a profit which will cover earnings of management, the reward of risk and enterprise, interest on capital, but nothing further. It remains, then, only to consider this last element of interest. CHAPTER VIII CAPITAL §1. _A Reference to Marx_. Interest is the price paid simply for the use of capital. But what is capital, and in what does its use consist? What claim has it to be regarded as an independent factor of production? Our very familiarity with the term, our habit of employing it with the rich looseness of every-day life is an obstacle to the clearness of thought, which is again essential. We recognize, most of us, clearly enough that capital, although we reckon it in terms of money, consists, like income, of real things; factories, machinery, materials and the like. It is quite obvious that these things are of use, are, indeed, indispensable for production; what more natural than that capital should command a price? It almost seems as though we might pass, without further ado, to a detailed discussion of the forces which determine the amount of this price. But this account does not bring out the essential point as brief reference to a very famous controversy will show. Some ingenious writers in the last century, the most notable of whom was Karl Marx, set out to prove that, in our modern society, workpeople are "exploited," robbed of the "whole produce of their labor," to the full extent of the return which accrues to capital. The argument was exceedingly complex in detail; but it boils down to this: The factories and machinery which are admittedly essential to production were themselves produced in exactly the same way as consumable goods. They were produced by labor, working with the assistance of nature, and, again, if you choose, of capital in the form of further factories, machinery, etc. But these further capital goods can in their turn be regarded as the product of labor, nature and capital; and so we can proceed until it seems as though the element of capital must disappear in the last analysis, as though labor and nature were the sole ultimate agents of production, and the reward of capital represented no more than the exercise of the exploiter's power. In one form or another this argument still dominates the minds of a large proportion of the so-called "rebels" against the existing social order. If we are to meet this argument, if, which is perhaps more important, we are to understand the true nature of capital, we cannot rest content with saying that it consists of factories and machinery, and that these are essential to the worker. Just as it was well to get behind the money terms, in which we often think of capital, to the real goods; so we have now to get behind the real goods to something else. What this something else is, the first chapter may have already done something to reveal.