What is “capital”? This term is oft-used but little understood in the investing and broader business worlds – indeed, even in the economics profession itself, there is confusion about its precise meaning.  But it is a categorical magnitude of immense importance not only for investment decisions but also for the betterment of human life and indeed, the advancement of civilization itself.  As investors we need to develop a precise understanding of this concept, and as citizens of a modern economy, we must defend its growth.  In this paper we explain the term clearly, as well as how to think about it in its various applications. In the process we also answer important ancillary questions: what is its role in promoting economic growth?  How do investors think about this concept in terms of asset allocation?  What public policies are best for the inducement of capital formation and profit growth?

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