第5章

NOTES:

1。Intheexchangesnecessarytoprocurethegoodswhicharetoreplacethecapital，inlieuofthedirectlyobtainedgoodswhichformthegrossreturn，goodsare，ofcourse，estimatedaccordingtotheirvalue。Capitalgoods，are，therefore，estimatedattheircapitalvalue。Tothisextentitappearsthattheknowledgeofthevalueofcapitalandofthelawswhichregulateit，mustprecedetheimputationofnetreturn。OnlyinsuchasimpleinstanceasthatgivenbyThunencananimputationofnetreturnbemadewithoutapreviousknowledgeofthevalueofcapital，andthisdestroysourproofthattheimputationofnetreturnisfundamentallyindependentofthevaluationofcapital。Itis，ofcourse，practicallyimpossibletoemploythisfundamentalprinciplesosoonasproductionbecomescomplicated。Butwheneverproductionbecomescomplicatedeverynewcalculationmustpracticallybelaidonthelinesoftheoldones；otherwisenoconclusioncouldbecometo。Everynewdeterminationofvaluepracticallypresupposesoldones(compareBookIII。chap。v。atend)。Aslittle，then，astheconclusioncanbedrainfromthis，thattheoryrequiresvalueinordertoexplainvalue，solittlecanitbeconcludedthat，theoretically，thevalueofcapitalconditionstheimputationofnetreturn。

NaturalValue byFriedrichWieserBook4:TheNaturalValueofLand，Capital，andLabourChapter1

IntroductionWehavenowtoretraceoursteps。Havingmadecleartheprinciplesaccordingtowhichthereturn，jointlyobtained，maybeimputedtotheseparateproductivefactors，wehavenowtoreturntothequestionastothevalueofthesefactors。Thegenerallawwearealreadyacquaintedwith:thevalueoftheproductdeterminesthevalueoftheproductiongood。Thepointwhichwemustnowtakeupistheapplicationofthispropositiontothespecialcircumstancesofland，capital，andlabour。

Inthisbyfarthegreatestdifficultiesmeetusinthecaseofcapital。Itseemsasifourexplanationofitsvaluecameintodirectcollisionwiththefactsofexperience。Assumethatacapital，employedforoneyearandtherebycompletelyusedup，yields，attheendoftheyear，areturnofthevalueof105；

experiencetellsusthatthevalueofthecapitalwillnotbeestimatedat105，butatasomewhatlessamountaccordingtothecurrentrateofinterest。Ata5%rate，e。g。，thecapitalwillbeestimatedat100。Theremainderofthereturnwillberegardedasnetreturnofinterest。Howdoesthisgowithourexplanation？Onwhatgroundisthisdeductionmade？Oughtnotratherthefullvalueofthegrossreturntogointothecapitalvaluewithoutanydeductionwhatever？Butifthatwereso，howshouldweexplainthecontradictionofexperiencewhichinterestpresents？

Howistheinteresttobeexplained？Ordoesnaturalvaluationexcludeinterest？Isit，perhaps，merelyaphenomenonofpresent-dayexchangeandprice，whichwouldnotre-emergeinthecommunisticstate？

OneofthemostconclusiveandbrilliantamongBohm-Bawerk\'scriticalexaminationsisthatdirectedtowardstheattemptstodeduceinterestfromtheproductivityofcapital。Bohm-Bawerkhimselfinfactarrivesattheconclusionthattheattemptishopeless。Toquotehisownwords:“ItwasnotsimplyanunfortunatechancethatnoonefoundtheOpenSesamewhichhadthepowertodiscoverthemysteriousoriginationofinterestintheproductivityofcapital。Itwasratherthatontheroadtothetruthawrongturninghadbeentaken。Fromthefirstitwasahopelessendeavourtoexplaininterestwhollyandentirelyfromaproductivepowerofcapital。Itwouldbedifferentiftherewereapowerthatcouldmakevaluegrowdirectlyaswheatgrowsfromthefield。Butthereisnosuchpower。Whattheproductivepowercandoisonlytocreateaquantityofproducts，andperhapsatthesametimetocreateaquantityofvalue，butnevertocreatesurplusvalue。Interestisasurplus，aremainderleftwhenproductofcapitalistheminuendandvalueofconsumedcapitalisthesubtrahend。Theproductivepowerofcapitalmayfinditsresultinincreasingtheminuend。Butsofarasthatgoesitcannotincreasetheminuendwithoutatthesametineincreasingthesubtrahendinthesameproportion。Fortheproductivepowerisundeniablythegroundandmeasureofthevalueofthecapitalinwhichitresides。Ifwithaparticularformofcapitalonecanproducenothing，thatformofcapitalisworthnothing。Ifonecanproducelittlewithit，itisworthlittle；ifonecanproducemuchwithit，itisworthmuch，andsoon；——alwaysincreasinginvalueasthevaluethatcanbeproducedbyitshelpincreases，i。e。asthevalueofitsproductincreases。Andso，howevergreattheproductivepowerofcapitalmaybe，andhowevergreatlyitmayincreasetheminuend，yetsofarasitdoesso，thesubtrahendisincreasedinthesameproportion，andthereisnoremainder，nosurplusofvalue“(CapitalandInterest，translatedbyWilliamSmart，page179)。

Whenweturntolandwefindalsoastrikingcontrastbetweentheapparentdemandsofourtheoryandexperience。Landyieldsreturnsthatstretchawayintothefarthestfuture。Thevalueofland，then，shouldsurelybenotmerelytwentyorthirtytimestheannualrent，asexperiencetellsusitis，butratheranindefiniteandincalculablenumberoftimestheannualrent；

perhapsitshouldbeestimatedasaninfiniteamount(seealsoonthispointCapitalandInterest，page67)。Butthesamelineofargumentmaybeappliedtocapital。Capitalalso，whenwellemployed，promisestoyielditsnetreturnonintotheindefinitefuture，soperhapsitsvaluealsooughttobeestimatedasaninfiniteamount。

Itwillbeseenthatthedifficultieswhichmeetusarenottrifling。If，nevertheless，Ibelievethattheycanbeovercome，itisbecauseItrusttothesupportgivenbytheresultsofourinvestigationintotheimputationofreturn。Noneofthewriterswhotriedtoderiveinterestfromtheproductivityofcapitalhadthissupport，andeveninBohm-Bawerk\'scritiqueitisnotforeseen。Havewenotinfactfoundaproductivepower，which，althoughnotcapable，asBohm-Bawerkclaims，ofcreating“morevalue，“cananddoescreatewhatamountstothesamething，“morereturn“；inotherwords，asurplus？

Weshallbeginwiththemostdifficult，thetheoryofthevalueofcapital。Afterwhathasbeensaiditisclearthatitcannotbetakenupwithouttakingupthetheoryofinterest。

Almosteverythinginthisbookwillfinditscomplementinthediscussionuponcostswhichistofollow。

Chapter2

TheValueofCapitalandtheInterestonCapital。I——

DiscountingCapitalreceivesitsvaluefromitsfruits。If，then，wearecalculatingthefinalreturnofanyproduction，and，forthatpurpose，deductfromthevalueofthesefruitsthecapitalconsumed，withitsvalue，theresultwillbezero，inasmuchas，soonerorlater，allcapitalisconsumedinproduction。Thedeductionmademustalwaysamounttothevalueofthefruits，——

indeed，thatvaluemeasuresthededuction——andconsequentlythevaluecalculationleavesnonetreturnwhatever。Notonlyisinterestnotexplained；itisabsolutelyexcluded。And，ifweconsiderthatmeansofproductionrenewthemselvesagainandagainindefinitely，andyieldresultsindefinitely，wecomeacrossanothercontradictionofexperience，forexperienceshowsthatthevalueofcapitalisnotinfinitebutalwaysfiniteandlimited。

Thesearetheproblemswhichliebeforeusforsolutionwhenwenowgoontoexaminethevalueofcapitalandtheinterestoncapital。

Fortheirsolutionwemayavailourselvesoftheresultsofouranalysisofthephysicalproductivityofcapital。Allcapitaltransformsitselfinthelastresortintogrossreturn。Inthisgrossreturnthecapitalreproducesitselfwithaphysicalsurplus，thenetreturn。Thesetwofacts，whichwehavealreadyestablished，willsufficeustodeducethevalue-productivityofcapital，andtosolveallthecontradictionswithexperience。

First:allcapitaltransformsitselfinthelastresortintogrossreturn；itfollowsfromthisthatthevalueofthecapitalcanneverexceedthevalueofthegrossreturn。Thevalueofcapitalisthusalimitedfiniteamount，althoughtheworkingoftheever-renewedproductionextendsawayintoanillimitablefuture。Thematerialsandapparatusoutofwhich，andwithwhosehelp，breadisproduced，cannotpossiblybeworthmorethanthebreaditself。Andthosethingsfromwhichthematerialsandapparatusthemselvesareproduced，andwhich，consequently，aretheproducersofbreadonestageremoved，have，intheprospectivegrossreturn——theperishablebread——amaximumlimitofvalue。Sowithallcapitals，howeverfartheirprimaryproductsmayberemovedfromdirectemploymentinthesatisfactionofwant。Toputitintofigures，——ifacapitaltransformsitselfsoonerorlaterintoagrossreturnofthevalueof105，itsownvaluecannotbeputatanythingabove105。

