Man will seek to discover the area(s) of land that will provide the most comfort for the least labor because labor is a cost to man in his quest for comfort. Man does not seek labor, he seeks comfort and he seeks to minimize the labor necessary to the attainment of comfort. And in a situation where there are no kings, and no priests, and where there is no market and no division of labor or trading we will see capital evolve. Man can maximize the amount of comfort for each unit of expended labor by finding more naturally productive land. But once the "best" location is found it is only capital (tools) that will reduce the amount of discomfort endured in the provisioning of our needs, our wants, our comfort. The return to capital is this reduction in discomfort, this reduction in our labors or an increase in our liesure. One of the absolute best explanations of capital is seen in the creation of a simple basket. That basket is the result of someone's desire to diminish the labor necessary to gathering, or carrying, or storing some commodity which is desirable.
Let us say that a man has found a berry patch that will supply him with sustenance for a long period of time. It is hot and humid in the berry patch and the mosquitoes are a nuisance. The mosquitoes are worse at night and at night the bears come. So the man lives on a hillside where the breezes blow and the mosquitoes are not so bad at night and the bears don't come to get berries. The man must walk four miles to the berry patch for his food. He spends two hours walking to the patch and spends the day eating berries and swatting mosquitoes or gathering berries and retreating to a safe haven from the mosquitoes which is a mile distant from the berry patch. He can gather 1 handful of berries (a meal) in half an hour, and then escape the mosquitoes and return at the cost of another hour. The rest of the day he goofs off in reasonable comfort in his sanctuary. But in the evening he leaves the berry patch to go to the hillside to sleep so as to avoid the bears, and he returns to the patch the next day. Each day, therefore, he labors for a total of 6.5 hours and the remainder of the day is free time (freedom), the rest is comfort.
Let's review
It occurs to this man that he might take a handful of berries home and "save" them for the next day and perhaps he can forgo the next day's walks (5 hours of labor). But he can't carry enough berries in one day. So he labors an extra .5 hours each day and saves a handful each day. His work day is now 7 hours a day and he accumulates one meal a day. And he therefore gets one day off out of 3. The berries at his hillside home are savings. These savings are worth 1.5 hours of labor when viewed as a cost. But when viewed as actual value they are worth 6.5 hours of labor because that is one day's work. The "investment" of 1.5 hours of additional labor over the course of 3 days has created a pile of berries worth 6.5 hours of labor because that is the labor that one day on the berry picking job would entail. The difference between the cost and the actual value we will style as profit. Thus we say that he has derived 5 hours of profit from his investment. By virtue of the possession of this new "wealth" he can spend a day in "freedom" doing whatever he will. And if we are to stay within some reasonable confines we must acknowledge that this is a manifestation of intellectual capital.
The importance of distinguishing intellectual capital from the berries themselves cannot be over emphasized. The berries can be seen as gold or dollars or units of labor. This "currency" did not copulate and have little baby labor hours or little baby gold pieces or little baby dollars while sitting on a rock or a shelf or in a safe. The return in labor saved (the profit) is a return to the intellect of the berry gatherer. This return has very little to do with a "time preference" or any other ridiculous posturing that would legitimize a return to loaned money. The implications of this observation are enormous when we later discuss money and rent. Profit is not the return to tight fisted self denial. Profit is the return to intelligence and to risk taking. The birds or the bears might have discovered and eaten the berries before the berry picker (the saver) could get the benefit of them and that is risk. We also see that the berries are worthless if the berry picker lets them sit too long. He will become inebriated perhaps if the berries turn to wine.
Man is an inquisitive creature and when he gets a day off from drudgery he has time to think and to experiment and such. While idle hands may be the Devil's workshop, these idle hands are also the bastion of creativity. This man wants life to be better and he knows that if he can carry more berries then he can take more days off. And because he thinks and dreams and is naturally lazy he conceives of this wonderful invention called a basket. He has seen the reed patch and he thinks he can fashion a container by tying these reeds together or by weaving them. Instead of going to the berry patch or just lounging around he eats a breakfast of berries, carries one handful of berries with him traveling to the reed patch 8 miles away where he eats his berries for lunch, gathers reeds, and brings them home. He just invested his savings worth 6.5 hours of labor and an additional 10 hours of labor to acquire some reeds for the creation of a basket. The fact that these reeds are virtually worthless is worthy of note. In their present form they serve no purpose at all and that is why they are worthless. We know that we put 16.5 hours of "value" into these reeds but it is of no consequence. They are still worthless until we add more labor and intellectual capital to them. The man is not absolutely certain that the reed tying or reed weaving deal, is going to pan out so there is risk in this endeavor. But 3 days later he invests another 6.5 hours of value and an additional 8 hours labor to make a basket. So far this basket has cost him 31 hours of value. This basket is a physical manifestation of capital. He has a basket and no berries. But the very next day he goes to the berry patch and he spends all of his time gathering berries and placing them in his basket (a long day). He eats as he works but he does not go to the sanctuary. He brings the berries home and looks at his new pile of savings; 9 handfuls of berries (he ate 3 handfuls (1.5 hours) while gathering the berries). We know from previous experience that the value of these berries is 21 hours of labor. We can also look at it in terms of the work week. We were working 3 days and getting one day off. But with the advent of capital in the form of a basket we will work one day and get 3 days off. Good stuff this capital.
The advent of a simple basket will return much value to the man who invested in its creation. But how do we measure the value of this tool? We can see that we spent far less labor creating the basket than the labor we would have spent gathering the berries one day at a time for the rest of eternity. But the basket nor the man will last an eternity. In order to define the real value of the basket we must put a limit on the durability of the basket. We must propose a useful life span for the basket past which the basket will need to be replaced. We see that the longer the life span of the basket the more valuable it will be. We know that life with the existence of the basket will entail one long day's work (10 hours) for 4 days of existence and that without it we would expend 3 days work (7 hours per day = 21 hrs) for 4 days existence So the basket is valued at 11 hrs for each 4 day span or 3.25 hrs per day. If the Basket will remain viable for 6 months then the value of the basket is 6 X 30 X 3.25 = 585 labor hours.