210 AGRICULTURAL ECONOMICS 



are capable of producing crops which are just as valuable in 

 terms of money. 



Again, it sometimes happens that land is valued for the social 

 standing which accompanies its ownership, as well as for the 

 income in money which it yields. In a country where this is 

 true, and where, at the same time, there are large numbers of 

 persons who have great fortunes and who are very desirous of 

 attaining to a high social position, the prices which may be 

 paid for land often rise far beyond what could be paid if the 

 series of annual incomes in cash were the only factor to be taken 

 into account. 



Of two pieces of land which will rent for the same amount, 

 that in one district may sell for a higher price than that in an- 

 other because there is more money seeking investment in the 

 one place than in the other. A man of wealth will usually 

 rather have his capital invested in land near where he lives than 

 at a great distance where he cannot so readily look after his 

 property, or if he invests in land at a greater distance he will 

 usually expect a higher rate of return to counteract the disad- 

 vantages arising from the distance. 



This same principle of capitalization may be applied to other 

 forms of income bearers as well as to land. In estimating the 

 value of a given machine, the farmer may think of the amount 

 of service he is to get out of the machine during the next ten 

 years, let us say, on the assumption that the machine will be 

 worn out in that time. This is a rather difficult process be- 

 cause the deterioration of the machine and perhaps, also, the 

 invention of a better machine to do the same work will result 

 in a gradual reduction in the usefulness of the machines ; and 

 yet, if he is to invest wisely in the various forms of equipment, 

 the farmer should attempt to estimate the value of the series 

 of uses which may reasonably be expected to be gotten from 

 the particular instrument of production during the time which 

 it shall be at all serviceable, and then find the present value 

 of these future uses by discounting them " at a rate that reflects 

 the prevailing premium on the present." 



This capital value of the instrument represents the maximum 



