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Topic: Overinvestment

	OVERCONSUMPTION AND FORCED SAVING
		Overinvestment reaches its maximum level at point 4, where the continued investment in early stages of production can be accommodated only by drawing resources from the late and final stages of production.
		But with the possibility of overinvestment taken into account, the theory can allow for the output level in most stages to be rising—but rising more rapidly in the early and late stages in comparison to the middle stages.
		Overinvestment (along with overconsumption) without malinvestment would allow the economy to experience a temporarily high growth rate, moving first beyond and then back to the PPF but without there being any intertemporal misallocations requiring painful adjustments that can send the economy inside the frontier.
	www.auburn.edu /~garriro/strigl.htm (9343 words)

	Notes on Over-Investment
		Overinvestment is defined as too much investment from the perspective of capital as a whole (the capitalist class): there's either too much to maintain a sufficiently high profit rate or too much to allow a stable growth process and thus the stability of profit income.
		Competing with each other for the same rich-country markets, they overinvest in the sense that if their capacity were fully used, it would mean even lower prices for them (lower exchange rates).
		This is similar to the phenomenon of overinvestment by small farmers (petty capitalists), who regularly invest too much (in the face of inelastic demand) and drive many of their members into bankruptcy.
	myweb.lmu.edu /jdevine/notes/Over-Investment.html (960 words)

	SMU - Cox : Research Detail
		The importance of this research comes not only from the creation of the model—one which has been in evolution for roughly 30 years—but in the usefulness to corporations in determining optimal levels of initial debt, debt maturities, flexibility in adjusting debt levels at maturity dates, and asset structures in general.
		Underlying the numerous issues addressed by the model, stockholder-bondholder conflicts of underinvestment and overinvestment, decisions of asset substitution versus asset expansion, and the agency costs related to decisions are analyzed.
		Given underinvestment and overinvestment, there are consequences and influences on capital structure, debt maturity structure, and the amount of financing that is optimal for a corporation.
	www.cox.smu.edu /article/research/research.do/90 (1223 words)

	Ulrike Neyer
		The first is to identify the conditions under which informational asymmetries lead to under- and overinvestment and to determine which factors influence the extent of these inefficiencies.
		In case of overinvestment the expected profit of the entrepreneurs with the relatively risky projects must be smaller than their opportunity costs, if it there is no subsidy.
		Crucial for the parallel occurrence of under- and overinvestment is the assumption, that both types of projects exist: the "mean-preserving-spread-projects" (underinvestment-type-projects) and the overinvestment-type-projects.
	iaes.org /conferences/past/charleston_50/prelim_program/g10-1/neyer.htm (1341 words)

	Asia Times Online :: China News, China Business News, Taiwan and Hong Kong News and Business.
		During his speech, Ma attributed the problem of overinvestment to the government's taking the "wrong role" in its handling of the market economy.
		Overinvestment has been rife across China, pushed forward with the backing of local governments.
		For example, Ma said that the central government planned to transfer 260,000 hectares of farmland to industrial and housing use this year, but local governments nationwide have already applied for the conversion of 800,000 hectares.
	www.atimes.com /atimes/China/GD28Ad06.html (534 words)

	Brad DeLong's Semi-Daily Journal: Paul Krugman Gets in Touch with His Inner Friedrich Hayek
		But the fact that overinvestment wine was not flowing freely in 1933 is a matter separate from whether the system was suffering a hangover from the financial bathtub gin that flowed so freely in the Roaring '20s.
		The key issue regarding whether the proper way to deal with an overinvestment hangover is "hair of the dog that bit you" is that that appproach may only lead to an even worse hangover (and eventually to cirrhosis of the liver).
		Overinvestment now leads to a credit collapse later as the worthless investments get weeded out of the system.
	delong.typepad.com /sdj/2005/05/paul_krugman_ge.html (10408 words)

	False Hopes, False Fears, and Real Concerns
		He states, "One of the most unreasoning fears, yet pervasive, is the nightmare of the interwar Austrian cycle theory: 'overinvestment.' But, the current boom-bust of the U.S. economy has, with good reason, led some in the business press to re-examine the Mises-Hayek theory of the business cycle.
		The Austrian cycle theory is a theory, not of overinvestment in the sense used by Phelps, but of the misdirection of production, malinvestment, which is accompanied by overinvestment and overconsumption properly understood.
		This characterization of overconsumption and overinvestment is from Roger Garrison.
	www.gold-eagle.com /gold_digest_03/cochran061803.html (1270 words)

	There Is No Such Thing as Overinvestment! There Is Only Deficient Demand: Archive Entry From Brad DeLong's Webjournal
		If you think that there is "overinvestment," dropping the interest rate will cure you of that belief.
		Maybe Brad's point is empirical, because he says "If you think that there is "overinvestment", dropping the interest rate will cure you of that belief...until you hit a liquidity trap".
		However, what's been distinctive about the current cycle is that capital spending had been very slow to respond to interest rate cuts, which seems to confirm rather than refute the overinvestment idea.
	www.j-bradford-delong.net /movable_type/2003_archives/002522.html (1050 words)

