NET-YIELD AND THE PRODUCTIVITY OF CAPITAL
In contrast with labor, capital, as we know, is not only a productive means but is itself a product. We know, too, that in the former capacity it is consumed, and that as a product it must therefore be constantly renewed so that the capital sum may remain unchanged and permanently capable of further production. We also know that capital, while serving directly as a means of production, must at the same time reproduce itself. Consumable productive means employed solely in the service of direct production are not employed as capital. Let us assume that a tribe of nomads, having made one attempt at agriculture, tilling and planting, decided to reap the one crop and wander on. In this case the seed has been used, not as capital but as a simple productive means. The entire crop has been consumed. No portion of it has been preserved to replace the seed consumed in planting and to become seed for a new harvest. In employing the entire yield as a net yield and consuming it, we gain the advantage of meet-
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ing immediate needs. But, on the other hand, we lose the greater utility of having our capital become a source of permanent yields. An economy aspiring to enduring service must distinguish between grossyields and net-yields. It must lay aside sufficient reserves to entirely renew its capital, treating only the residue as net-yield. To consider the present and the future as of equal importance is one of the requirements of economic management. The satisfaction of future needs must not be jeopardized by conditions of production inferior to those of the present. Thus the complete renewal of capital is a demand of a rational economy. If an increasing population must be provided for, provision should be made to enlarge the net-yield absolutely in order to maintain the per capita supply at the same level. An efficient people wanting to advance economically will go even further in its demands; it will enlarge the capital reservation sufficiently to increase the individual provisioning.