as the sum of growth and cash flow, and specifically negative unrealized output.
Then
deadweight loss = unrecovered decapitalization = negative output = negative unrealized output = max (0, - output)
= max (0, - unrealized output). (6.10)
Also positive unrealized output = max (0, proprietary output), (6.11)
and output = unrealized output + realized output. (6.12)
The Growth Truism
In general, growth = capitalization from outside + capitalization from inside - decapitalization. (6.13) Here
capitalization from outside = negative cash flow = transfer in, and capitalization from inside = positive unrealized output + plowback.
Also decapitalization = recovered decapitalization + unrecovered decapitalization = recovered decapitalization + deadweight loss. Then
growth = transfer in + positive unrealized output + plowback — recovered decapitalization - deadweight loss, (6.14)
or more simply
Chapter 6: Parallels with the Firm 2/4/16 7
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