Glossary

GLOSSARY [Consisting of definitions of technical terms used in this book. Most of these definitions are more fully discussed in The N atureoj Capital and Income, to which specific references are therefore made.] BASIS. - The rate of interest yielded by a property when sold at a specified price. Capital and Income, Ch. XVI, § 9. commercial,of a security.-The basis corresponding to the com . mercial value of the security. Capital and In6ome, Ch. XVI, §8. mathematical, of a security. - The basis corresponding to the mathematical value of the security. Capital and Income, ChI. XVI, § 8. riskless, of a security. - The basis corresponding to the riskless value of the security. Capital and Income, Ch. XVI, § 8. CAPITAL.- Abbreviation for Capital goods, and Capital value. Capital and Income, Ch. V, § 1. instruments. -:.-. (See Capital Wealth.) property. - A stock (or fund) of property existing at an instant of time. Capital and Income, Ch. V, § 1.

wealth. - A stock (or fund) of wealth existing at an instant of . time. (Syn. Capital instruments.) Capital and Income, Ch. V, § 1. value.- The value of a stock of wealth or property at an instant. It is found by discounting (or "capitalizing") the value of the income expected from the wealth or property. Capital and Income, Ch. V, § 1. CAPITALISTIC METHOD.- A method of production requiring a tem porary reduction in the income from specified capital. Ch. IX, §8. CAUTION, coefficientof. - The ratio of commercial value to mathe matical value. Capital and Income, Ch. XVI, § 6. CHANCE, of any event. - The ratio of the number of cases in which that event may occur to the total possible number of cases, when all the cases are equally probable. Any two cases are equally probable (to any particular person at any particular time) if the person has no inclination to believe one rather than the other to be true. (Syn. Probability.) Capital and Income, Ch. XVI, § 2.

commercial value 01. - The value which the chance will actually z 337 338 GLOSSARY command in the market. It is equal to the mathematical value multiplied by the coefficient of caution. Capital and Income, Ch. XVI, § 6. mathematical value of. --: The product of the value of the price at stake multiplied by the chance of winning it. Capital and In come, Ch. XVI, § 5. COEFFICIENT, of caution. - The ratio of commercial value to mathe matical value. Capital and Income, Ch. XVI, § 6. oj probability. - The ratio of mathematical value to riskless value. Capital and Income, Ch. XVI, § 6. 0/ risk. - The ratio of commercial value to riskless value; hence the product of the coefficient of caution multiplied by the coefficient of probability. Capital and Income, Ch. XVI, § 6. COMMERCIAL value of a chance. - (See Chance.) COMMODITIES. - Movable instruments not human beings. Capital and Income, Ch. I, § 2.

CONSUMPTION. - (See Services, enjoyable objective.) DESIRABILITY, of goods (wealth, property, or services). - The in tensity of desire, for those goods, of a particular individual at a particular time under particular circumstances. (Syn. Utility.) Capital and Income, Ch. III, § 2. marginal, of a specified aggregate of goods. - Approximate definition: The desirability of one unit more or less of that aggregate, or the difference between the desirability of that aggregate and another aggregate one unit larger or smaller. Capital and Income, Ch. III, § 4. Exact definition: The limit of the ratio of the increment (or decrement) of desirability to the increment (or decrement) of the aggregate when the last-named increment (or decre ment) approaches zero. (Syn. Marginal utility.) Capital and Income, Appendix to Ch. III, § 1. DI8COUNT CURVE. - A curve so constructed that, if one of its or dinates represents any given sum, any later ordinate will represent the" amount" of that sum at a time later by an in terval represented by the horizontal distance between the ordinates; consequently a curve such that any earlier ordinate will represent the "present value" of that sum at a time earlier by an interval represented by the horizontal distance between the ordinates. Capital and Income, Ch. XIII, § 1.

DISCOUNTED VALUE. - (See Value, present.) DISSERVICE. - A negative service. An instrument renders a disservice when, by its means, an undesirable event is pro moted or a desirable event prevented. Capital and Income, Ch. II, § 2; VIII, § 1.

GLOSSARY 339 DISUTILITY. - Negative utility. (Syn. Undesirability.) Capital and Income, Ch. 111,- § 2. -'EARNINGS. - (See Income, earned.) EXCHANGE. - The mutual and voluntary transfer of goods (wealth, property, or services) between two owners, each transfer being in consideration of the other. Capital and Income, Ch. -I, § 4; II, § 3. FLOW. - The quantity of any specified thing undergoing any specified change during any specified period of time. Capital and Income, Ch. IV, § 1. fuND. - A stock of wealth or property or its value. Capitaland Income,Ch. IV, § 1. o GOODS. - A term to include wealth, property and services. Capi tal and Income, Ch. III, § 1. INCOME. - Abbreviation for Income 8ervices and Income value. Capital and Income, Ch. VIII, § 1. account. - Statement of specified income and outgo, whether from capital or to a person. Capital and Income, Ch. VIII, §2. earned, by any capital. - Income realized plus appreciation of the capital (or minus its depreciation); i.e. that income which a given capital can -yield without alteration in its value.

