In Almost All Cases, A Reduction in Capital Means a Reduction in the VALUE of Available Production Equipment

The reason that it is so difficult to recognize capital consumption in this situation [of economic crisis] is that people view existing capital equipment predominantly or exclusively from a technical point of view without taking its economic meaning, that is, its value, into account. In almost all cases, however, a reduction in capital means above all a reduction in the value of available production equipment, which continues to exist for some time in unaltered form and which only gradually diminishes physically as a consequence of its loss in value. It is quite conceivable that, as a result of changed price constellations, the best-equipped factory, the most wonderful machine that only recently could have been used to greatest advantage in production and therefore represented a large capital value, quite suddenly loses its value and consequently ceases to be capital. The fact that this factory or machine continues to maintain the same high technical quality makes it difficult for anyone who envisages things from a technical rather than an economical point of view to understand that capital has been destroyed and that we have become that much poorer because of it.

—F. A. Hayek, “Capital Consumption (1932),” in The Collected Works of F. A. Hayek, vol. 11, Capital and Interest, ed. Lawrence H. White (Chicago: University of Chicago Press, 2015), 55.