Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

272 Money, Bank Credit, and Economic Cyclesjust before they were reached, and therefore no end wouldever be achieved and human action would be senseless. 9CAPITAL AND CAPITAL GOODSWe may use the term capital goods to designate the intermediatestages of each action process, subjectively regarded assuch by the actor. Or to put it another way, each of the intermediatestages in an actor’s production process is a capitalgood. Hence this definition of capital goods fits in perfectlywith the subjectivist conception of economics presentedabove. The economic nature of a capital good does not dependon its physical properties, but on the opinion of an actor, whobelieves the good will enable him to reach or complete a stagein his action process. Therefore capital goods, as we havedefined them, are simply the intermediate stages the actorbelieves he needs to go through before achieving the purposeof his action. Capital goods should always be placed in a teleologicalcontext, in which the essential defining elements arethe aim pursued and the actor’s subjective view on the stagesnecessary to fulfill it. 109 In a world without time preference people would consume nothingand save everything, and eventually humans would die of starvationand civilization would disappear. “Exceptions” to the law of time preferenceare merely apparent and invariably result from a disregard forthe ceteris paribus condition inherent in the law. Thus a careful examinationof any supposed “counter-example” suffices to reveal that refutationsof time preference do not involve identical circumstances. This isthe case with goods that cannot be simultaneously enjoyed, or thosewhich, although they appear physically equivalent, are not identicalfrom the actor’s subjective viewpoint (for instance, ice cream, which weprefer in summer, even when winter is closer). On the theory of timepreference, see Mises, Human Action, pp. 483–90 (pp. 480–87 of theScholar’s Edition).10 The principal point to be emphasized is that capital goods,thus defined, are distinguished in that they fall neatly intoplace in a teleological framework. They are the interim goalsaimed at in earlier plans; they are the means toward theattainment of still further ends envisaged by the earlier plans.It is here maintained that the perception of this aspect of tangiblethings now available provides the key to the unravelling