Sec. 12] THE RISK ELEMENT 285

The market quotations for any product are constantly
being changed and revised, not so much through the operation
 of the first three principles as through the fourth —
the constantly changing outlook into the future. Every
rumor as to crops, every storm or pest which is known to
have destroyed them, changes the expectation of future income.
 Since the third and fourth causes are both due to
lack of foresight, they may be included, if desired, under
the common head of “risk.”
In Figure 11 the operation of these four causes is represented
 as occurring successively in the order enumerated.
The capital-value first rises along the discount curve AB,

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D

Fic. 11.

constructed according to a particular rate of interest.
When the first income coupon, so to speak, BC, is detached,
the value falls to C, after which it travels again along the
discount curve CD, rising suddenly when a certain
expected cost DE has been gotten rid of, then following EF
again, whereupon, in consequence of a sudden and unexpected
rise in the rate of interest, it falls to @, after which it ascends
according to the steeper discount curve GH, and then, in
consequence of a change in the estimate of future income,
falls again to I, after which it proceeds along another discount
 curve to J, and so on indefinitely. The changes
caused by actual income and outgo, we here represent by
the continuous lines BC, DE, ete., and the changes due to
a revised estimate of interest and of income we represent by
the dotted lines FG, HI, ete.