 Ladies and gentlemen, it's time to call the meeting to order. It's 11.15, so we can begin. We're going to discuss for the next 45 minutes or so Austrian capital theory. So I'm going to have to try to reel in the fellowship. That's OK. Austrian capital theory is very important. Capital theory in general, and capital is very important. As Misa said in his essay, Planning for Freedom, there are no means by which the general standard of living can be raised other than by accelerating the increase of capital as compared with population. And so if one of the great engines for economic progress is saving and investment in the formation and accumulation of capital. And so if we want to understand how nations can move from poverty to relative wealth, we need to understand the importance of capital. And the Austrian capital theory is kind of an interesting animal. We can define capital as the sum of the whole complex of goods destined for acquisition evaluated in money terms. That's the definitions given in human action by Mises. And this phrase destined for acquisition means goods that are used in the production and sale of products. So they'd be producer goods, essentially, assets that are used in production. And yet he noticed that this whole sum of the sum of the whole complex of goods destined for production is evaluated in money terms. So there's a monetary component to Austrian capital theory as well. This is sort of interesting development, my Mises. Turns out in, like I said, the late 1880s, Karl Manger writes a monograph on capital theory where he tries to advance the idea that capital is primarily a monetary fund, capital is money. Bambovirk is much more well known for developing a capital theory where capital is a complex of physical capital goods. And Mises, I think, brings them together and develops this idea and further communicates the idea that capital is actually a tool of calculation. It is monitoring the sense that the sum of the capital goods owned by the producer is evaluated in monetary terms so that the producer, the entrepreneur, has a sense of the value of the firm, how the firm does from one period of time to the next. And so capital, Mises identifies as the sum, which is the starting point for economic calculation. If a firm wants to sort of evaluate how have they done over the last quarter or the last year? Have they increased their financial situation or not? You look to see, well, what has happened to the capital fund? And the importance of the physical capital goods is emphasized, again, in human action on page 500 where he says, Mises says, there is no such thing as an abstract or ideal capital that exists apart from concrete capital goods. Capital is always embodied in definite capital goods and is affected by everything that happens with regard to them. The value of an amount of capital is a derivative of the value of the capital goods in which it is embodied. So there's an organic link between the fund we call capital and the sum of the capital goods that are being evaluated in this fund. And therefore, to understand auction capital theory, we must and is helpful for us to understand the production structure, the structure in which the different capital goods that are used in production are arranged. And this production structure is rooted in Karl Manger's exposition of the interrelationship of economic goods that we find in his principles. And he establishes these two main categories of goods, the consumer goods and what we call higher order goods. Consumer goods are those goods that are directly serviceable. So a bottle of water can be a consumer good if you just drink it. You don't have to add anything to it. You just unscrew it. You drink it. You quench your thirst. That is a consumer good. It's directly serviceable. It serves your needs or your wants directly. And another term that Manger uses for this good is a good of the first order. And we'll sort of understand, we'll get to why that's the case soon. But then, distinct from consumer goods is higher order goods. Higher order goods. And these are also called producer goods or production goods. These goods are serviceable, but they are indirectly serviceable. They're indirectly serviceable. So if I want to make some scrambled eggs, I don't eat the eggs raw. I cook the eggs. But the raw eggs are serviceable, but they're indirectly serviceable. I need to do something to them. Just like the griddle that I cook the eggs on is serviceable, but it's indirectly serviceable. I don't get any direct satisfaction sort of watching it sizzle or just knowing that this thing's heating up. I need to use it to produce something I am going to consume, which is the scrambled eggs. And so higher order goods, producer goods, are goods that are indirectly serviceable. They're transformed into directly serviceable goods only at a point in the future. And of these producer goods, these higher order goods, there are three main categories. There's land, which includes all the natural resources in the land. There is labor or human effort. And then there are capital goods. And land and labor are often referred to as original factors of production. These are independently productive. The source of all producer goods, all capital goods, we can trace them back in time far enough, originated way back in time in land and labor. So land and labor, the original factors, capital goods are produced means of production. By definition, a capital good is a factor of production that itself must first be produced. Now that's the taxonomy of goods laid out by Carl Menger. For us to better understand sort of how capital goods