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Wartime Socialization of Investment: A Reassessment of U.S. Capital Formation in the 1940s

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  • HIGGS, ROBERT
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    Abstract

    During World War II, the U.S. government displaced private investors. According to NIPA data for the period 1942 1945, net private investment was negative $6.2 billion, and net government investment was positive $99.4 billion. Although economists have credited this government investment with various contributions to wartime and postwar economic growth, the bulk of it had little or no value beyond its immediate contribution to winning the war. This episode dramatically exposes a fundamental but false assumption that underlies official data on capital formation: that all expenditures for durable producer goods or munitions form genuine capital.There are circumstances which make the consumption of capital unavoidable. A costly war cannot be financed without such a damaging measure . There may arise situations in which it may be unavoidable to burn down the house to keep from freezing, but those who do that should realize what it costs and what they will have to do without later on.Ludwig von Mises

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    Bibliographic Info

    Article provided by Cambridge University Press in its journal The Journal of Economic History.

    Volume (Year): 64 (2004)
    Issue (Month): 02 (June)
    Pages: 500-520

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    Handle: RePEc:cup:jechis:v:64:y:2004:i:02:p:500-520_00

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    Cited by:
    1. Turner, Chad & Tamura, Robert & Mulholland, Sean, 2008. "How important are human capital, physical capital and total factor productivity for determining state economic growth in the United States: 1840-2000?," MPRA Paper 7715, University Library of Munich, Germany.
    2. Turner, Chad & Tamura, Robert & Schoellman, Todd & Mulholland, Sean, 2011. "Estimating Physical Capital and Land for States and Sectors of the United States, 1850-2000," MPRA Paper 32847, University Library of Munich, Germany.

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