{4

Frank A. Fetter

[March

the name of “a theory of capitalization” to the proposed treatment
of what usually is called “economic interest.????

Another solution may be found by combining into a logical system
‘he three typical modes in which goods appeal to wants. F irst, goods
appeal directly as want-gratifiers immediately available. Here is
cequired a theory of wants and enjoyable goods, and the technical
analysis of marginal utility. The mental process here examined is
chronologically the first stage of evaluation, in the history both of the
individual and of the race. Secondly, goods appear as more or less
durable, and may be made comparable by being considered, through
repairs, to be lasting use-bearers, yielding in a given short period a
group of uses. Here is the place for the theory of rents. This is
chronologically the second stage of evaluation, when durable goods are
thought of and expressed in terms of their usufructs, Thirdly, whenever
 two non-synchronous gratifications, rents or series of rents, are
exchanged, they must be discounted to their present worth to be made
comparable. Here is required a theory of capitalization, that is, of
economic interest. This is historically as well as logically the latest
stage of evaluation, characteristic of a developed money economy and
of a “capitalistic”” era. These three phases must be observed in every
complete analysis of value.
In an elementary textbook published in 1904 (The Principles of
Economics) this conception of the interest theory was embodied,
not as a thing apart from, but as an integral part of, a general
theory of value. "This mode of treatment, though new,?* was not
labeled with a distinctive name, and, being presented in an elementary
 text, has doubtless remained unread by many economists, and
its true import unrecognized by some who have read it.
As is shown in the passages cited above, my conception long has
een that in the analysis of the value problem the value of enjoyable
 goods must be first considered; that this should be followed
 by the valuation connected with the physical productivity
of agents; and that only after full consideration of income expressed
 in psychic terms, in physical terms, and in monetary terms,
Ss it in order to take up the theory of time-value, which is then

” Publications of the American Economic Association, 3d series, vol. V, in
4 paper on “The Relations between Rent and Interest,” p. 197.
% Believing this conception to be logically involved in much of Böhm-Bawerk’s
 argument in his critical volume, “Capital and Interest,” I credited
him with “the fertile suggestion” (see above, p. 73, quotation from the article,
“The Roundabout Process”). But he has not accepted this interpretation;
indeed, this would invalidate the greater part of what is distinctive in his
positive theory of the roundabout process, to which he adheres without change
in the latest edition. 1912.