instalments after prices have settled down, as it were, at the higher level, and is not exhausted until the buildings and machinery have become obsolete.  But the two profits are essentially similar, and in the long run should be commensurate.  In the one case, stock can be sold for a large profit, because it cannot be replaced except at a higher price; in the other case, plant and buildings yield a higher income because they cannot be replaced except at a higher price.  Indeed, if the owners choose, the plant and building can, like the stock, be sold at their appreciated value, as has been widely done by the owners of cotton mills in Great Britain since the armistice.

There is nothing in these considerations that should surprise us, or even shock our moral sense.  For what they have indicated is an increase of money profits in rough proportion to the price-level, so that the aggregate profits will represent about as much real income as before.[1] The conclusion therefore amounts to no more than this, that you cannot alter fundamentally the distribution of wealth between labor and capital by merely inflating the currency, or otherwise juggling with the price-level.  And this is only what we should expect, if there are any laws of distribution of sufficient importance and permanence to justify the many volumes which have been devoted to them.

[Footnote 1:  Assuming that the rate of interest has remained unaltered.  In fact it has greatly increased since pre-war days, and this points to a still further increase of money profits, and an increase in the real income which they represent.  See Chapter VIII, Sec.10]

But this somewhat tame conclusion does not make it any less important to grasp clearly the significance of the appreciation in the value of capital goods.  A failure to realize it lies at the root of our bewildered muddling of many crucial problems of the day.  In the matter of housing, for instance, we know we cannot build houses at less than two or three times their prewar cost, and yet we cannot endure to see the owners of pre-war houses obtaining a commensurate increase of rent.  And so, in Great Britain, we pass Rent Restriction Acts, and Housing Acts, and then, in a fit of economy we suspend the latter, and let the former stand, while the housing shortage becomes steadily more acute.  When we hand the railways back from State control to private hands, our horror at the idea of the companies receiving larger money profits than they did before the war leads us to lay down principles for the fixing of fares and freight charges, which take no account of post-war construction costs; and then, in alarm lest we may have thereby made it unprofitable for the companies to spend a single penny of fresh capital upon further development, we seek to provide for capital expenditure by cumbrous and dubious expedients.  Doubtless we shall muddle through somehow with such policies:  and, public opinion being what it is, they may perhaps have been about the best policies that were practicable.  But the problems would have been easier to handle, if the public generally were a little less disposed to think in terms of averages, and a little more in terms of margins, if we all of us instinctively realized that the cost that really matters is the cost at which additional production is profitable under the conditions ruling at the time, or in the immediate future.