Flight From Bonds to Stocks 201

favor of stocks, so far as this item of income is con
cerned. But if we count the increase in the capital
value of the securities, the advantage was reversed,
making a net advantage for bonds of $1,012.
This period was, as is well known, a period of rapidly
 falling prices, so that the bondholder, so far as
the element of change in the dollar is concerned,
was benefited thereby.
On the other hand, during periods of rising prices,
such as 1901-1922, the stockholder had a very decided
 advantage. Test 1, for instance, showed that
as between $10,000 invested in 1901 in stocks and
$10,000 invested at the same time in bonds, there
was a net advantage in favor of the stockholder, of
principal and income together, of $10,981.
In all these comparisons the advantages are reckoned
 in the actual dollars received, a reckoning which
is imperfect, first, because of the variability of the
dollar, and second, because of the unequal distribution
 in time of the returns from stocks and bonds.
Evidently the fairest comparison is to be made
by computing the rate of yield in the various investments,
 in the sense that this phrase is used in the
ordinary bond tables. In this way we find the real
yield as distinct from the nominal yield. The distinction
 is somewhat analogous to that between real and
nominal wages. The rate of yield on any investment
 is that rate of interest, which, if used for discounting
 the income and principal to be received,
would give an aggregate discounted value at the time
of purchase, equal to the purchase price. Thus the