ABSTRACT
In this chapter, the authors cover three topics. The first one relates to the role of exchange rates in international trade. The second incorporates Cantillon effects into the Economic Value Added (EVA) framework. Finally, the third one, covers the problem of economic calculation under socialism. In conventional microeconomics, the profit of the firm is represented as total revenue minus total costs. There is no time consideration, therefore there is no need to discount the economic profit of different periods to its present value. It is also usual to divide total costs into two components, labor and capital. The socialist-calculation debate at the beginning of the twentieth century was very influential in the development of economic theory. Knowledge is the ability to forecast market prices, and to apply an “EVA” valuation of a firm (what is investment, what are operation costs, how should value drivers be sliced, etc.).
