I’m surprised you’re adopting the Rothbard/Hoppe conception over the Misesian one. One can easily just call what Rothbard and Hoppe are talking about “capital goods consumption” and reserve “capital consumption” for what Mises is talking about. Market actors engaging in economic calculation really do seek to maintain and increase “the sum of the money equivalent of all assets minus the sum of the money equivalent of all liabilities as dedicated at a definite date to the conduct of the operations of a definite business unit.” There is no better word for this quantity than “capital”. And there is no better term for a net decrease in this quantity than “capital consumption”.
Be that as it may, in economic terms when a given social organization is engaged in capital consumption it is the consumption of complementary capital goods that is the real result; the consumption of financial capital on different firms’ account books is merely a reflection of this consumption and its various impacts on the price structure. And here I do not mean just the ‘using up’ of capital goods, nor their phasing out due to unprofitability, but their non-replacement in the structure of production.
in economic terms when a given social organization is engaged in capital consumption
"No less detrimental was a second confusion derived from the real capital concept. People began to mediate upon a concept of social capital as different from private capital. Starting from the imaginary construction of a socialist economy, they were intent upon defining a capital concept suitable to the economic activities of the general manager of such a system. They were right in assuming that this manager would be eager to know whether his conduct of affairs was successful (viz., from the point of view of his own valuations and the ends aimed at in accordance with these valuations) and how much he could expend for his wards’ consumption without diminishing the available stock of factors of production and thus impairing the yield of further production. A socialist government would badly need the concepts of capital and income as a guide for its operations. However, in an economic system in which there is no private ownership of the means of production, no market, and no prices for such goods the concepts of capital and income are mere academic postulates devoid of any practical application. In a socialist economy there are capital goods, but no capital.
The notion of capital makes sense only in the market economy. It serves the deliberations and calculations of individuals or groups of individuals operating on their own account in such an economy. It is a device of capitalists, entrepreneurs and farmers eager to make profits and to avoid losses. It is not a category of all acting. It is a category of acting within a market economy." (HA)
I am not talking about social capital here, I just mean the valuable capital goods that exist in a given market order. I use the term ‘social organization’ in this sense, not in the reified sense.
I agree, “capital” is meaningless in the absent of markets with money prices. But once capital becomes a reality as markets do exist, then it is, I think customary perhaps to distinguish between capital value and capital goods. Therefore, capital accumulation or capital consumption always has its counterpart with the supply of real physical goods. I think this is also consistent with how Mises would view it.
What do you make of the following for example:
Whenever an individual devotes a sum of money to saving instead of spending it for consumption,
the process of saving agrees perfectly with the process of capital accumulation
and investment. It does not matter whether the individual saver does or
does not increase his cash holding. The act of saving always has its counterpart in a supply of goods produced and not consumed, of goods available for further production activities. A man’s savings are always embodied in
concrete capital goods.
–Mises, Human Action
So I think Rothbard is not confusing it but just treating the term as used to describe “capital goods”. I don’t think he’s too worried about being inaccurate in the beginning of the book in the Crusoe autistic economy example. He just wants to get the point across before he even begins to talk about catallactics.
I also think that to respond to the OP by explaining the effects to the real physical capital structure is correct then.
" I don’t think he’s too worried about being inaccurate in the beginning of the book in the Crusoe autistic economy example. He just wants to get the point across before he even begins to talk about catallactics."
Well he was careful enough to say “psychic profit” instead of just “profit” in that section, perhaps in recognition of the fact that profit too is a catallactic category. I just wish he had been as careful with the capital goods/capital distinction and referred to it as “capital goods consumption”, because it had me confused for a while, and downplayed in my mind how radically different calculative action is from non-calculative action until I read Mises.
I don’t think I actually disagree with you, I think there was just a terminological difference. I agree that without prices you can’t make sense of capital values. But you can make sense of higher-order goods.
Calculative action is action which utilizes arithmetic with money prices. Non-calculative action is all other action. Non-calculative action indeed does not involve market exchange, because market exchanges, by definition, involve money prices.
I would agree that there is a world of difference between markets where money has emerged, and hence calculation of profit and loss can proceed, as opposed to markets where goods are bartered; but I don’t agree that the first case is a market exhibiting market exchange and the second is not. rather they both are, rather only one has the benefit of money and economic calculation; but I don’t think this fact alone warrants denying that voluntary trading of goods by barter are ‘market exchanges’
“I would agree that there is a world of difference between markets where money has emerged, and hence calculation of profit and loss can proceed, as opposed to markets where goods are bartered; but I don’t agree that the first case is a market exhibiting market exchange and the second is not.”
