DISTRIBUTION OF AGRICULTURAL INCOME 317 



who works for wages, all enjoy, the farmer is entitled to a sur- 

 plus profit somewhat analogous to that of an insurance company. 



The real reward of the insurer, whether he be a farmer or a 

 chartered insurance company, is to be found in the excess of 

 gains over losses. In the case of the insurance company it is 

 the total premiums received for assuming the risk minus the 

 losses consequent upon assuming the risk. Here the question 

 arises, How does there happen to be a difference ? Why will 

 the patrons of an insurance company pay it more than their 

 total losses, thus leaving the company a profit ? Evidently be- 

 cause the risk to the insurer is less than to the insured. In the 

 case of fire insurance, for example, the loss to the insurer in 

 case of fire would include only the money value of the buildings 

 and goods destroyed ; but in the case of the insured it would 

 also include shrunken credit and crippled business. Having 

 capital of his own, his credit is good for a certain amount in 

 addition, but a part at least of that credit vanishes with his 

 capital. More important still is the effect of a large and sudden 

 loss as compared with small annual payments upon his consump- 

 tion. These annual sums are paid, as it were, out of the last 

 and least necessary part of his income. In order to make these 

 payments he gives up only the enjoyment of those things which 

 he can best get along without. But a large and sudden loss may 

 deprive him of even the necessaries for a time. This can be 

 illustrated by means of the diagram on page 318. 



Let the income of a certain farmer be measured along the 

 line OX, and the utility to him of the various parts of that in- 

 come along the line OY. That is to say, if his income were 

 represented by the line OF, its marginal utility would be repre- 

 sented by the line EF; but being in fact, let us assume, repre- 

 sented by the line OB, its marginal utility is represented by the 

 line CB. Now let us suppose that he suffers a loss of $1000 by 

 fire once every 55 years on the average. He could well afford 



