CAPITAL. as a factor in the mod ern economic system is wealth, other than land, which is used by its owner to secure an income rather than for direct enjoyment. Land as a natural agent is usually treated in a class by itself, and is distinguished from products of human industry and enterprise. These products are subdivided, according to the uses to which they are put, into producers' goods and con sumers' goods. Producers' goods include all tools, machines, buildings and appliances which are used in production, while consumers' goods include only such goods as are used for direct enjoyment. Capital includes all producers' goods, and some consumers' goods. It includes all producers' goods since they are not used for direct consumption or enjoyment, but rather for the purpose of securing other goods. The term capital, however, is usually made to in clude, in addition to producers' goods, such consumers' goods also as are used by their owners for the purpose of securing an income. A pleasure automobile which is let for hire is a consumer's goods from the standpoint of so ciety, but it is capital to its owner, since he gets no consumer's enjoyment from it. He keeps it for the income which it brings him. A dwelling-house is likewise a consumer's goods, but if it is rented, it is capital to its owner. Some writers have accordingly spoken of two kinds of capital, first, social or productive capi tal, and second, private or acquisitive capital. Social or productive capital is synonymous with producers' goods, while private or acquisi tive capital includes such consumers' goods as are let, rented or hired by their owners to other people, Capital is sometimes thought of not as a class of goods but as a fund of value. There are two reasons which lead to this way of thinking. In the first place, however capital may have originated historically, the charac teristic method through which one comes into possession of it nowadays is that of purchase and the means of purchasing is money. What ever the form of capital which one ultimately possesses, it is almost certain to be in the form of money at one time or another. It is, of course, a mistake to say that capital is money.
A work-horse is a form of capital, but capital is not work-horses, neither is capital money, though money is a form of capital. Money may be used as a tool or a means of accom plishing more than could be accomplished with out it. After one comes into the possession of money, he then has the power of exchanging it for consumers' goods or for sources of in come as he may choose. If he decides to pur chase sources of income, he is said to invest his capital. As a matter of fact, he is merely ex changing one form of capital for another. This habit of speaking as though one had in vested capital when one had merely invested money, has led naturally to the idea that capi tal is money.
Another reason is found in the fact that capital, like all wealth, is measured in terms of money, and its quantity so expressed. There is no good way of saying how much capital one possesses except by stating it in terms of money. If any business man were to state how much capital he used in his business, he would be reduced to the necessity of saying so many dollars or so many dollars' worth. However, he is not likely to labor under the delusion that capital is money. If he were to state in what his capital consists, he would not, unless he were a money lender pure and simple, say that it consisted of money. He would give an in ventory of his productive property, or of the property which he used in his business.
Others who reject the idea that capital is money still hold to the idea that it is a fund of value. The distinction is made between capi tal and capital goods, capital being the fund of value and capital goods being the goods in which that fund is embodied. No great harm can come from this use of words so long as they are properly understood, but they are not strictly accurate and may lead to confusion. The value of the goods is not capital, the goods are capital. Value is the important quality which they all possess in common, and, there fore, it is the only quality in terms of which their quantity can be stated. Money is the commodity used in measuring that quantity. See VALuit.