THE THEORY OF INTEREST

thesis in which risk is disregarded, he will spend moneyon his automobile for repairs and renewals up to thatpoint where the last increment of repairs will secure areturn which will just cover the cost with interest.Beyond this he will not go.

In practice, of course, the choice between the variouspossible repairs, renewals, or betterments will involvesome corresponding choice between possible employmentof labor, land, and every agent of production. But I havetried here to isolate for study the services and disservicesof a physical instrument subject to repairs, renewals, orbetterments.

Another case of optional income streams is found in thechoice between different methods of production, especiallybetween different degrees of so-called capitalistic produc-tion. It is always open to the prospective house builderto build of stone, wood, or brick, to the prospective rail-road builder to use steel or iron rails, to the maker ofroads to use macadam, asphalt, wood, cobble, brick, orcement, or to leave the earth unchanged except for a littlerolling and hardening. The choice in all cases will dependtheoretically on the principles which have been alreadyexplained.

To take another example, the mere services of a housewhich has a durability of 100 years will be equivalent tothe services of two houses, each of which has a dur-ability of 50 years, one built today and lasting 50 years,and the other built at the expiration of that period andlasting 50 years more; yet the one house may well be bet-ter than the two. The difference between the one and thetwo will not be in the services but in the cost of construc-tion. The cost of constructing the 100-year house occursin the present; that of the two successive 50-year houses

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