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ANNO V (1911), XVIII-^ HOLOGNA NICOLA ZANICHELLI LONDON PARIS LEIPZIG WILLIAMS AND NORGATB FELIX ALCAN WILHELM ENGELMANN “SCIENTIA,, (RIVISTA D1 SGIENZA) iiileniazioiiale di siiitesi scifiitilita - IJcviie iiileriiatioiiale do syniliose scieiitiliqiii' liitcViiatioiial I’levicw of Scientific Syiilliesis - Internationale Zeitsclirift fiir wisseiiscliaftliclie Syiitliese IDII^KCTIOIM : G. J3IIUNI - A. Dionisi - F. Enkiques - A. Giakdina - E. Eigxaxo ^^SCIJEWTIA,, a ete fondee eii vue de contrebalancer le faclieiix effets de la specialisation scientilique a outraiice. Elle lie traite qne des sujets d’ ordre tout a fait general et vise sur- tout aux rapports qui unissent les diff^rentes sciences entre elles: elle tend par la a la sintlietisation et unification de la science. Par ses Articles se rapportant aux branches les plus diverses de la recherche theorique, depuis les mathematiques jusqu’a la socio- log'ie, par ses JSAtes Critiques sur les questions fondamentales le plus a I’ordre du jour, par ses Comptes Bendus de tons les ouvra- ges scientifiques d’inter^t general, iiar ses Bevues Generales des derniers progres dans chaque branche de la science, par ses Ana- lyses des articles les plus iniportants x^arus sur les autres x^rinci- paux periodiques de tout le monde, x^^i* sa Chronique des Congres et de tous les autres evenements de haute imxiortance scientifique, — elle cherche en outre a doiiner I’idee la x^lus complete de I’en- semble du mouvement scientifique contemx)orain. SCIEJVTIA „ fait ax^pel, pour le developx^ement de son X^rogramme, a la cooperation des autorites scientifiques les plus 6minentes de tous les x>ays. L’ accueil favorable qu’ elle a rencontre aux)res de celles-ci, la collaboration tout-a-fait internationale et de x^i'emier ordre qu’ elle a reussi a s’ assurer, et la diffusion si large qu’elle a gagnee en x>eu de temx^s dans tout le monde out demontre combien son x^i'ogramme corresx^ondait a un vrai besoin du monde savant actuel. SCIENTIA „ articles dans la langue de leurs auteurs. Mais dex^uis Janvier 1909 au texte pi'iiicipal est joint un supplement avec la traduction fran^aise de tous les articles orUfinaux allemands, anglais et italiens. Toutes les autres rubriques sont en franqais on, elles aussi, traduites en franqais. 4 livraisons par an de 280 a 300 pages chaciine (Pour les renseignements aux auteurs . < . ■ :■ r— ; ■ et les aboHnements voir la page 3 de la couverture) Anno - Annee Jahr - Year 1- IV -1911 SCIENTIA,, (RIVISTA DI SCIENZA) Organo internazionalc di sinlesi scientilica - Revue inlernationale de synth&e scientifique Intepuational Review of Scientific Synthesis - Internationale Zeitschrift flir wissenschaftliche Synthese INDEX F. Eiiriciues - II prohlema della realtd - (Le prohleme de la realite). H Poincare - L" evolution des lois. (ir. Celoria - 11 opera di Giovanni Schiaparelli - (L’ oeuvre de Giovanni Sehiaparelli ). L. De Marchi - J^uove teorie sulle cause delV era glaciale - (Nouvelles theories relatives aux causes de V ere glaciaire). E. S. Russell - Vitalism - {Le vitalisme). Oil. S. Sherrington - The « role » of reflex inhibition - (Le role de V inhibi- tion reflexej. W. Ostwald - Der Wille and seine physisehe Grundlegung - (La volonte et sa base physique). I. Fisher - The « imqyatience » theory of interest - ( Tine theorie de V interSt fondee sur V impatience). A. Meillet - Diferenciation et unification dans les langues. S. Arrhenius* - Tiber den Ursprmig des Gestirnlmltus - ( Sur V origine du cuUe des astres). Nota critica - Note critique - Kritische Notiz - Critical note. A. Fraenkel - Le calcul de la date de Pdques. Recensioni - Gomptes reiidiis - Referate - Book Reviews. Battelli, Occhialini et Ohella, La radioacUvite et la constitution de la matiere (R. De Baillehache) — E. HauGt, Traite de geologic. Les periodes geologi- ques (E. Repossi) — J. Duolaux, La chimie de la matiere vivante (F. Bottazzi) — H. Pringsheim, Lie Variabilitdt niederer Organismen. Line Descend enzthcorie (H. Pieron) — H. Ebbinghaus, Precis de psyehologie (J. Aiizolat) — A. Binet, Les idees modernes sur les enfants (Z. Treves) — L. Reinhardt, Der Mensch zur Liszeit in Europa und seine Kulturcntwichlung bis zum Ende der Steinzeit (R. 3Iaunier) — T. Somlo, Der Giltcrvcrhehr in der Urgesellschaft (E. Savor- gnan) — A. VAN Gennep, La formation des legendes (R. Bourgin) — W. Me. Dougall, A7i Introduction to social Psychology (Ch. Delisle Burns). Rassegne - Revues ge'nerales - Allg. Uebersicliteii - Gen. Reviews. Geologie: M. Rortani - Les raeines des montagnes. Biologie: A. Prenant - Questions de biologie cellulaire. La substance hereditaire. Flcoiiomique : W. Oualid - Revue annuelle : questions generates , distribution, consommation, population, flnanees. Riv. delle Riv. - Revue des Revues - Zeitschr. Umscliau - Review of Reviews. Gronaca- Ghronique - Glironik - Glironicle: (Co7igres et reunions - Nouvelles diverses). BOLOGNA NICOLA ZANICHELLI LONDON PARIS LEIPZIG WILLIAMS AND NORGATE FELIX ALCAN WILHELM ENGELMAN Direzione e Redazione: Milano, Via Aurelio Saffi, 11. Articles deja publife par “SCIENTIA Abegg, R. (Breslaiij: Chemische Affimtiit, Valenz iind das natiirliche System der Elemente (L’ciffinite chimique, la valence et le systeme naturel des elements). Arrhenius, S. (Stockholm): Die Unendlickheit der Welt (L’ univers infini). — iiher den TTrsprunq des Gestirnhultus (Sur V origine du culte des astres). Asher, L. (Bern): Die Bezielmngen zwisclien StruMur und Ftmklion im tierischen Organismus (Les relations de la structnre et la fonction dans I’organisme animal). Bayliss, W. M. (London): The functions of enzymes in vital processes (Les fonctions des enzymes dans les processus vitaux). Becher, S. (Giessen) : Uber Handlungsreaktionen und Hire Becleutung fiir das Ver- sUindnis der organischen Zweckmdssigkeit (Sur les reacfions-actes et leur signi- fication pour P intelligence de la finalite organique). Bethe, A. (Strassbnrg) : Neuere Vorstellungen uber die Natur der bio-elektrischen Strbme (Les idees moclernes sur la nature des courants bio-electriques). Bohlin, K. (Stockholm): TTas ist die Milclistrasse f (Qu’est-ce que la voie lactee ?). Bohn, G. (Paris) : Le psychisme cJiez les animaux inferieurs. Bonar, J. (Ottawa-Canada) : Home trade and foreign trade (Commerce inter ieur et commerce international). Boiinesen, T. (Kopenhagen) : La reforme de P enseignement des mathematiques ele- mentaires. Borel, (Paris): Le continu mathematique et le continu physique. Bortkiewicz, L. (Berlin): Die statistischen Generalisationen (Les generalisafions statistiques). Bottazzi, F. (Napoli): La cliimica fisica e la fisiologia (Chimie physique et physiologie). Boruttau, H. (Berlin): Die inner e Sekretion (La secretion interne). Bouasse, H. (Toulouse): Developpement historique des theories de la physique. Boutroux, P. (Poitiers): L^ evolution des mathematiques pures. Brunhes, B. (Clermont Ferrand) : La diversity de fortune des deux principes de la thermodynamique. Bruni, G. (Padova): Le soluzioni solide (Les solutions solides). — La chimica fisica nei suoi rapporti con le scienze biologiche (La chimie physique dans ses rapports avec les sciences biologiques). Bryan, G. H. (Bangor): Diffusion and dissipation of energy (Diffusion et dissipation de P energie). Carver, T. N. (Cambridge - U. S. A.): The english classical school of political eco- nomy (L’ ecole classique anglaise d’ economic politique). — Diminishing returns and value (Diminution du rendement et de la valeur). Castelnuovo, G. (Roma): II valore didattico della matematiea e della fisica (La valeur didactique des mathematiques et de la physique). — II principio di relativitd e i fenomeni ottici {Le principe de relativite et les pheno- menes optiques). Caullery, M. (Paris): La methode et les criteres de la morphologie. Celoria, G. (Milano): L’ opera di Giovanni Schiaparelli (IP ceuvre de Giovanni Schiaparelli ). Chwolson, 0. (St. Petersbourg) : Diirfen wir die physikalischen Gesetze auf das Universum anwendenf (Beut-on appliquer les lois de la physique a P Univers f). Ciamician, G. (Bologna): Problemi e metodi della chimica organica (Problemes et methodes de la chimie organique). Claparede, E. (Geneve): La fonction du sommeil. Crommelin, A. C. D. (Greenwich): The origin and nature of comets (Origine et nature des comet es). Cunningham, W. (Cambridge - England): Impartiality in history (IP impartialite de P historien). Darwin, G. H. (Cambridge - England!: The rigidity of the earth (La rigid ite de la Terre). Delage, Y. (Paris): La parthenogenese experimental et les proprietes des solution.^ electrolytiques. De Marchi, L, (Padova): Che cos’ e la Terra? (QiP est-ce que la Terre?). — Teorie geologiche : come si formano le montagne (Theories geologiques : comment se forment les montagnes). — Nuove teorie sulle cause delP era glaciate (Xourelles theories relatives aux causes de P ere glaciaire). l>emoor, J. (Bruxelles): A propos dii mecanisme des phemomenes d’ irritabilite. Diouisi, A. (Modena): H concetto di malattia (Le concept de maladie). Doelter, C. (Wien): Die Anwendung der physihalischen Ghemie auf Mineralogie und Geolog ie (La chimie physique appliquee d la mineralogie et a la geologie). Driesch, H. (Heidelberg): Die Physiologie der individuellen organischen Formbildung (La physiologie du developpement de la forme organique individuelle). £bstein, W. (Gottingen): Zur Geschichte der EntmicTclung des KranLlieitsbegriffes (Pour V histoire du concept de maladie). £dding^ton, A. S. (Greenwich): Star-Streams (Les courants stellaires). Edg^e worth, F. Y. (Oxford): On the use of differential calculus in economics (De I’ usage du calcul differ entiel en economie politique). Enriques, F. (Bologna): Heterodox science and ist social function (La science hete- rodoxe et sa fonction soeiale). - Le principe d’ inertie et les dynamiques non-newtoniennes. — L’ universitd italiana (L’ universite italienne). — La riforma dell’ universitd italiana (La reforme de I’ universite italienne). — 11 principio di ragion sufficiente nella costrusione scientifica (Le principe de raison suffisante dans la construction scientifique) . — Pazionalismo e storicismo (Bationalisme et historisme). -- La teoria dello stato e il sistema rappresentativo (Le theorie de I’etat et le systeme representatif). - La filosofia positiva e la classifieazione delle science (La philosophie positive et la classification des sciences). — II pragmatismo (Le pragmatisme) . — I numeri e V infinito {Les nombres