Capital as a factor of production, according to Marx’s theory, is a rather complicated concept. Externally, it can act in certain forms: permanent (means of production), money (cash), variable (people) and commodity (goods). However, these material carriers are not just capital, but are represented by production relations.
First, capital as a factor of production is a self-increasing value that is created by hired workers. Secondly, capital is a movement, a process of circulation, passing through various stages. This is a process involving three forms of circulation. Capital as a factor of production is a change in the form of value. For example, the monetary form is replaced by the commodity form, then the production form, and again the commodity form and the monetary form. Third, capital is not a thing. This is a certain social relation, represented in the thing, giving it a specific social character.
Capital as a category
Capital is a durable resource that is created for the production of a significant number of goods and services. Creating additional benefits in the future tense implies a certain amount of resources today. Therefore, there is often a problem of commensurability of goods that can be used in different periods. Capital as a category can express a certain amount of monetary, material and intellectual resources, allowing their owner to carry out business activities. At the same time, capital is inseparable from the social relations, under whose existence such activity functions. Therefore, it serves as the core of the entire market system.
Accounting and economic definition of capital
There are other definitions. Thus, in accordance with the accounting definition, all assets of a business entity are recognized as capital. According to the economic definition, capital is divided into real, monetary and commodity.
Theories of profit and capital have a long history. With them, the main core of a large number of economic theories is formed. So, Smith capital was characterized as an accumulated stock of money or things. Ricardo saw this concept as a means of production.
And only Marx considered capital as a factor of production, in the form of a social category. He argued that capital is a self-increasing value, generating surplus value. According to Marx’s theory, money can become capital only if it is used to buy labor and means of production. At the same time as the creator of surplus value, he called the work of hired workers. Profit is a transformed form of value increment, regarded as the creation of total capital.
Features of the human factor
There is another component of any production process - labor, which is inseparably connected with man. Therefore, the human factor of production is represented by both intellectual and physical activity with a focus on the production of goods, as well as the provision of services. The combination of certain abilities of any person, due to special education and vocational training, and form human capital. At the same time, capital and qualifications are directly dependent. From their effective interaction depends on the income from this capital in the form of wages. Today, investments in human beings are the fastest paying off and effective production costs. In modern conditions of management, the theory of the occurrence of risk is common, based on the provision of the need for certain funds that are required for carrying out economic activity and are capable of bringing either income or loss. Thus, the employee has the risk of losing only the place of work, while the employer risks losing capital.
Definition of entrepreneurial ability
Entrepreneurial activity is a specific factor of production and involves the effective use of ingenuity, initiative and risk in this process. Entrepreneurial ability as a factor of production is a special type of human capital, which is represented by the activity of combining and coordinating other production factors in order to create services and goods. The specificity of this type of human resource is the desire and ability to introduce various innovations (innovations) in the form of a new product, modern technologies and forms of business organization with a certain degree of risk and probability of incurring losses. In its scope, entrepreneurial activity can be equated with the costs associated with the use of highly qualified labor. There are various theories that interpret this concept. Thus, the English economist Cantillon was defined as an entrepreneur with a non-fixed income. He has the ability to buy other people's goods at a fixed price, which is still unknown to him. Therefore, risk is the main feature of an entrepreneur.