cap’=capcap/n>cap，inwhichcap’isthenominalcapital，asincreasedbythecreditelementcap/n。
　　mat’=mat1/ncap/n>mat，inwhichmat’isthecurrentvalueofthematerialequipment，asincreasedovermatbythecompetitivedemandforequipmentduetothecreditelementcap/n。
　　Oneofthesubstantialsecondarybenefitstobenotedasflowingfromthesemodembusinessexpedientsistheeffectofcorporationfinanceupontheaggregatenominalwealthofthecommunity。A
　　givencommunity，possessedofagivencomplementofmaterialwealth，isricherincapitalifalargeproportionofitsindustrialequipmentiscapitalizedandmanagedbycorporationmethods，quiteapartfromanyincreaseinthematerialitemsofwhichthecommunityispossessed。Cf。TwelfthCensusoftheUnitedStates，“Manufactures，“pt。I。p。xcviWealthmayinthiswaybeincreasedabouttwofoldonanaverage，inexpensively，bythesimpleexpedientofincorporatingthecommunity’sbusinessconcernsintheformofjoint-stockcompanies。Themorehighlyinvolvedandthemorewidelyextendedthecorporationfinancieringis，thericher，instatisticaltermsofcapital，isthecommunity，otherthingsequal。Amongtheseotherthingsarethematerialfactsofthecase。
　　Thecommoditiesboughtandsoldinthegoodsmarketaretheoutcomeofaprocessofproductionandareusefulforamaterialpurpose；thoseboughtandsoldinthecapitalmarketaretheoutcomeofaprocessofvaluationandareusefulforpurposesofpecuniarygain。
　　Cf。Marx，Kapital4thed。bk。I，ch。IV。
　　Effectivecapital=currentmarketvalueofnominalcapital=
　　presumptiveearningcapacityxpurchaseperiod，neglectingfortuitousandincalculableitemswhichmayaffectanygivencase。
　　Ifnominalcapital=cap，effectivecapital=cap’，presumedannualearnings=ea’，andthepurchaseperiodofcapitalizedpropertyyears’purchase=yp=1/interestrateperannum，wehavecapcap’=ea’xyp=ea’/int。
　　Thisequationbetweencap’andea’isdisturbedbythepresenceinanygivencaseofvariablefactorswhichcannotbeincludedintheequation，butitremainstrueafterallqualificationhasbeenmadethatcap’=fea’/int。
　　20。Somethingofthiskindistheusualgroundoftheobstinateresistancewhichmostbusinessmenopposetopublicityofaccounts。Inlinesofbusiness，as，e。g。railroading，inwhichaccountsarereadilyandeffectuallysophisticated“doctored“，theobjectionstopublicityarecommonlylessstrenuous。
　　Cf。，e。g。，Eberstadt，DeutscheKapitalismarkt。
　　Thecapitalofanyindustrialconcernunderthe“moneyeconomy“is，ofcourse，alsovendible，butwithrelativedifficulty；whilethereadiervendibilityofmoderncorporatecapitalissocharacteristicandconsequentialafactorinbusinessandcontrastssobroadlywiththeold-fashionedbusinessmethodsthatitmayfairlybespokenofasvendibilityparexcellence。The“holdingcompany“isthematuredevelopmentofthistrafficinvendiblecapitalinindustrialbusiness。
　　onp。95abovebecomes，underthecircumstancesofthemoderncorporationfinance，ingreatpartaquestionoftheintervalbetweenthepurchaseandsaleofthecapitalengagedinindustryontheonehand，andofthemagnitudeofthediscrepancybetweenactualandputativeearning-capacityontheotherhand，ratherthanaquestionoftheperiodoftheindustrialprocessandthemagnitudeoftheoutputanditsprice。
　　Theformulathereshownbecomes:——
　　turnover=capital/timeactualearningcapacity/n=putativeearningcapacity-actualearningcapacity
　　inwhichcapitalistheamountoftheoperator’sinvestmentintheconcern’ssecurities，thetimeistheintervalbetweenpurchaseandsaleofthesecurities，andtheputativeearningcapacityistakentoexceedtheactualearningcapacitybyanindeterminatefractionofthelatter。
　　Cf。Emery，“PlaceoftheSpeculatorintheTheoryofDistribution。“ProceedingsofthetwelfthannualmeetingoftheAmericanEconomicAssociation；also“Discussion“followingMrEmery’spaper。
　　WellshowninMrEmery’spapercitedabove。
