RELATION OF DISCOVERY AND INVENTION

ered the value of mills equipped with the circular saws.Hand looms and hand printing presses were superseded,except for special types of work, by power looms andpresses. The early forms of power machines have in turnbeen superseded by improved machines. The automobileruined first the carriage industry and later hurt the bi-cycle industry and even the perambulator industry. It issupplanting, in short hauls of freight and passengers, therailway industry, and both of these, in turn, are boundto be supplanted, in a measure, by the aviation industry,through its possibilities for producing the means of morespeedy transportaton.

The reasons for these reductions in value are simple.Each new process produces a larger supply of the par-ticular kind of service rendered. The price of this service—e.g., sawing or printing—is reduced, and consequentlythe capitalized value of the given amount of such servicewhich can be expected from the older devices is reduced,and often so far reduced as to make the reproduction oreven the repair of these older instruments wholly un-profitable. Thus progress constantly requires the writingoff of capital value because of obsolescence. 3

§4. The Ultimate Effects of Invention on Interest Rate

It is important to emphasize the temporary nature ofthe effects of invention and discovery in raising the rateof interest. The effect in raising interest lasts only solong as the rate of return over cost continues to be highand so tempts society to distort greatly its income streamin time shape. This period is the period of development

3 The economic effects of invention, and particularly its effects uponthe rate of interest, were well treated by John Rae, The SociologicalTheory oj Capital, Chapter IX, pp. 132-150; Chapter X, pp. 151-203.

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