The book is Capitalism without Capital. Recall that this is the one book that made both Tyler’s and my list of books of the year. I write,
defending the use of a cost-based method to value intangible capital strikes me as based on hope rather than theory or evidence. The overall economic value of intangible investment does not necessarily equal the resource cost spent. Indeed, strong economic performance may come from particularly good investment choices being made on average, while weak economic performance may be due to misallocation of intangible investments.
Hmmm. Is the distinction between intangible and tangible assets really that stark? This, to me, seems a lot like ‘capitalism with capital’ even though the assets are all intangible:
https://www.justinobeirne.com/google-maps-moat/
And I can think of examples of physical assets plummeting to zero value very quickly. There are many empty manufacturing plants in the country that were valuable right up to the point where they were closed and then suddenly not only worthless but worth less than zero (the land parcels would be more valuable without the empty buildings on them). An example that comes to mind is Pfizer which, during its various retrenchments, knocked down a number of buildings it couldn’t sell and where it didn’t want to pay taxes or maintenance costs:
https://goo.gl/b3oT8M
And aren’t there a lot of dead shopping malls in the country where the same is happening — a sudden transition from being worth millions to less than nothing?
My opinion on the capital debates:
Capital is inside information being marked to market, as opposed to yield over time that is insured. This is the first order definition, dictated by any aggregate theory that talks sustainability. Sustainability means possible asynchronous surprises are bound.
Traditional capital theory is all about some crazy idea of a two factor model, labor and capital. Not so, capital is a distribution of inside information being priced, not a two factor model but a supply chain model.
The labor theory part of this is so confounded by leisure, or otherwise best described as a labor market with high enough transaction costs that abstinence often pays. It is very hard model that with capital.
Where else but finance would an economist have to continue to argue that the value of a thing has nothing to do with what it cost? Has the labor theory of value dressed itself up as the all costs input theory of value for a come back tour?
One of my guesses regarding stagnation is that too many potentially viable business plans can’t attract sufficient entrepreneurial interest or investment because there is no good way to prevent quick spillover and capture market rate gains on invested resources and risk. Gradually, the market evolves in such a way that most successful new businesses have some special attribute or character that allows the dominant companies in the sector to maintain some good amount of market power or dominance.