ECONOMIC THEORY IN A NEW RELATION 53 



Analogous to the issue as to the law of growth of population is 

 that which concerns the law of accumulation of capital, and in this 

 connection less scientific work has been done than has been done 

 in the former field, and a highly questionable conclusion has been 

 lightly accepted. An increase in the amount of productive wealth 

 raises wages as a decrease in the number of workers would do. It 

 is the second of two coordinate causes of an enlarged return for the 

 laboring class, and it has been too readily assumed that an increase 

 in the productive fund of society tends to retard a further increase. 



The conclusion is thus easily reached that any gain which labor 

 may make through an enlargement of the social capital will grow 

 smaller, because this enlargement itself will go on more and more 

 slowly. An influx of capital tends to retard rather than to stimu- 

 late a further influx. As capital becomes greater, the rate of inter- 

 est falls; and it has been assumed that this fall reduces the total 

 incentive to accumulation. Abstinence is foregoing something in 

 the present for the sake of something in the future, and if this 

 prospective reward grows smaller, it is taken as a matter of course 

 that the motive for securing further capital will also be smaller. 



Now there is a theoretical condition in which the effect of an 

 increase of capital will be the opposite of this. It will stimulate 

 a further increase. It has been conceded that a desire to endow a 

 family with an income of a certain fixed amount may have such an 

 influence. If, in order to maintain an accustomed standard of 

 living, it is necessary that one's children should inherit an annual 

 income of four thousand dollars a year, a hundred thousand dollars 

 will be needed when the rate of interest stands at four per cent; 

 whereas, under a rate of five per cent, eighty thousand would have 

 sufficed. This qualification may have far more importance than has 

 been attached to it, for the reason, first, that a desire to place 

 descendants on a certain plane of life may become a dominant 

 motive of the capitalist class; and secondly, because this class may 

 come to include a larger and larger proportion of the men who 

 labor. Let it once be that workmen become habituated to a rising 

 standard of living, that they wish to see their children live better 

 than they do themselves, and that they rely on costly training and 

 on transmitted capital to enable them to do so, and we have a 

 motive for saving a greater amount of capital, the smaller the per- 

 centage of its annual earnings. If, further, the men who reap the 

 net rewards of business the entrepreneurs' profits look on such 

 returns more and more as a means of endowing descendants, you 

 have in their cases also a greater motive for saving as the income 

 from a given amount becomes smaller. The two chief sources of 

 increase of capital, namely, wages of labor and the net profits of 

 business, may, as interest falls, enlarge the grand total of wealth 

 more rapidly rather than less so. 



