Capital

Factors of production are necessary as inputs in order to produce outputs of commodities (i.e., final consumption goods). The definition of a factor of production is ‘anything which can serve as an input into the productive process when that is taken as a whole’ (Hicks, 1983b, p. 121). Capital meets this definition because it can be shown to have an impact upon ‘the time-shape of the flow output’ within a fixed period of time and, thereby, upon the total volume produced. A capital investment presents itself as an opportunity to have fewer commodities in ‘present’ periods in order to benefit from more commodities in ‘future’ periods: [i]t could happen that on the faster growing path, the total of output … when it is taken over the whole period, is greater than it is on the slower path. The faster path, therefore by sacrificing some earlier outputs, has substituted later outputs which are larger. So looking at the total of production over the whole period, there is on the faster path an increase in production. … To what is it to be attributed? We have to invent a factor of production to which to attribute it. … Senior called it Abstinence; Marshall and Cassel called it Waiting; Böhm-Bawerk Roundaboutness; Barone and Wicksell just Time. (Hicks, 1983b, p. 125)