fit into the process of production, we have to recognize that each and every consumer good that we consume is made possible because of its structure of production, because of the particular goods that are used to produce a particular product. And to make a consumer good, the producer must obtain the services of necessary land, labor, and a host of other capital goods. And so what better way of illustrating this point by looking at the greatest dessert in the history of Western civilization, which means probably the greatest dessert ever, and that is the flourless chocolate cake. The flourless chocolate cake is a delight to behold. The flourless chocolate cake is so good, you don't actually taste it, you experience it. It's almost like pure chocolate bliss. But the flourless chocolate cake doesn't make itself. It doesn't spontaneously generate. It must be produced. And so to make flourless chocolate cake, what do you need? Well, the ingredient list is simple. You need a pound of semi-sweet chocolate, a half a pound of butter, and eight eggs. And that's it. I told you it was good, and I'm not kidding. It's fantastic. But of course, the ingredients aren't the only thing that you need. You need other factors, such as a bowl, a mixer, a springform pan. You need an oven. You need spatulas or a bowl. You need two different ovens, actually. A microwave oven is helpful. Or you could use have a stovetop and have a little double burner to melt the chocolate. You need a roasting pan and a water bath that you sit the springform pan in. So there's a host of producer goods and those things, the chocolate, the butter, the eggs, the mixer, the spoons, et cetera. Those goods must first be produced, right? And so they are produced at a higher stage of production. And the producer obtains services of factors of production by purchasing them first in exchange for money. And here we have, on this graph here, I know it's not easy to read, but I had to get a lot of information. And this is actually a very simplified structure of production just for one flourless chocolate cake, right? The flourless chocolate cake needs land labor, semi-sweet chocolate, butter eggs, electricity, an oven, a microwave oven, springform pans, a mixer, a bowl, and a spatula, and probably other things. But then where does the oven come from? Where does the mixer come from? The bowl come from? The spatula come from? Well, you go to the kitchen supply store. The kitchen supply shop needs to get all of these goods that they can sell, but then they also need themselves, buildings, fixtures, and all of these other appliances. They have to have the mixers and the ovens and the pans and the bowls, right? Well, where does the oven come from? The oven, to get an oven, you first have to have a metal. You first have to have a machine press. You have to have automated equipment. You have to have electrical parts, plastic parts, enamel, insulation, hand tools, labor and land, just to produce an oven that can then be used to produce a flourless chocolate cake. Likewise, if you're going to produce a mixer, and my preference is the KitchenAid stand-up mixer, I'm not getting paid for this, I'm just saying, because I'm going to talk about this. It's actually highly productive. And how does that come about? Well, that doesn't spontaneously generate either. It has to first be produced. And so what do you need to produce that? You need zinc castings. You need metal parts. You need machines. You need paint. You need tools. You need electronic parts. You need a factory. You need packaging. You need land and labor. So for all of these consumer goods, or I'm sorry, these capital goods that are used to produce the flourless chocolate cake, you need further higher order goods to produce them. And so there's a successive stage as a production that exists to provide any particular consumer good. And the producer at any stage, right? So the producer of the flourless chocolate cake obtains services of production from land and labor and the oven and the semi-sweet chocolate and the eggs by purchasing them or the services of the goods or purchasing the goods outright from the producers at the higher stage of production. And so they use money, they invest, they spend money on those factors to obtain the use of those factors that they can then use to produce the final product. And this capital good then is used for the production of the lower order good. And if you go clear to the top, you find that for instance, the manufacturer of the zinc metal casting will sell the zinc metal casting to the producer of the mixer. And the producer of the mixer, Acme Incorporated, will spend money to buy the zinc castor. Acme Incorporated will make the mixer and they will sell the mixer for money to the chef who is making the flourless chocolate cake. Now this same process continues until the consumer's good is made, the flourless chocolate cake is made and the flourless chocolate cake then is sold to the consumer for money. And so this process, this structure production is a process by which goods are produced at the higher stages and they are transformed into successfully lower stage producer goods until ultimately a consumer good is produced and is sold to the producer. And again, this is one simplified structure of production for just one consumer good. I think it'd be very difficult to plan even just one industry, let alone an entire economy. That's why socialism is impossible as you just heard from Dr. Salerno. Now if you look at the production structure, there are a couple of important principles that you want to bear in mind. One is that production effort