The nature of capital and income

Bibliographic data

Monograph

Identifikator:: 834011689

URN:: urn:nbn:de:zbw-retromon-85682

Document type:: Monograph

Author:: Jung, Karl Emil http://d-nb.info/gnd/117659711

Title:: Lexikon der Handelsgeographie

Place of publication:: Leipzig

Publisher:: Verl. des Bibliogr. Inst.

Year of publication:: 1882

Scope:: 1 Online-Ressource (IV, 563 S)

Collection:: Economics Books

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Skc. 9] VALUE OF CAPITAL 221 income stream into arbitrary installment sand discounting each installment separately.’ The value of the income stream has heretofore been always reckoned in advance of its occurrence; that is, we have discounted income to obtain present value. We may, however, consider an income as paid for at the close of the period, in which case we have to deal with its “accu- mulated” value or its “amount.” ? §9 Thus far we have considered the possibility of but one income stream from any given capital wealth. But it often happens that, with one capital instrument, there is a choice between various income streams. Land may be used for grazing, agriculture, building, or recreation purposes. Tools may be employed in a variety of ways, and the same is true of innumerable articles of wealth, particularly when taken in combination. What determines the choice of the series of uses to which any given instrument may be put? Evidently that series of uses or income stream will be se- lected which yields the maximum present value. Thus, if land used for grazing purposes will yield a net service of $1000 a year forever, and interest is taken at four per cent, its value for grazing purposes is evidently $25,000. If, in like manner, the capital-value for some other use, say for growing wheat, is $20,000, it is clear that the land will be employed for grazing rather than for growing wheat. Sometimes the two series of uses to which land or other wealth may be put differ, not only in their amount, but in their time of beginning or ending. In a city, for instance, land may be used either for present dwelling or for future business-purposes, and it often becomes a question which use is the more valuable. In case the city is growing 1 For a fuller statement, see Appendix to Chap. XIII, § 12. ? For discussion, and for formul® for the capital-value of any in- come, discontinuous or continuous, see Appendix to Chap. XIII, §13.

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