INCOME AND CAPITAL

Of course, these particular forms are only special types;numerous other types might be given.

In interest theory the income with which we deal arenot statistical records of the past but those of the ex-pected future. What is to be one’s future income stream,chosen from among several income streams available, be-comes of supreme importance.

§17. Confusions to be Avoided

The very first effort of the beginner in this subjectshould be to rid his mind of all prepossessions as to thenature of income and capital. My grandchild of six re-cently asked the cashier of a savings bank, “Show methe money I am going to get when I grow up.” Thecashier gravely took him into a back room and held upa bag of coins. The vision of that bagful will doubtlesspersist into adult life as a picture of a savings bank ac-count, even after he has learned in college that the totaldeposits of a bank far exceed the cash on hand, and thatthe depositor’s capital is not actual cash but the right,measured in terms of cash, to the services or benefits flow-ing from the bank’s assets, real estate, mortgages on realestate, stocks and bonds, and all the rest of its resources.Both capital and income seem to be simply money. Wecan always show a money sample, as did the cashier, andwhere one’s capital is liquid so that it may readily beturned from one form to another via money—or rather

bars makes a series of flat tops or steps. But by taking days insteadof months, we come nearer to a sloping curve which is a better andsimpler ideal picture. Hereafter we shall use such continuous curves.But they may always be thought of as made up approximately of aseries of columns or bars. For fuller discussion of such charts, see TheNature oj Capital and Income, p. 204 ff.

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