THE THEORY OF INTEREST

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ence, is a true principle, they conclude that because ofthat fact all productivity principles must be false. Butthey overlook two important points. One is that, obviouslyand as a matter of practical fact, the technique of produc-tion does affect the rate of interest, and therefore cannotbe ignored; the other, that their proposed solutions areindeterminate—i.e., they have more unknown quantitiesthan determining conditions.

If, then, I am asked to which school I belong—sub-jective or objective, time preference or productivity—Ianswer “To both.” So far as I have anything new to offer,in substance or manner of presentation, it is chiefly on theobjective side. 1 ajul

In my opinion minute differences of opinion as to tnerelative importance of human impatience and investmentopportunity are of too little consequence to justify vio-lent quarrels as to which of the two is the more funda-mental, although I shall here and later, as occasion offers,note certain differences between them. The importantpoint is that the two rates, that of marginal time prefer-ence and that of marginal return over cost, must be equal,^granted continuity oYvariation, that is, variation by in-finitesimal gradations. If, as Harry G. Brown, 2 in a veryinteresting Robinson Crusoe phantasy, assumes as atheoretical possibility, the rate of return over cost is fixedimmutably at 10 per cent, the rates of impatience mustconform thereto and the rate of interest can only be 10per cent. Later in this chapter^an even simpler andmore easily imagined case, while at the same time more

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1 A somewhat similar treatment is that of Professor Harry G. Brown,Economic Science and the Common Welfare. Mathematical treatmentssubstantially in harmony with mine are those of Walras and Paretoreferred to in Appendix to Chapter XIII.

3 H. G. Brown, Economic Science and the Common Welfare, pp. 137-145.

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