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 differences
 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 overturn
 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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