Capital And Its Structure by LUDWIG M. LACHMANN

Author:LUDWIG M. LACHMANN [LACHMANN, LUDWIG M.]
Language: eng
Format: epub
ISBN: 978-1-61016-033-9
Publisher: Sheed Andrews and Mcmeel, Inc
Published: 1978-11-06T16:00:00+00:00

CHAPTER V

CAPITAL STRUCTURE AND ECONOMIC PROGRESS

In Chapter III we saw how entrepreneurs form and dissolve capital combinations in response to the varying needs of changing situations, and how these capital combinations, embodied in plans, have to be regarded at each moment as the ‘atoms’ of the capital structure. In Chapter IV we endeavoured to show how the forces inherent in a market economy tend to operate towards consistent capital change and a coherent pattern of service streams flowing into and out of capital combinations; and that in this sense we may say that a capital structure, though it could hardly ever exist for any length of time, is always in the process of being formed, a process continually interrupted by unexpected change. In this chapter we shall be chiefly concerned with the changes which the capital structure undergoes as capital is accumulated or, as we might say, with the specific forms the capital structure assumes in an ‘expanding economy’.

In Chapter III we thus saw how the ultimate constituents are determined, in Chapter IV how these constituents tend to form a system. In the present chapter we shall study the properties of this system under conditions of ‘uniform’ change.

We shall, however, have to change our method of attack. Thus far we have built up our argument, by and large, by the analysis and interpretation of certain well-known facts of business life, paying scant attention to what economic theories have to say about them; taking our justification for such disregard from the fact that theorists have, on the whole, had little to say about the matters in which we are interested, and that what little they have to say is, like Keynes’ theory of speculation, as often as not misleading rather than to the point.

In other words, it is of the nature of our approach that we are looking at capital as the entrepreneur does, who has to build up capital combinations from a diversity of material resources. So we had little to learn from economists who adopt the point of view of the accountant, private or social, to whom the common denominator of the capital account is the heart of the matter, and most economists have at least implicitly adopted the accountant’s point of view. But we shall now have to deal with one of the exceptions. In studying changes in the capital structure we cannot ignore previous discussions.

We shall in this chapter be mainly concerned with a question to which the intuitive genius of Boehm-Bawerk gave an answer of a kind, an answer, to be sure, we cannot fully accept and which, moreover, is marred by an excessive degree of simplification, yet an answer we cannot afford to disregard.

We ask what typical changes the capital structure undergoes as capital is accumulated. Boehm-Bawerk’s answer was, briefly, that the ‘period of production’ increases and causes an increase in output per man-hour. We cannot accept this answer as it stands, but we believe it possible to re-interpret it in such a way as to make it exempt from most of the more damaging attacks it has suffered in recent years.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.