et I’ infini). — II problema della realtd {Le probleme de la realite). Enriques, P. (Bologna): La morte (La mort). et Gortani, M. (Bologna): La successione degli strati e la teoria dei periodi geologici (La succession des couches et la theorie des per iodes geologiques). Emery, C. (Bologna) II polimorfismo e la fondazione delle societd negli insetti sociali (Le polymorphisme et la fondation des societes chez les insectes sociaux). Fabry, Ch. (Marseille) : La theorie electromagnetique de V univers. Fano, Gino (Torino): La geometria non-euclidea (La geometrie non-euclidienne) . Fano, Giulio (Firenze): Chimica e biologia (Chimie et biologie). Fisher, I. (New Haven; Conn., U. S. A.): The « impatience theory » of interest. A study of the causes determining the rate of interest (line theorie de I’ inter et fondee sur V impatience. Etude des causes qui determinent le taux cV interet). Foa, P. (Torino): II significato biologico dei tumori (La signification biologique des tumeurs). France, R. H. (Mlinchen): Das Eeaktionsvermogen der Pfianze (Le pouvoir de reaction des plantes). Fredericq, L. (Liege) : De la coordination organique par action chimique. Galeotti, G. (Napoli): Le teorie sulla immunitd (Les theories sur I’ immunite). — La dottrina degli anticorpi (L’Mat de nos connaissances sur les anticorps), Gini, C. (Bologna): Che cos’ e la probabilitd? (Qu’ est-ce que la probabilite f). Giuifrida-Rug^geri, V. (Napoli) : II pithecanthropus erectus e I’ origine della specie umana (Le pithecanthropus erectus et V origine de V espece humaine). Guig'nebert, Ch. (Paris): Les origines chretiennes — L’ evolution du christianisme ancien. — De Saint Augustin d Pie X. Haberlandt, G. (Gratz): Ueber Bewegung und Empfindung im Pfianzenreich (Du mouvement et de la sensibilite dans le regne vegetal). Hahn, E. (Berlin): Die Entstehung der Bodenwirtschaft {Les origines de I’ economie agricole). Hartog, M. (Cork): The dynamics of mitotic celldivision (La dynamique de la division cellulaire mitotique). Herz, N. (Wien): Die Eiszeiten {Les epoques glaciaires). Hbber, R. (Kiel): Die biologische Bedeutung der Kolloide (La valeur biologique des colloides). Hoernes, M. (Wien) : Die korperlichen Grundlagen der Kulturentwicklung (Les bases structurales du developpement intellectuel). Janet, P. (Paris): Le subcoscient. Jespersen, 0. (Gentofte - Danemark): Origin of linguistic species (L’ origine des especes linguistiques) . Kidd, B. (Oxford): The two capital laws of sociology (Les deux lois fondamentales de la sociologie). Eandry, A (Paris): Les trois theories prindpales de la population. Landry, A. (Paris): L’ ecole economique autrichienne : I. Histoire de V ecole ; ses conceptions methodolofjiqnes. II. Ses theories. Conclusiou. Lebedew, P. (Moscoii): Die Drucicicrdfte des Liclites (Les forces de pression de la lumiere). Le Dantec, F. (Paris): Comment se pose la question de I’ heredite des caracteres acquis Lehmann, 0. (Karlsruhe): Scheinhar lehende jiiessende Kristalle, Iciinstliche Zellen und MusTceln (Cristaux jinides aifant une apparence de vie orqanique ; cell^es et muscles artificiels). ^ Levi, A. (Firenze): II pensiero scientijico europeo nel secolo decimonono (La pensee Loisy, A. (Paris) : La critique des evanyiles scientifique en Europe au XTXsiecle). Loria, A. (Torino): L^ indiriszo storico nella scienza economica (Le point de vue historique dans la science economique). Lowell, P. (Flagstaff, Arizona - U. S. A.): Mars (Mars). Mach, E. (Wien): Die Leitgedanken meiner natnrwissenschaftlichen Erkenntnis- lehre und Hire Aufnahme durch die Zeitgenossen (Les idees directrices de ma theorie de la, connaissance dans les sciences naturelles et I’aecueil qu’ elles out regu des contemporains). Maunder, E. W. (Greenwich): The « Canals » of Mars (Les «Canaux» de 3[ars). Maunier, K. (Paris): La sociologie frangaise contemporainc. Mazzarella, G. (Catania): D etnotogia giuridica, I suoi meiodi, i suoi risultati ( L’ ethnologie juridique, ses methodes, ses resultats). Meillet, A, (Paris) : Linguistique historique et Hnguistique generate. — Differenciation et unification dans les langues. Miceii, V. (Palermo) : Gli elementi vivi del diritto (Les elements vivants du droit) Moreux, Th. (Boiirges) : Le Soldi et la prevision des pluies. Oppenheimer, F. (Berlin). Wesen und Entstehung des Kapitalismus (L’ essence et V origine du capitalisme). Ostwald, W. (Leipzig): Zur modernen Energetik (De I’ en erg etique moderne). — Der Wille und seine physische Grundlegung (La volonte et sa base physique). Pareto, V. (Losanne): ITeconomie et la sociologie au point de vue scientifique. Picard, E. (Paris): La mecanique classique et ses approximations suceessives. Pikler, J. (Budapest): Uber die biologische Funktion des Bewussteseins (Surla fonction biologique de la conscience). Pizzetti. P. (Pisa): Le misurazioni fisiche e la teoria degli errori d- osservazione (Les mesurages physiques et la theorie des erreurs d’ observation). Poincare, H. (Paris): L’ avenir des mathematiques. — L’ d'olution des lots. Puiseux, P. (Paris) : La place du Soleil parmi les etoHes. Rabaud, (Paris): IT evolution teratologique. Raffaele, F. (Palermo): II concetto di specie in biologia : I. Avanti e in Bane in ; II. La critica post-darviniana (Le concept d’ espde en biologie: I. Avant et chez Darwin; II. La critique post-darwinienne). Reinach, S. (Paris): De V in fiuence des images sur la formation des mythes. Rey, A. (Paris): La possibilite d’ une methode positive dans la theorie de la con- naissance. Riccobono, S. (Palermo): L’ in fiuenza del cristianesimo nella codificazione di Giu- stiniano (L’ in fiuence du christianisme dans la codification de Justinien). Rig;nano, E. (Milano): La memoire biologique en energetique. — Deir origine e natura muemonica delle tendenze affettive (De V origine et de la nature mnemoniques des tendances affectives). — Qxd est-ce que la conscience f — II fenomeno religioso (Le phenomene religieux). — Le materialisme historique. — II socialismo (Le socialismej. Rig'hi, A. (Bologna) : Comete ed elettroni (Cometes et electrons). Ritz, W. (Gottingen) : Die Gravitation (La gravitation). — Du role de P ether en physique. Rosa, D. (Firenze): Delle leggi che regolano la variabilitd filogenetica (Des lois qui gouvernent la variabilite phylog&netique). Rouse, W. H. D. (Cambridge): Classical work and method in the twentieth century (Les etudes classiques pendant le XX^ siecle). Russell, E. S. (London): The evidence of natural selection (Les preuves de P existence d’ une selection naturelle). — Vitalism (Le vltalisme). Sagnac, Ph. (Lille): De P importance relative des fails economiques dans P evolution historique. Schiaparelli, G. (Milano); I primordt deW astronomia presso i Babilonesi (La naissance de I’ astronomie cliez les Bahyloniens). - I progressi deU’ astronomia presso i Babilonesi (Ijes pr ogres de V astronomie chez les Bahyloniens). Scialoja, V. (Koma) : L’ arbitrio del legislatore nella formaizione del diritto positivo (L’ arbitraire dii legislateur dans Ui formation du droit positif). Seelig;er, H. (Miiiichen) : tlber die Anwendung der Natnrgesetze auf das Universum (Sur V application des lois de la nature d Punivers). Semon, R. (Miincheu) : Die physiologischen Grundlagen der organisclien Beproduk- tionsphaenomene (Les fondements physiologiques des plienomhies organiques de reproduction). Sergei, G. (Roma): Lacune nella scienza antropologica (Quelques lacunes dans la science antliropologique). Severi, F. (Padova): Ipotesie realtd nelle scienze geometriclie (Hypotheses et realite dans les sciences geometriques). Sherring^ton, Oh. S. ( Liverxiool ) ; The « role » of reflex inhibition ( Le role de P inhibition rfflexe). Sitnmel, H. (Berlin): Beitrdge zur Bhilosophie der Geschichte (Quelques considera- tions sur la philosophie de P histoire). Soddy, F. (Glasgow): The parent of radium (Le pdre du radium). Solla, R. (Pola) : Die Bflanzenphysiologie in ihren Beziehungen zu den anderen Wissenschaften (La pJiysiologie vegetale et ses rapports avec les autres sciences). Sollas W. J. (Oxford); The evolution of man (L^ evolution de P homme). Sombart, W. (Breslau) : Die Entstehung der Stddte im Mittelalter (L^ origine des villes an moyen dge). Sommerfeldt, E. (Tubingen); Grundlagen der theoretischen Kristallographie (Les bases de la cristallographie theorique). Suess, F. E. (Wien) : Moderne Theorien der Erdbeben imd Vulkane (Les theories modernes sur les tremblements de terre et les volcans). Supine, C. (Pavia). II caratte^'e delle leggi economiche (Le caractere des lois econo- miques). Tannery, J. (Paris); Questions pMagogiques : L’ enseignement secondaire. Uexkull, J. V. (Heidelberg) : Die neuen Fragen in der experimentellen Biologie (Nouvelles questions de la biologie experimentale). Volterra, V. (Roma): II momeiito scientifleo presente e la nuova Societd Italiana per il progresso delle scienze (Le moment scientiflque present et la nouvelle Societe Italienne pour P avancement des sciences). Walden, L. (Riga): TJeber das Wesen des Ldsungsvorganges und die Bolle des Mediums (Sur la nature du processus de solution et le role du solvant). Wallerant, F. (Paris): Les liquides cristallises. Westermarck, E. (Helsingfors); The origin of religious celibacy (Les origines du celibat religieux). Wiesner, J. (Wien) : Der Lichtbedarf der Pflanze (La quantite de lumiere neces- saire a la plante). Zeeman, P. (Amsterdam) ; L" origine des couleurs du spectre Zeuthen, G. H. (Kopenhagen) : Quelques traits de la propagation de la science de generation en generation. Zieg^ler, H. E. (Jena). Die natiirliche Zuchtwahl (Tai selection naturelle). Ziehen, H. (Frankfurt a. M.) ; Die Kultur der Gegenwart (La culture intellectuelle de notre temps). “SCIENTIA,, puhlie aussi des N OTES CRITIQUES sur des sujets d’ actualite ; des OOMPTES RENDUS sur tous les ouvrag^es d’ interet g;eneral recemment parus ; des REVUES GENERALES d’ Astronomie, de Physique, Ghimie, Biolog^ie, Physiolog^ie, Fsycholog^ie et Economie; des ANALYS ES des articles les plus importants qui paraissent sur les princi* paux periodiques du monde; et enfin une CHRONIQUE (Congres et Reu- nions - Nouvelles diverses) se tenant au courant de tous les evenements de haute importance scientilique. Sommaires des N.”® de la I"" et de la 2*"’® annee (1907 et 1908) Premiere Livrai-son (N. I). — E. - La mecanique classique et ses approximations sue- cessives. — W . Ost>VMlil • Zur modernen Energetik. — G. Ciaiiiioittii • Prohlemi e metodi della chimica organica. — E» KstITsiolo - II concetto di specie in biologia: 1° Avanti e in Dartvin. — H. E. Ziei^lei* • Die natiirliche Zuchtwahl. — C. Sii|iiiio.