DISCUSSION OF SECOND APPROXIMATION

of labor and satisfaction, or their cost of living equiva-lents, with a time interval between, are never shuffledout of existence, however much they may be shuffled outof sight. They are ever present and exert their influencejust as truly as they did with Robinson Crusoe.

In making the first of these two adjustments, the in-dividual is not trading with other human beings, but is,as it were, trading with his environment—Nature andthe Arts. That is why industry today maintains labora-tories of research. These aim to improve products andservice by scientific means, to develop new fields of ap-plication in by-products and materials, and to evolve newproducts and methods and so new investment opportuni-ties. Trading with the environment is making the mostof investment opportunity—of the future income re-turned per unit of present income sacrificed. Tradingwith mankind is making the most of impatience—of thepreference for a unit of present income over a unit offuture income.

When the individual sets out to trade with the environ-ment he finds that the rate of return over cost varieswith the extent to which he pushes this trading; he ad-justs the trading so as to harmonize the marginal rate ofreturn with the rate of interest. In his trading with otherhuman beings, on the contrary, he finds the terms of thecontract interest fixed, so far as any effort by him is con-cerned, but impatience varies with the extent to whichhe pushes this trading.

§2. Investment Opportunity Essential

Some. economists, however, still seem to cling to theidea that there can be no objective determinant of therate of interest. If subjective impatience, or time prefer-

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