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It is worth while to note here a point to which further reference will be made, namely that, whereas the causes of differences in wages per head in different occupations are identical, so far as wage-earners are concerned, with the causes of differences in individual incomes from labour, the causes of differences in profits per cent in different occupations are not identical with the causes of differences in individual incomes from capital. For the size of an income from capital evidently depends not only on the rate of profit, but on the quantity of capital. 2 Into the causes of differences in the quantities of capital owned by different individuals, Adam Smith made no enquiry. He regarded the distinction between the three factors of production as equivalent, broadly speaking, to a distinction between three classes of persons. " The whole annual produce naturally divides itself into three parts, and constitutes a revenue to three orders of people; to those who live by rent, to those who live by wages and to those who live by profit. These are the three great, original and constituent orders of every civilised society."3 To Adam Smith, as to most early

economists, the " landowner " is essentially a rural land owner. The urban landowner, with his dramatic scoops of" unearned increment," had not yet impressed himself upon the popular imagination, nor had the long and slow decline of agricultural rents yet begun. " Merchants," no less than "country gentlemen," were a class apart, "an order of men," according to Adam Smith, " whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it."1 Even in 1776, however, a division of society into landowners, merchants and labourers was becoming crude and misleading, and the changes which have since occurred have rendered such a division still less applicable to modern conditions. The factors of production may be a necessary device of economic analysis, but in the modem world they do not, with any approach to accuracy, indicate the sources of income of groups of persons wholly distinct from one another.