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Chapter 07 - Single Family Housing: Pricing, Investment, and Tax Considerations

Solutions to Questions - Chapter 7

Single Family Housing: Pricing, Investment, and Tax Considerations

Question 7-1
Why is the income approach to value often difficult to use on a single family residential appraisal?
Typically, the income approach is difficult to use because the sale of single family, rental properties are rare in the
area.

Question 7-2
What are the differences between the cost and sales comparison approaches to appraising property?
When using the market approach, the appraiser estimates the value of a property by comparing the selling prices of
properties similar to, and near, the property being appraised. Because no two properties are exactly alike, the values
of similar properties are adjusted by the appraiser for dissimilarities. When using the cost approach, the appraiser
establishes a value for the site on which the improvement is located, then determines the cost of reproducing the
improvements and adds the two. After the costs of the improvement and land value are added, the appraiser deducts
an amount for any depreciation that improvements have suffered since they were constructed.

Question 7-3
What are the capital gains rules as applied to residential property owners?
For sales of personal residence a homeowner may exclude from income $250,000 of gain, and a married couple may
exclude up to $500,000 of gain realized on the sale.
(1) Individual must have owned and used the home as a principal residence for at least two of the five years prior to
the sale (the two years do not have to be consecutive).
(2) Exclusion applies to only one sale every two years.

Question 7-4
List four important drivers of housing demand and price appreciation.
Population growth, income, households, price of rental housing

Question 7-5
What are public goods? How may they be reflected in house prices?
Public goods include education, police, fire, health and other services provided by the local public sector. To the
extent the quality/value of these services provided to homeowners exceed the cost (taxes, fees), paid, a net benefit is
thought to exist. This net benefit is generally reflected in land/property prices.

Question 7-6
When considering an investment in “distressed” properties, what are the most important areas of research that
should be considered?
(1) Market research to determine an expected future price when the investor plans to sell.
(2) Title search to determine any defects in the title and/or liens as well as the cost to clear the title.

7-1
Chapter 07 - Single Family Housing: Pricing, Investment, and Tax Considerations

Solutions to Problems - Chapter 7

Single Family Housing: Pricing, Investment, and Tax Considerations
Problem 7-1

Rent versus Own Analysis of a Personal Residence

Property information Loan Information:

Loan-to-value ratio 80.00%
Purchase price $200,000 Loan amount $160,000
Initial Rent $24,000 Interest rate 6.00%
Rental growth rate 3.00% Loan term (years) 30
Property growth rate 3.00% Payments (per year) 12
Insurance $1,500
Maintenance $1,500
Expense growth 3.00%
Marginal tax rate 26.00%
Property tax % 2.00%
Selling expenses 7.00%

Loan and equity calculations

Annual debt service (payment) $11,511

Annual loan constant 7.19%
Equity investment $40,000

Summary loan schedule

End of year 1 2 3 4 5
Payment $11,511 $11,511 $11,511 $11,511 $11,511
Balance 158,035 155,949 153,735 151,383 148,887
Interest 9,547 9,425 9,297 9,160 9,015
Principal 1,965 2,086 2,215 2,351 2,496

Property Data
0 1 2 3 4 5
Property value $200,000 206,000 212,180 218,545 225,102 231,855
Rents 24,000 24,720 25,462 26,225 27,012

BTCF (owner)
Year 1 2 3 4 5

Property taxes 4,000 4,120 4,244 4,371 4,502

Insurance 1,500 1,545 1,591 1,639 1,688
Maintenance 1,500 1,545 1,591 1,639 1,688
Principal and Interest 11,511 11,511 11,511 11,511 11,511
Cash Outflows before taxes 18,511 18,721 18,938 19,160 19,390

7-2
Chapter 07 - Single Family Housing: Pricing, Investment, and Tax Considerations

Problem 7-1 (B)

Tax deductions from owning

Property taxes $4,000 $4,120 $4,244 $4,371 $4,502

Interest 9,547 9,425 9,297 9,160 9,015
Total tax deductions $13,547 $13,545 $13,540 $13,531 $13,517
Tax savings 3,522 3,522 3,520 3,518 3,514

Net cost of owning

Cash Outflows before taxes 18,511 18,721 18,938 19,160 19,390
Tax savings 3,522 3,522 3,520 3,518 3,514
After tax cost 14,989 15,200 15,417 15,642 15,875

Net cost of renting

Rents $24,000 $24,720 $25,462 $26,225 $27,012

Net Cash Flow from Owning Before Sale

Cost of renting $24,000 $24,720 $25,462 $26,225 $27,012
Cost of owning 14,989 15,200 15,417 15,642 15,875
After Tax Cash Flow Own vs Rent $9,011 $9,520 $10,044 $10,583 $11,137

