THE THEORY OF INTEREST

We see then that, given the appropriate environment,the investment opportunity principle may dominate in-terest and force it to be zero, or minus 50 per cent, orplus 10 per cent, or any other figure. Under such con-ditions, the rate of impatience and the rate of interestwill follow suit.

In actual life, however, any shoving of real incomeforward or backward in time can never be done withoutcausing a variation in the rate of return over cost. Theresult is that the rate of impatience influences the rate ofreturn quite as truly as the rate of return influencesimpatience.

§7. Opportunities as to Repairs, Renewals, Betterments

In the foregoing examples the options consisted ofdifferent employments of a particular instrument or setof instruments of capital which were assumed to retaintheir physical identities throughout the period of thoseemployments. But now let us regard an instrument, orgroup of instruments, of capital as retaining only a sortof fictitious identity, through renewals or repairs, justas the proverbial jack-knife is said to be the same knifeafter its blade and then its handle have been replaced.This brings us to another large and important classof options; namely, the options of effecting, or noteffecting, renewals and repairs, and the options of effect-ing them in any one of many different degrees. If therepairs are just sufficient for the up-keep they may becalled renewals; if more than sufficient, or if involvingimprovement in quality, they may be called betterments.But it will be convenient to include in thought all altera-tions as to the form, position, or condition of an instru-ment or group of instruments affecting its stream of ser-

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