	Mises Economics Blog: Overinvestment or Malinvestment
		Mises constantly cautions that this is not a theory of overinvestment, rather malinvestment.
		It is customary to describe the boom as overinvestment.
		The essence of the credit-expansion boom is not overinvestment, but investment in wrong lines, i.e., malinvestment.
	blog.mises.org /archives/000204.asp (496 words)

	THE AUSTRIAN SCHOOL
		The Austrian theory took its more definitively Wicksellian "monetary overinvestment" form with the formidable construction of Friedrich von Hayek (1928, 1931, 1933).
		The Austrian theory of capital was maintained almost singlehandedly since the 1940s by Ludwig Lachmann, but was given an invigorating shot in the arm by the formidable effort of John Hicks (1973).
		Perhaps surprisingly, the Monetarist Counter-Revolution in macroeconomics, which buried the Keynesian orthodoxy and resurrected some of the old Austrian policy positions, did not embrace and was not embraced by the American Austrians.
	cepa.newschool.edu /het/schools/austrian.htm (2417 words)

	The Concise Guide To Economics, by Jim Cox
		The usual explanation for this crash are theories such as overinvestment, an imbalance in the distribution of income and hence a lack of consumption spending, or just a crack-up of the free market.
		The overinvestment theory is not fundamental enough to be meaningful--one must ask: What caused the overinvestment itself?
		The imbalance of income and lack of consumption spending is not only an irrelevancy but also factually incorrect--consumption increased from 73% of GNP in 1925 to 75% in 1929.
	www.conciseguidetoeconomics.com /book/blackTuesday (501 words)

	Overinvestment vs. Underinvestment in Education: A Search-Theoretic Approach
		Overinvestment vs. Underinvestment in Education: A Search-Theoretic Approach
		Abstract: We consider Spence's (1973) idea of job market signalling in a matching model, where workers invest in education to accumulate human capital and to signal their privately known 'types'.
		If workers' innate types and education are sufficiently strong complements in terms of productivity, the model may exhibit multiple steady state equilibria.
	www.valt.helsinki.fi /blogs/vesala/post35.htm (115 words)

	Arthur Spiethoff (Site not responding. Last check: 2007-09-20)
		This impact was in the field of business cycle theory.
		Spiethoff's theory of cycles (1902, 1903, 1923) built upon that of Tugan-Baranovsky's overinvestment theory and nudged the theory along by giving credit, the heart of the overinvestment theory, an endogenous character through innovation.
		Spiethoff's theory was later used with much profit by Schumpeter and Cassel.
	cepa.newschool.edu /het/profiles/spiethoff.htm (178 words)

	BBC NEWS \| Business \| China's growth races ahead (Site not responding. Last check: 2007-09-20)
		US officials are expected to press the issue when President George W Bush visits Asia over the coming week.
		"Government officials are quite worried about overinvestment in specific industries," Mr Huang said.
		But figures released earlier this week showed little sign the cooling measures were taking effect.
	news.bbc.co.uk /2/hi/business/3199772.stm (455 words)

	Debtor-in-Possession Financing and Bankruptcy Resolution: Empirical Evidence (SMEALSearch) - ... (Site not responding. Last check: 2007-09-20)
		Opponents of DIP financing argue that it leads to overinvestment.
		Using a large sample of bankruptcy filings, we find little evidence of systematic overinvestment.
		DIP financed firms are more likely to emerge from Chapter 11 than nonDIP financed firms.
	gunther.smeal.psu.edu /35922.html (286 words)

	Asian economic crisis
		Unable to find an explanation for the crisis most of our commentators were reduced to parroting statements about bad investments, poor decision-making, overinvestment, excess capacity, etc., in an attempt to hide their ignorance.
		These utterances were or less formed into four myths that now pass for informed economic opinion.
		Eventually the inflationary consequences of these policies brought on a monetary crisis which forced these malinvestments ('overinvestments') to take the form of idle capital and labour.
	www.brookesnews.com /042709asiancrisis.html (759 words)

	Overinvestment, Collateral Lending, and Economic Crisis
		For technical questions regarding this item, or to correct its listing, contact: (Thomas Krichel).
		"Overinvestment, collateral lending, and economic crisis," Japan and the World Economy, Elsevier, vol.
		"Overinvestment, Collateral Lending, and Economic Crisis," Papers 4, Chicago - Graduate School of Business.
	ideas.repec.org /p/wop/cidhav/4.html (663 words)

	EconPapers: Overinvestment, Collateral Lending, and Economic Crisis
		There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
		Working Paper: Overinvestment, Collateral Lending, and Economic Crisis (1999)
		Journal Article: Overinvestment, collateral lending, and economic crisis (2002)
	econpapers.repec.org /paper/fthchicbu/4.htm (377 words)

	IndustryWeek : Overinvestment In China Becomes A Concern (Site not responding. Last check: 2007-09-20)
		IndustryWeek : Overinvestment In China Becomes A Concern
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		Home : Economics & Public Policy : Global Economy : Overinvestment In China Becomes A Concern
	www.industryweek.com /ReadArticle.aspx?ArticleID=9991 (344 words)

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