BT Cash Flow - Sale

1 2 3 4 5
Sales price 206,000 212,180 218,545 225,102 231,855
Selling Costs 14,420 14,853 15,298 15,757 16,230
Mortgage balance 158,035 155,949 153,735 151,383 148,887
Benefit from sale (own - rent) 33,545 41,378 49,513 57,961 66,738

AT Cash Flow - Sale

Sales price $206,000 $212,180 $218,545 $225,102 $231,855

Less selling costs 14,420 14,853 15,298 15,757 16,230
Less purchase price 200,000 200,000 200,000 200,000 200,000
Gain on sale (8,420) (2,673) 3,247 9,345 15,625
Exclusion 0 0 3,247 9,345 15,625
Taxable gain 0 0 0 0 0
Tax 0 0 0 0 0
After tax cash flow 33,545 41,378 49,513 57,961 66,738

Cash savings and IRR summary

Cash flows ATIRR
Year Sold 0 1 2 3 4 5
1 -40,000 $42,556 6.39%
2 -40,000 9,011 50,899 24.63%
3 -40,000 9,011 9,520 59,557 29.58%
4 -40,000 9,011 9,520 10,044 68,544 31.18%
5 -40,000 9,011 9,520 10,044 10,583 77,875 31.61%

(C) The initial rent would have to be $12,356 to get an after tax IRR of 4.5% in year 4 as shown in the following exhibit.
Goal seek was used to find this answer in Excel. Trial and error cold also be used.

7-3
Chapter 07 - Single Family Housing: Pricing, Investment, and Tax Considerations

Chapter 7
Rent versus Own Analysis of a Personal Residence

Property information Loan Information:

Loan-to-value ratio 80.00%
Purchase price $200,000 Loan amount $160,000
Initial Rent $12,356 Interest rate 6.00%
Rental growth rate 3.00% Loan term (years) 30
Property growth rate 3.00% Payments (per year) 12
Insurance $1,500
Maintenance $1,500
Expense growth 3.00%
Marginal tax rate 26.00%
Property tax % 2.00%
Selling expenses 7.00%

Loan and equity calculations

Annual debt service (payment) $11,511

Annual loan constant 7.19%
Equity investment $40,000

Summary loan schedule

End of year 1 2 3 4 5
Payment $11,511 $11,511 $11,511 $11,511 $11,511
Balance 158,035 155,949 153,735 151,383 148,887
Interest 9,547 9,425 9,297 9,160 9,015
Principal 1,965 2,086 2,215 2,351 2,496

Property Data
0 1 2 3 4 5
Property value $200,000 206,000 212,180 218,545 225,102 231,855
Rents 12,356 12,727 13,108 13,502 13,907

BTCF (owner)
Year 1 2 3 4 5

Property taxes 4,000 4,120 4,244 4,371 4,502

Insurance 1,500 1,545 1,591 1,639 1,688
Maintenance 1,500 1,545 1,591 1,639 1,688
Principal and Interest 11,511 11,511 11,511 11,511 11,511
Cash Outflows before taxes 18,511 18,721 18,938 19,160 19,390

Tax deductions from owning

Property taxes $4,000 $4,120 $4,244 $4,371 $4,502

Interest 9,547 9,425 9,297 9,160 9,015
Total tax deductions $13,547 $13,545 $13,540 $13,531 $13,517
Tax savings 3,522 3,522 3,520 3,518 3,514

Net cost of owning

Cash Outflows before taxes 18,511 18,721 18,938 19,160 19,390
Tax savings 3,522 3,522 3,520 3,518 3,514
After tax cost 14,989 15,200 15,417 15,642 15,875

Net cost of renting

Rents $12,356 $12,727 $13,108 $13,502 $13,907

Net Cash Flow from Owning Before Sale

Cost of renting $12,356 $12,727 $13,108 $13,502 $13,907
Cost of owning 14,989 15,200 15,417 15,642 15,875
After Tax Cash Flow Own vs Rent ($2,633) ($2,473) ($2,309) ($2,141) ($1,969)

BT Cash Flow - Sale

1 2 3 4 5
Sales price 206,000 212,180 218,545 225,102 231,855
Selling Costs 14,420 14,853 15,298 15,757 16,230
Mortgage balance 158,035 155,949 153,735 151,383 148,887
Benefit from sale (own - rent) 33,545 41,378 49,513 57,961 66,738

AT Cash Flow - Sale

Sales price $206,000 $212,180 $218,545 $225,102 $231,855

Less selling costs 14,420 14,853 15,298 15,757 16,230
Less purchase price 200,000 200,000 200,000 200,000 200,000
Gain on sale (8,420) (2,673) 3,247 9,345 15,625
Exclusion 0 0 3,247 9,345 15,625
Taxable gain 0 0 0 0 0
Tax 0 0 0 0 0
After tax cash flow 33,545 41,378 49,513 57,961 66,738

