The nature of capital and income . higher than in-dicated, the discount curve AB will be nearer coincidencewith MN, and CD nearer coincidence with XY. We maysuppose a case in which coincidence is reached. This caseis represented in Figure 24. Here BC represents such aninteraction as occurs when one capital good is completelytransformed into another, as when the sapling becomes a tree at a certain definite point of time. The capital-value Sec. 5] SUMMARY OF PART III 313 of the sapling disappears at BC, but there appears in itsstead the capital-value of the tree. The change from oneto the other
The nature of capital and income . higher than in-dicated, the discount curve AB will be nearer coincidencewith MN, and CD nearer coincidence with XY. We maysuppose a case in which coincidence is reached. This caseis represented in Figure 24. Here BC represents such aninteraction as occurs when one capital good is completelytransformed into another, as when the sapling becomes a tree at a certain definite point of time. The capital-value Sec. 5] SUMMARY OF PART III 313 of the sapling disappears at BC, but there appears in itsstead the capital-value of the tree. The change from oneto the other is evidently entirely nominal, and it is possi-ble, by drawing any other vertical line than BC, to createan interaction simply by calling the portion on the twosides of this line by different names. When, as in Figure 25, a series of curves is constructedand superimposed to represent the income from any speci-fied group of capital instruments, the sum total of the incomeis evidently represented by the entire series of teeth in the. Fig. 25. top curve. These teeth form a physical picture of theouter fringe of services, which was discussed inprevious chapters. If in the diagram we omit the upper-most layer of capital, the curve remaining immediatelybelow this layer will then be the outer fringe for the entireseries of capital instruments below it. We may pro-ceed step by step in either direction, leaving off an item ofcapital or taking one on. In every case the outer fringeof teeth will represent the sum total of income for the groupof capital represented below it. 314 NATURE OF CAPITAL AND INCOME [Chap. XVIl In Figure 25 all the teeth below the top layer are rep-resented to be interactions. But if any of them shouldbe final services, they need only be carried forward by dottedlines to the top, as in Figure 26. Or if the capital repre-sented by one layer interacts with the capital representedby a layer two or more removes above it, the connection -Q
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