Reply To: Some questions

#18766
jmherbener
Participant

Capital consumption is manifest during the liquidation and reallocation of the bust. One could examine the extent of capital consumption empirically by looking at the bankruptcies, stock collapses, etc. Because the boom is a period of over-consumption and mal-investment, the greatest lines of mal-investment are in particular consumer goods, e.g., houses, and cars, and the higher-stages of production, e.g., commodities. The degree of mal-investment in any particular line depends on how the boom-level capital capacity lines up with the recovery-level capital capacity. You cannot determine that by comparing mal-investment in one line during the boom with mal-investment in another line during the boom.