Page:Indian Journal of Economics Volume 2.djvu/33

AR? OF ECOI?OMI? DgYELOPME1V? 28 4. DeFreeiatEn of Capital ?oods, and Mai,ttenance of the CaFital Fu,td i, tact.--Every kind of tool or machine tends to wear out with use, and every kind o! building or other strnctnre has a tendency to deterio- rate, or ex'en to' disintegrate. from the action o! the weather and other natural forces. During the early years not much deterioration is observable; but it may rapidly at a later date. Expensive repairs increase become necessary; and bnilt up out o! revenne if no reserre fund has .been it will be necessary to raise fresh capital in order to keep the machine or strnctnre in riseable condition. This wonld be yery bad. finance.' Both from the economic and financial point of ?qew it is essential clearly ?o recognize-that the .original capital fund shoald be maintained intact. The capital which was originally invested in ?nachinery, works and buildings may be said to evest ? itself during the whole life of the machines and strnctures, i.e., so long as they remain in nseable condition. There are data accnmulated by which it is possible to estimate approximately beforehand the probable life of every kind of machine, ?'ehicle or bnilding; and a sufficient annual charge to monnt up to the original capital aost at componnd interest end of its life must .be debited as part of the employment against the earnings of every capital goods ntilized for any kind of prodactive purposes or for direct enjoyment. nnderstood that failnre to the original capital fund, and net revenne is obtained by making by the cost o! kind of annual charge for repairs and depreciation, On the other hand, it is said that there are certain big engineering works requiring e?nbankments, tunnels, massive stone dams, and the like, which are originally constructed in so solid and durable a manner that t This tonn, first uoed by me in 1911, means precisely the ?ame as ,?ni,toest (see Jevous, '/'bor? of Po/. Ecoa., 4th ed.; pp. S?Jl and 284). It should be most clearly do this im'olves using up that a fictitiously high an insufficient