- 11 carattere delle leggi economiche- — W. CiiiiiiiiiS’lisiiii - Impartiality in history. — .1, Tsmiioi'y - Questions pedagogiqiies : r enseignement secondaire. — Revues generales de Physique et de Physiologie par €>. Ciiio et E. Bottcfczzi. — Coiuptes rendus. — Chronique. Deuxieme Livraison (N. II). — l>e Hflsirclii • Che cos’ e la Terra? — F. Walleruiit * Les liquides cristallises. — F. KsillViele : II concetto di specie in biologia: 2.” La critica post- darwiniana. — II. Dt*ie.«cll • Die Physiologie der individuellen organischen Fornibildiing — R. Nollai • Die Pflansenphysiologie in ihren Besiehungen zu den anderen Wissensehaften. — V. l•aI•eto - L’ economie et la sociologie au point de vue scientifique. — T. X. Cai*vei* • The english classical school of political economy. — F. Eiir*ic|iie!ii$ • Heterodox science and its social function. — G. l'a^tcliiuov4» - II valore didattico della matematica e della fisica. — Revues generales de Physique et de Chiiuie par O. HI, Coi»l>iilO et G. Rl'liili. — Ceinptes rendus. — Chronique. Troisieme Livraison (N. III). — I*. Fizzetti • Le misurazioni fisiche e la teoria degli errori d’ osservazione. — F, Eiii'i(|iiei!i - Le principe d’inertie et les dynamiques non-netvto- niennes. — E. Hoiiiiviei*IVl€lt • Grundlagen der theoretischen Kristallographie. — V. Relate - La parthenogenese experimentale et les proprietes des solutions electrolytiques. — F. Eiii'i4|iies - La morte — HI. Hai'lo^' - The dynamics of mitotic celldivision. — E. Claiiai^etl** - La fonction du sommeil. — A. Eaiicli^y - L’ ecole economique autrichienne : I. Histoire de V e cole. Ses conceptions methodologiciues. — W. Soiiil>ai*t • Die Entstehung der Stddte in Mittelalter. Revue generale de Physiologie par F. R€>ltazzi. — Coiuptes rendus. — Chronique. Quatrieme Livraisox (N. IV). — V. Voltei'i'a • II niomento scientifico presente e la de nuova Societa Italiana per il progresso delle scienze. -- G. Fal>i*y • La theorie electromag neticpue I’ univers. — F. Walden - Ueber das Wesen des Losungsvorganges und die Rolle des Mediums — G. FaiBO • Chimica e biologia. — •!. W^icsiiei* • Der Lichtbedarf der Pflanze. -- V. Giiif* f1i'ida-Riig;'^'ei*i - II pithecanthropus erectus e V origine della specie tiniana. — E. Ri^'iiaiio i Qu’ est-ce que la conscience? — A. Eaiidey • L’ ecole economique autrichienne : IL Ses theo- res. Conclusion. — K. Kidd - The two capital laws of sociology. — E. W’^estei'iiiai’ck - The origin of religious celibacy. — X. Boiiiieseii • La reforme de V enseignement des mathema- tiques elementaires. — Revue generale de Physique par T. Levi-Civita. — Coiuptes rendus, — Cronique. Prejiiere Livraison (N. V). — C, Faliey - La theorie electromagnetique de I’ univers. — phy C. II. Bi*.i ►'an - Diffusion and dissipation of energy. — G. Roelfei’ - Die Anwendung der sikalischen Chemie auf Mineralogie und Geologic. — E. Ral>and • L’evolution teratologique. — W. EGistein - Zur Geschichte der Entwicklung des Krankeitsbegriffes. — F. Foa • Il signi- ficato biologico dei tumori. — A. Eoi*ia ■ L’ indirizzo storico nella scienza economica. — B. Kidd. The two principal laws of sociology. — F. Enricfnes • L’ universita italiana. — Note critique par H. Fiefon. — Revues generales de Physique et de Physiologie par E. De Hlarelii et F. Bottazzi. — Coiuptes rendus. — Chronique. Deuxieme Livraison (N. VI). — G. Seliiai>ai*elli ■ 1 primordt delV astronomia presso i Babilonesi. — W. Ritz - Du role de V ether en physique. — G. II. Bi*ya»i - Diffusion and dissipation of energy. — G. Ilal>eelan«lt - Ueber Bewegung und Empfindung im I^anzeureieh — A. Dionii^i - Il concetto di malattia. — F. Oppenlieiinee • Wesen und Entstehung des Kapitalismus. — G. Gini - Che cos’ e la probabilita? — F. Eni'icines • La riforma deW uni- versitd italiana — Note critique par E. Rig'nano. — Revue generale de Physique par O. HI. Goel>inn — Coniptes rendus. — Revue des Revues. — Chronique. Troisieme Livraison (N. VII). — If* Foincaee - L’ avenir des maihematiques. — G. ^cliiaimeelli - I progressi dell’ astronomia presso i Babilonesi. — G. Bi*nni • Le solu- zioni solide. — *1. v. Llexkiill - Die neuen Fragen in der experimentellen Biologie. — HI. Ganl- leey - La methode et les criteres de la morphologic, — II. Boenttaii - Die innere Sekretion- — E. Rig'iiano - Le materialisme historique. — VA^. II* D. Roiii^e - Classical ivork and method in the twentieth century. — Note critique par F. Eni*ic|ne.«i. — Revue generale de Physio- logie jiar F. B4>ttazzi. — Coniptes rendus. — Revue des Revues. — Clironique. Quatrieme Livraison (N. A^III). — A. Eevi - Il pensiero scientifico europeo nel secolo deci- monono. — G. Fano - La geometria non-euclidea. — O. Eeliniann - Scheinbar Lebeude Fliessende Kristalle, kiinstlichen Zellen tind Muskeln. — F. Ee Dan tec - Comment se pose la question de 1’ heredite des caracteres acquis. — D. Rosa • Delle leggi che reggono la variabilitd filogenetica. — F. Oppenlieiiner - Wesen und Entstehung des Kapitalismus. — *1. B<»nai* — Home trade and foreign trade. — A. Hleillct - ijiu^ttistique historique et linguistique generale. — Revues generates de Physique et de Physiologie par D. HI. Goi*l>ino et F. Bottazzi. - Coniptes rendus. — Revue des Revues. — (Chronique, Sommaires des de la 3'™ et de la 4“'"' annee (1909 et 1910) Premiere Livraison TN. IXj. — II prineipio cli ragion sufficiente nella costriisione scientifica. H G. Zeiltlieil - La propagation de la science de generation en generation. — I*. Zeeiimil — L'origine des couleurs dii spectre. — L. ■ Die Besiehungen ziv. Struktur xi. Fimktion im tierischen Organismus. — K. S. Kiissell - The evidence for ixatural selection. — G . Uoliil — Le pstjchisme dies les animaux inferieurs. — I>. v. Boi'tkiewicz - Die statistichen Gene- ralisationexi. Hicool>OiiO - L’influensa del cristianesimo nella codificazione di Giustiniano. — Note critique par E. Kig'liailO — Revue generaie de Biologic par E. KllSSell — Com- ptes rendus — Revue des Revues — Chroniqne. Deuxieme Livraisox (N. X). — S. Ai’i'lieiBiiis - Die Unendlichkeit der Welt. — G. H. Dai'wiii • The xdgidity of the earth. — VV. Uitz - Die Gravitation. -- F. Soclcly ■ The parent of radium. — E. Fi**t«le»^ie€j - De la coordination organique par action chhniqne. — E Eli^ai’O - Preformismo ed epigenesi xiello svilnppo del sistema xiervoso. — •!. Fiklei' • Ueher die Uologische Fimktion des Bewusstsems. — Fli. Sas^iiac - Importance des faits econo- miques dans revolution historique. — S. Reiiiacli • De V influence des images sar la formation des mifthes. F. Eiil*i«|lies - Razionalismo e storicismo. — Note critique par H. FlerOil — Revues generates de Chimie, de Biologic et d’ Economique par C. Doeltor, E. S. et A. Eaiiclry. — Comptes rendus — Revue des Revues — Chronique. Troisieme Livraisox (N. XI). — F. BoiltfOllx - L’ evolution des niathematiques piix'es- — E. Borel • Le continu mathematiqae et le continu physique. — F. E. Siiess — Modexme Theorien der Erdheben und Vulkane. Erster Teil : Die Erdbeben. — G. Kruiii - La chimica fisica nei suoi rapporti colle scienze biologiche. - E. Kij^'iiaao - La memoire biologique en energetique. — J. DeiilOOi' - A propos du mecanisme des phenomenes d’ irritabilite. — G. Sergl • Lacune nella scienza antropologica. — O. .I<*si>ersea - Origine of linguistic species. — A. Eaaciry . Les trois theories principales de la population. — F. Eiiric|iies -^La teoria dello Stato e il sistema rappresentativo. — Notes critiques par E. Do Maoclii et • Soiltly. Revues gene- rates d’ Astronoinie et de Biologic par \V. Kitz et 1*. Eiiri(|iios. — Comptes rendus — Re- vue des Revues — Chronique. Quatrieme Livraisox (N. Xll). — H. Heelig-ei* - Uber die Anwendung der Naturgesetze auf das Universum. — I^. Do JDa 1*0111 - Come si formano le montagne. 1* . E. Hiioss Moderne Theorien der Erdbeben und Vulkane. Zweiter leil: Die Vulkane. Eiii*iC|iiCS e >1. Gortaiii - La successione degli strati e la teoria dei periodi geologici. — F. Bottazzi - Chiniica fisica e fisiologia. — B. II. Ffaiice - Das Eeaktionsvermbgen der Pflanze. — T. X. C’ai*voi'* - Diminishing returns and valxie. — G. Siiiiiiiol - Beitrdge zux' Philosophie der Geschichte. A. Hey - La possibilite d’ ime xnethode positive dans la theorie de. la connaissance. Notes critiques par G. Vailati et F. Eiil*i<|lies — Revues generates de Psychologic par 11. F ei*Oli — Comptes rendus — Revue des Revues Chronique. Premiere Livraisox (N. XIII) — F. Eo'well - Mars — B. Beiiiilies - La diversite de fortune des deux principes de la thermodynamique. — B. Iloljei* - Die biologische Bedeutung der Kolloide. - G, Gali'Otti • Le teoxne sulla immxinitd- — F. •laiiet • Le subeonscient. — F. A". Edg'ovoetli - On the use of the differential calculus in economics. — E. Bi^iiaiio - II fenomeno religioso. — V. t^oialoja - L’ arbitrio del legislatox'e nella forniazione del dix’itto positive. — Jf. Zielieil - Die Kultur der Gegenwart. — Note critique par H. Fiei*oii — Revues generates d’Anthropologie et de Psychologic par V. Giiif¥i*icla - Biig'g'ei*! et A. Bey. — Comptes rendus — Revue des Revues — Chronique. Deuxieme Livraisox (N. XIV). — E. Hlacli - Die Leitgedanken meiner natunvissenschaft- lichen Erkenntnislehre xind Hire Aufnahme durch die Zeitgenossen. — A. C. D. Ci*Oi¥iiiieIiii . The origin and nature of comets. — E. VA’". Maiiiidei* • The “ Canals „ of Mars. — H- Boiiasse - Developpement historique des theories de la physique. — F, Eeliedevi’' - Die Druckkrdfte des Lichtes. — G. Galeotti - La dottrina degli anticorpi. — R. Seiiioii • Die physiologischen Grundlagen der ox'ganischen Repx'oduktionsphaenomene — C. Eiiiei*y - II poli- morfismo e la fondazione delle societd negli insetti sociali. — M. Hoei*iiei9 - Die korperlichen Grundlagen der Kulturentivicklung. — F. Eiii*icgiies - La filosofia positiva e la classificazione delle scienze. — Revues generates de Physique, de Droit et d’ Histoire par Cli. Faliey? F. Boil- fante, et G. Baiiei^'iil. — Comptes rendus. — Revue des Revues. — Clironique. Troisieme Livraisox (N. XV) — F. Sevei*i - Ipotesi e realtd nelle scienze geometriche. — A. Eddington - Star-streams. — O. Cliwolisoii - Duefern tvir die phxjsikalischen Gesetze auf das Universum amvende? — B. Al>e^g‘ - Chemische Affinitdt, Valenz und das naturliehe System der Elements. — A. Betlie - Neuere Vorstelluxigen iiber die Natur der bio- elektxnschen Strome. — B. Alaiiiiiei* - La sociologie frangaise contemporaine. — G. JBazzaeella • L’ etnologia giuridica, i suoi metodi, i suoi xnsultati. — Cli. Glii^‘iiel>ei*t - Les origines chre- tiennes. — F. - II pragmatismo. — Revues generates de Pliysique, de Biologic et d’Eco- nomique par E. de Bailleliaelie, E. S. Biisi^ell^ et A. Eaiidi*y. — Comptes rendus. Revue des Revues. — Chronique. Quatrieme Livraisox (N. XA^l). — K. Boliliii - Was ist die Milchstrasse ? — A. Bi^'lii - Comete ed elettroni. — Tli. .Moi*eaiix • Le Soleil et la' prevision des pluies. — AV. Al. Bay- liss$ - The function of enzymes in vital processes. — Becliei* Uber Handlungsreaktionen und Hire Bedeutung. fiir das Verstdndnis der organischen Ziveckmdssigkeit. — A^. Alieeli • GU eln menti vivi del diritto. — E. Big’iiaiio • II socialismo. — Fli. Giiijii;'iiel>ei*t • L' evolution de- christianisme ancien. — A. Eaisy - La critique des evangiles. — Revues gi'merales de Biologie et de Paleontologie par A. I*l*eiiaiit et G. ^iei*gi, — Comptes rendus. — Revue des revues. — Clironique. Sommaires des N.