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Now I'll try to pull this together. Stock prices collectively, meaning all shares at current prices, is called “market cap.” (Cap is capitalization.) Market cap does not measure the whole underlying value of the issuers, meaning firms that issued the stock, since there are debt claims that must be paid off first. It measures the equity residue. It measures that imperfectly because some inefficiency and chicanery are here to stay. Itis more volatile than the debt claims because it is leveraged, but probably less volatile, given the observed reality of trends showing smoothed-out reaction of share prices to news over time, than what would be bid for the underlying assets, including intangibles, subject to the same debt claims that must be paid off first. National accounts measure market-valued (physical) capital by beginning with market cap. They then add the market value of debt claims on the same issuers, along with equity and debt claims on the rest of the business sector, and then the same for the housing sector. The sum is “private wealth.” Consumer durables such as cars and refrigerators are excluded as impractical to price. Government wealth net of national wealth is tracked separately, and tends to show as slight or negative. Finding the Free Growth Index for Stock Markets My concern in this chapter is the stock market as a data source for testing free growth theory. Here (4.2) would read total return in place of (net) output, while growth would be in market cap. Consumption in (4.2) would become dividend yield in the sense net of capital concurrently raised in new stock issues. The Global Financial Data website summarizes the history of world stock markets from inception in about 1700 for U.K., about 1800 in U.S., and later elsewhere. A nice feature of this data source, and most other sources for stock and security performance, is that market values are shown from the start. This left no need to correct for the inevitable lags in depreciation accounting, which gets the news only in purchases or sales. Chapter 4 Mill’s Idea 1/11/16 21 HOUSE_OVERSIGHT_011012