Obviously, the third factor of production, capital, came after labor and land. Primitive man soon learned, in a blundering way perhaps, that he could well afford to spend labor on the making of a bow and arrow, or on a stone ax, since by their use he could secure more game or more fuel than was possible working with his hands alone. At that moment capital came into existence. It is well to notice that this first capital was itself the product of a combination of land and labor, and that all capital, rather indirectly to be sure, rests on the same two primary factors of production. This very fact is the basis for the claim that all the products of industry belong to labor. Turning again to the creation of the first capital, let us formulate a definition of the term as used in economics. Obviously from what has been said, it was the product of industry, also it was used to further production. Capital, then, is a product of industry used for further production.

On the basis of this definition we shall find it necessary, contrary to general belief, to consider neither land nor consumers' goods as capital. Land, obviously, is not a product of industry, though it is used for further production. Consumers' goods, on the other hand, are the product of industry not used for further production. Whether or not a good is a producers' or a consumers' good usually depends on the use to which it is to be put at the particular moment. Wheat flour, for example, in the possession of a baker is a producers' good; in the flour bin at home it is a consumers' good.

The fourth factor of production, we may say, is the enterpriser, or business man. His duty is to assemble the other factors and to direct their efforts. It is not, however, an indispensable one, for it would be easy to conceive an industrial society rather highly developed without men exercising the distinctive duties of an enterpriser. Yet we must not forget that society as it is now organized utilizes the services of such men; also that if each man worked for himself and confined his own consumption exclusively to his own products, the efficiency of his production would depend in some measure on his ability to organize his own labor, his own land, and his own capital. For that reason we are justified in calling the skill of enterprisers a factor of production.