moves down the structure production. Production effort moves down the structure production which means we don't make the flourless chocolate cake first and then produce the semi-sweet chocolate that we used to make it. Or we don't make the butter first and then we produce the cream we used to make the butter. No, we must make, the production starts at the top, the highest stages, right? We have to have the dairy cow first and then we can milk it and get the cream and then we can use the cream to make the butter and the butter to make the flourless chocolate cake. So production effort, in terms of direction, production effort starts at the highest stages and moves down the structure production. On the other hand, value and income, value is imputed up the structure production, income is directed up the structure production. And that illustrates the principles of derived demand. Semi-sweet chocolate and butter and eggs and the mixer and the spatula and the springform pan, they are all demanded because they can be used, they're valued because they are used to make another good that is also valued, right? If people took outer leave of their senses and decided, you know what? I reject flourless chocolate cake. I care nothing about civilization. Then the value that people impute to flourless chocolate cake would go away and if enough other goods that are produced by chocolate, that value goes away. The value of semi-sweet chocolate as a producer good would fall significantly. And so semi-sweet chocolate and butter and eggs are valued as producer goods according to the value of the consumer goods that they can be used to produce. And so value is imputed up the structure production. Cream is valued in part because it is necessary to produce butter, butter is valued in part because it is necessary to produce flourless chocolate cake and other fine things. And so as people value the consumer goods, they will value then the factors that are used to produce those consumer goods. So that's why we say value is imputed up the structure production and then directionally, income also moves up the structure production, right? People invest in butter production so because there's a demand for butter, right? So the producer of the flourless chocolate cake will pay money to buy the butter. The producer of the butter will invest money to obtain the cream to make the butter. The person who's buying the cream buys the cream from the owner of the Holstein. And so the direction of income is up the structure production as production effort moves down the structure production. Now those producers, those producers who use their money to invest in producer goods at the higher stages, these are called capitalists. These are the true capitalists. Producers who invest their money in the purchase, a factory production or a production process, those are the capitalists. And the capitalists produce and own various stages of capital goods. Now production we've already established is an action. And therefore all production, like any action, takes time. Production is not instantaneous. Brushing one's teeth takes time. Eating an apple takes time. Producing a flourless chocolate cake takes time. In fact you wanna do it well, it probably takes about an hour and 10 minutes. Start to finish. Now what that means is, production is based on a speculation about the future state of the market. Production is based upon a speculation about the future state of the market. When a producer, a dessert maker makes flourless chocolate cake, they don't know exactly how many units of flourless chocolate cake are gonna be sold, what the demand's actually gonna be. They could make the flourless chocolate cake thinking, hey, everybody is as wise as me, I love flourless chocolate cake, what's not to like, they love flourless chocolate cake. They'd be willing to pay, say, $15 for this beauty and they bring it to market and nobody's willing to pay $15, right? Maybe they'd be willing to pay 10, but not 15. If they invest more than that, they earn a loss. So it's an entrepreneurial venture, right? It's an entrepreneurial venture. It's based on a speculation of the future state of the market. The structure of production also is the other side of the division of labor coin, right? We talked about the division of labor in the social order yesterday. We talked about how people specialize in production according to efficiency. All of these producer goods often are produced by specialists, right? It's rare that you have the manufacturer of ovens also be a large, very successful seller of eggs or butter. You tend to have people who specialize in butter production, you have people specialize in oven production, people specialize in mixer production, people specialize in spatula production, right? And so the structure of production is sort of the other side of the division of labor coin and therefore it, the structure of production must also be coordinated by entrepreneurs, right? Fitting the different capital goods into a structure of production that actually yields a consumer good at the right time for the people that want it in the right place, doesn't just happen. It is the result of a multitude of economic decision makers, a multitude of entrepreneurs that will direct production and make sure that every factor of production is the right place at the right time. Any investment in production is made in anticipation of a later sale to lower order producers and finally to consumers and this anticipation, this uncertainty must be borne by the producer and the producer that bears this is the entrepreneur. He's the one, he's the one who