Capital, in Mises’s view, is a basic and indispensable tool of economic calculation used by entrepreneurs in capitalist economies, that is, in market economies. He clearly considers it as an historically specific concept:
The concept of capital cannot be separated from the context of monetary calculation and from the social structure of a market economy in which alone monetary calculation is possible. It is a concept which makes no sense outside the conditions of a market economy. It plays a role exclusively in the plans and records of individuals acting on their own account in such a system of private ownership of the means of production, and it developed with the spread of economic calculation in monetary terms. (Mises, 1949: 262)
Monetary calculation based on capital is possible only under capitalism. Owing to the tools of capital accounting, entrepreneurs are able to compare the economic significance of their inputs and their outputs even in a complicated and dynamically “changing industrial economy” (Mises, 1949: 511). That is what distinguishes capitalism from other economic systems: “[O]nly people who are in a position to resort to monetary calculation can evolve to full clarity the distinction between an economic substance [capital] and the advantages derived from it [income], and can apply it neatly to all classes, kinds, and orders of goods and services” (Mises, 1949: 261). Mises’s theory of capital is a theory of the way monetary calculation based on (financial) capital helps entrepreneurs to organize the production process under capitalism. One could also say that his theory of capital is a theory of capitalism, a theory of how entrepreneurial operations are guided by capital accounting.
—Peter Lewin and Nicolas Cachanosky, Austrian Capital Theory: A Modern Survey of the Essentials, Cambridge Elements in Austrian Economics (Cambridge, UK: Cambridge University Press, 2019), 45-46.
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