CHAPTER VIII

DISCUSSION OF THE SECOND APPROXIMATION

§1. Opportunity Reduced to Lowest Terms

Since the second approximation contains the heartof the theory of interest, a further brief summary and dis-cussion of the steps already taken will be helpful beforeproceeding to the third approximation.

Any opportunity to invest simply reduces itself tothis: for a time there is more labor or less satisfactionthan there would be in the absence of such opportunity,while there is expected later less labor or more satisfac-tion. The earlier item of labor or abstinence is less thanthe expected satisfaction or labor saving. This picture oftemporary labor exerted, or abstinence from satisfactionswhich would otherwise be enjoyed, for the sake of latersatisfaction or labor saving is the ultimate picture of costand return.

When thus reduced to these lowest terms of labor andsatisfaction, not only is our picture simplified, but withthe simplification, we have rid it of a certain suspicion ofbegging the question of the interest problem. That is,as long as interactions, capital, and money were in theinvestment opportunity picture, interest was alreadyimplied in each of their valuations and there might re-main a haunting fear that this new rate of return overcost as an interest-determining factor was simply in-volving us in a circle. The question might be asked: Is

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