daily paper. "The population engaged in the production of coal and iron are recovering from depression, and are again marrying and giving in marriage at their usual pace." What effect will this have on the prosperity of the workmen in the iron and coal trades?

4. Is the fact that one blackbird can do very well in a cage, any reason for supposing that twenty blackbirds in the same cage would do equally well?

5. Give any reasons which are suggested by the contents of the last chapter, why the salaries earned by governesses are in general so small compared with those which are earned by men engaged in teaching.

CHAPTER III. On the Profits of Capital.

Profit is the reward of Capital for the service it renders in the Production of Wealth. Capital was defined, in a previous Section, as that part of wealth which is set aside to assist future production. Capital is consequently the result of saving; but, in order to fulfil its functions, it must be either wholly or partially consumed. It is now evident that the owners of wealth will not consent to its being appropriated to assist future production, unless they are rewarded by a share of the produce. This share is termed profits. It is thought by some, that it is an injustice that capital should receive any reward for its part in the production of wealth. Capitalists are by such persons denounced as selfish usurers, and the interest which their wealth returns to them is regarded as if it had been stolen from the public. M. Bastiat combated these notions (which are much more prevalent in France than in England) in a series of little tracts, in which by a number of examples he shewed the real nature of the profits of capital, "proving that it is lawful, and explain

ing why it should be perpetual." The following is an abridgement of one of his examples. "There was once in a village a poor carpenter, who worked hard from morning to night. One day James thought to himself, 'With my hatchet, saw, and hammer, I can only make coarse furniture, and can only get the pay for such. If I had a plane I should please my customers more, and they would pay me more. Yes, I am resolved, I will make myself a plane.' At the end of ten days, James had in his possession an admirable plane, which he valued all the more for having made it himself. Whilst he was reckoning all the profits which he expected to derive from the use of it, he was interrupted by William, a carpenter in the neighbouring village. William, having admired the plane, was struck with the advantages which might be gained from it. He said to James:

'You must do me a service; lend me the plane for a year.' As might be expected James cried out, 'How can you think of such a thing, William? Well, if I do you this service, what will you do for me in return?'

W. Nothing. Don't you know that a loan ought to be gratuitous ?

7. I know nothing of the sort; but I do know that if I were to lend you my plane for a year, it would be giving it to you. To tell you the truth, that was not what I made it for.

W. Very well, then; I ask you to do me a service; what service do you ask me in return?

7. First, then, in a year the plane will be done for. You must therefore give me another exactly like it.

W. That is perfectly just. I submit to these conditions. I think you must be satisfied with this and can require nothing further.

7. I think otherwise. I made the plane for myself and not for you. I expected to gain some advantage from it.

I have made the plane for the purpose of improving my work and my condition; if you merely return it to me in a year, it is you who will gain the profit of it during the whole of that time. I am not bound to do you such a service without receiving anything in return. Therefore, if you wish for my plane, besides the restoration already bargained for, you must give me a new plank as a compensation for the advantages of which I shall be deprived.

These terms were agreed to, but the singular part of it is that at the end of the year, when the plane came into James's possession, he lent it again; recovered it, and lent it a third and fourth time. It has passed into the hands of his son, who still lends it. Let us examine this little story. The plane is the symbol of all capital, and the plank is the symbol of all interest. If therefore the yielding of the plank by the borrower to the lender is a natural and equitable remuneration, we may conclude that it is natural and equitable that capital should produce interest. We may also conclude that interest is not injurious to the borrower. James and William are perfectly free as regards the transaction to which the plane gave rise. The fact of William consenting to borrow proves that he considers it an advantage to himself. He borrows, because he gains by borrowing."

The Profits of Capital are composed of three elements. The interest on capital, namely the sum which a borrower gives to the lender for the consideration of a loan, forms only a part of the Profits of Capital. The Profits of Capital are composed of three elements: interest on capital, compensation for risk, and wages of superintendence. The interest on capital, at any particular time and in any country, can be ascertained by the interest yielded, at the same time and in the same country, by those securities which involve no risk and no labour of superintendence. In this country, Government stock affords such a security.

Those who invest money in the funds are with reason confident that they run no risk of losing it, and the possession of stock does not involve any labour. The owners of Government stock receive about 3 per cent. interest on their capital, and therefore 3 per cent. is the current rate of interest at the present time in this country. If more than this is now given in this country for a loan, it is because the lender has not complete confidence in the ability of the borrower to pay; and therefore compensation for risk increases the sum which is given for the loan. If the profits of capital were no greater than the interest on capital, no one would take the trouble or incur the risk of entering into business. If the employment of money in trade yielded only a profit of 3 per cent., merchants and shopkeepers would withdraw their capital from business and buy Government securities. The profits of capital are greatest in those pursuits in which the greatest risk is incurred and where the labour of superintendence is most costly; the variableness of these two elements produces great variations in the rate of profit in different trades. A butcher, for instance, realises larger profits than a draper because his labour of superintendence is more disagreeable, and he also incurs greater risk, for in this climate a thunderstorm or a sudden alteration from cool weather to intense heat is often sufficient to destroy his whole stock of meat.

In uncivilised countries, the insecurity of property causes compensation for risk to form a very large proportion of the profits of capital. Speaking of the state of society in some parts of Asia, Mr Mill says, "Those who lend, under these wretched governments, do so at the utmost peril of never being paid. In most of the native states of India, the lowest terms on which any one will lend money, even to the government, are such that if the interest is paid only for a few years, and the principal not

at all, the lender is tolerably well indemnified." It is notorious that a spendthrift who has run through all his own property, can raise money only by promising an enormously high rate of interest. The money-lenders exact from him 60 or 70 per cent. as interest, for they know that there is a very great chance that they will never be paid at all. If they are paid, their profits are sufficiently large to compensate them for their frequent losses. There was a case in the papers a short time since of a Cambridge undergraduate who borrowed money at the rate of 75 per cent. The father of the young man refused to pay the debt because his son was not of age when it was contracted, and the law upheld him in his refusal. But the money-lender can well afford occasionally to lose both principal and interest because it appears that he is able to find a considerable number of young men foolish enough to accept loans from him on the exorbitant terms just quoted. The profits of the money-lender are increased not merely by his risk of loss, but by the dishonourable character of his business, which protects hiin from the competition of honest men, and from that of men who, whether they are honest or the reverse, desire the good opinion and esteem of their neighbours.

The Rate of Interest is the same in all trades in the same country and at the same time. If compensation for risk and for dishonourable reputation, together with the wages of superintendence, are eliminated from profits, the interest on capital alone remaining, the amount of this interest will remain constant in all trades at the same time and in the same country. The interest on the capital of the farmer, the grocer, and the manufacturer inevitably tends to an equality, at the same time and in the same place; the differences in the profits of these individuals are caused by the differences in the risk and reputation which they incur and in the wages which they receive for superintendence.