OBJECTIONS CONSIDERED

this larger income tends to lower the rates of impatienceof those who own it. So long as the rate of interest doesnot fall to correspond with the lower rates of impatience,there will continue to be profit in reproducing the produc-tive capital until adjustment is attained—whether by de-crease in the price of the products or by increase in thecost of the capital, or both, does not matter. In any casethis adjustment must be by lowering and not by raisingthe rate of interest, for the rate of interest cannot beraised if the rates of impatience are not raised, and therates of impatience cannot be raised if, as is assumed, theincome stream is increased in size without being alteredin other respects.”

Very possibly, Professor Seager and I may have beenarguing at cross purposes, for, of course, in the transitionperiod while prod uctivity is be ing doubled, (the rate ofinterest may be raised. This is amply provided for in mytheory. But even during the transition period somethingmore is required than increased productivity in orderthat the rate of interest shall rise; the cost of making thechange must be reckoned with and deducted from theincome stream. Mere physical productivity will notsuffice.

Having stated my views, it will serve to present clearlythe difference of opinion to quote an illustration whichProfessor Harry G. Brown has furnished me of his viewson the matter.

“Smith is a fisherman. His boat (capital necessary to his business)is wearing out and will last little longer. He catches, in general, 40halibut a week, which he sells for $1 each, or $40 a week. He is alsoa good carpenter and can make himself a boat in a week’s time.But to do so, he must give up the $40 worth of fish he could catch,or the $40 for which he could sell them. For him the cost of build-ing a boat is $40. That is its cost in the sense of the sacrifice Smith

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