Book 2, Chapter 1b

The Stock for Consumption and Fixed Capital

by Adam Smith Icon

The Stock for Consumption

12 The first is the part reserved for immediate consumption.

It affords no revenue or profit. It is made up of the stock of food, clothes, furniture, etc. which have been bought but not yet entirely consumed.


The whole stock of houses makes a part of this first division.

The stock laid out in a house ceases from being a capital or from affording any revenue.

A house contributes nothing to its inhabitant’s revenue, though it is extremely useful to him.

  • If it is rented out, the tenant must always pay the rent ultimately from the revenue from his labour, stock, or land.

A house may yield a revenue to its owner and serve as his capital, but it cannot yield any revenue to the public.

  • The public revenue can never be increased by it.

Clothes and furniture

Clothes and furniture sometimes yield a revenue and become a capital.

In countries where masquerades are common, masquerade dresses are rented out for a night. Upholsterers rent out furniture. Many people rent out furnished houses. The rent revenue must always be ultimately drawn from some other source of revenue.

Of all the parts of the stock reserved for immediate consumption, those laid out in houses is most slowly consumed.

  • A stock of clothes may last several years.
  • A stock of furniture 50-100 years.
  • A stock of houses, well built and properly taken care of, may last many centuries. Their total consumption lasts longer. But they are still a stock reserved for immediate consumption as clothes or furniture.

Second Division: The Fixed Capital

13 The second division is the fixed capital.

It affords a profit without circulating or changing masters.

It consists chiefly of 4 articles:

14 Useful machines and tools which facilitate and abridge labour.

15 Profitable buildings which produce a revenue for:

  • their proprietor who rents them out, and
  • their tenants who use them as shops, warehouses, workhouses, farmhouses, stables, granaries, etc.

Unlike mere dwelling houses, these are instruments of trade.

16 Improvements of land in clearing, draining, enclosing, manuring, and rendering it proper for tillage.

An improved farm is the same as those useful machines.

  • It allows an equal circulating capital to afford more revenue.
  • It is equally advantageous and more durable than machines.
  • Its frequent cultivation are the only repairs it needs.

17 Useful abilities of everyone in society.

The acquisition of such talents always costs the maintenance of the learner during his education. It is a capital fixed and realized in his person. Those talents form part of his fortune and the fortune of the society he belongs to. The worker’s improved dexterity is the same as a machine which facilitates labour. It has a cost which it repays with a profit.


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