Week 8 of the Mises Institute’s Home Study Course in Austrian Economics includes one audio lecture and one book chapter dealing with capital.
- “Capital” by Bob Murphy: Following Rothbard, Murphy defines capital as “reproducible means of production.” He says that a problem with many mainstream economists is that they equivocate on this term frequently, using it to refer interchangeably to capital goods or a capital fund of money. Money is not capital, though, and attempts to aggregate capital amounts in money terms run into meaninglessness when applied to entities like countries. Capital is closely related to interest; returns on capital approximate the interest rate under normal circumstances. Murphy also refers to Boehm-Bawerk’s idea of “roundabout-ness” in the structure of production: the more roundabout, capital-intensive the structure, the more productive it is.
“Make a New Plan, Stan: On the Place of Capital in the Economy” (Ch. 8 of Gene Callahan, Economics for Real People): “What distinguishes capital goods are not any physical characteristics or special circumstances under which they came into being, but the fact that they are, today, a part of someone’s plan to produce a consumer good.” If the item in question ceases to be part of such a plan, it loses its character as a capital good. Callahan echoes Murphy’s point about the absurdity of attempting to quantify “social capital,” not just because the prices of the capital goods would collapse if their owners attempted to sell them all at the same time, but also because they are part of contradictory plans. So the key Austrian insight is not that there’s some “total amount” of capital goods in the economy, but that they are part of an interlocking structure of individual plans. If this is true, the criticism of capitalism’s failure to employ “idle capital goods” disappears, because the items in question have ceased (at least temporarily) to be capital goods at all.
Don’t forget that Bob Murphy now teaches several courses at Liberty Classroom. Please join the party over there!
The Western Tradition 