Capital is an expression of person's business power in terms of money, being the esti ated price (with reference to market conditions) of the perso 's property rights to income. These property rights may be composed in part of claims upon income arising from the labor of others; a promissory note given by a student of good credit, or by an inventor hoping to continue his experiments, is capital in so far as it is saleable, or bankable, tho the income from which it will be paid is to come from personal resources and not from any material agents.
Business- or ind rial-capital is more specifically that part of a man's capital hich is invested in his business, from which to draw a m etary income. The value of his house, furniture, and personal belongings is capital, tho ordinarily not thought of as such, but as means of enjoyment. In an emergency they may be converted into money to be used in his business, and being part of the property available to pay his debts, they help to give him greater credit at all times. Nominal apital is the amount of shares of stock issued by a corporatikn, taken at their par, or nominal, amount. It may have little relation to the true investment. Where there is no regulation of stock issues, a company with no true capital may print shares of millions of dollars of nominal capital. In financial statistics, bonds as well as stocks are often included in the nominal capital (as in the reports on capital in Amer ican railroads).
§ 6. Capitalisation of direct durative agents. Capital ization is the process of calculating the market-price of sale able incomes (whether sold now or not) It It is the estimation of the present worth of marketable iniomes. This gives us another way of defining capital: capital is any right to prospective income that can be capitalized. Capital can either be pledged, or sold outright at a price.' I The Value of a slave may be capital. A man, in our times, may Some expression of the present worth of future uses is in volved in the choice made by the individual between any two uses that are not of the same time-period. It is easy to see that this is so in every case where a present stock of goods is kept for use in different periods; it is so in every case of re pair of agents for future use; it is so in every case where goods are produced for the future.
Many of these choices involve the choice of an object con taining a number of uses of different time-periods, which are summed up—capitalized. Take a direct durative good, such
as a fan, a house, a pleasure boat, an article of clothing, etc. That on which the value of the good as a whole is based is a series of uses which can not all be present. The fan repre sents all the cooling drafts to be got from it not only to-day, but many days to come. Additional uses may be obtained from the house by crowding more people into it, possibly thus slightly increasing the wear, but in no way can next year's shelter be obtained until next year. Each durative agent yields its uses through a period of time, a period usually not to be shortened except at a cost. The maximum economy of utilization (see Chapter 13) gives a series of uses at different times and of unequal present values. Each succeeding year's use, until the agent is expected to wear out, is adjusted to the value of this year's; that is, it is reduced to its present worth, and the sum of the present worths is the present value of the agent. Representing the total value as S (sum) and the an nual incomes as a' for the first year, etc., and the life of the agent as four years, we have: S = present worth of (a' -1- a" + a" ' + a" ") and substi tuting an assumed present worth of a, S= (10 + 9 + 8 + 7) =34 not legally sell himself into slavery. Therefore, free men, in any full sense, are not capital, and it is misleading to speak of them as such, or to estimate their capital value as is sometimes done. But to a limited extent, carefully guarded by law, a man may borrow and pledge his future earning power, and thus capitalize it.
§ 7. Capitalisation of durative agents. This process of valuing direct uses is extended to those indirect agents whose uses are more or less removed in time. Desires are so expansible that if the right kind and quality of direct goods could be had at will, enormously greater amounts would be used. But the continued income of present goods is de pendent on durative agents. The psychic income of a civilized community is conditioned on a favorable and extremely re fined environment: houses, libraries, theaters, the agencies of travel, as well as the sources supplying the more material needs. These agents, even in the richest community, are lim ited in variety, in quality, and in number. The present price of these goods is the capitalization of the expected uses they contain.