THIRD APPROXIMATION

is, as the sum of the enjoyable services, each multipliedby its price. This would lead us into the theory of pricesand the general economic equilibrium.

Impatience Principle B was expressed in the secondapproximation by formulas of the type:

i = f.

But now we must face not only one i but a series of i’s,according as the market is the call loan market, the 60to 90 day commercial paper market, the gilt-edge bondmarket, the farm mortgage market, and innumerableothers, for each of which there is its own separate / and i.

These many magnitudes, including the i’s, require stillother empirical equations impossible to formulate satis-factorily, albeit we know in a general way that the rateon gilt-edge bonds is lower than on risky bonds, the rateon first mortgages lower than that on second mortgages,and that the long term and short term markets do influ-ence each other. But these relations are too indefinite tobe put into any equations of real usefulness, theoreticalor practical.

Investment Opportunity Principle A was expressed byformulas of the type

<p(y',y", - ,y (m) )= 0

This becomes

V ( ) = 0

where the blank parenthesis stands for a multitude ofunknowns (and unknowables) which could be discussedad infinitum and each of which, in so far as it was notalready included among the variables entering into oursystem of equations, would require a new empirical equa-tion of some sort in order that the problem shall be de-terminate. Moreover, the <p equation representing a

[319]