(8) The cost of the new appliances may be defrayed by their owner's earlier accumulations or by loans. In either case they come out of a social fund that is created mainly by the appliances which in a preceding period have yielded special gains. The machine of to-day is paid for from the available surplus created by the machine of an earlier day, and a series of inventions enlarges the social fund of capital in spite of all wastes by which it is attended. [Illustration] The effect that a series of improvements has on the amount of social capital, if we measure the fund solely on the basis of the cost of the capital goods which embody it, may be represented thus:--The horizontal line measures time and is graduated in years from one to ten. The distance of the point above this base represents the amount of capital as estimated in units of cost, in the possession of the society at the time a particular improvement is made, and would remain unchanged if society were static. The level of the line _AB_ represents what, under such a condition, would be the capital of a decade. The curved line _AB'_, dipping below _AB_ and then rising above it, expresses the fact that a single important improvement first trenches on the amount of capital in use, and soon makes good the deduction and makes a positive addition. It raises the sum total of capital to the level of the latter part of the line _AB'_. The curved line _A'B''_, first falling below _A'B'_ and then rising above it, expresses the fact that a second improvement, made a year or two after the first one, makes a reduction of the amount of capital as determined by the first improvement, and later adds more than enough to make good this reduction. A third improvement, at the end of two or three further years, has the effect expressed by the line _A''B'''_; that is, it first reduces the fund below the level at which at that time it would otherwise have stood,--but by no means to the level at which it stood when the series of improvements began,--and later carries it above the line expressing the highest level it would, without this improvement, have attained. In so far as these three improvements affect the level of the social capital for the ten-year period, it stands at the level indicated by the line _AA'A''B'''_, and no later improvement, even at the time of its introduction, does more than to make a small reduction of the increment of capital accruing from the products of the earlier improvements. A series of economical changes means a perpetual increase of the social capital as well as a perpetual improvement in the mode of applying labor. The increments of capital due to the earlier changes are far more than is required by the introduction of any later one.