Itissafetoaffirmthatthisgood-willofthegreatreorganizerhasinsomemeasureenteredincapitalizedformintothecommonstockoftheUnitedStatesSteelCorporation，asalsointothatofsomeoftheothergreatcombinationsthathavelatterlybeeneffected。The“good-will“ofMrCarnegieandhislieutenants，aswellasofmanyotherlargebusinessmenconnectedwiththesteelindustry，hasalsonodoubtgonetoswellthecapitalizationofthegreatcorporation。Butgood-willonthishigherlevelofbusinessenterprisehasacertaincharacterofinexhaustibility，sothatitsuseandcapitalizationinonecorporationneednot，andindeeddoesnot，hinderordiminishtheextenttowhichitmaybeusedandcapitalizedinanyothercorporation。31*Thecaseisanalogous，thoughscarcelysimilar，tothatoftheworkmanlikeorartisticskillofahandicraftsman，oranartist，whichmaybeembodiedinagivenproductwithoutabatingthedegreeofskillpossessedbytheworkman。Likeothergood-will，thoughperhapsinahigherdegreeofsublimation，itisofaspiritualnature，suchthat，byvirtueoftheubiquitypropertospiritualbodies，thewholeofitmayundividedlybepresentineverypartofthevariousstructureswhichithascreated。Indeed，thefactofsuchgood-willhavingbeenincorporatedincapitalizedforminthestockofanygivencorporationseemsrathertoaugmentthantodiminishtheamountatwhichitmayadvantageouslybecapitalizedinthestockofthenextcorporationintowhichitenters。Ithasalsothecorrelativespiritualattributethatitmayimperceptiblyandinscrutablywithdrawitsanimatingforcefromanyoneofitscreatureswithouttherebyalteringthematerialcircumstancesofthecorporationwhichsufferssuchanintangibleshrinkageofitsforces。
Therecanbenoquestionbutthatthegood-willofthevariousgreatorganizersandtheirfinancieringhouseshasrepeatedlybeencapitalized，probablytoitsfullamount，inthecommonstockofthevariouscorporationswhichtheyhavecreated；
buttakeninthesenseofanassetbelongingtothefinancinghouseasacorporation，itisnotknownthatthisitemofimmaterialwealthhasyetbeenformallycapitalizedandofferedinquotablesharesonthemarketorincludedintheschedulesofpersonalproperty。32*
Thesublimationofbusinesscapitalthathasbeengoingforwardinrecenttimeshasgraveconsequencesfortheownersofpropertyaswellasfortheconductofindustry。Insofarasinvestedpropertyismanagedbythemethodsofmodemcorporationfinance，itisevidentthatthemanagementisseparatedfromtheownershipoftheproperty，moreandmorewidelyasthescopeofcorporationfinancewidens。Thediscretion，themanagement，liesinthehandsoftheholdersoftheintangibleformsofproperty；
andwiththeextensionofcorporationmethodsitisincreasinglytruethatthismanagement，again，centresinthehandsofthosegreaterbusinessmenwhoholdlargeblocksoftheseintangibleassets。Thereachofabusinessman’sdiscretionarycontrol，undercorporationmethods，isnotproportionedsimplytotheamountofhisholdings。Ifhisholdingsarerelativelysmall，theygivehimvirtuallynodiscretion。Whereasiftheyarerelativelylarge，theymaygivehimabusinessdiscretionofmuchmorethanaproportionatereach。Theeffectivereachofabusinessman’sdiscretionmightbesaidtoincreaseasthesquareofhisholdings；althoughthisistobetakenasasuggestivecharacterizationratherthanasanexactformula。
Amongtheholdingsofindustrialpropertythatcountinthiswaytowardcontrolofthebusinesssituation，theintangibleassetsrepresentedbycommonstock，good-will，andthelikearechieflyofconsequence。Hencefollowthesetworesults:thefortunesofpropertyownersareinlargemeasuredependentonthediscretionofotherstheownersofintangibleproperty；andthemanagementoftheindustrialequipmenttendsstronglytocentreinthehandsofmenwhodonotowntheindustrialequipment，andwhohaveonlyaremoteinterestintheefficientworkingofthisequipment。Thepropertyofthosewhoownless，orwhoownonlymaterialgoods，isadministeredbythosewhoownmore，especiallyofimmaterialgoods；andthematerialprocessesofindustryareunderthecontrolofmenwhoseinterestcentresonanincreasedvalueoftheimmaterialassets。
