A Hamiltonian formulation is used to investigate irrotational capillary wave dynamics. Dissipation is accounted for by putting the wave system in contact with a ‘heat bath’. The generation of short waves by longer waves is studied. It is found that millimetre-wavelength waves tend to be created on the forward face of a steep longer wave, while centimetre waves tend to form near the crest. Generation of capillary waves by wind waves is investigated. The results are compared with predictions of the Hasselmann transport equation. It is found that off-resonance interactions lead to significant corrections to the transport theory. The relative importance of three-wave and four-wave interactions is studied, as well as the role of triad resonances. For the capillary phenomena studied here, the four-wave terms in most cases lead to quantitative, but not qualitative, corrections to the three-wave only calculations. However, restricting interactions to the neighbourhood of triad resonances can give quite erroneous results. Use of a canonical transformation to pseudo-wave variables can greatly reduce numerical computation times.