What Isn’t There? Capital Definitions and Measurements

Abstract

Macroeconomic theory suggests the world continually accumulates capital, making it liable to an excess. Microeconomic observation finds firms, banks and governments doing all they can to economize on capital. The inconsistency is most likely to reflect differences in the definition of capital, some of which were already visible in the first three chapters. There, capital was variously treated as physical means of production, sums of money used to finance the operation of means of production, personal wealth (perhaps built up through flows of personal saving), or the stock that accumulates from flows of net investment. Capital flows as sums of money, but its stock more usually takes the form of physical resources or entitlements with monetary value. The studies reviewed in Chapter 1 suggest an excess flow which might coexist with shortage of stocks, while those of Chapter 2 point to excess stocks despite deficiency of flows.