6. Capital.—Unaided by tools and machinery man could make very- little use of the riches of nature. So out of the stick which first scratched the soil was finally evolved the idea of the spade, the hoe, the plow and the great mass of agricultural machinery in the invention and perfection of which the United States has led the world. In the processes of manu facture there has been the same evolution from the sharpened stone to the steel knife and ax, from the simple hand tools of not many hundred years ago up to the intricate and almost automatic machines of the modern factory.
The reader should note that these tools and ma chines are not wanted in themselves; that they do not gratify any human sense ; that they are wanted simply because they enable man to make more effective use of nature's resources and products. The farmer gets no pleasure out of a plow, but he does get satisfaction out of the knowledge that the thoro and deep turning of the soil is a step toward getting a good crop. The plow is merely an instrument of production. So are all tools and machines that play any part in the pro duction of other goods. To the economist all such goods are known as production goods or capital.
7. Capital and we do a little clear thinking about the nature of the process by which our tools and machinery have been created, we shall dis cover that the men who made them were thinking especially about future needs or wants and were willing to wait for their compensation. - While primi tive man was sharpening a stone into an arrowhead or was making his first rough bow, he had to forego the pleasure of the hunt and of fishing and he must have fasted a bit unless he had previously accumulated a store of food. It is evident that while a man is en gaged in the manufacture of a tool or machine he can not be producing food, or making clothing for himself, or constructing or repairing his shelter. In order that he may not suffer privation he must have food and clothing sufficient to last him thru the period of production and must have his house in fit condition for work. These things are essential to the creation of the tool or machine. Hence to the economist all the food and clothing and buildings in a country which are consumed in the production of wealth are capital.
The farmer who sows corn in the spring is planning for the autumn's crop. The seed corn is capital quite as much as the seeder which drops it in the. row.
In general economists defme capital as any form of I tc...ealth, land excepted, which is used in the production I of other wealth. All economic goods so used are
called capital goods or production goods.
8. Capital the production of most com modities the raw material is subject to several proc esses before a product is reached which is readv for final consumption. For example, the raw wheat be comes part of the miller's capital and is ground into flour; then it becomes part of the baker's capital and is made into bread ; finally it becomes part of the retailer's capital and is ready for distribution to the consumer. In the form of bread the economist thinks of it as a consumable good.
No absolute and clear line of distinction can be drawn between production and consumption goods, for loaves of bread consumed by men for the continu ance of productive effort are manifestly playing a part in the productive process. But this is a matter con cerning which there need be no refinement of discus sion. Under the head of a country's capital econo mists usually include all its tools, machinery, shops and factories, stores and warehouses, all its har vested raw materials, its mined ores in the various stages of manufacture, and the stored foodstuffs.
It would be idle to attempt to determine just what part of ay country's wealth is capital and what is not. It is sufficient to know that the idea of capital implies an element of time, a period of waiting, a postpone ment of consumption, consideration of future wants rather than of present.
9. The capital business men capital is always thought of in terms of money and very seldom in the strictly economic sense. If You ask what capital a man had when he started in business you will be told, say, $10,000. If a man needs more capital, he thinks of the amount of money he wants and will seek to borrow it.
We cannot here explain the close relation between the supply of capital goods and loanable funds, but such a relation does exist, as will be explained in later chapters. It is enough here for the reader to see that money, aided by credit, is merely a medium of exchange by the use of which men are able to get the capital or economic goods which they need for produc tive purposes. , A manufacturer's real capital is not the money he had at the start, but the factory and machines for which the money was exchanged. Reference to the sub ject is made here simply to put the reader on his guard. Business men and bankers often use the terms capital, money and loanable funds as if they were exactly the same thing, and for practical busi ness purposes they are.