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Capital

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A capital asset is one that can be used to make more assets.

For example, a farm is a piece of land that can be used to make food. But only with seed, water, sun and possibly pollination.

As another example, a compiler is a piece of software that can be used to make more software. But only with a programmer and boot image and computer involved.

Money in a bank that pays interest to the depositor is their "capital", however, whether anything new was created or not depends entirely on how the money was invested. Contrary to popular belief banks do not invest depositor's money, they create money and then when they write off loans they destroy money by calling in extant loans.

Because of major differences in how different types of capital operate, there are quite a few different analyses of them. Some are quite obvious nonsense. A very credible one is the Natural Capitalism analysis of Paul Hawken and Amory Lovins which has all capital divided into:

  1. natural capital - assets from nature that provide nature's services to we humans
  2. infrastructural capital - built and made assets (including everything manufactured and made or manipulated by human hands or machines, even clothing) that are physical
  3. financial capital - the abstraction in the bank that signals your score in economics
  4. human capital - your labour and talents; this analysis has been extended by some analysts who characterize the human as being a combination of:
    1. individual capital - unique talents that no other human has, that die with the body, such as teaching skill or musical composition skill
    2. instructional capital - knowledge that can conceivably be shared, e.g. as software or training manuals or instructional videos
    3. social capital - interpersonal trust that may outlast the person, e.g. all those who come together at your funeral are a good representation of your social capital

The above terms are not ideological in any sense, and make no reference to "who owns" the capital. Even financial capital is only defined according to the system printing the money and calling in the loans - it is not seen as equivalent to land or to labour.

See also[edit]

Wikipedia:Capital (economics)