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What is capital? Economists and sociologists have changed its meaning: should it be changed back?

What is capital? Economists and sociologists have changed its meaning: should it be changed back? This article traces the historical usages of the term capital and the explosion of different types of supposed ‘capital’ in the twentieth century, including ‘human capital’ and ‘social capital’. In medieval and early modern times, capital meant money investable or invested in business. This meaning persists in business circles today. In contrast, Adam Smith treated physical assets, machines and people as ‘capital’ and this different usage has dominated economics since. The pre-Smithian meaning referred to money or other saleable assets that could be used as collateral. This article questions the change in meaning by economists and sociologists and highlights the importance of collateralisable property for capitalism. ‘Human capital’ can only be collateral if the humans involved are slaves. ‘Social capital’ can never be used as collateral and it is not even owned. These important issues are masked by the broadened notion of ‘capital’. Given the conceptual problems involved, economists and sociologists should consider returning to the pre-Smithian and surviving business usage of the term. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Cambridge Journal of Economics Oxford University Press

What is capital? Economists and sociologists have changed its meaning: should it be changed back?

Hodgson, Geoffrey M.
Cambridge Journal of Economics , Volume 38 (5) – Sep 4, 2014
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References (175)

Publisher
Oxford University Press
Copyright
© The Author 2014. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.
ISSN
0309-166X
eISSN
1464-3545
DOI
10.1093/cje/beu013
Publisher site
See Article on Publisher Site

Abstract

This article traces the historical usages of the term capital and the explosion of different types of supposed ‘capital’ in the twentieth century, including ‘human capital’ and ‘social capital’. In medieval and early modern times, capital meant money investable or invested in business. This meaning persists in business circles today. In contrast, Adam Smith treated physical assets, machines and people as ‘capital’ and this different usage has dominated economics since. The pre-Smithian meaning referred to money or other saleable assets that could be used as collateral. This article questions the change in meaning by economists and sociologists and highlights the importance of collateralisable property for capitalism. ‘Human capital’ can only be collateral if the humans involved are slaves. ‘Social capital’ can never be used as collateral and it is not even owned. These important issues are masked by the broadened notion of ‘capital’. Given the conceptual problems involved, economists and sociologists should consider returning to the pre-Smithian and surviving business usage of the term.

Journal

Cambridge Journal of Economics – Oxford University Press

Published: Sep 4, 2014

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