in a strictly technical sense,
which will in some respects be narrower than the ordinary, and in some
more comprehensive. It will exclude all kinds of cleverness unapplied
to economic production; and will include many powers, in so far as such
production is affected by them, to the expression of whose scope and
character it may sometimes appear inadequate.[1]

And now when we have come thus far, a quite new question arises. We have
seen how ability is, by its direction of labour, the chief agency in
that process which produces wealth to-day, and how it makes the amount
produced, relatively to the number of the producers, so incomparably
greater than it ever was under any previous system. We have now to
consider the means by which this faculty of direction is exercised.

In order to understand this, we must turn our attention again to
capital, as something distinct and detached from the human efforts that
have produced it; and we shall find that the conception of it which
dominated the thought of Marx, and that which dominates the thought of
the orthodox school of economists, either excludes altogether, or fails
to reveal the nature of, that particular force and function of it which,
in the modern world, are fundamental.

Capital is divided traditionally into two kinds, technically called
"fixed" and "circulating." By fixed capital, which is what Marx had
mainly in view, is meant machinery, and the works and structures
connected with it; and it is called "fixed" on account of its
comparative permanence. By circulating capital is meant, as Adam Smith
puts it, any stock of those consumable commodities which, produced by
the aid of machinery, the merchant or the store-keeper buys in order to
sell them at a profit; and it is called "circulating" because the
commodities which are sold to-day are replaced by new ones of an
equivalent kind to-morrow.

Now, as to fixed capital, or the endlessly elaborated machinery of the
modern world, we have seen already that this is, in its distinctive
features, not, as Marx declared it to be, a crystallisation of labour,
but a crystallisation of the ability by which labour has been directed;
but this revised explanation tells us nothing of the means by which the
direction is accomplished. Still less is any light thrown on the
question by the nature of circulating capital, as Adam Smith understands
it.

The kind of capital which alone concerns us here is a kind which
resembles circulat