The Oxford English Dictionary defines "capital" as

n. economic goods (e.g. railways, ships, machinery, buildings) destined for use in production (as opposed to consumers' goods).

Historically, the first use of money has been to facilitate trade. According to this, it was only in the past few centuries that money has also been considered capital, and thus capitalists buy and sell money as though it were a productive economic good. Why is this?

How can money be capital? How does money have productive value when money simply facilitates trade? Certainly trade is useful, but is trade productive? Are there contemporary or historical economists who argue money can or cannot be capital?

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    $\begingroup$ A theology book is probably going to use the word capital a little differently than economists do. Money isn't really capital. It facilitates buying capital, but isn't capital itself. Money isn't used in the actual production process, so it doesn't fit your Oxford definition. $\endgroup$
    – Kitsune Cavalry
    Apr 1, 2016 at 19:18
  • $\begingroup$ @KitsuneCavalry "[Money] facilitates buying capital, but isn't capital itself." That makes sense, but do all economists hold that view? What I'm trying to get at with this question is: "What distinguishes the past few centuries' capitalism from pre-capitalist economies?" $\endgroup$
    – Geremia
    Apr 1, 2016 at 19:21
  • $\begingroup$ @Geremia Then please consider editing your question because that is a really different topic. $\endgroup$
    – Giskard
    Apr 1, 2016 at 20:09
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    $\begingroup$ money ie currency represents capital. currency ie money is the tool to spent capital $\endgroup$
    – Aurigae
    Apr 5, 2016 at 7:20

2 Answers 2


"...capitalists buy and sell money as though it were a productive economic good."

No they don't. They buy and sell currency, because the price of currency fluctuates (due to imagination and/or economic fundamentals) and so there are profit opportunities there.

Also, they are after liquidity, (i.e. holding money instead of physical capital), because liquidity enlarges the set of feasible economic choices that they can make (but since they have to eventually make some choice, we get to see some physical capital laying around after all).

Money per se is not productive (is just paper, or electronic bits) - but money is not just a medium of exchange, it is first and foremost a socially agreed upon store of value (socially, not intrinsically). This makes it (not just endows it with) purchasing power. People are willing to give up something that has, say, nutritional value, in exchange for an intrinsically worthless piece of paper (or for an even more useless electronic credit in their bank account) -and one can guess why.

Finally, all the financial world of "financial instruments", "derivatives", "futures" etc, is a bit about risk-management but predominantly, is a highly sophisticated betting market, beyond anything that casinos, horse races, soccer, etc have ever imagined or devised as regards betting. Here income and profits come from winning the bet, not because money is productive.

  • $\begingroup$ What's the difference between money and currency? $\endgroup$
    – Geremia
    Jul 1, 2019 at 19:36
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    $\begingroup$ @Geremia "Currency" is a legal concept, the official unit of measurement of value and means of exchange in a country. "Money" is an economic concept, broader and with more "definitions" than one (M1, M2 etc). $\endgroup$ Jul 2, 2019 at 19:42
  • $\begingroup$ You have made your point crystal clear, @AlecosPapadopoulos. Since capital may be defined as the result of human labour accumulated along time and money is value invested in the past (i.e., saving), wouldn't be fair to state that both money and capital have to be the same? Isn't that a natural conclusion drawn from the circular flow of income (you only can invest what you save) and Say's law (you can only demand if you have produced something)? $\endgroup$ Nov 12, 2020 at 1:24
  • $\begingroup$ Cryptocurrency makes an interesting case study on money as a betting market. $\endgroup$
    – user253751
    Oct 10, 2022 at 15:39

Knut Wicksell, author of Interest & Prices, argues that money ≠ capital:
(quoted on p. 8 of Bernard W. Dempsey's Interest & Usury)

It is usually said that in modern communities, capital (of the mobile kind) is lent in the form of money. But this is a metaphorical and inexact manner of speaking which can easily lead to error. Liquid capital, which is what we are considering, or, in other words, goods, are never lent,—they are never given and taken by way of borrowing; they are simply bought and sold.⁵


It is not true that "money is only one form of capital," that the lending of money constitutes a lending of real capital in the form of money, etc.…

Liquid real capital (i.e., goods) are never lent (not even in a system of simple merchandise credit); it is money which is lent and the commodity capital is then sold in exchange for this money.⁶

and 7 Lectures, II, p. 190.:

Money does not enter into the processes of production; it is in itself, as Aristotle showed [in Politics bk. 1 § 10, 1258a-b], quite sterile.⁷


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