Thevariousdescriptionsofsecuritieswhichinthiswayrepresentcorporatecapitalarequotableonthemarketandaresubjecttomarketfluctuations；wherebyitcomesaboutthattheaggregateeffectivemagnitudeofthecorporatecapitalvarieswiththetoneofthemarket，withthemanoeuvresofthebusinessmentowhomisdelegatedthemanagementofthecompanies，andwiththeaccidentsoftheseasonsandthechancesofpeaceandwar。Accordingly，theamountofthebusinesscapitalofagivenconcern，orofthebusinesscommunityasawhole，variesinmagnitudeingreatmeasureindependentlyofthemechanicalfactsofindustry，aswasnotedaboveinspeakingofloancredit。
Themarketfluctuationsintheamountofcapitalproceedonvariationsofconfidenceonthepartoftheinvestors，oncurrentbeliefastotheprobablepolicyortacticsofthebusinessmenincontrol，onforecastsastotheseasonsandthetacticsoftheguildofpoliticians，andontheindeterminable，largelyinstinctive，shiftingmovementsofpublicsentimentandapprehension。Sothatundermodernconditionsthemagnitudeofthebusinesscapitalanditsmutationsfromdaytodayareingreatmeasureaquestionoffolkpsychologyratherthanofmaterialfact。
Butinthisuncertainandshiftingrelationofthebusinesscapitaltothematerialequipmentthereareoneortwopointswhichmaybesetdownasfairlysecure。Sincethecreditinstrumentsinvolvedinmoderncapitalizationmaybeusedascollateralforafurthercreditextension，asnotedinthechapteronloancredit，14*theaggregatenominalcapitalinhandatagiventimeis，normally，largerbyanappreciableamountthantheaggregatevalueofthematerialpropertiesinvolved；15*andatthesametimethecurrentvalueofthesematerialpropertiesisalsogreaterthanitwouldbeintheabsenceofthatcreditfinancieringforwhichcorporatecapitalizationaffordsabasis。
Germanwritershavefamiliarizedeconomicreaderswiththeterms“crediteconomy，““moneyeconomy“Geldwirtschaft，and“naturaleconomy“Naturalwirtschaft，thelater-modernschemeofeconomiclifebeingcharacterizedasa“crediteconomy。“Whatcharacterizestheearly-modernscheme，the“moneyeconomy，“andsetsitoffincontrastwiththenaturaleconomydistributioninkindthatwentbeforeitinWest-Europeanculture，istheubiquitousresorttothemarketasaventforproductsandasourceofsupplyofgoods。Thecharacteristicfeatureofthismoneyeconomyisthegoodsmarket。Aboutthegoodsmarketbusinessandindustrialintereststurninearlymoderntimes；andtothisearly-modernsystemofindustriallifethecurrentdoctrinesofpoliticaleconomyareadapted，asindicatedabove。
Thecrediteconomy-theschemeofeconomiclifeoftheimmediatepastandthepresent-hasmadeanadvanceoverthemoneyeconomyintherespectwhichchieflydistinguishesthelatter。Thegoodsmarket，ofcourse，inabsolutetermsisstillaspowerfulaneconomicfactorasever，butitisnolongerthedominantfactorinbusinessandindustrialtraffic，asitoncewas。Thecapitalmarkethastakenthefirstplaceinthisrespect。Thecapitalmarketisthemoderneconomicfeaturewhichmakesandidentifiesthehigher“crediteconomy“assuch。Inthiscrediteconomyresortishabituallyhadtothemarketasaventforaccumulatedmoneyvaluesandasourceofsupplyofcapital。17*
Tradingundertheoldregimewasatrafficingoods；underthenewregimethereisadded，asthedominantandcharacteristictrait，tradingincapital。Bothinthecapitalandinthegoodsmarketthereareprofessionaltraders，aswellasbuyersandsellerswhoresorttothemarkettodisposeoftheirholdingsandtosupplytheirneedsofwhatthemarketaffords。Ineitherclassoftradingtheendssoughtbythoseengagedinthebusinessaregenericallythesame。Theendeavorsofthosewhoareinthebusinessoftrading，whobuyinordertosellandsellinordertobuy，aredirectedtothepecuniarygainthatistobegotthroughanadvantageousdiscrepancybetweenthepricepaidandthepriceobtained；butonthepartofthosewhoresorttothemarkettosupplytheirneedstheendsoughtisnotthesameinthetwocases。Thelastbuyerofgoodsbuysforconsumption，butthelastnegotiatorofcapitalbuysforthesakeoftheulteriorprofit；insubstancehebuysinordertosellagainatanadvance。Theadvancewhichhehasinviewistocomeoutoftheprospectiveearningsofthecapitalforwhichhenegotiates。Whathehasinviewashisulteriorendinthetransactionistheconversionofthevaluesforwhichhenegotiatesintoalargeroutcomeofmoneyvalues，-whateverprocessofproductionandthelikemayintervenebetweentheinceptionandthegoalofhistraffic。18*
