While this statement may be theoretically correct, it is NOT what we want to say.
I understand the point as it is an important part of an ordered presentation directed for the general audience. But what I’m trying to think here is the inability to elicit a meaningful response from established heterodoxians, based on the current exposition. They (honestly, I believe) can’t see in it any worthwhile theoretical contribution, or at least it’s “nothing new”. This is not to say the general exposition should change, but maybe there are some tactical choices, different emphases to make, which might have an impact in this regard. Tentatively, I think it can be done by going after their presumably safe accounting reality (as opposed to “the financial fiction”). If some of the critique would be reoriented in this fashion, it might be harder to conclude out of hand that “our narratives are identical” (“forward-looking capitalization and backward-looking real capital [read: tangible book value] are de-linked? of course they are! We said it all along!”).
I think that Hudson’s reference to ‘book value’ here is misleading
Maybe so, but I doubt he will choose the more “accurate” way, based on real abstract/metaphysical units. I’m pretty sure the other heterodoxians I mentioned before will not go down that path. And for good reasons. So they stay explicitly anchored in accounting reality, even though that reality is not theoretically grounded (for them) in any value theory. That’s the starting point of the engagement, as I see it.
Our point, rather, is that forward-looking capitalization and backward-looking real capital are de-linked (and in the U.S. case inversely correlated, as the figure below shows).
And in this context, what the above analysis shows for the heterodoxians, has little to do with “real capital”. It shows the relationship between capitalization and tangible book value (this time in replacement rather than historical cost). When discussed in those terms, can we say anything about the reasons for the inverse correlation?