Capital and Interest

CHAPTER V

THE TEXTE CONCEPTION OF THE USE OF GOODS

ALL material goods (Sachgüter) are of use to mankind through the action of the natural powers that reside in them. They are a part of the material world, and for that reason all their working, including their useful working, must bear the character that working generally has in the material world; it is a working of natural powers according to natural laws. What distinguishes the working of material goods from the working of other kinds of natural things, harmless or hurtful, is the single circumstance, that the results of such working-admit of being directed towards the advantage of man, this direction also being under the rule of natural laws. That is to say, all things are endowed simply with working natural powers, but experience shows that these powers only admit of being directed to a definitely useful end, when the matter which possesses these powers has taken on certain forms that are favourable to them being so directed. All matter on the surface of the earth, for instance, among other forms of energy, possesses an amount of energy corresponding to its distance from the centre of the earth. But while men can do nothing with this form of energy when stored up in a mountain, that same energy is useful to them when the matter possessing it has taken on some form they wish—that is, some form in which the energy is available; say, that of a clock pendulum, or a paper weight, or a hammer. The energy of chemical affinity which carbon possesses is identical in every molecule of it. We get a direct economic utility, however, from the results of this energy only when the carbon has taken such forms as that of wood or coal; not when it exists as part of one of the constituents of the air. We may therefore say that the nature of material goods, as opposed to those material things that are not useful, is that they are such special forms of matter as admit of the natural powers they possess being directed to the advantage of man.

From this follow two important inferences, of which one concerns the character of the useful functions of material goods, and the other concerns the character of the use (Gebrauch) of goods.

The function of goods can consist in nothing else than in a giving off, or rendering up, or putting forth of power; or, to use the terminology of physical science, the passing of energy into work. On the natural side it shows a complete parallelism with the character of the useful function performed by a manual labourer. In the same way as a porter or a navvy is of use, when he puts forth the natural power residing in his body in the form of rendering useful services, so are material goods of use through concrete forthputting of the natural powers inherent in them and capable of direction—physically speaking, through the forthputting in work of the available forms of energy they possess. It is by the passing of available energy into work that the “use”of goods is obtained by man.1

The use (Gebrauch) of a thing then is realised in this way: man takes the peculiar forms of energy of the good at the proper time, supplies the conditions necessary to render them available where they previously existed in an unavailable form, and then brings these forms of energy into proper connection with that object in which the useful effect is to take place. For instance, in order to “use”the locomotive the stoker fills the boiler with water, applies heat, and thus obtains in an available form the heat energy of the steam, which is transferred into energy of motion of the locomotive. This last-named energy is then transferred by connection to the carriages that convey persons or goods. Or one brings a book into the necessary relation with his eye for the image, which is continually being formed by reflection, to fall on the retina; or brings the house which continually offers shelter into proper relation with his whole person. But any “use” of material goods which does not consist in the receiving from them of useful results due to their inherent powers or forms of energy, is absolutely unthinkable.

I think I need have no fear of the propositions I have just advanced meeting with any scientific opposition. The conception laid down is no longer strange in our economic literature;2 and in the present state of the natural sciences the acceptance of it has indeed become a peremptory necessity. If by any chance it should be objected that this conception is one that belongs to the natural sciences and is not an economic one, I answer that in these questions economic science must leave the last word to natural science. The principle of the unity of all science demands it. Economic science does not explain the facts that belong to its province to the very bottom, any more than any other science does. It solves only one portion of the causal connection that binds together the phenomena of things, and leaves it to other sciences to carry the explanation farther. Not to mention other limiting sciences, the sphere of economic explanation lies between the sphere of psychological explanation on the one hand, and that of the natural sciences on the other. To give a concrete example. Economic science will explain thus far the circumstance that bread has an exchange value: it will point out that bread is able to satisfy the want of sustenance, and that men have a tendency to ensure the satisfaction of their wants, if necessary by making a sacrifice. But that men have this tendency, and why they have it, is not explained by economic science but by psychology. To explain that men want sustenance and why, falls within the domain of physiology. Finally, it also falls within the sphere of physiology to explain that bread is able to satisfy that want, and why it is able to do so, but physiology does not finish the explanation within its own sphere; it has to call in assistance from the more general physical sciences.

Now it is clear that all explanations given by economic science have a value only under this condition, that they are continuous with the related sciences. The explanations of economics cannot rest on anything that a science related to it is bound to declare untrue or impossible; otherwise the thread of the explanation is broken from the first. It must on that account keep exactly in touch with the related sciences at the points where they limit it, and one such point is just this question as to the working of material goods.

