In the following book, I have endeavoured 
to explain the nature of stock, the effects 
of its accumulation into capital of different 
kinds, and the effects of the different employments 
of those capitals. This book is divided 
into five chapters. In the first chapter, I have 
endeavoured to shew what are the different 
parts or branches into which the stock, either 
of an individual, or of a great society, naturally 
divides itself. In the second, I have endeavoured 
to explain the nature and operation 
of money, considered as a particular branch 
of the general stock of the society. The stock 
which is accumulated into a capital, may either 
be employed by the person to whom it 
belongs, or it may be lent to some other person
In the third and fourth chapters, I have 
endeavoured to examine the manner in which 
it operates in both these situations. The fifth 
and last chapter treats of the different effects 
which the different employments of capital immediately 
produce upon the quantity, both of 
national industry, and of the annual produce 
of land and labour
When the stock which a man possesses is no 
more than sufficient to maintain him for a few 
days or a few weeks, he seldom thinks of deriving 
any revenue from it. He consumes it 
as sparingly as he can, and endeavours, by his 
labour, to acquire something which may supply 
its place before it be consumed altogether
His revenue is, in this case, derived from his 
labour only. This is the state of the greater 
part of the labouring poor in all countries. 
But when he possesses stock sufficient to 
maintain him for months or years, he naturally 
endeavours to derive a revenue from the 
greater part of it, reserving only so much for 
his immediate consumption as may maintain 
him till this revenue begins to come in. His 
whole stock, therefore, is distinguished into 
two parts. That part which he expects is to 
afford him this revenue is called his capital
The other is that which supplies his immediate 
consumption, and which consists either, 
first, in that portion of his whole stock which 
was originally reserved for this purpose; or, 
secondly, in his revenue, from whatever source 
derived, as it gradually comes in; or, thirdly
in such things as had been purchased by either 
of these in former years, and which are 
not yet entirely consumed, such as a stock of 
clothes, household furniture, and the like. In 
one or other, or all of these three articles, consists 
the stock which men commonly reserve 
for their own immediate consumption
There are two different ways in which a 
capital may be employed so as to yield a revenue 
or profit to its employer
First, it may be employed in raising, manufacturing, 
or purchasing goods, and selling 
them again with a profit. The capital employed 
in this manner yields no revenue or profit to 
its employer, while it either remains in his 
possession, or continues in the same shape. 
The goods of the merchant yield him no revenue 
or profit till he sells them for money
and the money yields him as little till it is 
again exchanged for goods. His capital is 
continually going from him in one shape, and 
returning to him in another; and it is only 
by means of such circulation, or successive 
changes, that it can yield him any profit
Such capitals, therefore, may very properly be 
called circulating capitals
Secondly, it may be employed in the improvement 
of land, in the purchase of useful 
machines and instruments of trade, or in such 
like things as yield a revenue or profit without 
changing masters, or circulating any further. 
Such capitals, therefore, may very properly 
be called fixed capitals
Different occupations require very different 
proportions between the fixed and circulating 
capitals employed in them. 
The capital of a merchant, for example, is 
altogether a circulating capital. He has occasion 
for no machines or instruments of trade
unless his shop or warehouse be considered as 
Some part of the capital of every master 
artificer or manufacturer must be fixed in the 
instruments of his trade. This part, however, 
is very small in some, and very great in others. 
A master tailor requires no other instruments 
of trade but a parcel of needles. Those of the 
master shoemaker are a little, though but a 
very little, more expensive. Those of the 
weaver rise a good deal above those of the 
shoemaker. The far greater part of the capital 
of all such master artificers, however, is 
circulated either in the wages of their workmen
or in the price of their materials, and 
repaid, with a profit, by the price of the work
In other works a much greater fixed capital 
is required. In a great iron-work, for example, 
the furnace for melting the ore, the 
forge, the slit-mill, are instruments of trade 
which cannot be erected without a very great 
expense. In coal works, and mines of every 
kind, the machinery necessary, both for drawing 
out the water, and for other purposes, is 
frequently still more expensive
That part of the capital of the farmer which 
is employed in the instruments of agriculture 
is a fixed, that which is employed in the wages 
and maintenance of his labouring servants is 
a circulating capital. He makes a profit of 
the one by keeping it in his own possession
and of the other by parting with it. The 
price or value of his labouring cattle is a fixed