If this annual $100 cost of waiting is to be regarded as a negativeitem of income and, like other costs, is to be subtracted from thepositive income, we are forced to conclude that the owner of sucha perpetual annuity receives each year no income whatever!For, if we deduct from the $100 of positive income the $100 costof waiting, the remainder each year is zero! Yet a perpetualannuity is the simplest, purest case of income.
It should now be obvious that the theory which calls “wait-ing ” a cost has worked out its own absurdity. If taken seriouslyand introduced into an accounting system it either interfereswith the discount or capitalization principle or else distorts andeven obliterates the income reckoning in its simplest, or mosttypical form, that of a perpetual annuity. It falsely simplifiesthe formula for valuing capital.
The idea that the value or price of an article should equal itscost seems to possess a certain fascination for many students ofeconomics. That it is false has been sufficiently shown byBohm-Bawerk through reasoning somewhat similar to the fore-going. That it is absurd when carried to its logical conclusionwill be evident if we consider what happens if the same methodof bookkeeping is carried out with respect to the future as wellas the past. It is a poor rule which will not work both ways.This rule, applied to future expected income and outgo, yieldsthe strange result that the capital value of any article insteadof being less than its expected income is equal to it. Thus, torevert to the case of the tree, let us take its value at the end of14 years. It is then worth $2, which, in the parlance of theabstinence theorists, is equal to its previous costs of production,consisting of $1 worth of labor plus $1 worth of waiting duringthe 14 years. It is also, in like manner, equal to the futureincome to be derived from it, which consists of $3 worth ofactual receipts from the sale of the tree, due at the end of elevenmore years, less the cost of waiting for those $3, which amountsto $1.
In the same way, the ten-year annuitant just considered has,at the be ginnin g, property worth $772. This, according to
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