“^ de la annee (1911) Premiere Livraison — (N. XIII) F. Enriques - I numeri e V infinito - (Les nomhres et V infini). P. Piiiseux - La place du Soleil parmi les Stoiles. N. Herz - Die Eiszeiten - (Les epoques glaciaires). O. Casteliiuovo - LI principio di relativitd e i fenomeni ottici - (Le principe de relativite et les phenomenes optiques). E. Rigiiano - DeW origine e natura mnemo7iica delle tendenze affettive - (De V origine et de la nature mnemoniques des tendances affectives). W. J. Sollas - The evolution of man - (L’ evolution de V homme). E. Hahn - Die Entstehimg der Bodemvirtschaft - (Les origines de V econo- mie agricole). Oil. Guig:n chert - De Saint Augustin d Pie X. Nota Biografica di G. Ciainician - {L' oeuvre de Stanislas Cannizzaro). Nota critica di H. Pieron - (Les instincts nuisihles a V espece devant les theories transformistes). Analisi critiche di: E. De Martonne^ Traite de geographie physique (E. Repossi) - A. 0. Seward, Darwin and modern science (E. S. Russell) - W. OsTWALD^ Crosse Manner (W. Mecklenburg) - A. Loria^ La sintesi economica: studio suite leggi del reddito (E. Liiiientani) - J. Pentland Mahaffy, What have the Greehs done for modern civilisation f (G. Chat- terton-Hill) - W. JAMES;, Philosophic de V experience (F. Enriques). Rassegna di A-stronomia di F. W. Henkel - (L’ evolution stellaire et les theories de la capture). Rassegna di Biologia di G. Seliber - (La structure du protoplasme). Rivista delle Riviste. Notizie - (Congres et Reunions - Xouvelles diverses). Voir dans les pages precedentes les sommaires des autres numeros deja parus ct la liste par ordre atphabetique de tons les articles publics Jusqu* id. I. FISHER m “ liPAll T0W „ OF IITBT A STUDY OF THE CAUSES DETERMINING THE RATE OF INTEREST Estratto da “ SCIENTIA „ Rivista di Scienza VoL. IX, Anno V (1911), XVIII-^ BOLOGNA NICOLA ZANICHELLI LONDON PARIS LEIPZIG WILLIAMS AND NORGATE FELIX ALCAN WILHELM ENGELMANN / / I i lx. liologna - Stabilimento Poligrafico Emiliano I. Interest and Money. / Most people imagine that the rate of interest is a techni- ; cal phenomenon, concerning only money lenders or borrow- j ers. Of explicit or contract interest this is in a measure true ; but interest haay be implicit as well as explicit. It is impli- ' plicit in every price. If we invest in a bond, for instance, the price that we pay for the bond carries with it the impli- cation of a rate of interest, — that is, the rate we expect to "" realize on the investment. When a man buys stocks instead of bonds, or even a house or a piece of land, the same ele- ment of implicit interest enters into the transaction. He can- not even buy a piano or an overcoat or a hat without discounting » the value of the use which he expects to make of that particular article. The rate of interest, then, is not a narrow technical phenomenon. It touches the daily life of us ^ all. ' Concerning the verbal definition of the rate of interest, ^ there is no dispute ; but concerning its nature and its causes, ^ which I propose to discuss, there are numerous and conflic- f— ting theories. ^ By definition, the rate of interest is the price of capi- ^ tal in terms of income, when both capital and income are measured in terms of the same unit, as, for instance, of mo- ?? ney ; or, what amounts to the same thing, the rate of interest ^ is the excess above par which has to be paid for this year’s money in terms of next year’s money. f 4-(381) I. EISHEK But why should there be this excess? Why should uot a dollar to-day exchange on even terms for a dollar next year? And what principles determine the amount of excess? These questions are among the most perplexing with which economic science has had to deal, and for two thousand years econo- mists have been trying to solve the riddle which they represent. The theory of interest here briefly presented is that more fully contained in my book The Rate of Interest ^ It may be called for short, the « Impatience » Theory of Interest. First of all let us note the relation of interest to money. Among the earliest fallacies concerning the rate of interest was that it depends on the amount of money in circulation. In particular, this fallacious theory held that plentiful money makes the rate of interest low. We commonly speak of interest as the « price of money », and when the trade journals tell us that « money is easy » in Wall Street, or Lombard Street, their meaning is that interest is low, and low because it is easy to borrow money. Or, we are told that « the money market is tight », meaning that it is hard to borrow money. Probably the great majority of unthinking business men still believe that interest is low when money is plentiful, and high when money is scarce. We often hear the argument that the present high cost of living cannot be due to any plentifulness of money, because if money were really plen- tiful, it would be « cheap », meaning that the rate of interest would be low, whereas it is fairly high, and therefore, it is argued, money must be scarce. The fallacy consists in overlooking the fact that plenti- ful money raises the demand for loans just as much as it raises the supply. If money becomes more abundant, prices will rise and if prices rise, any intending borrower will need to borrow more money in order to purchase the same.^Pnouiit of goods. That the relative abundance of money has, under normal circumstances, no influence on the rate of interest, has been well known to those versed in this subject ever since the days of Locke; yet the opposite belief still prevails .among many intelligent people. One reason for this error is found in the experience and usages of banks. If his reserves are ^ Macmillan, New York and London, Co., pnbliMi , 1907. THE ‘‘ IMPATIENCE THEORY ,, OF INTEREST 5 -(">82) low the banker raises the rate of interest to « protect » those reserves. If the reserves are abundant, he reduces the rate of interest in order to get rid of them. But he mistakes a merely relative scarcity or abundance of reserves (as compared with money in circulation) for an absolute scarcity or abun- dance. When he says that more money lowers the rate of interest, he ought to say « When bank reserves get an un- due fraction of money, the rate of interest will be low; but when an undue fraction goes into circulation outside of banks, the rate of interost will be high ». In other words, an in- crease of money will operate in two different ways, according to where it hajipens to go first. Normally, however, and even- tually an increase of money distributes itself equally among pockets, tills, and bank reserves; and, in this case the rate of interest will not be affected at all. We conclude, then, that an infiation of the currency, as such, does not affect the rate of interest at all, provided^ hoiveveTj the inflation affects the loan at the time the loan is made just as much as it affects the repayment at the time the repayment is made. This proviso is important. For the loan and the repayment do not occur at the same time; and it may be that the degree of inflation is greater or less at the end than at the beginning of the intervening period, in which case the inflation may, through its effects on the values borrowed and repaid, affect the rate of interest duriny the process of change. Let us consider this transitional effect. Suppose, for in- stance, that the inflation of money has proceeded at such a pace that prices have been made to rise at the rate of one per cent per annum. Then,]100 dollars lent last year is equivalent in purchasing power not to 100 dollars repayable next year, but to 101 repayable next year. If prices had not risen, the borrower would pay back in his principal of 100 the value of the same amount of goods as were represented by the 100 which he borrowed. In terms of goods he would be in the same position at the end as at the beginning, and so would the lender. But we are supposing that prices have been rising. Then the lender, when he gets back his principal of 100, does not get back as much purchasing power as he lent, and the borrower does not pay back as much purchasing power as he borrowed. Under these circumstances, the principal of a debt I. fi8hp:k becomes less and less valuable. If prices are rising 1 per cent a year then the falling principal of the debt would have to be eked out each year by an indemnity of about 1 per cent in order that there vshould be exactly the same burden on the borrower in paying back as there would have been if prices had not risen. In practice this indemnity may be paid as I per cent higher interest. Likewise, if prices are rising 2 per cent per annum, 2 per cent would have to be added to the rate of interest, and so on. On the other hand, if prices are falling, the rate of interest^ in order to offset the appre- ciation of the principal, would have to de reduced. A study of the periods of rising and falling prices in the United States, England, Germany, Frances China, Japan, and India verifies these principles. It shows that, in general, when prices are rising, the rate of interest is high, and that in gen- eral when prices are falling, the rate of interest is low. II. Previous Theories of Interest. AVe have considered the relation of the relative abun- dj^nce of money to the rate of interest. We saw that the money supply has no effect on the rate of interest except during transition periods. But the real riddle of interest still remains unsolved. Why is there such a thing as a rate of interest, even when the purchasing power of money is con- stant, and what