produces in light of uncertainty. So the complex structure production is only made possible by the use of capital goods. And the use of capital goods requires a longer production process. That means that if somebody wants to produce a particular product, say Groucho is wanting to start up just desserts, a little dessert shop, and he knows he needs a standing mixer of some sort and he looks and says, oh, that's gonna cost $500. Well, the only way to direct $500 to purchasing that mixer, to investing in that capital good is to not spend $500 on something else. Just a forego, maybe $500 he was gonna spend on a ping pong table, which means, alas, not as much time spent recreating plain ping pong. And so he has to do without a consumer good to obtain a stand-up mixer. And so he foregoes $500 on the ping pong table to buy a mixer that's going to aid in the future production of flourless chocolate cake. And so that restriction of consumption is what we call saving, the restriction of consumption is saving and the transfer of resources, saved resources to the formation of capital goods or the obtaining of capital goods, that's called investment. And so accumulating and obtaining capital goods useful in production is made possible by saving and investment. Saving investment is absolutely crucial. Saving investment by somebody is absolutely crucial for forming and accumulating capital. Now, why do people find the need to engage in investment in capital goods? What are capital goods good for? Well, they are good for increasing productivity. People obtain capital goods by increasing because they help people produce more or produce the same amount in a shorter period of time. And they do so in two ways. This is highlighted by Rothbard in Mannequin State. The first way we can say that capital goods increases productivity is that it increases the productivity of land and labor by increasing the production of goods we could produce without the capital good, right? So suppose we want to make a flourless chocolate cake, we need eight eggs beaten, fairly, what should one say, firmly. And to the point where they foam, right? Now, technically it is possible to get eight eggs in a bowl and you can mix them with your hands, right? You could just, you know, just try to go crazy, getting these eggs mixed, right? And you could do that, right? But I tell you, it's a whole lot easier and quicker to use a stand-up mixer and you don't have the problem with carpal tunnel when you're done. So a mixer makes it much more quicker, much more easier to get the job done. And so there are a number of things that we could do without capital goods, but if we have capital goods, it's a whole lot more productive. Secondly, however, it's important to note that it allows people to produce goods they otherwise could not obtain at all, right? There's a whole host of goods, like these glasses. I could not have these glasses if it wasn't for capital goods because you can't make these glasses just land in labor, you can't. You need tools, you need capital goods. Here's this comic strip I put in my first book. Before the hook, the pole and the worm were even thought of, there existed a time known to fish as the golden age where people are trying to catch fish but can't by just grabbing down. And then they need a pole and a hook and a line to actually catch fish, right? And so another way that capital goods increases productivity, and this in fact is the most important way, it increases productivity and then adds to our standard of living is that capital goods allow people to produce goods they otherwise could not obtain at all. So by increasing productivity, what do capital goods actually do for us? Well, they advance people in time towards their objective of obtaining the consumer good. If I didn't have an oven, if I didn't have a springform pan, if I didn't have a mixer, if I didn't have a microwave oven, it would take me a lot longer to have anything close to a flourless chocolate cake. A whole lot more time would be had. One of the beauties of the standup mixer for instance is it essentially doubles your output. Because you have a standup mixer, you put the eggs in the mixer, you turn it on and the thing just moves. And so it can be doing that while you're chopping up the chocolate and the butter and putting the chocolate and butter in the microwave oven and you're essentially doing two people's worth of work with just one person, why? Because the mixer is that productive. And so that's what the capital good does for us. It advances people in time towards their objective of obtaining the consumer's good. Now what, so that's great. That's fantastic, right? Capital is productive, right? Even Marx understood this, capital is productive, right? So what's not to like? Why don't we just have, why don't we, why don't we just, you know, capital all the time, 24, 7, 365. That's all we're doing is accumulating capital. What keeps people from investing even more and more resources in capital goods, right? Well, as you heard from Dr. Herbner this morning, there is something called time preference. Time preference for present goods. At some point, at some point, people value present goods more than the same amount of goods in the future. People prefer to have their ends satisfied sooner than others. Time preference determines how willing people are to save and invest, right? I have some income, I can blow it all right now on bubble gum and cotton candy and consumer goods, or I can save and invest, right? And the more intensely we are, and the more intensely we want our needs and desires and want satisfied in the present, the less