The Central Intellectual Concept in Economic Calculation Is Capital; Mises Defines Capital in the Way that an Accountant Would

The central intellectual concept in economic calculation is capital. In this respect, the Marxists were right to call the market economy capitalism, though of course they intended the label as derogatory rather than complimentary. The Marxists wanted to brand the market economy as one that served only the interests of a small group of exploiters, whereas Mises appreciates the term because it recognizes that only in a market economy can individuals resort to the indispensable mental tool of economic calculation.

It’s important to note that Mises defines capital in the way that an accountant or businessperson would: Capital is quoted in monetary units, and is equal to the total market value of all assets minus the total market value of all liabilities. Loosely speaking, to calculate how much capital is invested or tied up in a particular business entity, the accountant estimates how much money would be left over after first selling all of the business assets and then paying off all of the business debts.

—Robert P. Murphy, Choice: Cooperation, Enterprise, and Human Action (Oakland, CA: Independent Institute, 2015), e-book.