# Tag Info

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In economics, capital refers to things that are used to produce other things. So, capital includes tangible things like a delivery truck, an office building, or a factory. These are things which often require energy to run. Hence, if a developing country has low capital per head, then it probably also has few delivery trucks, office buildings, and ...

5

Material capital is any durable good that is used as a factor of production and, by virtue of being durable, it is gradually consumed in production over a maximum possible duration of a length that is determined by (i) how much a unit of capital is used and (ii) the depreciation rate of a unit of capital. Capital forms by labor and savings (which is in ...

4

My guess is that it is not a new factor of production, but simply a type of total factor productivity. This is because: factors of production are a stock, which produce services. What is the stock of AI? The stock of labour is easy to calculate. The stock of capital is more complex, but at least all capital goods (even robots) have a market price. As such, ...

3

$k_t$ is your capital after investment, so if you subtract the capital you carried over from last period, $k_{t-1}(1-\delta)$, you obtain the amount that must have been invested in order to have $k_t$ of capital today. Remember that $k$ is a stock variable, while $i$ is a flow variable. This is why the flow $i_t$ is the difference between the current and ...

3

This is a subtle issue. First let's present a numerical example to see the head-scratching riddle. Assume $$\alpha =1/2 \implies Y = K^{1/2}L^{1/2}$$ and that the exogenously given input prices are $$r=1/8,\,\, w=4.$$ The f.o.c are $$\begin{cases} \frac {Y}{2K} = 1/8 \\ \\ \frac{Y}{2L} = 4 \end{cases} \implies K/4 = 8L \implies \left(L/K\right)^* = 1/32... 3 A clarification: The values w,r are not independent of input combinations: you have already solved for K/L. 1) Unless you assume that the price of the output is equal to 1, there is a minor mistake, as output prices affect factor prices. 2) If there is a profit maximizing pair (K,L), then for all \alpha \in \mathbb{R}_+ (\alpha K,\alpha L) will ... 3 The following is from Thomas Piketty and Gabriel Zucman (2015, From Handbook of Income Distribution, Volume 2, Chapter 15, Part 15.5.3 which is hard to link to directly but get it here): Take a CES production function$$Y=F(K,L)=(a⋅K^{\frac{\sigma-1}{\sigma}}+(1−a)⋅L^{\frac{\sigma-1}{\sigma}})^{\frac{\sigma}{1-\sigma}} Me: $\sigma$ is the elasticity of ...

2

From a Marxist perspective, capital is a social relation. Essentially, it is money that begets more money. As such, it only becomes more or less synonim with "means of production" once it takes over production, ie, once society becomes capitalist. In a feudal society, tools and land are not capital, albeit being means of production. The money of money ...

2

In the model with technological progress the capital per effective worker remains constant, implies that capital per worker grows at the rate of exogenous rate of technological progress. See Barro and Martin book, Chapter 1.

2

The broad definition I use is this: A resource is anything that's used to produce goods. (I treat the terms resource, factor of production, means of production, and input as interchangeable.) I neatly divide all resources into three categories: So, labor refers to human beings (or more correctly, the services thereof). Examples: (the services of) a ...

2

What I think you want to consider to be grouped with land, labour and capital is another factor to be considered with labor- technology (A.K.A "Knowledge*). The term "technology" here means an augmenting factor which is external to the present amount of labour. This can mean improved machinery to produce goods and services or alternatively, this can be ...

2

First, important thing to note here is that $K/Y$ is not the capital income to labor income ratio, but ratio of capital to total income (or output which is macro-economically equivalent to income). $K$ is not an income derived from capital it is the stock of capital. Wars destroy the stock of capital so even though returns to capital $r$ indeed increase ...

2

Different sides of the balance sheet. Capital represents long-dated instruments (infinite lifetime in the case of common equity) issued by a bank that are subordinated in a way to make them comparable to equity. (Can include instruments that are technically liabilities.) The existence of capital means that assets are greater than non-capital liabilities, i....

2

This is no different from any other markets... just for money. On the demand side of the goods, those who want money (those who sell bonds) say how much they're willing to pay in terms of bond yields. The supplier of the goods (bond buyers) come to the bond market and choose the product. Under a developed bond market, it's guaranteed that those who get the ...

