This section is from the "The Science Of Wealth" book, by Amasa Walker.
With this perfect equality, each will certainly obtain the share that belongs to him. Laws in regard to this, as all other property relations, are not needed to direct human industry, but to control human passion; to prevent one party from trespassing upon the rights of the other.
All these parties are equally necessary. In one respect, labor has the advantage, since it can accomplish a little without capital, while capital can produce nothing without labor. On the other hand, capital can rest, without extinction; while labor, if not employed, will soon perish by starvation.
It has been common to speak of the profits of capital, instead of the profits of business. This is a mistake which confounds necessary distinctions. The profits of trade, or business, are to be reckoned upon the amount transacted, not upon the capital employed. The difference between the two modes is often very great.
We give the following table as an illustration of what we mean: —
An Illustration of the Difference of Profits as computed on the Capital employed or the Business transacted.
Rate of Profits on Sales.
Expenses, including Interest.
Net Profits, if reckoned on Capital.
15 per cent
50 per cent
10 per cent
10 ,, ,,
37½ ,, ,,
5 ,, ,,
30 „ „
70 „ „
262/3 „ „
5 .) ii
20 „ „
The actual transactions of business present an endless variety, of which the above may be taken as samples.
The object aimed at by the business man is to get as large a net profit to himself as possible, irrespective of the per centum of profit on the capital employed. On his capi tal, if borrowed, he pays the interest; if he owns it, he computes the interest as a part of his expenses, reckoning the latter as the income on his capital.