Tools, machinery and other man-made elements used to produce goods and services

A capital good is a durable good (one that does not quickly wear out) that is used in the production of goods or services. Capital goods are one of the three types of producer goods, the other two being land and labor, which are also known collectively as primary factors of production. This classification originated during the classical economics period and has remained the dominant method for classification.

Articles

Bauer, Peter (1915-2002), by James A. Dorn, The Encyclopedia of Libertarianism, 15 Aug 2008
Biographical essay
"By observing economic reality and adhering to the logic of the price system, Bauer refuted key propositions of orthodox development economics, the most basic of which was the idea of a 'vicious circle of poverty.' Poor countries were said to be poor because people had low incomes and could not generate sufficient savings to allow for capital accumulation, which was widely viewed as a key determinant of economic growth. Bauer observed that many people and many countries had moved from poverty to prosperity and that large-scale capital investment is neither necessary nor sufficient for material advance."
Related Topics: Peter Thomas Bauer, Free Trade
Capital Goods and Capital, by Ludwig von Mises, Human Action, 1949
Chapter 15, Section 2; explains what are capital goods, differentiates them from "capital", defines other terms such as saving, income and capital consumption, and discusses spurious concepts such as real capital and social capital
"At the outset of every step forward on the road to a more plentiful existence is saving--the provisionment of products that makes it possible to prolong the average period of time elapsing between the beginning of the production process and its turning out of a product ready for use and consumption. The products accumulated for this purpose are either intermediary stages in the technological process, i.e. tools and half-finished products, or goods ready for consumption that make it possible for man to substitute, without suffering want during the waiting period, a more time-absorbing process for another absorbing a shorter time. These goods are called capital goods."
Collected Works of Nassau William Senior, by Donald Rutherford (editor), 1998
"Introduction" chapter of subject book, includes biographical and bibliographical information
"After discussing the different Smithian and Ricardian reasons for distinguishing fixed from circulating capital, Senior suggests capital should be classified as reproductive (e.g. farm animals and coals in a furnace), simply productive (instruments which produce something different, e.g. a lace machine) and unproductive (e.g. gold or jewellery which yields a profit through being retained for a period of time). Capital makes possible the use of implements and the division of labour."
Eugen von Böhm-Bawerk: A Sesquicentennial Appreciation, by Richard Ebeling, The Freeman, Feb 2001
Broad biographical essay, including Böhm-Bawerk relationships with Menger, Mises and Schumpeter, and his two major works
"... often the most effective path to a desired goal is through 'roundabout' methods of production. A man will be able to catch more fish in a shorter amount of time if he first devotes the time to constructing a fishing net out of vines, hollowing out a tree trunk as a canoe, and carving a tree branch into a paddle. Greater productivity will often be forthcoming ... if the individual is willing to undertake ... a certain 'period of production,' during which resources and labor are set to work to manufacture the capital—the fishing net, canoe, and paddle—that is then employed to [go] ... where larger and more fish may be available."
Inequality of Wealth and Incomes, by Ludwig von Mises, The Freeman, May 1955
Describes how attempts to equalize incomes and wealth lead to lowered standard of living for the masses and eventually to socialism
"The Ford enterprises would not exist if Henry Ford's profits had been taxed away as soon as they came into being. The business structure of 1895 would have been preserved. The accumulation of new capital would have ceased or at least slowed down considerably. The expansion of production would lag behind the increase of population."
Related Topics: Free Market, Socialism, Taxation
I, Pencil, by Milton Friedman (afterword), Leonard Read, Lawrence Reed (introduction), The Freeman, Dec 1958
Read's most famous essay; resource page at FEE website includes PDF, MOBI and ePub versions, and MP3 recording
"Now contemplate all the saws and trucks and rope and the countless other gear used in harvesting and carting the cedar logs to the railroad siding. ... Consider the millwork in San Leandro ... the heat, the light and power, the belts, motors, and all the other things a mill requires? ... the dam of a Pacific Gas & Electric Company hydroplant which supplies the mill’s power! ... Once in the pencil factory—$4,000,000 in machinery and building, all capital accumulated by thrifty and saving parents of mine—each slat is given eight grooves by a complex machine, fter which another machine lays leads in every other slat ..."
