Capital (economics)

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. At the macroeconomic level, "the nation's capital stock includes buildings, equipment, software, and inventories during a given year."^[2]

The means of production is as a "... series of heterogeneous commodities, each having specific technical characteristics ..."^[3] "capital goods", ^[4] are one of the three types of intermediate goods used in the production process, the other two being land and labour. ^[5] The three are also known collectively as "primary factors of production".^[5] This classification originated during the classical economics period and has remained the dominant method for classification.

Capital can be increased by the use of a production process (see production function and factors of production). Outputs of the production process are normally classified as capital goods, durable goods, and consumer goods. Durable goods are differentiated from capital goods by virtue of the fact that they are long lived personal property not used in the production of marketable goods, e.g personal homes and personal automobiles are not used in the production of marketable goods and services.

In Marxian critique of political economy, capital is viewed as a social relation.^[6] Critical analysis of the economists portrayal of the capitalist mode of production as a transhistorical state of affairs distinguishes different forms of capital:^[6]

constant capital, which refers to capital goods
variable capital, which refers to labor-inputs, where the cost is "variable" based on the amount of wages and salaries paid during an employee's contract/employment,
fictitious capital, which refers to intangible representations or abstractions of physical capital, such as stocks, bonds and securities (or "tradable paper claims to wealth")

Adam Smith defined capital as "that part of man's stock which he expects to afford him revenue". In economic models, capital is an input in the production function. The total physical capital at any given moment in time is referred to as the capital stock (not to be confused with the capital stock of a business entity). Capital goods, real capital, or capital assets are already-produced, durable goods or any non-financial asset that is used in production of goods or services.^[7]

^ Samuelson, Paul A., and Nordhaus, William D. (2001), 17th ed. Economics, p. 270. McGraw-Hill.
^ Samuelson, Paul A., and Nordhaus, William D.(2001), 17th ed. Economics, p. 442. McGraw-Hill.
^ Hagemann, Harold, 1987.
^ The New Palgrave: A Dictionary of Economics, 1st Edition.[1]
^ ^a ^b Samuelson, Paul A.; Nordhaus, William D (2004). Economics. McGraw-Hill. ISBN 978-0-07-287205-7.
^ ^a ^b Marx, Karl, Grunddragen i kritiken av den politska ekonomin i urval av Sven-Eric Liedman, 91 29 41310 9, 1971 p.66,104
^ Boulding, Kenneth E. "Capital and interest". Encyclopedia Britannica. Retrieved July 22, 2017.

[1] Samuelson, Paul A., and Nordhaus, William D. (2001), 17th ed. Economics, p. 270. McGraw-Hill.

[2] Samuelson, Paul A., and Nordhaus, William D.(2001), 17th ed. Economics, p. 442. McGraw-Hill.

[3] Hagemann, Harold, 1987.

[4] The New Palgrave: A Dictionary of Economics, 1st Edition.[1]

[Samuelson-5] Samuelson, Paul A.; Nordhaus, William D (2004). Economics. McGraw-Hill. ISBN 978-0-07-287205-7.

[:0-6] Marx, Karl, Grunddragen i kritiken av den politska ekonomin i urval av Sven-Eric Liedman, 91 29 41310 9, 1971 p.66,104

[Boulding-7] Boulding, Kenneth E. "Capital and interest". Encyclopedia Britannica. Retrieved July 22, 2017.

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