The kinetics of capital formation and economic organisation

Abstract

We examine the inseparability of capital formation and economic organisation in capitalist economic systems. Capital possesses a complex, multilevel (micro, meso, macro) structure that is always in the process of transformation. Levels of the capital structure are interdependent and interactive. Correspondingly, economic organisation at these various levels is not an independent entity in itself--it occurs as a by-product and structural aspect of capital formation. Rather than the transaction, our focal unit of analysis is a production notion: the capital combination that emanates from the kinetic organisation of material by human agency. We consider the behaviour of entrepreneurs as causal agents in specifying and appraising potential capital combinations, reorganising production and scrapping capital. Entrepreneurs' combinatorial actions often change existing materials to serve functions for which they were not originally designed, thereby changing capital structures and the shape and boundaries of economic organisation at different levels of economic complexity. Capital is created in a dynamic knowledge-generation process that depends on entrepreneurs' perceptions of gaps in the capital structure. Copyright The Author 2012. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.