some part of it unavoidably, some part through the indifference and carelessness of the workers. A machine eliminates all the time loss due to human frailty or negligence.

4. The cost of production is diminished. This will naturally follow from the lessening of wages and the increase of the prod

uct.

5. The price of the finished product is lowered. In manufacturing industries, where the product can be increased indefinitely at the will of the producer, the supply can be made to equal the demand. Again, as the cost of production is decreased, competition will tend to bring down the price of the product near to the cost of production.

6. The price of raw material is in many cases diminished. Many raw materials are themselves a product of machinery in some form or other and can be turned out with a saving of cost and in greater quantity, allowing their sale with profit at a lower price.

Disadvantages of Machinery. The disadvantages of machinery are:

1. The introduction of machinery throws the laborer out of employment. This is a real disadvantage, and for the time being at least is sorely felt by the laboring class. In time, however, those thrown out of employment will find other employment in other trades or indeed in different branches of their former trade, through the increase of production brought about by the introduction of machinery. Thus, one hundred years ago there were eight thousand employed in the cotton mills in England; to-day, there are five hundred thousand employed, precisely through the introduction of machinery.

2. Immense loss of life and limb. In New York State the total number of injuries received in factories, quarries, and tunnel construction amounted, in 1910, to 25,390, distributed as follows:

(N. Y. State Dep't Labor, 1910 Report of Factory Inspection, p. 134.)

In the same year, the number of accidents from machinery was 11,245. (Ib., p. 132.)

The laws, however, should safeguard against accidents, and during recent years much has been done in this matter. Factory inspection has become more thorough, and the prosecution of those who fail to observe the laws has been carried on more energetically.

IV. CAPITAL

Definition of Capital. The third factor in production is Capital. Capital is that part of wealth which is devoted to the production of more wealth.

Capital is always less than wealth. All of a man's possessions will not be devoted to productive purposes; all will not be sunk in business or in investments with the intention of reaping a monetary profit. A certain portion of what he owns will be devoted to the procuring of enjoyment, to the adornment of person or home, to expenditure which will bring no increase to his possessions.

A man may receive through inheritance $100,000. If he devotes $50,000 of that sum to leasing land, building a plant, and starting some manufacturing business, he has turned one half of his wealth into what is technically called capital.

It is the same with regard to the wealth and capital of a nation. All the wealth of the nation is not actually employed in producing more wealth. Only that portion of the wealth of the nation which is employed in producing more wealth through business or investment is economically termed capital.

The distinctive feature of capital, then, is that it is devoted to the production of more wealth. If a man in business makes a year's profit of $25,000, and expends the sum on diamonds and luxuries, no part of that profit becomes capital. It takes the form of wealth expressed in the diamonds and luxuries. Again, if he spends the $25,000 profit in paying laborers to build a race track about his grounds for his own amusement, the sum

expended does not become capital. If he devotes that sum to the purchase of new machinery and raw material to be used in his business, or if he expends it in draining and improving his farm land, so that it may produce a larger and a better crop, he has turned his money into capital.

In accordance with the same principle, oats are capital when fed to a dray horse which works on the farm; they are not capital when given to a race horse which the farmer keeps merely for fast racing.

Several things may or may not be considered as capital, according to their relation to the end, viz., the production of more wealth. Thus, food when partaken of for the mere pleasure of taste is not capital; when used for strength and muscle to be afterwards employed in labor, it is capital. Articles like jewelry, laces, pictures, from the point of view of the purchaser who buys them for the adornment of himself or his home, are not capital; from the point of view of the jeweler or the storekeeper who sells them, they are capital.

Capital is essential to

Capital Essential to Production. production, but not in the same way in which nature and labor are essential. Without the materials offered by nature and without some kind of labor on that material, there can be no production. Capital is necessary to production, because through it the material is procured or the laborer is enabled to apply his labor to the material. Thus, capital furnishes three things to the laborer :

1. Sustenance, i.e. food, clothing, and shelter, while he labors or until he completes the product.

2. The tools he makes use of.

3. The material on which he labors.

Capital requires Labor. Capital cannot produce of itself. Labor is requisite to make it productive. Men put thousands of dollars into banks, bonds, railroad and mining stocks, this or that business venture, and one who knows that these men live on the incomes received from these investments might be led to think that money naturally increases of itself. But money can

never increase of itself. A million dollars if left in a vault will not increase by the value of one cent in a thousand years.

Labor is the active principle which causes money to increase, and the incomes of the persons mentioned are all derived from the labor, if not of the investors themselves, then of some others whose activity is made possible by the capital invested.

Thus, the incomes from banks are derived from the labor of those employed in the undertakings set on foot by the loans of the banks to business men; the incomes from United States bonds are derived from the labor of all the taxpayers of the country; the incomes of railroad and mining stocks from the labor of the thousands who work on the railroads and in the mines; the incomes from business enterprises from the labor of the employees engaged in those business ventures.

Capital needs labor, therefore, to produce more wealth. An intimate dependency exists between capital and labor. Conversely, there exists just as intimate a dependency of labor on capital. Every hundred dollars' worth of capital judiciously invested induces more labor, while a diminution of labor is entailed by every withdrawal of capital, caused either by uncertainty in the business world consequent on great political upheavals, the fear of war, or government measures affecting the money standard, tariff rates, railroads, and corporations, or by the luxurious extravagance of the wealth owners whose expenses exceed their incomes.

Capital results from Saving. Saving here does not mean hoarding. He who hoards day after day will increase his wealth, but he does not add to his capital. Saving means the abstinence from the use of wealth or a part of it, and the assignment of it to some one of the various means of increasing it.

Every one has the absolute right to employ his wealth in any way that may suit his own fancy, if he violates no ethical law. He may expend it all for his own pleasure. But if he does so, he will not increase his wealth, since he puts none out in capital.

To invest capital, then, one must forgo the things which his

wealth could procure for him, and the greater is his abstinence, the larger will be his capital. A farmer may save by curtailing his wants within the limits of his necessaries. The rich man may save by denying himself luxuries.

Capital is consumed in Production. - Capital is consumed in producing new wealth. It is consumed in factories, in wages, in the buying of raw material, in the procuring and the repairing of machinery, in all the various methods employed to make business successful.

When a man possessing $100,000 devotes $50,000 of it to capital in some business, he takes a certain amount of risk on the capital invested, in the expectation that his venture will return him not only the sum invested, but a substantial increase. His $100,000 would be safer, perhaps, if stored away in a steel vault, but at the end of ten years he will have no more than his original $100,000. If he invests one half of it and sinks it in factories, wages, taxes, machinery, he exposes his investment to the dangers of business disaster, of fire, of the knavery of employees, but should he be fortunate enough to escape these, and at the same time conduct the business judiciously, at the end of the ten years his capital will have reproduced itself twice or three times over and his wealth will have proportionately increased.

Kinds of Capital.

Capital is either Fixed or Circulating.

Fixed capital embraces the permanent fixtures of a business, such as factories, machinery, and tools, which are not used up in a single act of production. Circulating capital embraces all those elements of a business which are consumed in the act of producing. Such are raw material, fuel, and wages.

The fixed capital will endure for a number of years; the circulating capital must be continually renewed.

The return from fixed capital need not be immediate; the gain of profit on it may extend over the space of several years. The return from circulating capital must be immediate, since it must be renewed by immediate expenditures.

Increase of Capital. The increase of capital depends on two

POL. ECON. -7