likely we are to put off present satisfaction to save and invest in obtaining capital goods that are gonna allow us to produce more in the future. And so the intensity of the preference of present satisfaction over future satisfaction is a crucial determinant of how much people are willing to save and invest and therefore how much capital they are willing to accumulate. And so if one wants to save and invest in capital, capital goods that embodies capital, there must be some threshold of willingness to save and invest. And that then illustrates that when we talk about issues of capital and what capital, how to allocate capital, where to allocate capital, what capital goods we want to embody our capital, we find there are a whole host of choices that capitalists and producers need to make with respect to capital. A good number of choices. One of these choices has to do with the less, the level of capital intensity in the production process, right? We can choose a more or less capital intensive process. Here we have what, five different goods, five different physical capital goods can be used to accomplish basically the same thing of mixing things fairly rapidly. The most primitive, the least capital intensive is a fork. It's a simple fork. Then we have a whisk, a handheld whisk. Then we have the handheld mixer. Then we have the standup mixer and then the one clear on your right is the industrial mixer. I got to use that one time when I was helping a local private Christian school make a funnel cake batter for their big fundraiser. And it was, I don't know, I'm probably a little bit too enthusiastic about kitchen appliances, but it was amazing to behold to see this big machine used for something as delightful as providing funnel cake to local citizens, community members, it's a wonderful thing. But it's huge, right? I do not have one of these in my kitchen because I don't need to mix that much, right? I don't need to have a kitchen production operation in my house that's that capital intensive, right? Such a decision I have to make. I could have stayed with the old whisk but I felt I need something more than just a whisk but I don't need the industrial strength, the Nimbus 3000 mixer. So the decision to be more or less capital intensive is part of the decision making process. We could also say that each factor has a different degree of specificity. Each producer good has a different degree of specificity, right? For instance, there are more things that eggs can be used to make as opposed to spring form pans. If I look through, say, my recipe book or my collection of recipes that I have inherited from my family and just look down there, there's a lot more recipes that uses eggs than spring form pans, right? Spring form pans typically used for a particularly specialized type of good, the flourless chocolate cake, the cheesecake, basically, maybe a kind of a groovy quiche or something but even quiches usually use like pie pans but eggs are used for many, many more things, right? So they're much less specific. Now of course, if they're less specific that also means that they are less beholden, the value of the eggs are less beholden to the value of one particular consumer good, right? So if the value of flourless chocolate cake goes away completely, again, because we just go crazy, the value of eggs isn't gonna drop to nothing, right? The value of spring form pans would probably fall more than the value of eggs because the eggs still have a lot of other things that they are used for. Another example, this would be milk chocolate versus semi-sweet chocolate, right? There's a whole host of goods that you can make with milk chocolate. You don't wanna use milk chocolate when you make a semi, when you make a flourless chocolate cake. I mean, I suppose you could try it, I suppose it might be okay but I just can't see how it'd be as good. I do know from experience once, I had a former department chair, my first place where I, my first job and we wanted to impress her. We had her over for dinner and I wanted to have a really nice ending dessert so I made the flourless chocolate cake and I turned out to get a really good do that time. I was very excited about that. And so she liked it, she wanted the recipe and so I gave her the recipe. I'm not one of those people like her Horde special recipes. I'm gonna be very magnanimous with my recipes and because this one was public knowledge already but anyway, but still, I don't like to be a hoarder of recipes and so she took it home then anything about it and about a month or two later, I came in and she kind of gave me the cold shoulder and she was not very happy. But what's like, I thought, is it just me? And then she seems very pleasant to everybody else in the office and then she goes, oh, hi, Sean. I then, what's, what, is there something, I talked to her later that day, is there something wrong? Did I do something wrong? She goes, no, well yes, well no. I said, well okay, do tell. She goes, well I'll make your flourless chocolate cake recipe last night. I said, okay. And she said, it didn't taste anything like yours. Well, my first response is what should be your response, well did you follow the recipe? She goes, well yes, well no, yes. And I said, well, what do you mean? She said, well, instead of using butter, I use margarine. Exactly, that's exactly what I said. And so it turns out, right? It turns out that not, you know, capital kids are not homogenous, right? They are, there's different levels of specificity. And there's certain things, like butter, that you can use in a flourless chocolate cake, other things like margarine, you