THIRD APPROXIMATION

he can modify his income stream by this means. Con-sequently it will not be possible, as assumed in the firsttwo approximations, for a man to modify his incomestream at will; its possible modification will be limited bythe fear of the borrower that he may not be able to repayand the greater fear of the lender that he may not be re-paid—because the borrower’s credit may not prove good.In consequence of this limitation upon his borrowingpower, the borrower may not succeed in modifying hisincome stream sufficiently to bring his rate of preferencefor present over future income down to agreement withthe rate or rates of interest ruling in the market; andfor like reasons he may not succeed in bringing the rateof return over cost into conformity with any rate ofinterest.

One feature of these limitations on borrowing may herebe noted. The ability and willingness to borrow dependnot only on the amount of capital which the would-beborrower possesses, but also on the form in which thatcapital happens to exist. Some securities are readily ac-cepted as collateral, and accepted as collateral at a highpercentage of their market value, whereas others will passwith difficulty and only at a low percentage of that value.The drift, especially during the last generation, towardthe corporate form of business has had a striking effect inincreasing the power and readiness to borrow. Whereasformerly many businesses were conducted as partnershipsand on a small scale, numerous stocks and bonds havenow been substituted for the old rights of partnershipand other less negotiable forms of security. Similarly thesmall local companies, the stock of which was held almostexclusively by one family or group of friends, have beenmerged into large nationally known companies, the securi-

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