ABSTRACT
While most Austrians develop their work on capital following Bohm-Bawerk’s groundwork, Ludwig von Mises followed Menger more closely than he did Bohm-Bawerk. For Mises, capital is a sum of money (market values) obtained following accounting practices. Capital is the sum of the money equivalent of all assets minus the sum of the money equivalent of all liabilities as dedicated at a definite date to the conduct of the operations of a definite business unit. Capital is not an input into the production function, it is a prerequisite for the economic calculation required to decide what and how to produce. Thus, Mises’s approach makes it clear that even though “financial capital” and “capital goods” may share the word “capital,” the conceptual difference between them is crucial for an understanding of the role of capital in a market economy. The combination of heterogeneous factors of production has value to the extent of the market value of their output.
