Squaring the Investment Cycle

Abstract

The present paper replaces the standard behavioral axioms by structural axioms and applies these to the analysis of the accumulation and decumulation of capital. This yields a coherent view of the interrelations of real and nominal saving–investment, of profit–loss, of money–credit, and of internal–external financing. The main result is that asymmetric growth is indispensable for the viability of the market system. An equilibrium of saving and investment would be rather disadvantageous for the business sector.

Keywords: new framework of concepts, structure-centric, axiom set, symmetric investment cycle, asymmetric investment cycle, flux-reflux, real rate of interest, nominal rate of profit, monetary profit, nonmonetary profit, roundaboutness

JEL Classification: E10, E21, E22, E23, E40