In economics, capital, capital goods, or real capital are those already-produced durable goods that are used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process. Capital is distinct from land in that capital must itself be produced by human labor before it can be a factor of production. At any moment in time, total physical capital may be referred to as the capital stock (which is not to be confused with the capital stock of a business entity.) In a fundamental sense, capital consists of any produced thing that can enhance a person’s power to perform economically useful work—a stone or an arrow is capital for a caveman who can use it as a hunting instrument, and roads are capital for inhabitants of a city. Capital is an input in the production function. Homes and personal autos are not capital but are instead durable goods because they are not used in a production effort.
In Marxian economics, capital is used to buy something only in order to sell it again to realize a financial profit, and for Marx capital only exists within the process of economic exchange—it is wealth that grows out of the process of circulation itself and forms the basis of the economic system of capitalism
In classical and neoclassical economics, capital is one of the factors of production. The others are land, labour and, according to some proponents, 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 have carried over to contemporary economic theory. There was the further clarification that capital is a stock. As such, its value can be estimated at a point in time. 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 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 labour 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.
Public capital, which encompasses the aggregate body of government-owned assets that are used to promote private industry productivity, including highways, railways, airports, water treatment facilities, telecommunications, electric grids, energy utilities, municipal buildings, public hospitals and schools, police, fire protection, courts and still others.
Natural capital, which is inherent in ecologies and protected by communities to support life, e.g., a river that provides farms with water.
Spiritual capital, which refers to the power, influence and dispositions created by a person or an organization’s spiritual belief, knowledge and practice.
Tags: 2012 capitalfinance1 capital finance news media report zion zionism financial loans mortgages insurance recession 2008 money currency USD America dollar cash bailout loans benchmark lending car credit yes economy economic gold silver fuel oil bullion reduce debt interest attorney lawyer solicitor claim donate support help trading market import export asia market wall st debt consolidation pay day loans