do not use in a flourless chocolate cake. It actually got better, because she said, I got so angry, I got so mad, it wasn't anything like yours, that I tried to flush it down the toilet. And it's made of semi-sweet chocolate and eggs and butter, neither of which really are water-soluble. So you can imagine what happened. There's a tremendous entrepreneurial air that she engaged in. But the point is simply, each good has different, each capital good has different degrees of specificity. Another choice variable is durability, right? The durability also needs to be taken into account. When an entrepreneur or a producer is trying to invest savings, obtaining particular capital goods, some capital goods that you could use are gonna be relatively less durable than others, right? And as a rule, the more durable the capital good, the more valuable it's gonna be to the producer, right? So here we have, you know, on your left, you have this spatula. It's an okay spatula, but it's kind of flimsy. It won't be very long before that spatula head come and departs from the handle and then you're stuck, whereas you have these red sort of silicone tube or things that are all molded, very durable. Those would be worth more than the flimsy spatula. There's a reason why the one on the, say the one on the right tends to be sold in a lot, say at the Dollar Tree, or the Buckingham Quarter Tree now, I guess it is. Because they're just not as durable, right? So durability needs to be taken into account. So the durability of the good, the specificity of the capital good, the level of capital intensity within the production process, all needs to be taken into account. And durability matters because capital goods are perishable. All capital goods are perishable. They're not, you know, they don't last forever. Even if they do last for a period of time, they can become obsolete. And so they all depreciate. Depreciation is the rate at which capital goods are used up. Each particular capital has a different rate at which it is used up. Eggs that are used to make flourless chocolate cake are used right away, right? You break the eggs and you mix them into the flourless chocolate cake batter and it's used up, right? You can't extract it. You can't use them again. That's it. As I said, the oven, however, that you use to bake the flourless chocolate cake might be used for 15, 20, who knows, 30 years if you treat it well, right? And so different capital goods have a different rate of depreciation. Now after the capital good, whatever capital good we're talking about, after the capital good is where it wears out, we're back to where we started. So if I invested in a spatula and I'm using it very well and I need the spatula, the spatula breaks or the mixer gives up the ghost of the machine, then you don't have it anymore. So you're back to where you started. You're back to production without the capital good. Which means in order to maintain productivity, in order to maintain our productivity that we get from capital goods, we must save during the production process so that we have enough savings to replace the old capital goods when they were out. In other words, if we want to, if we think, oh, I got this great standing mixer, this is fantastic, because my productivity increased significantly, if I want to maintain that higher level of productivity when the KitchenAid mixer, the standing mixer wears out, I have to have money that I can go ahead and buy a new mixer and have it ready to go right then. And so you have to save enough to maintain what's called maintaining your capital. Maintaining your capital is simply keeping the capital goods, the value of capital goods cost it over time. If you want to increase your production even more, you need to accumulate capital, which means you have to save even more than just enough to replace the old capital as a warehouse. You have to save and invest enough to buy more capital goods and devote more productive assets towards production. Now, if you don't really want to do any of that, that's okay, you can still do something, you can consume capital. You just use your capital goods, spend all your income on consumption, not to be confused with tuberculosis, that's a different type of consumption. But you spend it all on consumption and so when your old capital goods wears out, they just wear out, you can't replace them and your level of productivity falls and you are on the fast road to relative impoverishment. And so that's why Mises was talking about when he said that there are no means by which the general standard of living can be raised other than by accelerating the increase of capital is compared with population. What he's talking about is we need to save and invest enough so that we are accumulating capital relative to the population because as our level of capital increases relative population, each of us can be more productive and that by the way also allows us to further specialize and engage in the market division of labor which further increases our productivity, allows us to have more output and allows us to enjoy a higher standard of living. Now, the entire economic order, you know, the economy, the economic order is more than just the process by which we get the flourless out of the cake. You may not recognize this but there's a whole lot more consumer goods that exist than just the flourless chocolate cake, right? And so the entire, what we call the macro economy, what we call the macro economy is an integrated economic order that consists of a network of production structures, all of which move towards the culmination of the set of the depletor