Cash savings and IRR summary

Cash flows ATIRR
Year Sold 0 1 2 3 4 5
1 -40,000 $30,912 -22.72%
2 -40,000 -2,633 38,905 -4.61%
3 -40,000 -2,633 -2,473 47,204 1.62%
4 -40,000 -2,633 -2,473 -2,309 55,821 4.50%
5 -40,000 -2,633 -2,473 -2,309 -2,141 64,769 6.04%

7-4
Chapter 07 - Single Family Housing: Pricing, Investment, and Tax Considerations

Problem 7-2
(a) Equity Investment = $60,000, House Value = $300,000 Less Mortgage $240,000
4% ÷ (1-.80) = 4% ÷ .20 = 20%

Appr. House
(b) Year Rate Price Equity Calculation EAHE
0 0 300,000 60,000 - -
1 0 300,000 60,000 - 0%
2 2 306,000 66,000 6,000 ÷ 60,000 10.0%
3 3 315,180 75,180 9,180 ÷ 66,000 13.9%

Average Annual Rate of Appreciation:

(0% + 10.0% + 13.9%) ÷ 3 = 7.97%

Compounded:
(1.0 *1.10*1.139) = 1.2529

Calculation:
n = 3, PV = -1, PMT = 0, FV = 1.2529 solve i = 7.8%

(Note the greater divergence between the arithmetic and geometric mean due to the irregular rates of appreciation).

Problem 7-3
(a)
Property #1 Property #2 Property #3
Address 123 Clay St. 301 Cherry St. 119 Avenue X
Sale Price $85,000 $79,000 $75,000
Less: Adjustment
Time of Sale 1,500
Location (1,000)
Site 1,200
Design (1,000)
Construction Qlty. 1,500
Number of Bedrooms (1,200) 2,000
Baths
Garage 800 800

Total Adjustment (3,200) 2,000 5,800

Indicated Value $81,800 $81,000 $80,800

Comparable #2 had the fewest adjustments ($2,000) and, thus, its value of $81,000 was given the most consideration when
determining the value of the property. Comparable #1 required the next fewest adjustments ($3,200), but this property is
larger than the subject property and contains more amenities such as better design and a corner lot. As a result, this property
was given less consideration in the determination of value than was comparable #2. Comparable #3 was given the least
consideration in determining the value of the subject property. This was due to the rather large number and size of
adjustments which this property required in the appraisal process. The $5,800 in adjustments which had been made on this
property indicates that it is least similar to the subject property. The estimated value of the property using the market
approach to value is $81,000.

(b) Estimated Reproduction Cost of the Dwelling:

$36.00 per square foot x 1,800 square feet $64,000
Estimated Reproduction Cost of the Garage 3,700
Estimated Land Value 13,000

7-5
Chapter 07 - Single Family Housing: Pricing, Investment, and Tax Considerations

Estimated Value Using the Cost Approach $81,500

Problem 7-4
(a)
(1) Equity: Price $200,000 – Loan $160,000 = $40,000.

(2) Cash out flows are assumed to occur monthly and will average $2,991.

(3) Solving we have:

PV = -$40,000 PMT = $2,991

i = 20% n = 12
Solve for FV = $88,156

4) Adding the FV of $88,156 to the loan balance of $160,000 and $8,000 in selling expenses results in $256,156 as the
desired selling price @ EOY1 in order to achieve a 20% return.

(5) The other issues that he must consider for doing this analysis are the time when the expenses occurred and the amount of
expenses at those times. If more expenses are greater earlier rather than later in the year then the required selling price to get
20% return will be higher.

(b)
(1) Equity = $40,000

Rental Income = $1,200 per month

Additional Interest = $12,800 ÷ 12 or $1,066.67
Net Monthly Inflow Year 2 = $133.33
Beginning of Year 1 = $(40,000)
Monthly Outflows Year 1 = -$2,991
Monthly Outflows Year 2 = +$133.33

Solving the cash flow to get an IRR value of 20%, we get the selling price at the end of year 2 as follows:

PVo = -$40,000
Yr1 PMTs = -$2,991
Yr2 PMTs = +$133
i = 20%
FV = $93,451

Adding FV of $93,451 to the mortgage balance of $160,000 and $8,000 in selling expenses produces a sale price of $261,450
at end of year 2.

