The nature of capital and income

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Monograph

Identifikator:: 102659555X

URN:: urn:nbn:de:zbw-retromon-82920

Document type:: Monograph

Author:: Fisher, Irving http://d-nb.info/gnd/118533541

Title:: The nature of capital and income

Place of publication:: New York

Publisher:: The Macmillan Company

Year of publication:: 1923

Scope:: XXI, 427 Seiten

Digitisation:: 2019

Collection:: Economics Books

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Document type:: Monograph

Structure type:: Chapter

Title:: Part III. Capital and income

Collection:: Economics Books

188 NATURE OF CAPITAL AND INCOME [Cmar. XI ical productivity and value return, and attempts to deduce the rate of interest from mere physical productivity, which is impossible. § 4 In this book we are concerned chiefly with the fourth relation, value return, or the ratio of the value of income to the value of capital. The fundamental principle which applies here is that the value of capital at any instant is derived from the value of the future income which that capital is expected to yield. The expected services may, of course, not be the actual services. In our ignorance of the future we fix our present valuations on the basis of what we expect the future to be. The principle of present worth is of fundamental impor- tance in the theory of value and prices. It means that the value of any article of wealth or property is dependent alone on the future, not the past. The principle has been imper- fectly stated as follows: “The value of any article is not determined by its cost of production, but by its uses.” But the costs of production are disservices, and these, if they be future, enter into value on precisely the same terms as uses or services. They are discounted as are services. For instance, the value of the Panama Canal to-day is dependent upon the future expected services, taken in con- nection with the expected cost of completion. If these future elements be given, the value of the canal will be the same whether past cost was large or small, or nothing at all. Of course, the future expected cost for completing the canal is less than if some of the work had not been done already, so that the greater the past cost has been, the less the future cost will be, and hence the greater the value of the canal at present. Thus normally the value of capital will vary with the past cost of production. Moreover, the experience of the past enables us to make a better estimate as to future cost.

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