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People also ask
What is capital in economics?
Why is capital important?
What are capital goods in economics?
What is circulating capital in economics?
Why are capital goods referred to as means of production?
What is the difference between financial capital and economic capital?
In economics, capital goods or capital are "those durable produced goods that are in turn used as productive inputs for further production" of goods and services. [1] A typical example is the machinery used in a factory .
- Overview
- The classical theory of capital
economics
Written byKenneth E. Boulding,
Kenneth E. Boulding
Distinguished Professor of Economics, University of Colorado, Boulder, 1977–80. Author of Economics as a Science; Ecodynamics: A New Theory of Societal Evolution.
Paul Lincoln Kleinsorge,
Paul Lincoln Kleinsorge
Although ancient and medieval writers were interested in the ethics of interest and usury, the concept of capital as such did not rise to prominence in economic thought before the classical economists (Adam Smith, David Ricardo, Nassau Senior, and John Stuart Mill).
Adam Smith laid great stress on the role played by the accumulation of a stock of capital in facilitating the division of labour economics and in increasing the productivity of labour in general. He recognized clearly that accumulation proceeds from an excess of production over consumption. He distinguished between productive labour, which creates objects of capital, and unproductive labour (services), the fruits of which are enjoyed immediately. His thought was strongly coloured by observation of the annual agricultural cycle. The end of the harvest saw society with a given stock of grain. This stock was in the possession of the capitalists. A certain portion of it they reserved for their own consumption and for the consumption of their menial servants, the rest was used to feed “productive labourers” during the ensuing year. As a result, by the end of the next harvest the barns were full again and the stock had replaced itself, perhaps with something left over. The stock that the capitalists did not reserve for their own use was the “wages fund”—the more grain there was in the barn in October the sharper the competition of capitalists for workers, and the higher real wages would be in the year to come. The picture is a crude one, of course, and does not indicate the complexity of the relationship between stocks and flows in an industrial society. The last of the classical economists, John Stuart Mill, was forced to abandon the wages-fund theory. Nevertheless, the wages fund is a crude representation of some real but complex relationships, and the theory reappears in a more sophisticated form in later writers.
Adam Smith, paste medallion by James Tassie, 1787; in the Scottish National Portrait Gallery, Edinburgh.
Courtesy of the Scottish National Portrait Gallery, Edinburgh
Capital is stuff used to make things, like land, equipment, and supplies. Labor is people working. Return on capital measures how much money is made from investing in capital. The video shows how capital has changed over time in the U.S., like land becoming less important.
- Labor is often considered capital, but it's a fairly special type of capital. Labor is special because it can be used for anything, which is a bit...
- This is a great question, and is fundamental to understanding how potentially biased and arbitrary it is to sum up the value of all the capital in...
- Historically the return on capital investment has been fairly steady over long periods. The book _Stocks for the Long Run_ covers this at length. S...
- I think they mean the capital costs 4-5 times of the annual return.
- Capital goods are things of value which can used for the creation of other capital goods, or for the creation of consumer goods. Labor is a special...
- Yes, those are all frequently referred to as capital, at least informally, however money is radically different. Money is not economic capital - mo...
- Can you have more money in the bank than you earn in a year? Sure you can. So there is also no reason we cannot have more capital in the country th...
- 1. Capital is not a synonym of Wealth. They are different concepts that do overlap, however. "Capital" basically consists of what (land, equipment,...
Dec 8, 2023 · When economists refer to capital, they are referring to the assets that allow for increased work productivity. These include physical tools, plants, and equipment. Capital comprises...
May 5, 2014 · Although capital plays a central role in economic theory and in the world, many economists have historically given it insufficient attention. Even economist Piketty’s bestselling book explicitly devoted to capital still relies on a very simplistic conception of capital as a single aggregate.
Capital, the Economy and Monetary Policy. Capital expands the production of society or an individual beyond the levels that could be attained without it and plays a large part in improving productivity and standards of living. The key to understanding capital is recognizing the value of goods and services that are used as resources to produce ...
Jul 13, 2023 · Different Types of Capital. In this short introductory video , we will look at two important types of capital as an economic resource. The economic problem involves decisions about how to make the best use of limited (scarce) resources when not all wants/needs can be fully satisfied.
