tion of lis eaming-capacity,' not of ita prime cost or of itfl mechanical efficiency. It is only more remotely, and through the mediation of the eamingcapacity, that these last-named factors sensibly affect the value of the capital. This eaming-capacity of capital depends in its turn, not so much on the mechanical efficiency of the valuable items bought and Bold in the capital market, as on the tension of the market for goods. To recur to an expression already employed in a similar connection, the question of eaming-capacity of capital relates primarily to its I effectiveness for purposes of vendibility, and only at the second remove to its effectiveneas in the way if material serviceability. But the eaming-capacity which in this way affords ground for the valusr tion of marketable capital (or for the market capitalization of the securities bought and sold) is not its past or actual eaming-capacity, but its presumptive future eaming-capacity; so that the
■ Eifectlve capital = current market value ol nomioal capital = preffimptiTe earning capacity x purchase period, neglecting fortniWuB and incalculable Items wblcb may aSect any given case.
U nominal capital = cap, eflecUve capital = cap', proaumed annual eamingi = ea', and the purchase period of capitalized property ' purohaae) = yp = , we have cap ^cap'
b' X yp =
int'
interest rate per ai