_The Offset for Capital destroyed by Changes of Method._--What has happened in such a case to the enterprising man is a loss of personal capital. What he has just paid for the supplanted instruments has gone for nothing. His financial status is improved rather than injured because of the prospective profits which the new appliances will earn. What has happened to the man who keeps the old machinery is a partial or total loss of whatever he has lately put into it, not offset by such profits. By keeping his capital goods he is losing his capital without having his rival's assured prospect of regaining it. Whether the gains made by those who promptly discard antiquated appliances offset the wastes suffered by those who hold on to them too long, is a question that requires more space than can here be allotted to it; but the following facts determine the answer:-- (1) Instruments naturally at any one date are of an average age equal to about half their working duration. (2) Discarding all of one kind at any one date would involve drawing on the fund of social capital for about one half of the amount needed to replace these instruments. (3) Very few are at once discarded on the invention of the improved types. (4) Nothing but a fall in the price of the product created by the aid of these old machines can prevent them from earning the remainder of the fund required for replacing them. If they do this, they prevent any positive destruction of capital which many inventions cause. (5) When only one _entrepreneur_ introduces the new appliance, his production is usually increased, but not to an extent that causes a quick fall in price. This affords to the users of old appliances whose plants are not already at the final point of inefficiency a chance to continue accumulating the fund for replacement. The profits of the user of the better appliance are meanwhile accruing. (6) When all _entrepreneurs_ introduce the new appliance at once they do so--provided that their act is intelligent--because the saving effected in the cost of production makes the change advantageous in spite of the waste entailed. They expect an all-round net profit during the period before the price of the product falls to its new level, and they expect that this will give them more than is required for interest, cost of future replacement of the superior instruments, and the deficit in the accounts caused by the early discarding of the superseded appliances. (7) Without treating this prospective profit inhering in the new appliance as capital, we must regard it as affording an assurance that new capital will soon appear. There are great gains to be made by using the new appliances, and some of these will add themselves to the permanent fund of productive wealth.