Nevertheless the temptation to inflate capital will exist until the device is stringently prohibited by law. Both the nation and the states ought to adopt the policy of forbidding the sale of stock at less than par value, and restricting issues of stock to the amount required for the establishment, equipment, and permanent betterment of a concern, including a sum to cover the loss of interest to the investors during the early period of the business. Any extraordinary risks to which an enterprise is liable can be protected by the simple device of allowing a correspondingly high rate of interest on the securities. With such legislation enacted and enforced, neither the investor nor the consumer could be deceived or defrauded; and the financing and management of corporations would become less speculative, and more beneficial to the community. The present chapter may be fittingly closed with a moderate and significant statement from the pen of Professor Taussig: "It is doubtful whether the whole mechanism of irregular and swollen capitalisation was at any time necessary or wise. Why not provide once for all that securities shall be issued only to represent what has been invested?... It is sometimes said that freedom, even recklessness, in the issue of securities was a useful device, in that it enabled the projectors to look forward to returns really tempting, and at the same time concealed these returns from a grudging public.... A more simple and straightforward way of dealing with the issue of securities might thus have dampened in some degree the feverish speculation and restless progress of railway development. But a slower pace would have had its advantages also, and, not least, restriction of securities would have saved great complications in the later stages of established monopoly and needed regulation."[196] FOOTNOTES: [186] Cf. Ripley, "Trusts, Pools, and Corporations," pp. 207-210. [187] See Report of the Interstate Commerce Commission on these transactions. [188] Taussig, "Principles of Economics," II, 385, 386. [189] Final Report, p. 414. [190] Final Report of the Industrial Commission, p. 413. [191] Report on the Steel Industry, p. 38. [192] Idem, p. 39. [193] _Chicago Record-Herald_, July 29, 1912. [194] Op. cit., p. 28. [195] Cf. Van Hise, op. cit., pp. 29, 142, 149. [196] Op. cit., II, 387, 388. CHAPTER XX THE LEGAL LIMITATION OF FORTUNES