losses from careless workmen, unavoidable accidents, and other causes.

§ 968. In loaning his capital, a man is governed by various considerations. If he can, with his own labor, make it produce fifteen or twenty per cent., he will ask a higher interest than when it would yield but half that per centage. Thus, in proportion to the productiveness of capital, will generally be the interest charged for the use of it. If, how ever, he do not possess the knowledge and skill necessary to give the most profitable employment to his capital, he will be more likely to loan it to others at a lower rate of interest, than if he had the requisite skill and experience to manage his capital to advantage.

§ 969. The rate of interest is affected by risk, or uncertainty. A person loaning his capital for a definite period, makes arrangements for its reinvestment at the expiration of the term for which it was loaned; and if it be not punctually paid, the lender will be liable to loss or embarrass. ment. These risks and supposable contingencies, must therefore be taken into account by every person who loans his capital.

§ 970. But there is danger that capital lent will never be returned. The borrower may be dishonest; or, if honest, he may be destitute of the skill necessary to employ the capital profitably, and hence he may become unable to refund the same. In providing against these probable losses, the lender will charge a higher rate of interest than he would demand in case the investment were safe beyond the possi bility of loss. This may in part account for the fact, that the government usually pays a lower rate of interest than is paid by individuals. Capitalists have the fullest confidence in the public credit, in this country.

§ 971. The time for which money is loaned has some effect in determining the rate of interest. When money is lent for short or indefinite periods, a higher interest is charg

cost of his labor? § 968. Why does a man charge a higher rate of interest when the profits of capital are great? 969. Why should the circumstance of risk or uncertainty affect the rate of interest? § 970. Why should the danger of the insolvency of a borrower affect the rate of interest? § 971. Why is the rate of interest affected by

ed than when it is lent for long periods. When money is often returned to the lender, it will frequently remain on hand for a long time before an opportunity offers for reloan ing it; during which time it yields no interest. If the time for which the money is lent is indefinite as well as short, the liability to loss is still greater, as the money may be return ed unexpectedly to the lender, when he is unprepared for making a profitable reinvestment.

§ 972. We have spoken above of interest on capital, and interest on money, indiscriminately. Although the term interest is generally used to signify the price paid for the use of money, it is with equal, perhaps greater propriety, applied to other capital; for we borrow money for the purpose of procuring with it the capital which we desire: and the use of the money, strictly speaking, ends when the pur. chase of the capital is completed.

§ 973. Rent, or the price of the use of land, is regulated by the same principles as interest; regard being had to its power of production. For an acre of land which produces forty bushels of wheat, a person can afford to pay double the rent that is paid for an acre which yields but twenty bushels. More than this; for the cost of cultivation is the same in both cases.

§ 974. The relative value of productive and unproductive land, may be thus illustrated: Suppose the quantity of wheat produced to be as above supposed, and to be sold for one dollar a bushel; the value of the product of the one acre will be forty dollars, and the value of that of the other will be twenty dollars. If we deduct from each ten dollars for the cost of production and sale of the product, the value remaining of the proceeds of the one acre will be thirty dollars, and of the other, ten dollars. Now, if five dollars were paid for the use of the unproductive, and ten dollars for the use of the productive acre, the nett profits of the latter will still be four times as great as the profits of the former. § 975. The price of land depends essentially upon its

the period of time for which capital is lent? § 972. What is the dif ference between the interest of money and the interest of capital? § 973. By what principle is the rent of land regulated? § 974. Illastrate, by example, the relative value of oroductive and unproductive

situation. Land in the neighborhood of a market is more valuable than land of equal fertility lying at a greater dis. tance from the market; because, in the latter case, a con. siderable portion of the value of products is consumed in transportation. Hence, land of inferior quality in one place, may be of greater value than land of superior fertility in another. The disadvantages of situation, however, are often removed by the construction of canals, rail-roads, and other improvements of internal communication; and lands are thus frequently raised to two or three times their for. mer value.

§ 976. We see from what has been said, what circumstances enter into the computation, in estimating the value of land. There must be taken into account the several items of the cost of production, embracing the cost of the labor of the master-farmer and others employed in tillage and securing the crop, the cost of seed, and the expense of transportation. These may ordinarily be estimated with sufficient accuracy, to enable a person to determine how much he can afford to pay for the use of land.

