SOME COMMON PITFALLS

all, certainly not doubled, 5 because the value of theorchard would automatically advance with an increasein its value productivity.

The rate of physical productivity is evidently not therate of interest. The rate of physical productivity is notordinarily even the same kind of magnitude as the rateof interest. Bushels of wheat produced per acre is anentirely different sort of ratio from the rate per cent ofthe net value of the yield of land relative to the value ofthe land. Interest is a rate per cent, an abstract number.Physical productivity is a rate of one concrete thing rela-tively to another concrete thing incommensurable withthe first.

§5. Two Other Pitfalls

In this chapter I have tried at least to mention, ifnot completely to remove in advance, the chief pitfallsor impediments to the understanding of the interestproblem. Two other pitfalls, discussed elsewhere, may behere mentioned so that the reader may be on his guardagainst them also.

One is the idea that interest is a cost. While an interestpayment, like any other payment, is a cost or outgo tothe payer, it is income to the payee. But interest itself,as it accrues, is capital gain; and is neither negative in-come (cost) nor positive income. The fallacious idea thatit is a cost is simply the other side of the fallacious idea,discussed in Chapter I, that it is income. There are two

"It is true, however, as will become more apparent later, that if theincrease in productivity is foreseen, the rate of interest will be tem-porarily raised. But after the transition period is over and the supposeddoubled productivity is thereafter going on at a steady rate, the rateof interest will fall back; in fact, other things equal, it will fall belowwhat it was before productivity was increased.

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