change, and even economists, would be at the pains to gather it.

1. We learn, in the first place, what income is. It is most important to understand this clearly. Income is generally supposed to consist of money. It is always expressed in money. Profits, wages, salaries of all kinds are reckoned in money. All purchases are supposed to be made with money. Every one lays down that he has so much money to spend. Thus money hides the real facts which occur. Now income is not money. It is a pure delusion to suppose that income is money. Even where income is received in money, or wages, the true income is what the wages buy in the shops; the real wages, in contradistinction to what economists call nominal wages, that is, money. A labourer gets much or little exactly in proportion to what he can procure with his wages in the shops. In the same way, the great landowner's income is not money, for he may very probably not receive a pound of it in cash, but his share of the cattle, corn, and hay grown on his farms. The tenants sell these things for him, and pay their rents with cheques. He reaches what his income brings him when he completes the exchange by purchasing with these cheques what he desires. It is the same with profits. A merchant makes a profit of £1000 on a cargo of cotton. He lives upon these pounds. Is not the money specifically his income? No, for very probably he has never touched a shilling from these pounds in money. He received them in cheques or bills, and cheques and bills are not money, but only promises to pay money. These promises, written on paper, perform for him exactly

what coin does for the labourers. They are his nominal profits. His real profits are obtained when he exchanges these promises for the articles which he buys. These articles are his income. Money and paper are mere cartage. The things moved by the cart are what the owner finally receives as income.

2. We learn what savings are, surplus of things made over things consumed. When the owners of this surplus each man for himself-decides that this surplus shall be applied to increased means of production, it becomes capital.

An interesting question, little thought of, now presents itself, Where are these savings? Lord Overstone estimated the annual savings of England at 150 millions of pounds-an exaggerated sum probablybut undoubtedly they are excessively large. Where are they? in what form do they exist? Not in consols, certainly, or old railway shares, or shares in old companies; nor in fine houses and gardens freshly made-for these last are not capital. Most savers, no doubt, purchase investments-shares in companies and railways, or consols, or other stocks, but this does not tell us where the savings of the nation are. These investments were in existence before the saving was made. They remain unchanged. The man who buys such an investment does not determine where the saving he has made shall be. He transfers his money to a seller, and it is what the seller does with this money which determines not only where the saving shall be, but whether there shall be any saving at all. If he sells his railway shares to the saver, and with the money he receives pays for fox-hounds or race-horses, he destroys the saving

H

he inal result is an unaltered

But if the seller of the in

te proceeds as capital, then it is he who where the saving shall be. He may of ould a new mill or ship, or take shares way to be made, or make roads on his estate. y of these things he creates fresh capital

He saves, and gives a definite shape

the neome of the nation is permanently

operations have been effected by the agency acy, but the money is not the thing saved. There one money in the country, whether any saving eva made or not. Nor do the savings exist in

to a bank has only its buildings, its ledgers, polite rearve in gold, as wealth, and these are unhind by the savings of the country. Banks play

Large part in deciding where the savings shall h, but the savings are not in them. By advances and Tocoumbe they decide in multitudes of cases what form the savings call take. They may help a ship to be Foult, ca + new railway constructed, or draining carried

The

my great trade operation entered into. men who receive the advances and do these things, they give form and body to the saving, but the banks are only intermediate agents by means of pieces of paper. Took the contrary the banker makes an advance to a man a mortgage who desires to make large ornamental impcwoments on his house or park, beyond his means, he

destroy capital. When the advance is repaid,

or must have sacrificed a portion of his

3. Capital is divided into two classes, founded on a distinction pointed out by Adam Smith. He classed capital into circulating and fixed. Circulating capital is that which is consumed by a single use, and reappears, in full, in the products which it has created. Thus the food of the gardener is restored in the potatoes dug up. The coals burnt in the factory, the iron-ore which has been dissolved, reappear in the pig-iron created. Fixed capital is that which is not entirely consumed by a single use, which is capable of doing its work more than once, and consequently does not require that its produce should, on a single use, restore it in its integrity.

Circulating capital derives its name from its rapid movement. It is applied, then destroyed, and then recovered. A master carpenter sends his man to make repairs in a house. The work takes a day, and wood and nails are used up. the job is paid for.

When the man leaves at night, The wood, nails, and the man's wages destroyed the carpenter's capital. He receives it back again in the money received, or rather in the things which that money purchases.

Rapid circulation is of great importance. The thread made by a cotton-spinner is not capital for him, though it is capital to his buyer. If the sale is delayed for any reason, the spinner for the time is out of his capital. His production is so far paralysed. Hence it becomes clear that the slower the circulation, the longer time the products take in being made and sold, the larger is the capital required for the same business, the greater is the cost of production. This fact shows how large is the economical gain from ready-money payments, how

they render the goods cheaper, as in co-operative stores, without any diminution of profit or wages. On the same principle we discover the immense gift which railways bestow on consumers. They largely diminish the stocks lying idle, either on the road or in the retailers' shops. They give speed to circulation, that is they enable less capital to do the same work. The ultimate buyer, the consumer, has to pay for the forced idleness of the capital. He is the richer for the time saved, and all the consumers make up the nation. The capital of the country, without being actually augmented, is practically larger. The idle stocks in warehouses and shops exist no longer. They have been transformed into new working capital. Without any increase of means applied to production, the quantity of wealth created is very considerably increased by the railways.

The second class of capital, the fixed, is not consumed by performing its service once. By far the largest part of the machinery of production consists of capital of this nature. A steam-engine lasts years, so does the factory itself. But a distinction of importance must be drawn here. There is no such thing as fixed capital in an absolute sense. A part of what is called by this name is really circulating capital. The wear and tear of the engine and the building, of the merchant ship and the cart-horse, are pure circulating capital, as truly so as the coals which generate the steam. circulation is completed by repairs, and repairs are only the capital destroyed in a machine by working reappearing in its renovated state. These repairs are charged upon the goods made in their price; they enter into cost

The