The Theory of Finance

Extract

1. Capital is wealth appropriated to reproductive employment, and, in the words of the late J. S. Mill, “the gross profit on capital may be distinguished into three parts, which are respectively the remuneration for risk, for trouble, and for the capital itself, and may be called insurance, wages of superintendence, and interest.”

It is with the last of these, Interest, that we have at present to do.

2. In civilized communities wealth is measured in money, and therefore in our investigations it is of money that we shall speak; but evidently it is immaterial, in laying down general propositions, whether the standard units are of one actual value or of another, so long as we remain consistent with ourselves, and use the same standard throughout. We shall therefore, as the most convenient course to suit all currencies, treat of units of value, without specifying to what currency these units belong.