circulating capital

The explicit distinction between fixed and circulating capital first makes its appearance in Book II, chapter 1 of Adam Smith’s Wealth of Nations , who derived it from ample hints in Quesnay and Turgot. Circulating capital goods, according to Smith, consist of those intermediate goods that embody a quantity of purchasing power that perpetually returns to the capitalist as he disposes of the final goods into the making of which they entered, in contrast to fixed capital goods, whose value is never fully recovered in one production cycle. The simplest example of circulating capital is raw materials, just as the simplest example of fixed capital is buildings and machines. However, all the classical economists, including Smith, included in circulating capital not just raw materials but also the consumer goods that support labour during the process of production; that is, wage goods. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.