Consuming your capital as though there will be no tomorrow

[Boojatta]

Suppose someone owns an oil well and sells oil from the well to foreigners and relies on the revenue as a source of income for living expenses for his or her growing (extended) family. It has been said that such a lifestyle involves living off one's capital.

Analogously, if someone in ancient Greece or ancient Rome owned a salt mine and consumed the stream of income that was generated by periodically and frequently selling salt extracted from the mine, then would such a person be an example of an early capitalist?

[Boojatta]

1. Two more questions...

Are OPEC countries not only fueling capitalism throughout the world, but also themselves major examples of successful capitalist economies? What do Russian and Chinese economic theorists who focus a lot of attention on the concept of capitalism have to say about OPEC?

[WCGreen]

2. The purpose of owning or leasing an Oil Well is to produce income...

It's a depletable asset. The oil well structure would be the capital investment. If you sold off the rig piece by piece then you would be using up your capital.

If you capped it and waited until the commodity price went higher, you would still be intending to sell the oil sometime. That's why it isn't considered capital, per say.

Think of it as owning a building. You rent out the building to get a stream of income to, hopefully, make up for the investment you have in the building. It's not exactly the same since the building is depreciable and oil is depletable, but almost.

[Boojatta]

3. Suppose you had a gold mine instead of an oil well.

would still be intending to sell the oil sometime. That's why it isn't considered capital, per say.

If you sold half the mine to get ten thousand ounces of gold extracted from the half of the mine that you continued to own, then would you not necessarily be a capitalist? In other words, you might buy and sell and ultimately be debt free and the owner of ten thousand ounces of gold and you might not be a capitalist?

What if you buy and sell stocks and bonds?

Is a worker someone who buys and sells land, gold mines, gold, etc and a capitalist someone who buys and sells stocks and bonds?

[WCGreen]

4. Anyone who engages in commerce on the open market regardless

of what they take to that market is a capitalist.

I thought you were talking about is oil a capital asset. In a way, yes because of depletion allowances in the Tax Code. But ultimately, the value of that well or mine is tied up in what is inside of that well or mine. So in that sense, it is a commodity in waiting until you take it is extracted.

A worker earns wages, a capitalist earns a return on an investment. Owning the well is a capitalist action but it isn't necessarily a capital good.

A building is a capital asset because it can be used over and over again. A mine, once it is depleted, is only worth what ever someone wishes to pay for an empty mine.

[Boojatta]

6. "Anyone who engages in commerce on the open market ..."

... regardless of what they take to that market is a capitalist."

Is J. K. Rowling (author of Harry Potter series of fiction) a capitalist? Does it depend on whether she has a contract with a publisher for everything that she might write within the next twelve months? Does it depend on whether or not she is now writing something for which she is not contractually obligated to sell it to any particular publisher? If she offers the copyrights on a new work by auction, then is she automatically a capitalist?

If you were an employee of a corporation specializing in educational products and services and if it gave all employees the option of either getting an employer contribution for their private investment portfolios for retirement or receiving shares in the corporation, then would you opt to refrain from diversifying your retirement nest egg in order to remain a worker and not become a capitalist? In other words, would a significant part of your retirement funds be in the form of shares in that one corporation that you work for? (I say "a significant part of" rather than "all of" because you might have a mortgage and have paid more than an initial deposit, so you may have at least one other significant asset.)

[Boojatta]

7. "I thought you were talking about is oil a capital asset. In a way, yes"

If the word "capital" means something, then what prevents you from either unequivocally asserting that oil is capital or unequivocally asserting that oil isn't capital?

[GliderGuider]

5. Ecologically speaking, oil is considered "natural capital"

Under our current economic paradigm, it's considered a "resource" which blurs the distinction between a renewable resource ("natural income") and a non-renewable resource ("natural capital").

This is one of the many calamitous ways the current global economic system blurs essential distinctions for its own advantage, since resources aren't considered to be capital.