2

This is not really an economic terminology. Many words can have multiple meaning in common English. According to the Oxford dictionary: structure /ˈstrʌktʃə / ▸ noun 1 the arrangement of and relations between the parts or elements of something complex. ... 2 a building or other object constructed from several parts. In case of that article the first ...

2

In the short run, you cannot sell your capital. To do so would be a violation of "short run" and would instead be the "long run". Case 3 (and I would also contest Case 2) are outright forbidden by the definition of short run. I would note that your question has a lot of narrative to it - which is good in some cases, but you want to keep ...

1

While it’s true that firms can pay other firms for land or capital (and in fact firms can pay another firms for entrepreneurship - you can hire consulting firms, and there are also firms that ‘borrow’ workers to other firms). All firms are in the end owned by some household. Even if legally you can have both physical and legal persons (i.e. limited company ...

1

In National Income Accounting, the capital stock is divided into structures and equipment. Equipment consists of machines, transport equipment, etc. Structures are buildings, bridges, etc. For definitions, see https://www.bea.gov/resources/learning-center/definitions-and-introduction-fixed-assets

1

What is the depreciation rate ($\delta$)? Assumptions: $Y_t = K_t^{\alpha} (A_tL_t)^{1-\alpha}$, $\alpha = 0.5$ ($\alpha$ = capital income share), $A_0 =1$ and $g = 0$ ($g$ = growth rate of technology), $s = 0.2$ ($s$ = savings rate), $n = 0.05$ ($n$ = growth rate of the labor force/population). Capital in the next period is equal to the capital from the ...

1

Consider this... A bank's capital is used to finance the purchase of assets. Those assets are mostly loans made to households and businesses and governments. When a loan is made the bank is "buying" the future payments of the borrower. This suggests the whole right side of the balance sheet is capital because it takes the entire right side to finance the ...

1

According to how you've defined the firm's LOMOC, investment produces capital simultaneously. That is, $i_t = k_t - (1-\delta)k_{t-1}$ defines how much capital the firm created in period $t$. If you want a delayed investment function, you could simply set the LOMOC to $k_t = (1-\delta)k_{t-1} + i_{t-1}$. In this setting, firms invest output into capital in ...

1

The Grundrisse’s “fragment on the machines” expounds on the tendency to universal automation rather famously, without Marx having stripped his more idealistic hopes from his exposition, and without the deadening jargon of Capital’s chapters on the organic composition of capital. It isn’t perfect on the automation of science itself, but that just needs to be ...

1

A market is an social institution with various attributes and works under complex conditions. Under some conditions a pure monopoly is the only known limit. Markets are creations by human intelligence and will not exist if not used for merchand. The market mechanisms are used in our society to enable a complex, diverse, work-sharing economy. Not the other ...

1

Per capita availability of capital very strongly correlates with GDP per capita. GDP measures all economic activity and the capital is the input to this activity. So your question is pretty much an extension of How is energy consumption related to GDP? Well, if not for differences in energy efficiency, GDP would be determined by energy consumption. ...

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It seems that Mankiw has implicitly assumed that all the investment is used to replace the depreciated capital. See the second sentence in the Investment section of Chapter 3-3:"Firms buy investment goods to add to their stock of capital and to replace existing capital as it wears out. " Usually, the law of motion of capital is written as \begin{equation} ...

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This is actually pretty tricky, as "capital flight" can be a contested term itself. Here's a distinction provided by Darryl McLeod in the Concise Encyclopedia of Economics, edited by David Henderson and provided online by the Library of Economics and Liberty: There is no widely accepted definition of capital flight. The classic use of the term is to ...

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The key to the answer is good data on Capital. There is a project (KLEMS), which is computing harmonised (i.e. comparable) information on capital, labour, energy, etc for many countries. At the moment it has information mainly on developed countries, but data for more developing countries are coming up. For example, this is a calculation of the capital-...

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I read through the resource the OP linked to. The authors argue the case for "AI as a new factor of production" as follows: "But what if AI has the potential to be not just another driver of TFP, but an entirely new factor of production? How can this be? The key is to see AI as a capital-labor hybrid. AI can replicate labor activities at much greater ...

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