The nature of capital and income

Bibliographic data

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

Usage license:: Get license information via the feedback formular.

Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Part III. Capital and income

Collection:: Economics Books

Sec. 4] FOUR INCOME-CAPITAL RATIOS 189 But, however determined, it is the estimated future cost alone which enters into the calculation of present value. All of these principles are well illustrated in the case of the canal. After some $300,000,000 had been sunk in the enterprise, the proprietors were willing to sell out for only $40,000,000. To them, therefore, it was worth less than it had cost. The effect of the work already done on the canal was certainly to lessen the labors of the present possessors, but it also at the same time opened their eyes to the magni- tude of the task still before them; hence the reduction in value to correspond to the new forecast of the future. No one will dispute that the buyer of any article of capital will value it for its expected services to him, and that “at the margin” of his purchases, the price he will pay is the equivalent to him of those expected services, or, in other words, is their “present worth,” their “discounted value ” or “capitalized value.” But some doubt may be felt re- garding the professional seller. As to him, he is simply a speculator as to the possible demand. He sells for what he can get, affixing whatever price he believes will, in the end, profit him most, sometimes making out of the transaction more than his costs of acquisition, sometimes less, usually, or normally, covering those costs plus interest on them for the time elapsing between their occurrence and the sale. The same principle applies all the way back in the pro- duction processes. The labor expended is staked (either by the laborer or entrepreneur) in anticipation of the prices which the buyers will be willing to pay. If these anticipated prices are not expected to cover the value of the labor and other costs plus the interest upon them, the result will be that the labor and other costs will not be expended. Hence by trial and error the labor and other costs will, under nor- mal conditions, gradually be fitted to the prices. When prices find this normal level at which costs plus interest are covered, it is not because the past costs of pro- duction have determined prices in advance, but because

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