9. Money and Capital; Saving and Investment
Capital is computed in terms of money and represents in such accounting a definite sum of money. But capital can also consist of amounts of money. As capital goods also are exchanged and as such exchanges are effected under the same conditions as the exchange of all other goods, here too indirect exchange and the use of money become peremptory. In the market economy no participant can forego the advantages which cash holding conveys.
6. The Influence of the Past Upon Action
The more the accumulation of capital goods proceeds, the greater becomes the problem of convertibility. The primitive methods of farmers and handicraftsmen of earlier ages could more easily be [p. 506] adjusted to new tasks than modern capitalist methods. But it is precisely modern capitalism that is faced with rapid changes in conditions.
Chapter XVIII. Action in the Passing of Time
1. Perspective in the Valuation of Time Periods
Acting man distinguishes the time before satisfaction of a want is attained and the time for which the satisfaction continues.
2. Time Preference as an Essential Requisite of Action
The answer to this question is that acting man does not appraise time periods merely with regard to their dimensions. His choices regarding the removal of future uneasiness are directed by the categories sooner and later. Time for man is not a homogeneous substance of which only length counts. It is not a more or a less in dimension. It is an irreversible flux the fractions of which appear in different perspective according to whether they are nearer to or remoter from the instant of valuation and decision.
3. Capital Goods
As soon as those present wants are sated the satisfaction of which is considered more urgent than any provision for the morrow, people begin to save a part of the available supply of consumers’ goods for later use. This postponement of consumption makes it possible to direct action toward temporally remoter ends. It is now feasible to aim at goals which could not be thought of before on account of the length of the period of production required.
4. Period of Production, Waiting Time, and Period of Provision
If one were to measure the length of the period of production spent in the fabrication of the various goods available now, one would have to trace back their history to the point at which the first expenditure [p. 494] of original factors of production took place. One would have to establish when natural resources and labor were first employed for processes which--besides contributing to the production of other goods--also contributed ultimately to the production of the good in question. The solution of this problem would require the solubility of the problem of physical imputation.
5. The Convertibility of Capital Goods
Capital goods are intermediary steps on the way toward a definite goal. If in the course of the period of production the goal is changed, it is not always possible to use the intermediary products already available for the pursuit of the new goal. Some of the capital goods may become absolutely useless, and all expenditure made in their production appears now as waste.
Introduction to the Second Edition of Man, Economy, and State by Joseph T. Salerno
Man, Economy, and State with Power and Market
