Capital (economics)

Capital (economics)

Capital refers to sums of money or assets put to productive use. Capital, in the form of money seeking to expand itself through investment, forms the basis of capitalism.

In economics, 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.

Read more about Capital (economics):  In Narrow and Broad Uses, Interpretations

Famous quotes containing the word capital:

    Oh, a capital ship for an ocean trip,
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    Charles Edward Carryl (1841–1920)