Capital (economics) - Wikipedia, the free encyclopedia

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http://en.wikipedia.org/wiki/Capital_(economics)

From Wikipedia, the free encyclopedia

In economics, capital or capital goods or real capital are factors of

production used to create goods or services that are not themselves
significantly consumed (though they may depreciate) in the production
process. Capital goods may be acquired with money or financial capital.
In finance and accounting, capital generally refers to financial wealth,
especially that used to start or maintain a business.

Finance

Financial markets

1 Capital in narrow and broad uses

2 Capital in classical economics and beyond
3 Capital Controversy
4 See also
4.1 Lists
5 References

Bond market
Stock (Equities) Market
Foreign exchange market
Derivatives market
Commodity market
Money market
Spot (cash) Market
OTC market
Real Estate market
Private equity
Market participants

In classical economics, capital is one of three (or four, in some

formulations) factors of production. The others are land, labor and (in
some versions) organization, entrepreneurship, or management. Goods
with the following features are capital:
It can be used in the production of other goods (this is what makes
it a factor of production).
It was produced, in contrast to "land," which refers to naturally
occurring resources such as geographical locations and minerals.
It is not used up immediately in the process of production unlike
raw materials or intermediate goods. (The significant exception to
this is depreciation allowance, which like intermediate goods, is
treated as a business expense.)
These distinctions of convenience carried over to neoclassical economics
with little change in formal analysis for an extended period. There was the
further clarification that capital is a stock. As such, its value can be
estimated at a point in time, say December 31. By contrast, investment, as
production to be added to the capital stock, is described as taking place
over time ("per year"), thus a flow.
Earlier illustrations often described capital as physical items, such as
tools, buildings, and vehicles that are used in the production process.
Since at least the 1960s economists have increasingly focused on broader
forms of capital. For example, investment in skills and education can be
viewed as building up human capital or knowledge capital, and

Investors
Speculators
Institutional Investors
Corporate finance
Structured finance
Capital budgeting
Financial risk management
Mergers and Acquisitions
Accounting
Financial Statements
Auditing
Credit rating agency
Leveraged buyout
Venture capital
Personal finance
Credit and Debt
Employment contract
Retirement
Financial planning

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investments in intellectual property can be viewed as building up

intellectual capital. These terms lead to certain questions and
controversies discussed in those articles. Human development theory
describes human capital as being composed of distinct social, imitative
and creative elements:
Social capital is the value of network trusting relationships between
individuals in an economy.
Individual capital which is inherent in persons, protected by
societies, and trades labor for trust or money. Close parallel
concepts are "talent", "ingenuity", "leadership", "trained bodies", or
"innate skills" that cannot reliably be reproduced by using any
combination of any of the others above. In traditional economic
analysis individual capital is more usually called labour.
Further classifications of capital that have been used in various theoretical
or applied uses include:
Financial capital which represents obligations, and is liquidated as
money for trade, and owned by legal entities. It is in the form of
capital assets, traded in financial markets. Its market value is not
based on the historical accumulation of money invested but on the
perception by the market of its expected revenues and of the risk
entailed.
Natural capital which is inherent in ecologies and protected by
communities to support life, e.g. a river which provides farms with
water.
Infrastructural capital is non-natural support systems (e.g. clothing,
shelter, roads, personal computers) that minimize need for new
social trust, instruction, and natural resources. (Almost all of this is
manufactured, leading to the older term manufactured capital, but
some arises from interactions with natural capital, and so it makes
more sense to describe it in terms of its appreciation/depreciation
process, rather than its origin: much of natural capital grows back,
infrastructural capital must be built and installed.)

http://en.wikipedia.org/wiki/Capital_(economics)

Public finance
Tax
Government debt
Deficit spending
Warrant (of payment)
Banks and banking
Fractional-reserve banking
Central Bank
List of banks
Deposits
Loan
Money supply
Financial regulation
Finance designations
Accounting scandals
Standards
ISO 31000
International Financial Reporting
Economic history
Stock market bubble
Recession
Stock market crash
History of private equity

In part as a result, separate literatures have developed to describe both natural capital and social capital.
Such terms reflect a wide consensus that nature and society both function in such a similar manner as
traditional industrial infrastructural capital, that it is entirely appropriate to refer to them as different types of
capital in themselves. In particular, they can be used in the production of other goods, are not used up
immediately in the process of production, and can be enhanced (if not created) by human effort.
There is also a literature of intellectual capital and intellectual property law. However, this increasingly
distinguishes means of capital investment, and collection of potential rewards for patent, copyright (creative
or individual capital), and trademark (social trust or social capital) instruments.the word capital is what you
have as a wealth.

Within classical economics, Adam Smith (Wealth of Nations, Book II, Chapter 1) distinguished fixed capital
from circulating capital, including raw materials and intermediate products. For an enterprise, both were
kinds of capital.
Karl Marx adds a distinction that is often confused with David Ricardo's. In Marxian theory, variable capital

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http://en.wikipedia.org/wiki/Capital_(economics)

refers to a capitalist's investment in labor-power, seen as the only source of surplus-value. It is called
"variable" since the amount of value it can produce varies from the amount it consumes, i.e., it creates new
value. On the other hand, constant capital refers to investment in non-human factors of production, such as
plant and machinery, which Marx takes to contribute only its own replacement value to the commodities it is
used to produce. It is constant, in that the amount of value committed in the original investment, and the
amount retrieved in the form of commodities produced, remains constant.
Investment or capital accumulation in classical economic theory is the production of increased capital. In
order to invest, goods must be produced which are not to be immediately consumed, but instead used to
produce other goods as a means of production. Investment is closely related to saving, though it is not the
same. As Keynes pointed out, saving involves not spending all of one's income on current goods or services,
while investment refers to spending on a specific type of goods, i.e., capital goods.
The Austrian economist Eugen von Bhm-Bawerk maintained that capital intensity was measured by the
roundaboutness of production processes. Since capital is defined by him as being goods of higher-order, or
goods used to produce consumer goods, and derived their value from them, being future goods.

The Cambridge capital controversy was a 1960s debate in economics concerning the nature and role of
capital goods.The debate was largely between economists such as Joan Robinson and Piero Sraffa at the
University of Cambridge in England and economists such as Paul Samuelson and Robert Solow at the
Massachusetts Institute of Technology, in Cambridge, Massachusetts. The two schools are often labeled
"neo-Ricardian" (or "Sraffian") and neoclassical, respectively.
In neoclassical economics capitalist income is the rate of profit multiplied by the amount of capital, but the
measurement of the "amount of capital" involves adding up quite incompatible physical objects, for example,
adding trucks to lasers. Neoclassical economists assumed that there was no real problem here just add up
the money value of all these different capital items to get an aggregate amount of capital. But Sraffa (and
Joan Robinson before him) pointed out that this financial measurement of the amount of capital depended
partly on the rate of profit. There was thus a circularity in the argument. To date most economists continue
to measure capital in the traditional neoclassical sense, but the controversy continues even if under the radar
of most in the economics profession.

Capital deepening
Capitalism
Capitalist mode of production
Factors of production
Physical capital
Means of production
Venture capital
Wealth (economics)
Lists
list of economists
list of management topics
list of marketing topics
list of accounting topics
list of finance topics
list of ethics topics

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http://en.wikipedia.org/wiki/Capital_(economics)

F. Boldizzoni (2008). Means and ends: The idea of capital in the West, 1500-1970, New York:
Palgrave Macmillan, 2008, chapters 4-8.
K.H. Hennings (1987). "Capital as a factor of production," The New Palgrave: A Dictionary of
Economics, v. 1, pp. 327-33.
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