reated by the aid
of these old machines can prevent them from earning the remainder of
the fund required for replacing them. If they do this, they prevent
any positive destruction of capital which many inventions cause.

(5) When only one _entrepreneur_ introduces the new appliance, his
production is usually increased, but not to an extent that causes a
quick fall in price. This affords to the users of old appliances whose
plants are not already at the final point of inefficiency a chance to
continue accumulating the fund for replacement. The profits of the
user of the better appliance are meanwhile accruing.

(6) When all _entrepreneurs_ introduce the new appliance at once they
do so--provided that their act is intelligent--because the saving
effected in the cost of production makes the change advantageous in
spite of the waste entailed. They expect an all-round net profit
during the period before the price of the product falls to its new
level, and they expect that this will give them more than is required
for interest, cost of future replacement of the superior instruments,
and the deficit in the accounts caused by the early discarding of the
superseded appliances.

(7) Without treating this prospective profit inhering in the new
appliance as capital, we must regard it as affording an assurance that
new capital will soon appear. There are great gains to be made by
using the new appliances, and some of these will add themselves to the
permanent fund of productive wealth.

(8) The cost of the new appliances may be defrayed by their owner's
earlier accumulations or by loans. In either case they come out of a
social fund that is created mainly by the appliances which in a
preceding period have yielded special gains. The machine of to-day is
paid for from the available surplus created by the machine of an
earlier day, and a series of inventions enlarges the social fund of
capital in spite of all wastes by which it is attended.

[Illustration]

The effect that a series of improvements has on the amount of social
capital, if we measure the fund solely on the basis of the cost of the
capital goods which embody it, may be represented thus:--The
horizontal line measures time and is graduated in years from one to
ten. The distance of the point above this base represents the amount
of capital as estimated in units of cost, in the possession of the
society at the time a particular improvement is made, and would remain
unc