1914] Interest Theories, Old and New

73

More than a year later, in reviewing some essays by Böhm-Bawerk,**
 I said:
Great as have been the services of our author in stimulating to clearer
and deeper thinking in economic theory, his presentation of a Capitalsiheorie
 evidently is not destined to be a finality. Some development
it is sure to undergo, and is undergoing. And that development lies
along the lines of a value concept as opposed to a cost-of-produetion
eonceDpnt.

Again in the same year, at the conclusion of a eritical article
on Böhm-Bawerk’s theorv :?

Let us venture an opinion as to the nature of the dificulty and
‘he direction that must be taken to reach a- correct solution. ...
Let us suggest the view that rent and interest are very dissimilar aspects
 of the value of goods. Rent’® has to do with “production”
of scarce and desirable uses of things. To the interest theorist this is
in the nature, one might almost say, of an ultimate fact. The interest
theory begins with the valuation of these different rents or incomes,
distributed through different periods of time. The “productiveness’ of
a material agent is merely its quality of giving a scarce and desirable
service to men, To explain this service of goods is the essence of the
theory of rent. Given this and a prospective series of future services,
however, the problem of interest arises, which is essentially that of
explaining the valuation set on the future uses contained in goods. Interest
 thus expressing the exchange ratio of present and future services
or uses is not and cannot be confined to any class of goods; it exists
wherever there is a future service. It is not dependent on the roundaboutness
 of the process; for it exists where there is no process whatever,
 if there be merely a postponement of the use for the briefest
period. A good interest theory must develop the fertile suggestion of
Böhm-Bawerk that the interest problem is not one of product, but of
‘he exchange of product,—a suggestion he has not himself heeded. It
must give a simple and unified explanation of time value, wherever it
is manifest. It must set in their true relation the theory of rent as
he income from the use of goods in any given period, and interest as
che agio or discount on goods of whatever sort. when camnared throughyut
 successive periods.
A year later, in 1908, I outlined the same conception of a
:horoughgoing psychological analysis, and for the first time gave

* “Einige Strittige Fragen der Capitalstheorie,” Political Seience Quarterly,
7ol. 17 (Mar., 1902), p. 173.
* Quarteriy Journal of Economics, vol. 17 (Nov., 1902), p. 179.
“The reader will observe that the term rent was there used in the more
general sense of the income from the use, or the usance, of agents, not merely
in the sense of contractual rent. This particular terminology which was due
to the influence of J. B. Clark, has since been modified, not to weaken but to
strengthen, the conception involved.