Software as Capital: An Economic Perspective on Software Engineering by Howard Baetjer, Jr. Piscataway, NJ, The Institute of Electrical and Electronics Engineers, Inc., 1998, 194 pages. ISBN 0-8186-7779-1

H oward Baetjer has written a book that will be of interest to a number of distinct audiences. First, this book will interest specialists in the computer field, especially those involved in software development. They will find here linkages from the technicalities of software engineering to the broader economic context. They will find important insights into the value dimensions of software components and perhaps they will be stimulated to think more deeply about the social institutions in which they work and how they may be improved. Second, this book will be of interest to curious lay readers interested in the history of the software industry and the evolution of software generally. Third, economists in general will find this book full of keen insights applicable to a number of subfields in their discipline. And finally, fourth, this book is an application of market process capital theory and is of particular interest to specialists in that field. It is primarily from this fourth perspective that I derived particular pleasure in reading the book. Baetjer makes use of the theory of capital as developed in the Austrian tradition, by Böhm-Bawerk, Hayek and Lachmann. “What is true of software is true of capital goods in general” (11). And what is true for capital goods in general is true for software. In this way software is seen both as an analogy for capital in general and as part of capital in general. As an analogy it is very precise. Individual software products embody knowledge in the same way as all capital goods embody knowledge. As such they represent the fruits of roundabout methods of production. “Capital goods are knowledge, knowledge in the peculiar state of being embodied in such a form that it is ready-to-hand for use in production. The knowledge aspect of capital goods is the fundamental aspect. Any physical aspect is incidental” (10). So capital goods in general can be thought of as “embodied knowledge” that relate to each other much in the same way that individual software components relate. In spinning out this analogy, Baetjer provides a very accessible and complete introduction to the market process theory of capital, notably that of Lachmann. Among the topics elucidated are capital heterogeneity (which in this context implies knowledge heterogeneity), complementarity, personal, tacit and intersubjective knowledge, the role of social institutions, the meaning of capital maintenance in a changing world, and the crucial relationship