Replacement Investment Theory

Michael Perelman

Chapter 3 in Keynes, Investment Theory and the Economic Slowdown, 1989, pp 103-155 from Palgrave Macmillan

Abstract: Abstract Investment is the engine of a capitalist economy. Replacement investment is the most important component of investment. In Hayek’s words: The essential characteristic of capital, and one which affects the current input, is that it needs replacement and in consequence leads to investment. This in turn leads to the creation of new capital, but once this new capital exists the historical aspect becomes irrelevant. The important thing is not that the capital has been produced, but that it (or some equivalent) has to be reproduced. (Hayek, 1941, pp. 87–8)

Keywords: Machine Tool; Capital Stock; Capital Good; Future Market; Spot Market (search for similar items in EconPapers)
Date: 1989
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DOI: 10.1007/978-1-349-19940-2_3

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