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

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  • Geoffrey M. Hodgson

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.

Suggested Citation

  • Geoffrey M. Hodgson, 2014. "What is capital? Economists and sociologists have changed its meaning: should it be changed back?," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 38(5), pages 1063-1086.
    • Handle: RePEc:oup:cambje:v:38:y:2014:i:5:p:1063-1086.
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    File URL: http://hdl.handle.net/10.1093/cje/beu013
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    Cited by:

    1. Lilia Costabile, 2015. "A note on Piketty’s Capital in the Twenty-First Century and its critics," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 32(3), pages 377-385, December.
    2. Tiago Cardao-Pito, 2017. "Organizations as Producers of Operating Product Flows to Members of Society," SAGE Open, , vol. 7(3), pages 21582440177, August.
    3. Eduard Braun, 2015. "The Theory of Capital as a Theory of Capitalism – Hidden Austrian Contributions to a Historically Specific Approach to Capital," TUC Working Papers in Economics 0015, Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal).
    4. Rossi, Enrico, 2020. "Reconsidering the dual nature of property rights: personal property and capital in the law and economics of property rights," LSE Research Online Documents on Economics 105840, London School of Economics and Political Science, LSE Library.
    5. Franklin Obeng-Odoom, 2015. "Oil boom, human capital and economic development: Some recent evidence," The Economic and Labour Relations Review, , vol. 26(1), pages 100-116, March.
    6. Beninger, Stefanie & Francis, June N.P., 2022. "Resources for business resilience in a COVID-19 world: A community-centric approach," Business Horizons, Elsevier, vol. 65(2), pages 227-238.
    7. Tiago Cardao-Pito & João Silva Ferreira, 2018. "‘Fair Value’ accounting as the normative Fisherian phase of accounting," Accounting History Review, Taylor & Francis Journals, vol. 28(3), pages 149-179, September.
    8. Alexandre Rambaud & Jacques Richard, 2015. "Towards a finance that CARES," Post-Print halshs-01260075, HAL.
    9. Philipp Korom, 2019. "A bibliometric visualization of the economics and sociology of wealth inequality: a world apart?," Scientometrics, Springer;Akadémiai Kiadó, vol. 118(3), pages 849-868, March.
    10. Victor, Peter A., 2020. "Cents and nonsense: A critical appraisal of the monetary valuation of nature," Ecosystem Services, Elsevier, vol. 42(C).
    11. Cachanosky Nicolás, 2017. "Austrian Economics, Market Process, and the EVA® Framework," Journal of Business Valuation and Economic Loss Analysis, De Gruyter, vol. 12(s1), pages 1-9, July.
    12. Lewin, Peter & Cachanosky, Nicolás, 2018. "Substance and semantics: The question of capital," Journal of Economic Behavior & Organization, Elsevier, vol. 150(C), pages 423-431.
    13. Carolina Cañibano & Jason Potts, 2019. "Toward an evolutionary theory of human capital," Journal of Evolutionary Economics, Springer, vol. 29(3), pages 1017-1035, July.
    14. Mauricio De Rosa, 2022. "On Capital: an essay on inequality, capital and value theory," Documentos de Trabajo (working papers) 22-08, Instituto de Economía - IECON.
    15. Godbersen, Hendrik, 2021. "Let social capital (finally) be (economic) capital - Conceptualising, formalising and operationalising social capital," Arbeitspapiere der FOM 80, FOM Hochschule für Oekonomie & Management.
    16. Alexandre RAMBAUD, 2023. "How can accounting reformulate the debate on natural capital and help implement its ecological approach?," Working Paper 8567406c-bed0-4401-9792-a, Agence française de développement.
    17. Alexandre Chirat & Charlotte Le Chapelain, 2017. "Some “unexpected proximities” between Schultz and Galbraith on human capital," Working Papers of BETA 2017-18, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    18. Alexandre Chirat & Charlotte Le Chapelain, 2017. "Some “unexpected proximities” between Schultz and Galbraith on human capital," Working Papers 08-17, Association Française de Cliométrie (AFC).
    19. Fabian Grabicki & Jens Weghake, 2016. "Why the QWERTY phenomenon is not just in the theorists’ minds yet not pose a problem in reality," TUC Working Papers in Economics 0016, Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal).
    20. Peter Lewin & Nicolas Cachanosky, 2020. "Entrepreneurship in a theory of capital and finance—Illustrating the use of subjective quantification," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(5), pages 735-743, July.
    21. Franklin Obeng†Odoom, 2018. "Transnational Corporations and Urban Development," American Journal of Economics and Sociology, Wiley Blackwell, vol. 77(2), pages 447-510, March.
    22. Ishmael Adams & Sumita Ghosh & Goran Runeson & Mahsood Shah, 2022. "Local Perceptions and Scientific Knowledge of Climate Change: Perspectives of Informal Dwellers and Institutions in Accra, Ghana," Sustainability, MDPI, vol. 14(9), pages 1-25, April.

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