THE PLACE OF INTEREST IN ECONOMICS

to those who wear it, in other words, upon the use or“wear” of the clothes.

Thus the final services, consisting of the use of theclothes, will have an influence on the value of all theanterior services of tailoring, manufacturing cloth, pro-ducing wool, and pasturing sheep, while each of theseanterior services, when discounted, will give the valueof the respective capitals which yield them, namely, theclothes, cloth, wool, sheep, and pasture land. The values,not only of all articles of wealth, but also of all inter-mediate services which they render, are dependent uponthe values of final enjoyable uses. Capital values and ■ K u- '"values of final uses are linked by the rate of interest. A 5 ^rise or fall in the rate of interest will be felt most by As* "H*

the links most distant from these final services. A change - >■»

in the rate of interest will tend to affect but slightly the '

price of making clothing, but it will tend to affect con-siderably the price of pasturing sheep.

The theory of prices, so far as it can be separated intoparts, includes: (1) explanation of the prices of finalservices on which the prices of anterior interactionsdepend; (2) explanation of the prices of intermediateinteractions, as dependent, through the rate of interest,on the final services; (3) explanation of the prices ofcapital instruments as dependent, through the rate ofinterest, upon the prices of their final services. The firststudy, which seeks merely to determine the laws regulat-ing the price of final services, is independent of the rateof interest. 2

The second and third problems, which seek to showthe dependence on final services of the intermediate ser-

3 See my Mathematical Investigations in the Theory of Value andPrices. New Haven, Yale University Press , 1926.

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