Sec. 10] VALUE OF CAPITAL 223

Tt should be observed that if the rate of interest is raised,
the relative advantages of the two uses in the example
given might be quite different. In this case it might pay
to put up the dwelling rather than wait for the business
block ; for the holder of the land, as he expresses it, could
not afford to “lose his interest” when it is at so high a rate.

§ 10

Thus far we have considered the capital-value only of
individual articles of wealth. The same reasoning applies
to a group of articles of wealth. An important case is
that of a merchant’s stock. In this case we may prefer
to capitalize the stock as a whole rather than to take
the sum of the capitalizations of its separate elements.
The net income from the stock is found by subtracting
from the gross income all the outgo, including, besides
the cost of replenishing the stock, the other costs of the
business, — clerk hire, rent, and even an allowance for the
work of the merchant himself, unless he is a mere “silent
partner.” If the net income is supposed to remain constant
forever, the capital value of the stock will, of course, be
found by dividing the net income by the rate of interest.
In this case the rate of interest must be taken for the proper
installment interval. If the goods are supposed to be continuously
 bought and sold, the rate to be employed is the
“rate of interest per annum reckoned continuously.” 5

§ 11

We conclude, therefore, that the value of any capitalgood,
 either of wealth or of property-rights, assuming that
all future income is foreknown, is the discounted value of
that income, and consequently that, as time goes on, the
value of that capital will oscillate, rising gradually during
intervals between installments along a “discount curve,”
1 For a mathematical statement in this connection, see Appendix
to Chap. XIII, § 14.