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confidence, we would know how much correction was enough. That’s a reason to take depreciation theory seriously. Market-Valued Capital in Macroeconomics Another reason why macro should be reconceived from scratch is that its defining equations, written mostly over half a century ago, leave out capital. Change in capital shows as net investment, but capital itself stays outside. Flows are considered sufficient for description. Piketty, a good economic historian, tells us that this did not have to be. It seems that the largest economies had good records of market-valued capital since the late- middle nineteenth century. Piketty does not speculate why macro and national accounts ignored them when both took form in the 1920s and 1930s. Physical capital and its changes can be measured at market or calculated by the perpetual inventory method used in balance sheets. | showed in Chapter 2 why that method is not the best. Depreciation accounting assumes norms in the loss of capital value with time, and gets the news of actual outcomes long after. National accounts reported positive real net investment, meaning growth in capital value, in 1929, 1930, 1937 and 2008. They give little clue to reality in years of surprise. The neglect of market-valued capital in macro and the national accounts until 1990 or so may have to do with the influence of Keynes. The General Theory includes some hilarious broadsides on the fickleness of market speculators. He put more trust in the sober disciplines of accounting. Piketty trusts the market more, and so do I. Then why does Piketty track new investment, or change in capital, by the accounting methods used in national accounts? That seems inconsistent. My charts and tables track it at market. It seems to me that national accounts should track it both ways, Chapter 8 Banks, Money and Macroeconomics 2/8/16 20 HOUSE_OVERSIGHT_011109