Study Guide to Man, Economy, and State with Power and Market

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Chapter 8: Production: Entrepreneurship and Change 97 Income to Land and Labor Factors 83 ounces Interest ↑ ↑ ↑ ↑ ↑ ↑ Income 17 ↑ ounces 19 ounces ↑ 1 ← 20 8 ↑ 2 ← 30 13 ↑ 2 ← 45 12 ↑ 3 ← 60 16 ↑ 4 ← 80 15 5 ← 100 ounces Original Structure (Figure 41 from page 369) Income to Land and Labor Factors 69.9 ounces Interest ↑ ↑ ↑ ↑ ↑ ↑ ↑ Income 10.1 ↑ ounces 17 ounces ↑ 0.5 ←17.5 10 ↑ 0.8 ← 28.3 10 ↑ 1.1 ← 39.4 10 ↑ 1.5 ← 50.9 11.3 ↑ 1.9 ← 64.1 1.6 ↑ 2.0 ← 67.7 10 2.3 ← 80 ounces New Structure
98 Study Guide to Man, Economy, and State with Power and Market another 12 on labor and land factors, and then sells the resulting intermediate good for 60 ounces one year later, for a rate of return of 3/57 ≈ 5 percent. Finally, there are six stages of production. In the second figure, we see the hypothetical structure of production after a net saving and investment of 20 gold ounces. That is, of the original 100 ounces available for consumption, the members of the community decide to spend only 80 on present consumption goods. Thus we know that total consumption must drop to 80, and that gross investment must rise to 338 ounces (318+20). These figures are consistent with the diagram: the bottom row has 80 ounces spent by the consumers on the finished good, while total investment (=67.7+10+64.1+1.6+50.9+11.3…) does indeed (approximately) equal 338. The natural rate of interest in the new arrangement has dropped to 3 percent; e.g., the mid-level capitalist spends 39.4 ounces on a higher-order capital good, plus an additional 10 ounces on labor and land factors, and sells the resulting product one year later for 50.9 ounces, for a rate of return of 1.5/49.4 ≈ 3 percent. Of the total net income of 80 ounces, the capitalists earn 10.1 ounces while the land and labor owners earn the remaining 69.9. (The net income of the capitalists can be found by summing the left-hand column, or by multiplying gross investment by the interest rate; i.e., 338x.03 ≈ 10.1.) Finally, note that there are now seven stages of production; the accumulated savings and corresponding drop in the interest rate have fostered a more “capitalistic” structure of production. 3. Capital Values and Aggregate Profits in a Changing Economy A progressing economy is one in which there are net aggregate profits, a stationary economy is one in which aggregate
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CONTENTS INTRODUCTION . . . . . . .
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In June of 2004, I became convinced
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Introduction ix appropriate, I have
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Chapter Summary In a money economy,
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Chapter 4: Prices and Consumption 4
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Chapter 11: Money and Its Purchasin
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Chapter Summary Economists often ta
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Chapter 1: Defense Services on the
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Chapter 1: Defense Services on the
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Chapter Outline 1. Types of Interve
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Chapter 2: Fundamentals of Interven
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Chapter Summary Society is composed
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Chapter 4: Binary Intervention: Tax
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Chapter Summary There has been litt
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Apriorism, 1, 9 Ability-to-pay prin
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Index 251 Equilibrium, 47, 104 macr
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Index 253 Medium of exchange, 27, 3
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Index 255 See also Economy, Evenly
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