determines that rate? Many theories have been proposed. One of the most persistent is the theory that « interest is due to the produc- tivity of capital ». If a man who has never thought on the subject is asked why the rate of interest is 5 per cent, he will almost invariably answer : « Because 5 per cent is what investments pay ». Now it is true that if you have 100 dollars and invest it, and it yields you 5 per cent a year, the rate of interest is 5 per cent. A 100,000 dollars mill will produce a net income of 5000 a year. A 100,000 elollars piece of land will produce a net crop worth 5000 a year, and so on through- out the whole series of investments. AA'hen the rate of interest is 5 per cent, nothing at first sight seems more* e)bvious than that it is 5 x^er cent because cax)ital yields 5 ])er cent. Since capital is productive, it seems self-evident THE “ IMPATIENCE THEORY „ OF INTEREST 7 -(384) that an investment of 100 dollars in i^rodiictive land, machinery, or any other form of capital, will yield a rate of interest pro- portionate to its productivity. This proposition looks attrac- tive, but it is superficial. Why is the land worth 100,000? Simply because this is the discounted value of the expected 5000 a year. The value of capital is derived by the process of « discounting* » from the value of its income, not the va- lue of the income from that of the capital. But whenever we thus discount income, we have to assume a rate of interest. One hundred thousand dollars is a capitalization calculated on the basis of 5 per cent interest. If we capitalize 5000 dollars at 5 per cent, and get 100,000, we naturally find that we are getting 5 per cent on the investment, for we assumed 5 per cent in the first place. We get out exactly what we put in. Besides the productivity theory (which itself has many variations) there are numerous other theories, such as the following : that interest represents labor saved by capital ; that interest is the reward of abstinence, or of waiting; that interest is the cost of managing capital: that interest is the exjiloitation of laborers by capitalists. The last is the socia- list’s theory. To the socialist, interest appears an evil — the evil — and he thinks it ought to be abolished. He says: « It is all wrong that the capitalist who does not lift a finger should get any pay; he is getting something for nothing, namely interest ; interest is robbery ; interest is sucking the blood out of the underman, viz. the workman ». The socialist’s position involves two propositions: first, that practically all income and all capital are produced by labor; and secondly, that all income should be paid to the laborer. Now the first proposition is much more nearly cor- rect than the second. We need not contest it in order to see the fundamental error in the theory of socialism. Let it be granted that practically every instrument of production is produced by labor; let it be granted that the capitalist is always living on the product of xiast labor. Yet as Bdhm- Bawerk says: « The iierfectly just proi)osition that the laborer should receive the entire value of his product may be understood to mean either that the laborer should now receive the entire present value of his product, or should receive the entire /u- ture value of his product in the future. But Eodbertus and 8 - ( 385 ) 1. FISHER the socialists exiiound it as if it meant that the laborer should now receive the entire future value of his product ». Finally there is Bohm-Bawerk’ s own theory, which, with some variations, is that of his predecessors Bae, Jevons, Sax and Lauuhardt, as well as some of his various successors, especially Adolphe Landry. Bohm-Bawerk calls his theory the « Agio Theory ». Bohm-Bawerk distinguishes two problems: (1) Why does in- terest exist ? and (2) What determines any particular rate of in- terest! In answer to the first problem, he states virtually that this world is so constituted that most of us prefer pre- sent goods to future goods of like kind and number. This preference is due, according to Bohm-Bawerk, to three cir- cumstances: one being the « technical superiority » of present over future goods, or the fact, as Bohm-Bawerk conceives it, that the « roundabout » or « capitalistic » processes of produc- tion are more remunerative than those which yield immediate returns. This circumstance — the so-called technical superiority of present over future goods — we believe contains essential errors. According to Bohm-Bawerk, labor invested in long pro- cesses of production will yield larger returns than labor in- vested in short processes, and will therefore confer a « tech- nical advantage » uiion those who have the command of that labor. This technical advantage produces, so Bohm-Bawerk believes, a preference for present over future goods which is entirely apart from and in addition to the preference due to the perspective underestimate of the future or that due to the underendowment of the present. Bohm-Bawerk regards this part of his theory as most essential, and repeatedly states that the theory must stand or fall by the truth or falsity of this part. The fact is that the only reason any one prefers the product of a month’ s labor invested to-day to the product of a month’ s labor invested next year is that to-day ’s investment will ma- ture earlier than next year’ s investment. If a fruit tree is planted to-day which will bear fruit in four years, the labor available to-day for j)lanting it is preferred to the same amount of labor available next year; because, if the planting is deferred until next year, the fruit will likewise be deferred a year, maturing in five instead of four years THE “ IMPATIENCE THEORY „ OE INTEREST 9 -( 380 ) from the present. Nor is this essential fact altered by the possibility of a number of different kinds of investments to- day. It is true that a month’ s labor in the present may be spent in planting slow-growing or fast-growing trees; but so may a month’ s labor invested next year. It is from the pre- ference for the early over the late fruition of any productive process that the so-called « technical superiority of present over future goods » derives all its force and not from the superior productiveness of roundabout processes of produc- tion. The latter has no power whatever to create interest. It is impossible in this brief article to enter into a de- tailed account of Bohm-Bawerk’ s theory and its merits and defects. For amplification of the brief statement here presen- ted the reader is referred to my « Kate of Interest ». III. Human Impatience the true Basis of Interest. We are now ready to state briefiy our own theory of interest. This is a modification of Bohm-Bawerk’ s agio theory. Partly to distinguish it from Bohm-Bawerk’ s, and partly to find a better term than « agio », it is here pr\)posed to call the present theory the « Impatience theory ». It is odd that no one has haxiiiened heretofore to hit on this term, which seems to be the only one expressing accurately and in a single word, the real basis of interest. The term delay (« mora ») was used by some medioeval writers, who first sought to ex- cuse interest taking on the ground that rex>ayment of a loan was « delayed » and that the delay should be penalized ; but the justification of interest consists not exactly in the delay in paying, but in the fact that the borrower does not like the delay. The term « abstinence » has had much currency; but it is not abstinence but the inconvenience of abstinence which is the real factor. By Professor Marshall the term « waiting » has been suggested ; but it is not the waiting which is significant but the reluctance to wait. Bbhm-Bawerk’s term « agio » has attracted much attention; but it has no evident meaning until it is explained by a longer phrase — i. e. « a premium in the esteem of man for xiresent over future goods ». The idea which it is sought to exx)ress by all these l>roposed terms — delay, abstinence, waiting, agio, as well 10-(387) I. FISHER as by other more clumsy expressions such as « labor of sa- ving », — is simply the very familiar one exxiressed in daily experience by the term « impatience ». It is because a man is impatient that he thinks « delay » should be penalized; it is because he is imijatient that « abstinence » from imme- diate indulgence or « waiting » for future indulgence, is re- garded with disfavor; it is because he is imx)atient that he puts a iiremium or « agio » on j) resent goods as compared with future. The jieculiar litness of the term « imi)atience » is here emphasized because so much stress has been laid on economic catch- words and because this particular catch -word seems to liave escaped notice. In my own book, « The Eate of Inte- rest », for instance, this term was unused because unthought of, and the clumsier and less self-explanatory term « time- X>reference » was employed instead. The proiiosal to employ the term « impatience » is here made for the first time. While the use of one term or another does not in the least affect the xirinciples involved, it does affect the poimlar compre- hension of those principles. Impatience is a fundamental attribute of human nature. As long as people like to have things to-day rather than to- morrow, there will be a rate of interest. Interest is, as it were, impatience crystallized into a market rate. The rate of interest is formed out of the various degrees or rates of im- ])atience in the minds of different people. The rate of im^ia- tience in any individual’ s mind is his preference for receiving an additional dollar or dollar’ s worth of goods at once, over receiving it a year from to-day. In other words, it is the excess of the « marginal utility », or as I prefer to express it, « desirability » of to-day’s money over that of next year’s money viewed from to-day’s standpoint. It can be ex- pressed in numbers as the x)remium that a man is willing to l>ay for this year’ s over next year’ s money. If, for instance, in order to get 1 dollar at once he is willing to promise to iiay 1 .05 next year, then his rate of imx>atience is 5 jier cent. The present 1 dollar is worth to him so much that, in order to get it, he is willing to pay 5 xier cent more than 1 dollar in the future for it. It is because of the willingness to do this to gratify one’ s impatience that there is such a thing as a rate of in- terest. A man will prefer to have a machine to-day rather THE “ IMPATIENCE THEOEY „ OP INTEKEST 11 -( 388 ) than a machine in the future ; a