The Measurement of Capital in Relation to the Measurement of Other Economic Aggregates

I Propose in this paper to discuss the measurement of capital from what seems to have become a rather unfashionable angle. The time-references of a capital stock are themselves a source of so much difficulty that it is tempting, when considering them, to avert one’s eyes from other difficulties and, by some violent simplification, to assume that differences in ‘life’ or in prospective date of completion are the only causes of heterogeneity that fall to be considered. By such means, to use Joan Robinson’s phrase, the ‘index-number birds’ may be scared off. I have myself come to the problem of capital measurement as part of the general problem of measuring economic aggregates in real terms; so I fear that I may be taken, on this occasion, to be one of the birds who were to be scared. But it is by no means my intention to be destructive. I belong to the party which is still looking to find, at the end of its journey, a rehabilitation of the so-called ‘Production Function’ P =f(L, C) in some form or other; what I am looking for is a concept of capital which will ultimately allow us to think, more or less, in those terms. But I think it is clear, once the question is posed in that way, that it will be impossible for any concept of capital to be used in that manner unless it is provided with a concept of Product which is correlative with it. The measurement of capital and the measurement of product are at bottom two aspects of the same problem; what has been learned about the one matter must be relevant to what has to be learned about the other.