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Critical Reflections on Rothbard’s Concept of Gross Investment

Critical Reflections on Rothbard’s Concept of Gross Investment Abstract This paper critiques Rothbard’s ( (1962) 2004 . Man, Economy , and State – A Treatise on Economic Principles . Auburn, AL: Mises Institute) concept of gross investment. Rothbard introduced the concept in order to demonstrate his point that it is not consumer spending that primarily drives the economy, like the mainstream Keynesian view maintains, but the capitalists’ spending. In this paper, it is argued that, contrary to Rothbard’s opinion, the amount of gross investment as he defines it does not contain significant information concerning the question as to whether the capital structure of a society can be upheld or not. Instead, it is an arbitrary figure that depends on the length of the different stages of production. This problem has not been recognized by Rothbard because his exposition rests upon the assumption of an equal time length for all stages. Apparently, he has been led astray by his intention to find arguments against the importance of consumer spending in the determination of output. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal des Économistes et des Études Humaines de Gruyter

Critical Reflections on Rothbard’s Concept of Gross Investment

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Publisher
de Gruyter
Copyright
Copyright © 2014 by the
ISSN
2194-5799
eISSN
2153-1552
DOI
10.1515/jeeh-2013-0001
Publisher site
See Article on Publisher Site

Abstract

Abstract This paper critiques Rothbard’s ( (1962) 2004 . Man, Economy , and State – A Treatise on Economic Principles . Auburn, AL: Mises Institute) concept of gross investment. Rothbard introduced the concept in order to demonstrate his point that it is not consumer spending that primarily drives the economy, like the mainstream Keynesian view maintains, but the capitalists’ spending. In this paper, it is argued that, contrary to Rothbard’s opinion, the amount of gross investment as he defines it does not contain significant information concerning the question as to whether the capital structure of a society can be upheld or not. Instead, it is an arbitrary figure that depends on the length of the different stages of production. This problem has not been recognized by Rothbard because his exposition rests upon the assumption of an equal time length for all stages. Apparently, he has been led astray by his intention to find arguments against the importance of consumer spending in the determination of output.

Journal

Journal des Économistes et des Études Humainesde Gruyter

Published: Jul 1, 2014

References