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Conflating Inventions (Technological Progress) with Capital in Economics

Posted by dbhalling 8 years, 9 months ago to News
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Will Thomas and I gave a talk on Austrian Economics at Atlas Summit 2016, where I pointed out that Austrian Business Cycle Theory (ABCT) does not fit the empirical facts. ABCT claims that increasing savings/capital are the cause of economic growth, which is very similar to what classical and neo-classical economics states. I pointed out that in fact it is increasing levels of technology (inventions) that are the cause of economic growth not increases in capital. One of the questioners after the talk stated that inventions (technology) are part of capital. (Click link for the full article)

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  • Posted by MarcusT 8 years, 9 months ago
    If inventions create capital how is Warren Buffet so rich? Most of the businesses he owns and invests in are finance/insurance related, not technology. That is, financial innovations (like insurance) are responsible for his wealth.

    A far more accurate/correct statement is that "innovations create capital". Inventions are just innovations in technology.
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  • Posted by khalling 8 years, 9 months ago in reply to this comment.
    think of it this way. In order to catch more fish, I spend time to create a net that can catch many fish. Now, the net becomes capital. I have not yet traded with anyone
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  • Posted by dbhalling 8 years, 9 months ago in reply to this comment.
    Thx. What is interesting is that if you are living in the Malthusian Trap there is nothing to save - no capital. Inventions create capital.
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  • Posted by $ jbrenner 8 years, 9 months ago
    Nice article, Dale. While some capital is necessary for the invention to occur, invention creates the new capital and is the cause of economic growth. An optimal situation happens when the capitalist and the inventor work synergistically, as Morgan and Edison did for a while.
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