Second:inthegrossreturncapitalreproducesitselfwithaphysicalsurplus，thenetreturn。Itfollowsthatthecapitalvaluecannotbecreditedwiththewholevalueofthegrossreturn。Inthereproductioncapitalrepresentsonlyaportionofitsowngrossreturn，andcanthereforeabsorbonlyaportionofthevalueofthatgrossreturn。If，fromthevalueof105，5aresetasideasfruitswhichmaybeconsumedwithoutpreventingthefullreplacementofthecapital，onlytheremainderof100canbereckonedascapitalvalue。Theprospectofhavingthisresidualvalueof100transformedoncemore，atthecloseofthenextperiodofproduction，intothegrossreturnof105——byagainemployingitproductivelycannotmakeanychangeonthisvaluation；sincetheexpectedreturnof105isalwaysdividedinthesameway，assumingthesameconditions；viz。100goestocapitaland5totheincrementoncapital。

Grossreturnandnetreturnarethusthetwogivenamountsfromwhichcapitalgetsitsvalue。Thewholedifficultyoftheproblemliesessentiallyintherecognitionofthefactthatthosetwoamountsaregiven。Forproofofthiswerefertoourformerdisquisitionuponimputationingeneral，andtheimputationinthecaseofcapitalinparticular。Ifphysicalproductivityofcapitalinvolves，aswehavemaintained，theimputationofgrossreturnandtheimputationofnetreturn，wehaveatonceaclearandsimpleprincipleforthevaluationofcapital。

Thereisincommonuseadefinitenameforthemethodofcalculatingvaluerequiredbythisprinciple。Tofixthepresentvalueofamoneyclaim，carryingnointerest，whichfallsdueatafuturedate，wemakeuse，aseveryoneknows，ofthemethodknownas“discounting。“Thatis，wededucttheusualinterestfromthefuturesum。Noweverycapitalvalue，——notalonethevalueofasumofmoneybutofeveryperishableproductiveinstrument——iscalculatedbydiscounting；thatistosay，fromthevalueofthefutureexpectedsumofproductsintowhichthecapitalwillbetransformed，thecorrespondingnetreturnisdeducted。Onlythat，practically，indiscountingmoneyclaims，afixedrateofinterest——i。e。adefiniterelationbetweencapitalvalueandnetreturn——isalwaysassumed，andalwaysemerges，whileweareexplainingtheformationofthisrelationbyfirstdiscoveringtheprincipleforestimatingcapitalvalue。

Bohm-Bawerk，arguingagainstThunen\'sexplanationofinterest——whichhasmuchincommonwiththatjustgiven——askswithwhatrightitcanbeassumedthatthevalueofthegrossreturnneverraisesthevalueofcapitaltoitslevel，or，inversely，thatcapitalvalueneverdepressesthatofthegrossreturntoitslevel？Ifareturnof105canbeobtainedwithanoutlayof100，willtherenotbecompetitioninproduction，orlevellingofthevaluations，untileithertheoutlaycometobevaluedat105

orthereturnat100，orbothsettleatsomefigurehalf-waybetweenthetwo？Bohm-Bawerkisrightinraisingthequestion，seeingthathedoesnotstart，aswedo，withaphysicalnetreturntocapital。Butassumingthisphysicalnetreturnthequestionisatonceansweredandsettled。Solongasthegrossreturnremainslargeenoughtoreplacethecapitalandyieldanetreturn，thevalueofgrossreturnandthevalueofcapitalcanneverbeassimilated:therewillalwaysbeadifference——

viz。thevalueofthenetreturn。Thisdifferencecouldonlydisappearwiththedisappearanceofphysicalproductivity。Solongasitexists，solongdoesphysical-productivityguaranteevalue-productivitytocapital，andsolongdoescapitalalsocreatemoreinvaluethanitself；——toapplyagainthewordsofBohm-Bawerk，itcreates“morevalue。“Andif，inordertocalculatetheamountofcapitalconsumed，thecapitalvaluebedeductedfromthegrossreturn，itisnotthewholeamountofgrossreturnthatisdeducted；thesubtrahendissomewhatlessthantheminuend，andtherequiredresidueofinterestmustbetheresult。

Ifthisbeso，then，inthecommunisticstatealso，capitalvaluemustbeestimatedinsuchwisethatitabsorbsonlyaportionofthegrossreturntocapital；solongatleastascapitalretainsthesameefficiency，asanauxiliaryofproduction，whichgeneralexperiencefromtimeimmemorialhasshownittodo。Andforsolong，consequently，mustit，eveninthecommunisticstate，bearinterest。Calculationofthenetreturntocapital，anddeductionordiscountofthesamefromthegrossreturn，inordertofindthevalueofcapital；——thesearenaturaleconomiccalculations，indispensableineveryeconomysolongasthefundamentalconditionsofproductionknowntogeneralexperienceremaininforce。

Acapitalwhich，intwelvemonthsfromthedateofpossession。yieldsthesamegrossreturn(say105)andthesamenetreturn(say5)，isvaluedatthedateofpossessionatthesameamount(say100)。Itis，nevertheless，notamatterofindifferencewhetherthecapitalcomesintoourpossessionnoworonlyattheendofthetwelvemonths，inasmuchaspossessionnowguaranteesareturnofinterestbesides。Itwould，therefore，beincorrectifweweretotaketheequivalenceofvaluationputuponcapitalsinthepresentandinthefuture，andarguefromthattothefulleconomicequivalenceofthepresentandthefuturepossession。Apresentsumisalwaysworthmorethanthesamesumatafuturedate，or，aswemaysay，thefuturesumisalwaysworthless，andthatinproportiontothefuturityofthetimewhenitwillcomeintoourpossession。IfinthecourseofayearIcanmake105outof100，thesumof100whichIshallobtainonlyattheendofayear，is，to-day，worthonlyabout95。Toreducefuturecapitalvaluestopresentvalue，theymustbediscounted，justasthevaluesoffuturegrossreturnsare。

Thereaderwillrememberthat，inchapterviofBookI，wedefendedthepropositionthatpresentandfuturewants，comingintocompetitionwitheachother，are，asarule，toberegardedasequal；thatistosay，thedifferenceintimedoesnotnecessitateanydifferenceinvaluation。Tothispropositionwehavenowtoaddasecond:——that，withinthesphereofproduction，thedifferenceintimedoesnecessitateadifferenceinvaluationofthegoodsemployedinproduction。Thetwopropositionsareinperfectaccord，andmutuallysupplementoneanother。Ifwantsarecontinuouslytofindthesamesatisfaction，equalamountsofreturnmustcontinuouslybeproduced。Andifequalamountsofreturnarecontinuouslyproduced，capitalmustremaincontinuouslythesameinsubstance。Butifcapitalisactuallytoremainthesameinsubstance，andsoisabletoyieldcontinuouslythesamereturns，thismustfindexpressioninavaluationwhichascribestocapitalahighervalue，theearlierthepointoftimeitcomesintoourpossession。Fortheearlierthepointoftime，theearlier，andconsequentlythegreater，thereturnthatmaybeexpected。

Thebusinessmanwhotakesnoteofhisowncalculations，whotestshisrecollectionsandimpressions，andaskshimselfwhyhecalculatesinterest，andonwhatprinciplehegraduatesthevalueofhiscapital，willarrivesubstantiallyatthesameconclusionsasthosetowhichwehavejustcome。Thevalueofgoodsisderivedfromtheirutility；thevalueofcapitalgoodsfromtheirusefulreturns；interestrepresentsanetincrementtoorfruitofcapital:——thesearetheaxiomsofpracticallifesomuchcontradicted，evenlibelled，bytheorists。Theyareaxiomswhicheverylaymanrecognises，inhisownway，asthemotivesbywhichhebelieveshimselfguidedinhiseconomicoperations。Atheorywhichshouldsucceedinvindicatingtheseaxiomsofripenedexperience，whichshouldgiveadistinctformtothevagueimpression，andagoodandnecessarycontenttoopinionsnotquiteconsciousoftheirownraisond\'etre，couldhavenobettertestimonytoitscorrectness。

NOTES:

1。CompareMenger，p。135。

Chapter3

TheValueofCapitalandtheInterestonCapital(continued)。II——

TheRateofInterestInterestisthereturntocapitalwhenthatreturn，withitsvalue，isconsideredinrelationtocapitalvalue。Therelationexistingbetweencapitalvalueandinterest，whenconsideredintheindividualcase，maybedescribedasthepercentageofincrement；itbecomesthe“rateofinterest“onlywhenitobtainsinalargenumberofconnectedcases。Therateofinterestisthegeneralpercentageofincrementtoallthecapitalinthemarket。

Thefactthat，inoneandthesamesphereofproduction，thereemergesageneralpercentageofincrement，oratleastaconstanttendencytowardit，arisesfromthemany-sidedconnectionsbetweenvariouskindsofproduction。Inconsequenceofthecomparativelygreatfreedomofchoiceinthedestinationofmostcapital，land，andlabour，itisalmostalwayspossibletoextendanysingleproductionatthecostofsomeother，ortolimititinfavourofsomeother。Ofthispossibilitypeoplewillavailthemselveswhenever，andaccordingas，anyoneproductionshowsaparticularlyfavourableorparticularlyunfavourablepercentageofincrement。Inseekingforthemostfavourablepercentageofincrement，andinstrivingtowardstheequalisingofalldifferences，ageneralpercentageofincrementwillbecreated，oratalleventswillbeaimedat，sofarasthereiscompetitionbetweenthevariousproductions。

Theorganisationswhichatpresentcontributemosttotheequalisationoftheinterestratearethemoneymarkets，wheretheprincipalamountsofcapitalintheshapeofmoneyarelent。

