In 1893, John Bates Clark (1893) described two complementary concepts of capital: a fund of capital and real capital. Both concepts were required for the analysis of capitalism. Capital as a fund was required in the study of interest and portfolio adjustment; capital as goods in the study of production.

The only one of these two concepts which was amenable to unambiguous measurement was the fund since it was comprised of money. Real capital could not be measured at all since it consisted of the heterogeneous machines and materials which were the embodiment of the fund. Clark reasoned that since, over long periods of time, investment goods are worn out or used up and replaced, changes in the fund of capital or in the capital fund–labor ratio could be effected through replacements of real capital goods. In effect, changes in the value of capital or the capital–labor ratio reflected changes in the stock of investment goods.

Clark offered this view as part of his explicit defense of capitalism (Clark, 1893, pp. 3, 4). Indeed, his concept of capital as a fund was essential to his demonstration of the necessary and sufficient conditions for capitalism to conform to utilitarian principles of natural law. There were two such conditions. First, Clark sought to demonstrate that under laissez-faire capitalism each individual who contributed to production received the value of what he produced. Second, Clark required that no individual receive a smaller income than he desired. The first point was satisfied by the marginalist theory of production. The wage rate is equal to the value of output which would be lost if any individual worker were to withdraw his services.