THE THEORY OF INTEREST

vices and of the capital which bears them, involve therate of interest. Under this second study will fall, as aspecial case, the study of the determination of economicrent, the rent both of land and of other instruments ofwealth. The rent of a pasture consists of the value ofthe services of pasturing. This value, in accordance withthe principles, expounded in Chapter I, is dependentthrough the rate of interest upon the discounted valueof the future final services to which the pasturing con-tributes. It is clear, then, that the rent of the land ispartly dependent upon the rate of interest, and thatthe same dependence applies to the rent of any otherinstrument.

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§3. Interest Rates and Wages

Similar considerations apply to the determination ofthe rate of wages. From the standpoint of the employer,the payment of wages to a workman supposedly repre-sents the value of his services. These services are inter-actions, or intermediate services, leading ultimately tosome future enjoyable service. Thus the shepherd, hiredby the farmer to tend the sheep in the pasture, rendersservices the value of which to the farmer is estimatedin precisely the same way as the value of the services ofthe land which the farmer hires.

Consequently, if interest varies, wages will vary. Thus,if the land is used for farming, the wages paid for plant-ing crops will be gauged in the estimate by the farmerby discounting the value of the expected crops and willvary somewhat according to whether the discounting isat 5 per cent or at 4 per cent. In like manner the work-ers engaged in bridge building are presumed to be paidthe discounted value of the ultimate benefits which will

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