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country and period tested. I call it free growth. My own free growth theory acknowledges growth by consumption restraint, which I call thrift, only asa mathematical possibility which doesn’t seem to happen. So my idea, taking account of data Mill didn’t have, is different from his. 1 must be careful not to put my ideas in his mouth. When I say “Mill’s idea”, from now on, I will mean some of both. No one had the data to prove him right until national accounts began reporting market-valued capital in 1990 or so, and reconstructing it for a few decades before. What they had earlier was the book measures of capital that we see in balance sheets. They don’t reveal enough. Book measures assume depreciation norms. Outcomes converge to norms over time, but meanwhile might be anything. National accounts follow a form of this book or depreciation accounting. They now report market-valued capital too, but still prefer book methods to calculate investment I and output Y in the Y = C + I equation. That doesn’t work well. Did you know that national accounts in France, Germany, U.K. and the United States all reported positive net investment in the crash years 1929, 1930, 1937 and 2008? Net investment, meaning net of depreciation, is intended to show growth in capital value. Do you think values really went up in those crash years? And national accounts can be just as wrong in the opposite direction. In the boom year 1933, when stock markets were up 42%, 67%, 96% and 46% in those four countries, Germany and U.S. reported net investment (capital growth) as negative while France and U.K. reported it up less than half a percent. All this shows in my charts and tables. Reports of net investment in national accounts tend to prove radically wrong in years of unexpected upturn or downturn because they don’t get the news of wars or national disasters or discoveries or business cycles until new assets are bought or new products sold. Purchases and sales are normally the only input into the books. Average time between original purchase and realization in sales is the “holding period” or “turnover period” of capital. For all physical capital together, it runs several years. Accounts in those slump years were reporting the good news of boom years shortly before, including the booms of 1935 as well as 1933 preceding the slump year 1937. Accounts in the boom year 1933 were finally getting the news of Chapter 2: Fast Forward 1/06/16 6 HOUSE_OVERSIGHT_010946