pure consumption. Why? Output in itself means creation of economic value. Mathematically, that could include what I called “output exhaust”, meaning value exhausted as soon as created. | ruled that out as “free goods”, which happen every day but are neglected in economics as unable to influence behavior either before or after. That’s why “equals” cannot mean “is” in (A1.3). And neither does it in (A1.5). Rather both state that output provides cash flow offset plus total capital growth.
This distinction helps everywhere in economics. We know for example that transfer out may be drawn either from capital in place or from concurrent output. The source of first kind is decaptialization D. But decaptialization also includes other components than transfer out. In Chapter 3, and again just now, I excluded output
exhaust as free goods possible in math but neglected in economics. That makes
decapitalization D the only source of pure consumption C, . And not all
decapitalization is transfer or exhaust. Some is deadweight loss, defined in (A1.1) as
any negative sum of capital growth K,, and cash flow F. That can show in
D=D\+D, and D,=D_+C,. (A1.4)
Here D, is recovered or realized decapitalization, D, is “transfer depreciation” net
of plowback into the same asset, and D, is deadweight loss. A is lambda. At the
collective scale, where transfers cancel internally, (A1.4) becomes
D=C., (A1.4a)
The dispositions of transfer out may be reinvestment in other assets of the same owner, or may be gift to donees. Reinvestment can be interfactor as shown in
Chapter 5. Transfer out from total capital of any individual, net of internal transfers,
APPENDIX A: The Argument in Notation 3/7/16 2
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