THE THEORY OF INTEREST

practical factors. All of these are worthy of careful studybut are not within the scope of the main problem ofthis book.

In some cases, as in the theory of the moon’s motions,the perturbations may be worked out with a high ap-proximation to reality by combining rationally a num-ber of elementary influences. Such resolution of empiricalproblems represents the highest ideal of applied science.But until that stage is reached there remains a wide gapbetween rational and empirical science, and the two haveto be pursued by somewhat different methods. That isthe case with economic science in most of its problemstoday . 3

In respect to our present problem, while there is agreat field for research, the only perturbing influence oftranscendent importance is that of an unstable monetarystandard, and, as was seen in Chapter II, even that wouldmake nothing more than a nominal difference in theresults if it were not for the “money illusion.”

But with respect to this disturbance, theory and prac-tice are miles apart. The disturbances of unstable moneyoften reverse the normal operation of those supposedlyfundamental forces which determine the rate of interestand are the chief subject of our study in this book.

* See Mitchell, Wesley C., Quantitative Analysis in Economic Theory .American Economic Review, Vol. XV, No. 1, March 1925, pp. 1-12.

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