Theories of capital: the concept and essence of capital, features

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:45

Capital is a key production factor, and is a certain source of long-term labor benefits (buildings, structures, cars, equipment, etc.), inventories and finances, concentrated in the possession of entrepreneurs and companies that provide production final products and services, as well as profit-generating.

Basic postulates

The formation and development of the theory of capital was greatly influenced by such prominent experts in the field of economics as A. Smith, K. Marx, A. Marshall, I. Fischer and D. St. Mill. Each of them held their own views on the matter.

It is customary in the economy to allocate the following types of capital:

1. Physical. It is also called materialistic. This category includes buildings, facilities, equipment, machines, materials, etc.
2. Human. These are the specific we alth that people own. They are expressed in knowledge, labor skills and experience applied in the production process.
3. Financial. This is the assimilation of cash and stock prices.

Thisbasic theories of capital. Although many experts in their teachings presented its essence in different ways.

Mercantile position

Representatives of this doctrine correlated national we alth with money, which they identified with metals of a noble class.

According to their theory of capital, only foreign trade could serve as a source of we alth. It guarantees the appearance of gold and silver in the country. To do this, it is only necessary to maintain an active trade balance.

Money for mercantilists is a format of capital, which must first become productive, and then commodity. This ensures efficient production and employment for all.

The accumulation of we alth is one of the elements in social production. Money is historically the initial form of capital.

Physiocracy

The followers of this direction have the honor of introducing the concept of "capital" into economic science. The pioneer in this regard was Le Tron.

The physiocratic theory of capital is related to agriculture. Here there is its division into two groups of advances: initial and annual. They differ in their methods of entering the price of the finished product.

Reimbursement of annual species occurs in full in one production session, and the initial ones - in parts.

The source of we alth is the gift the farmer receives from the land. To do this, he works effectively. And capital is formed inas a result of land rent, which is received free of charge by the owner of the site.

Thus, the physiocrats made the following provisions:

1. Separation of fixed and circulating types of production capital.
2. Methods for transferring the price of these types to the created product.
3. Application of the analysis of the practical exploitation of capital in the manufacturing industry, as well as the search for its source in this area.

Classic direction

Its founder A. Smith was sure that reserves could be converted into capital when they go to:

1. Create, recycle or purchase products to resell and generate income.
2. Techniques and tools that will bring profit without changing owners.

Thus, the specialist for the first time considers capital in two areas: circulation and production. Its main characteristic is the ability to bring monetary benefits. To achieve this, you need to use it in the following industries:

1. Extraction and processing of raw products that society needs.
2. Transporting her.
3. It is divided into parties according to the interests of consumers.

Smith also displays two types of capital: circulating and fixed.

Theorems of J. St. Milla

This specialist, analyzing the theory of capital, deduced the following postulates:

1. Each productive activity in its scale depends on the parameters of capital.
2. He himself isconsequence of savings. And it necessarily increases when new workers are hired and production develops.
3. The use of savings is carried out only as capital itself.
4. Work is contained and used when it is spent on providing conditions for it.

Marxist movement

Its founder brought the theory of primitive accumulation of capital. According to it, the source of its formation is the circulation of products, and money is the initial form of its expression.

Capital develops in the emergence of labor force. It is the basis of value. And the price does not rise in the process of buying and selling. Its source is involved in the manufacturing industry.

Karl Marx also defined the circular movement of capital, which goes through three stages in this process:

1. Investment in production and conversion to natural form. This is the money form stage.
2. Technology workforce is joining. Benefits are created. The transition to the commodity format should follow.
3. Created products are sold and surplus value is arranged.

School of marginalists

Its representative Böhm-Bawerk developed a theory according to which the land and labor activity are considered to be the primary factors of production. Capital is of secondary importance. It acts as a link.

The theory of capital accumulation here is based on labor and nature. It is created by them, as well as through the introduction of speci altechnologies that improve production efficiency.

And the main postulate of this theory is this: capital has its own productivity.

Neoclassical theory

It was created by Alfred Marshall. He analyzed the amount of capital involved in social production based on supply and demand relationships.

The object of study was distinguished at two levels:

• individual citizen or company,
• of public importance.

The capital of a person is that part of his fortune that functions for profit (for example, rent).

National income is created at the second level. Here, the capital is the entire available fund of funds for the creation of we alth. And you can get certain benefits from it. This also takes into account production costs.

The totality of the former is due to the efficiency of capital as a key factor in the creation of products. And this affects the formation of market demand for himself.

The supply of capital is influenced by the interests of citizens in its accumulation. The reward for such an expectation is the accrued interest.

Depends on these quantities (supply and demand):

1. The market price of capital, which Marshall defined as gross interest.
2. Its volume required in production.
3. Measurement of nationwide we alth creation.

Keynesian School

Her position is as follows: it is necessary to provide full employment and bringproduction volume to full turnover. To do this, the economy must be stimulated by investment - the development of the value of capital property. It includes fixed, working and liquid capital. And we alth translates into a ratio of normalized interest (the cost of capital) to the potential return on its application.

Experts of this movement call such a factor extreme capital efficiency.

Historical Foundation

Whatever schools and trends are created, the initial form of capital is trading - it is also a merchant model (primary name).

It settled down in the Middle Ages. Then various merchant associations and connections were actively involved. Absolutist power often became the backbone of merchant capital. This gave him a great advantage over the emerging industrial analogue and the right to impose his will on the peasants and artisans in the sale of their products.

And income arose only because of the difference in funds appearing in such operations. Such a source gradually weakened.

As industrial capital developed and the merchant model fell, the latter was transformed into a trading form. And on this basis, another material source was formed in the circulation industry.

Due to various factors, the industrial type experienced difficulties with the sale of goods, and part of its circulation became isolated. Trading capital began to emerge from it.

This had a beneficial effect on the dynamics of the industrial analogue. improved andproduction efficiency.

And the theory of trading capital acquired the following foundations:

1. The industrialist is not obliged to sell products, and free funds go to the development of production.
2. Only having two variations. The first is money. The second is commercial.
3. Permanent circulation.
4. Products are purchased from manufacturers and then sold directly to consumers.

Structure provisions

In developing his business, an entrepreneur is looking for optimal solutions. He needs to optimally structure his capital and minimize its average price tag. Along with this, earnings per share should develop and financial stability should be established.

Here the theory of capital structure plays the most important role. It has the following approaches:

1. Traditional.
2. Modern.
3. Compromise.
4. With asymmetric information.
5. Signal.
6. Ordinal funding.
7. Using agency connections.

Items 1 and 2 have received the greatest application. They differ from each other in the reaction of the price tag of their capital to market metamorphoses.

According to the first approach, shareholders do not respond to the growth of borrowed capital for a long time, as the situation is unstable.

The second implies their immediate reaction in order to develop profits.