The one thing of which I have, perhaps, some reason to be afraid is, that the employment of this physical conception in regard to a certain limited class of material goods, especially to the so-called “ideal goods,” may be somewhat startling at the first glance to some readers. That, e.g. a fixed and stationary dwelling-house, a volume of poems, or a picture of Raphael should be of use to us through the forthputting of inherent properties connected with one or other of the forms of energy, or, as we may shortly express it, the forthputting of its natural powers, may at first, I admit, be a little strange. Objections like these, however, which have their origin more in feeling than in understanding, may be removed by a single consideration. All the things that I have named enter into the relation which makes them “goods”only in virtue of the peculiar natural powers which they possess, and possess, indeed, in peculiar combination. That a house shelters and warms, is nothing else than a result of the forces of gravity, cohesion, and resistance, of impenetrability, of the non-conducting-quality of building materials. That the thoughts and feelings of the poet reproduce themselves in us is mediated, in a directly physical way, by light, colour, and form of written characters; and it is this physical part of the mediation which is the office of the book. There must of course have been a poet soul in whom ideas and feelings waked, and, again, it is only in a spirit and through spiritual forces that they can be reawakened; but the way of spirit to spirit lies some little distance through the natural world, and over this distance even the spiritual must make use of the vehicle of natural powers. Such a natural vehicle is the book, the picture, the spoken word. Of themselves they give only a physical suggestion, nothing more; the spiritual we give of our own on accepting the suggestion; and if we are not prepared beforehand for a profitable acceptance of it,—if we cannot read, or, reading, cannot understand, or cannot feel,—it remains simply a physical suggestion.

With these explanations perhaps I may consider it established beyond question that material goods exert their economical use through the forthputting of the natural powers residing in them.

The individual useful forthputtings of natural powers that are obtainable from material goods I propose to designate as “Material Services.” 3 In itself, indeed, the word Use (Nutzung) would not be inappropriate, but to adopt it would be to surrender our conception to all the obscurity that now, unfortunately, hangs over that ambiguous expression.4

The conception of Material Services is, in my opinion, destined to be one of the most important elementary conceptions in economic theory. In importance it does not come behind the conception of the economic Good.5 Unfortunately up till now it has received little attention and little development. From the nature of our task it is indispensable that we should repair this neglect, and follow out some of the more important relations into which the material services enter in economic life.

First of all, it is clear that everything which would lay claim to the name of a “good”must be capable of rendering material services, and that, with the exhausting of this capability, it ceases to have the quality of a good; it falls out of the circle of “goods”back into the circle of simple “things.” An exhaustion of this capability must not be thought of as an exhaustion of the capability to exert or to put forth energy in general; for what we have called the “natural powers “of the material are as imperishable as the material itself. But although these powers or forms of energy never cease to exist in some form or other, they may very well cease to be available for material services in this way, that the original good, in the course of doing work, has undergone such a change,—be it separation, dislocation, or uniting of its parts with other bodies,—that, in its changed form, its energy is no longer available for human use. For instance, when the carbon of the wood burned in the blast furnace has combined with oxygen in the combustion process, its powers cannot again be employed to smelt iron, although these powers are constant, and continue to work according to natural laws. The broken pendulum retains its energy due to gravity just as it did before, but the loss of the pendulum form does not allow of this energy being directed to regulate the clock. The exhaustion of capability to render material services we are accustomed to call the using up or Consumption of goods.

While all goods thus agree and must agree in this, that they have to render material services, they differ essentially from one another in the number of services that they have to render. On this rests the familiar division of goods into perishable and non-perishable, or better, into perishable and durable.6 Many goods are of such a nature that, to render the uses peculiar to them, they must give forth their whole power, as it were, at a blow, in one more or less intense service, so that their first use quite exhausts their capability of service, and is their consumption. These are the so-called perishable goods, such as food, gunpowder, fuel, etc. Other goods, again, are, in their nature, capable of rendering a number of material services in the way of giving off these services successively, within a shorter or longer period of time; and thus after a first, or even after many acts of use, they may retain their capability of rendering further services, and so retain their character of goods. These are the durable goods, such as clothing, houses, tools, precious stones, land, etc.

