INVESTMENT OPPORTUNITY PRINCIPLES

the productive operations of his plant for a year, to scrapmuch of his old machinery and to provide a new installa-tion at the cost of millions. The larger returns which heexpected from the sale of the new car were only obtain-able by the sacrifice of immediate income—by waiting.

Our outer opportunities urge us to postpone presentincome—to shift it toward the future, because it willexpand in the process. Impatience is impatience to spend,while opportunity is opportunity to invest. The more weinvest and postpone our gratification, the lower the in-vestment opportunity rate becomes, but the greater theimpatience rate; the more we spend and hasten our grati-fication, the lower the impatience rate becomes but thehigher the opportunity rate.

If the pendulum swings too far toward the investmentextreme and away from the spending extreme, it isbrought back by the strengthening of impatience andthe weakening of investment opportunity. Impatience isstrengthened by growing wants, and opportunity isweakened because of the diminishing returns. If thependulum swings too far toward the spending extremeand away from the investment extreme it is brought backby the weakening of impatience and the strengtheningof opportunity for reasons opposite to those stated above.

Between these two extremes lies the equilibrium pointwhich clears the market, and clears it at a rate of inter-est registering (in a perfect market) all impatience ratesand all opportunity rates.

It is all a question of the time and amount of theseries of items constituting real income. Shall we get in-come enjoyment now or later and how much? Shall wespend or invest?