Problem 7-5
Cash flows are summarized as follows:
(a) PV = $200,000 Price
-$180,000 Loan
+$10,500 Acquisition fees
$30,500 Equity

(b) Monthly outflows: $2,000 Repairs

1,200 Interest
$3,200 per month

(c ) Year of sale: $180,000 Loan repayment

3,000 Selling expenses
$183,000

7-6
Chapter 07 - Single Family Housing: Pricing, Investment, and Tax Considerations

(d) Solve for FV as follows:

PV = -$30,500
PMTs = -$3,200
i = 20%
n = 12
Solve for FV = (X-$183,000)
FV = $262,314

It appears that this is not a good investment if the expected sale price is $225,000. The investor would have to achieve a
$262,314 sale price in order to earn the desired 20% return.
Problem 7-6
(a)

Cash flows ATIRR

Year Sold 0 1 2 3 4 5
1 -30,000 $24,270 -19.10%
2 -30,000 761 28,592 -1.10%
3 -30,000 761 930 33,067 5.16%
4 -30,000 761 930 1,101 37,705 8.08%
5 -30,000 761 930 1,101 1,275 42,513 9.65%

(b)

Cash flows ATIRR

Year Sold 0 1 2 3 4 5
1 -30,000 $22,860 -23.80%
2 -30,000 2,141 24,122 -6.69%
3 -30,000 2,141 2,096 25,477 -0.34%
4 -30,000 2,141 2,096 2,049 26,931 2.86%
5 -30,000 2,141 2,096 2,049 2,000 28,491 4.74%

(c)

Cash flows ATIRR

Year Sold 0 1 2 3 4 5
1 -45,000 $41,402 -7.99%
2 -45,000 3,046 45,558 4.06%
3 -45,000 3,046 3,212 49,855 8.13%
4 -45,000 3,046 3,212 3,380 54,301 10.03%
5 -45,000 3,046 3,212 3,380 3,550 58,904 11.07%

(d)

Cash flows ATIRR

Year Sold 0 1 2 3 4 5
1 -30,000 $28,650 -4.50%
2 -30,000 5,141 33,026 13.84%
3 -30,000 5,141 5,364 37,556 19.60%
4 -30,000 5,141 5,364 5,590 42,249 21.96%
5 -30,000 5,141 5,364 5,590 5,819 47,113 23.01%
7-7
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 BOOK XVII.

PHYSIOLOGY AND COMPARATIVE ANATOMY.

 Vegetable Morphology.

Morphology in Linnæus.

I HAVE stated that Linnæus had some views on this subject. Dr.
Hooker conceives these views to be more complete and correct
than is generally allowed, though unhappily clothed in metaphorical
language and mixed with speculative matter. By his permission I
insert some remarks which I have received from him.

The fundamental passage on this subject is in the Systema

Naturæ; in the Introduction to which work the following passage
occurs:—

“Prolepsis (Anticipation) exhibits the mystery of the

metamorphosis of plants, by which the herb, which is the larva or
imperfect condition, is changed into the declared fructification: for the
plant is capable of producing either a leafy herb or a fructification. . .
...

“When a tree produces a flower, nature anticipates the produce of

five years where these come out all at once; forming of the bud-
leaves of the next year bracts; of those of the following year, the
calyx; of the following, the corolla; of the next, the stamina; of the
subsequent, the pistils, filled with the granulated marrow of the seed,
the terminus of the life of a vegetable.”

Dr. Hooker says, “I derive my idea of his having a better

knowledge of the subject than most Botanists admit, not only from
the Prolepsis, but from his paper called Reformatio Botanices
(Amœn. Acad. vol. vi.); a remarkable work, in respect of his candor
in speaking of his predecessors’ labors, and the sagacity he shows
in indicating researches to be undertaken or completed. Amongst the
latter is V. ‘Prolepsis plantarum, ulterius extendenda per earum
metamorphoses.’ The last word occurs rarely in his Prolepsis; but
when it does it seems to me that he uses it as indicating a normal
change and not an accidental one. 637

“In the Prolepsis the speculative matter, which Linnæus himself

carefully distinguishes as such, must be separated from the rest, and
this may I think be done in most of the sections. He starts with
explaining clearly and well the origin and position of buds, and their
constant presence, whether developed or not, in the axil of the leaf:
adding abundance of acute observations and experiments to prove
his statements. The leaf he declares to be the first effort of the plant
in spring: he proceeds to show, successively, that bracts, calyx,
corolla, stamens, and pistil are each of them metamorphosed leaves,
in every case giving many examples, both from monsters and from
characters presented by those organs in their normal condition.

