328 PRINCIPLES OF RURAL ECONOMICS 



very uncertain, are very large, the gambling instinct will lead 

 men to invest freely. Shares in such enterprises can be sold at a 

 price so high as to make it certain that investors as a class will 

 lose, just as the buyers of the first box of tickets, in the foregoing 

 illustration, are sure to lose. But when the enterprise is such that 

 large sums must be risked, and the profits, though small, are 

 fairly certain, men are so reluctant to invest that the price which 

 has to be paid (for the farm, for example, or the farming equip- 

 ment) is so low as to make it certain that they who do invest 

 will gain as a class, just as the buyers of the second box of 

 tickets, in the foregoing illustration, will gain as a class. 



There is a certain parallelism between the risk theory of prof- 

 its and the abstinence theory of interest. In the discussion of in- 

 terest it was seen that the necessity of waiting for the product 

 of a piece of capital tended to reduce its present value somewhat 

 below the sum total of its future earnings. The one who buys 

 it at its present value and waits for its earnings to mature will, 

 for this reason, secure a surplus in the form of interest. In a 

 similar way, the risk connected with carrying on any enterprise 

 under unstable conditions may reduce the present value of the 

 equipment, including the labor employed, somewhat below the 

 probable value of its product, even after allowance is made for 

 interest. Those who undertake such enterprises may be ex- 

 pected, in the long run, to secure a surplus in the form of profits. 



But we saw in our discussion of the interest problem that not 

 all waiting is equally burdensome, some being done without any 

 hope or expectation of reward in the form of interest. Similarly, 

 not all risk is equally burdensome, some being undertaken for 

 the sake of the excitement of the hazard. In the case of an 

 enterprise which appeals to the gambling instinct, the eagerness 

 of men to buy the risk will give it a selling value somewhat 

 greater than it is really worth, so that they who persist in buy- 

 ing such risks invariably lose in the long run more than they 