If interest be assumed invariable and all future income fore known, this definition is equivalent to another; viz. -the uni form and perpetual income which a given capital might yield; but the equivalence ceases if interest varies (see Capital and Income, Appendix to Ch. XIV, § 1) or if future income is un known. (Syn. Earnings, Standard income.) Capital and Income, Ch.-XIV, §-4. enjoyable. - Income which consists of enjoyable services.Capi tal and Income, Ch. VII, § 6. gross. - Sum of-all positive income elements. Capital and Income, Ch. VII, § 1. individual. - The income from the entire capital ofan individual. Capital and Income, Ch. VII, §7. money. - Income which consists of the receipt of money. Capi tal and Income, Ch.VII, §7; IX, § 5. natural. - Income which consists of services not obtained by exchange. Capital and Income,Ch. VII, § 7; IX; § 5. net. - The difference between gross income and outgo. Capital and Income, Ch. VIII, § 1.

p8ychic. - Agreeable conscious experiences. (Syn. Subjective income.) Capital and Income, Ch. X,§ 3. realized, .from any capital. - Its actual income, i.e. the value of its actual services. Capital and Income, Ch. XIV, § 4.

340 GLOSSARY services, of any capital. - The flow of services from that capital through a period of time. Capital and Income, Ch. VIII, § 1. social. - The income from the entire capital of society. Capital and Income, Ch. VII, § 7. standard. - (See Income, earned.) stream. - Synonym of· Income. Employed to emphasize its duration in time. subjective. (See Income, psychic.) value, from any capital. - The value of its income-services. Capital and Income, Ch. VIII, § 1. INSTRUMENT. - An individual article of wealth. Capital and Income, Ch. I, § 1. INTERACTION. - An event which is a service of one capital and at the same time a disservice of another. (Syn. Interacting service, Intermediate service, Preparatory service, Coupled ser vice.) Capital and Income, Ch. IX, § 2. INTERACTING services. - (See Interaction.) INTERMEDIATE services.- (See Interaction.) INTEREST. - The product of the rate of interest multiplied by the capital-value. Capital and Income, Ch. XIV, § 4.

explicit, rate of. - A rate of interest explicitly contracted for (in contradistinction to implicit interest). Ch. II, § 1. implicit, rate of. - The rate of interest realized on any invest ment, the exact return of which is not explicitly contracted for, but is left to be determined by circumstances. Ch. II, § 1. rate 0/. - Many meanings are given below. The standard mean ing used in this book is that called" rate of interest in the premium sense reckoned annually." Capital and Income, Ch. XII, § 4. rate of. - In the price sense: The ratio between the annual rate of a perpetual annuity and the equivalent capital-value. Cap ital and Income, Ch. XII, § 2. The rate of interest is said to be reckoned annually if the annuity is payable in annual installments; it is said to be reckoned semiannually if the annuity is payable in semiannual installments; quarterly, if in quarterly installments; continu ously, if payable continuously.

rate of. - In the premium sense: The excess above unity of the rate of exchange between the values of future and present goods taken in relation to the time interval between the two sets of goods. (Syn. rate 01 interest in the agio sense.) Capital and Income, Ch. XII, § 4. The rate of interest is said to be reckoned annually if the two sets of goods are one year apart. This is the standard GLOSSARY 341 meaning of the It rate of interest" as used in this book. It is said to be reckoned semiannually, if they are a half-year apart; quarterly, if three months apart; continuously, if infinitesi maJly apart. rate of. - In agio sense: (See in premium sense.) rate of. - Reckoned annually, semiannually, quarterly, continu ously: See under rate oj interest in price sense and rate 01 interest in premium sense. total. - The difference between any sum and its" amount." Capital and·Income, Appendix to Ch. XIII, § 7.

INVESTING. - Purchasing the right to remote income. Ch. VII, § 4. LABOR. - Outgo in the form of human exertion. Capital and Income, Ch. X, § 6. LAND. - Wealth which is part of the earth's surface. Capital and Income, ·Ch. I, § 2. MATHEMATICAL value of a chance.-(See Chance.) OPTION. - Anyone of a number of income-streams among which an individual may choose. Ch. IX, § 1. OUTGO. - Negative income. Capital and Income, Ch. VIII, § 1. PREPARATORY SERVICES. - (See Interaction.) PRICE. - 'A ratio of exchange. Capital and Income, Ch. I, § 4. money. - The quotient found by dividing the money exchanged for goods by the quantity of the goods themselves. Capital and Income, Ch. I, § 4. PRINCIPAL. - The final payment on a bond or note, supposed to be (but not always in fact) equal to the original sum "lent." Capital and Income, Ch. XIII, § 7. PROBABILITY. - (See Chance.) PRODUCTION .,- (See Transformation.) PRODUCTIVE PROCESS. - (See Transformation.) PRODUCTIVITY, physical. - The ratio of the quantity of services 'of capital per unit of time to the quantity of the capital. Capital and Income, Ch. XI, § 2.

