The two concepts -- fictitious capital and discounted present value -- are not
entirely
different. Marx's term is more useful because it emphasizes the fact that the
future is
both unknown and unknowable. There was a time when the returns from holding
General Motors
stock would have seemed very predictable, almost as much as an investment with
Bernie
Madoff.
Anticipating Minsky, Marx realized that over time people would become less risk
averse and
the risk-corrected discounted present values would start to rise.
What I did in Marx's Crises Theories was to explain that this trend would tend
to delink
move prices from underlying values, thereby eliminating the limiting
coordinating powers of
the market and setting the stage for crises.
In a sense, this part of Marx's crisis theory is not that far from Hayek's, but
I think
that Hayek may have taken this from Marx without attribution.
On Sat, Jan 31, 2009 at 07:22:26AM -0800, Jim Devine wrote:
> I have a question: how does fictitious capital differ from the present
> discounted value of an expected income stream? Isn't it true that
> _some_ fictitious capital has a basis in reality (the production of
> surplus-value), so that strictly speaking, it isn't all fictitious?
> (of course, it's hard to know ahead of time which capital is truly
> fictitious and which isn't.)
> --
> Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own
> way and let people talk.) -- Karl, paraphrasing Dante.
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--
Michael Perelman
Economics Department
California State University
Chico, CA 95929
Tel. 530-898-5321
E-Mail michael at ecst.csuchico.edu
michaelperelman.wordpress.com
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