THE THEORY OF INTEREST

miners, canal and tunnel diggers, there will tend to beless immediately enjoyable income and correspondinglymore enjoyable income in later years. Thus, by with-drawing labor from one employment and transferring itto another, it is in the power of society to determine thecharacter of its income stream in time shape, and also insize, composition, and uncertainty. This power is exertedthrough the “enterpriser,” to use Professor Fetter’s term,according to the enterpriser’s estimate of what returnwill come from each particular employment taken inconnection with the cost involved and the ruling rate ofinterest.

§9. Fluctuations in Interest Rates Self-Corrective

Since the choice, for an individual, among differentoptions, depends on the rate of interest in the mannerdescribed in Chapter VI, it is clear that a low ratefavors the choice of the more ascending income streams,but also that the choice of such income streams reacts toraise the rate of interest. If, on the contrary, the rate ishigh, the opposite of both these propositions holds true;the high rate favors the choice of the less ascending in-come streams, but that choice reacts to lower the rate ofinterest.

Thus, if we apply these principles to repairs, renewals,and betterments, it is evident that the lower the rate ofinterest, the better can the owner of an automobile affordto keep it in repair, and the better can the owner of arailroad keep up its efficiency, and the same applies toall other instruments. But it is equally clear that thevery attempt to improve the efficiency of instrumentstends, in turn, to increase the rate of interest, for everyrepair means a reduction in present income for the sake

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