THE THEORY OF INTEREST

type of fluctuating income, as represented in Chart 13,which may result in alternate borrowing and lending soas to produce a more nearly uniform income stream. Suchfinancing over the lean parts of a year is often practicedwhen the income is lumped at one or two spots, suchas dividend dates.

It must not be imagined that the classes of borrowersand lenders correspond respectively to the classes ofpoor and rich. The factors, environmental and personal,discussed in Chapter IV, will determine whether a man’srate of preference is high or low, and therefore whetherhe will become a spender or a saver.

When we come to the second and third approximationsand have to study so-called productive loans, especiallyof risk-takers, or enterprisers as Professor Fetter callsthem, we shall find still other influences determiningwhether a person shall be a borrower or lender or both.At present we are only at the first approximation whereit is assumed there is no risk and no such series of oppor-tunities to vary the income stream as lie at the basis ofso-called productive loans.

§5. Altering Income by Sale

But borrowing and lending are not the only ways inwhich one’s income stream may be modified. Exactly thesame result may, theoretically, be accomplished simply bybuying and selling property; for, since property rightsare merely rights to income streams, their exchange re-places one such stream by another of equal present valuebut differing in time shape, composition, or uncertainty.This method of modifying one’s income stream, whichwe shall call the method of sale, really includes the former,or method of loans, for a loan contract is, as Bohm-

[ 112 ]