house to-day rather than a house a year from now ; a piece of land to-day rather than a piece of land w^hen he is ten years older ; he would rather have some food to-day than wait until next year for it, or a suit of (dothes, or stocks, or bonds, or anything else. But what are these present and future « goods » which' are thus contrasted? At first sight it might seem that the « goods » compared are rather heterogeneous, — wealth, pro- ])erty, services, or any economic elements whatever. This is true but some of these cases are reducible to others. When present capital is preferred to future capital, this i) reference is really a preference for the income of the first capital as compared with the income of the second. As already indicated the reason we would choose a iiresent fruit tree rather than a similar fruit tree available in ten years is that the fruit of the first will be available earlier than the fruit of the second. The reason we prefer immediate tenancy of a house to the right to occupy it in six months is that the uses of the house will be- gin six months earlier in one case than in the other. In short, (^apital available early is preferred to capital of like kind available at a more remote time, simply because the income of the former is available earlier than the income of the latter. It will thus be seen that all rates of imiiatience resolve themselves into preference for early income over late income. Moreover, the preference for present income over future in- come resolves itself into the preference for present enjoyable income over future enjoyable income. The income from an article of caiiital which consists merely of an intermediate step in production is desired for the sake of the final enjoyable income to which that intermediate step paves the way. We prefer present bread baking to future bread baking because the enjoyment of the resulting bread is available earlier in the one case than in the other. We thus see that all impatience for goods (preference for prevsent over future goods) resolves itself, in the last analysis, into impatience for enjoyable income (a preference for early enjoyable income over late enjoyable income). The preference for present over future goods, when thus reduced to its low- est terms, i. e. a preference for enjoyable income rids the present and future values of the interest element, which, in I. FISHER all other attempts at explanation, is so unconsciously pre- supposed. For when any other goods than enjoyable income are considered, their values already imply a rate of interest. IV. The influences on impatience. But we have not yet wholly solved the problem of inter- est. It is not enough to know that the more impatient a people are, the higher will be their rate of interest, and that the more patient they are, the lower will be their rate of interest. We must also know on what causes the rate of im- patience depends. It depends principally upon two circum- stances, the character of the individual and the character of the income of which he finds himself the owner. It is clear that the rate of impatience which corresponds to a specific income-stream will not be the same for every- body. One man may have a rate of impatience of 5 per cent and another a rate of imiiatience of 10 jier cent, although both have the same income. The difterence will be due to the personal characteristics of the individuals. These charac- teristics are chiefly five in number: (1) foresight, (2) self-con- trol, (3) liabit, (4) expectation of life, (5) love for posterity. We shall take these up in order. 1) First, as to foresight. Generally speaking, the greater the foresight, the less the rate of impatience, and vice versa. In the case of primitive races and instructed classes of so- ciety, the future is seldom considered in its true proportions. The story is told of a Southern negro that he Avould not mend his leaky roof when it was raining, for fear of getting more wet, nor when it was not raining, because he did not then need shelter. Among such persons the rate of imi)atieiice for present gratification is powerful because their comprehen- sion of the future is weak. If we compare the Scotch and the Irish, we will find a contrast in this respect. The Irish, in general, lack foresight and are improvident, and the Scotch have foresight and are provident. Consectuently the rate of interest is high in Ireland and low in Scotland. These differences in degrees of foresight produce corre- s] bonding ditterences in the dependence of impatience on the character of income. Thus, for a given income, say 1000 dollars THE ‘‘ IMPATIENCE THEORY „ OF INTEREST 13- (390) a year, the reckless might have a rate of imijatience of 10 per cent, when the forehanded would experience a rate of only 5 per cent. Therefore the rate of impatience, in general, will be higher in a community consisting of reckless individuals than in one consisting of the opposite type. 2) We come next to self-control. This trait, though, distinct from foresight, is usually associated with it and has very similar effects. Foresight has to do with thinking; self- control with tvilling. A weak will usually goes with a weak intellect, though not necessarily, and not always. The effect of a weak will is similar to the effect of inferior foresight. Like those workingmen who cannot carry their jiay home Sa- turday night, but spend it in a grogshop on the way, many persons cannot deny themselves any present indulgence, even when they know definitely what the consequences will be in the future. Others, on the contrary, have no difficulty in controlling themselves in the face of all temptations. 3) The third characteristic of human nature which needs to be considered is habit. That to which one is accustomed exerts necessarily a powerful influence upon his valuations and therefore upon his rate of impatience. This influence may be in either direction. A rich man’ s son who has been brought up in habits of self-indulgence, when he finds himself with a smaller income than his father provided him during his formative years, will have a higher rate of imi^atience than a man who has the same income but who has climbed u]) instead of climbed down. 4) The expectation of life will affect a man’s rate of impatience. A man who looks forward to a long life will have a relatively high appreciation of the future, which means a re- latively low appreciation of the present, i. e. a low rate of imi^atience; whereas a man who has a short life to look forward to will want it at least to be a merry one. « Eat, drink, and be merry, for to-morrow we die », is the motto applying to this type. 5) The fifth circumstance is love for posterity. Proba- bly the most powerful cause tending to reduce the rate of interest is love for one’ s children and the desire to provide for their good. When these sentiments decay, as they did decay at the time of the decline and fall of the Eoman Empire, T. FISHER Rud it becomes tlie fashion to exhaust wealth in self-indul- i»en('.e and leave little or nothing to offsiiring, the rate of impatience and the rate of interest are high. At such times the motto « After us the deluge », indicates the feverish de- sire to squander in the present, at whatever cost to the fu- ture. A noted gambler, who had led a wild and selfish life, once said, when life-insurance was first explained to him. « I have seen many schemes for making, money, but this is the first time I have seem a scheme where you had to die before you could rake in the pile ». That man didn’ t care for a xiayment which would come in after his death. But there are many men who do, and in fact care much more for it than for anything else in the world. This care leads them to insure their lives in order that they may leave the money to their families. Their desire to provide for those who survive them gives them a low rate of impatience. Life insurance, by training people to iirovide for posterity, is acting as one of the most iiowerful means of lowering the rate of impatience and therefore the rate of interest. At present in the United States the insurance on lives amounts to 20,000,000,000 of dollars. This represents, for the most part, an investment of the present generation for the next. The investment of this sum springs out of a low rate of impatience, and tends to jiro- diice a low rate of interest. ^ Thus we see that men may ditter in many ways which aftect tlie rate of impatience and rate of interest. We may contrast two extreme tyjies of men, irrespective of. the char- acter of their income. Men may have a high rate if they are shortsighted, or are weak-willed, or have spendthrift habits or look forward to a short or uncertain life, or are selfisli and without regard for posterity. They will have a low rate if they liave the opposite characteristics, — foresight, self-control, habits of thrift, length and certainty of life, and altruism with respect to posterity. But not only does impatience vary as between difterent individuals; it varies also for the same individual according to circumstances. The most important circumstance affecting an individuar s degree of impatience is the character of his ex])ected income in the immediate and in the remote future, Smith’ s impatience for satisfactions will depend on the abundance of his present as compared with his future satis- THE “IMPATIENCE THEORY,, OF INTEREST 15 - ( 892 ) factions. If the future satisfactions that he expects and looks forward to are very great, and his iiresent satisfactions are very small, he will be impatient to hurry from his present scarcity and arrive at the expected future abundance; that is, he will have a high rate of iireference for present over future satisfactions. This is on the same principle that jirices are high when goods are scarce. The preference for present satisfactions is high if present satisfactions are scarce. Now the rate of preference which Smith has for present satisfactions over future satisfactions will depend on his whole future stream of satisfactions, that is, what we call his final enjoyable income. It will depend on four chief characteristics of that income: first, as just said, it will depend on the time-shape of the income, the relative abundance of his present and his future satisfactions; second, on the amount of the income, i. e. whether his satisfactions are few or many; third, on the uncertainties of the income, i. e. to what extent his satisfac- tions throughout future years can be depended upon; and fourth, on the composition