§15. Capital-Income Relations

In conclusion we may say that the chief relations between capital and income are:

(1) Capital value is income capitalized or discounted.

(2) If the rate of interest falls, the capital value (capitalized value of expected income) rises, and vice versa.

(3) This rise or fall in capital value is relatively great for durable goods like land, and relatively small for transitory goods like clothes.

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(4) Capital value is increased by savings, the income being decreased by the same amount that the capital is increased.

(5) These savings thus diverted from income and turned back into capital will, except for mischance, be the basis for real income later.