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Quote by: bishop The amount of money which must be withdrawn from annual gross income and reinvested to replace the capital used up in production. The reinvestment, however, need not be in the "used up" assets. |
This simply references what the costs would be to maintain production capabilities. Production capabilities degrade, if these costs aren't paid, but that requires an
investment to maintain it. Again, capital consumption, as other forms of consumption is
using up a resource, and not beneficial in itself. The definition even specifically says this and indicates that there's no guarantee anyone will replace this consumption of capital.
The chicken and egg scenario is cleared up when you look at supply and demand instead of production and consumption. Demand seems to be the initiating force - some people want something - then investments occur to producting it and create a supply. Generally we consume most of the supply, which doesn't provide any long term benefit but fulfills a short term desire but what really fuels growth is reinvesting savings in additional production capabilities (i.e. capital
investments).
But I do agree that in the end, a measure of economic performance is how much consumption can be supported, but that's still not the same as consumption fueling growth. Consumption is consuming/using up/losing something and has no benefit in itself.