capacity

Capacity (German: "Vermoegen") is the endowment of >actors with means enabling them to act. This is a complex category which both refers to >knowledge and matter-energy, that is, for example, capabilities, tools, wealth or social relations. Accordingly, it has to be interpreted in bimodal terms, because every actualization of capacity presupposes knowledge of these capabilities, both referential and non-referential: Someone owns a tool, but cannot use, another knows how to do, but has no training, and the other is skilled to use it without thinking. Every capacity is knowledge in terms of a potential for >action.

In the economy, very often knowledge about the capacity of an actor resides in other actors, hence in >elements that are not congruous with the actor. This divergence gives rise to the division of labour: In particular, >entrepreneurs are people who know about possible uses of other actor’s capacity.

The actualization of capacity is governed by >rules. Insofar as these rules are embedded in the networks of systems, we conclude that individual capacity is always a social phenomenon. In concrete human societies, this is reflected in the customary and institutional regulation of capacity. In very general terms, rule-governed capacity is a right to action. More specifically, in networks rights are acknowledged by other actors and can be governed by convention, informal institutions and formal >institutions. An important formal institution are property rights.

On a more systematic empirical level, capacity is therefore described as endowment with different kinds of >capital: The concept of capital refers to this close relation between capacity and rights. In EE, we distinguish between real, financial, human, social and nature capital, which is not necessarily a complete enumeration. Frequently, in economic systems there are institutional regulations on the degree of substitutability between different kinds of capital: Money cannot buy everything everywhere.

It is important to note that in many respects capacity and capital can only be measured in relation to other actors. Capacity is closely related to >power. This implies, that striving for capacity is a kind of status >competition, so that standard economic criteria of social optima do not apply.

Basic References
My ideas on capacity, power and capital are strongly influenced by the sociological literature, in particular the contributions by Bourdieu, Coleman and others. In the context of economics, the classic is:
James Coleman, Foundations of Social Theory. Cambridge/London: Belknap, 1990.

Semantic Field
power   knowledge
actor   capacity
action   capital