ABSTRACT
There are two kinds of risks in business, predictable and unpredictable risks. Predictable risks are those whose weight over a year or over the course of a number of years is known, if not for the individual business at any rate for a group consisting of a large number of businesses which are similar and similarly situated. This chapter is concerned with the unpredictable risks of industry. Further, the income tax alters the income and capital circumstances of each individual subjected to it; and this in itself alters his preferences as between stocks of different degrees of riskiness, i.e. alters the indifference curve diagram, perhaps in the direction of riskier, perhaps of safer, shares. The Income Tax cuts down the annual volume of savings and investment. But investment takes the form of capital goods; and the output of the capital-producing industries, therefore, which are chiefly represented by the heavy industries, will be reduced by the tax.