Thedistinctionbetweenbusinesscapitaland“industrialcapital“or“capitalgoods“hasbeenshownbyKnies，GeldundCredit，vol。I。ch。II。pp。40-60。DistinctionshavingaverysimilarerectinsomebearingsaretobefoundinRodbertus“privatecapital“and“nationalcapital“，inBohm-Bawerk“acquisitivecapital“and“productivecapital，“or“privatecapital“and“socialcapital“，inClark“capital“and“capitalgoods“。Similardistinctionsaremadebyvariouswriterstohelpouttheincompetencyofthereceiveddefinitionoftheterm。Themeritofthesedistinctionsdoesnotconcernthepresentinquiry，sincetheyaremadeforotherpurposesthanthathereaimedat。
Thedistinctionmadeaboveisnotanattempttorecasttheterminologyofeconomictheory，butissimplyanexpedientforpresentuse。Itamountstoanunqualifiedacceptanceoftheconceptmoreorlesswelldefinedwhichbusinessmenhabituallyattachtotheterm“capital。“MrF。A。Fetterhaslatterlyspokenfortherestrictionof“capital，“asatechnicalterm，practicallytowhatisherecalled“businesscapital。“MrFetter’s“capitalconcept，“however，shouldprobablynotbetakentocoverintangibleassets。ThepracticaldistinctionisvisibleinthetestimonyofvariouswitnessesbeforetheIndustrialCommission，asalsointhespecialreporton“Securities，“
Report，vol。XIII。
EvensolateandcompetentastudentofcorporatecapitalasJ。vonKorosiisboundbythisantiquepreconception，andhisworkhassufferedinconsequence。SeeFinanzielleErgebnissederActiengesellschaften，p。3。
Thisstateofthecaseisbroughtout，inaveiledmanner，bythewell-knownproposition，expoundedinvaryingformbyvariouswriters，thatthecostofequipmentonwhichcapitalizationmust，intheory，takeplaceisthecostofreproductionofallvaluableitemsincluded，tangibleandintangible。
“Nothingismoreillusiveanddelusivethantheideathatifacorporation’sstockbeonlypaidininmoneyattheoutsetitisthereforebetteroffthanonethathasissueditsstockforpropertythatcouldnotbeconvertedforonecentonthedollar。
Thequestioniswhatassetsthecorporationhasgotatthetimeoftheparticulartransaction，andthatcanbeascertainedonlybypresentinquiry。“-TestimonyofF。L。Stetson，ReportoftheIndustrialCommission，vol。I。p。976。Cf。Meade，TrustFinance，ch。XVIandXVIII。
Earning-capacityispracticallyacceptedastheeffectivebasisofcapitalizationforcorporatebusinessconcerns，particularlyforthosewhosesecuritiesarequotedonthemarket。
Itisinthestockmarketthatthiseffectivecapitalizationtakesplace。Butthelawdoesnotrecognizesuchabasisofcapitalization；norarebusinessmengenerallyreadytoadoptitinsetform，althoughtheyconstantlyhaverecoursetoit，ineffect，inoperationsofinvestmentandofcreditextension。Cf。
ReportoftheIndustrialCommission，vol。I。pp。6，17，21Test。
F。B。Thurber；p。967Test。F。L。Stetson；pp。585-587Test。
H。H。Rogers；pp。110-111，124Test。H。O。Havemeyer；pp。1021，1032Test。J。W。Gates；pp。1054-1055TestS。Dodd；vol。XIII。
pp。287-288Test。H。Burn；p。388Test。J。Morris；pp。
107-108Test。E。R。Chapman。SeeQuarterlyJournalofEconomics，February1903，pp。344-345，“TheHolyokeWaterCase，“foranillustrativedecision。
Theadvantagesaffordedtheirownersbytheseintangibleassetshavelatterlybeendiscussedbyeconomistsundersuchheadingsas“Rent“or“Quasi-Rent。“Thesediscussions，itisbelieved，areofgreattheoreticalweight。Inbusinesspractice，however，theitemsinquestionaretreatedascapital，whichmustavailasanexcuseforincludingthemhereinbusinessCapital。
CompareBohm-Bawerk’sandClark’sdistinctionsbetween“private“and“social“capital，andbetween“capital“and“capitalgoods。“
SeeChapterIIIabove。
Onthebooksofthecorporationitis，ofcourse，carriedasanitemofliability；asisthecommonstock；butthatisatechnicalexpedientofaccountancy，anddoesnottouchthesubstantialquestion。
10。Seetestimonyofvariouswitnesseson“Capitalization“beforetheIndustrialCommission，vols。I，IX，XIII。
11。Asoneofmanyillustrativecases，theRubberGoodsManufacturingCompanymaybetakenasatypicalinstanceofacorporationorganizedinaconservativebutup-to-datemannerforpermanentsuccessandstablevalue。Itsauthorizedissueofstockis$25，000，0007percentcumulativepreferred，and$25，000，000
