THE THEORY OF INTEREST

you like, as contrasted with the statistical, empirical, orquantitative approach. While it is true that in the discus-sion of the theoretical portions of the book, empiricalevidence has been employed, this analysis is supple-mental to rather than independent of the principles to beillustrated or tested.

The aim in view has therefore dictated the suppressionof the innumerable secondary factors in order to focusthe analysis upon the primary factors involved. It is theselatter factors with which pure economic theory is con-concerned and this book is intended to be a study in puretheory.

As such, its ultimate objective is to explain how therate of interest would be determined in vacuo or underthe ideal operation of the assumptions. Outside this do-main, there are literally thousands of forces which wouldhave to be analyzed and allowed for before an adequateexplanation of an actual market rate of interest could bemade.

Thus, after' presenting in Chapter II the theoreticalrelations of changes in the value of money to the rate ofinterest, we assume thereafter (until we reach ChapterXIX) a constant value of money and therefore the ab-sence of any influence of a changing value of money.Yet we know that such an assumption is seldom realisedin this actual world of incessant inflation and deflation.

Although this methodology of pure theory is at onewith that employed in the whole range of scientific in-vestigation, it may seem to some open to the criticism ofbeing unreal and therefore presumably defective, if notuseless, so far as practical affairs go . 41 While it is impos-

“Veblen, Fisher’s Rate of Interest, Political Science Quarterly , Vol.XXIV, June, 1909, pp. 296-303. Marget, The Loan Fund, a doctoral dis-

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