Progress and Poverty · Chapter
II: The Meaning of the Terms explained
This chapter defines wealth and capital in political economy, distinguishing actual wealth (tangible products of labor) from relative wealth (debts, land values, slaves).
What happens
This chapter defines wealth and capital in political economy, distinguishing actual wealth (tangible products of labor) from relative wealth (debts, land values, slaves). It critiques common misconceptions and reviews definitions by Adam Smith, Ricardo, McCulloch, and Mill, ultimately clarifying that capital is a subset of wealth devoted to production.
Themes in this chapter
Distribution of Wealth
The chapter distinguishes actual wealth from relative wealth (e.g., land values, debts) that represent claims on production, highlighting how ownership affects distribution.
Wages and Labor
Wealth is defined as labor impressed upon matter, and capital as wealth aiding production, linking labor to the creation of tangible wealth.
Characters to notice
- Unknown
The narrator defines wealth and capital, critiques vulgar errors, and reviews definitions from leading economists.
- Adam Smith
Mentioned for counting personal qualities as capital, an error inconsistent with his own definition.
- David Ricardo
His definition of capital is discussed and compared with others.
- John Stuart Mill
His definition of capital is referenced and explained.
Key passages
“All things which have an exchange value are, therefore, not wealth, in the only sense in which the term can be used in political economy.”
Not everything with a price tag is true wealth in economic terms.
The narrator clarifies that only tangible products of labor count as wealth.
“Wealth is not the sole object of labor, for labor is also expended in ministering directly to desire; but it is the object and result of what we call productive labor—that is, labor which gives value to material things.”
Labor can serve desires directly, but only when it adds value to physical objects does it create wealth.
Distinguishes productive labor from services.
“Capital is only a part of wealth—that part, namely, which is devoted to the aid of production.”
Capital is a subset of wealth used to help produce more wealth.
Defines the relationship between wealth and capital.