spent in acquiring the skill necessary to the due perform. ance of the labor.

§ 961. Such is the labor of lawyers, physicians, and clergymen, whose wages are such as to compensate them for the expenditure of money, as well as time, in acquiring the qualifications indispensable to their several callings. If labor of this description did not receive an adequate reward, persons would be little disposed to qualify themselves for the learned professions.

CHAPTER XX.

Interest, or the Price paid for the Use of Capital.-Rent of Land.

§ 962. WE are next to speak of the profits of capital. If a man lends his capital to another, he is entitled to something for the use of it; because, first, had he not loaned it, he might have united his own labor with it, and thus have derived from it a profit greater than would have accrued from his own simple labor, disconnected from capital; secondly, because the borrower, having expended neither time nor previous labor in acquiring the capital, can afford, and ought to pay, something for the use of that which has cost another a great amount of labor, and which renders his own industry more productive.

§ 963. In all cases, therefore, the owner of capital employed in production, is entitled to a share of the profits arising from its employment. If he has used it himself, he of course receives the whole profit of the capital and industry united; but if the labor of another person has been exerted upon it, the profits are divided among the capitalists and laborers.

rewarded? § 961. What kind of labor is that of lawyers, physicians, and clergymen?

§ 962. Why is a man entitled to a compensation for the loan of capital? § 963. In what cases does he receive the whole profits of his

964. The division of the profits of capital and labor, varies according to the nature of the agreement between the parties. A coach-manufacturer, for example, possesses all the capital necessary for the prosecution of his business; but he employs other persons to perform the labor. In this case the capitalist assumes all the risk, and pays to the laborers stipulated wages, retaining to himself all that remains of the profits of the business.

§ 965. But the owner of the capital may choose to loan his shop and tools to the laborers, the latter taking the risk of the business. In this case, and in similar instances, in which the risk devolves upon the borrower, a specific sum is generally paid to the capitalist, and the remainder of the profits is taken by those who perform the labor.

§ 966. There are other conditions still, on which capital and industry are united, and which require a different distribution of the profits. One individual may furnish the capital, and another the labor and skill, each assuming a portion of the risk attending the enterprise. The union thus formed is called a copartnership; and the profits of the business are usually shared by the parties, either equally, or in such other proportions as have been previously agreed on. Or, each may furnish a portion of both the capital and labor, and share in the risks and profits of the business.

§ 967. The rate of interest is varied by circumstances. If, with the labor bestowed upon capital, it should yield a revenue no greater than the same labor would produce without capital, the borrower could afford to pay no interest for the use of it. If it should produce a revenue equal to double the cost of the labor bestowed, he could afford to pay for the use of the capital a price nearly equal to one half of the value produced. We say nearly equal; for it should be remembered, that every kind of business in which capital is employed, is attended with some degree of risk; and the borrower, if he be an economist, will calculate for

capital? 964, 965. Illustrate, by an example, how the distribution of profits is varied by the agreement between parties. § 966. How are partnerships usually formed? By what rule are the profits of partnerships divided? § 967. Why ought not a person to pay as interest for the use of capital, all it produces over and above the bare

Josses from careless workmen, unavoidable accidents, and other causes.

§ 968. In loaning his capital, a man is governed by various considerations. If he can, with his own labor, make it produce fifteen or twenty per cent., he will ask a higher interest than when it would yield but half that per centage. Thus, in proportion to the productiveness of capital, will generally be the interest charged for the use of it. If, however, he do not possess the knowledge and skill necessary to give the most profitable employment to his capital, he will be more likely to loan it to others at a lower rate of interest, than if he had the requisite skill and experience to manage his capital to advantage.

§ 969. The rate of interest is affected by risk, or uncertainty. A person loaning his capital for a definite period, makes arrangements for its reinvestment at the expiration of the term for which it was loaned; and if it be not punc. tually paid, the lender will be liable to loss or embarrassment. These risks and supposable contingencies, must therefore be taken into account by every person who loans his capital.

