SEMAINE D'ÉTUDE SUR LE ROLE DE L'’ANALYSE ECONOMETRIQUE ETC. 
58y 
labour services have to be performed in order to produce the 
final output. 
Capital itself is a commodity, or rather a series of commo- 
dities, which have been produced in the economy, so that the 
final outputs of the system are now of two types: consumption 
goods, which are consumed as in the previous case, and capital 
goods, which are invested in the process of production. Ca- 
pital goods are durable and therefore, once produced, they go 
to increase the existing stock of capital. However, although 
durable, they are not eternal. As a result of being used by 
:abour they wear out, and must be continually re-integrated 
if production is to go on. This means that each productive 
process leading to a final commodity needs a further item. Be- 
sides a flow-input of labour and a stock of capital, each process 
also needs a flow-input of capital goods to keep the initial capital 
stock intact. This means that total production of capital goods, 
which represents total gross investment of the system, must be 
distinguished in two parts. A first part of it (replacement) 
simply goes to replace worn-out capital: in fact it is nothing 
but a cost of production, since it is needed in order that the 
productive processes may end up with the same amount of 
capital stock with which they began. The rest of the total 
production of capital goods, namely the excess over replace- 
ment, represents a net addition (net investment) to the exist- 
ing capital stock. 
But how is capital going to be measured? In our analysis, 
all commodities have been measured sa far in two ways — in 
physical terms — whatever the physical unit may be — and 
in current price terms — physical quantities multiplied by 
prices. The same procedure will be used for capital goods, 
>xcept that a particular physical unit will be adopted, namely 
broductive capacity. Of course, a unit of productive capacity 
s, in an ordinary sense, a very composite physical commodity: 
not only does it include both what has been called « circulat- 
ng » and what has been called « fixed » capital. It may 
10] Pasinett: - pag. 19