THE THEORY OF INTEREST

neither borrows nor lends. Every one has opportunitiesto shift along his 0 line at a rate above or below the mar-ket rate of interest, even if it be merely in the degreeof care he gives his clothes, his house, his fences, or evenhis food. At a certain stage it is literally true that a “stitchin time saves nine”. That is, mending one’s clothes yields900 per cent. But beyond a certain point mending one’sclothes, or a roof, painting a house, or tilling the soilwill not repay the cost. Each activity has its marginalpoint and enters into the construction of every person’sO line. An individual’s Opportunity line is a compositeof his separate potential activities—what he might doif he chose.

Of course the 0 line cannot be drawn without the aidof valuations which involve the market principles andso involve the rate of interest. The farmer who encountersthe law of diminishing returns in agriculture buys ma-chinery and labor and sells grain. His 0 line is thus some-what dependent on the prices of machinery and, since theprice of every good is a discounted valuation, it dependson the rate of interest. Only in a primitive or imaginaryRobinson Crusoe land can we get a pure case of in-vesting successive amounts of this year’s income for thesake of getting a diminishing return in future years with-out the presence of some buying or selling as an ingredientin the make-up of the 0 line. It is largely because theelement of the rate of interest is almost omnipresent inthe valuations entering into the 0 line that the otherand essential ingredient of technical limitations has beenoverlooked so generally. Even the farmer does some ofthat omnipresent trading, but besides this trading withother men, he is dealing with nature—the soil, the seasons,the weather, insect enemies, and all the rest. Every in-

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