apital among Different Industries._--The capitalist
can invoke the aid of competition outside of the limits of one
particular business. He may offer his loan to steel makers, to woolen
manufacturers, cotton spinners, silk weavers, shoemakers, etc. Within
each one of these industries perfect competition between the different
employers will give him the value of the product which, in that
business, his capital is able to create. If, however, what in this way
he offers to men in one occupation is worth more than what he offers
to men in another line,--if capital is worth more to steel makers than
it is to cotton spinners,--he will find a market for his capital in
the former industry; and this process of seeking out the employment in
which capital is the more productive and there bestowing the loans of
capital, will go on until every such local excess of productive power
is removed and capital can produce as much wealth in one business as
it can in another. Everywhere capital will then be both producing and
receiving the same amount, and general interest will everywhere be
determined by the final productivity principle acting all through the
business world.
_When Interest as Directly Determined equals Interest as Residually
Measured._--The area _BCD_ of the first figure measures what the
_entrepreneur_ has left after paying wages. This amount and no more he
can pay as interest, and he will pay it if he has to. The area
_A'B'D'E'_ of the second figure represents what he must pay as
interest; and we can now see that, if competition is perfectly free,
this amount equals the amount _BCD_ of the first figure. If, after
paying wages, there is any more left in the _entrepreneur's_ hands
than competition compels him to pay out as interest, he is realizing a
net profit; he is selling his goods for more than they cost him, and
this, as we saw at the outset, is a condition that under perfect
competition cannot continue. The natural price of goods is the cost
price. If the market price of anything is in excess of cost,
_entrepreneurs_ receive a profit, and in order to do more business and
make a larger aggregate of such profit they bring new labor and
capital into their industry. The increased output lowers prices, and
the excess of gain is thus taken from the _entrepreneur_. If _BCD_ is
smaller than _A'B'D'E'_, the _entrepreneur_ incurs a loss and will
curtail his business and let some labor and capital go where they can
produce mor
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