§ 970. But there is danger that capital lent will never be returned. The borrower may be dishonest; or, if honest, he may be destitute of the skill necessary to employ the capi. tal profitably, and hence he may become unable to refund the same. In providing against these probable losses, the lender will charge a higher rate of interest than he would demand in case the investment were safe beyond the possi bility of loss. This may in part account for the fact, that the government usually pays a lower rate of interest than is paid by individuals. Capitalists have the fullest confidence in the public credit, in this country.

§ 971. The time for which money is effect in determining the rate of interest. lent for short or indefinite periods, a higher

loaned has some When money is interest is charg

cost of his labor? § 968. Why does a man charge a higher rate of interest when the profits of capital are great? 969. Why should the circumstance of risk or uncertainty affect the rate of interest? 970. Why should the danger of the insolvency of a borrower affect the rate of interest? § 971. Why is the rate of interest affected by

ed than when it is lent for long periods. When money is often returned to the lender, it will frequently remain on hand for a long time before an opportunity offers for reloaning it; during which time it yields no interest. If the time for which the money is lent is indefinite as well as short, the liability to loss is still greater, as the money may be returned unexpectedly to the lender, when he is unprepared for making a profitable reinvestment..

§ 972. We have spoken above of interest on capital, and interest on money, indiscriminately. Although the term interest is generally used to signify the price paid for the use of money, it is with equal, perhaps greater propriety, applied to other capital; for we borrow money for the purpose of procuring with it the capital which we desire: and the use of the money, strictly speaking, ends when the purchase of the capital is completed.

§ 973. Rent, or the price of the use of land, is regulated by the same principles as interest; regard being had to its power of production. For an acre of land which produces forty bushels of wheat, a person can afford to pay double the rent that is paid for an acre which yields but twenty bushels. More than this; for the cost of cultivation is the same in both cases. :

$974. The relative value of productive and unproductive land, may be thus illustrated: Suppose the quantity of wheat produced to be as above supposed, and to be sold for one dollar a bushel; the value of the product of the one acre will be forty dollars, and the value of that of the other will be twenty dollars. If we deduct from each ten dollars for the cost of production and sale of the product, the value remaining of the proceeds of the one acre will be thirty dollars, and of the other, ten dollars. Now, if five dollars were paid for the use of the unproductive, and ten dollars for the use of the productive acre, the nett profits of the latter will still be four times as great as the profits of the former. § 975. The price of land depends essentially upon its

the period of time for which capital is lent? § 972. What is the dif ference between the interest of money and the interest of capital? § 973. By what principle is the rent of land regulated? § 974. Illustrate, by example, the relative value of productive and unproductive

situation. Land in the neighborhood of a market is more valuable than land of equal fertility lying at a greater distance from the market; because, in the latter case, a considerable portion of the value of products is consumed in transportation. Hence, land of inferior quality in one place, may be of greater value than land of superior fertility in another. The disadvantages of situation, however, are often removed by the construction of canals, rail-roads, and other improvements of internal communication; and lands are thus frequently raised to two or three times their for. mer value.

§ 976. We see from what has been said, what circumstances enter into the computation, in estimating the value of land. There must be taken into account the several items of the cost of production, embracing the cost of the labor of the master-farmer and others employed in tillage and securing the crop, the cost of seed, and the expense of transportation. These may ordinarily be estimated with sufficient accuracy, to enable a person to determine how much he can afford to pay for the use of land.

§ 977. The principle of distribution may be exemplified in the case of a manufactured product. The aggregate cost of a coat includes these several items: the cost of the wool from which the garment is made; the labor of the mastermanufacturer, the interest on his capital, and the wear of his machinery; the labor of the spinner, weaver, dyer, and dresser of the cloth, and the cost of the dying materials; the additional charge of the manufacturer for risks and losses; the labor and skill of the merchant, with interest on his capital; and lastly, the labor of the tailor. Thus the price of the coat is distributed among these several producers.

§ 978. For aught that has been said, it may be supposed that every man has a right to loan his capital for what another is willing to pay. But such is the law, that capital, consisting of any thing else than money, may be thus loan

land. § 975. How does the situation of land affect its price? How may the disadvantage of situation be removed? § 976. What are the principal circumstances to be taken into account in estimating the price of land? § 977. Illustrate the principle of distribution in the case of a manufactured product. §978. May a person receive for