CHAPTER 7 
CAPITAL AND INTEREST 
Stir another factor, that of capital and interest on capital, 
will now be considered. We have seen that while the mere shift 
from cost in terms of labor to supply price in terms of money 
wages did not modify our conclusion, the consideration of differ- 
ences in wages and of their influence on the money expenses of 
production did lead to significant modifications. So it will prove 
as regards interest on capital. Obviously this constitutes an item 
in the expenses of production; and it is one that has effects of its 
own. Yet these also are such as rather to modify the general 
conclusions reached on the simpler suppositions than to over- 
turn them. 
It is hardly necessary to remark that we need not consider 
separately such an item as the expense for materials — one that 
would bulk large in an accountant’s schedule. It is familiar in 
economic doctrine that expense for raw materials may be resolved 
into previous expense for wages and interest. For the purposes 
both of international trade and of domestic trade we bring together 
in one sum total all the costs and expenses involved for a given 
article; not only those of the immediate producer, but those of 
the antecedent persons from whom he buys materials and supplies, 
and whom he recoups (with interest) for their expenses in the way 
of wages and still earlier materials. In the same way, when we 
considered the principle of comparative costs in its simplest aspect 
(disregarding money expenses and prices) we attended to all the 
labor involved in producing an article, not merely that of the 
last stages in its production. Raw materials, then, may be 
brushed aside, as involving an embodiment of previous labor and a 
recapitulation of previous wages and interest. 
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