A theory which links the theories of production, growth, value and distribution to explain why capital produces a return which keeps capital intact but yields interest (or profit) which is permanent. Over the past 200 years the notion of capital has varied greatly: to many of the CLASSICAL ECONOMISTS it was to a large extent the raw materials and the WAGES FUND; later it was viewed as a physical INTERMEDIATE good. To MARX capital was a social mode of production; to the AUSTRIAN SCHOOL time was crucial to the concept; to FISHER capital was a stock which produced a stream of income with its value determined by relative preference for future rather than present goods. Important debates include the relationship between the RATE OF INTEREST and the value of capital, as well as discussion of the notion of aggregate capital. As there are many important sub-species of capital, including HUMAN CAPITAL and EQUITY capital, specialist theories of capital are also propounded.
Capital theory expanded its concerns in the 1960s within the context of growth theory. A major issue discussed then was the method of measuring aggregate or social capital to achieve a value independent of distribution and prices. Joan ROBINSON suggested using labour time as a measure; Champernowne introduced a CHAIN INDEX METHOD.
