Capital

Capital is a term with uses in architecture, geography and political science, and finance and economics.

Architecture

In architecture, the capital of a pillar or column is its top part. See capital (architecture).

Geography and Political Science

Also, the capital or "political capital" of a country or other political entilty is the city or town that contains the seat of government. Historically, it was also the place where the various economic forms of capital were concentrated - the origin of the use of the term in economics. A country may have more than one official capital at any given point in time. It may be separate from the actual seat of government or move about seasonally. Different branches of government may be centered in different cities. See capital cities.

Finance and Ecomonics

Capital has a number of related meanings in economics, finance and accounting.

In finance and accounting, capital generally refers to financial wealth, especially that used to start or maintain a business.

Capital in economic theory

In economic theory, capital is one three factors of production, the others being land and labour. Goods with the following features are capital:

It can be used in the production of other goods (this is what makes it a factor of production).
It is man-made, in contrast to land which means naturally occurring resources such as soil and minerals.
It is not used up immediately in the process of production.

Investment in economic theory is the act of producing capital. In order to invest, goods must be produced which are not to be immediately consumed, but instead used to produce other goods. Investment is closely related to saving.

Further economic analysis of capital

Traditional economic theory tended to see capital as physical items such as tools, buildings and vehicles. More recently economists have focussed on broader forms of capital. For example, investment in skills and education can be viewed as building up human capital, and investment in ideas as building up intellectual capital. Other examples of classifications, or 'Styles' of capital, include:

Social capital is trust available to all members of a community (e.g. family, customer base)
Financial capital is liquidated as money for trade, and owned by legal entities.
Natural capital is inherent in ecologies and protected by communities to support life.
Individual capital is inherent in persons, protected by societies, trades labor for trust or money
Instructional capital is knowledge persons and communities and software executes to predict/create or avoid futures
Infrastructural capital is non-natural support systems (e.g. clothing, shelter, roads, PCs) that minimize need for new social trust, instruction, and natural resources.

Capital may be analysed further into its imitative, creative, and social components.

As infrastructural capital has declined in financial value relative to these, separate literatures have developed to describe natural capital and social capital. There is also a literature of intellectual capital that increasingly distinguishes rewards for imitative (patent), creative (copyright), and social trust (trademark) production as part of the ongoing debate on intellectual property law.

References

Hubley, cited in Harding, describes six 'styles' of capital

also see capitalism

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