　　Asistrueofgood-willandcreditextensionsgenerally，sowithrespecttothegood-willandcreditstrengthofthesegreaterbusinessmen；itaffordsadifferentialadvantageandgivesadifferentialgain。Inthetrafficofcorporationfinancethisdifferentialgainisthrownimmediatelyintotheformofcapitalandsoisaddedtothenominalcapitalizedwealthofthecommunity。Whatitgivestoitsholdersinthiscapitalizedformisaclaimtoaproportionateshareintheexistingwealth。Ifotherthingsaresupposedtoremainthesamewhichmaynotbethecase，theclaimsoenforcedbythegreatfinanciersonthebasisofgood-willandcreditextensiondeductsthatmuchfromthewealthheldbytherest，thepreviousholders，ascountedintermsofmaterialwealth；ascountedintermofmoneyvalue，ofcourse，theholdingsofpreviousholdersdoorneednotsuffer，sincethenewclaimtaketheformofaneditiontothenumberofcapitalizedvalueunits，althoughtheincreasedaggregatenumberofvalueunitsconstitutesaclaimonthesameaggregatemassofwealthasbefore。Theproratareductionofthematerialmagnitudeoftheseveralsharesofwealthisnotfeltasanimpoverishment，becauseitdoesnottaketheformofareductionofthenominalvalueoftheshares。
　　Thiscapitalizationofthegainsarisingfromadifferentialadvantageresultsinalarge“saving“andincreaseofcapital。
　　Thewealthsodrawninbythefinanciersentrepreneursisnearlyallheldascapital，verylittleofitbeingconsumedincurrentexpensesofliving。Ithasbeencogentlyarguedthattheprofitsoftheundertakersisthechiefandnormalsourceofcapitalizedsavingsinthemodernsituation，andthemethodhereindicatedseemtobethemethodbywhichsuchsavingischieflyeffected。Anextremelysuggestivediscussionoftheundertaker’sgainsinthisconnectionoccursinapaperbyL。V。Birck“DriftsherrensGeviust“，readbeforetheDanishEconomicAssociation，December1901。MoreimmediatelytothepointstillisV。Schou’sdiscussionofMrBirck’spaper。SeeNationalokonomiskTidsskrift，January-February1902，pp。76，78-80J。B。Clark，inlectureshithertounprinted，followsalineofanalysissomewhatcloselyparallelwithSchou，thoughnotcarriedtoquitethesamelength。
　　Thisprocessofcombinedrecapitalizationandsavingmaybestatedformallyasfollows:Theinitialvalueofthepropertiessubmittedforcoalitionandrecapitalization，cap，isinthenormalcaseaugmentedbytheincrementdelta，makingtheeffectivevalueoftheproperties=capdelta，ineffectiveunits，Uc。Thisaugmentedeffectivevalueoftheproperties=
　　Uccapdeltaiscapitalizedatanominalvalueofcap’=
　　Uncapdelta，innominalunits，Un，nominallyequivalenttoUc。Intherecapitalizationthenumberofunitsofcapitalizationisincreasedbyanelementofintangibleassetsassignedtheownersonaccountofapresumedincreaseofearning-capacityduetothecoalition。Thiselementofgood-willduetocoalitionmaybecalledco。Furtherthereisaddedthebonusofthepromoter，takenasablockofstockinthenewcapitalization，pro。HenceUncap’=Uncapdelta=Uncapcopro。Unpro=Uncap’-cap-co=Undelta-coisevidentlyasecuregaintothepromoterofUcdelta-co，whichisafractionoftheeffectivevalueUccapdelta。Thisissavedbyhiminthecapitalizedform。Theaccountoftheformerownersofthepropertieswillthenstandasfollows:Uccapdelta-pro
　　UccapaccordingasUcdeltaUcpro。Thenominalgainoftheowners，co，mayormaynotbearealgainaccordingastheeventmayprovethatthepromoter’sbonushasnotorhasabsorbedtheentireeffectiveaugmentationofvalue，delta，duetothecoalition；itisthereforeaproblematicalgain，whichmayormaynot，intheevent，provetobeaneffectiveelementofcapitalizedsavings。
