Chapter 14: The Money Economy and the Concept of Capital

1. Are national bonds or promissory notes, wealth?

2. Is it money or things that the borrower wants?

3. If you were starting a factory on credit, would you rent the machines or buy them with borrowed money? Why?

4. When a man says he has a certain capital invested in his business, does he mean to include the value of the land and buildings?

5. What is the meaning of the phrase, "a capitalistic age"?

NOTE.--We are indebted to the economic historians for a
better understanding of the important influence money has
had on economic organization. See Hildebrand's notable
article in the first number of the _Jahrbücher_, and
Ashley, _English Economic History_. J. B. Clark was the
first among contemporary economists to emphasize the value
concept of capital. The scholarly and judicial article by
Irving Fisher on "Precedents for Defining Capital" in
_Quarterly Journal of Economics_, May, 1904, makes possible
better understanding and agreement on the subject. I am
pleased to say that in this article, and in personal
correspondence, Professor Fisher disavows the
interpretation I had thought (see "Recent Discussion,"
etc.) that his words required. His conception of capital is
thus, in essentials, the one here employed, differing from
it not in thought, but merely in terminology. Professor
Fisher's original studies of the capital concept, in the
_Economic Journal_ in 1896-7, are indispensable to an
understanding of the development of this important phase of
the new economic theory. The connection between the
conclusions of economic history and the value concept of
capital in economic theory has been made by the author in
essays before cited under chapters 6 and 8: "Recent
Discussion of the Capital Concept"; "The Next Decade of
Economic Theory," and "The Relations between Rent and
Interest."