THE THEORY OF INTEREST

and practical considerations without end. One result isthat in order to reverse one’s direction on the Marketline, a bigger rise or fall of the interest rate would beneeded than the charts as here used would suggest. Ittakes a push to dislodge the individual from P in eitherdirection. The same sort of considerations cause his posi-tion Q to be determined without the nicety of precisionsuggested by the continuous curves.

But all these and other practical considerations do notdestroy the fact that each of our four determining con-ditions represents a reality—a real tendency even when inactual practice balked or neutralized.

The relationship of the rate of time preference to in-come is analogous to that of marginal utility or cost toconsumption or production. In order to show how themarginal desirability of sugar in the case of Individual 1is related to his consumption of sugar, we employ a curve,which, under certain assumptions, becomes the familiardemand curve for sugar. Such a curve has come intouniversal use.

Why has no similar curve been used to indicate thecorresponding relationship between time preference (amarginal desirability derivative) and income? There aremany reasons, but perhaps chief is the difficulty of find-ing a suitable graphic method for variables so diverse andrelated to each other in so complicated a manner. Themap of the Willingness, or Impatience, lines partly solvesthis problem. So far as two periods of time are concerned,it “puts on the map” the whole problem of interest.

§17. Relation to Supply and Demand

Some students familiar with demand and supply curvesas applied to the loan market may feel that they can get

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