Capital (economics)

Already-produced durable goods that are used in production of goods or services / From Wikipedia, the free encyclopedia

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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]

Capital goods have also called complex product systems (CoPS).[3] The means of production is as a "...series of heterogeneous commodities, each having specific technical characteristics ..."[4] in the form of a durable good that is used in the production of goods or services. Capital goods are a particular form of economic good and are tangible property. Capital goods are one of the three types of producer goods, 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 the factors of production, which however excludes certain durable goods like homes and personal automobiles that are not used in the production of saleable 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]

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