I must disagree, old chap.
Mises, HA: “Not logical or epistemological rigor, but considerations of expediency and traditional convention make us declare that the field of catallactics or of economics in the narrower sense is the analysis of the market phenomena. This is tantamount to the statement: Catallactics is the analysis of those actions which are conducted on the basis of monetary calculation. Market exchange and monetary calculation are inseparably linked together.”
And…
“For monetary economic calculation is the intellectual basis of the market economy. The tasks set to acting within any system of the division of labor cannot be achieved without economic calculation. The market economy calculates in terms of money prices. That it is capable of such calculation was instrumental in its evolution and conditions its present-day operation. The market economy is real because it can calculate.”
Its the ‘economy’ part that makes up the latter part of the term ‘market economy’ that so tightly binds the concept of ‘market economy’ to ‘there is money and hence economic calculation’. I suppose I am saying that there are markets which are market economies and there are markets which are not (like primitive barter ones that don’t benefit from monetary calculation)
No, it’s “market” that is the key word. Mises said, “Market exchange and monetary calculation are inseparably linked together”, not “economic exchange and monetary calculation are inseparably linked together.”
Okay, let me say it a different way. When he writes:
“the field of catallactics or of economics in the narrower sense is the analysis of the market phenomena.”
…he’s saying that market phenomena are the special subject of catallactics.
When he writes:
“Catallactics is the analysis of those actions which are conducted on the basis of monetary calculation.”
…he’s saying that monetary-calculative action is the special subject of catallactics.
And remember that he says that he’s expressing the same thing in two different ways, because he inserts “This is tantamount to the statement:” between the two statements.
If market phenomena are the special subject of catallactics, and monetary-calculative action the special subject of catallactics, then market phenomena must BE monetary-calculative action.
Again, as he explicitly stated, he’s saying the SAME thing expressed in two different ways.
This is simply a terminological semantic issue, so there probably isn’t any value in digging around this… I just don’t see the justification for this special technical definition of ‘market’ when the standard everyday concept of buyers and sellers (with or without money) of market seems perfectly serviceable. I suppose when writing an epic book it can be a pain to write “markets featuring money” every time you want to reference just that type of market, and its easier to just stipulate that ‘markets’ = {markets with money}. but that’s all it looks to me like Mises is doing.
I don’t know. Mises really agonized over terminology. And, to avoid confusion and false syllogisms, I think it’s useful to establish as much of a common language in a scholarly community as possible. And I think Human Action, and Mises’ work in general, is the best touchstone we have for establishing such a common language.
well, I just looked back at the opening of chapter 14 section 3
XIV. THE SCOPE AND METHOD OF CATALLACTICS
3. The Pure Market Economy
The imaginary construction of a pure or unhampered market economy assumes that there is division of labor and private ownership (control) of the means of production and that consequently there is market exchange of goods and services.
so, really he is just launching in with the imaginary construct he is calling ‘market economy’, he is going to be dealing with catallactics and trying to understand how prices form. buying and selling involving barter are therefore out of the scope ofhis intended analysis, its simply not on his agenda here. He is going to do some Catallactics. Certainly when you narrow a scope like that, you get a narrowed scope…
Lets look again at the quote you sourced
"Not logical or epistemological rigor, but considerations of expediency and traditional convention make us declare that the field of catallactics or of economics in the narrower sense is the analysis of the market phenomena. "
The imaginary construction of a pure or unhampered market economy assumes that there is division of labor and private ownership (control) of the means of production and that consequently there is market exchange of goods and services.
“so, really he is just launching in with the imaginary construct he is calling ‘market economy’,”
No, what makes it imaginary is the words “pure” and “unhampered”, not the word “market”.
“Not logical or epistemological rigor, but considerations of expediency and traditional convention”
Yes, those last two considerations were always part of his agonizing over terminology. But that was because at the time, nobody had really systemetized the science in its new form yet, so he had to weigh heavily on the last two considerations. But then he DID systemetize it, and created a whole, useful systematic taxonomy of concepts. I think we should make full use of it.
Well, I can agree to the stipulation to make the term ‘market’ jealously cover only ‘markets featuring economic calculation’ and exclude ‘markets’ which lack that, but invent a word for me to cover those ‘barter markets’ because I want a word for them
I think the key phrase here is “narrower sense”. I think Mises falls in no contradiction, as he talks about markets (private property and economic exchange) and a narrower definition of the term, which involves “monetary calculation”, which delimits the scope of catallactics.