common。Theactualissuein1901wasabout$8，000，000preferredand$17，000，000common，ofwhichthepreferredwaspresumedtocoverthevalueofthetangibleassets。AnothercoalitionorganizedbythesamepromoterMrC。R。Flint，theAmericanChicleCompany，illustratesthesamegeneralfeature。Thepreferredstockofthiscompany$3，000，000“inroundnumberswasthreetimestheamountoftangibleassets，“whilethecommonstock$6，000，000representsnotangibleassets。Theaggregatecapitalizationisaboutninetimesthetangibleassets。Thewitnesssaysthatthiscorporationhasbeenprovedbyeventstobe“onaconservativebasisfromthefactthatthecompanyhaspaid8percentonitscommonstock，“whichhasbeensellingat80-ReportoftheIndustrialCommission，vol。XIII。pp。47，50。
12。Itmaybearguedthatthisidentificationofthecommonstockwiththeintangibleassetsholdstrueintheoryonly，inthesensethatthisistheviewheldbythebusinessmenwhooccupythemselveswithsuchmatters；whileinpointoffactnodistinctionofthisnaturebetweencommonandpreferredstockisorcanpracticallybemaintainedafterthestockhasoncefounditswayintothemarket。Itmightseem，inotherwords，thatwhenthestockhasoncepassedthestageoforganizationandgoneintothehandsofthepurchasers，eachsharerepresentsnothingbutanundividedinterestintheaggregatecapitalizationoftheconcern，sothattheparticularitemofwealthrepresentedbyagivenshareorgivenformofsecuritycannolongerbeidentified。
Onthefaceofthesituationsuchappearstobethecase，buttherearefactswhicharguefortheviewsetoutabove。Itis，e。g。，wellknownthatwhenevercircumstancesarisewhichimmediatelyaffectthevalueofthegood-willofacorporation，itisthequotationsofthecommonstockthatfirstandmostdecidedlyareaffected。Ifthegoodwilloftheconcernmakesagreatandrapidgain，e。g。throughmanoeuvreswhichputitinapositionofmonopolyorthroughchangesinthegoodsmarketwhichgreatlyincreasethedemandfortheconcern’sproduct，andthelike，itisthequotationofthecommonstockthatmeasuresandregisterstheadvantagewhichtherebyaccruestotheconcern，andthemarketfluctuationofthecommonstockislikewisetheinstrumentbymeansofwhichmanipulationsarecarriedthroughthataffecttheseintangibleassets。Atthesametimethisruledoesnotholdhardandfast，asisseenincaseofaliquidationwhenthecapitaloftheconcernmayhaveshrunktosuchdimensionsthattheentirecapital，includingtheintangibleassets，willnomorethansatisfytheclaimsrepresentedbythedebentures。Still，inpointofpracticalfact，thetheoretical
preconceptionofbusinessmenthatthecommonstockinsomeintelligiblesensecoverstheintangibleassetsisfairlyborneoutbyeverydayexperience，takenbyandlarge。
Acuriousparallelmightbetracedbetweenthecurrentendeavorsofthebusinesscommunitytoorganizeandmanagetheindustrialequipmentonthebasisofimmaterialassetsandthemedievalbusinessperplexitiesandactionsrelativetoloansoninterest。Inbothcasesthebusinesscommunityhashadtofaceuntriedexigenciestogetherwithapopular，traditionalprejudicethatdiscountenancestheexpedientsbywhichtheseexigenciesaretobemet。Themedievalpresumptionwasthatthemanagementofproductivegoodsandtheprofitsaccruingfromtheirusemustgototheirusers。Cf。Ashley，EconomicHistory，vol。I。ch。III，vol。IIch。VI；Endemann，DienationalokonomischeGrundsatzederkanonistischenLehre。Themodernpresumptionisthatthemanagementoftheequipmentandthegainsfromsuchmanagementmustvestintheowner。Themodernexigenciesdecidethattheequipmentmustbemanagedbyothersthantheownersandthatprofitsmustlargelyaccruetothosewhofinanciallymanagetheconcern。Theexpedientbywhichthisresultissoughttobereachedisthefictionofintangibleassetsandtheimpersonal，irrevocablecreditextensioncoveredbythepreferredstock。Theeffectistodissociateownershipfrommanagement。Thisisthenecessaryoutcomeofa“crediteconomy“consistentlyandfullycarriedthrough。Themanagementofthematerialequipmentofindustryisthrownintothehandsofthosewhoowntheimmaterialwealth；thatistosay，thosewhoowntheclaimtomanagetheequipment。Thecurrentprejudicewhichinsistsonmanagementbytheownersissetasidebyfeigningthatthisclaimhasanindustrialvalue，andsocapitalizingitonthebasisofthedifferentialadvantagewhichaccruestoitsholders。
SeealsoadiscussionbyE。S。Meade，QuarterlyJournalofEconomics，February1902，pp。217etseq。，ofhow“good-will“mayvaryinmagnitude，orevendisappear，whenaconcerneatersalargercoalition；also，onthesamegeneralhead，W。F。
Willoughby，“IntegrationofIndustryintheUnitedStates，“
ibid。，November