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Principles of Economics: Capital

Principles of Economics: Capital

Jan 6, 2024

Principles of Economics: Capital


The field of economics encompasses the study of how individuals, businesses, and governments make decisions regarding the allocation of resources. A comprehensive guide to understanding these principles is now available via "Principles of Economics" by Saifedean Ammous. This particular lecture covers the subject of capital.

Availability of Resources

The guide titled "Principles of Economics" is accessible in multiple formats, including hardcover, audiobook, and ebook. It can be purchased from, Amazon, and several other booksellers globally. Accompanying the book is an online course located on, which follows the academic calendar from September to June. This course includes bi-weekly lectures and weekly live online discussion seminars, making it accessible to a diverse audience worldwide.

Course Structure and Benefits

The course is designed to enhance economic decision-making skills by imparting knowledge from centuries of economic thought. It is structured to gradually delve into complex topics, initially setting the foundational concepts and methodologies before progressing to labor, property, and eventually, the critical concept of capital. By signing up for the course, participants also receive a complimentary copy of the "Principles of Economics" book.

Lecture Focus: Capital

The sixth lecture of the online course delves into the concept of capital, a topic often under-emphasized in mainstream economics. Capital is defined as property used to produce consumable goods and is distinguished by its production utility rather than direct consumption utility. The value of capital goods hinges on their employment in production processes rather than intrinsic qualities.

The Importance of Capital

Capital is instrumental in lengthening the structure of production, leading to more productive outcomes despite longer production timeframes. This concept is elucidated through examples such as the difference between catching fish by hand versus using a fishing rod or a boat. The role of capital in economizing marginal time per unit of output is highlighted, with the emphasis that saving is the precursor to capital formation.

Capital Accumulation and Time Preference

The relationship between capital and time preference is pivotal, with time preference acting as the control knob of capital formation. Lower time preference leads to greater capital accumulation, enhancing productivity and living standards. This virtuous cycle is described as the process of civilization.

Misconceptions and Fallacies

Keynesian economics often misrepresents the nature of saving, portraying it as detrimental to economic health. This misunderstanding arises from flawed assumptions about the separation of saving and investment and equilibrium conditions. The guide aims to correct these misconceptions by explaining the true costs and responsibilities associated with capital.


Capital remains a fundamental component of economic growth, with no inherent limits to its accumulation. Technological advancement and the continuous discovery of more efficient uses of capital ensure that economic prosperity can persist indefinitely. The only constraints are time preference and the opportunity cost of consumption. The next lecture will explore the concept of technology as a unique form of capital.

Further Information

For those interested in furthering their understanding of economics, the syllabus for the "Principles of Economics" online course is available on Additionally, The Saif House, a publishing house and online bookstore, offers a range of economic literature in various formats. These resources aim to provide comprehensive solutions and insights for economic enthusiasts and professionals alike.


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