Capital as in capitalism, or capital as in capital goods, or both?


Austrian economists employ two different concepts of capital. Sometimes they treat capital as a universal phenomenon of human action as such. Capital is then understood as a combination of heterogeneous capital goods that appear on the intermediate stages of the production process. In other instances, they understand capital as a homogeneous value magnitude expressed in money terms that is employed in business accounting. This paper argues that this practice not only creates terminological confusion, but leads to substantial misunderstandings when it comes to important theories held by the Austrian school. The point is exemplified by the Austrian theory of the business cycle.

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The author thanks Professor David Howden for helpful comments on an earlier draft of this paper. He has further profited from discussions with several participants of the 2017 conference on “Perspectives of Integrated Austrian Theory” at the Universität Hamburg, Germany.

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Correspondence to Eduard Braun.

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Braun, E. Capital as in capitalism, or capital as in capital goods, or both?. Rev Austrian Econ 33, 383–395 (2020).

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  • Capital
  • Capitalism
  • Capital goods
  • Austrian business cycle theory

JEL classification

  • B53
  • D24
  • P12