In most countries the vast majority of workers go to their jobs during the normal working hours. The majority of business establishments operate only one shift. A great many people, when first confronting these facts, are struck by the apparently low levels of capital utilization that are typically observed. For this reason a good way of approaching our subject is to classify the reasons for capital idleness.

We must first distinguish between intended and unintended idleness. One of the reasons that physical capital lies idle is that events do not always occur in the way that business managers expect. Demand may be less than expected, input supplies may be disrupted, or machinery may break down. These are examples of unintended capital idleness.

The reasons for intended idleness of capital depend on the type of activity involved. For example, some products and most services cannot be stored, and the timing of their production must be arranged to coincide with fluctuation in demand. In addition, many outdoor activities in agriculture, fishing, and construction are strongly affected by the weather and by the amount of daylight; obviously much idleness of capital in these sectors is explained by such factors.

The factors just mentioned do not apply to the great bulk of manufacturing activity, and yet much of the fixed capital in that sector is idle for much of the time.