THE THEORY OF INTEREST

streams may differ in size, time shape, composition andcertainty. As among income streams of different sizes butsimilar in other respects, the most desirable will, ofcourse, be the largest.

As among income streams of different composition butsimilar in other respects, the most desirable will be thatin which, to the given individual, the marginal desirabili-ties of the different constituents are proportional to theirseveral prices, in accordance with the fundamental prin-ciple of marginal desirability in the theory of prices . 2

Finally, and principally, as among income streamsdiffering in time shape alone, the most desirable isfound in accordance with the principles which governthe rate of interest, and which are to be expounded inthis book. It is, therefore, with income streams differingin time shape that we are here chiefly concerned.

In order definitely to illustrate income streams differ-ing in time shape, let us begin by supposing only three.An individual is, let us say, possessed of a piece of landalmost equally good for farming, lumbering, or mining.These terms are used merely to fix the reader’s thought inconcrete pictures. Logically, it would be better to desig-nate the three optional supposititious income streams’simply by the letters A, B, and C, for there is no pretensethat the income streams closely resemble in more thana very general and sketchy way those of actual farm-ing, lumbering, or mining; nor is it essential that thethree products should differ in kind. Thus, the threestreams might represent three different methods of pro-ducing the same product, one more roundabout or capital-istic than another. They are here given the concrete

1 See my Mathematical Investigations in the Theory of Value andPrices.

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