Understanding Capital: Types, Functions, and Significance
Capital: An Economic Perspective
CAPITAL: Among the various meanings of this word in everyday language, its economic significance is derived from lending at interest. The capital or principal is given to generate revenues, serving to obtain some benefit or gain. This is the prevailing concept of capital in economics: the product for a new production.
Capital is formed in a productive first operation. In a second output, the work creates the product and turns it into capital, causing them to play. For some, this becomes the capital accumulation anticipated. Neither work nor labor, then, is the economic capital in these or those things, but represents the idea of a use or purpose that can receive all: money, wheat, a tree uprooted from the earth. All products without distinction will cease to be capital either as engaged in new production or are consumed unproductively.
Forms of Capital
Capital takes multiple forms as varied as the results and industry combinations may result. These are classified, however, because of the trade that capital plays as follows:
- Supplies: Everything that serves to keep the worker while engaged in developing the new product.
- Raw materials: Those which, as a result of earlier work, are the foundation of an industry (producing wheat flour, flour on the bakery).
- Auxiliary materials: Which are used or consumed to change that first call, such as fuel, etc.
- Farmland and industrial buildings: Included under this form of capital are all alterations made on the ground to prepare you for applications of agricultural work, for the manufacture and change, such as clearing, buildings, roads, etc.
- Machines: Tools that help the work of our faculty.
- Money: Although not directly involved in production, is also a form of capital, as can be purchased through them things where the capital is.
- Right to services: Debts and obligations for us because they represent a value changeable it can be applied productively.
Capital’s Role in Production
Capital, such as child labor, is his assistant and constant companion in the economic task, and their functions are more effective and less painful human effort, multiplying the product perfecting and reducing their cost, requires, however, maintenance costs and renewal, so that workers must increase their own needs maneja.
Fixed vs. Circulating Capital
Capital is divided into fixed and circulating capital. Some resist several productions, such as machinery, buildings, etc., while others disappear as they are applied or incorporated into the new product, such as raw materials and some auxiliary materials.
Material vs. Intangible Capital
Some economists distinguish between material and intangible capital, making the latter consist in Schools and personal circumstances of the worker in their education, morality, culture, etc., but this is not simply a consequence of the doctrine discussed elsewhere (1), which considers man as an object of economic production, and So we will just indicate here comes the contradiction to this principle, declare to be a sophisticated, honest and religious is the same as being capitalist.