§ 977. The principle of distribution may be exemplified in the case of a manufactured product. The aggregate cost of a coat includes these several items: the cost of the wool from which the garment is made; the labor of the mastermanufacturer, the interest on his capital, and the wear of his machinery; the labor of the spinner, weaver, dyer, and dresser of the cloth, and the cost of the dying materials; the additional charge of the manufacturer for risks and losses; the labor and skill of the merchant, with interest on his capital; and lastly, the labor of the tailor. Thus the price of the coat is distributed among these several producers.

978. For aught that has been said, it may be supposed that every man has a right to loan his capital for what another is willing to pay. But such is the law, that capital, consisting of any thing else than money, may be thus loan

land § 975. How does the situation of land affect its price? How may the disadvantage of situation be removed? § 976. What are the principal circumstances to be taken into account in estimating the price of land? § 977. Illustrate the principe of distribution at the case of a manufactured product. § 978. May a person receive for

ed; but in loaning money, the lender is restricted to a certain rate of interest.

§ 979. Many are of the opinion, that this law unjustly interferes with the right of property, and is in its operation injurious to the community. Why should money be the subject of such a regulation, when every other species of capital or property is exempt from it? When land is pro ductive, and its products are dear, a high price may be taken for the use of it; and if no person will pay the rent asked, the owner may occupy it himself.

§ 980. When money may be so invested as to yield a higher than ordinary profit, the borrower can afford to pay a corresponding price for it. But if the law forbid his receiving for it what it is worth, he will choose to invest it himself where it will produce such revenue. Thus he is compelled to enter into a business for which he has no inclination, and the other is obliged to forego the privi lege of engaging in what may be to him a profitable and agreeable undertaking. But it is often the case, that, rather than relinquish a promising or favorite project, a price is offered for money sufficiently high to induce the lender to risk the consequences of a violation of the law, or to devise some dishonorable means of evading its penalty.

§ 981. Whatever may be the tendency and operation of this law, it has in view the worthy object of preventing men from oppressing the poor and necessitous, by extorting from them ruinous rates of interest. And public sentiment in this and other civilized nations has hitherto sanctioned this law. The propriety of a law fixing the rate of interest to be paid in cases in which there is no previous agreement between parties, is admitted by all.

the use of money whatever another is willing to pay? § 979. Why should a distinction be made between money and other property? 980. What reasons may be given against this distinction? § 981. How extensively do usury laws prevail? Can you tell what are the probable good effects that would result from the repeal of these laws? 27*

CHAPTER XXI.

Consumption.-Individual Consumption.

§ 982. By consumption is meant the destruction of value; and this destruction of value or utility of a product, is effected by appropriating it to the use for which it is intended. The production of wealth, we have defined to be the creation of value, or the investing of any substance with utility; that is, with the capability of gratifying our desires, or of satis fying our wants. Consumption, on the contrary, is the destruction of this utility, which is effected by appropriating it to its intended use, or by accident. A person may destroy the value of a garment by wearing it, or it may accidentally fall into the fire, and be burned. In either case, the garment is consumed; that is, its value is destroyed.

§ 983. Production consists, not in the creation of matter, but in giving it value, or in so changing its form as to invest it with utility; consumption is the subtracting from a product its value or utility; that is, its capability of satisfying our wants. All products are created for the purpose of use or consumption, and, sooner or later, they will be consumed. § 984. Consumption may be considered to be of two kinds, individual and national. As many things relating to the subject of consumption, have necessarily been remarked, incidentally, in the other divisions of this treatise, we shall embrace what remains to be said on this division, in two chapters; one of which will be devoted to each of the two kinds of consumption above mentioned; and our remarks will relate chiefly to the principles by which consumption is regulated.

§ 985. Individual consumption is always designed either to effect the reproduction of value, or to gratify the desires or satisfy the wants of individuals. And no value can be produced without the destruction of some other value previously created. Thus the value of wool, as such, is consumed in the production of a piece of cloth. And the

§ 982, 983. What is understood by consumption? How is the value of a product destroyed? § 985. What is individual consump