SEc. 2] EARNINGS AND INCOME 229 
§2 
If the rate of interest is not 5 per cent, but 2 per cent, 
there will result great differences in the capital-values. 
The consequences are seen in the last column of the 
table. But the effect on capital-values wrought by thus 
cutting the rate of interest in two will be different for each 
of the five different articles. The more enduring ones will 
be affected the most. When the rate of interest is halved 
the value of the land will be doubled, rising from $20,000 to 
$40,000, but the value of the house will rise by only about 
60 per cent, i.e. from $18,300 to $28,400; the value of the 
horse will rise only 10 per cent, i.e. from $508 to $551; the 
value of the suit will rise only from $28 to $29; and, finally, 
the value of the loaf of bread will not rise at all, but will 
remain at 10 cents. We see in these five types of articles 
that the sensitiveness of capital-value to a change in the 
rate of interest is the greater the more enduring the income. 
In general, also, this sensitiveness is the greater the more 
remote the periods of time at which the income is concen- 
trated. For instance, if the total income is $100, and is 
all concentrated at a point of time fifty years distant, its 
capital-value, when the rate of interest is 5 per cent, is $8.72, 
but it becomes $29.09 when the rate of interest is reduced to 
2} per cent. That is, the rate of interest being halved, the 
capital-value is more than trebled. If the same income of 
$100 were to be due only one year from date, the change 
from 5 per cent to 23 per cent in the rate of interest would 
elevate the capital-value only from $95 to $97.50. 
§3 
Thus far we have been concerned only with foal income, 
in relation to capital-value; we now consider the rate of 
income per year in relation to capital-value. This ratio 
has already been called the rate of “value-return.” 
In accordance with previous explanations the sequence