This book proposes a “representational” theory of capital according to which there is a relation between capital goods in the real side of the economy and instruments representative of property claims on those goods in the abstract side. Financial instruments are treated herein as a particularly liquid form of property claim. The relation proposed between these two things is a loose rather than a direct one, and the causes for (and consequences of) the looseness are explored in the book. This book aims not merely to simplify our understanding of the relationship between “things” and “claims to things,” but to make explicit and precise what many current researchers assume implicitly and, consequently, imprecisely. This book will be a tool that researchers can apply to their own research, in the form of a standard by which inconsistencies in the literature on Capital Theory can be identified. Understanding what capital is requires delving into its nature on both the real and the abstract sides. In regard to capital goods, what they actually are is made clearer by the thesis that they exist on a spectrum with respect to consumer goods. In going back to the philosophical and economic basics, no claim is made of being comprehensive. The argument is that a crucial idea for our understanding of what capital is that actual capital goods (and processes, and knowledge) are represented in financial instruments and other property claims. A formal treatment that lays out the philosophical and economic basics is necessary to put this idea across, and the model proposed in the book is a first step in that direction. Further, by laying out the philosophical and economic basics of the theory, the book offers the reader the reasons why having a clearer concept of capital is an important tool for wealth creation, and why wealth creation is, more than never, necessary for our individual wellbeing and the flourishing of our civilization.
Leonidas Zelmanovitz is senior fellow at Liberty Fund.
List of Figures
List of Tables
Chapter 1: Introduction
Chapter 2: Austrian Capital Theory, Legal Rights, and Capital Representation
Chapter 3—The Reification of Capital, the Representational Theory of Capital and Its Model
Chapter 4 - The Epistemological Problem of Capital
Chapter 5—The Real Side
Chapter 6 – The Spatial Dimension of Capital
Chapter 7—The Abstract Side
Chapter 8—Financial Instruments
Chapter 9 - A Dynamic Model
Chapter 10—The Relation Between Money and the Structure of Production
Index of Terms in the Model
About the Author
Dr. Zelmanovitz's The Representational Theory of Capital advances a theoretical framework that not only helps to explain the relation between capital goods in an economy and certain instruments representative of property claims on those goods in the abstract side of the economy, but also suggests productive directions for future scholarship. Zelmanovitz is not just addressing fellow economist, however. Although this book is certainly not an introductory work, it is readily accesssible to readers who approach economics and political/financial institutions from an interdisciplinary persepctive. As such, Zelmanovitz's contribution is immense. Simply put: this is one of the most important and original books in decades.
Law & economics are generally understood as the application of concepts of microeconomics the analysis of law. What is unique in Representational Theory of Capital is that the author took an inverse course. Here, the legal institution of private property is brought to help the understanding of one of the most elusive concepts of economics: the concept of capital. As demonstrated in the book, with the use of the proposed model, the identification of the dual nature of capital, as both real and representative, has a potential to revolutionize macroeconomics. Aside from its contribution to economics, by expanding the frontiers of the discipline, this book is of particular interest to law & economics scholars.
"What is capital? How do instruments represent it? Zelmanovitz’s joint expertises in economics and philosophy enable him to answer profitably these key questions of capital theory. Some parts of economies are real (farms, machines, buildings, etc.) and some abstract (money, title deeds, bonds, etc.)—so a clear grasp of each and their relations is critical to the health of complex economies, especially against those who debase or otherwise play fast and loose with value."