But if capital goods are heterogeneous, then whether or not you earn an income from them depends crucially on what kinds of capital goods you buy and exactly how you combine them, and in turn how that combination has to complement the combinations that others have put together. You build an office-cleaning business in the hopes that someone else has built an office to clean.
There’s nothing automatic about it; error is always a possibility.
Last week I spoke – for this short podcast – with Caleb Brown of Cato about Thomas Piketty’s Capital in the Twenty-First Century. (By the way, just last month, Caleb successfully completed his masters degree in economics at GMU. I had the pleasure of supervising his master’s thesis – a superb work on state pension funds.)
In this video, UCLA economist Lee Ohanian dispels some myths about the Great Depression, including the myth that President Herbert Hoover advocated laissez-faire policies. According to Ohanian, it was “Hoover’s incessant meddling … that provoked the Great Depression.”