Where a good successively gives off a number of material services, it may do so in one of two ways: either the services following each other evidently separate themselves from each other, as clearly marked single acts, in such a way that they are easily distinguished, limited, and counted,—as, e.g. the single blows of a coining press, or the operations of the automatic printing press of a great newspaper; or they issue from the goods in unbroken, similar continuance,—as, e.g. the shelter silently given over long periods of time by a dwelling-house. If, however, it is desired, in cases of this sort, to separate and divide the continuous amount of services—and practical need often requires this—the expedient is adopted that is generally taken in the dividing of continuous quantities; the dividing line that does not suggest itself in the phenomena under consideration is borrowed from some outside circumstance, e.g. from the lapse of a definite time; as when one delivers over to the hirer of a house the services to be rendered by the house during the year.

Another essential feature that meets us in the analysis of material services is their capability of obtaining complete economical independence. The source of this phenomenon is that in very many, indeed in most cases, the satisfaction of a concrete human want does not demand the exhaustion of the entire useful content of a good, but only the rendering of a single material service. In virtue of this the single service in the first instance obtains an independent importance as regards the satisfaction of our wants, and then in practical economic life this independence is fully recognised. We give the recognition (1) wherever we make an independent estimate of the value of isolated services; and (2) wherever we make them into independent objects of business transactions. This latter happens when we sell or exchange single services, or groups of services, apart from the goods from which they proceed. Economical custom and law have created a number of forms in which this is effectuated. Among the most important of these I may name the relations of tenancy, of hire, and of the old commodatum;7 further, the institution of easements, of fee farm, of copyhold (emphyteusis and superficies). A little consideration will convince us that, as a fact, all these forms of transaction agree in this, that one portion of the services of which a good is capable is divided off and transferred separately, while the rest of the anticipated services, be they many or few, remain with the ownership of the body of the good, in the hands of the owner of the good.8

Finally, it is of great theoretic importance to determine the relations that exist between the material services and the goods from which they proceed. On this point I may put down three cardinal propositions, all of which appear to me so obvious that we may dispense here with any detailed proof of them; more especially as I have gone thoroughly into the subject on another occasion.9

1. It seems to me clear that we value and desire goods only on account of the material services that we expect from them. The services, as it were, form the economical substance with which we have to do. The goods themselves form only the bodily shell.

2. It follows from the above, and appears to me equally beyond doubt, that, where entire goods are obtained and transferred, the economical substance of such transactions always lies in the acquisition and the transference of material services; indeed of the totality of these services. The transference of the goods themselves constitutes only a form—certainly a form that, in the nature of things, is very prominent, but still only an accompanying and limiting form. To buy a good can mean nothing, economically speaking, but to buy all its material services.10

3. From this, finally, comes the important conclusion that the value and price of a good is nothing else than the value and price of all its material services thrown together into a lump sum; and that accordingly the value and price of each individual service is contained in the value and price of the good itself.11

Before going farther let me illustrate these three propositions by a concrete example. I think all readers will agree with me when I say that a cloth manufacturer values and demands looms only because he expects to get from the looms the useful energies peculiar to them; that not only when he hires a loom, but when he buys it, he looks, as a fact, to the acquisition of its services; and that the ownership he acquires at the same time in the body of the machine only serves as greater security that he will obtain these services. Even if this ownership in point of law appears to be the primary thing, economically it is certainly only the secondary. And, lastly, it will be granted, I think, that the use which the whole machine renders is nothing else than the use of all its material services thrown together into one sum; and that similarly the value and price of the whole machine is nothing else, and can be nothing else, than the value and price of all its material services thrown together into one sum.

12 I may remind the reader that, according to the scientific conception of energy—energy being that quality the possession of which confers upon a body the power of doing work—it may exist either as available or unavailable energy; that is, the body may possess energy of which a use can be made, or it may possess energy of which no use can be made. Thus the storage of energy in certain material bodies in an unavailable form, and the change of this unavailable into available energy, by means of which work is done that has a direct influence on the satisfaction of human wants, is just the physical conception applied to economics.—W. S.

13 Schäffle, in particular, in the third volume of his Bau und Leben, very beautifully puts the same point of view. Schäffle, I may say, forms an honourable exception among economists as regards this objectionable habit of not taking any trouble with the principles that regulate the working of goods.

14 I have already introduced this term Nutzleistung in my Rechte und Verhältnisse; before that I used it in a work written in 1876 but not printed. It is employed by Knies several times in the second portion of his Kredit, but unfortunately in the same ambiguous sense in which on other occasions he uses the word Nutzung.

NOTE BY TRANSLATOE.

