ABSTRACT
A hallmark of a capitalistic economy is that machinery, factories, and tools (and economists limit their meaning of the word capital to these and similar items) can be the private property of individuals. The owners of capital can be called capitalists, although to be a true capitalist, the ownership of capital must be combined with an entrepreneurial role. On their personal balance sheet, the value of the capital is listed in the assets column. Capitalists have several options regarding how they use their assets. One option is to employ them in their own business to produce goods and services. A second option is to rent them out for use by other businesses. Both of these options generate a flow of income known either as the rent on capital or, simply, interest. (To be precise, interest is the return on lending money, but that return comes from the return on using capital.) A third option is to sell ownership rights to another party. On the personal balance sheet, this transaction simply reduces capital and increases money assets by the same amount. Of course, capitalists can also buy an ownership stake in capital from another person. This raises capital and lowers money assets by the same amount.
