Capital and Fixed Capital

In Supereconomics, capital is anything that creates value.

This is opposed to finished or consumable products or services which represent the value itself.

Modern Economics defines capital as property, machines, money, and equipment that produces goods and services.

However, Supereconomics capital is a bit different that it inclues the skill, personal attributes, relationships, name, reputation, and other non-physical things.

• Capital in Economics is material and physical
• Capital in Supereconomics can be material or immaterial

Two Types of Capital

There are 2 types of capital:

1. Fixed Capital

This yields a revenue without changing owners or circulating any further. Examples are:

• land improvements
• useful machines
• beautiful voice
• good reputation

2. Circulating Capital

This is employed in raising, manufacturing, or buying goods and selling them again. A circulating capital yields no revenue to its employer while it remains with him.

For example:

• the goods in the store give no revenue while they are in the store unsold
• a bank’s monetary reserves does not generate revenue for the bank
  • This is why banks want to have minimum reserves

The Force of Capital

Our definition of capital as anything that creates value means that capital has ’economic potential energy'.

This energy has to be used, otherwise the whole capital will be useless.

For example:

• owning a huge tract of land will give a lot of economic potential energy to its owner. This will drive him to use his land in order to utilize that energy
• money in the bank will not give revenue to the bank unless it charges a deposit fee. The bank must lend it to others for interest revenue
• a woman with a beautiful face will not give value if she were always at home away from the eyes of people. She can get revenue by being a commercial model

This potential energy is the force of capital. The bigger or more valuable the capital, the more energy it has, and therefore more force.

The misuse or non-use of this force leads to imbalances that manifests as inflation, unemployment, scarcity (or overproduction), etc.

Four Employments of Capital

The force of capital leads to the use and employment of capital.

1. Extraction

This is the extraction of raw materials for use and consumption.

This includes agriculture wherein the inorganic nutrients from the soil are extracted into organic elements that are useful for industry and human consumption.

2. Manufacturing

This is the processing of the raw materials for immediate use and consumption.

3. Wholesale

This is bringing those finished or processed goods from where they abound to where they are lacking.

This includes Logistics and Storage.

4. Retail

This is the dividing the portions of raw materials or finished goods into small parcels for those who want them.

This includes Distribution such as last mile deliveries.

Each of these four methods is needed by the other three.

Which capitals replace which capital?

The retailer’s capital replaces, with profits, the wholesaler’s capital.

The wholesaler’s capital replaces, with profits, the capitals of the farmers and manufacturers he buys from.

Part of the capital of the master manufacturer is employed as a fixed capital in the instruments of his trade.

The farmer’s capital mobilizes the most amount of productive labour.