After much deliberation Material Service is the nearest rendering I can give to the word Nutzleistung, introduced by Professor Böhm-Bawerk. Every translator finds the difficulty of rendering scientific terms from one language into another, but this difficulty is greater in political economy, where we are bound to use words “understanded of the people.” The word Nutzleistung is one of these happy combinations which, as compounded of two familiar words, do not strike a German as peculiar or clumsy, and are yet strict enough to satisfy scientific requirements. But our language does not admit of many such combinations—the literal translation “use rendering “ at once shows the impossibility in the present case—and in a translation one does not feel justified in coining a new word. In rendering the word thus it becomes necessary to eliminate a note that follows in the German edition, where Professor Böhm-Bawerk congratulates himself on having escaped Say’s services productifs, which might be objected to on the ground that “ only a person, not a thing, can render services.” The prefix “material” seems to me fairly to meet this objection, as the total expression now implies a service—a forthputting of natural powers in the service of man—rendered by a material object.—W. S.

15 After this clause, in the German edition, come the words: “Und andererseits scheint mir der Name Nutzleistung in der That ausserordentlich prägnant zu sein: es sind im eigenstlichen Wortsinn nützliche Kräfteleistungen, die von den Sachgütern ausgehen.”—W. S.

16 It is unfortunate that in English economics we have devoted so little attention to this most elementary conception, on which Menger, in particular, has bestowed so much pains. The poverty of our scientific nomenclature shows this defect very markedly: the word “commodity” is really the only singular equivalent we have for the familiar and suggestive word “goods,” although I personally have not scrupled to translate the German Gut by the English “good.” There is, indeed, reason for Mr. Ruskin’s sarcasm that our most famous treatise on Wealth does not even define the meaning of the word “wealth.”—W. S.

17 Even the so-called non-perishable goods are perishable, however gradually they perish.

18 Not of the loan; see below.

19 See also my Rechte und Verhältnisse, p. 70, etc.

20 In my Rechte und Verhältnisse, p. 60, where, in particular, I have stated the character of the material services as primary elements of our economic transactions, and have deduced the value of goods from the value of the material services.

21 This idea, though put somewhat differently, is explicitly recognised by Knies, Der Kredit, part ii. pp. 34, 77, 78. He expressly calls the selling price of a house the price of the permanent use of a house in opposition to the hire price, which is the price of the temporary uses of the same good. See also his Geld, p. 86. Schäffle too (Bau und Leben, second edition, iii. ) describes goods as “stores of useful energies” (p. 258).

