CHAPTER XVIII
CAPITAL AS AFFECTED BY CHANGES OF METHOD
Labor Saving and Capital Concentrating.—There is a common impression that whatever saves labor usually requires an increase of capital in the industry where the economy is secured, and this impression is justified by the experience of the century following the invention of the steam engine and the early textile machinery. Hand spinning and weaving require small amounts of fixed capital, while the mills in which spinning and weaving are done by steam or water power require a great deal. Fortunately in any long period this capital comes as abundantly as it is needed from the profits of the very business that calls for it and does not reduce the capital of other industries. The profit of one year furnishes the new instruments required in the next; but the immediate effect of substituting a costly machine for hand labor is to concentrate capital, or to call it from places to which it would otherwise go.
The Liberation of Capital by Invention.—For a long period it was the general rule that a mechanical invention at first called capital to the point at which it was applied, although it afterward created new capital and sent it away to make more than good the draft it originally made. This rule is no longer universally applicable. When an invention cheapens capital goods, it liberates capital. It is clear that a hundred and twenty-five years ago there was small chance that an invention would liberate very much capital by reducing the cost of making tools, buildings, rails, machinery, etc., since there were so few of them to cheapen. Now that machines are at hand in myriad forms the chance is large that an invention will substitute for many of them others of less costly construction. It will in these cases cause less capital to be required per machine than was formerly needed.
Simplifying the Forms of Machinery and Cheapening the Materials of It.—The history of invention shows that the early machines sometimes took cumbersome and expensive forms, for which simple and cheaper forms were later substituted. Much simplifying of mechanical appliances is all the while going on, and this, of course, liberates some capital. Making instruments of any kind out of cheaper materials has the same effect that anything has which reduces the cost of constructing the instruments. Bessemer steel has made rails, bridges, ships, buildings, steam boilers, and a vast number of mechanical tools and appliances less costly than they were, and so has liberated some of the capital which such things formerly embodied. After one of the machines of the costlier type has earned the fund on which its owner relies for replacing it as it is worn out, it appears that a part of this fund will suffice for procuring a perfectly good substitute for it, and the remainder may be used for procuring other appliances of production.
Cheapening the Process of Making Instruments.—If we recur to the table which represents the groups
| A´´´ | B´´´ | C´´´ | H´´´ |
| A´´ | B´´ | C´´ | H´´ |
| A´ | B´ | C´ | H´ |
| A | B | C | H |