THE THEORY OF INTEREST

portant; it is the antithesis between immediate andremote income. The adjustment between the two deter-mines the time shape of one’s income stream. Spendingincreases immediate real income but robs the future,whereas investing provides for the future to the detri-ment of the present. There is often misconception inreasoning about spending and investing. For example,Henry Ford ’s remark has been widely reported: “No suc-cessful boy ever saved any money. They spent it as fastas they got it for things to improve themselves.” In thisremark Mr. Ford drew no hard and fast line betweenspending for personal enjoyment and investment for im-provement. And there is no hard and fast line. Spendingmerely means expending money primarily for more or lessimmediate enjoyment. Saving or investing is expendingmoney for more or less deferred enjoyment. Consequently,much of what is called spending might legitimately becalled investment. Even the money we spend for food,clothing and shelter is in a sense really partly invested,since our lives and capacity to work can be preserved onlyby means of these necessaries. Just so with a set of books,or any other durable good which increases the efficiencyand hence the earning power of the purchaser; it is anexample, not of spending for consumption merely, but ofsaving through investment. Mr. Ford cites the exampleof Thomas Edison as spending his early earnings as fastas he made them. But Edison did this, not for food anddisplay, but for experimentation that resulted in timeand labor saving inventions which have benefited every-body. His outlays were in a way investments.

Popular usage has devised many other terms andphrases in this field, most of which, like spending andinvesting, while containing meanings of importance, in-

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