SEc. 9] SUMMARY OF PART III 321
curve of capital-value is at the beginning. When the ele-
ment of chance or luck is taken into account, the capital
curve is less likely to begin at the zero line. It may begin
at some point above; it will not begin at any point below;
for if the present value of the chance of gain did not out-
weigh the present value of the chance of loss, the enterprise
would never be undertaken at all. In the great majority
of cases, the capital-value at the outset of an enterprise
is greater than zero; that is, in the estimation of those who
enter into it, the gains will not only pay for the costs with
interest, but something in addition, even when the element
of chance is included in the discounting operation. At any
rate, it is not infrequent that when a new enterprise
is started, those who have the first knowledge of the
possibilities, and the first opportunity to exploit them,
expect returns out of proportion to the ordinary rate of
interest and compensation for risk. The only reason this
is not more generally true is because of the existence of
competition, by which the special advantage of individuals
through special knowledge, foresight, etc., is offset by the
vigilance of their rivals.
With these points in mind, we observe that the history
of the value of any particular article of capital-wealth may
be represented as in Figure 32. Starting at 4, some point
above the zero line, the capital-value rises to B, because,
let us say, of the first expenditure involved. From B it
proceeds along a discount curve to C. There, through the
influence of the risk element, it suddenly drops to D, at
which point some new information has reduced the prospect
of future gain or increased the risk of future loss. From D in
turn it proceeds along the discount curve to E. At this point
the cost EF is incurred, but at the same time confidence as
to the future receives a shock, and instead of proceeding
from F, the curve drops at once toG. Thencelt rises gradu-
ally and normally to H, when the first income item, HI,
is received. This being, let us say, Jess than was anticipated,
Y
