32

Frank A. Fetter [March

says,“ that Seager regards “all produetivity theories as alike
sound in principle.” Seager’s opinion has, however, an element of
progressiveness in it, for he says that nothing has shaken his “confidence
 in the essential soundness of the productivity-theory
explanation of interest, when presented not as the complete explanation
 but as the necessary supplement to the discount theory.“
He suggests in his explanation (also eclectic) of the way in which
expenses of production and prices are related, that it is “nearer
the truth to say that prices . . . determine the expense of production
than the reverse.” Yet he concludes,“® “the chain of causation is
not straight, but it turns upon itself in a eircle.” He seems about
to avow the same doctrine of coördinate rank and mutual influence
as between technical productivity and time-preference, but he turns
to the view that the part of productivity is in a fuller sense causal
and primary, and that time-discount is the resultant of this.“ He
declares that it is borrowers’ “demand for capital growing out of”
che productivity which is “the positive, active influence determining
 interest.”
The capitalization theorist is compelled regretfully to reject
he compromise involved in this enlightened eclectieism. For this
is the way Seager begins his indication of what his theory “does
and what it does not involve 50

It starts out with the proposition that entrepreneurs desirous of
making profts by supplying goods at current prices compete against
one another for control of the factors necessary to production. "This
competition tends to keep their own profits down to a large or small
“wages-of-management”” and to force them to pass along as the remuneration
 of the factors which they hire, subject to this deduction and to
a deduction for the replacement fund, the total price which they
receive for the things which they sell. It is, therefore, contended that
it is the part these factors play in production as compared and measared
 by the entrepreneurs that determines the shares of this total price
that are assigned to them. The part that capital plays presents two
aspects: that of capital goods available at a given instant of time, and
‘hat of the purchasing power tied-up in these capital goods during the
period that they are performing their productive funetion. In relation
:o the first aspect, entrepreneurs appear as buyers. Normally, under
conditions of free competition, the prices which they must pay for capial
 goods conform to their expenses of production. In relation to the
%* AMERICAN Ecowomic REvıew, Sept. 1913, p. 617.
# Idem, Dec., 1912, p. 849.
® Idem, p. 845.
® Idem, p. 848,
% Tdem, D. 847-848.