Related Topics: Free Market, Government, Labor, Land
Letters to Thomas Robert Malthus, on Several Subjects of Political Economy, and on the Cause of the Stagnation of Commerce, by Jean-Baptiste Say, 1821
Series of five letters from Say to Malthus, written in response to the latter's criticisms in Principles of Political Economy (1820); the letters were translated from the French by John Richter
"The service rendered by capital in any undertaking whatever ... is likewise an immaterial product. He who consumes a capital unproductively destroys the capital itself; he who consumes it reproductively, consumes the material capital, and also the service of that capital ... When a dyer puts indigo, to the value of a thousand francs, into his copper, he consumes material produce worth a thousand francs; and, besides, he consumes the hire of this capital, its interest. The dye which he obtains, returns to him the value of the material capital employed, and also the value of the immaterial service of the same capital."
Minimum Wage Rates, by Ludwig von Mises, Human Action, 1949
Chapter 30, "Interference With the Structure of Prices", Section 3; discusses the setting of minimun wages both by legislation and by collecitve bargaining, pointing out some of the resulting problems
"Tools and machinery are primarily not labor-saving devices, but means to increase output per unit of input. They appear as labor-saving devices if looked upon exclusively from the point of view of the individual branch of business concerned. Seen from the point of view of the consumers and the whole of society, they appear as instruments that raise the productivity of human effort. They increase supply and make it possible to consume more material goods and to enjoy more leisure."
The Brilliance of Turgot, by Murray Rothbard, 1986
Biography and review of Turgot's major writings; introduction to The Turgot Collection
"In his great 'Reflections,' Turgot pointed out that wealth is accumulated by means of consumed and saved annual produce. Savings are accumulated in the form of money, and then invested in various kinds of capital goods. Furthermore, as Turgot pointed out, the 'capitalist-entrepreneur' must first accumulate saved capital in order to 'advance' his payment to laborers while the product is being worked on. In agriculture, the capitalist-entrepreneur must save funds to pay workers, buy cattle, pay for buildings and equipment, etc., until the harvest is reaped and sold and he can recoup his advances. And so it is in every field of production."
The Economic Role of Saving and Capital Goods, by Ludwig von Mises, The Freeman, Aug 1963
Explains there is a third factor of production aside from nature's resouces and human labor, and also that entrepreneurial judgement is necessary to attain the desired end of production
"Capital goods come into existence by saving. A part of the goods produced is withheld from immediate consumption and em­ployed for processes the fruits of which will only mature at a later date. ... Civilized man produces tools and intermediary products in the pursuit of long-range designs that finally bring forth results which direct, less time-consuming methods could never have attained, or could have attained only with an incomparably higher expenditure of labor and material factors."
Related Topics: Entrepreneurship, Technology, Wages
The Kirznerian Way: An Interview with Israel M. Kirzner, by Israel Kirzner, Austrian Economics Newsletter, 1997
Topics include: Ludwig von Mises, the Austrian School, equilibrium, entrepreneurship, capital, business cycle theory, time preference, Hayek, Lachmann and Rothbard
"Usually, people look at capital as objects, usually highly valued objects. That tempts us to think that physical capital is itself the source of the flow of income. The view of capital I present relates directly to the purposes of individuals. ... I like to use the metaphor of the half-baked cake in an oven. This is a desk, and the person who made it was planning that I would use it to write on, put papers on, and so on. By itself, the desk is a half-baked cake, just as are cars, buildings, and machines. ... We must look at capital, not in objective terms, but as representing the plans of individuals and their forecasts of the future."

Books

Capital and Interest, by Eugen Böhm von Bawerk, 1884
3 volumes: History and Critique of Interest Theories, Positive Theory of Capital, and Further Essays on Capital Interest. Electronic text based on 1890 translation, available at The Library of Economics and Liberty.

The introductory paragraph uses material from the Wikipedia article "Capital good" as of 06 Sep 2018, which is released under the Creative Commons Attribution-Share-Alike License 3.0.