U2 : Reading materials and Questions

According to Adam Smith, capital is primarily defined by:

Its monetary value

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Its function: generating profit

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Its physical materiality

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Its acquisition cost

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For Karl Marx, the concept of surplus value means: *(multiple answers possible)*

The unpaid labor of the worker

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The increase in machine productivity

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Working time beyond that necessary to produce the value of the wage

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Capital reinvested in the company

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The difference between selling price and production cost

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Thomas Piketty’s formula r > g means that:

Growth exceeds the return on capital

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The return on capital exceeds economic growth

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Labor income increases faster than capital income

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Tangible capital grows faster than intangible capital

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In 1975, tangible assets represented what share of the value of S&P 500 companies?

50%

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65%

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83%

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90%

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In 2020, the proportion of intangible assets in the value of S&P 500 companies was approximately

50%

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70%

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83%

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90%

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What are the characteristics of intangible capital? *(multiple answers possible)*

It wears out with use

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Costs are essentially fixed

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Network effects multiply its value

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It can easily be used as bank collateral

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Returns become increasing with use

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According to traditional accounting standards, R&D investments are generally

Capitalized as assets

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Treated as immediate expenses

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Amortized over their useful life

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Recorded on the balance sheet as intangible assets

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Underinvestment in intangible capital is explained notably by:

Its difficulty of measurement and valuation

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Its excessively high cost

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The absence of profitability

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Overly strict regulations

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*Complete the following text with appropriate words or expressions.*

**Word list (some may be used multiple times, others not at all):**

capital – labor – profit – surplus value – tangible – intangible – return – growth – inequalities – measurement – accounting – patents – R&D – algorithms – innovation – assets – productivity – accumulation – concentration – immaterial

To understand modern economies, we must distinguish two sources of wealth: Fill in the blank 1 of 17 and Fill in the blank 2 of 17 . Labor represents direct human effort, while capital encompasses everything that enables production without immediate effort.

Adam Smith laid the foundations by identifying that capital is not the object itself, but its function: generating Fill in the blank 3 of 17 . Karl Marx radicalized this analysis by introducing the concept of Fill in the blank 4 of 17 , which represents the unpaid labor of the worker, reinvested to become new capital. This process of Fill in the blank 5 of 17 leads to increasing Fill in the blank 6 of 17 of capital in the hands of a minority.

Thomas Piketty updated the debate with his formula r > g, which shows that the Fill in the blank 7 of 17 on capital exceeds economic Fill in the blank 8 of 17 , mechanically leading to increasing wealth Fill in the blank 9 of 17 .

The contemporary economy has undergone a profound transformation with the shift from Fill in the blank 10 of 17 capital to Fill in the blank 11 of 17 capital. In 1975, tangible assets represented 83% of corporate value, whereas in 2020, 90% of this value consists of intangible Fill in the blank 12 of 17 : Fill in the blank 13 of 17 , brands, software, and know-how.

Intangible capital has particular characteristics: it does not wear out with use and costs are essentially fixed. However, its Fill in the blank 14 of 17 poses serious challenges. Traditional Fill in the blank 15 of 17 standards, designed for the industrial economy, treat Fill in the blank 16 of 17 investments as immediate expenses rather than as assets, thus creating a distortion in the representation of corporate value.

This difficulty in valuation creates paradoxes: banks refuse to lend against intangible assets, and innovative companies lack traditional financing. Fill in the blank 17 of 17 , the driver of this transformation, fundamentally resists quantification, revealing the limits of our measurement tools inherited from the industrial era.

Advanced Innovation & entrepreneurship

MODULE 1: CAPITAL, VALUE, AND ORGANIZATION

Alvaro Pina Stranger 04/11/2026

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