[marshmallow]

Proposition - the income from capital is entirely legitimate. It flows to its recipients because they entirely deserve it for the valuable service they have provided. Any attempt to outlaw it, redistribute it, destroy it, or legislate it out of existence or all recognition, is unjust on its face. It is economically beneficial, not destructive. Protecting and encouraging income from capital leads to additional capital formation and thereby enriches everyone, without exception.

I was looking for the word "risk" but I didn't see it.

I guess you forgot the second part of the proposition.

You know..........the part that says income from capital is not guaranteed?

Right?

That's the bit that says when capital is provided unwisely to bad risks and the deal goes sour, you get no income and instead get to eat your losses.

Risk.........reward........two different sides of the same coin.

Right?

If we're going to preach about the horrors of redistributing income from capital then we ought to include doing the same with losses incurred by the same process, I believe. You wouldn't want to give the impression that this is some sort of hymn to the infallibility and impeccability to those who provide capital, would you?

[JasonC]

No, payment for risk is separate from the income from capital, simply. If capital has been risked, then an additional income is necessary to defray that risk, or to amortize expected losses over all risky investments. But an income remains besides, which is the return on capital itself. Similarly, the return *of* the capital - whether as repayment or as depreciation gradually - is separately owed and is not an income from capital.

If corporate bonds typically default 1% of their principle value every year and lose half of that amount after all recoveries, then the risk payment is 0.5% per year - that suffices to amortize the experienced losses. We say it is the true insurance cost of the risk.

In addition to return of capital, and insurance cost or risk amortization, and also the true interest on capital I am saying it legitimate, there is another kind of reward often earned by some investments of capital. That is entrepenurial profit, from choosing a form of investment superior to the average use of capital. That isn't mere interest from capital either, though it is part of the earnings from capital and I claim a legitimate part of it.

But it is not required for the income from capital to be legitimate. Even a form of providing capital to others that earns no extra enterpenurial profit, and may not even take the risks associated with that; and even providing capital in ways that do not involve any risk to speak of, still deserve what they earn.

Distinguish the propositions, just to be clear about them - not saying this is the position you are taking. Some man might say it is only legitimate to earn any interest at all if you are at risk of losing everything and sometimes do, and might even say that the amount of the interest is only legitimate if the average losses in the long run equal the interest paid - he would be allowing the legitimacy of *insurance cost* but specifically denying the legitimacy of interest, or of income from capital simple *as such*.

And the full legitimacy of income from capital simply as such, is what I am maintaining. I claim that men do not need to run elaborate risks, nor to be right about entrepenurial profit opportunities no one else sees, to deserve an income for providing their capital to others for productive uses. I claim that simply providing that capital to others is itself a worthwhile service that deserves its income, even if all the other factors are completely lacking.