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 con- 
stant 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 accumu- 
late 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 fluctu- 
ations 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.