of consumer goods and this then, this large structure production is the macro economy and here is a place where we could highlight briefly the difference between an Austrian understanding of capital and macro and the approach of what we call modern macro. Modern macro, we tend to have say two different versions, right, we have the Keynesian version where national output is, or income is seen as simply the summation of consumer expenditures, investment expenditures, government expenditures and net exports, C plus I plus G plus NX. And investment then is the big I, right? It's the big I and it's just money spent on physical production and for Keynes, and the Keynesians, it doesn't matter where the money is spent, it doesn't matter how durable the capital goods are, doesn't matter how specific the capital goods are, it doesn't matter for what the money's being spent on, it's just being spent. If it's being spent, it's contributing to national income. The neoclassical approach sees and tries to model the entire economy as one large production function and then treats capital as essentially units of homogeneous K, right? What I think same as Senator Friedrich Schmu, right? A hunk-a-hunk-a, a unit is a hunk-a-hunk-a, Bernan Schmu, whoo, right? It's, capital is a homogeneous blob and each unit is just exactly like any other unit. So the aggregation that is used to conceptualize the entire economy from both Keynesians and neoclassical theorists, obscure all of the insights of the Austrian structure production. They obscure, for instance, the fact that the capital goods are heterogeneous capital goods with different uses, different specificities, different levels of durability and that these capital goods for them to actually contribute to producing what people want, what they really, really want, the zig-a-zig-a, so to speak, to produce the goods that people want that's when they increase their standard of living. These capital goods must be used in the right place, at the right time, in the right combination with other complementary factors in order to be productive in manufacturing the specific consumer goods that people want when they want them and where they want them. And this general economic order is an integrated then aggregate production structure that supports the production of all consumer goods. This has been represented, for instance, by Austrians historically as concentric circles by Bumbavurg in its positive theory of capital. It's been represented by the Hayekian Triangle, by Hayek Rothbard, Roger Garrison and Jesus Water De Soto, most recently. The point here is that capital, capital is neither best represented by a stock of goods, just a conglomeration of goods, nor a flow of goods or a flow of money. But it's a structure in which all parts are interrelated through production decisions made at every stage of production. And the same principles that apply to the individual production process of producing flourless chocolate cake applies to all production processes throughout the entire economic order. Throughout the entire economic order, money moves from consumer goods industries up to the higher stages of production. At the same time, production effort in the form of goods flows from the higher stages to the lower order of production, finally culminating in the sale of whatever consumer goods are being produced. And at any given moment in time, there is productive activity occurring simultaneously at the very stages in the production structure. There is money moves from consumers, the supplier of consumer goods. And these purchases are not time transactions. You're exchanging present money for a present consumer good. But then, producers of the consumer goods invest spending money on land, labor and capital goods in order for those factors to be used to produce a good that they will sell for money in the future. And that happens throughout the entire structure of production throughout the entire economic order. And there are three facts to be brought to bear upon this structure, or upon the production structures as we conceive of capital theory in the Austrian perspective. And one is that production in the Market Division of Labor is heavily weighted to the production of capital goods. That's one of the weaknesses of viewing GDP as a measure of the economy is that it ignores the majority of spending that must take place to support the production of capital goods throughout the structure of production. And so every structural production is supported by saving and investment. It's not supported by consumption. We produce in order to consume. We don't consume. We don't want to stimulate consumption spending so that we can then somehow invest more as an economy, the goods that we consume has to be produced first so that what drives economy is saving and investment. It's not consumption. Secondly, the capitalist is the laborer's benefactor. The capitalist is not the enemy. In a free market, the capitalist is the benefactor. The capitalist is the one who provides income to the workers that sustain them throughout the production process, throughout the time it takes to bring a consumer good to production. And then finally, the economic order is extremely complex. The capital that is invested is not just a big I. It's not just a big K. It's not even a special K. It is a structure. It is a monetary evaluation of a structure of heterogeneous capital goods all working together to produce particular products that are demanded by consumers that benefit the lives of those consumers according to their subjective preferences. And with that, I think we're out of time.