Question

Indicate whether the following statement is true or false: 

All wealth is capital

Answer 1

This statement is false.

Explanation:

• Wealth refers to all goods that have value and possess characteristics like utility, scarcity, transferability and externality. Wealth includes both natural resources like land, forests and man-made goods.
• Capital, however, is a specific part of wealth that is man-made and used specifically for further production of goods and income. It excludes natural resources and items not used for production.
• Therefore, while all capital is wealth since capital is valuable and transferable, not all wealth is capital because wealth also includes natural resources and other goods not used as capital.

Hence, all capital is wealth, but all wealth is not capital.