PERSONAL AND BUSINESS LOANS

ties. Yet, in either case, it serves to relieve his needs. In asense all loans are impatience loans, but in the productioncase he has another method of relief—not to invest at all.The essential contrast, then, between him and the un-fortunate is simply that he has a possible course open tohim which the latter does not have.

This is not to deny that the loan (and the investmentwhich it makes possible) is also to be considered for thepurpose of increasing his income. It is both. As statedalready, had he wished, he might have refrained, or-dinarily, altogether from making the investment. Hewould, then, let us suppose, have had an income of$11,000 a year both this year and next. He was attractedby the opportunity to invest $1,000 because while thiswould reduce this year’s income by that amount—to$10,000—it would increase next year’s by $1,500—to$12,500. The whole set of operations go together. If weseparate them in thought, the true sequence is: of thetwo optional income streams ($11,000, $11,000, on theone hand, and $10,000, $12,500 on the other) the mer-chant selects the latter because it had the greater presentvalue (or, what amounts to the same thing, because therate, 50 per cent, of the return of $1,500 on the sacrificeof $1,000 is greater than the rate of interest, 5 per cent).That being done he then borrows because, although hewill have the same present value, he will get a moredesirable time shape. This description takes account ofthe whole series of operations, and corresponds to theprinciples propounded in Chapter VI. It is the extraoption which gives rise to the contention that the loanproduces a profit not possible or easy without it, andthat it is, therefore, productive. And this is true in thesense that the loan carries with it the extra option. The

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