Inthemoneymarketsitis，ofcourse，inthefirstinstanceonlyinterestonloansthatisdetermined，butthestateoftheloanmarketinthelastinstanceaffectsalsothereturntoproduction，inasmuchasitinfluencestheextendingofindustriescarriedonwithborrowedcapital。Notonlyloancapital，however，butalsothatcapitalwhichisthepersonalpropertyofundertakers，movesperpetuallyinthedirectionofthehighestpercentageofincrement。Underacommunisticregimeallcapitalwouldbelongtotheonesingleundertaker，thestate；capitalwouldnolongerbelentforproduction；andtheinterestonloanswouldceasetoinfluencethepercentageofincrementinproduction。Butthiswouldsimplyleavecapitalstillmorefreetoshiftfromoneproductiontoanother；itwouldnolongerbehinderedbythosebarrierswhichthecircumstancesofprivateownershipatpresentoppose。

Everyoneknowsthattherateofinterest，inspiteofthetendenciestoequaliseit，isneverreallythesameallover。

Thisischieflycausedbythefactthattheunityororganisationofproductionisbynomeansperfect。Thereisnosuchthingasaunitedmoneymarket，andmuchlessisthereanythinglikeaunitedwayofconductingproductivebusiness。Theindividualismofthepresenteconomicorderdistributesproductionamongindividualundertakings。These，ofcourse，undertheinfluenceofcompetitionandthedesireforgain，arebuiltintoonecoherentstructure，whichtosomeextentrealisestheeconomicorderthatanidealplanofproductionwouldpresent。Yetathowmanypointsdowefindgreatgaps；howmanydislocationsthroughexcessiveaccumulationofmeansofproductionatthewrongplaces；howoftenthingsgotooquickly，howoftennotfastenough！Andmistakesliketheseareallthegreaterthemoredistantthegroupscomparedarefromoneanother。Theseparatebranchesofagriculturalproductionmaybe，relativelyspeaking，moreinharmonywitheachother，than，forexample，agricultureasawholewithmanufactureasawhole。Thetransferencesfromagriculturetomanufacturing，andviceversa，takeplacetooseldomtoallowoftheproperbalancebetweenthembeingmaintained。

Thisresults，aswehavesaid，indifferencesofpercentageofincrementamongtheindividualproductivegroups。Itisscarcelynecessarytoemphasisethefactthateverydifferenceinrateofinterest，arisingfromthiscause，isamisfortune。Everysuchdifferenceimpliesaviolationoftheveryfirstprincipleofemployinggoods；thattheyshallfirstbeusedinthemostfavourableemployments，andthatthelessfavourableshallbeallowedonlyinsofarasthereisnotenoughofthemorefavourable。Inonegrouppeoplearecontentwithalesspercentageofincrement，whileinotherstheymaybeobtaininghigherpercentages。Thehurtfulconsequencesofthisarebynomeansconfinedtotheuseofcapital；theygofurther，andmisdirecttheproductionofcapital。Capitalswhichyieldatriflinginterestareproducedfarmorelargely，andcapitalswhichmightyieldahighinterest，toamuchlessextentthantheyoughttobe。

Ontheotherhand，uniformityinthepercentagesofincrement，andauniformrateofinterest，are，wheretheyexist，proofs，economicallyspeaking，ofawell-balanceddistributionanddisposalofcapital。Theyareproofsthattheeconomicallyindicatedlimitsoftheemploymentofcapitalareeverywhereequallyrespected；thatnowhereisthereanyfallingshort，andnowhereanyoversteppingofthem。Intheprinciplewhichdemandsthattheemploymentofcapitalshallbeguidedbytherateofinterest，andthatallemploymentswhichfailtoreturnthecustomaryinterestbeleftalone，wefindthemarginallawbroughtintoonecommonexpressionasregardsallthedifferentformsofcapital。Thenetreturnisadefinitequotaofthegrossreturn，andwherethequotaofnetreturniscontrolled，thedirectionofcapitalgenerallyiscontrolled。

Inthecommunisticstate，whenproductionisdirectedfromonepointandtooneend，thedifferencesinpercentageofincrement，sofarastheseareoccasionedbytheinorganicnatureofoursystemofproduction，woulddisappear。Ofcourse，eventhere，certaindifferenceswouldstillremain；allthose，namely，whichcouldnotbefurtherequalisedbytransferencesfromoneproductiontoanother。Inthenatureofthings，byreasonofthevarietyinthepropertiesofthings，noproductioncanbeincreasedatthecostofothersbeyondacertainpoint，and，onsimilargrounds，noproductioncanbelimitedinfavourofothersbelowacertainpoint。Agriculturalcapitalcouldneverbecompletelytransferredtotrade，nortradecapitalalltransferredtoagriculture。Butwhatdoesobservationhereshow？

Itshowsthatthoseverydifferences，whichitseemsquiteimpossibletoremove，arealwaysremoved，andthatthroughaninstrumentalitywhichispermissibleevenwheretransferencesofcapitalarenotpermissible；bymeans，thatistosay，ofcalculation。

Howthishappensandwhatitmeans，weshallnowtrytoshow。

Chapter4

TheValueofCapitalandtheInterestonCapital(continued)。III——

TheLawoftheUniformCalculationoftheInterestRateAcapitalwhich，inaoneyear\'sproductionperiod，transformsitselfintoagrossreturnof？05，willbevaluedat？00ifthegeneralrateofinterestbe5%:theresidue？isnetreturn。Ifthegrossreturnshouldrisesuddenlyandgreatly，say，e。g。，to？26，——thegeneralrateofinterestremainingunaltered——itappearsatfirstsightthattherisemustaffectthenetreturn，andcauseittobecalculatedat？6insteadofat？asformerly。But，asamatteroffact，isthereturnsocalculated？Itisinoneparticularcase；that，namely，wheretheriseisregardedasasolitaryinstance。Butifitisregardedaspermanentthecalculationwillbedifferent。Theownercertainlyreckonstheentireincreaseof？6asgain，buthedistributesitbyputting？0tocapitaland？tonetreturn。Fromthistimeonwardhewillreckonhiscapital，andconsequentlyhisconsumptionofcapital，at？20，andhisnetreturnat？；sothathedoesnotassumeanincrementof26%，butonlyof5%，correspondingtothegeneralrateofinterest。(1*)Inthesameway，shouldthegrossreturnofacapitalsinkpermanently，whiletherateofinterestremainsunaltered，aportionofthelosswillbewrittenoffthecapitalvalue，insuchamannerthattherelationbetweencapitalvalueandnetreturnshallagaincorrespondtothegeneralrateofinterest。

Inthiswayitcomesaboutthat，wheretransferencesfromproductiontoproductionarenolongerpermissible，theindividualpercentagesofincrementonindividualcapitalsare，bycalculation，regulatedaccordingtothegeneralrateofinterest。

Therateofinterestwhichobtainsintheparticularproductivegroup，orintheparticularmarkettowhichthecapitalinquestionbelongs，istheratethatdecides。

Themeaningofthisactofcalculationiseasytounderstand。

Acapitalyielding26%interestandoneyielding5%，arenotequivalenttooneanother，althoughbothmaybeexpressedinthesamefigures。Onlyequalcapitalsbearingequalinterestareequivalent。Capitals，then，canbecalculatedoff-hand——i。e。

withoutconsiderationtotheinteresttheybear——onlywheretherateofinterestisthesame。Thatisthereasonwhy，whentherateofinterestcannotbemadeequal，itisatleastcalculatedassuch，bymeansofshiftingthedifferencestothecapitalvalue，andgivingthemexpressionthere。

A3%capitalanda6%capitalof？00arenotequivalenttooneanother；theyareputintotermsfitforcomparisonbycalculatingthe3%capitalat6%，andsoreducingthecapitalto？0，orbycalculatingthe6%capitalat3%andraisingcapitalvalueto？00。

Asameansofsimplifyingcalculation，itmightbeexceedinglydesirablethattherateofinterestshouldbethesameinallmarkets，andinallproductivegroups。Therate，however，isnotthesame，andthefactmustbereckonedwith。Iftherateofinterestonbondsamountto4%andthebankrateto3%，itisaconsequenceofthefactthatthetwoloanmarketsareseparatedfromoneanother，andthatdemandandsupplyintheonedonotapproximatetodemandandsupplyintheother，or，atallevents，approximateonlyintriflingdegree。Thiswantoftouch，however，whichrendersimpossibletheequalisationofratesofinterest，alsorendersitlessnecessary；itisonlywhencapitalistransferredfromonemarkettotheotherthatthedifferenceinratesofinteresthasanypracticalimportanceforthevaluationofcapital。Itisdifferentwhereoneandthesamemarketisconcerned。Herecapitalsarecontinuallyvaluedagainsteachother，andhere，therefore，differencesinpercentageofincrementcouldnotbeputupwith。Theyareovercomeeitherbyregulationofproduction，or，wherethatisnotpracticable，bycalculation。Inthecommunisticstate，whereallcapitalswouldbeunderauniformadministration，itwouldbeanobviousexpedientofcalculationtoregulateallindividualpercentagesofincrementaccordingtotheprevailingrateofinterest。

Wenowproceedtofurtherapplicationsofthefundamentalpropositionthattherateofinterest，whenpossible，shouldbeuniformlycalculated。

NOTES:

1。IntheaboveexampleIassume(1)circulatingcapital，and(2)

circulatingcapitalwhosevalueisnotdepressedtoalowerlevelbycheapercostsofproduction；——say，ascarcerawmaterial。

