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fundamental economic concepts:

Unlike consumption, capital is intended from the beginning to be multi-dimensional, micro-speciÖc, and all-encompassing. Indeed, the major purpose of this approach is to present the simplest case where there is a powerful connection among wealth, income, accounting, and sustainability for multiple investments in multiple capital goods. Consumption is already aggregated into one composite good, which serves as the numeraire, but capital is disaggregated into its many speciÖc forms or types. The notion of ìcapitalîused here is quite a bit more general than the traditional produced means of production, like equipment and structures. Subsoil minerals are forms of capital. Fish stocks are forms of capital. More generally, natural resources of all types (renewable and non-renewable) are here considered to be forms of capital. Forms of human capital, such as education, skills, capabilities, and know-how should in principle be included, and also the knowledge capital accumulated from R&D-like activities. In principle, social and institutional and intellectual-property capital should be accounted for (if only we knew how to quantify and price such concepts). Generally speaking, every possible type of capital ought to be included ñto the extent that we know how to measure and evaluate at e¢ ciency prices the associated áow of net investments. In principle, environmental assets should be treated as forms of capital. From this perspective, environmental quality might be viewed as a stock of capital that is depreciated by pollution and invested in by abatement. The underlying ideal is to have the list of capital goods be as comprehensive as possible, subject to the practical limitation that meaningful competitive-market-like e¢ ciency prices are available for evaluating the corresponding net investments. Suppose that altogether there are n capital goods, including stocks of natural resources and other unorthodox forms. The stock of capital of type j (1  j  n) in existence at time t is denoted Kj (t) and its corresponding net investment áow is Ij (t) = K_ j (t), where K_ j (t)  dKj (t)=dt. The n-vector K = fKjg denotes all capital stocks, while I = fIjg stands for the corresponding n-vector of net investments. In vector notation, I(t) = K_ (t), where K_ (t)  dK(t)=dt.