328 NATURE OF CAPITAL AND INCOME [Cmar. XVIII

each change in the rate of interest employed in the discount
process, and with each change in the estimate of the chance
element. If the alternate rise and fall in the value of capital
are rhythmic and even, the capital will recur to a constant
 level, and the income in this case is said to be the
earnings of capital. The earnings of capital constitute a
standard with respect to which the actual income in any
case may be compared. If the actual income exceeds the
standard income, there will be a depreciation of capital,
which may be made good, however, by paying back the
excess into another fund of capital called the depreciation
fund. If, on the contrary, the earnings exceed the actual
income, the excess will constitute savings, and will accumulate
 and be added to the capital.

§5

To describe in a few words the nature of capital and
income, we may say that those parts of the material
universe which at any time are under the dominion of
man constitute his capital wealth; its ownership, his capital
property; its value, his capital-value; its desirability, his
subjective capital. But capital in any of these senses
stands for anticipated income, which consists of a stream
of services or its value. When values are considered, the
causal relation is not from capital to income, but from
income to capital; not from present to future, but from
future to present; in other words, the value of capital is
the discounted value of the expected income. The fluctuations
 of this capital-value will, chance aside, be equal and
opposite to the deviations of “ income” from “ earnings,”
whereas, when the influence of chance is included, there
will be in addition to these fluctuations still others which
mirror the successive changes in the outlook for future
income.