DISCUSSION OF SECOND APPROXIMATION

tive. Growing crops and animals often make it possibleto endow the future more richly than the present. Mancan obtain from the forest or the farm more by waitingthan by premature cutting of trees or by exhausting thesoil. In other words, Nature’s productivity has a strongtendency to keep up the rate of interest. Nature offersman many opportunities for future abundance at triflingpresent cost. So also human technique and invention tendto produce big returns over cost.

It is difficult to imagine a precise and simple case inwhich the rate of return over cost is fixed as in the caseof the hard-tack or the figs but, instead of being zeroor negative, is positive, say 10 per cent, neither morenor less. The best example is the ingenious one workedout by Professor Harry G. Brown in which fruit treesare planted at the cost of 100 units of fruit and auto-matically produce 110 units of fruit a year later andthen die. 4 A simpler imaginary example, if we can for-get certain obvious practical limitations, is that of theproverbial flock of sheep, which multiply in geometricprogression affording alternately 100 units of muttonand wool today or 110 next year and ten per cent moreeach succeeding year. These examples symbolize a stateof things in which it is always possible at the cost of100 units out of this year’s income to secure a return of110 units next year, making a return over cost of 10 percent. In such examples, just as in the hard-tack casewith its zero per cent, or the fig case with its minus 50per cent, the investment opportunity principles prescribeor dictate the rate of interest and the rate of timepreference. These rates will in the present instance of thesheep all be 10 per cent.

4 Brown, Economic Science and the Common Welfare, pp. 137-147.

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