CAPITAL-GOODS AS A FACTOR IN PRODUCTION 271 



The feature, condition, or purpose that makes wealth capital is its 

 productive use in conjunction with labor. The part played by capital 

 in production has given rise to unfortunate misconceptions. It is 

 customary to say that capital yields an income. This seems to be 

 an essential part of its nature, just as trees naturally bear fruit or as 

 hens naturally lay eggs. Hence the income provided by capital is 

 regarded as a product due exclusively to capital. The spread of this 

 false notion is due partly to the fact that a vast amount of capital is 

 in the form of securities, bonds, or shares, with interest falling due 

 every year or every six months. 



We must nevertheless abandon the idea of the natural produc- 

 tivity of capital an idea which has aroused the more or less justifi- 

 able ire of the socialists. The mysterious productive and generative 

 power, attributed to capital as part of its nature, is a pure chimera. 

 Notwithstanding the popular belief to the contrary, money does not 

 produce money nor does capital produce capital. Not only has a 

 bag of money never produced a single cent, as Aristotle remarked long 

 ago, but a bale of cotton or a ton of iron never has produced any cotton 

 or iron. Capital is inert matter, and by itself is absolutely sterile. 

 But when it is put in the service of labor, it gives labor a degree of 

 productivity that may be very great. With a horse and plow, a 

 farmer can produce more wheat than with his manual labor alone. 

 It is this increased or supplementary crop that constitutes the income 

 from capital. It does not arise from the plow; it is due to the man 

 aided by the plow. 



Capital which can be used only once, because it is consumed in 

 the act of production, is called circulating capital; examples of this 

 kind of capital are: the wheat that is sown, manure that is mixed with 

 the soil, coal that is burned, cotton that is spun. Capital that can 

 be used to serve for several productive acts is called fixed capital; 

 it may include the most fragile implements, such as needles, and the 

 most durable kinds of wealth, such as canals or tunnels, which last 

 as long as the world. 



81. MACHINERY AS A MEANS OF INCREASING THE EFFECT- 

 IVENESS OF LABOR 1 



Barley (unit 3), oats (unit 13), rice (unit 17), rye (unit 18), and 

 wheat (units 26 and 27) may be grouped under the head "small 

 grains" and considered together as to a number of operations. In 



1 Adapted from the Thirteenth Annual Report of the Commissioner of Labor 

 1898, pp. 84-87. 



