---
entity_slug: capital_replacement
evaluator: null
evaluated_at: '2026-02-23T04:41:10.966321'
overall_score: 4.6
scores:
- name: definition_precision
  value: 4.0
  max_value: 5.0
  rationale: The definition clearly distinguishes capital replacement as the restoration
    of worn-out capital goods to maintain productive capacity, which is a precise
    and non-circular concept. It effectively differentiates this process from capital
    expansion or other uses of capital.
- name: source_grounding
  value: 5.0
  max_value: 5.0
  rationale: This entity is directly grounded in Smith's text from Book II, Chapter
    4, where he explicitly discusses the distinction between capital used for replacement
    versus expansion. The context accurately reflects Smith's analysis of how replacement
    capital creates a pool available for lending at interest.
- name: domain_placement
  value: 5.0
  max_value: 5.0
  rationale: The placement in the "Accumulation" domain is entirely appropriate, as
    capital replacement is fundamental to understanding how economies maintain and
    grow their productive capacity over time. This concept sits at the heart of Smith's
    analysis of capital accumulation processes.
- name: vsm_relevance
  value: 4.0
  max_value: 5.0
  rationale: This entity maps well to VSM System 1 (primary operations) as it represents
    the basic maintenance function necessary for continued production. It also has
    relevance to System 3 (internal regulation) as replacement decisions involve monitoring
    and maintaining system viability.
- name: explanatory_value
  value: 5.0
  max_value: 5.0
  rationale: This entity provides significant explanatory power by illuminating the
    mechanism through which economies maintain productive capacity and how replacement
    needs create capital markets. It reveals a structural relationship between depreciation,
    replacement, and the availability of loanable funds that is central to Smith's
    economic theory.
---

# Evaluation: Capital Replacement

## definition_precision — 4.0 / 5.0

The definition clearly distinguishes capital replacement as the restoration of worn-out capital goods to maintain productive capacity, which is a precise and non-circular concept. It effectively differentiates this process from capital expansion or other uses of capital.

## source_grounding — 5.0 / 5.0

This entity is directly grounded in Smith's text from Book II, Chapter 4, where he explicitly discusses the distinction between capital used for replacement versus expansion. The context accurately reflects Smith's analysis of how replacement capital creates a pool available for lending at interest.

## domain_placement — 5.0 / 5.0

The placement in the "Accumulation" domain is entirely appropriate, as capital replacement is fundamental to understanding how economies maintain and grow their productive capacity over time. This concept sits at the heart of Smith's analysis of capital accumulation processes.

## vsm_relevance — 4.0 / 5.0

This entity maps well to VSM System 1 (primary operations) as it represents the basic maintenance function necessary for continued production. It also has relevance to System 3 (internal regulation) as replacement decisions involve monitoring and maintaining system viability.

## explanatory_value — 5.0 / 5.0

This entity provides significant explanatory power by illuminating the mechanism through which economies maintain productive capacity and how replacement needs create capital markets. It reveals a structural relationship between depreciation, replacement, and the availability of loanable funds that is central to Smith's economic theory.
