rt? - Es 
Sec. 4] : °. CAPITAL 59 
tinction between one kind of wealth and another. As a 
consequence, their studies of the problems of capital have 
been full of confusion Among the many confusions? 
* which have come from overlooking the time distinction 
between a stock and a flow was the famous wage fund 
theory, that the rate of wages varies inversely with the 
amount of capital in the supposed “wage fund.” Mac- 
Culloch wrote : 2 — 
“To illustrate this principle, let us suppose that the capital of a 
country appropriated to the payment of wages would, if reduced to 
the standard of wheat, form a mass of 10,000,000 quarters; if the 
number of laborers in that country were two millions, it is evident 
that the wages of each, reducing them all to the same common 
standard, would be five quarters.” 
“The wages would be five quarters” — thus MacCul- 
loch — but five quarters in what time? Five quarters per 
hour, per day, or per year? Divorced as it is from any time 
concept, this definition is meaningless. 
Even so acute a writer as John Stuart Mill unhesitatingly 
states:® — 
“Wages, then, depend mainly upon the demand and supply of 
labour; or, as it is often expressed, on the proportion between popu- 
lation and capital. By population is here meant the number only 
of the labouring class, or rather of those who work for hire; and by 
capital, only circulating capital, and not even the whole of that, but 
the part which is expended in the direct purchase of labour. To this, 
however, must be added all funds which, without forming a part of 
capital, are paid in exchange for labour, such as the wages of soldiers, 
domestic servants, and all other unproductive labourers. . . . With 
these limitations of the terms, wages not only depend upon the rela- 
tive amount of capital and population, but cannot under the rule of 
competition be affected by anything else. Wages (meaning, of course, 
the general rate [sic]). . . .” 
A little attention to business bookkeeping would have 
saved economists from such errors; for the keeping of rec- 
ords in business involves a practical if unconscious recog- 
! See “What is Capital 2” loc. cit. 
* Principles of Political Economy, 1st ed., pp. 327-328, 2d ed., pp. 
377-378. See Cannan, History of Theories of Production and Distri- 
bution, p. 264. ’ 
* Political Economy, Book II, Chap. XI, § 1.