Capital Goods and Capital
The notion of capital makes sense only in the market economy, writes Ludwig von Mises. It serves the deliberations and calculations of individuals or groups of individuals operating on their own account in such an economy. It is a device of capitalists, entrepreneurs, and farmers eager to make profits and to avoid losses. It is not a category of all acting. It is a category of acting within a market economy. in an economic system in which there is no private ownership of the means of production, no market, and no prices for such goods, the concepts of capital and income are mere academic postulates devoid of any practical application. FULL ARTICLE
Comments (3)
This passage fails in a way I find frustrating to distinguish (apropos of production) between CALENDAR TIME (waiting) and CLOCK TIME (working, or effort). Admittedly, making such a distinction could cause an unwelcome digression in the discussion, but avoiding the confusion I feel in reading this material would be well worth a considerable disgression.
Another conflation concerns the use of the term SOCIAL CAPITAL at the end. I think social capital in today's terminology may be subject to confusion with HUMAN capital and other such concepts. Better words (here, editing Mises!) for what I think he has in mind could be SOCIALISTIC capital, or PUBLIC (as versus private) capital. Both are, as Mises suggests, major contradictions in terms.
Published: March 2, 2007 12:48 PM
Perhaps someone could explain to me what Von Mises is saying in this piece in somewhat simpler English.
I think he is saying that capital is by definition unconsumed goods. But he doesn't like the term "real capital" to represent the same concept. And he doesn't like the estimation of real capital for the economy as a whole, because capital consists of all different sorts of goods. And so any number for an estimated value of real capital would not just be an approximation, it would be totally meaningless.
Is this basically it?
Published: March 2, 2007 5:53 PM
Alex, Mises seems to saying that only in monetary economy concept of capital has meaning. Thus heterogenous collection of goods of different qualities can be added together only by using money. And this money must be commodity formed by the market process, not any artificial construct of Central Planning Board.
BTW, modern economists dont share this view with Mises. I have Cowles Monograph No 13 (Activity Analysis of Production and Allocation, ed. Koopmans Tjalling, John Wiley,NY 1951 ). This monograph can be downloaded from Cowles Foundation webpage at Yale University. There is interesting problem at the page 94(108) called "Helmsman-Custodian game". There you can find how prices for intermediate, final and primary commodities are formed even in centralized resource allocation situation.
This is something what was already suggested by Enrico Barone in his "Il Ministro della Produzione nello Stato Collettivista", 1908, Giornale degli Economisti.
Personally I think that Hayek's reformulation of Mises critique in Socialist Calculus debate is much better than the original one.
Published: March 3, 2007 3:00 AM