THE THEORY OF INTEREST

the construction of irrigation works for arid lands, andBoulder Dam projects.

There is still room for much improvement in our rail-way systems by making them more efficient and moredurable, by making the roads straighter, the roadbedsmore secure, the rolling stock heavier, the bridges largerand stronger, by further electrifications, and similar im-provements. In a new country where the rate of interest ishigh, the cheapest and most primitive form of railway isfirst constructed. Very often it is a narrow-gauge roadwith many curves, costing little to construct, thoughmuch to operate. Later, when the rate of interest falls,or the traffic so increases that the rate of return on sacri-fice is greater, the broad-gauge comes into use and thecurves are eliminated. This is the kind of change whichhas been proceeding in this country with great rapidityduring recent years. There is a transition from relativelysmall first cost and large running expenses to preciselythe opposite type of plant, in which the cost is almost allinitial and the expense of operation relatively insignifi-cant.

§10. Wide Opportunities Stabilize Interest

The existence of a wide variety of available incomestreams, then, acts as a sort of governor or balance wheelwhich tends to check any excessive changes in the rate ofinterest. Interest cannot fall or rise unduly; any suchfluctuation corrects itself through the choice of appro-priate income streams.

We see here a reason why interest does not suffer veryviolent fluctuations. It is not only true that naturalprocesses are regular enough to prevent sudden andgreat changes in the income stream; it is also true that

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