DISCUSSION OF SECOND APPROXIMATION

is, the rate of return and the rate of impatience are bothzero, the former, rate of return, being fixed at zero by thetechnical conditions of the particular environment on thedesert island, and the impatience rate being forcedthereby to be zero also. In this case opportunity (or thelack of it) rules impatience.

It would be possible, of course, to make this illustrationsomewhat more realistic by adding to our supposed sup-plies of hard-tack supplies of other foods, as well as ofclothing and sundry other real income. But the value ofthe illustration is not in any realism which can be madeout of it. Rather does the fact that conditions in real fifedo not permit such freedom of shifting real income intime (because of change in quantity or quality) revealsome of the reasons why the rate of interest is not zero.

§5. The Imaginary “Figs” Example

Not only may the rate of interest conceivably be zero;it may conceivably be negative. Suppose our sailors wereleft not with a stock of hard-tack, but with a stock of figswhich, like the hard-tack, can be used at any time as de-sired, but which, unlike the hard-tack, will deteriorate.The deterioration will be, let us say, at a fixed and fore-known rate of 50 per cent per annum. In this case (as-suming that there is no other option available, such aspreserving the figs) the rate of interest in terms of figswould be necessarily minus 50 per cent per annum, asmay be shown by the same reasoning that established thezero rate in the hard-tack case.

More generally, this would be true if there were aworld in which the only provisioning of the future con-sisted in carrying over initial stocks of perishable food,clothing, and so forth and if every unit so carried over

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