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A Neo-Austrian perspective on the value of growth prospects

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  • A. Mantovi

    ()

  • A. Schianchi

    ()

Abstract

The valuation framework inherent to the neo-Austrian theory of capital set forth by Hicks’ (1973) is discussed in terms of a fundamental formula which disentangles the profitability associated with the scale of operation from the internal rate of return of the production process. The formula is employed to tailor a perspective on the value of investment prospects, meant to complement the insights embodied by Tobin’s q metric. Balance sheet recessions are briefly discussed as a cogent line of application of our formula. Potential lines of progress are envisioned.

Suggested Citation

  • A. Mantovi & A. Schianchi, 2015. "A Neo-Austrian perspective on the value of growth prospects," Economics Department Working Papers 2015-EP01, Department of Economics, Parma University (Italy).
  • Handle: RePEc:par:dipeco:2015-ep01
    as

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    References listed on IDEAS

    as
    1. Man-Seop Park, 2015. "The Impossibility of Capitalist Instantaneous Production," Metroeconomica, Wiley Blackwell, vol. 66(1), pages 28-50, February.
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    3. Lindenberg, Eric B & Ross, Stephen A, 1981. "Tobin's q Ratio and Industrial Organization," The Journal of Business, University of Chicago Press, vol. 54(1), pages 1-32, January.
    4. Gauti B. Eggertsson & Paul Krugman, 2012. "Debt, Deleveraging, and the Liquidity Trap: A Fisher-Minsky-Koo Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 127(3), pages 1469-1513.
    5. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    6. Thomas R. Stauffer, 1971. "The Measurement of Corporate Rates of Return: A Generalized Formulation," Bell Journal of Economics, The RAND Corporation, vol. 2(2), pages 434-469, Autumn.
    7. R. Violi, 1985. "Sentiero di traversa e convergenza," Working Papers 14, Dipartimento Scienze Economiche, Universita' di Bologna.
    8. Dorfman, Robert, 1969. "An Economic Interpretation of Optimal Control Theory," American Economic Review, American Economic Association, vol. 59(5), pages 817-831, December.
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    More about this item

    Keywords

    Neo-Austrian Capital Theory; Convolution Theorem; Investment; Tobin’s q.;

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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