Free Capitalist Network - Community Archive
Mises Community Archive
An online community for fans of Austrian economics and libertarianism, featuring forums, user blogs, and more.

What is 'capital consumption'?

Answered (Not Verified) This post has 0 verified answers | 41 Replies | 5 Followers

Not Ranked
72 Posts
Points 2,995
ITGF posted on Tue, Jun 15 2010 4:58 PM

From time to time I have read articles that refer to capital consumption, but I don't really understand what it means.  Can someone explain it to me?

  • | Post Points: 50

All Replies

Top 10 Contributor
7,105 Posts
Points 115,240
ForumsAdministrator
Moderator
SystemAdministrator

Its the 'economy' part that makes up the latter part of the term 'market economy' that so tightly binds the concept of 'market economy' to 'there is money and hence economic calculation'. I suppose I am saying that there are markets which are market economies and there are markets which are not (like primitive barter ones that don't benefit from monetary calculation)

Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid

Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring

  • | Post Points: 20
Top 25 Contributor
Male
3,260 Posts
Points 61,905
ForumsAdministrator
Moderator
Staff
SystemAdministrator

No, it's "market" that is the key word.  Mises said, "Market exchange and monetary calculation are inseparably linked together", not "economic exchange and monetary calculation are inseparably linked together."

"the obligation to justice is founded entirely on the interests of society, which require mutual abstinence from property" -David Hume
  • | Post Points: 20
Top 10 Contributor
7,105 Posts
Points 115,240
ForumsAdministrator
Moderator
SystemAdministrator

yes, they are inseparably linked, who could imagine monetary calculation without market exchange?

so that quote alone doesn't force me to change my opinion :-)

Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid

Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring

  • | Post Points: 20
Top 25 Contributor
Male
3,260 Posts
Points 61,905
ForumsAdministrator
Moderator
Staff
SystemAdministrator

Okay, let me say it a different way.  When he writes:

"the field of catallactics or of economics in the narrower sense is the analysis of the market phenomena."

...he's saying that market phenomena are the special subject of catallactics.

When he writes:

"Catallactics is the analysis of those actions which are conducted on the basis of monetary calculation."

...he's saying that monetary-calculative action is the special subject of catallactics.

And remember that he says that he's expressing the same thing in two different ways, because he inserts "This is tantamount to the statement:" between the two statements.

If market phenomena are the special subject of catallactics, and monetary-calculative action the special subject of catallactics, then market phenomena must BE monetary-calculative action.

Again, as he explicitly stated, he's saying the SAME thing expressed in two different ways.

"the obligation to justice is founded entirely on the interests of society, which require mutual abstinence from property" -David Hume
  • | Post Points: 20
Top 10 Contributor
7,105 Posts
Points 115,240
ForumsAdministrator
Moderator
SystemAdministrator

This is simply a terminological semantic issue, so there probably isn't any value in digging around this... I just don't see the justification for this special technical definition of 'market' when the standard everyday concept of buyers and sellers (with or without money) of market seems perfectly serviceable. I suppose when writing an epic book it can be a pain to write "markets featuring money" every time you want to reference just that type of market, and its easier to just stipulate that 'markets' = {markets with money}. but that's all it looks to me like Mises is doing.

Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid

Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring

  • | Post Points: 20
Top 25 Contributor
Male
3,260 Posts
Points 61,905
ForumsAdministrator
Moderator
Staff
SystemAdministrator

I don't know.  Mises really agonized over terminology.  And, to avoid confusion and false syllogisms, I think it's useful to establish as much of a common language in a scholarly community as possible.  And I think Human Action, and Mises' work in general, is the best touchstone we have for establishing such a common language.