of the income, i. e. the relative amounts of foods, shelter, etc., of which it is composed. For brevity we shall here consider only the time-shape of income, i. e. the divstribution of income in time. Three difier- ent types of time-shape may be distinguished: uniform in- come, consisting of equal yearly items, income increasing in the future, and income decreasing in the future. The effect of possessing an increasing income is, as we liave already indicated, to make the possessor impatient, i. e. to make his xi reference for jiresent over future income higher than otherwise; for it means that the earlier jiarts of his income are relatively scarce, and the remoter, relatively abundant. For instance, a man who is now enjoying an in- come of only 1000 dollars a year, but exjiects in ten years to be enjoying one of 10,000 dollars a year, will be imiiatient to have ten years elaiise. He has « great expectations ». He may, to sa- tisfy his impatience, borrow money to eke out this year’ s in- come, and make rexiayment by sacrificing from his more abundant income ten years later. Eeversely, a decreasing income, making, as it does, the earlier income relatively abundant, and the remoter incomes relatively scarce, tends to reduce impatience, or tlie prefer- ence for present as comxiared with future income. The man H)-(393) I. FISHER with a desceuding income already has a high income without being compelled to wait for it. With him there is little reason for impatience; there is nothing to be impatient for; on the contrary, the tuture does not look at all inviting. He will therefore strive to save from his present abundance to provide for coming needs. V. The determination of the Rate of Interest. The question now arises, will not the rates of impatience of dilferent individuals be very different, and if so, what re- lation do these different rates have to the rate of interest? It might seem at first that the rates of impatience would differ widely. In a nation of hermits, without any mutual lending and borrowing, this would be true; the rate of impa- tience of individuals would diverge widely, and there would be no common market rate of interest. It is modern society’s habit of borrowing and lending that tends to bring into equality the rates of impatience in different minds, and it is only because of the limitations of the loan market that abso- lute equality is not reached. The chief practical limitation to lending is due to the risk involved, and to the difficulty or impossibility of obtain- ing the security necessary to eliminate or reduce that risk. Those who are most willing to borrow are oftentimes those who are least able to give security. It will then happen that these persons, shut off* from the loan market, experience a higher rate of impatience than the rate of interest ruling in that market. If they can contract loans at all, it will be only through the pawnshop or other high -rate agencies. But for the moment let us assume a perfect market, in which the element of risk is entirely lacking. We assume that all individuals are initially possessed of fore -known in- come streams, and are free to exchange any parts of them vso that present income may be exchanged for future income. This exchange may be effected by borrowing or lending, by buying and selling Avealth or property and by changing tlie uses to Avhich capital is put. Under these conditions, the rates of impatience for dif- ferent individuals Avill be perfectly equalized. BorroAving and THE ‘‘IMPATIENCE THEOEY „ OP INTEKEST lT-(394) lending' evidently affect the time-shape of the incomes of borrower and lender; and since the time-shape of their in- comes affects their rate of impatience, sucli a moditication of time-shape will react iiijon and modify their rate of impa- tience and bring the market into equilibrium. For if, for any iiarticnlar individual, the rate of impa- tience differs from the market rate, he will, if he can, adjust the time-shape of his income -stream so as to harmonize his rate of impatience with the interest rate. For instance, those who, for a given income-stream, have a rate of impatience above the market rate, will sell some of their surx)lus future income to obtain (i. e. « borrow ») an addition to their pre- sent meagre income. This will have the effect of enhancing the value of the future income and decreasing that of the pre- sent. The process will continue until the rate of impatience of this individual is equal to the rate of interest. In other words, a person whose impatience- rate exceeds the current rate of interest will borrow up to the point which will make the two rates equal. Eeversely, those who, with a given in- come-stream, have a rate of impatience below the market rate, will sell (i. e. « lend ») some of their abundant j) resent income to eke out the future, the effect being to increase their rate of impatience until it also harmonizes Avith the rate of interest. To put the matter in figures, let us suppose the rate of interest is 5 per cent, whereas the rate of impatience of a particular individual is at first 10 per cent. Then, by hypo- thesis, the individual is ivilUng to sacrifice 1.10 of next year’s income in exchange for 1 dollar of this year’ s. But in the market he is ahle to obtain 1 dollar for this year by spending only 1.05 of next year. This ratio is, to him, a cheap price. He therefore borrows, say, 100 dollars for a year, agreeing to return 105 dollars; that is, he contracts a loan at 5 per cent M^hen he is willing to pay 10 per cent. This loan, by increasing his iiresent income and decreasing his future, tends to reduce his rate of impatience from 10 per cent to, say, 8 per cent. Under these circumstances he will borroAv another 100 dollars being now willing to iiay 8 per cent, but having to pay only 5 per cent. This loan will still further reduce his rate of impatience. He will continue to borrow until his rate of 18 - ( 395 ) I. FISHER impatience lias been tinally brought down to 5 per cent. Then for the last or « marginal » 100 dollars, his rate of impatience will agree with the market rate of interest. As in the general theory of prices, this marginal rate, 5 per cent, being once established, applies indifferently to all his valuations of pre- sent and future income. In like manner, if another individual, entering the loan market from the other side, has at first a rate of impatience of 2 per cent, he will become a lender instead of a borrower. He is willing to accept 102 dollars of next year’ s income for 100 of this year’s income, but in the market he is cible^ instead of the 102 dollars, to get 105. As he can lend at 5 iier cent when he Avould gladly do so at 2 per cent, he jumps at the chance and invests, not one 100 dollars only, but another and another. But his present income, being reduced by the process, is now more highly esteemed than before, and his future income, being- increased, is less highly esteemed. The result will be a higher relative valuation of the present, which, under the infiuence of successive additions to the sums lent, will rise gradually to the level of the market rate of interest. In such an ideal loan market, therefore, where every in- dividual could freely borrow or lend, the rates of impatience for all the different individuals would become equal to each other and to the rate of interest. The two men whom we have imagined started out Avitli rates of impatience different from the market rate of inte- rest. The market rate ivas 5 per cent, while the first man had a rate of impatience above this, and the second, a rate of impatience below this. But Avlien they finished their loan o[)erations or readjustments in the time- shape of their in- come-streams, they brought their rates of impatience each into harmony with the rate of interest and therefore with each other. Therefore, as long as there is a market in which everybody can borrow or lend at aauII at 5 per cent, every- body Avill have at the margin a rate of impatience of 5 per cent. Nobody will have a rate of impatience above 5 per cent, because, if it is at first above it, he will borrow enough to bring it down to the market rate; and nobody AAill have a rate below it, because if it is at first below it, he Avill lend enough to bring it up to the rate of interest. Thus we see that even men of widely difierent natures THE IMPATIENCE THEORY „ OP INTEREST 19 -(396) V as to foresight, self-control, etc., will have the same marginal rates of impatience. This adjustment of the impatience of different individuals takes place, as we have seen, by adjusting their respective incomes^ increasing their immediate income at the expense of future income or increasing their future income at the expense of immediate income. These changes in income we have supposed, for illustration, to be effected by borrowing and lending. As a matter of fact they may also take place in two other ways. One way is by, buying and selling property. If a man buys property like a growing forest, which will bring him remotely future income and sells property, like household furniture, or short-time notes which brings him more imme- diate income it is clear that he can profoundly change the character of his present and future income. The other way is by changing the uses to which he imts his capital, e. g. changing the use of land from growing immediate crops to growing timber in the remote future. But whether he modi- fies this income by borrowing and lending, or by buying and selling, or by changing the uses of his cajiital, the essential point is that he does modify its time-shape and by so doing- raises or lowers his rate of impatience so as to make it agree with the market rate of interest. For the individual the rate of interest is a relatively fixed fact, since his own rate of impatience and resulting action can affect it only infinitesimally. All he can do is to adjust his rate of imjiatience to it. For society as a whole, however, it is these\ same rates of impatience which meet in, and determine, the rate/ of interest. While for the individual the rate of interestj determines the rate of impatience, for society the rates otj impatience of the individuals determine the rate of interest' The rate of interest is simply the rate of impatience, upon which the whole community may concur in order that the mar- ket of loans may be exactly cleared. Supply and demand will work this out. To put the matter in figures: if the rate of interest is set very high, say 20 per cent, there will be relatively