Thevalueofanygivenblockofcapital，therefore，turnsonitsearning-capacity；or，asthemathematicalexpressionhasit，thevalueofcapitalisafunctionofitsearning-capacity，19*
notofitsprimecostorofitsmechanicalefficiency。Itisonlymoreremotely，andthroughthemediationoftheearning-capacity，thattheselast-namedfactorssensiblyaffectthevalueofthecapital。Thisearning-capacityofcapitaldependsinitsturn，notsomuchonthemechanicalefficiencyofthevaluableitemsboughtandsoldinthecapitalmarket，asonthetensionofthemarketforgoods。Torecurtoanexpressionalreadyemployedinasimilarconnection，thequestionofearning-capacityofcapitalrelatesprimarilytoitseffectivenessforpurposesofvendibility，andonlyatthesecondremovetoitseffectivenessinthewayofmaterialserviceability。Buttheearning-capacitywhichinthiswayaffordsgroundforthevaluationofmarketablecapitalorforthemarketcapitalizationofthesecuritiesboughtandsoldisnotitspastoractualearning-capacity，butitspresumptivefutureearning-capacity；sothatthefluctuationsinthecapitalmarket-thevaryingmarketcapitalizationofsecurities-turnaboutimaginedfutureevents。Theforecastinthecasemaybemoreorlesssagacious，but，howeversagacious，itretainsthecharacterofaforecastbasedonothergroundsbesidesthecomputationofpastresults。
Allcapitalwhichisputonthemarketisinthiswaysubjectedtoaninterminableprocessofvaluationandrevaluation-i。e。acapitalizationandrecapitalization-onthebasisofitspresumptiveearning-capacity，wherebyitallassumesmoreorlessofacharacterofintangibility。Butthemostelusiveandintangibleitemsofthismarketablecapitalare，ofcourse，thoseitemswhichconsistofcapitalizedgood-will，sincetheseareintangiblegoodsfromstarttofinish。Itisuponthisfactorofgood-willincapitalthatachangeinpresumptiveearning-capacityfallsmostimmediately，andthisfactorshowsthewidestandfreestmarketfluctuations。Thevariationsinthecapitalizedvalueofmerchantablegood-willarerelativelywideandunstable，asisshownbythequotationsofcommonstock。
Inthecapitalmarketthecommodityinwhichtradingisdone，then，isthecapitalizedputativeearning-capacityofthepropertycoveredbythesecuritiesboughtandsold。Thispropertyisinparttangible，inpartintangible，thetwocategoriesbeingseldomclearlydistinguishable。Theitemsboughtandsoldareputintomerchantableformbybeingstandardizedintermsofmoneyandsubdividedintoconvenientimaginaryshares，whichgreatlyfacilitatesthetraffic。Theearning-capacityonwhichthemarketcapitalizationrunsandaboutwhichthetrafficinmerchantablecapitalturnsisaputativeearning-capacity。Itfollowsthatthisputativeearning-capacityofagivenblockofcapital，asittakesshapeinthesurmisesofoutsideinvestors，maydifferappreciablyfromtheactualearning-capacityofthecapitalasknowntoitsmanagers；anditmayreadilybetothelatter’sinterestthatsuchadiscrepancybetweenactualandimputedearning-capacityshouldarise。20*When，e。g。，theputativeearning-capacityofthecapitalcoveredbyagivenlineofsecurities，asshownbythemarketquotations，risesappreciablyabovewhatisknowntoitsmanagerstobeitsactualearning-capacity，thelattermayfindtheiradvantageinsellingout，oreveninsellingshort；whileintheconversecasetheywillbeinclinedtobuy。Moreover，putativeearning-capacityistheoutcomeofmanysurmiseswithrespecttoprospectiveearningsandthelike；andthesesurmiseswillvaryfromonemantothenext，sincetheyproceedonanimperfect，largelyconjectural，knowledgeofpresentearning-capacityandonthestillmoreimperfectlyknownfuturecourseofthegoodsmarketandofcorporatepolicy。Hencesalesofsecuritiesarefrequent，bothbecauseoutsidersvaryintheirestimatesandforecasts，andbecausetheinformationoftheoutsidersdoesnotcoincidewiththatoftheinsiders。Theconsequenceisthatagivenblockofcapital，representing，e。g。，acontrollinginterestinagivenindustrialenterprise，may，andinpracticeitcommonlywill，changeownersmuchmorefrequentlythanagivenindustrialplantwaswonttochangeownersundertheoldregime，beforethefullydevelopedcorporationfinancecametooccupythefieldofindustrialbusiness。21*
