THE THEORY OF INTEREST

double if interest is halved. Fluctuations in the value offurniture will be even less extensive, clothing still less,and very perishable commodities like fruit will not besensibly affected in price by a variation in the rate ofinterest. In all the foregoing cases it is, of course, as-sumed that the expected services remain unchanged.

§2. Interest Rates and Values of Services

As to the influence of the rate of interest on the priceof services, we first observe that services may be eitherfinal or intermediate. 1 The value of a dinner about to beeaten involves no time of waiting and so no discount orinterest. Nor does the irksomeness of labor about to beundertaken involve discount to the laborer. Both the din-ner or its enjoyment and the labor are final items of in-come, the one positive and the other negative. The valueof intermediate services (“interactions”) is derived fromthe succeeding future services to which they lead. Forinstance, the value to a farmer of the services of hisland in affording pasture for sheep will depend upon thediscounted value of the services of the flock in producingwool. If he rents the land, he will calculate what he canafford to pay for it on the basis of the value of the woolwhich he would expect to obtain from his flock. In likemanner, the value of the wool output to the woolenmanufacturer is in turn influenced by the discountedvalue of the output of woolen cloth to which it con-tributes. In the next stage the value of the production ofwoolen cloth will depend upon the discounted value ofthe woolen clothing to which that cloth contributes.Finally, the value of the last named will depend uponthe expected real income which the clothing will bring

1 See Chapter I; also The Nature of Capital and Income, Chapter IX.

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