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Capital as a layer cake: A systems approach to capital and its multi-level structure

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  • Harper, David A.
  • Endres, Anthony M.
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    Abstract

    We elaborate a systems approach to the nature of capital that develops the work of Menger and Lachmann (the "ML trajectory"). We propose a "layer cake" metaphor to capture the kernel of the ML approach and contrast it with the neoclassical metaphor of capital as an amorphous, homogeneous "jelly". According to the ML approach, capital is combinatorial and is organized structurally and relationally. The approach examines capital as it exists "out there" in the world, as it is actually formed and experienced by entrepreneurs. Capital goods only exist and become productive once they are connected in entrepreneurs' production plans so that the focus is upon relations of complementarity between heterogeneous capital goods as used in production. Hence, capital has a layered structure: there is a nested hierarchy of capital goods, capital combinations and economy-wide capital structures. Using Bunge's theory of systems, we investigate how each of these entities is a concrete system at a different layer of economic reality. Both capital combinations and overall capital structure arise in an irreversible, causal-genetic process in real time and capital structure has the added distinction of being an emergent, spontaneous order.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

    Volume (Year): 74 (2010)
    Issue (Month): 1-2 (May)
    Pages: 30-41

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    Handle: RePEc:eee:jeborg:v:74:y:2010:i:1-2:p:30-41

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    Web page: http://www.elsevier.com/locate/jebo

    Related research

    Keywords: B25 B41 B53 D24 E22 L23 Capital Lachmann Menger Complementarity Production Systems Ontology;

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    References

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    1. Hicks, John R, 1974. "Capital Controversies: Ancient and Modern," American Economic Review, American Economic Association, vol. 64(2), pages 307-16, May.
    2. Kirsten Foss & Nicolai J. Foss & Peter G. Klein & Sandra K. Klein, 2007. "The Entrepreneurial Organization of Heterogeneous Capital," Journal of Management Studies, Wiley Blackwell, vol. 44(7), pages 1165-1186, November.
    3. Avi J. Cohen, 2003. "Retrospectives: Whatever Happened to the Cambridge Capital Theory Controversies?," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 199-214, Winter.
    4. Lewis, Paul & Runde, Jochen, 2007. "Subjectivism, social structure and the possibility of socio-economic order: The case of Ludwig Lachmann," Journal of Economic Behavior & Organization, Elsevier, vol. 62(2), pages 167-186, February.
    5. John Foster, 2005. "From simplistic to complex systems in economics," Cambridge Journal of Economics, Oxford University Press, vol. 29(6), pages 873-892, November.
    6. Kenneth E. Boulding, 1956. "General Systems Theory--The Skeleton of Science," Management Science, INFORMS, vol. 2(3), pages 197-208, April.
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    Cited by:
    1. Harper, David A. & Endres, Anthony M., 2012. "The anatomy of emergence, with a focus upon capital formation," Journal of Economic Behavior & Organization, Elsevier, vol. 82(2), pages 352-367.
    2. David Harper, 2014. "Property rights as a complex adaptive system: how entrepreneurship transforms intellectual property structures," Journal of Evolutionary Economics, Springer, vol. 24(2), pages 335-355, April.
    3. Ehret, Michael, 2014. "Financial socialism: The role of financial economics in economic disorganization," Journal of Business Research, Elsevier, vol. 67(1), pages 2686-2692.
    4. Rosser, J. Barkley, 2012. "Emergence and complexity in Austrian economics," Journal of Economic Behavior & Organization, Elsevier, vol. 81(1), pages 122-128.
    5. Anthony Endres, 2013. "Is the economics of time and ignorance a “classic”?," The Review of Austrian Economics, Springer, vol. 26(1), pages 17-25, March.
    6. Anthony M. Endres & David A. Harper, 2012. "The kinetics of capital formation and economic organisation," Cambridge Journal of Economics, Oxford University Press, vol. 36(4), pages 963-980.

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