按键盘上方向键 ← 或 → 可快速上下翻页，按键盘上的 Enter 键可回到本书目录页，按键盘上方向键 ↑ 可回到本页顶部！
————未阅读完？加入书签已便下次继续阅读！
has come in evidence in this later time is traceable to the fact
that other things have not remained the same。 The odious outcome
has been made by disturbing causes； not by these enlightened
principles of honest living。 Security and unlimited discretion in
the rights of ownership were once rightly made much of as a
simple and obvious safeguard of self…direction and self…help for
the common man； whereas； in the event； under a new order of
circumstances； it all promises to be nothing better than a means
of assured defeat and vexation for the common man。
Chapter 4
Free Income
Industry of the modern sort mechanical； specialised；
standardised； drawn on a large scale is highly productive。
When this industrial system of the new order is not hindered by
outside control it will yield a very large net return of output
over cost； counting cost in terms of man power and necessary
consumption； so large； indeed； that the cost of what is
necessarily consumed in productive work； in the way of materials；
mechanical appliances； and subsistence of the workmen； is
inconsiderable by comparison。 The same thing may be described by
saying that the necessary consumption of subsistence and
industrial plant amounts to but an inconsiderable deduction from
the gross output of industry at any time。 So inordinately
productive is this familiar new order of industry that in
ordinary times it is forever in danger of running into excesses
and turning out an output in excess of what the market that is
to say the business situation will tolerate。 There is constant
danger of 〃overproduction；〃 So that there is commonly a large
volume of man power unemployed and an appreciable proportion of
the industrial plant lying idle or half idle。 It is quite
unusual； perhaps altogether out of the question； to let all or
nearly all the available plant and man power run at full capacity
even for a limited time。
It is； of course； impossible to say how large the net
aggregate product over cost would be counting the product in
percentages of the necessary cost in case this industrial
system were allowed to work at full capacity and with free use of
all the available technological knowledge。 There is no safe
ground for an estimate； for such a thing has never been tried；
and no near approach to such a state of things is to be looked
for under the existing circumstances of ownership and control。
Even under the most favorable conditions of brisk times the
business situation will not permit it。 There will at least always
be an indefinitely large allowance to be reckoned for work and
substance expended on salesmanship； advertising； and competitive
management designed to increase sales。 This line of expenditures
is a necessary part of businesslike management； although it
contributes nothing to the output of goods； and in that sense it
is to be counted as a necessary deduction from the net productive
capacity of the industrial system as it runs。 It would also be
extremely difficult to make allowance for this deduction； since
much of it is not recognised as such by the men in charge and
does not appear on their books under any special descriptive
heading。 In one way and another； and for divers and various
reasons； the net production of goods serviceable for human use
falls considerably short of the gross output； and the gross
output is always short of the productive capacity of the
available plant and man power。
Still； taken as it goes； with whatever handicap of these
various kinds is to be allowed for； it remains patently true that
the net product greatly exceeds the cost。 So much so that
whatever is required for the replacement of the material
equipment consumed in production； plus 〃reasonable returns〃 on
this equipment； commonly amounts to no more than a fraction of
the total output。 The resulting margin of excess product over
cost plus reasonable returns on the material equipment is due to
the high productive efficiency of the current state of the
industrial arts and is the source of that free income which gives
rise to intangible assets。 The distinction between tangible
assets and intangible is not a hard and fast one； of course； but
the difference is sufficiently broad and sufficiently well
understood for use in the present connection； so long as no pains
is taken to confuse these terms with needless technical verbiage。
To avoid debate and digression； it may be remarked that
〃reasonable returns〃 is also here used in the ordinary sense of
the expression； without further definition； as being sufficiently
understood and precise enough for the argument。 The play of
motives and transactions by which a rough common measure of
reasonable returns has been arrived at is taken for granted。 A
detailed examination of all that matter would involve an extended
digression； and nothing would be gained for the argument。
According to the traditional view； which was handed on from the
period before the coming of corporation finance； and which still
stands over as an article of common belief in the certified
economic theories； 〃capital〃 represents the material equipment；
valued at its cost； together with funds in hand required as a
〃working capital〃 to provide materials and a labor force。 On this
view； corporation securities are taken to cover ownership of the
plant and the needed working capital； and there has been a
slow…dying prejudice against admitting that anything less
tangible than these items should properly be included in the
corporate capitalisation and made a basis on which to issue
corporate securities。 Hence that stubborn popular prejudice
against 〃watered stock〃 which corporation finance had to contend
with all through the latter half of the nineteenth century。
〃Watered stock〃 is now virtually a forgotten issue。 Corporation
finance has disposed of the quarrel by discontinuing the relevant
facts。
There is still a recognised distinction between tangible
assets and intangible； but it has come to be recognised in
corporation practice that the only reasonable basis of
capitalisation for any assets； tangible or intangible； is the
earning…capacity which they represent。 And the amount of capital
is a question of capitalisation of the available assets。 So that；
if the material equipment； e。g。； is duly capitalised on its
earning…capacity； any question as to its being 〃watered〃 is no
longer worth pursuing； since stock can be said to be 〃watered〃
only by comparison with the cost of the assets which it covers；
not in relation to its earning…capacity。 The latter point is
taken care of by the stock quotations of the market。 On the other
hand； intangible assets neither have now nor ever have had any
other basis than capitalisation of earning capacity； and any
question of 〃water〃 in their case is consequently quite idle。
Intangible assets will not hold water。
Corporation finance is one of the outgrowths of the New
Order。 And one of the effects wrought by corporation finance is a
blurring of the distinction between tangible assets and
intangible； inasmuch as both are now habitually determined by a
capitalisation of earning…capacity； rather than by their
ascertained cost； and it is difficult； if not impossible； to draw
a hard and fast line between that part of a concern's
earning…capacity which is properly to be assigned to its plant
and that which is due to its control of the market。 Still； an
intelligible distinction is maintained in common usage； between
tangible assets and intangible； even if the distinction is
somewhat uncertain in detail； and such a distinction is
convenient； so long as too sharp a contrast between the two is
not insisted on。
The earning…capacity of the tangible assets is presumed to
represent the productive capacity of the plant； considered as a
mechanical apparatus engaged in an industrial process for the
production of goods or services； it is presumed to rest on the
market value of the mechanical output of the plant。 The plant is
a productive factor because and in so far as it turns to
practical account the state of the industrial arts now in use；
the community's joint stock of technological knowledge。 So soon；
or so far； as the plant and its management falls short of meeting
the ordinary requirements of this current state of the industrial
arts； and fails to make use of such technological knowledge as is
commonly employed； the whole works ceases by that much to be a
productive factor。 The productive efficiency； and the productive
value； of any given item of industrial equipment is measured by
its effective use of the technological knowledge current in the
community for the time being。 So also； the productive value of
any given body of natural resources land； raw materials； motive
power is strictly dependent on the degree in which it fits
into the industrial system as it runs。
This dependence of productive value on conformity to and use
of the state of the industrial arts is constantly shown in the
case of land and similar natural resources； by the fluct