Progressive theory of capital

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The progressive theory of capital is an economic theory posited by Léon Walras in 1874 in part 5 of his book Elements of Pure Economics . [1]

Léon Walras French mathematical economist

Marie-Esprit-Léon Walras was a French mathematical economist and Georgist. He formulated the marginal theory of value and pioneered the development of general equilibrium theory.

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In economics, capital consists of an asset that can enhance one's power to perform economically useful work. For example, in a fundamental sense a stone or an arrow is capital for a caveman who can use it as a hunting instrument, while roads are capital for inhabitants of a city.

In economics, capital services refer to a chain-type index of service flows derived from the stock of physical assets and software. These assets are coordination, equipment, software, structures, land, and inventories. Capital services are estimated as a capital-income weighted average of the growth rates of each asset. Capital services differ from capital stocks because short-lived assets such as equipment and software provide more services per unit of stock than long-lived assets such as land. Unlike capital goods, capital services are owned by the person or group of people providing them.

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In economics, general equilibrium theory attempts to explain the behavior of supply, demand, and prices in a whole economy with several or many interacting markets, by seeking to prove that the interaction of demand and supply will result in an overall general equilibrium. General equilibrium theory contrasts to the theory of partial equilibrium, which only analyzes single markets.

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Gérard Debreu French economist and mathematician

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Michio Morishima Japanese economist

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Monetary disequilibrium theory is a product of the monetarist school and is mainly represented in the works of Leland Yeager and Austrian macroeconomics. The basic concepts of monetary equilibrium and disequilibrium were, however, defined in terms of an individual's demand for cash balance by Mises (1912) in his Theory of Money and Credit.

A Walrasian auction, introduced by Léon Walras, is a type of simultaneous auction where each agent calculates its demand for the good at every possible price and submits this to an auctioneer. The price is then set so that the total demand across all agents equals the total amount of the good. Thus, a Walrasian auction perfectly matches the supply and the demand.

Walras's law is a principle in general equilibrium theory asserting that budget constraints imply that the values of excess demand must sum to zero. That is:

The Lange model is a neoclassical economic model for a hypothetical socialist economy based on public ownership of the means of production and a trial-and-error approach to determining output targets and achieving economic equilibrium and Pareto efficiency. In this model, the state owns non-labor factors of production, and markets allocate final goods and consumer goods. The Lange model states that if all production is performed by a public body such as the state, and there is a functioning price mechanism, this economy will be Pareto-efficient, like a hypothetical market economy under perfect competition. Unlike models of capitalism, the Lange model is based on direct allocation, by directing enterprise managers to set price equal to marginal cost in order to achieve Pareto efficiency. By contrast, in a capitalist economy managers are instructed to maximize profits for private owners, while competitive pressures are relied on to indirectly lower the price to equal marginal cost.

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References

  1. "Walras's Progressive Theory of Capital". History of Economic Thought. Retrieved 2018-01-25.

Further reading

Augustus M. Kelley, Publishing was a New York–based publishing house named after its founder, Augustus M. Kelley (1913-1999). The exact dates of operation of the firm are not known. The concern primarily published non-fiction works and was noted for facsimile reprints of older books. Many of their books dealt with economic history and theory.

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