CHAPTER XVI

RELATION OF DISCOVERY AND INVENTION TOINTEREST RATES

§1. The First Effect of Each Important Discovery andInvention Is to Increase the Rate of Interest

The interplay of impatience and opportunity on therate of interest is profoundly influenced by inventionand discovery. The range of man’s investment opportu-nity widens as his knowledge extends and his utilizationof the forces and materials of Nature grows. With eachadvance in knowledge come new opportunities to invest.The rate of return over cost rises. With the investmentscome distortions of the investors’ income streams. Thesedistortions are softened through loans, so far as the indi-vidual is concerned, the distortion being thus transmittedfrom borrower to lender and so spread over society gen-erally. This distortion means relative abstinence fromconsumption during the period of producing and exploit-ing the new devices, followed by greater consumptionlater. In the meantime human impatience is increased.

In the field of transportation, for example, man origi-nally had to depend upon his legs and arms to carry him-self and his burdens. Later he invested in domesticatedanimals, and secured large returns on his investment,by increasing the range, speed, and efficiency of locomo-tion. Still later the invention of the wheel introducedthe use of vehicles drawn by horses. The invention of the

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