X

PREFACE

Chapter I is added for the purpose of giving the readerwho has not read my Nature of Capital and Income, abrief summary of its contents.

I have, for the first time, in a book on pure economictheory, introduced mathematics into the text, instead ofrelegating it entirely to appendices. This is done in viewof the increasing use of mathematics and the increasingnumbers of students equipped to read mathematical eco-nomics and statistics.

Parts of Chapters II and XIX, with their appendices,have appeared in different form in my monograph,“Appreciation and Interest.” Thanks are due to theAmerican Economic Association for permission to useparts of this monograph unaltered. Since it appearedthree decades ago, the view expressed in it (that appre-ciation or depreciation in the value of money should,and to some extent does, lower or raise the rate of in-terest) has gained considerable currency, and has beenillustrated and verified by war-time experience.

Chapter XIX is made up, for the most part, of a newand intensive study of the relationships existing betweenprices and interest rates. These relationships are testedby new and rigorous statistical methods of analysis.While the conclusions presented as the results of theseanalyses are only tentative, yet they are, I think, worthyof further statistical studies into the relation of interestrates on the one hand, and prices, business activity, bankreserves, and bank loans on the other.

In the preparation of the original book I received im-portant aid from many persons. Finance Minister Bohm-Bawerk, whose writings on interest and whose historyof the subject are classic, kindly read and criticized thechapter devoted to his theory of interest. Afterward,in the third edition of his Positive Theorie des Kapitales