Abstract
Among several contributions, Carl Menger proposed a division of economic goods in orders. This sets the foundations for the Austrian capital theory, usually maintained as a complex of higher orders goods in a production process. Curiously, Menger dismissed this concept of capital, in favor of one used in common parlance. This change of view is often overlooked, but represents a turning point in the field of capital theory. This paper assesses how Menger's popular notion of capital differs from the scientific one. To achieve this goal, we investigate the concept of capital in Classical and Marginalist economists. One of the implications is that the popular concept is related to the theory of capitalism. Capital, as used in business language for economic calculations, is better suited for analyzing the capitalist system, as it captures the usage in monetary economies and business accounting.
Highlights
Capital theory is undoubtedly the most controversial research field in Economics. Fisher (1896, p. 509) opens his investigation on capital by saying that “of all economic conceptions, few are more fundamental and none more obscure than capital”. Walras (1954 [1874], p. 213) argues that “many authors are still confused and obscure in their writings” on capital theory. Menger (1888:1) admits that the character of capital is ambiguous and controversial.Carl Menger is considered the founder of the Austrian School of Economics
The Austrian capital theory is usually maintained as a complex of higher orders goods in a production process
Having founded his theory on the idea of general equilibrium, he influenced what is known as the Neoclassical school and is the most present author of the Marginalist Revolution in today’s mainstream economics
Summary
Capital theory is undoubtedly the most controversial research field in Economics. Fisher (1896, p. 509) opens his investigation on capital by saying that “of all economic conceptions, few are more fundamental and none more obscure than capital”. Walras (1954 [1874], p. 213) argues that “many authors are still confused and obscure in their writings” on capital theory. Menger (1888:1) admits that the character of capital is ambiguous and controversial. Capital theory is undoubtedly the most controversial research field in Economics. To assess the differences between the popular notion of capital and the conception of produced means of production, and the research field that it potentially opens (HODGSON, 2014; BRAUN, 2017), this article firstly approaches the Classical concept of capital as in Smith, Ricardo, and Stuart Mill. It proceeds to investigate the Marginalist concept of capital, as in the three exponents of this tradition, Jevons, Menger, and Walras.
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