CAPITAL AND RENT

They did not seek out learned economists; there were none in the locality. But they chose just men with common sense, which amounted to the same thing: political economy, justice, and common sense are one and the same.

Frédéric Bastiat
Pamphlets II
Part 3 of 5, The House

After introducing the notion of working capital and current assets with the sack of wheat, Frédéric Bastiat introduces the notion of fixed capital and long-term assets thanks to a house. Unlike fixed assets constituted by the machines in an enterprise, the house is an asset that is accessible to everybody (at least in its use if not in its property), which helps to understand the proprieties of capital. It allows to show that private property is exclusive (if Valère lives in the house, Mondor cannot benefit from it), that the capital depreciates and that, on top of the depreciation, the owner who allows somebody else to use a capital good can legitimately request to be paid for it.

In order to understand the analogy, it then suffices to replace the house by monetary capital in order to see that this legitimate payment corresponds to interests, which are themselves legitimate as a consequence.

Other quotes from Capital and Rent:
Introduction – Part 1 of 5 – The sack of wheat – The house – The plane – Part 5 of 5

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