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Exploring Capital and Entrepreneurship in Production Structures

This subjectivist exposition delves into roundaboutness and production structure, exploring various meanings and theories of capital in entrepreneurship. Analyzing the pivotal role of entrepreneurship, stages of production, economic growth, and monetary expansion, this study uncovers key elements influencing sustainable production structures.

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Exploring Capital and Entrepreneurship in Production Structures

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  1. Capital and Entrepreneurship. A Subjectivist Exposition of Roundaboutness and the Structure of Production Antony Mueller UCS Graduate Business School University Caxias do Sul, Brazil antonymueller@yahoo.com

  2. Variant Meanings of “Capital” • Capital as Financial Capital • Capital a ProductionGoods • Capital as a Stock • Capital as a ProductionProcess • Capital as a Productive Force • Capital as a Factor of Production

  3. Capital Theory • Heterogeneity vs homogeneity of capital • Structured vs. unitary • Production process vs. fixed stock • Separate productivity of factors of production vs Coordination and Specialization • Permanence vs. Non-permanence • Absence of Entrepreneur vs. Pivotal Role of Entrepreneurship

  4. Roundaboutness – Umweg-produktion Q Roundabout Production Standard Production Available Time

  5. Q New Roundabout Production Standard Production B t1 to RTP E S

  6. RP’ RP SP RTP RTP n RTP m Sn Sm S

  7. Roundaboutness and Stages of Production (dAD = 0) DoR +ΔD FP -ΔD dAD = Change in Aggregate Demand DR = Degree of Roundaboutness FP = Final Product dD = Change in Demand

  8. Modeling capital as “Hayekian triangle” A simple Hayekian triangle – Stages of Production Degrees of Consumption Maturity Consumable Output SP1, ........ , SPx, .......... SPn Consumption Stages of Production (SP)

  9. Savings and economic growth in the Hayekian triangle D A C B C B A

  10. Shortening of Production Structure DR +dD FP -dD

  11. Unsustainable Production StructuresCentral Planning Distortions DR +dD +dD FP

  12. Soviet-Cuba Style Development Policy = Guns and Butter Policy +DR +dD +dD SoP

  13. Imports-maintained Production Structure DR +dD FP +dIM

  14. Growth-cum-debt development strategy in a three-stages model DR +dD +dD FP +dIM

  15. Forced Savings DR +dEX FP -dD +dD

  16. Natural and cyclical production frontiers P NPF AD CPF Po Q0 Output

  17. Productivity-induced expansion P NPFo NPF’ P0 P1 AD Q0 Q1 Output

  18. Money-induced expansion in the loanable fund model • i ICD/CCD S S + dM dAD LF

  19. Savings and credit supply and demand S S+ΔM = i CD TCS in im En Em TC

  20. Productivity gains and inflation targeting – recipe for a boom bust cycle? P NPF NPF’ AD CPF P3 CPF’ P0 P2 AD’ P1 Q0 Q3 Q1 Q2 Output

  21. Government and consumption credit-driven expansion • i I I+CC+GC S S + dM • i0 I, C, G

  22. Effect on production frontier • P NPF’NPF CPF ‘ CPF AD’ AD Q2 Q0 Q1 Output

  23. Credit expansion and credit crunch – financial markets • i S - dM I S • S + dM • i’’ • i0 • i’ dAD’’ dAD dAD’ LF

  24. PQ = Pc (Qc) + PI (QI1 +...+ QIx + ... + QIN) Keynesian Disaggregation: PQ = Y Y= C + I + G Monetarist Disaggregation: MV = PQ MV = YrP M = MB x m Austrian Disaggregation

  25. Money side and goods side M x V = Q x P (MV/P) = Q P Q Po MV/P Q

  26. Money side and goods side – Change of Q M x V = Q x P (MV/P) = Q P Qo Q1 Po P1 MV/P Q

  27. Money side and goods side –change of M and/or V M x V = Q x P (MV/P) = Q P Q P1 Po MV/P’ MV/P Q

  28. Equation of Exchange • Equation of Exchange • MV = PQ • Keynesian Model: • MV = P (Qc + QI + QG) • Monetarist Model: • MB x m x V = P x Yr • Disaggregated Model • MB x m x V = Pc (Qc) + PI (QI1 +...+ QIx + ... + QIN) + PA(QA)

  29. Classical Position: Auto-Stabilization through interest rate Keynesian Position: Destabilization through investment (paradox of thrift) – Stabilization through deficit spending Monetarist Position: Destabilization through money – Stabilization through stable money supply Classical, Monetarist, and Keynesian View

  30. Problem and its Solution • Instability through money, banking and government • Solution proposals • Gold standard • Commodity standard • Denationalization of money • Hundred per cent reserve requirement

  31. Summary • Causes of Instability in Keynesianism and Monetarism: I and Ms • Realb Business Cycle: Shocks, mainly external • Instability in Austrian Economics: deviation of monetary rate of interest from natural rate • Causes of instability in this model: Any kind of interventionism as to I, G, Ms, Md, i • Cycle gets amplified because of Fractional Reserve Banking

  32. Main elements of this model • Time preference • Roundaboutness • Stages of production • Standard production • Roundabout production • Capital • Entrepreneurship

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