Summary: § 1. The capitalization theory and its knowledge assumptions. –§ 2. Early capital theorists and the knowledge problem: Irving Fisher and ≪certainty equivalents≫. –§ 3. Fisher's reduction of the future income stream to a ≪riskless≫ flow via the frequency‐ratio probability theory. –§ 4. Fisher's coefficient of caution. –§ 5. Capitalization as a multiple discounting process. –§ 6. Criticism of the frequency ratio probability approach for treating uncertainty. –§7. Aspects of Shackle's ≪potential surprise≫ approach. –§ 8. Implications of the potential surprise concept for asset valuation. –§ 9. Criticism of the coefficient of caution as a discount factor. –§ 10. The coefficient of caution as a source of error in rationalizing investor behavior. –§ 11. How the coefficient of caution undermines the frequency ratio probability approach. –§ 12. A possible alternative to the current capitalization theory. –§ 13. The need to place the capitalization theory in its proper perspective.