1.5 Land, Capital, and Labor
It is not necessary for all the elements essential to a given act of production to belong to a single person, and there are numerous examples of instances in which they do not:
- A landowner may rent his estate to another individual, who supplies capital and labor to farm it
- An capitalist with money or material goods may lend his money to another person who will make productive use of it
- An laborer with no possession save his own person may lend his effort to a task using someone else's capital and land
Rent, interest, and wages are the price earned for such activities, and they are paid according to the profit that can be made from them.
There's a mention of the disparity in the time profit is enjoyed: a capitalist or landowner reaps his reward only when the goods he produces are finished and sold. The laborer or hired craftsman is paid in advance, regardless of whether the goods are produced at all, or if they are able to be sold.
An individual who tends his own fields may supply all three, and earn the profits of landowner, capitalist, and laborer.
There are also industries in which one or more of these three key elements may be missing. Consider the travelling knife-grinder, whose profession requires no real estate, but only his labor and a few sharpening stones. Consider the fisherman, whose profession likewise requires no land, merely a boat, nets, and his own effort.
Another passing consideration is the reinvestment of capital: a farmer may sell the crops of his ten acres and, in time, amass the wealth to buy ten more acres of land. The ability of industry to increase itself is limited to some extent by the availability of space (land to farm or build upon), but largely by demand in the market: a farmer can double his acreage but not increase the need for food in his village.
Nations that have little capital or labor are "under great disadvantage" for creating physical goods, but can find great wealth in manufacturing and commerce: Genoa, Venice, and other small municipalities have amassed great wealth on little land and sparse population.