Supposethereisanincreaseddemandforarticlesmadefromamber，whileambercannotbeobtainedingreaterquantities；itwillriseinvalue。Thoseundertakingswhichworkwithambercertainlyobtaintherebyariseintheirgrossreturns；butthereis，ontheotherhand，asimilarriseintheamountdeductedforconsumptionofcapital，andthismustbetakenintoconsiderationintheirestimateofgain。Inthelongrunthereremainsahighernetreturn，butitisonlyrelativelytotheincreasedoutlayofcapital。

Amuchmorecomplicatecalculationhastobemadeasregardsfixedcapital，asalsoasregardscapitalwhosevalueisinfluencedbythecostsofproduction。Imustleavethereadertothinkoutforhimself——inthelightoftheprinciplesnowtobediscussed——thecorrespondingmodificationsinthevaluationoffixedcapitalandintheinfluenceofcosts。

Chapter5

TheValueofCapitalandtheInterestonCapital(continued)。IV——

ChangeintheRateofInterestIthasjustbeenshownthat，whenthevalueoftheserviceofanyindividualformofcapital——e。g。arawmaterial，oramachine——risesorfalls，thefactexpressesitselfinacorrespondingelevationordepreciationinitscapitalvalue。Thenetreturnimputedis，ofcourse，alteredatthesametime，butonlyinsofaraswillbringitagainintothatrelationwiththecapitalvaluewhichcorrespondswiththeordinaryrateofinterest。

Inorderthatthegeneralpercentageofincrement——therateofinterest——mayfallorrise，theremustbechangesofanextensivekindinthereturntothegreatmassofcapitals——

broughtaboutthroughchangesinsupply，indemand，intechnique，inaword，inanyofthefactorsofimputation。Ageneralriseinthegrossreturntocapital，broughtaboutbyagreatanduniversallyeffectiveinvention，wouldcauseageneralriseinthenetreturntocapital，anditsrelationtocapitalvalue，——

thatistosay，intherateofinterest。Thecapitalvaluemightinthisinstanceremainentirelyunaltered。Onlythosecapitalswhichhadnopartintheeffectsoftheinvention，andwereinthisrespectindividuallyseparatedfromthegeneralmassofcapital，mustnecessitybeaffected。Wheretheamountoftheirserviceshadremainedunalteredinthemidstofthegeneralincrease，inestimatingthevalueofthosecapitalsagreaterdiscountfromthatamountwouldrequiretobemade，correspondingtotheincreasedrateofinterest。Supposetherateofinteresttorisesuddenlyfrom3%to6%，thevalueofallcapitalwhoseinterestremainsunalteredat3%mustbeappraisedatacorrespondinglylowerrate。

Wehavediscussedtheeffectwhichtheindividualfactorsofimputationproduceuponthecontributionsofcapital，insufficientdetailtomakethederivationoftheruleswhichgovernthechangeintherateofinterestamatterofnodifficulty。

Onesingleremarkmaybeadded。Itisquiteahackneyedpropositionthattheincreaseofcapitalcausesadeclineintherateofinterest。Thispropositionistrueonlywithacertainlimitation；itholdsonlywhen，byincreaseofcapital，isunderstoodincreaseinamount，withoutasimultaneousincreaseinthevarietyoftheformsofcapital。Increasedvarietyincapitalissynonymouswithanadvanceintechnique；itisoneofthosefactsofeconomichistorytowhichspecialattentionmustbedrawn，whenitisdesiredtoshowclearlythedifferencebetweenprimitiveanddevelopedproduction。Thustoitisduewhatweknowtobetheeffectofeverytechnicaladvance；namely，ariseinthevalueoftheservicesofcapital，asregardsindividualbusinesses，and，whencomprehensiveenough，ariseintherateofinterest。Notuntilthequalitativeadvancehasbeenquantitativelyusedup，andthestocksofthenewvarietiesofcapitalbeenmultiplied，withoutothernewvarietiescomingtothefront——thatis，notuntilproductionexpandsandfillsoutthenewly-setlimits，——cantheincreaseofwealthhavepower，first，todepressthevalueoftheservicesofcapitalindividually，and，inthelongrun，shoulditscompassbesufficientlyextensive，——tocauseafallintherateofinterest。

Ifwelookbackoverthechangesintherateofinterestonproductionoverthewholecourseofeconomichistory，weshallnoticeanunceasingupwardanddownwardmovement，accordingasadvancesinproductionaremade，orasthemarginalvaluesofthenewly-acquiredwealthareagaindepressedbytheincrementofcapitalwhichfollows。Butthroughtheseunceasingfluctuationsrungreatfundamentaltendencies，whichare，ofcourse，subjecttodisturbancefromopposingtendenciesoftherateofinterestonconsumptionloans。Economichistorybeginsataperiodwhenthereisalmostnocapital，——thezeroofpropertyincapitalaswellasthezeroofreturnfromcapital。Fromthattimeonwardspropertyandreturn，measuredabsolutely，goongrowingsolongastheeconomicworldthrives，andhasnotyetreachedthedowngradeofthemovementofvalue。Andtherelationbetweenthesetwo——i。e。therateofinterest——risessimilarlyfromthebeginning，andonlybeginstofallwhenthedowngradeinthemovementofvaluebeginstocomeinsight。

Chapter6

TheValueofCapitalandtheInterestonCapital(continued)。V——

TheValuationofFixedCapitalUptothispointwehavedisregardedthecircumstancethatmanycapitals——allthosecalled“fixedcapitals“——donotexhaustthemselvesinyieldingonesinglereturn，butco-operateinseveralprocessesofproduction，andyieldseveralreturnsbeforetheyarefinallyusedup。Wewerejustifiedinhithertoneglectingthiscircumstance，asitisofnoimportancetotheprincipleofthevaluationofcapitalwhichwehadfirsttoestablish。Now，however，thattheprinciplehasbeenestablished，wemustgoontothisnextquestion。Weshallfindthatthecircumstancealludedtodoesnotessentiallyaltermatters，althoughitcertainlyrendersthemmuchmorecomplicated。

Inthecaseoffixedcapital，insteadofonesinglefuturereturnthereareseveralreturns，andthepresentvalueoftheseseveralreturnsmustbedeterminedbydiscounting。Ifamachineremainscapableofworkovertenyears，theservicesofallthetenyearswhicharetobeimputedtoitmustbediscountedandaddedup，attheirpresentvalue，inordertoobtainthecapitalvalueofthemachine。Itneedscarcelybesaidthateverylaterservicemustbeestimatedatsomuchlessinpresentvalue，asthediscountmustberelativetotheterminalpoint。Furthercomplicationsarecausedbythefactthatrepairs，andreconstructions，andextensivereplacements，frequentlytakeplaceinfixedcapitalduringtheperiodinwhichitiswearingout。Theoutlaywhichthisoccasionsmustbediscounted——takingintoaccountofcoursetheperiodoftimeatwhichthisoutlaymaybeanticipated。Stillfurthercomplications，finally，arisefromtheuncertainty——whichincreasesastheperiodofwearandtearlengthens——whetherthereturnsexpectedwillactuallybereceivedatall。Andthisalsonecessitatespeculiardeductions，whichwillbemostsimplymadewherepeoplecaninsureagainstthedanger。

Inthecaseofsuchfixedcapitalsasareconsumedexceedinglyslowly，and，consequently，yieldexceptionallymanyreturns，theprocessofcapitalisationfrequentlytakestheplaceofdiscounting。Beforespeakingofthis，however，itwillbenecessarytotouchatleastuponanothersomewhatdifficultquestion。

Thisisthemethodofcalculatingtheindividualpercentagesofgrossreturnassignablerespectivelytointerestandtowearandtear。Ifamachineremainsserviceableforfiveyears，andyieldseveryyear？000，thisyearlyincomemustbedividedoutbetweeninterestandwearandtear(Amortisation)inaccordancewithacertainlaw。Inordertofindthislaw，itisbesttorepresenttheindividualratesofreturnasannuities。Thefirstinstalmentmustyieldinterestforthefirstyearuponthetotalcapitalvalue，allreturnbeyondthatisrepaymentofcapital；

thesecondinstalmenthastoyieldinterestonthecapitalvalueremainingafterdeductionofthisrepayment，andtheresidue，whichmustnowbealargerone，servestowardfurtherrepayment；

andsoon，untilfinallytheentirecapitalisreplaced，andinterestobtaineduponalltheportionsofcapitalaccordingtotheperiodoftheiremployment。Thereasonforthiskindofcalculationlies，inthelastresort，inthelawoftheuniformcalculationoftheinterestrate。(1*)

NOTES:

1。Calculatedonthefiguresgiveabove，andassuminga5%rateofinterest，thevalueofthemachine，onputtingintopresentvaluethefiveexpectedannualreturnsof1000，withinterestandcompoundinterest，maybereckonedat4329。48。Thefirstreturnof1000pays216。47，as5%interestonthecapital，whiletheresidueof783。53goestorepaymentofcapital，thusleavingaremainingcapitalsumof3545。95。Fromthesecondreturn117。30

fallstointerest，and822。70tothesinkingfund；fromthethird，inthesamemanner，tointerest136。16，and，toreplacement，863。84；fromthefourth，92。97tointerest，907。03

tocapital；andfinally，fromthefifth，47。62tointerest，and952。38torepayment，wherebytheentirecapitalisreplaced。