　　Theconstitutionofdeltawilldecidewhatistheultimatesourceofthesavingseffectedbythistransaction。Ifdeltaconsistsentirelyofeconomiesofproduction，thecapitalizedsavingsheldbythepromoterandformerownersasaresultofthetransactionrepresentnewvaluesaddedto，orsavedto，theaggregatewealthofthecommunity。Ifdeltaconsistsentirelyofgood-willintheshapeofmonopolyadvantage，thesavingiseffectedatthecostofthecommunityandforthebenefitofthepromoterandowners；itisthenaninvoluntaryorsubconscioussavingonthepartofthecommunity，wherebyapartofthecommunity’swealthatlargepassesintothehandsoftherecapitalizedcorporation。Wheredeltaismadeupofthesetwoconstituentstogether，theresult，asregardsthepresentpoint，shouldbeplainwithoutdiscussion。If，ontheotherhand，delta=0，sothatcap’=cap，thenthepromoter’ssavings；pro，aresecuredatthecostoftheformerowners；Uccap’-pro=Uccapdelta=0-pro=Uccap-pro。WhereasifUcpro=
　　Ucdelta，Ucco=0，leavingtheownerswithouteffectiveprofitorlossinspiteofanynominalincreaseofthecapitalization。
　　Good-will“inthisfieldofenterprisemostfrequentlytakestheformofalargeabilitytohelporhinderotherfinanciersandfinancinghousesinanysimilarmanoeuvresinwhichtheymaybeengaged，oranabilitytoputtheminthewayoflucrativefinancingtransactions。Theguildoffinanciersiscommonlysplitupintomoreorlesswell-definedfactions，eachcomprisinganextensiveramificationoffinancinghousesandfinanciersfurtheringoneanother’sendeavorsundermoreorlesssettledworkingarrangements。Theseworkingarrangementsarealargepartofthefinanciers’“good-will。“
　　Thiscategoryofgood-willstandsinarelationtothecreationofvendiblecapitalsimilartothatwhichthecorporategood-willofanindustrialbusinessconcernbearstothecreationofvendibleproducts。
　　Parentheticallyitmayberemarkedthatthefailuretocapitalizesuchitemsofgood-willislikelytoinvolveavirtualevasionofthetaxonpersonalproperty，andmay，therefore，bequestionableonmoralgrounds。
　　ThecaseofJ。P。MorganandCompanyis，ofcourse，notherecitedasbeingauniqueorpeculiarinstance，butsimplyasatypicalandstrikingillustrationofwhathappensandofwhatmightbeaccomplishedinanumberoflargeandveryconsequentialcasesofthesameclass。
　　Thisdissociationofthebusinesscontrolfromworkmanlikeefficiencyandfromimmediatecontactwithorownershipoftheindustrialplantgivestheexistingsituationasuperficialresemblancetothefeudalsystem，insofarastouchestheimmaterialityofthecaptain’sconnectionswiththeeverydaylifeandinterestsofthecommunityofwhoseaffairsheismaster。Itgivesacertainplausibilitytotheattemptedinterpretationoflatter-dayeconomicdevelopmentsinfeudalisticterms-SeeGhent，OurBenevolentFeudalism。
　　TheTheoryofBusinessEnterprisebyThorsteinVeblen1904
　　TheTheoryofModernWelfareBeforebusinessprinciplescametodominateeverydaylifethecommonwelfare，whenitwasnotaquestionofpeaceandwar，turnedontheeaseandcertaintywithwhichenoughofthemeansoflifecouldbesupplied。Sincebusinesshasbecomethecentralandcontrollinginterest，thequestionofwelfarehasbecomeaquestionofprice。Undertheoldregimeofhandicraftandpettytrade，dearthhighpricesmeantprivationandmightmeanfamineandpestilence；underthenewregimelowpricescommonlymeanprivationandmayonoccasionmeanfamine。Undertheoldregimethequestionwaswhetherthecommunity’sworkwasadequatetosupplythecommunity’sneeds；underthenewregimethatquestionisnotseriouslyentertained。
　　Butthecommonwelfareisinnolessprecariousacase。Theproductiveefficiencyofmodernindustryhasnotdoneawaywiththerecurrenceofhardtimes，orofprivationforthoseclasseswhoseassuredpecuniarypositiondoesnotplacethemabovethechancesofhardtimes。Distressmaynotbesoextremeinmodernindustrialcommunities，itdoesnotreadilyreachthefaminemark；butsuchadegreeofprivationasisimpliedintheterm“hardtimes“recursquiteasfreelyinmoderncivilizedcountriesasamongtheindustriallylessefficientpeoplesonalowerlevelofculture。Theoscillationbetweengoodtimesandbadisaswideandasfrequentasever，althoughtheaveragelevelofmaterialwell-beingrunsatahighermarkthanwasthecasebeforethemachineindustrycamein。