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Marginal Efficiency of Capital

   Also found in: Encyclopedia 0.01 sec.
Marginal efficiency of capital
The percentage yield earned on an additional unit of capital.
Marginal Efficiency of Capital
The extra yield that an investor earns for each additional dollar of capital invested in the venture or security. The marginal efficiency of capital helps measure how much investment capital is worth the risk at a given return. It is also called marginal productivity of capital.
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Keynes, for instance, developed a new "box of tools" (in Joan Robinson's phrase)--consisting of such technical arcana as the consumption function, the investment multiplier, the liquidity-preference function, and the marginal efficiency of capital, among others--that changed the vocabulary and way of thinking of economists who deal with aggregate income and employment problems.
Two Lucky People: Memoirs by BREIT, WILLIAM / Independent Review
He felt Keynes gave a definition of the marginal efficiency of capital very superior to anything else in this field: "the marginal efficiency of capital may be said to govern the terms on which loanable funds are demanded for the purpose of new investment; whilst the rate of interest governs the terms on which funds are being currently supplied" (5, p.
Keynes' antagonist: correspondence between Alvin Hansen and Dennis ... by Higgins, Anthony; Wright, J.W., Jr. / American Economist
Once the interest rate is determined, the level of investment is read from a marginal efficiency of capital schedule.
Equivocation in mathematical economics by Miller, Edward M. / American Economist
 
 
 
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