THE THEORY OF INTEREST

consumption loans are explained on principles quite otherthan are production loans. In personal loans the twoprinciples of impatience are dominant, while in businessloans the two principles of investment opportunity aredominant. But in either case both sets of principles playtheir parts. And, since the degree of impatience and therate of return over cost both tend toward equality withthe market rate of interest, each influencing the otherin that direction, we reach the same result to whicheverone of the two—impatience or investment opportunity—we give our main attention. Lest the role of impatiencein business loans be overlooked, let us first fix our eyes onthat.

While business loans differ from consumption loans inrespect to investment opportunity principles, they donot really differ in respect to the impatience principles.Both are used to tide over lean times in anticipation ofprosperity, and they are said to be contracted in orderto rectify the distortion of the income stream whichwould otherwise result from business operations.

The truth is—and it should never be lost sight of—that the business man conducts his business with an eyealways to ultimately enjoyable income whether for him-self, his family or for others. In a sense it is his home thatruns his business rather than his business that runs hishome.

§3. Short Term Loans

Two classes of business loans may be distinguished,namely, short loans growing out of periodic income varia-tions, and long loans for relatively permanent invest-ment. The short or periodic loans are those which growout of the change in the seasons and the ebb and flow of

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