Chapter7

TheValueofCapitalandtheInterestonCapital(continued)。VI——

CapitalizationInterestisalwaysanaliquotpartofcapitalvalue，andcapitalvalueisalwaysamultipleofinterest。Whereinterestis5%，forexample，theinterestis1/20ofthecapitalvalue，andthecapitalvalueisequalto20timestheinterest。Itisthisfactwhichrendersitpossibletodeterminethevalueofcapital，notbydeductinginterestfromgrossreturn，butbyanothermethodwhichleadstopreciselythesameresult——namely，bymeansofacorrespondingmultiplicationofinterest，or，tousetheordinaryterm，bycapitalisation。Whetherdiscountingorcapitalisationispreferredwilldependuponcircumstances。Withcirculatingcapitaldiscountingistheusualmethod，asthegrossreturninthiscaseformsthenearestandclearestbasis。Withfixedcapital，ifthewearingoutiscomparativelyrapid，andthegrossreturnsarefewinnumber，discountingwillbethepreferablemethodinthiscasealso；butifalongseriesofgrossreturnsistobetakenintoaccount，capitalisationwillbepreferred。

Capitalisationiseasiestwherethegrossreturncontainsnoquotaforwearandtear，andisthereforeentirelynetreturn。

Thiswouldbethecasewithacapitalwhichneverworeout，whichpromisedrenttoalleternity，andarent，moreover，absolutelysecure。Tocarrythroughtheprocessofdiscountingherewouldbelaboriousinthehighestdegree；therentofeachseparateyearwouldhavetobeseparatelycalculated，untilthatrentwasreachedwhosepresentvaluewaszero；andnottillthencouldthecalculationbefinished。Howmuchsimplerinsuchacasetomultiplytheyear\'srentinaccordancewiththerateofinterest！

Theresultobtainedinthisfashionagreeswiththatgivenbytheformerandmorelaboriousmethod，notmerelyapproximately，butwithmathematicalexactitude，asanytext-bookofmathematicswillconfirm。Themathematicalformulaforthediscountingofaneternalrentissimplytheformulaofcapitalisation。

Thecalculationisalittlemorecomplicatedwhenthegrossreturnscontainquotasforwearandtear，andwhenrepairsandthelikemustbecoveredandinsurancepremiumsorpremiumsagainstriskretainedoutofthesegrossreturns。Insuchcasesallnecessarydeductionsmustfirstbemadefromthegrossreturnbeforewegetthenetreturnwhichistobecapitalised，andthisisveryoftenexceedinglydifficultintheindividualcase。Thepremiumsjustmentionedarefrequentlynotdeducted，buttheamountofriskfindsinsteaditsexpressionsimplyintherateofinterest。Thereturn，forexample，ofabusinessregardedasofdoubtfulsoliditywillbecapitalisedatahigherrateofinterest，i。e。asasmallermultiple。(1*)

NOTES:

1。Alltheseparateprinciplesherededucedforthecalculatingofcapitalvalueandinterestarefollowedinpracticallifeandarepracticallyfamiliartous。Thetheoryofthem，too，isoftengiven。Buttheyarealwaysfollowedandtaughtundertheassumptionthatthefactofinterestandafixedratioofinterestaregiven。Nothingissimpler，undersuchanassumption，thantocapitalisearent，ortoshowthemethodofcapitalisation。Butthedutyofthetheorististodiscovertheselaws，and，atthesametime，toexplainwhysuchassumptionsmaybemade。Whencecomesinterest？whencetherateofinterest？

Theseareourfundamentalquestions。Allthesinglelawswhichwehavelaiddownareconfirmedtheoreticallyonlyifwehavesucceededinexplainingalsotheassumptiononwhichtheyarebased，i。e。theexistenceofinterestandtherateofinterest。

Theanalysisofthevalueoflandwhichfollowswilloncemoregivethereaderoccasiontonoticehowdifficultitiswiththematterinhandtoescapearguinginacircle，andtopreventtheentranceofanyassumptionwhichisitselfinneedofexplanation。

Chapter8

InterestontheConsumptionLoan。HouseRentThenaturalprincipleshithertolaiddownforestimatingcapitalvalueandinterestreferonlytoproduction。Itmustnowbeaskedwhetherthereisalsoanaturalinterestwhichcorrespondstotheinterestgivenonaloanforconsumptionpurposes，orinterestderivedfromlettingofdwelling-housesandthelike。(1*)

Themotivesofadebtorwhoborrowswiththeviewofspendingtheloanonhimselfaredifferentfromthoseofanundertakerwhoborrowstoincreasehisbusinesscapital。Theundertakerhopestoobtainbothrepaymentofcapitalandinterestoutofthereturnontheborrowedsum。Themeredebtorcannothopeforthis，butmusttrustthatitwillbepossibleforhimtorepayhisdebtofcapitalandinterestoutofsomeotherincome。Heborrowsbecauseheneedsgoodsnow，andhasnotgotthem，whileheexpectsinthefuturetohavethemandnottoneedthemtothesamedegree——atleasthedeludeshimselfwithsomesuchhope。Thusinacertainsenseinterestonproductionandinterestonconsumptionhaveacommonsource。Bothofthemrelatetoadifferenceinthevaluationofpresentandoffuturegoods，onlythatthecauseswhichproducethisdifferencearedistinct。Inthecaseoftheproductiveoutlayofcapitalitistheproductivityofcapitalwhichcausesthedifferencebetweenpresentandfuture；inthecaseoftheconsumptionloan，itisaccidentalandpersonalcircumstances，——accidentalaccumulationofpresentwantsandexpenditure，accidentaldisturbanceofincome，andsoforth。Onewhofindshimselfinasituationofurgentnecessityisactingquiterationallywhenhepromises——atsomefuturetimewhenhehopestobemorefavourablysituated——topaytothepersonwhoassistshimbyanadvanceofmoneyoutofhispresentdifficulty，notonlytheamountadvanced，butanextra，aninterest。Asumofl05attheendofayearmaybeworthlesstohimthan？00isatthepresentmoment；hemightevenpromise？50，？00，ormore，andyetnotbeactingirrationally。Butifheistofindapersonwillingtolendhimthemoney，itisessentialthateveryoneshouldnotbeinthesamecircumstancesofpresentneedandfutureaffluenceashimself。Itisessentialthatthereshouldbepeoplewho，atthemoment，havemeanswhichtheycandowithout。

Andthusitfollowsthat，inanentirelyorganiceconomy，suchaswouldexistinthecommunisticstate，thenecessaryconditionsforconsumptioninterestarewanting，inasmuchasallthecitizenstogetherwouldformonlyoneeconomicsubject，andwouldparticipatecontinually，eitherinthesameconditionofwant，orinthesameimprovedconditionofeconomicwell-being。

Theinterestobtainedfromthelettingofdwelling-houses，andsuchlikeobjectsofconsumptionwealth，amounts，onanaverage，toasumwhichallowstheownertoenjoy——duringtheperiodforwhichthebuildinglasts——interestuponthecapitalexpendedinbuilding，and，besides，toprovidewhattheGermansconvenientlycall“amortisation“ofthesame；sothat，whenthedwellingiswornout，heisinapositiontoreplaceit。Inshort，thereisassuredhim，ontheaverage，apermanentnetreturncorrespondinginamounttothegeneralrateofinterestuponpropertyofthiskind。DuringallthelongperiodoftimewhencontractinterestonLoanswasforbiddenbylaw，andviolentlycombatedbyalltheorists，noonethoughtofobjectingtotheinterestonconsumption-wealth。Thiswasalwaysheldequitable；andanownerwhomadeoverhispropertytoanotherinperpetuitywasregardedashavingarighttoclaiminreturnapermanentremuneration。If，however，welookcarefully，itwillbeseenthatthetheoreticalargumentsemployedagainstinterestonloansapplyequallytointerestonhouseproperty，insofarasitbringsinmorethanenoughtorepaythecostsofbuilding。

Ifmoneybe“unfruitful，“soarebuildings；andtothisextentitisimpossibletoseewhytheyshouldbringtotheirownersanetincomelastingbeyondthephysicaldurationofthehouse。Weretheownertoretainthehouseforhisownusehewould，bythetimeittumbledtoruins，possessnothingmoreofitthan，possibly，thevalueofthematerials；——isitnotratherahardconditionthatthepersonwhohiresthehousemustrebuilditforhim？

Tojustifytheusualamountofrentonhouseproperty，wemustgosomewhatfurtherback，viz。tothefactthattheobjectsofusewhichareletmustbeproduced。Butiftheyaretobeproduced，theremustbetheprospectthattheirvaluewillincludethefullandpermanentmaintenanceoftheundertaker\'scapital，alongwiththecustomaryreturntocapital，whetherthisvalueberealisedthroughsellingorthroughlettingtheproperty。Nohouseswouldbebuiltforlettingiftheprospectsofthiskindofundertakingwerepoorerthanthoseofanyother；

theinterestofhireorletmust，therefore，standattheusualamountofinterestoncapital。Itisanapplicationofthelawofcosts(seebelow，BookV)，accordingtowhichthecustomaryinterestoncapitalisreckonedamongcosts。Asinallcases，sointhis，doesthecalculationofcostsassurethefullesteconomicdistributionoftheemploymentsofgoods。Themoreexactlythenetincomereceivedfromthelettingofdwelling-housescorrespondswiththerateofinterestgeneraloverthecountry，themoreexactlywillthebuildingofhouses，andthesatisfactionoftheneedwhichthismeets，correspondwiththegeneralconditionofproductionandofthesatisfactionofwants。Ifpeopleweretobecontented，e。g。，withanexceptionallylowreturnfromhouses，itwouldimplyadisproportionatelyamplesatisfactionofthewantfordwellings。