22 For more exact statement, see my Rechte und Verhältnisse, p. 64.

• 1Grundlagen der National-Oekonomie, tenth edition, Stuttgart, 189. I
• 2This consideration of itself suggests the indefmiteness of what is usually called Undertaker’s Profit. In the Limited Liability Company this “ wage of intellect “ is measured and paid, but the varying dividend shows that it by no means exhausts this “profit.” The solution probably is that the attempt to assess undertaker’s wage on any principle is hopeless in present circumstances. It is a “ glorious risk,” depending, among other things, on adroitness, foresight, opportunity, and exploitation of labour—four factors scarcely reducible to figures. But with this line of thought, interesting and important as it is, we have nothing to do here.
• 3See the striking passage on pp. 134, 135.
• 4I may append some of the passages oftenest referred to. Plato in the Laws, p. 742, says: “No one shall deposit money with another whom he does not trust as a friend, nor shall he lend money upon interest.” Aristotle, Nicho-inachean Ethics, iv. § 1: “Such are all they who ply illiberal trades; as those, for instance, who keep houses of ill-fame, and all persons of that class; and usurers who lend out small sums at exorbitant rates: for all these take from improper sources, and take more than they ought.” Cicero, De Officiis, ii. at end: “Ex quo genere comparationis illud est Catonis senis: a quo cum quaereretur, quid maxime in re familiari expediret, respondit, bene pascere. Quid secundum? Satis bene pascere. Quid tertium? Male pascere. Quid quartum? Arare. . . . Et, cum ille, qui quaesierat, dixisset, quid foenerari? Turn Cato, quid hominem, inquit, occidero?” Cato, De Be Rustica: “Majores nostri sic habuerunt et ita in legibus posuerunt, furem dupli condemnare, foeneratorem quadrupli. Quanto pejorem civem existimarunt foeneratorem quam furem, bine licet existimari. “ Plautus, Mostellaria, Act iii. scene 1: “ Videturne obsecro hercle idoneus, Danista qui sit? genus quod improbissimum est…. Nullum edepol liodie genus est hominuni tetrius, nec minus bono cum jure quam Danisticum.” Seneca, De Beneficila, vii. 10: “Quid enim ista sunt, quid foenus et calendarium et usura, nisi liumanae cupiditatis extra naturam quaesita nomina? ... quid sunt istae tabellae, quid computationes, et venale tempus et sanguinolentae centesimae? voluntaria mala ex constitutione nostra pendentia, in quibus nihil est, quod subici oculis, quod teneri manu possit, inanis avaritiae somnia.”
• 5Quarterly Journal of Economics, April 1889.
• 6Kapitalzins. The word “Interest” in English does not require any addition.—W. S.
• 7“Es heisst Mietlioder Pachtzins, wenn das überlassene Kapital aus dauerbaren Gütern bestand. Es heisst Zinsen oder Interessen, wenn das Kapital aus verbrauchlichen oder vertretbaren Gütern bestand.” I have translated the passage to suit our English usage of the words. The adjective “vertretbar” (for which the legal “fungible” is the only equivalent) indicates that the thing lent is not itself given back, but another of the same kind. Grain and money are the typical fungibles.—W. S.
• 8I think it advisable to translate Unternehmer and Unternehmung throughout by Undertaker and Undertaking. Rowland Hill, when he adapted Greensleaves to a psalm, said he did not see why the devil should have all the good tunes. Neither, in my opinion, should our science any longer deny itself these useful words, introduced by Adam Smith himself, simply because they are usually confined with us to one special branch of industry.—W. S.
• 9ii. p. 255.
• 10On the whole question see Pierstorff, Die Lehre vom Unternehmergewinn Berlin, 1875.
• 11To give the reader some idea of the tone which the fathers of the Clmrcli adopted in dealing with the subject I append some of their most quoted passages. Lactantius, book vi. Divin. Inst. chap, xviii. says of a just man: “Pecuniae, si quam crediderit, non accipiet usuram: ut et benefichila sit incolume quod succurat necessitati, et abstineat se prorsus alieno in hoe enim genere officii debet suo esse contentus, quam oporteat alias ne proprio quidem parcere, ut bonum faciat. Plus autem accipere, quam dedevit, injustam est. Quod qui facit, insidiatur quodam modo, ut ex alterius necessitate praedetur. “Ambrosius, De Bono Mortis, chap. xii.: “Si quis usuram acciperit, rapinam facit, vita non vivit.” The same De Tobia, chap. iii.: “Taliasunt vostra, divites ! beneficia. Minus datis, et plus exigitis. Talis humanitas, ut spolietis etiam dum subvenitis. Foecundus vobis etiam pauper est ad quaestum. Usurarius est egenus, cogentibus nobis, habet quod reddat: quod impendat non habet. “So also chap. xiv.: “Ideo audiant quid lex dicat: Neque usuram, inquit, escarum accipies, neque omnium rerum.” Chrysostom on Matthew xvii. Homily 56: “Noli mihi dicere, quaeso, quid gaudet et gratiam habet, quod sibi foenore pecuniam oolloces: id enim crudelitate tua coactus fecit. “Augustine on Psalm cxxviii.: “Audent etiam foeneratores dicere, non liabeo aliud unde vivam. Hoc mihi et latro diceret, deprehensus in fauce: hoc et effractor diceret ... et leno ... et maleficus.” The same (quoted in the Decret. Grat. chap. i. Causa xiv. quaest. 3): “Si plus quam dedisti expectas accipere foeneratores, et in hoc improbandus, non laudandus.”
• 12Physical productivity manifests itself in an increased quantity of products, or, it may be, in an improved quality of products. We may illustrate it by the well-known example given by Koscher: “Suppose a nation of fisher-folk, with no private ownership in land and no capital, dwelling naked in caves, and living on fish caught by the hand in pools left by the ebbing tide. All the workers here may be supposed equal, and each man catches and eats three fish per day. But now one prudent man limits his consumption to two fish per day for 100 days, lays up in this way a stock of 100 fish, and makes use of this stock to enable him to apply his whole labour-power to the making of a boat and net. By the aid of this capital he catches from the first perhaps thirty fish a day.”
