1. What was the origin of capital?

2. Name the three steps necessary to create capital.

3. Are any individuals or groups unable to take these steps? Explain.

4. Which is the more useful member of society, a miser or a spendthrift ?

5. Why is capitalistic production said to be roundabout or indirect ?

6. What are the advantages of indirect production over direct production?

7. How does the replacement fund give mobility to capital ?

8. Explain how a carpenter's hammer replaces itself.

9. What has become of the large amount of capital formerly used in the buggy and carriage industry?

10. Is any capital completely fixed? Explain.

11. Where should the line be drawn between fixed and circulating capital? between free and specialized capital?

12. Why should specialized capital yield a larger income than free capital ?

13. Just why is gold a highly specialized form of capital?

14. Name some forms of social wealth.


1. Call to mind persons in your community who contribute to the supply of capital.

a. Are all of them relatively well-to-do ?

b. Which, if any, appear to sacrifice unduly in order to save?

c. Which are normally thrifty?

d. Have any adopted definite plans for saving?

e. What advice has any of them to offer in the matter of saving?

2. Imagine, if you can, a general return to direct methods of production.

a. How would civilization be affected?

b. Would the volume of production be greater or smaller?


c. Would individuals and groups be more or less self-sufficing?


d. Would people have more or less leisure time? Why?

e. How would such a change affect public education ?

/. Name some industries that would be likely to suffer the most.

3. Many tasks, such as digging ditches, cleaning streets, and carrying brick and mortar, are usually performed by direct methods.

a. Could capitalistic methods be employed? How?

b. Why are they not usually employed?

c. Under what conditions are they sometimes employed ?

d. Does there appear to be any relation between capitalistic methods and the law of diminishing returns? Explain.

4. Classify the capital in some industry with which you are familiar into free, specialized, fixed, and circulating.

5. Suppose a certain individual invests $10,000 in a store site and building; also an equal amount in another site and building utilized by the state as an armory for a company of militia. Which should normally earn the larger return? Why?

6. Prepare a list of various forms of social capital. Show how each item in the list lessens the need for greater individual wealth.


1. "The corporative form of industry has been a big factor in the saving and investing of capital." Explain with some detail how this is true.

2. Socialists usually claim that labor is the source of all wealth.

a. Can wealth be created without labor? How?

b. Can capital create wealth without the assistance of labor?


c. How would the destruction of all wealth affect the efficiency of labor?

3. "With the extension of capitalistic methods of production the proportion of fixed and specialized capital goods shows a tendency to increase." a. Is this statement true?

b. Why is it true ?

c. Why, or why not, is this proportion likely to increase?

d. Under what conditions might it decrease ?

Supplementary Reading

Bullock, Introduction to the Study of Economics, 3d ed., pages 131-141, Ely, Outlines of Economics, 3d ed., pages 119-122. Fisher, Elementary Principles of Economics, pages 37-59. Johnson, Introduction to Economics, pages 192-214. Seager, Principles of Economics, pages 140-152. Seligman, Principles of Economics, 5th ed., pages 313-328. Taussig, Principles of Economics, 2d ed., Vol. I, pages 67-85.