PERSONAL AND BUSINESS LOANS

same function as any other loan—to even up the incomestream in accordance with the principles of impatience.

§6. Purpose of Borrowing to Increase Present Income

We have now seen that the theory of interest whichhas been propounded is adequate to explain the motiveswhich lead to borrowing in the actual business world.

The personal loan comes near to exemplifying our firstapproximation where there is a supposedly fixed incomestream, while the business loan exemplifies the second orthe full fledged third approximation where there arealternatives. Of course, even the unfortunate who needsa loan may have alternative ways to turn. No incomestream in actual life is absolutely rigid. But the variousopportunities open to the typical personal borrower arenot very important or striking as compared with thoseopen to a business man seeking a loan to finance somegreat enterprise.

The foregoing classification of loans is made from thestandpoint of the borrower. From the standpoint of thelender, loans do not need to be so minutely classified.

§7. Public Loans

Public Loans need not be treated in detail since theyhave all the characteristics which belong to private loansfor consumption and production. The public loan forconsumption is exemplified in the war loans and theloans to anticipate future revenues. A government re-ceives its income chiefly in taxes, and in some cases onlyonce a year, whereas its outgo occurs day by day andmonth by month. It thus happens that a government isalternately accumulating a large surplus and sufferinga large deficit. The inconvenient effects of this have

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