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 has been based upon the assumption that capital and labour are the only essentials required in production. Labour is frequently used in different senses, according to the confused and confusing habit of economists of using the same word in different meanings in different parts of their work. Adam Smith apparently used it as covering all the activities of mind and body required for production. In this sense it covers, of course, the work of the unskilled labourer, the skill of the skilled labourer, and the organizing capacity of the manager. In these days when people talk of labour they more commonly mean the labour of the weekly wage-earners, skilled and unskilled, applied to production. In this meaning of the word the claim that is often made that labour is entitled to the whole of its product is clearly an absurdity, if it means that manual labour can by itself be considered responsible for the whole of an article produced under modern conditions. If it only means that labour is entitled to all that it, by itself, produces, then, as we shall find later, labour gets all this and a great deal more.

Capital we had to divide into two classes according to the extent of the risk that