"the obligation to justice is founded entirely on the interests of society, which require mutual abstinence from property" -David Hume
  • | Post Points: 20
Top 10 Contributor
7,105 Posts
Points 115,240
ForumsAdministrator
Moderator
SystemAdministrator

well, I just looked back at the opening of chapter 14 section 3

 

XIV. THE SCOPE AND METHOD OF CATALLACTICS


3. The Pure Market Economy


The imaginary construction of a pure or unhampered market economy assumes that there is division of labor and private ownership (control) of the means of production and that consequently there is market exchange of goods and services.

so, really he is just launching in with the imaginary construct he is calling 'market economy', he is going to be dealing with catallactics and trying to understand how prices form. buying and selling involving barter are therefore out of the scope ofhis intended analysis, its simply not on his agenda here. He is going to do some Catallactics. Certainly when you narrow a scope like that, you get a narrowed scope....

 

Lets look again at the quote you sourced

"Not logical or epistemological rigor, but considerations of expediency and traditional convention make us declare that the field of catallactics or of economics in the narrower sense is the analysis of the market phenomena. "

Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid

Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring

  • | Post Points: 20
Top 25 Contributor
Male
3,260 Posts
Points 61,905
ForumsAdministrator
Moderator
Staff
SystemAdministrator

The imaginary construction of a pure or unhampered market economy assumes that there is division of labor and private ownership (control) of the means of production and that consequently there is market exchange of goods and services.

"so, really he is just launching in with the imaginary construct he is calling 'market economy',"

No, what makes it imaginary is the words "pure" and "unhampered", not the word "market".

"Not logical or epistemological rigor, but considerations of expediency and traditional convention"

Yes, those last two considerations were always part of his agonizing over terminology.  But that was because at the time, nobody had really systemetized the science in its new form yet, so he had to weigh heavily on the last two considerations.  But then he DID systemetize it, and created a whole, useful systematic taxonomy of concepts.  I think we should make full use of it.

"the obligation to justice is founded entirely on the interests of society, which require mutual abstinence from property" -David Hume
  • | Post Points: 20
Top 10 Contributor
7,105 Posts
Points 115,240
ForumsAdministrator
Moderator
SystemAdministrator

Well, I  can agree to the stipulation to make the term 'market' jealously cover only 'markets featuring economic calculation' and exclude 'markets' which lack that, but invent a word for me to cover those 'barter markets' because I want a word for them :-)

Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid

Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring

  • | Post Points: 20
Top 500 Contributor
304 Posts
Points 6,045

I think the key phrase here is "narrower sense". I think Mises falls in no contradiction, as he talks about markets (private property and economic exchange) and a narrower definition of the term, which involves "monetary calculation", which delimits the scope of catallactics.

  • | Post Points: 5
Top 500 Contributor
304 Posts
Points 6,045

Nevertheless, I think that defining "monetary calculation" is somewhat difficult. We can possibly imagine lots of societies, with varying degrees of "monetary calculation" in them. Maybe a barter economy, in which at least one commodity is developing into a common medium of exchange, has some (low) level of monetary calculation. We may also say the same about some sort of a market-socialist economy. And the degree of monetary calculation can come to its full expression only in the case of a "pure and unhampered" market, that is, a purely libertarian society in which private property rights are the rule. This is also consistent which the One Big Firm (as Rothbard puts it) imaginary model, in which an enterprise is the owner of all the means of production in a given economy, and where monetary calculation does not exist at all (or it is useless).

  • | Post Points: 20
Top 10 Contributor
7,105 Posts
Points 115,240
ForumsAdministrator
Moderator
SystemAdministrator

well one way to maybe think about it is to consider those individuals who have begun to trade the commodity as money as being participants in a fully 'market economy', and those bartering and not valuing the commodity as money are simply not direct participants in that market, and only have indirect effect on that market by virtue of the barter trades they make with those who are within the market economy. As money becomes more widely accepted the arena comprising no-money barterers involved in non-economic action shrinks and a money economy grows and takes over the whole arena (or market in the 'broadest sense')

Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid

Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring

  • | Post Points: 5
Page 3 of 3 (42 items) < Previous 1 2 3 | RSS