Capital is a kind of good that is invested in production for profit. The founder of modern economics, Adam Smith, defined him as part of the man's property, from which he expected additional income. To date, distinguish different types of capital. However, earlier this word meant all the movable property of the firm. In the Middle Ages in France, loans were called capital, the percentage of which was paid in the head of cattle. This is completely correlated with the original meaning of the Latin word caput, from which the term comes. In the modern economy, fixed assets are buildings, structures and equipment used in the production of goods, and recycled materials and raw materials, fully consumed in one production cycle.

Thus, the concept of capital refers to all durable goods or any non-financial assets used in the production of goods and services. Their renovation in the form of depreciation costs is set in the cost of released products. But everything depends on the form of capital.

Features

The fixed capital differs from the land or other non-renewable resource by the fact that it can be increased due to human labor and entrepreneurial abilities. With the help of an arrow, a caveman could shoot a beast or a bird. As it increases its ability to perform useful work, it is its capital. For a modern man, an arrow is often the subject of collecting. If he does not earn on it, then it is not his capital. Does not apply to capital for most people and housing, and their personal cars. Exception is made by those who work at home and taxi drivers. In the Marxist theory of political economy, capital is understood as money. which are used to buy something and then resell to profit. The process of such a commercial exchange is the basis of the capitalist economy. In modern schools of economic thought, this is only one type of capital - financial.

In the narrow sense

Classics and neoclassics understand capital as a factor of production, which is applied along with land and labor. Its feature is that it is not used immediately in the production process, as is the case with raw materials, and its cost can be increased at the expense of human effort. Marxist theory distinguishes the following types of capital:

  • Permanent These include goods used in production (buildings, premises, equipment).
  • Variables. They relate to the productivity of labor, which is estimated in wages employed in production.
  • Fictitious These include intangible assets such as stocks, bonds and other securities.

broad definition

The earliest representations of capital described it as material things. These could be facilities, machines, equipment used in the production process. However, since the 1960s economists began to use a broader interpretation of this term. For example, investing in the development of skills and education of workers can be considered as a contribution to human capital. The question of a broader definition of this term and now devote their articles to many economists. Separate advanced capital. It represents assets invested in production for profit in the future. Often, these are the funds that are provided to perform a specific task of reorganizing processes or creating a new enterprise.

Modern types of capital

  • Financial. It represents a commitment of the enterprise to its shareholders and is used as money for trading. Its value does not depend on historical preconditions.
  • Natural. It is characterized by the state of the environment and the volume of resources, such as trees.
  • Social. It includes the reputation and cost of the trademark.
  • Intellectual. There is no generally accepted view of what to mean under this type of capital. However, in a broad sense, all forms of knowledge transfer from one individual to another fall into this category.
  • Human. This is a very broad concept, which includes all forms of personality development. Often it is used in the theory of sustainable development.

interpretations

An economist, Henry George, believed that such types of capital as stocks, bonds, loans, bills of exchange and other certificates, in fact, should not be allocated to a separate group. Increasing or decreasing their value does not affect the overall welfare of the community (state). Therefore, they can not be attributed to types of capital. Werner Sombart and Max Weber find the origins of the modern concept of this concept in double accounting. They define capital as the amount of wealth used to generate profits. He paid attention to this concept in his famous book The Wealth of Nations and Adam Smith. He distinguished the main and working capital. Before the first, he attributed physical assets that were not consumed in the production process. For example, cars or warehouses. The second is the physical assets that are consumed in the production process.

For example, raw materials and workpieces. Marx introduces the notion of variable capital into science. Under him, he understands the attachment to the workforce. In his opinion, only they create value added in the capitalist economy. Investments in other factors of production Marx calls constant capital. The notion of savings and investment should be distinguished. As Keynes noted, the first arises when an economic entity does not spend all its current income, and the second means the purchase of certain goods that can be earned. Thus, buying a personal car is not an investment unless a person is a tax collector or a good car is not needed to enhance his business image. Representatives of the Austrian School of Economics understood the products of "higher order" under capital, because they produce other goods and services. The most discussed for today are three forms of capital: social, individual and intellectual. They all relate to the person's abilities and abilities, since it is he who is the central subject of the modern economy.