Thiswouldstandoutfromthegeneraleconomicplane；andwouldnecessarilybebalancedandcompensatedbylimitationsinsomeotherdirection。

Eveninanentirelyorganiceconomy，inwhichtheoppositionbetweenownerandtenantwasabolished，itwouldbeasneedfulasitnowistotakecarethatbuildingofhousescorrespondedwiththegeneralpositionofproductionandofsatisfaction。Andtothisextentwemightdrawanalogiesbetweentheinterestofhouserentandacalculation，intermsofvalue，ofthesatisfactiongivenbyhouses，whichwouldresultinacontrolofexpenditurequiteascompleteasthatgivenbyhouserent。(2*)

NOTES:

1。AfurtherformofinterestwillbediscussedinBookV。chap。

ii。

2。Thatistosay:——Inthepresentstatethedueprovisionofhousesforthepeopleisguaranteedbytheconsiderationthatcapitalists，investingtheirmoneyinhouseproperty，willgettheordinaryreturnofinterestoncapitalgenerally。Rentmustcoverreplacementaswellasinterest。Inacommunisticstate，wherethegovernmentprovidedeverything，thebuildingofhouseswouldbecontrolledbyconsiderationsofwantsandsatisfactionswhichplacedthedemandforhousesverymuchinthesamerelativepositiontoothersatisfactionsasnow。Nosocialiststate，forinstance，couldprovidehousesinsuchquantitiesthattheirvaluewasreducedtothemereexpensesofbuilding，withoutdisturbingthemarginalplane，anddiminishingthetotalsumofsatisfactionobtainablebytheemploymentofthenationalcapital——W。S。

Chapter9

TheValueofLandThevalueoflandiscalculated——accordingtothesameprinciplesasthevalueofapermanentrent——bycapitalisingtherentofland。Thisisapropositionwhichisheldnowadaysasself-evident。Itwasnotalwaysso，however，and，indeedcouldnotalwaysbeso。Inordertocapitalise，agivenrateofinterestisnecessary；andthataninterestratemaybegiven，weneedcapital。Tocapitaliserentmeanstomultiplyitaccordingtoprincipleswhicharederived，asthenameitselfshows，fromthevaluationofcapital。

Imagineanidealconditionofagriculturewherenocapitalwhateverisemployed。Thelandyieldsproduceofallkindsandingreatquantity。Inthesecircumstancesthevalueofeachproductcanbeestimatedexactly；thevalueofeachharvestcanbeestimatedexactly；rentcanbefixedexactly；——butthereisnomeansbywhichtodeterminewithcertaintyhowmanyrentswouldberequiredtogivethevalueoftheland。

Whyistherenosuchmeansinthecaseoflandasthereisinthecaseofcapital？Theanswerissimple。Capitalreproducesitselfinthegrossreturnasapartofthatgrossreturn。Thusthereisafixedrelationbetweenthetwo“known“quantities，grossreturnandnetreturn，andthe“unknown“quantity，capitalvalue；andthisrelationgivesthemeasureforcapitalisation。

Landhasnotthesamedoublepositionasproductivefactorandasproduct。Itproduceswithoutbeingreproduced；andthus，todeterminethevalueofland，itbecomesnecessarytobringtoouraidthestandardforcapitalisationwhichwefindincapital。

Fromthisconsiderationitfollowsthat，solongascapitalwasscarce，itwasimpossibletoobtainafixedvaluationofland。Everyowneroflandmightestimateitsvaluedifferently，inasmuchashemighttake，asbasisofcalculationeitheragreaterorsmallernumberofyearlyrentals，accordingtovaryingexternalcircumstances，andaccordingashisjudgmentwasinfluencedbyrecklessnessorbyforethought。Anegoistpureandsimple，whocalculatedonlywithregardtohisownlifetime，andtowhomhislandwasofimportanceonlybecauseitsecuredhimarentforlife，wouldestimateitsvalueaccordingtotheprobabledurationofhislife，andwouldtherebyobtainakindoffixedvaluation；atallevents，hislandwouldrepresenttohimafinitesumofvalueandnotaninfiniteone。Butonewhothoughtofhischildren，andofsucceedinggenerations，andtooktheirinterestsintoconsiderationinestimatingthevalueofhislandwouldofnecessityregarditasaninfiniteamount。Asinconsiderateegoismmaybecountedexceptional，thevalueoflandmust，asarule，havebeenestimatedasinfinite，or，atallevents，asanamountincapableofbeingmeasured。

Asamatteroffact，thisprobablywasthecasewithprimitiveeconomy。Inthebeginning，wherelandhadanyvalueatallascribedtoit——as，e。g。，thepasturelandsofnomadictribeswhentherewasnosuperfluousamountofsuchlands，theopinionmusthavearisenthatheremanhadtodowithanindispensableconditionofexistence；aconditionwhichrequiredtobekeptuppermanently；andaconditionwhoseimportancecouldnotinanywaybecomparedwiththatofrapidlychanging，comingandgoing，movablegoods。Thepossessionofpasturelandwasamatteroflifeanddeath，andthetribe，recognisingthatitscontinuedexistencedependeduponthepossession，wouldriskitsuttermosttoretainit。Eveninpresenttimesasimilarmodeofthoughtmaybemetwithindistantmountainousregions，wherethepeasantfarmshissolitarypatchofland。Hiscroftisinalienablefromhim，anditsvalueindeterminableasagainstothergoods。Whatshouldthepeasantdoifheceasedtobeapeasant？Nosumofmoneythatabuyermightoffercouldbeanytemptationtohim，unlessjustthenanoccasionpresenteditselftoexchangeitforanotherandbetterpieceofland——anunlikelypossibilityinthecircumstances。Thepeasant\'scroftisandremainsforhimagoodbyitself，thevalueofitimpossibleofexpressioningoodsofanyotherkind，——infact，indeterminable。

Thisconceptionaltersonlywhencapitalhasbecomemoreplentiful，andwhenthelandownerhasbecomemorefamiliarwithitsuseanditsvalue。Therearetwocircumstanceswhichbringthisabout。Theoneisthatlandandcapitalbegintobeexchangedforeachother，accordingtotheamountoftherentstheyyield，andthuspeopleusethevalueofcapitaltoexpressthevalueofland。Theother，andmoreimportant，isthatthelandbecomesmoreintensivelycultivated，anditselfemploys，muchcapital。Consequently，ineveryactofcultivation，thequestionhastobeconsidered，howlandandcapitalshouldbeemployedrelativelytoeachother，soastogivethebestreturnsofrent。Thesamereturnincropsmaybeproducedbytakingmoreorlesslandintocultivation，orbyemployingmoreorfewerdosesofcapital，andagriculturistshavetodecideonthesepoints。Thuslandandcapitalbecomecommensurableintheirproducts；and，whenevercivilisationhasgotthislength，itisimpossiblelongertoavoidvaluinglandaccordingtothefundamentallawsofvaluingcapital。Todootherwisewouldbetorenouncetheonlypossiblemeasureforcalculationandeconomicdecisions。Justascapitalscanberightlycomparedwitheachotheronlywhencalculatedatthesamerateofinterest，socanlandandcapitalberightlycomparedonlywhenthevaluationoflandassumestherateofinterestoncapital。

Inthecommunisticstate，itistrue，theconnectionbetweenlandandcapital，broughtaboutbyexchangeoftheonefortheother，disappears，buttheconnectionarisingfromtheircommonco-operationinproductionremains。Thecapitalisingoflandvalue，accordingly，wouldremainasnow。

Chapter10

TheValueofLabourTohismastertheslaveisacapital，andhisvalue，likethatofananimal，amachine，oranypieceoffixedcapital，isdeterminedbysummingupanddiscountingalltheserviceswhichmaybeexpectedfromhim，or，aswemaysay，bycapitalisinghisnetreturn。

Thecapitalvalueoffreelabour，thevalueofthefreelabourer，isnoobjectforvaluation，anymorethanhispersonisanobjectofeconomicaldisposal，ora“good。“Ontheotherhand，theindividualactsoflabourarealwaysobjectsofeconomicaldisposal，andsoobjectsofvalue，eveninthefreestcommunity，——eveninacommunitywherethelabourerhimselfgovernsandmakes，thelaws。Noeconomycouldbeconductedwithoutmenrecognisingnotonlywhichlabour，ingeneral，isthebestandwhichtheworst，butwhich，inthecircumstances，isthemoreandwhichthelessimportant，whichmustbeusedsparinglyandwhichmaybeusedwithmostfreedom。

Themethodbywhichlabourisvaluedisexceedinglysimple。

Theordinaryprinciplesofimputationdecidewhatshareofthereturnmaybeascribedtoeachindividualservice，andthevalueofthisshareobtainsdirectlyasthevalueoftheservicewhichproducesit。Thuseverykindandqualityoflabourshowsadifferentresultaccordingtotheavailablesupply，thedemand，thesupportrevivedfromcomplementarygoods，andthetechnicalpossibilities。Atthetopofthetreestandthe“monopoly“

services，whenthegeneraleconomicconditionsofthetimeaidthemwithtechnicalsupportandgeneraldemandatthebottomstandtheover-congestedbranchesoflabour，particularlyunskilledmanuallabour。Whereverlabourpowerisavailableingreatquantityitisvaluedasa“cost-good，“andsuffersfromallthedisadvantagesofthisvaluation。Themarginalemploymentisalwaysthedecisiveone，——thatemploymentofthelabourinquestionwhichbringsthesmallestresulteconomicallypermissible。

