2010
DOI: https://doi.org/10.1007/978-0-387-98169-7_14