Tuesday, March 17, 2020
The Meaning of Capital Deepening
The Meaning of Capital Deepening Some definitions of capital deepening can be a little hard to understand, not because the concept is difficult or complex but because the formal language of economics has a special vocabulary. When youre beginning your study of economics, at times it may seem less like a language than a code. Fortunately, the concept isnt that complicated when its broken down into everyday speech. Once you understand it in that way, translating into the formal language of economics doesnt seem that hard. The Essential Idea You can look at the creation of value in capitalism as having an input and an output. The input is: Capital. This, as economists have considered it since Adam Smith first discussed the creation of value in capitalism in The Wealth of Nations, consists not only of money but also the variety of things that have to do with production, such as physical plants, machinery, and materials. (Land, by the way, was treated by Smith as a separate input  different from other capital because unlike capital generally, which can grow indefinitely, there is only a finite amount of land).Labor. In economics, labor consists of work undertaken for a wage or for some other form of monetary reward. If labor and capital are the inputs, the output is the added value that results. What happens in between the input of labor and capital and the output of added value is the production process. Thats what creates the added value:             Input (production process)-Output                       (labor and capital)                                     (value created) The Production Process as a Black Box For a moment consider the production process as a black box. In Black Box #1 are 80 man-hours of labor and X amount of capital. The production process creates output with a value of 3X. But what if you wanted to increase the output value? You could add more man-hours, which of course has its own cost. Another way you could increase the output value would be to increase the amount of capital at the input. In a cabinet shop, for example, you could still have two workers working for a week for a total of 80 man hours, but instead of having them produce three kitchens worth of cabinets (3x) on traditional cabinet-making equipment, you buy a CNC machine. Now your workers basically only have to load the materials into the machine, which does much of the cabinet building under computer control. Your output increases to 30 X at the end of the week you have 30 kitchens worth of cabinets. Capital Deepening Since with your CNC machine you can do this every week, your production rate has permanently increased. And thats capital deepening. By deepening (which in this context is economist-speak for Increasing) the amount of capital per worker you have increased the output from 3X per week to 30X per week, a capital deepening rate increase of 1,000 percent! Most economists quantify capital deepening over a year. In this instance, since its the same increase every week, the growth rate over a year is still 1,000 percent. This growth rate is one commonly used way of assessing the rate of capital deepening. Is Capital Deepening A Good Thing or a Bad Thing? Historically, capital deepening has been viewed as beneficial for both capital and labor. The infusion of capital into the production process produces an output value that far exceeds the increased capital at the input. This is obviously good for the capitalist/entrepreneur, but, the traditional view has been that it is good for labor as well. From the increased profits, the business owner pays the worker increased wages. This creates a virtuous circle of benefits because now the worker has more available money to purchase goods, which in turn increase business owners sales. French economist Thomas Piketty, in his influential and controversial reexamination of capitalism, Capitalism in the Twenty-First Century, criticizes this view. The details of his argument, which extends over most of a dense 700 pages, is beyond the scope of this article but has to do with the economic effect of capital deepening. He argues that in industrialized and post-industrial economies, the infusion of capital produces wealth at a growth rate that exceeds the growth rate of the broader economy. Labors share of the wealth decreases. In short, wealth becomes increasingly concentrated and increasing inequality results. Terms Related to Capital Deepening CapitalCapital consumptionCapital intensityCapital ratioCapital structureCapital augmentingHuman capitalSocial capital
Sunday, March 1, 2020
How to Turn Lead Into Gold
How to Turn Lead Into Gold Before chemistry was a science, there was alchemy. One of the supreme quests of alchemy was to transmute (transform) lead into gold. Lead (atomic number 82) and gold (atomic number 79) are defined as elements by the number of protons they possess. Changing the element requires changing the atomic (proton) number. The number of protons cannot be altered by any chemical means. However, physics may be used to add or remove protons and thereby change one element into another. Because lead is stable, forcing it to release three protons requires a vast input of energy, such that the cost of transmuting it greatly surpasses the value of the resulting gold. History Transmutation of lead into gold isnt just theoretically possible; it has been achieved! There are reports that Glenn Seaborg, 1951 Nobel Laureate in Chemistry, succeeded in transmuting a minute quantity of lead (possibly en route from bismuth, in 1980) into gold. There is an earlier report (1972) in which Soviet physicists at a nuclear research facility near Lake Baikal in Siberia accidentally discovered a reaction for turning lead into gold when they found the lead shielding of an experimental reactor had changed to gold. Transmutation Today Today particle accelerators routinely transmute elements. A charged particle is accelerated using electrical and magnetic fields. In a linear accelerator, the charged particles drift through a series of charged tubes separated by gaps. Every time the particle emerges between gaps, it is accelerated by the potential difference between adjacent segments. In a circular accelerator, magnetic fields accelerate particles moving in circular paths. In either case, the accelerated particle impacts a target material, potentially knocking free protons or neutrons and making a new element or isotope. Nuclear reactors also may be used for creating elements, although the conditions are less controlled. In nature, new elements are created by adding protons and neutrons to hydrogen atoms within the nucleus of a star, producing increasingly heavier elements, up to iron (atomic number 26). This process is called nucleosynthesis. Elements heavier than iron are formed in the stellar explosion of a supernova. In a supernova gold may be transformed into lead, but not the other way around. While it may never be commonplace to transmute lead into gold, it is practical to obtain gold from lead ores. The minerals galena (lead sulfide, PbS), cerussite (lead carbonate, PbCO3), and anglesite (lead sulfate, PbSO4) often contain zinc, gold, silver, and other metals. Once the ore has been pulverized, chemical techniques are sufficient to separate the gold from the lead. The result is almost alchemy.
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