§2. Income Prescribed

Such assumptions are, of course, highly theoretical. They imagine a world in which incomes are produced spontaneously, as mineral water gushes from the spring. They picture these income-bearing agents as pouring forth their income streams at rates which follow a foreknown, rigid, and unchangeable schedule. There being no flexibility in the flow from any one article, there is no flexibility in the scheme of combined flow from the whole group possessed by an individual. His total real income is scheduled in advance with no possibility of modification except by borrowing or lending, buying or selling.49

The abstract nature of this hypothesis need not greatly trouble us for two reasons: the first, and in itself quite sufficient reason, is that most of the elements of this hypothesis will be abandoned when we reach the second approximation. It is adopted temporarily merely for simplicity of exposition. Secondly, the hypothesis might easily be made more realistic without changing its essential features. We might even alter our hypothesis of a Edition: current; Page: [103] rigidly prescribed income stream to the hypothesis of an income stream which, while it may be decreased at will, cannot be increased beyond a fixed amount at each period of time. While free to decrease his income in any period, its possessor would not do so unless thereby he could secure an increase in some other period.

Not only is such an hypothesis quite thinkable, it is probably actually approximated in primitive communities. In our own day most men have opportunities (quite apart from lending to others at interest) to secure much real income in future years by temporarily sacrificing a little immediate real income as, for instance, by investing labor in building a house or machine. But we can readily suppose a situation such that this year's production and next year's production would be almost independent of each other. This situation is true of most animals and even of man in the hunting and fishing stage, and before that stage even more markedly when his only implements were his hands. And even in our own civilization, many are mere stipendiaries, virtually without any opportunity to add to future income except by lending at interest.

The essence of the hypothesis therefore on which the first approximation rests is that we are not to be bothered by the possibility of a man's thus increasing his income in one period through decreasing it in another except through the process of trading some of one year's income with another person for some of another year's income.

We may in fact for practical purposes picture the income stream of each person as thus fixed for only a few years, and assume that expectation of income beyond those years so indefinite as to have no effect on the Edition: current; Page: [104] present rate of interest. Such a community has been approximated in former years by the typical American army camp isolated in a western community in which each inhabitant, or family, had a prescribed income. A series of such hypotheses will lead us through successive approximations to an eventual picture of actuality.