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. 2] EARNINGS AND INCOME 229 §2 If the rate of interest is not 5 per cent, but 2 per cent, there will result great differences in the capital-values. The consequences are seen in the last column of the table. But the effect on capital-values wrought by thus cutting the rate of interest in two will be different for each of the five different articles. The more enduring ones will be affected the most. When the rate of interest is halved the value of the land will be doubled, rising from $20,000 to $40,000, but the value of the house will rise by only about 60 per cent, i.e. from $18,300 to $28,400; the value of the horse will rise only 10 per cent, i.e. from $508 to $551; the value of the suit will rise only from $28 to $29; and, finally, the value of the loaf of bread will not rise at all, but will remain at 10 cents. We see in these five types of articles that the sensitiveness of capital-value to a change in the rate of interest is the greater the more enduring the income. In general, also, this sensitiveness is the greater the more remote the periods of time at which the income is concen- trated. For instance, if the total income is $100, and is all concentrated at a point of time fifty years distant, its capital-value, when the rate of interest is 5 per cent, is $8.72, but it becomes $29.09 when the rate of interest is reduced to 2} per cent. That is, the rate of interest being halved, the capital-value is more than trebled. If the same income of $100 were to be due only one year from date, the change from 5 per cent to 23 per cent in the rate of interest would elevate the capital-value only from $95 to $97.50. §3 Thus far we have been concerned only with foal income, in relation to capital-value; we now consider the rate of income per year in relation to capital-value. This ratio has already been called the rate of “value-return.” In accordance with previous explanations the sequence

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