Why Capital is Overvalued

Max Sawicky sawicky at epinet.org
Fri Mar 5 08:54:59 PST 1999

> Max asked why investors should over value outdated equipment.
The answer, in the sense, comes from Minsky. So long as the firms are earning money, even though these earnings float atop of a fragile bubble, investors capitalize this stuff. During the bubble time, weak competitive forces allow the efficient and the inefficient alike to remain profitable. Once competition breaks out, the apparent value of the outdated equipment disappears.>

That's plausible enough, as far as it goes. But if this always happens, why do the investors always make the same mistake?


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