THE THEORY OF INTEREST

tions to curtail their expenses, the third or fourth genera-tion may come to actual poverty.

The accumulation and dissipation of wealth do some-times occur in cycles. Thrift, ability, industry and goodfortune enable a few individuals to rise to wealth fromthe ranks of the poor. A few thousand dollars accumu-lated under favorable circumstances may grow to severalmillions in the next generation or two. Then the unfa-vorable effects of luxury begin, and the cycle of povertyand wealth begins anew. The old adage, “From shirtsleeves to shirt sleeves in four generations,” has somebasis in fact. This cyclical movement is more likely tooccur in countries like the United States , where, owingto the rapidly changing conditions, there is more chanceeither to rise or fall in the economic scale. Wherever, as inthe older countries of Europe , conditions have becomefixed and less subject to changes of any kind, incomes andwealth are likely to remain relatively unchanged in thesame families, generation after generation. This tendencyis strengthened in England, where the customs of inheri-tance have helped to keep large fortunes intact in thehands of the eldest son.

We are not concerned here with creating a completetheory of personal distribution and its changes. Thiswould include the effects of many factors other thanthrift. But here we are interested simply in the role ofinterest and thrift in distribution.

§6. The Loan Market Is a Highway for Re-Distribution

We see, then, that the existence of a market rate ofinterest to which the individual adjusts his rate of im-patience supplies an easy highway for the movementof his fortune in one direction or the other. If an indi-

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