Is it gold, machines, industry? I still don’t understand what makes something to be capital and what makes it not to be.
From Google;
- assets available for use in the production of further assets
- wealth in the form of money or property owned by a person or business and human resources of economic value
Very crudely:
Capital is one of the four things that generate economic wealth:
There’s Capital (earns interest), Land (rent), Labour (wages) and “Entrepreneurship” (profit).
A capital good is somthing that is used to produce a consumer good. So for instance if I take aluminium (commodity), make a machine (capital good) out of it, it can be used to produce a tin-can (consumer good).
You could go on indefinitely into categorising different kinds of capital, for example:
Assets: machines, buildings, factories
Financial Capital: Stocks, Bonds
Human Capital: Education, talent
Imagine that you wash up on a deserted island. You need to eat berries to survive, and you collect berries very slowly. If you had a stick, you could shake berries from trees and collect berries much faster. But to find a stick, you need to spend time that won’t be spent collecting berries, which means that you must have a supply of berries to consume while producing the stick.
This reserve of berries is capital. The stick is a capital good.
Let me give this a try..
I think capital is anything that you use to gain profit from an exchange. For example..
if I have a furniture store my capital will be the furnitures that I’m trying to sell like chairs, tables, sofa
and if I’m the consumer, my capital will be the money that I have to buy furnitures.
em i right?
A car for example would be considered a capital good when you use it to go to work and a consumer good when you use it to just have fun driving around?
What about when you go on a trip to somewhere but you hate the car travel, the car would be considered a capital good? But if the car travel was fun it would be considered a consumer good?
I know those questions sound ridiculous. [;)]
That’s about right.
My turn:
Capital is wealth stored now with the intent creating more wealth in the future. This is different from consumption that is the satisfaction of current desires with existing capital. The money in my bank account is capital. It is declining wealth reserved for future use. There is a large number of things (maybe infinitely many) that are considered capital. The business/personal use car mentioned previously is a good example.
Thx, that explanation was really helpful.
What would be the difference between consumer good and capital?
A consumer good is a product sold to an end user, a/k/a first order goods. A plumber’s wrench is a first order good, but note that it is part of the plumber’s capital stock. The steel sold to the wrench manufacturer is a higher order good.
Not unless the car is being used productively. If you’re just driving somewhere and you hate it, that doesn’t necessarily obtain.
Capital is any good used in the production of another good, and in this capacity is not directly consumable. Capital goods can either be used in the production of other capital goods (and thus would be higher order capital goods) or in the production of consumer goods (and thus would be lower order.) Note that it has nothing to do with the physical characteristics of the good, only with how it is put to use.
-Jon
Hmm, so if i have a reserve of food and gold for me to use, it is a consumer good, but if i use it to survive while i am setting up a business that would become capital?
If you’re using it for direct consumption, no. It’s just savings you’re drawing on.
-Jon
Well here is my favorite definition of capital.
Capital is anything that you can employ as a means to achieve your goals.
Mind the “can” meaning having control of.
Hmm, but isn’t there a difference if you are using it for only consumption or if you are using it to generate more capital?
sure, the difference is called savings 
Ok, serious now, whatever you have saved, that is not consumed yet, is the capital you have to be employed in the future as means for whatever goals you have.
And if your goal is to accumulate wealth than this is what you use your capital for.
Short on time right now, that prevents you from having to read my babble for more than a few sentences.
Cheers
A house that you rent out is a capital good.
A house that you live in is a consumer good.
An item valued, not for its own sake, but for what it can be used to get is a capital good. In the case of a rental house you don’t own the house because you want another place to live, you own the house because you want money.
Wouldn’t that blur the distinction between capital goods and land/labor? Land (as in any resource that is physically permanent and does not require continual upkeep to remain productive, and which might potentially be depleted in use) can earn rents too, as can labour, but neither properly speaking are capital. Capital is strictly for the purpose of production, but it also requires continual maintenance, even in the ERE.
-Jon
I don’t see how a rental house is any less a piece of capital than a taxi cab.