“The (to me) obscure and critical part of the Prolepsis was that
relating to the change of the style of Carduus into two leaves. Mr.
Brown has explained this. He says it was a puzzle to him, till he went
to Upsala and consulted Fries and Wahlenberg, who informed him
that such monstrous Cardui grew in the neighborhood, and procured
him some. Considering how minute and masked the organs of
Compositæ are, it shows no little skill in Linnæus, and a very clear
view of the whole matter, to have traced the metamorphosis of all
their floral organs into leaves, except their stamens, of which he
says, ‘Sexti anni folia e staminibus me non in compositis vidisse
fateor, sed illorum loco folia pistillacea, quæ in compositis aut plenis
sunt frequentissima.’ I must say that nothing could well be clearer to
my mind than the full and accurate appreciation which Linnæus
shows of the whole series of phenomena, and their rationale. He
over and over again asserts that these organs are leaves, every one
of them,—I do not understand him to say that the prolepsis is an
accidental change of leaves into bracts, of bracts into calyx, and so
forth. Even were the language more obscure, much might be inferred
from the wide range and accuracy of the observations he details so
scientifically. It is inconceivable that a man should have traced the
sequence of the phenomena under so many varied aspects, and
shown such skill, knowledge, ingenuity, and accuracy in his methods
of observing and describing, and yet missed the rationale of the
whole. Eliminate the speculative parts and there is not a single error
of observation or judgment; whilst his history of the developement of
buds, leaves, and floral organs, and of various other obscure matters
of equal interest and importance, are of a very high order of merit,
are, in fact, for the time profound.

“There is nothing in all this that detracts from the merit of Goethe’s
638 re-discovery. With Goethe it was, I think, a deductive process,—
with Linnæus an inductive. Analyse Linnæus’s observations and
method, and I think it will prove a good example of inductive
reasoning.

“P. 473. Perhaps Professor Auguste St Hilaire of Montpellier

should share with De Candolle the honor of contributing largely to
establish the metamorphic doctrine;—their labors were
cotemporaneous.

“P. 474. Linnæus pointed out that the pappus was calyx: ‘Et
pappum gigni ex quarti anni foliis, in jam nominatis Carduis.’—Prol.
Plant. 338.” (J. D. H.)
 CHAPTER VII.

Animal Morphology.

T HE subject of Animal Morphology has recently been expanded

into a form strikingly comprehensive and systematic by Mr.
Owen; and supplied by him with a copious and carefully-chosen
language; which in his hands facilitates vastly the comparison and
appreciation of the previous labors of physiologists, and opens the
way to new truths and philosophical generalizations. Though the
steps which have been made had been prepared by previous
anatomists, I will borrow my view of them mainly from him; with the
less scruple, inasmuch as he has brought into full view the labors of
his predecessors.

I have stated in the History that the skeletons of all vertebrate

animals are conceived to be reducible to a single Type, and the skull
reducible to a series of vertebræ. But inasmuch as this reduction
includes not only a detailed correspondence of the bones of man
with those of beasts, but also with those of birds, fishes, and reptiles,
it may easily be conceived that the similarities and connexions are of
a various and often remote kind. The views of such relations, held by
previous Comparative Anatomists, have led to the designations of
the bones of animals which have been employed in anatomical
descriptions; and these designations having been framed and
adopted by anatomists looking at the subject from different sides,
and having different views of analogies and relations, have been
very various and unstable; besides being often of cumbrous length
and inconvenient form.
 The corresponding parts in different animals are called
homologues, 639 a term first applied to anatomy by the philosophers
of Germany; and this term Mr. Owen adopts, to the exclusion of
terms more loosely denoting identity or similarity. And the Homology
of the various bones of vertebrates having been in a great degree
determined by the labors of previous anatomists, Mr. Owen has
proposed names for each of the bones: the condition of such names
being, that the homologues in all vertebrates shall be called by the
same name, and that these names shall be founded upon the terms
and phrases in which the great anatomists of the 16th, 17th, and
18th centuries expressed the results of their researches respecting
the human skeleton. These names, thus selected, so far as
concerned the bones of the Head of Fishes, one of the most difficult
cases of this Special Homology, he published in a Table, 44 in which
they were compared, in parallel columns, with the names or phrases
used for the like purpose by Cuvier, Agassiz, Geoffroy, Hallman,
Sœmmering, Meckel, and Wagner. As an example of the
considerations by which this selection of names was determined, I
may quote what he says with regard to one of these bones of the
skull.
44 Lectures on Vertebrates. 1846, p. 158. And On the Archetype
and Homologies of the Vertebrate Skeleton. 1848, p. 172.

“With regard to the ‘squamosal’ (squamosum. Lat. pars squamosa

ossis temporis.—Sœmmering), it might be asked why the term
‘temporal’ might not be retained for this bone. I reply, because that
term has long been, and is now universally, understood in human
anatomy to signify a peculiarly anthropotomical coalesced congeries
of bones, which includes the ‘squamosal’ together with the ‘petrosal,’
the ‘tympanic,’ the ‘mastoid,’ and the ‘stylohyal.’ It seems preferable,
therefore, to restrict the signification of the term ‘temporal’ to the
whole (in Man) of which the ‘squamosal’ is a part. To this part Cuvier
has unfortunately applied the term ‘temporal’ in one class, and ‘jugal’
in another; and he has also transferred the term ‘temporal’ to a third
equally distinct bone in fishes; while to increase the confusion M.
Agassiz has shifted the name to a fourth different bone in the skull of
fishes. Whatever, therefore, may be the value assigned to the
arguments which will be presently set forth, as to the special
homologies of the ‘pars squamosa ossis temporis,’ I have felt
compelled to express the conclusion by a definite term, and in the
present instance, have selected that which recalls the best accepted
anthropomorphical designation of the part; although ‘squamosal’
must be understood and applied in an arbitrary sense; and not as
descriptive of a scale-like 640 form; which in reference to the bone so
called, is rather its exceptional than normal figure in the vertebrate
series.”

