The terms gross cash flow, earned revenue and gross realized output will be used
interchangeably. “Realized” and “recovered” will likewise be synonymous, as will be
tt
“proprietary”, “unrealized” and self-invested”.
(A6.1) allows
realized output = cash flow + plowback + transfer in - recovered decapitalizaiton. (6.1a)
Define
unrealized output = output - realized output = growth + cash flow - realized output = growth - plowback - transfer in + recovered decapitalization, (6.9)
by (6.1a) and the total return truism.
Proprietary Output and Deadweight Loss
Unrealized or proprietary or self-invested output of the firm is creation of value not yet sold or not meant to be sold. This can be something as workaday and perfunctory and automatic as output to inventory. Other illustrations could be where a construction firm builds its own offices, or a car manufacturer makes cars for its executive fleet. (6.9) shows that it includes all growth not explained by plowback plus transfer in less recovered decapitalization. This implicitly includes all free growth. Judging from my charts and tables, free growth seems to mean all of
growth at the collective scale. What effect might it have on the firm?
Free growth includes random windfall gain and deadweight loss as well as the overall upward trend expressing new ideas. Deadweight loss is unrecovered
decapitalization, meaning not recovered in cash flow, That makes it negative output
Chapter 6: Parallels with the Firm 2/4/16 6
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