This is a brilliantly concise exploration, which nullifies not only the neoclassical production function, but a good deal of current writing in the economics of education.
Non-economist here. Would it be reasonable to define capital as something like “the capacity to create things of economic value”.
This would account for things such as patents, because they grant one company the ability to generate economic value while preventing the others. This is a subject that I know little about, and I am open to being shown a better definition
Because the economy is no longer dominated by manufacturing, we do need to think about capital as more than plant, equipment, etc. I agree that some analysts have stretched the term too far. However, maybe we can think that capital includes expenditures whose value doesn't rapidly diminish such as advertising. My late prof Roger Sherman at Virginia did some work in this field. He was contesting the notion that advertising created entry barriers and long term above normal profits. Sherman found that if advertising expense was treated as a depreciating asset, it didn't create a stream of future above normal profits.
I agree the "production function" is a pretty crude metaphor, but how does it lead to mistaken policy decisions? And specialization and trade are not contradictory to the idea of a production function. One "production function" in one place is more productive in market price terms of one thing than another leading to gains from have owners of one production functions specialize and trade with the owners of other production functions.
Is it time to revisit Gary Becker and his human capital work? After all, he was pretty sure that education was an important contributor to human capital. Maybe something important was missing there?
This is a brilliantly concise exploration, which nullifies not only the neoclassical production function, but a good deal of current writing in the economics of education.
Capital vs Labor is centuries old.
Funny that we have a hard time agreeing on the definitions of the economic system for which we are known.
Perhaps Capital is "Everything owned, controlled or used by a firm excluding labor costs"
The purpose of Capital being to multiply the effectiveness of labor and enable more specialization and output.
what is the chance that the techs are a bubble ?
and the bubble is based on EVERYONE in the corporate world and the media greatly overvaluing advertising
The greatest trick the advertising platforms ever pulled was convincing the world that advertising works.
https://www.takimag.com/article/the_emperors_new_ads_steve_sailer/
Which page of the Abraham paper? Cannot find it
Classical economists (although not Adam Smith—see the Abraham paper) describe physical capital—plant and equipment used to produce goods
Non-economist here. Would it be reasonable to define capital as something like “the capacity to create things of economic value”.
This would account for things such as patents, because they grant one company the ability to generate economic value while preventing the others. This is a subject that I know little about, and I am open to being shown a better definition
Because the economy is no longer dominated by manufacturing, we do need to think about capital as more than plant, equipment, etc. I agree that some analysts have stretched the term too far. However, maybe we can think that capital includes expenditures whose value doesn't rapidly diminish such as advertising. My late prof Roger Sherman at Virginia did some work in this field. He was contesting the notion that advertising created entry barriers and long term above normal profits. Sherman found that if advertising expense was treated as a depreciating asset, it didn't create a stream of future above normal profits.
I agree the "production function" is a pretty crude metaphor, but how does it lead to mistaken policy decisions? And specialization and trade are not contradictory to the idea of a production function. One "production function" in one place is more productive in market price terms of one thing than another leading to gains from have owners of one production functions specialize and trade with the owners of other production functions.
Is it time to revisit Gary Becker and his human capital work? After all, he was pretty sure that education was an important contributor to human capital. Maybe something important was missing there?