The principles which Mr. Owen here adopts in the selection of

names for the parts of the skeleton are wise and temperate. They
agree with the aphorisms concerning the language of science which
I published in the Philosophy of the Inductive Sciences; and Mr.
Owen does me the great honor of quoting with approval some of
those Aphorisms. I may perhaps take the liberty of remarking that
the system of terms which he has constructed, may, according to our
principles, be called rather a Terminology than a Nomenclature: that
is, they are analogous more nearly to the terms by which botanists
describe the parts and organs of plants, than to the names by which
they denote genera and species. As we have seen in the History,
plants as well as animals are subject to morphological laws; and the
names which are given to organs in consequence of those laws are
a part of the Terminology of the science. Nor is this distinction
between Terminology and Nomenclature without its use; for the rules
of prudence and propriety in the selection of words in the two cases
are different. The Nomenclature of genera and species may be
arbitrary and casual, as is the case to a great extent in Botany and in
Zoology, especially of fossil remains; names being given, for
instance, simply as marks of honor to individuals. But in a
Terminology, such a mode of derivation is not admissible: some
significant analogy or idea must be adopted, at least as the origin of
the name, though not necessarily true in all its applications, as we
have seen in the case of the “squamosal” just quoted. This
difference in the rules respecting two classes of scientific words is
stated in the Aphorisms xiii. and xiv. concerning the Language of
Science.

Such a Terminology of the bones of the skeletons of all vertebrates

as Mr. Owen has thus propounded, cannot be otherwise than an
immense acquisition to science, and a means of ascending from
what we know already to wider truths and new morphological
doctrines.

With regard to one of these doctrines, the resolution of the human

head into vertebræ, Mr. Owen now regards it as a great truth, and
replies to the objections of Cuvier and M. Agassiz, in detail. 45 He
gives a Table in which the Bones of the Head are resolved into four
vertebræ, which he terms the Occipital, Parietal, Frontal, and Nasal
Vertebra, respectively. These four vertebræ agree in general with
what Oken called the Ear-vertebra, the Jaw-vertebra, the Eye-
vertebra, and 641 the Nose-vertebra, in his work On the Signification
of the Bones of the Skull, published in 1807: and in various degrees,
with similar views promulgated by Spix (1815), Bojanus (1818),
Geoffroy (1824), Carus (1828). And I believe that these views, bold
and fanciful as they at first appeared, have now been accepted by
most of the principal physiologists of our time.
45 Archetype and Homologies of the Vertebrate Skeleton. 1848,
p. 141.

But another aspect of this generalization has been propounded

among physiologists; and has, like the others, been extended,
systematized, and provided with a convenient language by Mr.
Owen. Since animal skeletons are thus made up of vertebræ and
their parts are to be understood as developements of the parts of
vertebræ, Geoffroy (1822), Carus (1828), Müller (1834), Cuvier
(1836), had employed certain terms while speaking of such
developements; Mr. Owen in the Geological Transactions in 1838,
while discussing the osteology of certain fossil Saurians, used terms
of this kind, which are more systematic than those of his
predecessors, and to which he has given currency by the quantity of
valuable knowledge and thought which he has embodied in them.

According to his Terminology, 46 a vertebra, in its typical

completeness, consists of a central part or centrum; at the back of
this, two plates (the neural apophyses) and a third outward
projecting piece (the neural spine), which three, with the centrum,
form a canal for the spinal marrow; at the front of the centrum two
other plates (the hæmal apophyses) and a projecting piece, forming
a canal for a vascular trunk. Further lateral elements (pleuro-
apophyses) and other projections, are in a certain sense dependent
on these principal bones; besides which the vertebra may support
diverging appendages. These parts of the vertebra are fixed
together, so that a vertebra is by some anatomists described as a
single bone; but the parts now mentioned are usually developed
from distinct and independent centres, and are therefore called by
Mr. Owen “autogenous” elements.
46 Archetype and Homologies of the Vertebrate Skeleton. 1848,
p. 81.

