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Measure of Capital in Böhm-Bawerk's Flow Input Model
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- Authors
- Issue Date
- 1990-04
- Citation
- Seoul Journal of Economics, Vol.3 No.2, pp. 159-178
- Keywords
- roundaboutness ; average period ; Hahn
- Abstract
- One of the shortcomings of Böhm-Bawerk's capital theory is
his neglect of the compound interest rate in the calculation of
the value of capital. However, this paper shows that the introduction
of the compound interest rate itself may not invalidate
his assertion that the increase of value of capital will lengthen
the production period and thus decrease the interest rate, if
there exists a sensible measure of the "roundaboutness", as is
the case with Böhm-Bawerk uniform flow input model. The fundamental
problem with Böhm-Bawerk is that the average production
period cannot serve as a sensible measure of capital
under a general time distribution with multiple parameters, contrary
to his conjecture. An alternative measure of production
period under less restrictive conditions is also suggested with a
textual evidence.
- ISSN
- 1225-0279
- Language
- English
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