Itfollows，further，thatunderthesecircumstancesthemenwhohavethemanagementofsuchanindustrialenterprise，capitalizedandquotableonthemarket，willbeabletoinduceadiscrepancybetweentheputativeandtheactualearning-capacity，byexpedientswellknownandapprovedforthepurpose。Partialinformation，aswellasmisinformation，sagaciouslygivenoutatacriticaljuncture，willgofartowardproducingafavorabletemporarydiscrepancyofthiskind，andsoenablingthemanagerstobuyorsellthesecuritiesoftheconcernwithadvantagetothemselves。Iftheyareshrewdbusinessmen，astheycommonlyare，theywillaimtomanagetheaffairsoftheconcernwithaviewtoanadvantageouspurchaseandsaleofitscapitalratherthanwithaviewtothefutureprosperityoftheconcern，ortothecontinuedadvantageoussaleoftheoutputofgoodsorservicesproducedbytheindustrialuseofthiscapital。
Thatistosay，theinterestofthemanagersofamoderncorporationneednotcoincidewiththepermanentinterestofthecorporationasagoingconcern；neitherdoesitcoincidewiththeinterestwhichthecommunityatlargehasintheefficientmanagementoftheconcernasanindustrialenterprise。Itistotheinterestofthecommunityatlargethattheenterpriseshouldbesomanagedastogivethebestandlargestpossibleoutputofgoodsorservices；whereastheinterestofthecorporationasagoingconcernisthatitbemanagedwithaviewtomaintainingitsefficiencyandsellingaslargeanoutputasmaybeatthebestpricesobtainableinthelongrun；buttheinterestofthemanagers，andoftheownersforthetimebeing，istosomanagetheenterpriseastoenablethemtobuyituportoselloutasexpeditiouslyandasadvantageouslyasmaybe。Theinterestofthecommunityatlargedemandsindustrialefficiencyandserviceabilityoftheproduct；whilethebusinessinterestoftheconcernassuchdemandsvendibilityoftheproduct；andtheinterestofthosemenwhohavethefinaldiscretioninthemanagementofthesecorporateenterprisesdemandsvendibilityofthecorporatecapital。Thecommunity’sinterestdemandsthatthereshouldbeafavorabledifferencebetweenthematerialcostandthematerialserviceabilityoftheoutput；thecorporation’sinterestdemandsafavorablepecuniarydifferencebetweenexpensesandreceipts，costandsalepriceoftheoutput；thecorporationdirectorate’sinterestisthatthereshouldbeadiscrepancy，favorableforpurchaseorforsaleasthecasemaybe，betweentheactualandtheputativeearning-capacityofthecorporation’scapital。
Ithasbeennotedinanearlierchapterthatthereunavoidablyresultsadiscrepancy，notuncommonlyadivergence，betweentheindustrialneedsofthecommunityandthebusinessneedsofthecorporations。Undertheregimeoftheold-fashioned“moneyeconomy，“withpartnershipmethodsandprivateownershipofindustrialenterprises，thediscretionarycontroloftheindustrialprocessesisinthehandsofmenwhoseinterestintheindustryisremovedbyonedegreefromtheinterestsofthecommunityatlarge。Butundertheregimeofthemoreadequatelydeveloped“crediteconomy，“withvendiblecorporatecapital，22*
theinterestofthemenwhoholdthediscretioninindustrialaffairsisremovedbyonedegreefromthatoftheconcernsundertheirmanagement，andbytwodegreesfromtheinterestsofthecommunityatlarge。
Thebusinessinterestofthemanagersdemands，notserviceabilityoftheoutput，norevenvendibilityoftheoutput，butanadvantageousdiscrepancyinthepriceofthecapitalwhichtheymanage。Thereadyvendibilityofcorporatecapitalhasingreatmeasuredissociatedthebusinessinterestofthedirectoratefromthatofthecorporationwhoseaffairstheydirectandwhosebusinesspolicytheydictate，andhasledthemtocentretheirendeavorsuponthediscrepancybetweentheactualandtheputativeearning-capacityratherthanuponthepermanentefficiencyoftheconcern。Theirconnectionwiththeconcernisessentiallytransient；itcanbeterminatedspeedilyandsilentlywhenevertheirprivatefortunedemandsitsseverance。Instancesareabundant，moreparticularlyinrailwaymanagement，wherethisdiscrepancybetweenthebusinessinterestoftheconcernandtheprivatebusinessinterestofthemanagersforthetimebeinghasledtoverypicturesquedevelopments，suchascouldnotoccuriftheinterestsofthemanagementwereboundupwiththoseofthecorporationinthemanneranddegreethatonceprevailed。Thefactissignificantthatthemorefrequentandstrikinginstancesofsuchmanagementofcorporateaffairsforprivateendshavehithertooccurredinrailroading，atthesametimethatthemethodsandexpedientsofmoderncorporationfinancehavealsofirstandmostwidelyreachedafairdegreeofmaturityinrailroading。Itholdsoutasuggestionastowhatmayfairlybelookedforwhencorporationfinanceshallhavemadeitselfmorethoroughlyathomeinthe“industrials“proper。Indeed，thefieldofthe“industrials“isbynomeansbarrenofinstancescomparablewiththematurerandmoresagaciousrailroadfinanciering。