The General Homology of the vertebral skeleton is the reference

of all the parts of a skeleton to their true types in a series of
vertebræ: and thus, as special homology refers all the parts of
skeletons to a given type of skeleton, say that of Man, general
homology refers all the parts of every skeleton, say that of Man, to
the parts of a series of Vertebræ. And thus as Oken propounded his
views of the Head as a resolution of the Problem of the Signification
of the Bones of the Head, 642 so have we in like manner, for the
purposes of General Homology, to solve the Problem of the
Signification of Limbs. The whole of the animal being a string of
vertebræ, what are arms and legs, hands and paws, claws and
fingers, wings and fins, and the like? This inquiry Mr. Owen has
pursued as a necessary part of his inquiries. In giving a public
lecture upon the subject in 1849, 47 he conceived that the phrase
which I have just employed would not be clearly apprehended by an
English Audience, and entitled his Discourse “On the Nature of
Limbs:” and in this discourse he explained the modifications by
which the various kinds of limbs are derived from their rudiments in
an archetypal skeleton, that is, a mere series of vertebræ without
head, arms, legs, wings, or fins.
47On the Nature of Limbs, a discourse delivered at a Meeting of
the Royal Institution, 1849.

Final Causes
 It has been mentioned in the History that in the discussions which
took place concerning the Unity of Plan of animal structure, this
principle was in some measure put in opposition to the principle of
Final Causes: Morphology was opposed to Teleology. It is natural to
ask whether the recent study of Morphology has affected this
antithesis.

If there be advocates of Final Causes in Physiology who would

push their doctrines so far as to assert that every feature and every
relation in the structure of animals have a purpose discoverable by
man, such reasoners are liable to be perpetually thwarted and
embarrassed by the progress of anatomical knowledge; for this
progress often shows that an arrangement which had been
explained and admired with reference to some purpose, exists also
in cases where the purpose disappears; and again, that what had
been noted as a special teleological arrangement is the result of a
general morphological law. Thus to take an example given by Mr.
Owen: that the ossification of the head originates in several centres,
and thus in its early stages admits of compression, has been pointed
out as a provision to facilitate the birth of viviparous animals; but our
view of this provision is disturbed, when we find that the same mode
of the formation of the bony framework takes place in animals which
are born from an egg. And the number of points from which
ossification begins, depends in a wider sense on the general
homology of the animal frame, according to which each part is
composed of a certain number of autogenous vertebral elements. In
this 643 way, the admission of a new view as to Unity of Plan will
almost necessarily displace or modify some of the old views
respecting Final Causes.
 But though the view of Final Causes is displaced, it is not
obliterated; and especially if the advocate of Purpose is also ready to
admit visible correspondences which have not a discoverable object,
as well as contrivances which have. And in truth, how is it possible
for the student of anatomy to shut his eyes to either of these two
evident aspects of nature? The arm and hand of man are made for
taking and holding, the wing of the sparrow is made for flying; and
each is adapted to its end with subtle and manifest contrivance.
There is plainly Design. But the arm of man and the wing of the
sparrow correspond to each other in the most exact manner, bone
for bone. Where is the Use or the Purpose of this correspondence? If
it be said that there may be a purpose though we do not see it, that
is granted. But Final Causes for us are contrivances of which we see
the end; and nothing is added to the evidence of Design by the
perception of a unity of plan which in no way tends to promote the
design.

It may be said that the design appears in the modification of the

plan in special ways for special purposes;—that the vertebral plan of
an animal being given, the fore limbs are modified in Man and in
Sparrow, as the nature and life of each require. And this is truly said;
and is indeed the truth which we are endeavoring to bring into view:
—that there are in such speculations, two elements; one given, the
other to be worked out from our examination of the case; the datum
and the problem; the homology and the teleology.

Mr. Owen, who has done so much for the former of these portions
of our knowledge, has also been constantly at the same time
contributing to the other. While he has been aiding our advances
towards the Unity of Nature, he has been ever alive to the perception
of an Intelligence which pervades Nature. While his morphological
doctrines have moved the point of view from which he sees Design,
they have never obscured his view of it, but, on the contrary, have
led him to present it to his readers in new and striking aspects. Thus
he has pointed out the final purposes in the different centres of
ossification of the long bones of the limbs of mammals, and shown
how and why they differ in this respect from reptiles (Archetype, p.
104). And in this way he has been able to point out the insufficiency
of the rule laid down both by Geoffroy St. Hilaire and Cuvier, for
ascertaining the true number of bones in each species. 644

