and satisfaction. From the standpoint of its owner, however, it is used to get an income. He gets no consumer's satisfaction out of it, but he gets paid for its use, and this payment is a part of his income. In short, he keeps it for the sake of the income which it brings him. A dwelling house is likewise a consumers' good from the standpoint of society; but if it is rented, it is capital to its owner. He gets no direct satisfaction out of it. He gets money for its use. This money is a part of his income.

Social capital and private capital. Some writers have accordingly spoken of two kinds of capital: first, social, or productive, capital; and, second, private, or acquisitive, capital. Social, or productive, capital is identical with producers' goods; private, or acquisitive, capital includes such consumers' goods as are let, rented, or hired by their owners to other people. Consumers' goods, of course, are just as useful as producers' goods, but they are used for different purposes. Therefore private, or acquisitive, capital is just as useful as social, or productive, capital. The owner is just as well entitled to his income in one case as in the other. Capital, then, is goods; but it is that portion of the produced goods in the possession of society which is used by its owners for the purpose of securing income rather than for the purpose of direct enjoyment. It is used by its possessors, however, as distinct from its owners, either for the production of other goods or for direct enjoyment. The possessor of a rented shop is using the shop for productive purposes; the possessor of a rented dwelling house is using it for purposes of direct enjoyment.

Capital a class of goods, not a fund of value. Capital is sometimes conceived of not as a class of goods but as a fund of value. There are two reasons which lead naturally to this way of thinking, but there is danger that this way of thinking may lead us into serious error. In the first place, however capital may have originated historically, one nowadays usually comes into possession of it first in the form of money; that is,

the owner of the automobile, the dwelling house, the shop, the factory, usually spent money in order to get it. The possession of money gives one the opportunity to come into possession of these other forms of capital. The purchase of these various forms of capital is usually called investing capital. After one has purchased a shop or a factory, a house which one intends to rent to someone else, or any other income-bearing property, one is said to have invested his capital. That sounds as though the money were the capital which one had invested. That is not strictly true. One has merely exchanged one form of capital for another.

Money one form, but only one form, of social capital. The last statement implies that money is a form of capital. This has sometimes been disputed. To be sure, money is not the only form of capital, but it is one form. While it is not correct to say that capital is money, it is correct to say that money is capital. A work horse is likewise a form of capital, but it is not proper to say that capital is a work horse. There is this difference, however, between money and work horses. Very few capitalists ever find that the greater part of their capital is in the form of work horses. Almost every capitalist nowadays finds, at one time or another, that a large part of his capital is in the form of money or has passed through that form. He is continually buying and selling, receiving money and paying out money, and is not receiving work horses and paying out work horses.

Money may be said to be tool or means by which the community can do more work than it would be able to do without money. It is therefore, like other tools, a form of capital. It is also a very important form of capital, one which is continually coming into the possession of every capitalist and being paid out again. This leads naturally, as suggested above, to the inference that capital consists of a fund of value, or of value expressed in terms of money. While there is no objection to continuing to speak of investing capital, when one is

only exchanging money for other forms of capital, still one must be on one's guard against assuming that capital is anything else than goods. It is well to remember also that stocks, bonds, mortgages, etc. are not capital, but only evidences of ownership of capital. The shares of the stock of a railroad company, for example, are not themselves capital; they are only evidences of ownership in the railroad itself, which is the real capital.

Another reason which leads naturally to thinking of capital as a fund of value is found in the fact that capital, like all wealth, is measured in terms of value and its quantities expressed in terms of money. There is no good way of saying how much capital there is in any community or in the possession of any individual except by saying it in terms of money. If any capitalist were asked how much capital he possessed, and he were to answer in terms of tons, or cubic feet, or yards, or any other unit of physical measurement, he would not convey any clear or definite idea. Therefore, if you ask any business man to state how much capital he uses in his business, he can only answer you intelligently by saying so many dollars or so many dollars' worth. This is a mere quantitative expression. If, however, you were to ask him in what his capital really consists, he could only answer you intelligently by giving you an inventory of the various goods which make up his fund of capital. The only exception to this case would be the money lender, whose capital consists solely of money.

Pure capital and capital goods; pure weight and weighty objects. One may, however, reject the idea that capital is money and still persist in the idea that it is a fund of value. The distinction has sometimes been made between pure capital and capital goods, pure capital being a fund of value embodied in the goods, and capital goods being the things themselves in which that fund of value is embodied. The value of the goods is not capital any more than the weight of an object is the object itself. As stated above, value is the attribute

which we use in trying to arrive at a quantitative conception of the real goods. It is the only attribute which they all possess in common and which at the same time indicates their ability to serve the owner's needs. The value, however, is only a symptom of that ability, and not a cause of that ability.

The function of productive capital is to aid in production. Except in the case of money it is not the value of the goods which enables them to do their work. The value is only a symptom of the fact that they are doing that work. A producers' good which ceased to aid in production would lose its value; a producers' good which continued to be a real aid in production would retain its value. The value would be the shadow of the real thing and not the substance. Land also has value if it is productive. But it is not the value which makes it productive; it is its productivity which makes it valuable. In this respect capital and land are similar. In the case of that special kind of capital known as money, and in this case alone, its usefulness, its ability to function, depends upon value; in every other case its value depends upon its usefulness or its ability to function.

Capital the result of working and waiting. The next question to arise is, How does capital come into existence? If it consists of tools, buildings, machines, equipment, etc., it is rather obvious that they come into existence because labor is expended in producing them. But this does not tell the whole story. In order that any community may come into possession of a larger stock of tools and equipment, it must, temporarily at any rate, divert its labor force from the production of consumers' goods into the production of these producers' goods. Whether it be a communistic society or an individualistic society, this physical fact remains the same. In a communistic society, if the stock of capital goods is to be increased, some labor must be put to work making tools, machines, buildings, equipment, etc., and just that much less labor will be available during that time for the production of consumers' goods. During this period the

community as a whole will have fewer consumers' goods than it otherwise might have had. Of course, the expectation is that the tools and equipment, after they are produced and put to use, will again add to the total production. This, however, involves a certain amount of postponement of consumption. The community as a whole decides that it will have fewer consumers' goods in the present or immediate future in order that it may have more in the distant future. There is no possibility of evading this physical necessity.

In an individualistic society, however, though the same physical necessity exists, the process is slightly different. Any individual may decide that he will consume a little less in the present or the immediate future in order that he may have a little more to consume in the distant future. The way he does this is to save and invest, or else to turn aside, as may have been done in very simple states of society, from the work of gathering consumers' goods in order to apply himself to the work of making tools.

Making tools rather than consumers' goods. A primitive fisherman has frequently been used as an illustration of this simple process. He has been in the habit of catching fish with very simple tackle, but he sees an opportunity of increasing his catch if he can only get some kind of boat, so he decides to spend a part of the time each day in making one. By this combination of frugality and industry he eventually comes into possession of a boat which thereafter adds to his income and more than compensates him for the frugality which he practiced during the period in which the boat was building. This case is doubtless real enough to serve as an illustration of the essential process of increasing the stock of capital.

It has not been many generations since farmers used very crude and simple implements, some of which they could make for themselves. The farmer who made his own plow was depriving himself of the opportunity for amusement, which is a kind of consumption, or was reducing somewhat his