Home Forum Political Economy Basic Questions Reply To: Basic Questions

Scot Griffin
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You may find this forum thread helpful.

The most common use of the term “capitalization” in CasP is shorthand for “market capitalization” and refers to the market cap of a company’s stock, which is the price of a single share of the stock multiplied by the total number of outstanding shares. According to CasP theory, a company’s market cap, i.e., capitalization, is a quantification of its relative power to create or change order within society.  Market cap is one of the “key statistics” maintained for every publicly traded company by financial websites like Yahoo Finance.

CasP uses the terms “discounting” and “discount rate” in exactly the same way they are used in finance and accounting.   A company’s market capitalization does not represent the present value of its present assets, it represents the present value of its future earnings (profits).  To determine the present value of future earnings — which are really only estimates based on certain assumptions– you discount them according to a formula using a discount rate. This basic process is known as “net present valuation” or “NPV,” which is readily available as a function in spreadsheet programs.  If you want a deep dive on NPV and how it relates to discounting, see this link.  NOTE: the book simplifies the presentation of discounting and discount rate and does not use the NPV formula, but sometimes it is better to sacrifice detail for clarity.

FYI – as much as the book talks about economics, CasP theory is grounded in finance. So, not having an economics background is to your advantage.