• 13The question now is, Is such a dividend pure interest? Here we have to reckon with the familiar fact that limited companies, under similar conditions, pay the most various rates of dividend. If then we accept “dividend” as the equivalent of “interest” we shall have to conclude that varying rates of interest are obtainable on equal amounts of capital. On looking closer, however, we find the dividing line again reasserting itself. If a sound industrial company is known to be paying a dividend higher than a certain definite percentage on its capital, the value of the stock, or parent capital, will rise to the point where dividend corresponds to an interest no greater than this definite percentage—e.g. the £100 stock of a great railway paying 5 per cent will rise to something like £125, at which price the 5 per cent dividend on the original capital shows a return of 4 per cent on the new value of the capital.
• 14But the fact is that, in all this, we have an entire misconception of the origin of value. Value cannot come from production. Neither capital nor labour can produce it. What labour does is to produce a quantity of commodities, and what capital co-operating with labour usually does is to increase that quantity. These commodities, under certain known conditions, will usually possess value, though their value is little proportioned to their amount; indeed, is often in inverse ratio. But the value does not arise in the production, nor is it proportional to the efforts and sacrifices of that production. The causal relation runs exactly the opposite way. To put it in terms of Menger’s law, the means of production do not account for nor measure the value of products; on the contrary, the value of products determines and measures the value of means of production. Value only arises in the relation between human wants and human satisfactions, and, if men do not “value” commodities when made, all the labour and capital expended in the making cannot confer on them the value of the smallest coin. But if neither capital nor labour can create value, how can it be maintained that capital employed in production not only reproduces its own value, but produces a value greater than itself?
• 15The legal prohibitions of interest may, of course, be taken as evidence of a strong and widespread conviction of the evils connected with its practice. But it can scarcely be said that they were founded on any distinct theory; at any rate no such theory has been handed down to us. The philosophic writers, again—like Plato, Aristotle, the two Catos, Cicero, Seneca, Plautus, and others—usually touch on the subject too cursorily to give any foundation in theory for their unfavourable judgment. Moreover, the context often makes it doubtful whether they object to interest as such, or only to an excess of it; and, in the former case, whether their objection is on the ground of a peculiar blot inherent in interest itself, or only because it usually favours the riches they despise.
• 16In concluding, I should like to say with Dr. James Bonar—that, while it would be bold to affirm that Professor Bòhm-Bawerk has said the last word on the theory of Interest, his book must be regarded as one with which all subsequent writers will have to reckon.
• 17The income that flows from capital, sometimes called in German Bent of Capital, we shall simply call Interest.
• 18The owner of capital, however, frequently prefers to give up the chance of obtaining this natural interest, and to hand over the temporary use of the capital to another man against a fixed compensation. This compensation bears different names in common speech. It is called Hire, and sometimes Rent (in German Miecthzins and Pachtzins) when the capital handed over consists of durable or lasting goods. It is generally called Interest when the capital consists of perishable or fungible goods. All these kinds of compensation, however, may be appropriately grouped under the name of Contract interest or Loan interest.
• 19It may with reason appear questionable if the entire profit realised by an undertaker from a process of production should be put to the account of his capital. Undoubtedly it should not be so where the undertaker has at the same time occupied the position of a worker in his own undertaking. Here there is no doubt that one part of the “profit” is simply the undertaker’s wage for the work he has done. But even where he does not personally take part in the carrying out of the production, he yet contributes a certain amount of personal trouble in the shape of intellectual superintendence—say, in planning the business, or, at the least, in the act of will by which he devotes his means of production to a definite undertaking. The question now is whether, in view of this, we should not distinguish two quotas in the total sum of profit realised by the undertaking; one quota to be considered as result of the capital contributed, a second quota to be considered as result of the undertaker’s exertion.
• 20Mario’s views are a mixture of Use and Productivity theories taken from Say. He recognises, with special emphasis on the necessity of their working together, two sources of wealth—natural power and labour power—and from this comes his conception of capital as “ perfected natural power.” Corresponding to the two sources of wealth are two kinds of income—interest and wages. “ Interest is the compensation for the productive or consumptive use of parent-wealth.” “If we apply forms of wealth as instruments of work, they contribute to production, and so render us a service. If we apply them to purposes of consumption we not only consume the wealth itself, but also the service which it might have rendered if productively employed. If we employ wealth belonging to other people, we must compensate the owners for the productive service which it might have rendered. The compensation for this is variously called interest or rent. If we employ our own goods we ourselves draw the interest which they bear.” It is a poor epitome of Say’s old theory.
• 21On the other hand, there are many, especially among the younger economists, who hold that such a division is inadmissible, and that the so-called undertaker’s profit is homogeneous with the profit on capital.
• 22Of the two phases of the canonist writings on this subject, the first is almost without value for the history of theory. Its theologising and moralising do little more than simply express abhorrence of the taking of interest and appeal to authorities.