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

G.M. Hodgson

Research output: Contribution to journalArticlepeer-review

61 Citations (Scopus)
265 Downloads (Pure)

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.

Original languageEnglish
Pages (from-to)1063-1086
Number of pages24
JournalCambridge Journal of Economics
Volume38
Issue number5
Early online date4 Apr 2014
DOIs
Publication statusPublished - 30 Sept 2014

Keywords

  • Capital
  • Collateral
  • Finance
  • Human capital
  • Money
  • Social capital

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