OBJECTIONS CONSIDERED

expected income stands unrefuted. This is not to say costof production does not have an influence. But past costshave no influence on the present value of a capital good,except as those costs affect the value of the future ser-vices it renders and the future costs. Future costs influ-ence this value more directly by being themselves dis-counted at the current rate of discount. It is certainlytrue that if the reproduction cost of the capital goods islowered, their production will be stimulated, the supplyof services they render will be increased, the valuationof these services, i.e., the income from these capital goodsper unit will be lowered, and, therefore, quite aside fromany effect on the discount rate, the capitalization of thisreduced income will tend to be lowered. Furthermore, thisfall in the value of the capital goods will be brought downto a point, through the operation of the opportunity prin-ciple, where it is brought into conformity with the newcost of production of the capital good plus a margin torepresent the amount of interest.

But, although it is true, it is objected, that under thesupply and demand analysis, an increase in the supply ofa single commodity will lower its value, the same does notfollow when applied to all goods. “Exchange values andprices are relations among goods. Increase the supply ofone good and the ratio at which it exchanges for othersor for money will change to its disadvantage. If, however,you increase at the same time the supplies of all goods,including gold, the standard money material, you affectsimultaneously both sides of all ratios of exchange andconsequently the ratios should remain substantially asbefore. It is just such an increase of goods of all sorts anddescriptions that is denoted by Bohm-Bawerk’ s phrase,‘the technical superiority of present over future goods’,

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