§ 3. Property. No trade of goods is possible unless the trader has possession of the goods, or can deliver that control over to the other party in the trade. The fact of possession is implied in all discussions of value, price, use, and rent. Possession is a legal fact. It is legal control, not physical hold of goods. In any settled community it must be regu lated by law, the law of property. Property is ownership. It is an intangible right; only by a loose figure of speech has it come to be applied to the object owned (e.g., a man has a property in a house and lot—real estate; hence the house and lot are called his property). The law of property is the rule of the community determining control over economic goods. Economic goods are valuable; other persons would like to have them. A property right is either a claim upon some one else or a limitation of some one else's claim. You say in various ways, this house with land is mine, it is my own, it is owned by me, it is my property, I have a property right in it, it belongs to me, etc. All these phrases express your right to have and use as against other men's rights. But you may sell to another man a right to a method of use or to a limited pe riod of use, in a written instrument, a lease. He then has a legal right in his leasehold, and your right is limited by his.
He may have an "equity" in the house (a claim upon the in come from the house which formerly was enforceable in a court of equity). At the same time you may get repairs made by mechanics who until paid have a legal claim for which the house itself is legal security (law of mechanics' lien). And so there may be a score of overlapping and mutually limiting claims upon the income from one economic agent. There is a legal distinction between your legal claim to the fee simple of a landed estate, and the various legal claims upon you, or equitable interests in the house (when it is the security). But it is property rights that are traded rather than the things themselves, for legally each party in a trade can deliver the possession and use only of that limited part, aspect, or mode of use, of goods, which is his.
§ 4. Wealth and property rights. The valuable objects themselves, such as lands, houses, cattle, implements, and ships, are wealth. If there are no overlapping legal rights, the property right to a piece of wealth has the value of the wealth itself. In simple conditions of industry each piece of wealth had one owner who had the right to all the income of that wealth ; or if others had overlapping claims (of landlord, sovereign, etc.), they were of a fixed sort, not objects of sale. Neither the objects of wealth (the lands, etc.) nor outsiders' claims upon them were ordinarily bought and sold. There fore their magnitude was usually estimated in terms of their rents, or incomes, and not in terms of their price if sold as a whole. In England, where land rarely changes hands except
by inheritance, an income whether from land or other sources is still spoken of as worth so many pounds a year, rather than as worth so much as a whole. As there comes to be a net work of property rights extending over the wealth, and mu tually delimiting each other, it is evident that the total price of these rights can not exceed the total price of the uses (prod nets) of the wealth. The different pieces of wealth have yields that are impersonal—the field yields its crop, the house its services, the ship its uses, and these impersonal yields are apportioned to different persons as incomes according to their property rights. Two or more men may be partners, one en titled to another to and another to % of the total usance ; or before these incomes are apportioned, many other small prior claims may be first deducted. Corporate ownership with small shares of stock gives a much greater division of claims upon income.
More and more it is these claims to income that have come to be the objects of trade among men, rather than the con crete wealth itself. One may be a very rich man to-day and not own outright, in fee simple, any but small personal belong ings. He does not own wealth in the old-fashioned way, he has capital, and is a capitalist.
§ 5. Origin of capital; its definition. Capital is from the Latin adjective capitalis (from caput, head) in the phrase capitalis pars, the chief part, principal part ; hence principal, of a money-loan. The capital, or principal, of the lender was this amount of money, distinct from the usury (originally meaning the sum paid for the use) or interest, the amount in addition which was due him at the expiration of the loan. Money loans of this kind were rare except among merchants in cities, and the borrower on his part looked upon the capital as the amount he had to "invest" (literally, clothe) in various kinds of goods. Taking these goods to a distant market, or changing them by manufacture into more valuable forms, he expected to regain when he sold them not only his capital but more than enough to pay the interest.
Merchants, manufacturers, bankers, were constantly thus investing capital. They ea to estimate in terms of capital not only the sums borrow and lent but the value of all their own rights in the goo / Even now the capital-mode of ex pression is less common in the rural economy, tho it is in creasingly used by farmers of the enterprising sort, who are borrowing and making improvements, getting better equip ment, etc., in many cases in America going so far as to count also the original price of the land, or its present value, as a part of their capital. We may define capital in accordance with this modern view.