Economics Dictionary of Arguments

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Capital: Capital in economics refers to assets used to produce goods and services, including financial capital, machinery, buildings, and human skills. It represents an investment in productive resources, contributing to economic growth, productivity, and wealth generation. Capital can be physical or human, and its accumulation is crucial for development.
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Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments.

 
Author Concept Summary/Quotes Sources

Mountifort Longfield on Capital - Dictionary of Arguments

Rothbard II 139
Production/capital/Longfield/Rothbard: Even if capitalists qua capitalists and not as labourers,
Rothbard II 140
produce nothing tangible, they perform a vital service in saving capital and paying factors to engage in ‘time-consuming’ processes of production.
While most of the British classicists, including Ricardo, spoke perfunctorily of a period of production, they linked it strictly to the one-year harvest cycle in agriculture. Longfield was able to break out of this agricultural framework, moving ‘toward making the time dimension of production a variable in his analysis. He did this by linking the period of production directly to the division of labour and identifying increases in one with extensions of the other’. Longfield accomplished this linkage by repeating Adam Smith's famous discussion of the pin factory and the division of labour, while showing that extending that division will bring more roundabout processes into play. In short, greater capital investment will eventually lower the labour time required to produce a unit of output, but only by increasing the waiting time between the initial point of investment and the eventual unit of consumer goods. During the time of waiting for the eventual product, the workers must be able to live, and this living is precisely what the capitalists provide.
They do so by ‘abstaining’ from consumption, thereby allowing the worker to ‘consume something produced by the toil of others, although nothing produced by him has yet been consumed by anyone’. In short, while the product of labour is off in the future, the capitalist saves money now and hires the worker: ‘The person who employs him [the worker] and directs his labour, in general pays him in the first instance, and repays himself by the sale of the articles thus produced.’ In this way, Longfield was able to offer a remarkable anticipation of the Böhm-Bawerkian theory of capital(1). The capitalists' gross profit, then, consists of two parts: a return for the service of advancing wages to the workers until the product is sold (long-run interest), and returns for the labour of direction and for the assumption of business risk. Longfield made no attempt to stress the latter and concentrated on the former, the return for the service of advancing wages. Hence, as Longfield points out in anticipation of the sophisticated and highly perceptive Austrian discounted marginal productivity theory of factor pricing, the worker in effect pays the capitalist a discount from his marginal productivity for the service of supplying money now rather than having to wait for the sale of the product.
Again Longfield: [The capitalist] pays the wages immediately, and in return receives the value of [the worker's] labour, to be disposed of to the best advantage... Hence the value of the labour fixed in... any article, is greater than the wages of that labour. The difference is the profit made by the capitalist for his advances; it is, as it were, the discount which the labourer pays for prompt payment.(2)
Time-preference/Rothbard: It is only a slight step from this analysis to the identification of this discount as a payment for time-preference.
>Time-preference
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1. Eugen von Böhm-Bawerk, Capital and Interest, Vol. I, History and Critique of Interest Theories (South Holland, 111.: Libertarian Press, 1959),
2. Mountifort Longfield. 1833. Lectures on Political Economy. Dublin 1834.
https://doi.org/10.2307/2223849

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Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments
The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition.

Longfield I
Mountifort Longfield
Lectures on political economy, delivered in Trinity and Michaelmas terms, 1833 Dublin 1834

Rothbard II
Murray N. Rothbard
Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995

Rothbard III
Murray N. Rothbard
Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009

Rothbard IV
Murray N. Rothbard
The Essential von Mises Auburn, Alabama 1988

Rothbard V
Murray N. Rothbard
Power and Market: Government and the Economy Kansas City 1977


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