Real Capital

Carl Christian von Weizsäcker () and Hagen Krämer
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Carl Christian von Weizsäcker: Max Planck Institute for Research on Collective Goods

Chapter Chapter 4 in Saving and Investment in the Twenty-First Century, 2021, pp 63-103 from Springer

Abstract: Abstract Preshaped by the influence of Marx[aut]Marx, Karl, Böhm-Bawerk[aut]Böhm-Bawerk, Eugen Ritter von and modern neoclassical economicsNeoclassical economics, the general opinion is that the marginal product of capital must always be positive. With the help of the “period of productionPeriod of production” T, we define a coefficient of intertemporal substitutionIntertemporal substitution, coefficient of ψ that is always non-negative. It can also be used when the real interest rate is negative. With the help of the concept of the “waiting periodWaiting period” Z, we can also define an always non-negative coefficient of intertemporal substitutionIntertemporal substitution, coefficient of γ for the household side. The “loss formula” for deviations of the rate of interest from the growth rate is one application of ψ and γ. Ω = (ψT2 + γZ2)(r − g)2/2 provides a good approximation of the relative loss Ω. Overcomplexity of the system of production leads to negative marginal returns on capital. It can be empirically presumed that the OECD plus ChinaChina region is on the cusp of overcomplexity. The hypothetical natural rate of interestRate of interest, natural in the eurozoneEurozone is well into the minuses. To determine the value of the real capital Real capitalof the private sector in the OECD plus ChinaChina region, we use a framework of data taken from the World Inequality DatabaseWorld inequality database (WID.world). We have supplemented the data available there with data from other sources and adapted it to our theoretical objectives. According to our estimates, private wealthWealth, private in the form of real capitalReal capital in the OECD plus ChinaChina region comes to approximately four times total annual consumption.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-75031-2_4

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DOI: 10.1007/978-3-030-75031-2_4

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