I have a question about the Cobb-Douglass Production Function: Y = A K L . I do not understand how one can possibly add up all the capital in a country. I understand how estimates can be made in terms of a singular firm but how does one add up all the capital of all individuals who all have different plans and considerations of what is and what is not capital? My question is not so much directed at the Cobb-Douglass Production Function but really about the idea of "total capital". I am taking Macroeconomic Analysis at school and I am so lost. I started studying the Austrian School from Carl Menger's Principles of Economics (and a little bit of Aristotle, Hume, etc.). When I walked into my Macroeconomics class, I was so lost.
Not sure. Austrians treat capital as heterogeneous. Perhaps Garrison has some insights on the mainstream views in his book, Time and Money?
Freedom of markets is positively correlated with the degree of evolution in any society...