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Frank A. Fetter [March

At every point where Professor Fisher is at his best, and rejects
productivity “as a direct acting cause,” Professor Brown disagrees
with him, and accepts productivity. Vet the article is marked by
a number of just observations and seems at one point to touch
ıpon the truth of the capitalization theory :*
We may say that a person’s valuation of capital, along with the
valuations of other persons in like situation, is less the direct result
of the previously existing market rate of interest, than it is, by affecting
 his and their attitude towards the market, a determinant of the
tate of interest.
But the argument on the whole is on the plane of that conception
of productivity criticised above. Every feature of the old argument
 is reproduced. "The explanation is hardly begun until the
productivity is assumed to be a five per cent, a ten per cent, or a
twenty per cent productivity. Per cent of what? Of the capital
valuation, or the prices at which the borrower can buy the agents.
Productivity in what way? In that the present prices, being the
discounted value of the incomes that are expected, emerge at their
maturing value as time elapses. "The discount-rate involved in the
capitalization is the “rate of productivity” which appears again
and again in the argument. "The borrower pays contract interest
of five per cent only when he thinks he sees the opportunity to get
this increment and something more for his trouble. Simple and
true as an explanation of why men borrow at a rate of contract
interest related to the prevailing rate of time-discount, but no
proof whatever that the rate of interest is due to technical
productivity.
Here, as always, the productivity theorist looks at the proximate
influence, not at that one step removed; examines the middleman’s
motive, and ignores the ultimate consumer. The productive borrower
 is but the intermediary, transmitting to the market of consumers
 through the agency of prices, the effects of time-preference.
Forgetting the motives and influences of the really determining
zroup of minds, Professor Brown looks only at the “productive”
borrower and says: “In what possible sense can it be said that he
borrows only because he is impatient?”® “All question of imthan

 cause”; and, finally, page 650, impatience “is also, to some extent, a joint
sonsequence, with interest, of the other cause, the superiority of indirect
production.”
3 Quarteriy Journal of Economics, Aug., 1913, p. 644.
B Tdem. D. 638.