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.

APPENDIX TO CHAPTER XVI 409 the theory of distribution. From it follows as a corollary that the richer an individual, the less risk in taking risks. Being possessed of capital, he has a wider range within which he can safely afford to operate, and therefore he has a far greater probability of keeping within these limits of safety than his less fortunate competitors. Professor Norton has also empha- sized the fact that the advantage of the capitalist is further enhanced by the tendency toward monopoly. “The result is a most interesting circle, constant combination at the top in order to force down the commercial price of the risk, and monopoly of the upper field, which pays tremendous profits, resulting in still greater increase in the financial power of the risk takers. To this there is no end, save in the divorce, through heredity, of ability and financial power.” 1 An important application of these methods is to the calculation of the chance that earnings should fall below the amount re- quired to pay interest on bonds. This chance is found from the probability table. It is the probability corresponding to that relative deviation obtained by dividing the difference between the mean expected earnings and the interest by two thirds of the standard deviation. In this and other ways business men could, as Professor Norton has shown, make better use of their Past experience than they do. Merely to glance over past earnings and receive an impression is not a very scientific mode of utilizing the facts which those earnings display. To aver- age them is not of much more value, While it is important to know the mean, it is also important to know the dispersion about the mean. This dispersion is shown by the standard deviation. The best procedure would therefore seem to be to calculate first the mean of past experience as to earnings; secondly, the standard deviation from that mean; thirdly, the chances of fluctuations thus displayed (e.g. the chance of earnings falling below the interest-paying line); and, fourthly, to correct the results thus obtained by taking into account the degree in which it is believed that the future will not follow in the footsteps of the past. Only the last of these four ! From a letter to the author. Cf. also Professor Norton’s ¢ Theory of Loan Credit,” Publications of the American Economic Association, 1904, Pp. 64.

Access restriction

Copyright

fullscreen: The nature of capital and income

Monograph

Table of contents

Download

Monograph

This page

Image fragment

Citation links

Citation recommendation