depreciation. This opened a can worms. It contradicts the Y = C + I equation, and the related belief that output equals profit plus pay. I will try to track down some of the
worms, as | promised, and release new ones in the process if I must. This book will continue to hunt for certitude, absolute when possible and subjective otherwise. If the convergence axioms are trustworthy, behavior will reveal aims
well enough.
Output Exhaust
I define output as creation of value, and equivalently of capital. Does this overlook the possibility that output might also create taste-satisfying pure consumption
directly, without passing through a capital phase first?
Such a thing is possible in math, but not in economics. Since capital is foreseen eventual exhaust, exhaust not drawn from capital in place would be implicitly unforeseen. This is the flip side of the deadweight loss rule. Economics is a rationale
of choices, and neglects unforeseen taste satisfaction as unable to influences choices.
Those unforeseen and hence costless satisfactions are called “free goods”, and ignored as outside the economic purview. They why not ignore free growth too? Growth is roughly foreseen and factored into choices, for one thing, even if 1 am the first since Mill to foresee it as free. For another, even unforeseen events are of economic interest if they affect means or choices after. Free growth does. Costless
satisfactions leave no trace. Note in any case that the total return truism (3.2) through (3.3b) does not depend on this inference. Those equations describe creation of value, not necessarily of
capital alone. Output exhaust would be added both to output and to exhaust, and
would disappear in their difference.
Chapter 3: Foundations 1/11/16 17
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