Final Causes, or Evidences of Design, appear, as we have said,

not merely as contrivances for evident purposes, but as
modifications of a given general Plan for special given ends. If the
general Plan be discovered after the contrivance has been noticed,
the discovery may at first seem to obscure our perception of
Purpose; but it will soon be found that it merely transfers us to a
higher point of view. The adaptation of the Means to the End
remains, though the Means are parts of a more general scheme than
we were aware of. No generalization of the Means can or ought
permanently to shake our conviction of the End; because we must
needs suppose that the Intelligence which contemplates the End is
an intelligence which can see at a glance along a vista of Means,
however long and complex. And on the other hand, no special
contrivance, however clear be its arrangement, can be unconnected
with the general correspondences and harmonies by which all parts
of nature are pervaded and bound together. And thus no luminous
teleological point can be extinguished by homology; nor, on the other
hand, can it be detached from the general expanse of homological
light.
 The reference to Final Causes is sometimes spoken of as
unphilosophical, in consequence of Francis Bacon’s comparison of
Final Causes in Physics to Vestal Virgins devoted to God, and
barren. I have repeatedly shown that, in Physiology, almost all the
great discoveries which have been made, have been made by the
assumption of a purpose in animal structures. With reference to
Bacon’s simile, I have elsewhere said that if he had had occasion to
develope its bearings, full of latent meaning as his similes so often
are, he would probably have said that to those Final Causes
barrenness was no reproach, seeing they ought to be not the
Mothers but the Daughters of our Natural Sciences; and that they
were barren, not by imperfection of their nature, but in order that they
might be kept pure and undefiled, and so fit ministers in the temple
of God. I might add that in Physiology, if they are not Mothers, they
are admirable Nurses; skilful and sagacious in perceiving the signs
of pregnancy, and helpful in bringing the Infant Truth into the light of
day.

There is another aspect of the doctrine of the Archetypal Unity of

Composition of Animals, by which it points to an Intelligence from
which the frame of nature proceeds; namely this:—that the
Archetype of the Animal Structure being of the nature of an Idea,
implies a mind in which this Idea existed; and that thus Homology
itself points the way to the Divine Mind. But while we acknowledge
the full 645 value of this view of theological bearing of physiology, we
may venture to say that it is a view quite different from that which is
described by speaking of “Final Causes,” and one much more
difficult to present in a lucid manner to ordinary minds.
BOOK XVIII.

GEOLOGY.
W ITH regard to Geology, as a Palætiological Science, I do not
know that any new light of an important kind has been thrown
upon the general doctrines of the science. Surveys and
examinations of special phenomena and special districts have been
carried on with activity and intelligence; and the animals of which the
remains people the strata, have been reconstructed by the skill and
knowledge of zoologists:—of such reconstructions we have, for
instance, a fine assemblage in the publications of the
Palæontological Society. But the great questions of the manner of
the creation and succession of animal and vegetable species upon
the earth remain, I think, at the point at which they were when I
published the last edition of the History.

I may notice the views propounded by some chemists of certain

bearings of Mineralogy upon Geology. As we have, in mineral
masses, organic remains of former organized beings, so have we
crystalline remains of former crystals; namely, what are commonly
called pseudomorphoses—the shape of one crystal in the substance
of another. M. G. Bischoff 48 considers the study of pseudomorphs as
important in geology, and as frequently the only means of tracing
processes which have taken place and are still going on in the
mineral kingdom.
48 Chemical and Physical Geology.

I may notice also Professor Breithaupt’s researches on the order

of succession of different minerals, by observing the mode in which
they occur and the order in which different crystals have been
deposited, promise to be of great use in following out the geological
changes which the crust of the globe has undergone. (Die
Paragenesis der Mineralien. Freiberg. 1849.)

In conjunction with these may be taken M. de Senarmont’s

experiments on the formation of minerals in veins; and besides
Bischoff’s 647 Chemical Geology, Sartorius von Walterhausen’s
Observations on the occurrence of minerals in Amygdaloid.

As a recent example of speculations concerning Botanical

Palætiology, I may give Dr. Hooker’s views of the probable history of
the Flora of the Pacific.

In speculating upon this question, Dr. Hooker is led to the

discussion of geological doctrines concerning the former continuity of
tracts of land which are now separate, the elevation of low lands into
mountain ranges in the course of ages, and the like. We have
already seen, in the speculations of the late lamented Edward
Forbes, (see Book xviii. chap. vi. of this History,) an example of a
hypothesis propounded to account for the existing Flora of England:
a hypothesis, namely, of a former Connexion of the West of the
British Isles with Portugal, of the Alps of Scotland with those of
Scandinavia, and of the plains of East Anglia with those of Holland.
In like manner Dr. Hooker says (p. xxi.) that he was led to speculate
on the possibility of the plants of the Southern Ocean being the
remains of a Flora that had once spread over a larger and more
continuous tract of land than now exists in the ocean; and that the
peculiar Antarctic genera and species may be the vestiges of a Flora
characterized by the predominance of plants which are now
scattered throughout the Southern islands. He conceives this
hypothesis to be greatly supported by the observations and
reasonings of Mr. Darwin, tending to show that such risings and