DISCUSSION OF SECOND APPROXIMATION

occurs half in the present and half at the end of 50 years.In order that the more durable house may have any ad-vantage as to cost, the excess of its cost over the costof the less durable one must be less than the presentvalue of the cost of replacing it 50 years later.

The choice between different instruments for effectingthe same purpose may, of course, depend on their relativeefficiency, that is, the rate of flow of income, or upontheir relative durability, that is, the time of the flow. Itis true, however, as John Rae has pointed out, 6 that effi-ciency and durability usually go hand in hand. A housewhich will endure longer than another is usually morecomfortable also; a tool which will cut better will usuallywear out more slowly; a machine which does the fastestwork will generally be the strongest and most durable.

The alternatives constantly presented to most businessmen are between policies which may be distinguished astemporary and permanent. The temporary policy involvesthe use of easily constructed instruments which soonwear out, and the permanent policy involves the con-struction at great cost of instruments of great durability.When one method of production requires a greater costat first and yields a greater return afterward, it may becalled, conformably to popular usage, the more capitalis-tic of the two. The word capitalistic refers to methodsof employing capital which tend toward an ascending in-come stream. Although the term is not a happy one, ithas a plausible justification in the fact that an ascend-ing income stream means the accumulation of capital,or saving, and still more in the fact that only a capi-talist can afford to choose a method of production whichat first yields little or no income, or even costs some* Rae, The Sociological Theory of Capital, p. 47.

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