THE THEORY OF INTEREST

countries. When postal savings banks were first intro-duced in England , it was objected that the English poorfor whom they were intended were so spendthrift thatthey would never make use of them. But Gladstone in-sisted that habits were an arbitrary matter, and that thefashion of spending would be displaced by the fashion ofsaving as soon as opportunity and incentive were affordedand the principle of imitation had had time to operate.The experience with English postal savings banks justi-fied his prediction . 9

Rae remarks upon the flimsiness of the Chinese build-ings and implements and explains this by saying thatthe people “think not so much of future years as of thepresent time.” 10 But the high interest rates of China areprobably not due, as Rae seemed to think, to any nativelack of industry, frugality, or parsimony on the part ofthe Chinese people, as is evidenced by the large accumu-lations of capital made by Chinese living abroad wherethey are freed from the exactions of arbitrary governorsand from the tyranny of the clan-family system. Pre-sumably the wastefulness and high interest so evident inChina are most largely due to the action of poverty anduncertainty.

For, as has been emphasized in previous chapters, therate of preference for present over future goods is not aquestion of mere personal characteristics, but dependsalso upon the character of one’s income stream; on itssize, shape, composition, and certainty. In respect to size,our theory maintains that the larger the income, otherthings such as habits, foresight and self-control beingequal, the lower the rate of preference for present over

"Brown, The Development of Thrift.

10 The Sociological Theory of Capital, pp. 88-89 and 92.

[ 378 ]