Thesocialistswouldhaveusbelievethatthevalueofeverykindoflabourshouldbeestimatedsimplyaccordingtotime；thatistosay，thedurationoftheserviceshouldalonedecideitsvaluerelativetootherlabour，——whichassumes，ofcourse，thatslovenlylabourisreducedtoearnestlabour，unskilledtoskilledlabour。Thisistheextenttowhichthequalityofthelabourwouldbetakenintoconsideration，butnofurther。Thosedifferencesofqualitywhichresideinthetasksetbeforethelabourerareleftquiteoutofconsideration。Commonmanuallabour，higherartisanlabour，superiormentallabour，arealltoberegardedasequal。Doesitrequireanyspecialproofthatthisiscontrarytothenaturallawsofvaluation，andthatnoeconomycouldlastwhichtreateditsdivisionoflabourinthisway？

Thesocialistscontinuallyoverlookthefact——although，indeed，theyonlyfollowinthefootstepsofmostoftheeconomists——thatvalue，inourpresentconditionofsociety，hastwoservicestoperform。Theoneistoactastitletopersonalincome。Inthegreatroundgameofincome-winning，everyoneistoreceiveintheendasmuchasthevalueofhisstakeamountsto；andinthegamethestakesmaybewealthaswellaspersonallabour。Themanwhohasmuchwealthtostakereceives，asarule，muchincome，evenwithoutpersonallabour，andthemanwhohaslittlewealthtostake，asarulereceiveslittle，evenwiththemoststrenuousexpenditureoflabour。

Theotherserviceofvalue，——andoneusuallyquiteoverlooked，——concernstheeconomicalbalancingorweighingofgoodsagainstgoods，andofemploymentofgoodsagainstemployment，withoutregardtodistributionamongpersons，andsimplywithaviewtoreachthegreatestpossibleeconomicresults。Tothisserviceofvaluebelonge。g，thoseprincipleswhichareabsolutelyindispensabletoanyeconomy；——thateveryproductionshouldbedirectedsoastoobtainthegreatestpossiblereturn，thatnomorebespentuponanyproductthancanbemadegoodbyitsvalue，thatinconsumptionthegoodsuitedtosatisfyurgentwants，andthereforethemorevaluable，shouldnotbespentonatriflingsatisfaction，that，generallyspeaking，thelimitsofsupplyanddemand，asgiveninmarginalvalue，shouldbeobserved，andsoon。

Whatwouldthesocialistshave？Theywisharelatedeconomy，innowayworse，andpossiblybetterregulatedthanthatofto-day；butwiththispeculiaritythatlabourshallbetheonlysourceofpersonalincome。Thevalueoflandandcapital——orthevalueoftherentsoflandandcapital——shallnolongerbeimputedtoanyindividualashisoutlayorstake；shallnolongerserveanyoneindividualasatitletopersonalincome。Isthereinthisclaim——thejusticeofwhichweshallnotherediscuss——anyforcewhichcanabrogatetheeconomicalserviceofvalueaswellasthepersonalservice？Becauselandandcapitalarenolongertobelongtoindividualsbuttothestate，musttheythereforeberegardedbythestateasvalueless，andbeemployedinproductionwithoutregardtotheprinciplesofvalue？Becauselabouristobetheonlybasisofpersonalincome——measuredpossiblybythelengthoftimewhicheachmanhasworked——islabouralonetobeconsideredinproduction，andistheonlymeasureofitsvaluetobeitsduration？Becausethereistobeaneworderinthedistributionofgoodsamongpersons，musttherebeacompletedisorganisationinthewholeindustrialconductofgoods？

Ofcoursesocialistsareveryfarfromdesiringsucharesult。Theywishtohavearelatedeconomy，buttheyexpectatthesametimetosecurethatgoodsareusedandemployedaccordingtotheirusefulness。Doesthismeanthattheusefulnessofgoodsisreallytheonlythingtobeconsidered——notquantityanditschanges，notdemandwithitsriseandfall，notthemutualconnectionofmeansofproduction，withallthevicissitudesoffavourableandunfavourablecoincidence？Butifusefulness，supply，demand，complementarityarecombined，whatisthisbuttovaluegoodsaccordingtotheutilityimputabletotheminthegivencase，insteadofaccordingtotheirgeneralusefulness——inotherwords，toestimatethemaccordingtotheirvalue？

Thenaturalprinciplesofvaluationareindispensable，becausetheyserveindispensableeconomicpurposes。Consequentlywheretheseprinciplesareobserved，theyservethesepurposes，andare，insofar，good。Insofarasexchangevaluecorrespondswithnaturalvalue，itisrightthatitshouldregulatetheeconomicconductanddisposalofgoods，andthatineverydepartment，whetherasregardsland，capital，orevenlabour。Andalthoughthelabourermaysufferseverelyunderthislawofvalue，althoughsocietygenerallymaysufferwithhim，althoughtherecompenseofthelabourermayrequiretobeadjusted，inhisowninterestandthatofsociety，byadifferentlaw；——stilllabourcannotbevaluedaccordingtoanyotherlawwhereitsemploymentisconcerned。Whenitcomestoemploylabour，thecommunisticstatemustretainthesamelawinforce，oritseconomywillbecomechaos。

Notonlythequestionofpayment，but，beyondthat，thequestionoflabourinthefuture，mustbekeptdistinctfromitsemployment。Wherevercommonlabourpowerisdisproportionallyabundant，itcan，andmust，beemployedonlyinproducingreturnsofverytriflingvalue。Nonethelesswillitberegardedasanevilthatthereshouldbeavailablelabourpowerofsuchtriflingproductivecapacity，andalleffortstowardsincreasingtheservicesoflabourandthussecuringitahighervalue，areworthyofpraise；allthemoresoifthesmallcapacitybringsasmallpayment，andthusresults，overwidecirclesofworkers，ininsufficientsatisfactionsofwantsandwretchedconditions。

Chapter11

TheValueofProductionGoods，WithReferencetotheCompetitionBetweenPresentandFutureInterestsTodistributeasupplyofmeansofsubsistence，orotherconsumptiongoods，overaconsiderableperiodoftime，andtovalueitwithregardtothecompetitionbetweenpresentandfuturewants，is，atbottom，averysimpletask。Onewouldselectthehighestsatisfactionswhichcanbereachedonthewhole，andthesewouldformthebasisforthevaluationofthegoods，themarginalsatisfactiondecidingthevalueoftheunit。Atwhatpointoftimethemarginalsatisfactionwilloccurcannotbestatedgenerally。Itmaybeatthebeginningthatthehighestsatisfactionsarepossible，asinthecaseofstockswhicharelargeandliabletospoil，andcannotwellbepreservedforanylengthoftime。Itmaybethatthegreatestamountofsatisfactioncanbeattainedonlyattheendoftheperiod；aswhenforethoughtdemandsthatacertainrestraintbeobservedattheearlierdatesincaseofpossibleaccidents。

Notinfrequentlythistaskiscomplicatedbythefactthatthereisaquestionbetweentheproductiveemploymentofgoods，andtheirdirectemploymentinthesatisfactionofwants。Coal，forinstance，exertsitspowerofheatingequallywellinthedwellingandinthefactory，andsowithmanyothermaterialgoodswhichmaybeemployedeitherforconsumptionorascapital。

Thesamewillbeobservedinthecaseofland；afieldmayeitherbeemployedinproducingareturn，orbelaidoutasapark。And，finally，itisthesamewithlabour。Itmayeitherbeemployedaspersonalservice——domesticserviceinahouseforinstance——

orusedforproductiveends。Asallproductionprovidesforconsumptionsoonerorlater，thechoicebetweenimmediateconsumptionandproductiveemploymentisalwaysachoicebetweenpresentorproximateconsumptionandfutureormoredistantconsumption。Theprinciplewhichgovernsthischoiceistheonejustgiven；thatemploymentwhich，inaconsiderationofthewholeground，isfoundtobethemarginalone，decidesthevalue。

Andhereagainitisimpossibletostategenerallyatwhatpointoftimethemarginalemploymentwilloccur。Itmayoccurinthepresent，theperiodofimmediateconsumption；itmayoccurinthefuture，theperiodofproductiveemployment。Themarginalvalueofcoalmightbedecidedequallywell，eitherbyitsserviceinheatingthedwellingorbyitsserviceinthefactory。

Thisconsiderationmaybecarriedfurtherwithinthesphereofproduction。Productionmaybemadetoyielditsfruitstoconsumptionsoonerorlater，accordingtothemannerinwhichitisdirected。Itispossibleeithertolimitproductionprincipallytoobjectsofdirectconsumption，——bywhichmeanstheendthatisnearestinpointofdesireismorespeedilyreached，——ortodirectitonandon，devotingittothemakingofproductiongoodsthemselves，andtoensuringtheconditionsofgreatandlasting“rentability“——bywhichpresentenjoymentispostponedforthesakeofagreaterdegreeofenjoymentinthefuture。Notonlydoesthechoiceofobjectsofproductioncomeintoconsideration，butmanyothercircumstancesalso。Almosteverykindofproduction——withtheexceptionpossiblyofthosestrictlydependentuponseasonsoftheyear——permitsofashorterorlongerprocess；almosteveryproduction——withstillmoretriflingexceptions——maybecarriedout“extensively“or“intensively，“withslightermeansandmoretemporaryresults，orwithstrongermeansandmoredurableresults。Inallsuchcasesithastobedecidedwhetherthepresent，thenearerenjoyment，orthefuture，themoredistant，bepreferable。Andfinallythereisstillanotherpeculiarcircumstance，whichcontributestothecompetitionbetweenpresentandfutureinterests。Theaccomplishmentofalmosteveryundertakingdemandspersonalexertion；itthusdemandstheovercomingoftheresistanceofferedbythenaturaldesireforrestandcomfort。Inthisconnectionalsotheconsiderationsofpresentandfuturewelfarecomeintocollision。

