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Measuring Capital in the New Economy

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Measuring Capital in the New Economy This PDF is a selection from a published volume from the National Bureau of Economic Research Volume Title: Measuring Capital in the New Economy Volume Author/Editor: Carol Corrado, John Haltiwanger and Dan Sichel, editors Volume Publisher: University of Chicago Press Volume ISBN: 0-226-11612-3 Volume URL: http://www.nber.org/books/corr05-1 Conference Date: April 26-27, 2002 Publication Date: August 2005 Title: Remarks Author: Robert E. Hall, Baruch Lev, Erik Brynjolfsson, Lorin Hitt URL: http://www.nber.org/chapters/c10629 Chapter pages in book: (557 - 576) After reading and hearing the papers at this conference, I’d like to take the opportunity to summarize my own positions on some of the key issues of the conference set forth in my own papers. I was gratified to see that these papers have had some impact on the work of this conference, but there has been remarkable confusion about what paper said what. So let me just spend a few minutes on this topic, because all these papers, I believe, are completely central to the topics addressed at this conference. The first paper, “The Stock Market and Capital Accumulation,” came out in the American Economic Review (AER) in December 2001. That pa- per infers the total amount of capital, tangible and intangible, in the econ- omy—specifically in the nonfinancial corporate sector of the U.S. econ- omy—from the value of the securities that are claims on that capital. An important factor in that paper is the recognition that one of the reasons that the market values capital at prices above or below its creation cost is scarcity arising from adjustment costs. A standard view of the stock market that I inherited in this research was that—because short-run supply curves are upper sloping—an expansion of the economy will generate rents that show up in the stock market. This view, which we attribute very closely to James Tobin, has also been run in reverse in the q theory to infer adjustment

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