76

Frank A, Fetter

[March

Seeing the two problems as in large measure distinguishable,
and seeking for the logical starting point in the study, I asked:
Which of these two questions was prior in history and which is
primary in logic? In both cases the answer was time-value. "The
canon of priority in economic reasoning applied here: whichever of
two interrelated problems or mutually acting forces can be thought
&gt;f as existing without the other, must be primary in the explanation.
 A rate of interest on money loans would be anthinkable if
there were no differences relative to time in the estimates men
placed on some goods available at different points of time. On
‘he other hand, the use of money and the practice of borrowing
and lending in terms of money are of comparatively recent origin;
and the estimate of time-value today is thinkable, and is actually
made, apart from the use of money or from any act of borrowing
or exchange between persons, It must always have been found, as
it now is in countless cases, in an impersonal relation between man
and objects. Further, I applied the same test to determine the
priority of capitalization and the rate of interest on loans (taking
sapitalization to mean simply putting a valuatien, a present
worth, upon a more or less durable group or source of incomes).
The usual view has been that capitalization is subsequent to a rate
pf interest. But capitalization, as the process of putting a present
worth upon any durable source of wealth and thus discounting its
future uses by the act of exchanging it for other things, must have
occurred many times before a rate of contract interest existed.
This process surely occurs now in many cases without previous
reference to such a rate. If, however, the less erude view he taken,
that the interest problem studied is economic interest (time-discount)
 rather than contract interest, it is clear that this also is an
aspect of the capitalization rather than antecedent to it. "This
rate of discount (“implieit” or “economic interest”) is in itself
nothing but an arithmetic reflection, in no sense causal, of the
preference implied in the valuation of goods. Robinson Crusoe,
in his individual economy, must, by his choice of goods which embody
 uses maturing at different periods, wrap up a scale of timevalues
 which only later, if ever, except in a very vague form, app.
 104; “difference in want-gratifying power,” p, 144; “time-difference” ; “timediscount”;
 “the rate of time-discount,” P. 145; “estimate of time value,” p. 145;
“a choice between present enjoyment and future provision,” p. 146; “a premium
 rate on present goods,” p. 146; “the exchange in time-valuation,” p. 146;
“preference of the future over the present,” p, 158; “the preference of present
over future,” p. 159.