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A rule of conduct or procedure established by custom, agreement, or authority. The body of rules and principles governing the affairs of a community and enforced by a political authority; a legal system: international law. The condition of social order and justice created by adherence to such a system: a breakdown of law and civilized behavior. A set of rules or principles dealing with a specific area of a legal system: tax law; criminal law. A piece of enacted legislation. What is Law?

Capital (economics)

Capital has a number of related meanings in economics, finance and

In finance and accounting, capital generally refers to financial wealth,
especially that used to start or maintain a business. It is assumed that
other styles of capital, e.g. physical capital, can be acquired with money,
so there is little need for any further analysis.

Capital in classical economic theory

In classical economics, capital is one of three factors of production, the
others being land and labour. Goods with the following features are capital:

   * It can be used in the production of other goods (this is what makes it
     a factor of production).
   * It is man-made, in contrast to land, which means naturally occurring
     resources such as geographical locations and minerals.
   * It is not used up immediately in the process of production.

Investment in classical economic theory is the act of producing capital. In
order to invest, goods must be produced which are not to be immediately
consumed, but instead used to produce other goods as a means of production.
Investment is closely related to saving.

The Austrian economist Eugen von Bhm-Bawerk maintained that capital
intensity within a certain industry as determined by consumer demand rather
than the supply of saving, through the roundaboutness of production processes.

Modern economic analysis of capital

Traditional economic theory tended to see capital as physical items such as
tools, buildings and vehicles. More recently economists have focussed on
broader forms of capital. For example, investment in skills and education
can be viewed as building up human capital (or in more detailed analyses,
building up individual capital using instructional capital, recognizing that
both the individual and the instruction may benefit from the interaction).

Some theories use the terms intellectual capital or knowledge capital which
lead to certain questions and controversies discussed in those articles. In
general, intellectual capital is that which produces new "intellectual
property", and that in turn is "whatever one can get paid royalties for".
These are terms that rightly belong in law but mean little in economics.

In modern economic theories, the less controversial analyses break down each
of the major factors of production as its own 'style' of capital, allowing
for the capital appreciation and depreciation of each asset. Such analyses
recognize four styles of capital, or in more detail, six:

   * Financial capital which represents obligations, and is liquidated as
     money for trade, and owned by legal entities.
   * Natural capital which is inherent in ecologies and protected by
     communities to support life, e.g. a river which provides farms with
   * Infrastructural capital is non-natural support systems (e.g. clothing,
     shelter, roads, PCs) that minimize need for new social trust,
     instruction, and natural resources. (almost all of this is
     manufactured, leading to the older term manufactured capital, but some
     arises from interactions with natural capital, and so it makes more
     sense to describe it in terms of its appreciation/depreciation process,
     rather than its origin: natural capital grows back, infrastructural
     capital must be built and installed).
   * Human capital, which in macro-economics or even modern theories such as
     Natural Capitalism, is narrowly treated as just another way to generate
     money (via salary). Human development theory recognizes it as being
     composed of clear and distinctive social, imitative and creative
        o Social capital is trust available to all members of a community
          (e.g. family, guild, customer base), which is typically applied to
          distribute resources in case of difficult times. Governments tend
          to rely heavily on social capital, and in some ways trade on it
          directly by collecting taxes and spending the funds on things
          which further advance society. Historically in the Western world
          it was represented and later protected as what came to be known as
        o Instructional capital which is adequately-tested knowledge that
          persons and communities and software executes to predict/create or
          avoid futures that they consider desirable, or not. A close
          parallel term is 'ideas applied in practice', or 'praxis'.
          Historically in the Western world it was commonly recognized and
          protected via the patent system that provides limited exclusive
          rights to gain from an invention.
        o Individual capital which is inherent in persons, protected by
          societies, and trades labor for trust or money . Close parallel
          concepts are 'talent', 'ingenuity', 'leadership', 'trained
          bodies', or 'innate skills' that cannot reliably be reproduced by
          using any combination of any of the others above. Accordingly, it
          must be seen as a style of capital in its own right. Historically
          in the Western world it was recognized and rewarded via copyright,
          even in cases of political or religious leaders (who often fund
          their retirement by sales of memoirs).

More modern analyses differentiate the latter three. They also avoid the
term "human" in part to avoid implying that humans are owned, and so that
non-human instructional capital (e.g. software), non-human individual
capital (e.g. orang-utans painting, or a race-winning horse, or prize stud
bull), and the activities of government can be analyzed more exactly for
performance, e.g. in a health observatory.

Although it is still possible to calculate the traditional macro economic
idea of "human capital" yield (economics) as payments (like salary), it is
rarely or not used when discussing the process of planning investment: for
this it is broken down into the more specific styles, which are distinct
when one considers the means of identifying them, investing in, and
exploiting them. The term "human capital" may thus do more harm than good.

Another prompting for the more exact and deeper six-style analysis is that
infrastructural capital has declined in financial value relative to
intellectual rights, and natural resources have become more scarce.
Meanwhile, both human development and biodiversity have become a main
priority of government in every developed nation.

In part as a result, separate literatures have developed to describe both
natural capital and social capital. Such terms reflect a wide consensus that
nature and society both function in such a similar manner as traditional
industrial infrastructural capital, that it is entirely appropriate to refer
to them as styles of capital in themselves. In particular, they can be used
in the production of other goods, are not used up immediately in the process
of production, and can be enhanced (if not created) by human effort.

There is also a literature of intellectual capital and intellectual property
law. However, this increasingly distinguishes means of capital investment,
and collection of potential rewards for patent (imitative or instructional
capital), copyright (creative or individual capital), and trademark (social
trust or social capital) instruments. Literature that makes these
distinctions tends to parallel the six-style analysis, which explains why
three distinct bodies of law would have evolved in the first place.

Some analysts, e.g. Baruch Lev, claim there are seven styles of capital. It
is not clear how his analysis relates to that of human development theory,
as it arises from management accounting practices. It is not very widely
used, not at all outside the US, and is under some suspicion as it emerged
during the dotcom boom and did not specifically claim that those companies
were grossly overvalued or corrupt, as later events proved them to be. This
has led to speculation that political capital, or political influence or
corruption, is his actual seventh factor. This is probably oversimplified,
but calls for comprehensive accounting reform have reached the highest
levels in the US, particularly in the wake of major accounting scandals, so
it is hard to wholly dismiss this concern.
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