The Mystery of Capital

Capital is born by representing in writing—in a title, a security, a contract, and in other such records—the most economically and socially useful qualities about the asset as opposed to the visually more striking aspects of the asset. This is where potential value is first described and registered.

looking at the law from an extralegal point of view, to better understand how it functions and what effects it produces.

it provides a standard index to measure the value of things so that we can exchange dissimilar assets.

What they wanted to understand was what capital is and how it is produced and accumulated.

Thus the term “capital” begins to do two jobs simultaneously, capturing the physical dimension of assets (livestock) as well as their potential to generate surplus value.

For accumulated assets to become active capital and put additional production in motion, they must be fixed and realized in some particular subject “which lasts for some time at least after that labour is past.

is a world where ownership of assets is difficult to trace and validate and is governed by no legally recognizable set of rules; where the assets’ potentially useful economic attributes have not been described or organized; where they cannot be used to obtain surplus value through multiple transactions because their unfixed nature and uncertainty l

For Smith, economic specialization—the division of labor and the subsequent exchange of products in the market—was the source of increasing productivity and therefore “the wealth of nations.” What made this specialization and exchange possible was capital, which Smith defined as the stock of assets accumulated for productive purposes.

Third World and former communist nations are infamous for inflating their economies with money—while not being able to generate much capital.