CHAPTER XVI 
THE RISK ELEMENT 
§1 
TarROUGHOUT the three previous chapters, we have as 
sumed the existence of artificially simple conditions. We 
have assumed that the entire future history of the capital 
in question is definitely known in advance; in other words, 
we have ignored chance. The factory which was taken 
for illustration was supposed to yield definite future in- 
come which could be counted upon as a bondholder counts 
upon his interest. In actual practice, however, every factory 
or other enterprise offers chances both of gain and loss. 
How these chances affect capital-value will be discussed 
in the present chapter. 
We have seen that capital-value increases as an antici- 
pated installment of income approaches in time, and 
diminishes as that installment is reached and passed. These 
changes in capital-value take place when the future in- 
come is regarded as certain. The introduction of the 
element of chance will bring other and even more impor- 
tant changes in capital-value. If we take the history of 
the prices of stocks and bonds, we shall find it chiefly to 
consist of a record of changing estimates of futurity, due 
to what is called chance, rather than of a record of the 
foreknown approach and detachment of income. Few, if 
any, future events are entirely free from uncertainty. In 
fact, property, by its very definition, is simply the right to 
the chance of future services. A mine owner takes his 
chances as to what the mine will yield; the owner of an 
orange plantation in Florida takes risks of winter frosts; 
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