unless, as Mill says, it is protected by the Government.

We have now seen how land and labour a requisites of production, the third requisite is capi

CHAPTER III.

CAPITAL.

§ I. IN a savage state man thinks only of satisfying his immediate wants; in a civilized state he devotes much labour to preparing the roads, buildings, tools, materials, etc. which may be of service to him in the future. He abstains from seeking immediate enjoyment from the whole produce of his labour, and devotes some part of it to producing things which will assist him in his future work. These requisites of production are called Capital.

Capital is the result of labour and abstinence. It consists of all wealth which is destined to be employed Productively1.

We say 66 destined" or devoted, because it is not always possible to tell whether a thing is capital or not, without knowing how the owner intends to use it. Thus oats are capital if they are to be given to a cart-horse, but not if they are to be given to a racehorse. Again, many things are used sometimes for business, therefore as capital; sometimes for pleasure, and therefore not as capital. A French peasant's cart is used as capital in the field, but not as capital when it carries him and his family for a jaunt on a holiday. Again, it is not always clear to what extent a doctor's house and his carriage should be regarded as capital required for his business.

"To familiarise ourselves with the conception, let us consider what is done with the capital invested in any of the branches of business which compose the productive industry of a country. A manufacturer, for example, has one part of his capital in the form of buildings, fitted and destined for carrying on his branch of manufacture. Another part he has in the form of machinery.

1 See Chap. i. § 6.

s shape.

capitalist has money, which he pays to his work enables them to supply themselves: he has also in his warehouses, by the sale of which he obtains to employ in the same manner, as well as to reple of materials, to keep his buildings and machin and to replace them when worn out. His mone goods, however, are not wholly capital, for he do devote them to these purposes: he employs a pa and of the proceeds of the other, in supplying consumption and that of his family, or in hirin valets, or maintaining hunters and hounds, or in children, or in paying taxes, or in charity. Wh capital? Precisely that part of his possessions, which is to constitute his fund for carrying on fresh It is of no consequence that a part or even th is in a form in which it cannot directly supply labourers1."

The land itself and natural agents, such as not called capital; because they are not made by m are not saved by him. We are not dependent on th abstinence of our forefathers for our supply of land power. But all the improvements that are mad capital; for they are the result of labour and abs labour by which they were made was devoted not the means of immediate enjoyment, but to doing will assist man in his future work of production. are capital; but the Thames, which is a far mo source of wealth than any canal, is not capital. question whether capital should not be so defined all those natural agents and resources for the p wealth, which are capable of being appropriated. the word in this sense, the capital of America w mensely greater than that of England. But eco agreed to define capital so as to exclude all things made by man. And when thus defined the capital is probably less than that of England.

§ 2. Capital is the result of labour and absti saved. But it is also used.

fashion in civilized countries. An Englishman, when he saves capital, intends either to use it himself, or to lend it out to be used by others; and capital when it is used is almost always spent: but it is so spent as to be reproduced: it is spent Productively.

We may find a good instance of that Productive expenditure which is really saving in the career of the great Duke of Bridgewater. In his time English industries were sadly hampered by the enormous cost of carrying goods from one part of the country to another. None of the roads leading into Manchester were passable by carts. Coals, corn, cloth and other things were carried on horses' backs in summer. But in winter, when the roads were bad, Manchester was like a beleaguered town. The duke conceived the daring project of making canals to connect the manufactures of Manchester with the coal districts on the one hand, and with the sea at Liverpool on the other. He devoted all his wealth and energies to the work. He lived in the plainest manner, had long consultations with Brindley the engineer in rough log huts; and derived from the excitement of his enterprise a keener pleasure than he would have obtained from spending his wealth in luxury. He bequeathed vast wealth to his descendants, but in the act of saving it he gave employment to vast numbers of working men. His canals are a source of the prosperity of his country, and afford permanent employment to thousands.

Capital devoted to making things that are to be consumed unproductively does indeed sustain labourers during the process, but it does not produce a fresh supply of capital which will in its turn support and assist labour. A man who employs people in making lace or in laying out ornamental grounds, sustains them while they are at work, and then this means of support comes to an end. On the other hand a man who invests capital in a coal mine not only benefits labourers during the time, but prepares a store of coal which may again be used as capital: his expenditure has the after effect of increasing the amount of those things which either support or assist labour.

83. And now we may pause to consider Bastiat's distinction between those effects of an action which are seen and those which are not seen. When a spendthrift is wasting his substance it is easy enough for his neighbours to see how he gives employment to cooks and valets and horse-jockeys. But when a man saves his money and invests it, say in a new canal or railway, it is not so easy to see that his wealth employs navvies and other workmen in the present, and will go on affording employment to other labourers in other generations. Though his wealth is spent, it is not spent by himself: so that

others unfold in succession-they are not seen; if they are foreseen. Between a good and a bad constitutes the whole difference: the one takes a the visible effect: the other takes account of the are seen and also of those which it is necessary to this difference is enormous, for it frequently happ the immediate effect is favourable, the ultimate co fatal and conversely. Ignorance surrounds m cradle; then its actions are determined by the quences, the only ones which in its first stage it only gradually that it learns to take account of t has to learn this lesson from two very different n rience and foresight. Experience teaches effect tally. It makes us acquainted with all the effect by causing us to feel them, and we cannot fai knowing that a fire burns when we have burned ou this rough teacher I should like if possible to sub gentle one-I mean Foresight. For this purpose I the effects of various economical phenomena b opposition to each other those which are seen and are not seen." There are, as Bastiat goes on to important consequences of men's action which are which may be foreseen by the aid of economic prin

One of the most important of these princip expressed by saying "Industry is limited by Ca when so stated it is often misunderstood. It mean Labour requires support and aid from c demand for labour in a district cannot in be increased by any device that does no increase of the supply of capital in it. [If the efficiency of labour were to be doubled by wand, while the material capital in the country we

1 The sentence "Industry is limited by Capital" is th four "fundamental propositions about Capital." His fou expresses another side of the same truth; it is "Demand ties" (payment for them being made after they are finishe done) is not demand for labour" (payment for it bein hand, as is usually done). Mill's second proposition effect; it is "Capital is the result of saving." This and h sition "Capital is consumed" have already been explaine