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The Demand and Supply of Capital Goods — The Building Blocks of A Theory of Accumulation

In: Money and the Real World

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  • Paul Davidson

Abstract

‘It is by reason of the existence of durable equipment that the economic future is linked to the present … therefore … the expectations of the future should affect the present through the demand price for durable equipment’.1 Any demand for investment goods, however, needs to be financed and hence, the stock of money (i.e. the inherited stock plus current creations) plays an important role in connecting entrepreneurial long-term expectations with current efforts to expand plant and equipment. These links between the irrevocable past, the present, and the uncertain future interact so that the present economic situation has an impact on the future, while anticipations about the future affect current economic behaviour. Thus, any discussion about expectations and current activity must, in an uncertain world, involve monetary phenomena. For expository simplicity, at the present stage, monetary phenomena will be suppressed by assuming that the monetary authorities provide whatever finance is required.2

Suggested Citation

  • Paul Davidson, 1978. "The Demand and Supply of Capital Goods — The Building Blocks of A Theory of Accumulation," Palgrave Macmillan Books, in: Money and the Real World, edition 0, chapter 0, pages 59-110, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-15865-2_4
    DOI: 10.1007/978-1-349-15865-2_4
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