production. Where the critics were right was in finding a lack of clarity and predictive value in the theory. Where does it lead? Rabbits and redwoods have different periods of production, at first glance, but should nonetheless agree in return if in risk. Jevons wrote that he meant production of the “wage fund” as a whole, meaning the universe of consumer goods. But he pointed to wine and timber as examples to help pin down the period. Boehm Bawerk picked nine years for no
reason I can see.
All went wrong by considering physical capital only. The factors blend into each other; physical becomes human capital through invested consumption, and conversely when human depreciation is recovered in products. The generation length gives the replacement period for total capital if total capital is interpreted as
fitness and if all fitness of each generation is passed to the next.
Jevons and Boehm Bawerk assumed growthlessness for simplicity, and would have realized that they were modeling only the replacement component in net output. Boehm Bawerk’s contribution, anticipated by Petty, was his insight that time preference rate explains rate of return by pricing the capital denominator, and not the reverse. This had not been clear in Rae or Senior or Jevons. | give all four high marks for a near miss. But they could have come closer. Remember that Senior's first axiom had been Malthus’ population principle. He and the others would also have known of Petty’s human and total capital idea, which was occasionally revived
and critiqued. They didn’t quite connect the dots.
Next Generation Theory
Petty wrote A Treatise of Taxes in 1662. The whole title continues to about as many words, counting ampersands, as pages in the book or pamphlet. His son tells us that Petty dictated his books overnight to secretaries who slept by turns. It is easy to
believe that Petty didn’t need much sleep. He was a go-getter who had sailed to
Chapter 7 Petty’s Idea 2/3/16 13
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