as the sum of growth and cash flow, and specifically negative unrealized output
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as the sum of growth and cash flow, and specifically negative unrealized output.
Then
deadweight loss = unrecovered decapitalization
= negative output
= negative unrealized output
= max (0, - output)
= max (0, - unrealized output). (6.10)
Also
positive unrealized output = max (0, proprietary output), (6.11)
and
output = unrealized output + realized output. (6.12)
The Growth Truism
In general,
growth = capitalization from outside + capitalization from inside
- decapitalization. (6.13)
Here
capitalization from outside = negative cash flow = transfer in, and
capitalization from inside = positive unrealized output + plowback.
Also
decapitalization = recovered decapitalization + unrecovered decapitalization
= recovered decapitalization + deadweight loss.
Then
growth = transfer in + positive unrealized output + plowback
— recovered decapitalization - deadweight loss, (6.14)
or more simply
Chapter 6: Parallels with the Firm 2/4/16 7
HOUSE_OVERSIGHT_011041
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