One of the areas where Austrian economists are far superior to their mainstream counterparts is found in how both groups pursue capital theory. Austrians have a workable and impressive theory, while the mainstream’s theory can be summed up by: capital happens.

Not surprisingly, Paul Krugman falls into category of people who believe that the usefulness of capital investments are limited mostly to the spending that occurs with the capital formation. The actual capital, he believes, causes problems of “income inequality” and more. I address these issues in my latest post on Krugman-in-Wonderland.