Theprinciplewhichmustguideone\'schoiceinthisrespectisinallcasesthesame，althoughthedifficultyofapplyingitincreaseswiththecomplicationofthecase。Thatschemefortheemploymentofgoodswhichpromisesthegreatestadvanceonthewhole，mustbetheonechosen，andvaluation——sofarasispracticable，marginalvaluation——mustbeadaptedtothisscheme。

Ingeneral，indeed，labourandcapitalaremoreconcernedinwhathasjustbeensaidthanisland。Themotiveswhichmakeforlabouralways，oralmostalways，encounterinthepleasureofthemomentacertainresistancewhichmustbeovercome。Andcapital，asitmustcontinuallybereproduced，continuallyraisesthequestionwhetherthemeansnecessaryforitsre-creationcouldnotbeemployedelsewheretomoreadvantage。Inthishaveoriginatedtwocelebratedtheories，intimatelyrelatedtooneanother，althoughtheyhaveemergedseparately:theonerelatingtothevalueoflabour，theothertothevalueofcapital。Theformerderivesthevalueoflabourfromthe“sacrifices“oflabour；thistheoryweshalldiscusslater。Theotherderivesthevalueofcapital，or，rather，interest，fromthe“sacrifice“

which，asitasserts，ismadebythecapitalistindevotinghiscapitaltoproductioninsteadofdirectlyconsumingit。Thisisthewell-knownAbstinenceTheory，whichregardsinterestasawagefortheabstinenceofthecapitalist。Afewwordsuponthistheorymaynotbeoutofplacehere。Afterwhathasjustbeensaidthereshouldbenodifficultyinforminganopinionuponit。

Itistruethat，inallcasesoftheformationofcapital，capitalmighthavehadanotherdestinationthantheoneactuallychosen，——forproductionisaveryProteusinitscapabilityoftakingvariousshapes；butitisnottrue——aswillnowbegenerallyacknowledged——thateverycapitalpermitsalsoofbeingimmediatelyconsumed。SinceLassalle\'scriticismitisunnecessarytowasteanotherwordonthispoint。Butevensupposingitweretrue，supposingthateveryconcreteformofcapitalmightbeimmediatelyconsumed，theabstinencetheorywouldnonethelessbefalse。Innowayisitpossiblethataconsumption，fromwhichitiseconomicaltorefrain，canserveasameasureofvalue。Whatkindofsensewouldtherebeinthis？

Goodsareofvaluetousbecauseofwhatwecanobtainfromthem，andthosedestinationsofgoodswhicharechosenastheeconomicallypermissibleones，furnishthebasisofvalue。Theconsumablenatureofcapitalgoodscaninfluencetheirvalueonlyinsofarascapitalgoodsareactuallydevotedtoconsumption；

ifcapitalbeconsumedtheproductivestockwillbediminished；

ifmuchcapitalbeconsumeditwillbesensiblydiminished，andproductivevaluewillrise。Buteventhiseffectmustnotberegardedasaone-sidedone。Theproductiveemploymentofcapitalandthepersonalconsumptionofitmutuallydetermineoneanother。Moreovertheydetermineoneanotheronlyinconsiderationoftheamountofvalueemployedatthetime。Ontheotherhand，neitherofthemcanbebasisfortheother。Thecircumstancethatcapitalisconsumablecannomoregivevaluetoafoolishemploymentofitinproduction，thanthecircumstancethatcapitaliscapableofproductiveemploymentcanmakeitconsumable，ifitbenotsoinitsownnature。Thevalueofanemploymentmustbefoundedonitself:productivevaluecanbederivedonlyfromproduction，andconsumptionvalueonlyfromconsumption。Theamountsofvaluegainedinthevariousemploymentsofcapitalare，ofcourse，comparedwitheachother，sofarasispracticable，intheefforttoattaintothegreatestpossibleresultonthewhole:and，moreover，evenwheretheyarenotcompared，theyarestillputatanequalvaluewithoneanotherinvirtueoftheparticularformofvaluationwhichthemarginallawbringwithit。Asamatteroffactabstinencefromconsumptionisnothingmorethanasymptomofproductivevalue，——occasionallyofsomuchproductivevaluethatthesacrificeofabstinenceisatleastcounterbalanced。

Theabstinencetheoryinitsessencebearsastrikingresemblancetothattheorywhichderivesthevalueofproductsfromtheircosts。Asweshallseeimmediately，thelawofcostsdoesindeedexistasaverygoodworkinglawofvaluation。Butcostsdonotformthefoundationofvalue；theyonlyequaliseit:

and，moreover，thecircumstancethatcostsareexpendedmakesusconcludefortheexistenceofvalue。Thecosttheory，liketheabstinencetheory——exceptthatitisconfinedtoanarrowersphere——confusesalawofthemoreorlessofvalue，ormoreexactly，alawoftheequalisationofvalues，withthefundamentallawofvaluation。Intheonetheoryasintheother，asymptom，whichallowsustoconcludefortheexistenceofvalue，istakentobeitscauseandexplanation。

NaturalValue byFriedrichWieserBook5

TheNaturalCostValueofProductsChapter1

TheLawofCostsProductiongoodswhicharecapableofbeingemployedinseveralwaysreceivetheirvalue，asweareaware，fromthevalueoftheleastoftheirproducts，theproductionofwhichiseconomicallypermissible；thatis，fromthemarginalproductorfromtheircontributiontotheproduct。Thisvalueattachesequallytoallsimilararticlesorsimilaritemsofaproductivestock，eventothosewhichareactuallyemployedinmoreremunerativeways。Inastockofironeachparthasanequalvaluewitheverysimilarpartinthestock，basedonthemarginalcontribution。Itisthesamewithastockofcoal；thesamewithanyavailablesupplyoflabourofequalquality；thesamewithanyotherproductiongood。Assumethat，inaproductivestockoftheclassa，theitemputtothemostinsignificantusegivesaproductof1，everyiteminthestockwillhavethevalueof1；

everyitemoftheclassbhasthevalueof2，ifthemarginalproductivecontributionoftheclassbe2，andeveryitemoftheclasschasthevalueof3，ifthemarginalproductivecontributionamountsto3。

Now，asarule(theexceptionswillbediscussedlateron)

productiongoodsretainthatvaluewhichisascribedtothembeforethebeginningoftheproduction——inanticipationofthebestpossibleresult，——afterthecompletionoftheprocessofproduction；thatistosay，theyretainitstillintheproductswhichtheyhavebeentransformedinto。Totaketheformerfigures，theproductoftheelements10a+10b+10c，will，asarulehavethevalue10+20+30+60，andtheproductoftheelements10a+20b+10c，willhavethevalue10+40+30=80。

Thislawmaybeexpresseddifferentlyaccordingaswestateitfromthesideofproductiongoodsorfromthatofproducts。

Intheformercaseitrunsthus:——similarproductiongoodsmaintain，asarule，ineveryproduct，first，asimilarvalue，andsecond，thatvalueasitattachestothemthroughtheirmarginalproductivecontribution。Thisisthecorrectformula。Asthelawofcostsisusuallyunderstood，however，thesecondclausewouldbeleftout；thusgivingaformulaforrelativevalues，butnotforabsoluteamountsofvalue。

Inthelattercasethelawrunsthus:——thevalueofaproductis，asarule，acomplexobtainedbymultiplyingthequantityofproductiongoodsemployedbythevalueoftheproductiveunit，or——takingintoconsiderationthefactthateveryproductisalwaysproducedfromseveralproductivefactors——itisasumofsuchcomplexes(10a+10b+10c，or10a+20b+

10c，andsoon)。Fromthisformula，whichindicatestheabsoluteamountsofvalue，therefollowsanotherfortherelationsofvalue。Itisthatthevaluesofproductswhichhaveoneproductivefactorincommonare，toeachother，inrespectofthiscommonfactor，asthequantitiesofitrequisitefortheirproduction。Thisisthecorrectformula。Asusuallyunderstoodthelawrunsmorebrieflythus；——thevaluesofproductsaretoeachotherasthecostsrequisitefortheirproduction。This，again，ismerelyarelative，notanabsoluteexpression。Closerconsiderationshowsthatitisnotpossibletoapplythisrelativeformulasolongasitstandsalone。Theamount10a+20b+10cisnottwiceasgreatastheamount10a+10b+10c，buttwiceasgreatonlyasregardsthefactorb；thegeneralrelationcanonlybeestablishedwhentheabsolutevaluesofa，b，andc，areknown。Ifa=10，b=20，andc=30，theratioisas80to60；ifb=100，itisas240to140。

IntheUrsprungdesWerthesIcalledproductswhichhaveoneproductivefactorincommonProductionsverwandt，whichmayberenderedinEnglishas“cognate。“Theyrepresent，asitwere，thedescendinglineofthisfactor，andstandtooneanotherincollateralrelationship。Allproductsmadefromthesamequalityofironarecognate。Manyproductsarecognatetoeachotherinmorethanonerespect，e。g。productsofironinthemakingofwhichhavebeenexpendedsimilarkindsoflabourorsimilarfuel。

Understoodinthissense，itisalwayscognateproductstowhichthelawjuststatedrefers。

Thisisthewell-knownlawofcosts。Thetasknowliesbeforeustoexplainandproveit。(1*)