Money and Markets: Essays in Honor of Leland B. Yeager

14 Roger Koppl(physically defined) capital.” Taking the price Wicksell effect seriously helps us tosee why “unlike labor and land, capital cannot be measured summarily, accordingto Wicksell, except in value terms.”Garrison shows that a little care with units analysis leads us to identify the rightunit for measuring capital. I make the same argument, but in a slightly alteredform. We assume that interest is the price of capital and ask in what units we are tomeasure capital. We denote the interest rate r, the quantity of capital is K, the wagerate is w, and the quantity of labor is L. We need a unit for K such that rK will be somany dollars, just as wL is so many dollars. Recall how units analysis tells us that wLis so many dollars. We calculate w in dollars per man-year and we calculate L inman-years. Thus, wL is calculated in units that put the dollars from w in thenumerator and the man-years from w in the denominator, while also putting theman-years from L in the numerator. The two terms for man-years drop out and wehave wL computed simply in dollars. We calculate r in dollars per dollar-year. Forexample, if the interest rate is 5 percent, the debtor must pay in interest $0.05 foreach dollar that is borrowed and repaid one year later. The debtor must pay $0.05for each dollar-year of debt. The units for K are whatever they must be for rK toresolve into simple dollars, which means the units are dollar-years.It matters that capital is measured in dollar-years. As Garrison explains at somelength, Yeager (1976) was able to transform this insight about units into a thoroughgoingcritique of Cambridge capital controversies. Garrison’s “Child’s Guide tothe Capital Paradoxes” shows, as Yeager had in 1976, that the supposed paradoxesof capital evaporate when put under the combined heat of units analysis and thearithmetic of present values. Units analysis reveals “capital’s dimensional, orradical, heterogeneity.” Barges and blast furnaces are different and can have nocommon unit but dollar-years. In my opinion, this is a definitive solution to the supposed“problem” of reswitching. This solution, however, is so alien to CambridgeUK sensibilities that Cohen and Harcourt imagine that it “did not make a meaningfulcontribution to the debate” (2003, as cited in Garrison’s contribution to thisvolume). Apparently, the logic of this dismissal goes something like this: Yeagerdoes not fit neatly within our pre-fabricated box labeled “neoclassical,” nor is heone of us; thus, his contribution does not count or even have meaning. Fortunately,Mr. Yeager has always shown a greater zeal for truth than is here manifested byCohen and Harcourt.Yeager’s zeal for truth allows him to face tough issues. He “has tackled themhead-on,” as Randall Holcombe (Chapter 14) puts it. Laurence Moss (Chapter 15)takes on the “eliminationist politics” of genocide and ethnic cleansing. In hissecond contribution to this volume, Gordon Tullock (Chapter 16) explores onesuch issue, the financial health of the welfare state. Holcombe examines Yeager’sethic framework for thinking about such issues, namely, utilitarianism.Holcombe’s paper includes a skillful summary of Yeager’s indirect utilitarianism,his protests to the contrary notwithstanding. Yeager develops his position atsome length in his 2001 book, Ethics as Social Science. As a type of utilitarianism,Yeager’s position starts with the undefended and “fundamental value judgment,”