few borrowers and many would-be lenders, so that the total extent to which would-be lenders are willing to reduce their income- streams for the present year for the sake of a much larger future income will be, say 100,000,000 of dollars; whereas, those who are willing to add to their present income at the I. FISHt:R high price of 20 ])er cent interest will borrow only, say, 1,000,000 of dollars. Under such conditions the demand for loans is far short of the siii)ply, and the rate of interest Avill therefore go down. At an interest rate of 10 per cent, tlie present year’ s income offered as loans might be 50,000,000 of dollars, and the amount which Avould be taken at that rate only 20,000,000 of dollars. There is still an excess of supply over demand, and interest must needs fall further. At 5 per cent Ave may suppose the market cleared, borroAvers and lenders being Avilling to take or giA^e respectiA^ely 30,000,000 of dollars. In like manner it can be shoAAm that the rate AYOuld not fall beloAV this, as in that case it would result in an excess of demand OA^er supply, and cause the rate to rise again. Thus the rate of interest is the common market rate of impatience for income, as determined by the supply and demand of present and future income. Those who, haAung a high rate of impatience, striA^e to acquire more present income, at the cost of future income, tend to raise the rate of interest. These are the borrowers, the spenders, the sellers of property yielding remote income, such as bonds and stocks. On the other hand, those Avho — having a Ioav rate of impatience — strUe to acquire more future income at the cost of present income, tend to loAver the rate of interest. These are the lenders, the saA^ers, the iiiA^estors. VI. Verification and Conclusion, We have sketched the main principles determining the rate of interest. Some have not been mentioned sav^e by impli- cation. In summary Ave may say the rate of interest, consi- dered independently of fluctuations in the monetary standard, is determined by six conditions. Those which we have here considered and explained are the folloAving three: (1) the dependence of impatience ui>on prospectUe income — its size, shai^e, composition, and uncertainties ; (2) the tendency of rates of impatience for different indiAuduals to become equal to each other and to the rate of interest, through the loan market ; (3) the fact that supply and demand must be equal so that the modifications in the income-streams of individuals, through THE IMPATIENCE THEORY „ OF INTEREST 21 -(398) buying and selling, or borrowing and lending, must « clear the market. » Of the other three determining conditions the most important is that the rate of interest must be equal not only to the marginal rates of impatience but also to the « marginal rates of return on sacrifice ». This, though a fund- amental and distinctive feature in my theory of interest cannot adequately be presented in this short sketch. It is fully elaborated in the « Eate of Interest ». It is there shown that this principle — that rates of return on sacrifice har- monize with the rate of interest — may also be stated in the following form: of all the optional uses to which a man may put his capital he will choose that one which at the market rate of interest maximizes the present value of his capital — the discounted value of the uses chosen. The remaining two conditions are the very obvious ones; (1) that what is borrowed at any time by some persons, equals what is loaned at that time by other persons and (2) that what any i^erson borrows at one time must be repaid by that person at another time Avith interest at the market rate. These six determining conditions are all essential. If any one of them is omitted we shall find ourseh^es trying to deter- mine the unknown quantity, the rate of interest, by means of other unknown quantities — rates of impatience, rates of return on sacrifice, amount of loans and incomes — without providing adequate means for determining these other unknown (juantities also. This is the difficulty with most theories of inter- est, the atteinjit to explain ignotum per ignotiiis. There is no objection to explaining one unknoAvn in terms of others pro- vided only we furnish enough determining conditions for all. It is a fundamental law of algebra that in order to deter- mine fully each one of the unknowns we must have an exactly equal number of indei>endent equations. As is shown in « The Eate of Interest », the six sets of determining conditions above mentioned provide exactly the number of equations needful to determine all the unknown quantities invoh-ed in them including the rate of interest itself. We have now completed our study of the causes deter- mining the rate of interest. If they are correct, we should find that the rate of interest is low (1) if in general the iieople are by nature thrifty, far-sighted, self-controlled, and loA^e their children, or (2) if they haA^e large or descending income- 22 -( 399 ) I. 3^'ISHEE streams; aud that it is high (1) if the ijeople are shiftless, short-sighted, impulsive, selfish, or (2) if they have small or ascending income-streams. History shows that the facts accord with these conclu- sions. The communities and nationalities which are most noted for the qualities mentioned — foresight, self-control, and regard for posterity — are probably Holland, Scotland, England, France. Among these people interest has been low. Moreover, they have been money lenders; they have the habit of thrift or accumulation, and their instruments of wealth are in general of a durable kind. On the other hand, among communities and peoples noted for lack of foresight and for negligence with respect to the future are China, India, Java, the negro communities in the Southern states, the peasant communities of Eussia, and the North and South American Indians, both before and after they had been pushed to the wall by the white men. In all of these communities we find that interest is high, that there is a tendency to run into debt and to dissipate rather than to accumulate capital, and that their dwellings and other instru- ments are of a very fiimsy and perishable character, built for immediate, not remote, gratification. This is true even where, as in China, the people are industrious. Industry without patience will work only for immediate gratification. These examples illustrate the effect on the rate of interest of differences in human nature. We now turn to illustrations of differences in the time-shape of incomes. The most striking examples of increasing income -streams are found in new countries. It may be said that the United States has almost always belonged to this category. In America we see exem- X)lified on a very large scale the truth of the theory that a rising income-stream raises, and a falling income-stream de- presses, the rate of interest, or that these conformations of the income- stream work out their efiects in other equivalent forms. A similar causation may be seen in particular locali- ties in the United States, especially where clianges have been rapid, as in mining communities. In California, in the two decades between 1850 and 1870, following the discovery of gold, the income-stream of that state was increasing at a prodigious rate. Huriug this period the rates of interest were abnormally high. The current rates in the « early days » were THE IMPATIENCE THEORY „ OP INTEREST 23 -(400) quoted at 1 ‘4 to 2 per cent a month. « The thrifty Michael Eeese is said to have half repented of a generous gift to the University of California, with the exclamation : « Ah, but I lose the interest » — a very natural regret when interest was 24 per cent per annum ». After railway connection in 1869, Eastern loans began to flow in. The decade 1870-1880 was one of transition during which the phenomenon of high interest was gradually replaced by the phenomenon of borrowing from outside. The residents of California were thus able to change the time-shape of their income-streams. The rate of interest consequently dropped from 11 per cent to 6 per cent. The same phenomena of enormous interest rates were also exemplified in Colorado and the Klondike. There were many instances in both these places during the transition period from poverty to affluence, when loans were contracted at over 50 per cent per annum, and the borrowers regarded themselves as lucky to get rates so « low. » We have seen that the rate of interest is not a mere technical phenomenon, restricted to Wall Street and other « money markets, » but that it permeates all economic rela- tion. It is the link which binds man to the future and by which he makes all his far-reaching decisions. It enters into the price of securities, land, and capital goods generally, as well as into rent and wages. The rate of interest also plays a central role in the theory of distribution. The true problem of distribution is that of determining the amounts of capital and income possessed by different individuals in society. Individuals of the spendthrift type, if in possession of land and other durable instruments, will either sell or mortgage them in order to secure the mean^ for obtaining enjoyable services more rapidly. The effect will be, for society as a whole, that those individuals who have an abnormally low appreciation of the future and its needs will gradually part with the more durable instruments, and that these will tend to gravitate into the hands of those who liave the opposite trait. By this transfer and inequality in the distribution of capital is gradually effected, an this inequa- lity, once achieved, tends to perpetuate itself. Hence, in some countries the rich and poor come to be widely and perma- nently separated, the former constituting a hereditary aristo- cracy and the latter a helpless and degraded peasantry. ‘24-(4()l) I. FISHER We see, therefore, that the rate of interest is of almost universal application and importance in economic relations. It concerns not only the phenomena of borrowing and lend- ing but of buying and selling. It enters implicitly into prices. It affects distribution. It cannot be abolished by law nor by any other means unless human impatience be abolished. New Haven (ConnecUeiit, TJ. S. A.)^ Yale University, Libreria Editrice Nicola Zanichelli - Bologna Novita importantissime : GARIBALDI \ POEMA AUTOBIOGRAFICO (DALL’ A'UTOGRAFO) CARME ALLA MORTE E ALTRI CANTI INEDITI Pubblicati da G. E. 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