THE PLACE OF INTEREST IN ECONOMICS

be yielded by the bridge. The wages of those engaged inmaking locomotives normally represent the discountedvalue of the completed locomotives, and hence, as thevalue of a completed locomotive is in turn the discountedvalue of its expected service, their wages represent thediscounted value of the ultimate benefits in the series. 3In all these cases, the rate of wages is the discountedvalue of some future product, and therefore tends to de-crease as interest increases. But the effects in the differ-ent lines will be very unequal.

Wages of domestic servants and those engaged in put-ting the finishing touches on enjoyable goods will havetheir wages affected comparatively little by the rate ofinterest. On the other hand, for laborers who are engagedin work requiring much time the element of discount ap-plied to their wages is a considerably more importantfactor. If a tree planter is paid $1 because this is thediscounted value at 5 per cent of the $2 which the treewill be worth when matured in fifteen years, it is clearthat a change in the rate of interest to 4 per cent willtend materially to increase the value of such work. Sup-posing the value of the matured tree still to remain at$2, the value of the services of planting it would be notone dollar but $1.15. On the other hand, for laborers en-gaged in a bakery or other industry in which the finalsatisfactions mature early, the wages are more nearly jequal to the value of these products. If they producefinal services worth $1, due, let us say, in oije year, theirwages would be 95 cents when the interest rate is 5 percent and 96 cents if interest falls to 4 per cent.

It is clear, nevertheless, that such unequal effects com-

’ This is, of course, highly theoretical; it assumes a competitive marketfree from legal and other restrictions.

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