PRODUCTIVITY, value. - The ratio of the value of services of capi tal per unit of time to the quantity of the capital. Capital and Income, Ch. XI, § 2. PROPERTY (or property rights). - Rights to the chance of future services of wealth. Capital and Income, Ch. II, § 3. right, complete.- The exclusive right to all the services of an instrument. Capital and Income,. Ch. II, §·10. right, partial. -The right to part of the services of an instru ment, other parts belonging. to other owners. Capital and ,Income, Ch. II, § 10.

342 GLOSSARY RETURN.- When used alone, tt return" signifies the value of the advantage of one income-stream compared with another during any particular portion of its course. Ch. VIII, § 8. RETURN, physical. - The ratio of the quantity of services of capi tal to the value of the capital. Capital and Income, Ch. XI, § 2. on sacrifice,rate of. - That rate of interest, reckoning by which the discounted value of the "return" equals the discounted value of the " sacrifice." Ch. VIII, § 8. value. - The ratio of the value of services of capital to the value of the capital. Capital and Income, Ch. XI, § 2. RISK, coefficient oj. - The ratio of commercial value to riskless value. It is equal to the product of the coefficient of prob ability multiplied by the coefficient of caution. Capital and Income, Ch. XVI, § 6. RISKLESS, value. - The value which a thing would have if risk were eliminated. Capital and Income, Ch. XVI, § 6.

SACRIFICE. - The value of the disadvantage of one income-stream compared with another during any particular portion of its course. Ch. VIII, § 8. SERVICE. - An instrument renders a service when, by its means, a desirable event is promoted or an undesirable event pre vented. (Syn. Use.) Capital and Income, Ch. II, § 2. SERVICES, coupled. - (See Interaction.) enjoyable objective.- Services received directly by human beings, and not (like interactions) merely received for human beings by other (objective) capital. (Syn. [not well chosen] Consumption.) Capital and Income, Ch. X, § 1. intermediate. - (See Interaction.) preparatory. - (See Interaction.) SPENDING. - Purchasing the right to immediate enjoyable income. Ch. VII, § 4. STANDARD INCOME. - (See Income, earned.) STOCK. - The quantity of any specified thing at any instant. (Syn. Fund.) Capital and Income, Ch. IV, § 1. TIMEPREFERENCE, rate of. - The excess above unity of the ratio between the marginal utility (to a given person, under given conditions, at a given time) of (say) a dollar's worth of enjoyable income available at any time and a dollar's worth of enjoyable income available one year later. It follows that it is also the excess above unity of the ratio between the quantity of the later income and the quantity of the early income which will exchange for each other (both being expressed in the same standard, as dollars). Ch. VI, § 1.

TIllE-SHAPE, oj an income-stream. - The distribution in time of a GLOSSARY 343 given income-stream as expressed by the relative amounts of the income accruing at specified periods. Ch. VI, § 6. TRANSFORMATION. - An interaction which is a cha:q.ge of form or condition of wealth. (Syn. Production, Productive process.) Capital and Income, Ch. IX, §§ 2, 3. U~DESIRABILITY. - Negative desirability. (Syn. Disutility.) Capi tal and Income, Ch. III, § 2. UTILIt.rY OF GOODS. - (See Desirability.) VALUE. - The value of goods (wealth, property, or services) is the product of their quantity multiplied by their price. Cap ital and Income, Ch. I, § 6. commercial, of a chance. - (See Ohance.) discounted. - (See Value, present.) mathematical, oj a chance. (See Chance.) money. - The quantity of goods multiplied by their money price. Capital and Income, Ch. I, § 6. present. - The present value of any given future goods is the quantity of present goods which will exchange for those future goods. (Syn. Present worth, Discounted value.) Capital and Income, Ch. XIII, § 1.

riskless, 01 a chance. - (See Chance.) WEALTH (in its broader sense). - Material objects owned by human beings. Capital and Income, Ch. I, § 1. (in its narrower sense). - Material objects owned by human beings and external to their owners. Capital and Income, Ch. I, § 2. article 01.- A single object of wealth. (Syn. Item 0/ Wealth, Instrument.) Capital and Income, Ch. I, § 1. item 01. - (See Wealth, article of.) WORTH, present.- (See Value, present.) APPENDICES ApPENDIX TO CHAPTER II. ApPENDIX TO CHAPTER IV. ApPENDIX TO CHAPTER V. ApPENDIX TO CHAPTER VII. ApPENDIX TO CHAPTER VIII. ApPENDIX TO CHAPTER XI. ApPENDIX TO CHAPTER XIV. PRODUCTIVITY THEORIES BOHM-BAWERK'S THEORY ApPRECIATION AND INTEREST FIRST ApPROXIMATION SEOOND ApPROXIMA.TION THIRD ApPROXIMA.TION STATISTICS APPENDIX TO CHAPTER II PRODUCTIVITY THEORIES § 1 (TO CH. II, § 6) Mathematical Proof that the Rate of Net Income from Reconstituted Capital is equal to the Rate of Interest employed in valuing the Ele ments of which that capital is composed.