sugar may become twenty-one barrels, and his flour and his
tea increase in a like proportion. In the simplest illustration that
could be given of a capital earning five per cent a year, we should
assume that each kind of productive instrument in a man's possession
increases in quantity, during the year, by that amount. If he be a
manufacturer, his mill becomes a hundred and five feet long, instead
of a hundred feet. It contains twenty-one sets of woolen machinery,
instead of twenty. The flow of water that furnishes power becomes by
five per cent more copious; and the stock of goods, raw, unfinished,
and finished, becomes larger by the same amount.

Of course, such a symmetrical enlargement of all kinds of goods could
never actually take place, for some things increase in quantity more
than others. The illustration shows, however, what fixes the rate of
interest: it is the self-increasing power of a miscellany of real
capital. If the mill, the machinery, the stock, grow in quantity at
the five per cent rate, that is the natural rate of interest on loans
of real capital. The lender gives to the borrower twenty units of
"commodity" and gets back twenty-one. If marginal social capital,
consisting of commodity and measured in some way in units of kind, has
the power to add to itself in a year one unit for every twenty,
lenders will claim about that amount, and borrowers will pay it.

_How the Increase of a Miscellany of Goods has to be Computed._--How
does the real earning capacity of capital in concrete forms reveal
itself? How does the grocer know that he can make five per cent with
the final unit of capital that he borrows? Not by the fact that each
lot of twenty barrels of sugar gains one barrel, that each lot of
twenty pounds of tea gains one pound, and so on. If there were to be
such a symmetrical all-around increase in the commodities in the man's
possession, his shelves, counters, bins, tanks, would have to enlarge
themselves in the same ratio. In the case of a manufacturer the mill
would have to elongate itself by one foot for every twenty, as in the
foregoing illustration, and the machinery and all the stock would have
to grow in the same proportion. The land and the water power would
have to enlarge themselves by the same constant fraction.

Of course, such a thing does not take place. The general amount of
capital goods of every kind enlarges; but the enlargement is in
practice computed in monetary value, and