Capital

2009-05-22T21:32:22Z

88.64.50.78: Adding categories

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Capital are the [[good]]s, that were produced by previous stages of production, but do not directly satisfy consumer's needs; they are used in [[production]] to eventually produce consumer goods.<ref name="Rothbard_Means">Murray N. Rothbard. [http://mises.org/rothbard/mes/chap1c.asp#9._The_Formation "9. The Formation of Capital"], ''[[Man, Economy and State]]'', referenced 2009-05-19.</ref>

==The Formation of Capital==
In the simplest example of an economy (the "[[Robinson Crusoe economy]]"), a person can spend [[time]] producing consumer goods and consuming them. In order to produce capital goods, he must [[Saving|save]], i.e. ''consume less'' than his means allow in the present. With capital, he can produce more and and so ''consume more'' in the future.

The creation of capital goods is called [[investment]].<ref name="Rothbard_Means" />

==Capital in Production==
Capital makes the [[production]] process more "roundabout"; in general are these methods are more productive than shorter, more direct methods. An actor will opt for longer, more roundabout methods so long as the enhanced output more than offsets the increased waiting time, which in itself is a disadvantage because of [[Time#Time preference|time preferences]].

Without the aid of capital, only goods with the shortest period of production are available. Goods with longer periods of production are not available unless capital goods are acquired.

There are two ways in which longer processes of production through the use of capital may increase productivity:
# by making possible a greater production of the same good per unit of time; or
# by making possible the production of consumer goods that were not available ''at all'' with a shorter process of production<ref name="Rothbard_Means" />

==References==
{{Reflist}}
[[Category:Economical Concepts]]

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Capital